Exhibit 10.30

 

LEASE

UNIVERSITY CENTER WEST

HCP UNIVERSITY CENTER WEST LLC,

a Delaware limited liability company,

as Landlord,

and

SORRENTO THERAPEUTICS, INC.,

a Delaware corporation,

as Tenant.

 

 

 

 

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TABLE OF CONTENTS

 

 

 

Page

1.

PREMISES, BUILDING, PROJECT, AND COMMON AREAS

4

2.

LEASE TERM; OPTION TERM; TERMINATION RIGHT

5

3.

BASE RENT

8

4.

ADDITIONAL RENT

8

5.

USE OF PREMISES

12

6.

SERVICES AND UTILITIES

16

7.

REPAIRS

17

8.

ADDITIONS AND ALTERATIONS

18

9.

COVENANT AGAINST LIENS

19

10.

INSURANCE

19

11.

DAMAGE AND DESTRUCTION

21

12.

NONWAIVER

22

13.

CONDEMNATION

22

14.

ASSIGNMENT AND SUBLETTING

22

15.

SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES

25

16.

HOLDING OVER

25

17.

ESTOPPEL CERTIFICATES

26

18.

SUBORDINATION

26

19.

DEFAULTS; REMEDIES

26

20.

COVENANT OF QUIET ENJOYMENT

28

21.

SECURITY DEPOSIT

28

22.

COMMUNICATIONS AND COMPUTER LINE

29

23.

SIGNS

29

24.

COMPLIANCE WITH LAW

29

25.

LATE CHARGES

30

26.

LANDLORD’S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

30

27.

ENTRY BY LANDLORD

30

28.

TENANT PARKING

31

29.

MISCELLANEOUS PROVISIONS

31

 

EXHIBITS

 

 

 

 

A

OUTLINE OF PREMISES

 

A-1

OUTLINE OF SITE PLAN

 

B

TENANT WORK LETTER

 

C

FORM OF NOTICE OF LEASE TERM DATES

 

D

FORM OF TENANT'S ESTOPPEL CERTIFICATE

 

E

PARKING SITE PLAN

 

F

ENVIRONMENTAL QUESTIONNAIRE

 

G

LETTER OF CREDIT PROVISIONS

 

H

FF&E INVENTORY LIST

 

I

SAMPLE SNDA

 

 

 

 

 

 

(i)

HCP, INC.

Unversity Center West

[Sorrento Therapeutics, Inc.]

 

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INDEX

 

 

Page(s)

Abatement Event

28

Accountant

12

Advocate Arbitrators

6

Alterations

18

Base Building

20

Base Rent

8

Base Rent Abatement

8

Brokers

34

Building

4

Common Areas

4

Comparable Buildings

6

Contemplated Effective Date

24

Contemplated Transfer Space

24

Direct Expenses

8

Eligibility Period

28

Estimate

11

Estimate Statement

11

Estimated Direct Expenses

11

Existing Hazardous Materials

14

Expense Year

9

Force Majeure

32

Intention to Transfer Notice

24

Landlord

1

Landlord Parties

19

Landlord Repair Notice

21

L-C Reduction Conditions

 

Lease

1

Lease Commencement Date

5

Lease Expiration Date

5

Lease Month

5

Lease Term

5

Lines

29

Mail

32

Neutral Arbitrator

7

Nine Month Period

24

Notices

32

Objectionable Name

29

Operating Expenses

9

Option Rent

6

Original Improvements

20

Outside Agreement Date

6

Premises

4

Project,

4

Review Period

12

Security Deposit

28

Sign Specifications

29

Statement

11

Subject Space

22

Summary

1

Tax Expenses

9

Tenant

1

 

 

(ii)

HCP, INC.

Unversity Center West

[Sorrento Therapeutics, Inc.]

 

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Tenant Work Letter

4

Tenant’s Share

8

Termination Date

7

Termination Fee

7

Termination Notice

7

Transfer Notice

22

Transferee

22

 

 

 

 

 

(iii)

HCP, INC.

Unversity Center West

[Sorrento Therapeutics, Inc.]

 

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UNIVERSITY CENTER WEST

LEASE

This Lease (the “Lease”), dated as of the date set forth in Section 1 of the
Summary of Basic Lease Information (the “Summary”), below, is made by and
between HCP UNIVERSITY CENTER WEST LLC, a Delaware limited liability company
(“Landlord”), and SORRENTO THERAPEUTICS, INC., a Delaware corporation
(“Tenant”).

SUMMARY OF BASIC LEASE INFORMATION

 

TERMS OF LEASE

DESCRIPTION

 

 

1. Date:

February 3, 2015

 

 

2. Premises

(Article 1).

 

 

 

2.1 Building:

9380 Judicial Drive, San Diego, California 92121

 

 

2.2 Premises:

Approximately 43,022 rentable square feet of space consisting of the entire
Building, as further set forth in Exhibit A to the Lease.

 

 

3. Lease Term

(Article 2).

 

 

 

3.1 Length of Term:

Approximately ten (10) years and seven (7) months.

 

 

3.2 Lease Commencement Date:

The earlier to occur of (i) the date upon which Tenant first commences to
conduct business in the Premises, and (ii) May 1, 2015.

 

 

3.3 Lease Expiration Date:

If the Lease Commencement Date shall be the first day of a calendar month, then
the day immediately preceding the one hundred twenty-seventh (127th) monthly
anniversary of the Lease Commencement Date; or, if the Lease Commencement Date
shall be other than the first day of a calendar month, then the last day of the
month in which the one hundred twenty-seventh (127th) monthly anniversary of the
Lease Commencement Date occurs.

 

 

 

 

 

 

HCP, INC.

Unversity Center West

[Sorrento Therapeutics, Inc.]

 

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4. Base Rent (Article 3):

 

 

 

 

 

 

 

Lease Months

Annual

Base Rent

Monthly

Installment

of Base Rent*

Approximate

Monthly Base

Rent per Rentable

Square Foot

 

 

 

 

1-12**

$1,161,594.00

$96,799.50

$2.25

 

 

 

 

13-24**

$1,196,700.00

$99,725.00

$2.32

 

 

 

 

25-36

$1,232,838.48

$102,736.54

$2.39

 

 

 

 

37-48

$1,270,009.44

$105,834.12

$2.46

 

 

 

 

49-60

$1,308,213.00

$109,017.75

$2.53

 

 

 

 

61-72

$1,347,449.04

$112,287.42

$2.61

 

 

 

 

73-84

$1,387,717.68

$115,643.14

$2.69

 

 

 

 

85-96

$1,429,535.04

$119,127.92

$2.77

 

 

 

 

97-108

$1,472,384.88

$122,698.74

$2.85

 

 

 

 

109-120

$1,516,783.68

$126,398.64

$2.94

 

 

 

 

121-Lease Expiration Date

$1,562,214.84

$130,184.57

$3.03

* The calculation of the Monthly Installment of Base Rent reflects an annual
increase of 3%, rounded to the nearest cent, after every twelve (12) Lease Month
period.

** Tenant's obligation to pay the Monthly Installment of Base Rent otherwise
attributable to the Premises shall be subject to the terms and conditions of
Section 3.2 of this Lease.

 

 

5. Tenant Improvement Allowance (Exhibit B):

An amount equal to $28.00 per rentable square foot of the Premises (i.e.,
$1,204,616.00 based upon 43,022 rentable square feet in the Premises); provided,
however, the foregoing amount may be increased by up to an additional $100.00
per rentable square foot of the Premises (for a total of $128.00 per rentable
square foot of the Premises in the aggregate) in accordance with the terms and
conditions of Sections 2.1.2, 2.1.3 and 2.1.4 of the Tenant Work Letter.

 

 

6. Tenant's Share

(Article 4):

 

One hundred percent (100%).  

 

 

7. Permitted Use

(Article 5):

 

The Premises shall be used only for general office, research and development,
and/or laboratory uses, including, but not limited to, administrative offices
and other lawful uses reasonably related to or incidental to such specified
uses, all (i) consistent with first class life sciences projects in San Diego,
California (“First Class Life Sciences Projects”), and (ii) in compliance with,
and subject to, applicable laws and the terms of this Lease.  

 

 

 

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8. Security Deposit

(Article 21):

 

$316,000.00

 

 

9. Parking

(Article 28):

 

All unreserved and reserved parking spaces pertaining to the Building, as
depicted on Exhibit E to the Lease, subject to the terms of Article 28 of the
Lease.

 

 

10. Address of Tenant

(Section 29.18):

 

Sorrento Therapeutics

6042 Cornerstone Court West, Suite B

San Diego, California 92121

Attention: Rich Vincent, CFO

(Prior to Lease Commencement Date)

and

 

 

 

Sorrento Therapeutics

9380 Judicial Drive

San Diego, California 92121

Attention: Rich Vincent, CFO

(After Lease Commencement Date)

 

 

11. Address of Landlord

(Section 29.18):

 

See Section 29.18 of the Lease.

 

 

12. Broker(s)

(Section 29.24):

 

Representing Tenant: RE:Align, Inc.

and

Representing Landlord:  CBRE

 

 

 

 

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1. PREMISES, BUILDING, PROJECT, AND COMMON AREAS

1.1 Premises, Building, Project and Common Areas.

1.1.1 The Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the premises set forth in Section 2.2 of the Summary (the
“Premises”). The outline of the Premises is set forth in Exhibit A attached
hereto. The outline of the “Building” and the “Project,” as those terms are
defined in Section 1.1.2 below, are further depicted on the Site Plan attached
hereto as Exhibit A-1. The parties hereto agree that the lease of the Premises
is upon and subject to the terms, covenants and conditions herein set forth, and
Tenant covenants as a material part of the consideration for this Lease to keep
and perform each and all of such terms, covenants and conditions by it to be
kept and performed and that this Lease is made upon the condition of such
performance. The parties hereto hereby acknowledge that the purpose of Exhibit A
is to show the approximate location of the Premises only, and such Exhibit is
not meant to constitute an agreement, representation or warranty as to the
construction of the Premises, the precise area thereof or the specific location
of the “Common Areas,” as that term is defined in Section 1.1.3, below, or the
elements thereof or of the accessways to the Premises or the “Project,” as that
term is defined in Section 1.1.2, below. Except as specifically set forth in
this Lease and in the Tenant Work Letter attached hereto as Exhibit B (the
“Tenant Work Letter”), Landlord shall not be obligated to provide or pay for any
improvement work or services related to the improvement of the Premises. Tenant
also acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty regarding the condition of the Premises, the Building
or the Project or with respect to the suitability of any of the foregoing for
the conduct of Tenant’s business, except as specifically set forth in this Lease
and the Tenant Work Letter. The taking of possession of the Premises by Tenant
shall conclusively establish that the Premises and the Building were at such
time in good and sanitary order, condition and repair. For purposes of
Section 1938 of the California Civil Code, Landlord hereby discloses to Tenant,
and Tenant hereby acknowledges, that the Premises have not undergone inspection
by a Certified Access Specialist (CASp). Subject to “Applicable Laws,” as that
term is defined in Article 24 of this Lease, and the other provisions of this
Lease, and except in the event of an emergency, Tenant shall have access to the
Premises twenty-four (24) hours per day, seven (7) days per week, every day of
the year.

1.1.2 The Building and The Project. The Premises constitutes the entire building
set forth in Section 2.1 of the Summary (the “Building”). The Building is
currently known as “University Center West.” The term “Project,” as used in this
Lease, shall mean (i) the Building and the Common Areas, (ii) the land (which is
improved with landscaping, parking facilities and other improvements) upon which
the Building and the Common Areas are located, and (iii) at Landlord’s
discretion, any additional real property, areas, land, buildings or other
improvements added thereto outside of the Project.

1.1.3 Common Areas. Tenant shall have the non-exclusive right to use in common
with other tenants in the Project, and subject to the rules and regulations
referred to in Article 5 of this Lease, those portions of the Project which are
provided, from time to time, for use in common by Landlord, Tenant and any other
tenants of the Project (such areas, together with such other portions of the
Project designated by Landlord, in its discretion, are collectively referred to
herein as the “Common Areas”). The manner in which the Common Areas are
maintained and operated shall be at the sole discretion of Landlord and the use
thereof shall be subject to such rules, regulations and restrictions as Landlord
may make from time to time. Landlord reserves the right to close temporarily,
make alterations or additions to, or change the location of elements of the
Project and the Common Areas. Notwithstanding the foregoing, Landlord and Tenant
acknowledge that there are currently no Common Areas as the Building is the only
building within the Project as of the date of this Lease.

 

 

 

 

 

 

HCP, INC.

Unversity Center West

[Sorrento Therapeutics, Inc.]

 

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1.1.4 Condition of Building Systems. Notwithstanding anything set forth in
Section 1.1.1, above, to the contrary, Landlord shall cause the “Building
Systems,” as that term is defined in Section 7, below, which serve the Premises
to be in good working condition and repair upon the delivery of the Premises to
Tenant. The foregoing shall not be deemed to require Landlord to replace any of
the Building Systems, as opposed to repair any Building Systems. In addition,
Landlord hereby covenants that the heating, ventilation and air conditioning
(“HVAC”) system serving the Premises (the “Warrantied Item”) shall remain in
good working condition for a period of twelve (12) months following the Lease
Commencement Date. Notwithstanding anything in this Lease to the contrary,
Landlord shall, at Landlord’s sole cost and expense (which shall not be deemed
an “Operating Expense,” as that term is defined in Article 4), repair or replace
any portion of the Warrantied Item during such twelve (12) month period which is
not in good working condition (“Landlord’s 12 Month Warranty”), provided that
(i) the need to repair or replace was not caused (A) by the misuse, misconduct,
damage, destruction, omissions, and/or negligence of Tenant, its subtenants
and/or assignees, if any, or any company which is acquired, sold or merged with
Tenant (collectively, “Tenant Damage”), or (B) by any modifications, Alterations
or improvements constructed by or on behalf of Tenant, and (ii) Landlord has
reasonably approved Tenant’s HVAC vendor (“HVAC Vendor”) and corresponding
maintenance operating plan (“Maintenance Plan”) and such HVAC Vendor conducts
quarterly HVAC inspections in compliance with the Maintenance Plan. Landlord’s
12 Month Warranty shall not extend to the costs of normal and customary
preventive maintenance relating to the Warrantied Item. To the extent repairs
which Landlord is required to make pursuant to this Section 1.1.4 are
necessitated in part by Tenant Damage, then Tenant shall reimburse Landlord for
an equitable proportion of the cost of such repair. If it is determined that the
Warrantied Item was not in good working condition and repair as of the date
Tenant accepts possession under this Lease, Landlord shall not be liable to
Tenant for any damages, but, subject to Section 19.5.2, below, as Tenant’s sole
remedy, Landlord, at no cost to Tenant, shall promptly commence such work or
take such other action as may be necessary to place the same in good working
condition and repair, and shall thereafter diligently pursue the same to
completion. The parties hereto acknowledge and agree that the terms of this
Section 1.1.4 does not affect Landlord’s obligations to repair and maintain the
Building, including without limitation, Landlord’s obligation to repair and
maintain the Building Systems and the Building Structure, pursuant to the
express terms and conditions of Section 7 of this Lease.

1.2 Rentable Square Feet of Premises. The rentable square footage of the
Premises is hereby deemed to be as set forth in Section 2.2 of the Summary, and
shall not be subject to measurement or adjustment during the Lease Term.

1.3 Furniture, Fixtures and Equipment.  Landlord and Tenant have performed an
inventory of the existing furniture, fixtures and equipment at the Premises, and
such inventory is set forth in Exhibit H attached hereto (the “Existing
FF&E”).  During the Term, Tenant shall have the right to use the Existing FF&E
at no additional cost to Tenant, provided that (A) such Existing FF&E shall, at
all times during the Lease Term, remain the property of Landlord, and Tenant
shall not have the right to remove any of the Existing FF&E from the Premises
without Landlord's prior written consent, and (B) Tenant shall, at its sole cost
and expense, maintain, repair and replace (to the extent reasonably necessary)
the Existing FF&E in accordance with Article 7 below.  Notwithstanding any
contrary provision of this Lease, the Existing FF&E shall be delivered to Tenant
in its then existing “As Is” condition, and Landlord shall have no liability or
obligation with respect to the condition thereof or for any maintenance and
repairs required thereto.  Tenant shall have no obligation to insure such
Existing FF&E or replace such FF&E in the event of any casualty.  Upon the
expiration or earlier termination of this Lease, (i) Tenant shall surrender the
Existing FF&E to Landlord in materially the same condition and operating order
as received by Tenant, reasonable wear and tear excepted, (ii) any replacements
of Existing FF&E that are permanently affixed to the Premises (or paid for by
funds provided by Landlord) shall become Landlord’s property and be surrendered
by Tenant to Landlord, and (iii) any replacements of Existing FF&E that are not
permanently affixed to the Premises (and are not paid for by funds provided by
Landlord) shall be Tenant’s property and be removed from the Premises by Tenant,
at its sole cost, pursuant to Section 15.2, below.  

2. LEASE TERM; OPTION TERM; TERMINATION RIGHT

2.1 Lease Term. The terms and provisions of this Lease shall be effective as of
the date of this Lease. The term of this Lease (the “Lease Term”) shall be as
set forth in Section 3.1 of the Summary, shall commence on the date set forth in
Section 3.2 of the Summary (the “Lease Commencement Date”), and shall terminate
on the date set forth in Section 3.3 of the Summary (the “Lease Expiration
Date”) unless this Lease is sooner terminated as hereinafter provided. For
purposes of this Lease, the term “Lease Month” shall mean each monthly period
during the Lease Term; provided that the first (1st) Lease Month of the Lease
Term shall commence on the Lease Commencement Date and end on the last day of
the first (1st) full calendar month of the Lease Term, and the last Lease Month
shall end on the Lease Expiration Date; and provided further that, if
applicable, the first (1st) Lease Month of the Option Term shall commence on the
first (1st) day of the Option Term and end on the last day of the first
(1st) full calendar month of the Option Term, and the last Lease Month of the
Option Term shall end on the last day of the Option Term. At any time during the
Lease Term, Landlord may deliver to Tenant a notice in the form as set forth in
Exhibit C, attached hereto, as a confirmation only of the information set forth
therein, which Tenant shall execute and return to Landlord within five (5) days
of receipt thereof.

 

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2.2 Option Term.

2.2.1 Option Right. Landlord hereby grants the Tenant originally named in this
Lease (the “Original Tenant”), and any assignee of Original Tenant’s entire
interest in the Lease that has been approved in accordance with the terms of
Article 14, below (a “Permitted Assignee”), one (1) option to extend the Lease
Term for a period of five (5) years (the “Option Term”). Such option to extend
shall be exercisable only by written notice delivered by Tenant to Landlord not
more than twelve (12) months nor less than nine (9) months prior to the
expiration of the initial Lease Term, stating that Tenant is thereby irrevocably
exercising its option to lease the Premises during the Option Term. Upon the
proper exercise of the option to extend, and provided that, at Landlord’s
option, as of the date of delivery of such notice, Tenant is not in default
under this Lease and has not previously been in default under this Lease more
than twice during the preceding twelve (12) month period, and as of the end of
the initial Lease Term, Tenant is not in default under this Lease, the Lease
Term shall be extended for a period of five (5) years. The rights contained in
this Section 2.2 shall be personal to Original Tenant and any Permitted Assignee
(and not any other assignee, sublessee or “Transferee,” as that term is defined
in Section 14.1, below, of Tenant’s interest in this Lease).

2.2.2 Option Rent. The annual Rent payable by Tenant during the Option Term (the
“Option Rent”) shall be equal to the “Fair Rental Value,” as that term is
defined below, for the Premises as of the commencement date of the Option Term.
The “Fair Rental Value,” as used in this Lease, shall be equal to the annual
rent per rentable square foot (including additional rent and considering any
“base year” or “expense stop” applicable thereto), including all escalations, at
which tenants (pursuant to leases consummated within the twelve (12) month
period preceding the first day of the Option Term), are leasing non-sublease,
non-encumbered, non-equity space which is not significantly greater or smaller
in size than the subject space, for a comparable lease term, in an arm’s length
transaction, which comparable space is located in the “Comparable Buildings,” as
that term is defined in this Section 2.2.2, below (transactions satisfying the
foregoing criteria shall be known as the “Comparable Transactions”), taking into
consideration the following concessions (the “Concessions”): (a) rental
abatement concessions, if any, being granted such tenants in connection with
such comparable space; (b) tenant improvements or allowances provided or to be
provided for such comparable space, and taking into account the value, if any,
of the existing improvements in the subject space, such value to be based upon
the age, condition, design, quality of finishes and layout of the improvements;
and (c) other reasonable monetary concessions being granted such tenants in
connection with such comparable space; provided, however, that in calculating
the Fair Rental Value, no consideration shall be given to any period of rental
abatement, if any, granted to tenants in comparable transactions in connection
with the design, permitting and construction of tenant improvements in such
comparable spaces. The Fair Rental Value shall additionally include a
determination as to whether, and if so to what extent, Tenant must provide
Landlord with financial security, such as a letter of credit or guaranty, for
Tenant’s Rent obligations in connection with Tenant’s lease of the Premises
during the Option Term. Such determination shall be made by reviewing the extent
of financial security then generally being imposed in Comparable Transactions
from tenants of comparable financial condition and credit history to the then
existing financial condition and credit history of Tenant (with appropriate
adjustments to account for differences in the then-existing financial condition
of Tenant and such other tenants). The Concessions (A) shall be reflected in the
effective rental rate (which effective rental rate shall take into consideration
the total dollar value of such Concessions as amortized on a straight-line basis
over the applicable term of the Comparable Transaction (in which case such
Concessions evidenced in the effective rental rate shall not be granted to
Tenant)) payable by Tenant, or (B) at Landlord’s election, all such Concessions
shall be granted to Tenant in kind. The term “Comparable Buildings” shall mean
the Building and those other first-class laboratory and R&D buildings located in
the University Towne Center area of San Diego, California that are comparable in
age (based on the date of original construction or the latest major renovation)
location, quality of construction, services and amenities.

2.2.3 Determination of Option Rent. In the event Tenant timely and appropriately
exercises an option to extend the Lease Term, Landlord shall notify Tenant of
Landlord’s determination of the Option Rent on or before the Lease Expiration
Date. If Tenant, on or before the date which is thirty (30) days following the
date upon which Tenant receives Landlord’s determination of the Option Rent, in
good faith objects to Landlord’s determination of the Option Rent, then Landlord
and Tenant shall attempt to agree upon the Option Rent using their best
good-faith efforts. If Landlord and Tenant fail to reach agreement within thirty
(30) days following Tenant’s objection to the Option Rent (the “Outside
Agreement Date”), then each party shall make a separate determination of the
Option Rent, as the case may be, within five (5) days, and such determinations
shall be submitted to arbitration in accordance with Sections 2.2.3.1 through
2.2.3.7, below. If Tenant fails to object to Landlord’s determination of the
Option Rent within the time period set forth herein, then Tenant shall be deemed
to have accepted Landlord’s determination of Option Rent.

2.2.3.1 Landlord and Tenant shall each appoint one arbitrator who shall be, at
the option of the appointing party, a real estate broker, appraiser or attorney
who shall have been active over the five (5) year period ending on the date of
such appointment in the leasing or appraisal, as the case may be, of commercial
office properties in North San Diego, California. The determination of the
arbitrators shall be limited solely to the issue of whether Landlord’s or
Tenant’s submitted Option Rent is the closest to the actual Option Rent, taking
into account the requirements of Section 2.2.2 of this Lease, as determined by
the arbitrators. Each such arbitrator shall be appointed within fifteen
(15) days after the Outside Agreement Date. Landlord and Tenant may consult with
their selected arbitrators prior to appointment and may select an arbitrator who
is favorable to their respective positions. The arbitrators so selected by
Landlord and Tenant shall be deemed “Advocate Arbitrators.”

 

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2.2.3.2 The two (2) Advocate Arbitrators so appointed shall be specifically
required pursuant to an engagement letter within ten (10) days of the date of
the appointment of the last appointed Advocate Arbitrator to agree upon and
appoint a third arbitrator (“Neutral Arbitrator”) who shall be qualified under
the same criteria set forth hereinabove for qualification of the two Advocate
Arbitrators, except that neither the Landlord or Tenant or either parties’
Advocate Arbitrator may, directly or indirectly, consult with the Neutral
Arbitrator prior or subsequent to his or her appearance. The Neutral Arbitrator
shall be retained via an engagement letter jointly prepared by Landlord’s
counsel and Tenant’s counsel.

2.2.3.3 The three arbitrators shall, within thirty (30) days of the appointment
of the Neutral Arbitrator, reach a decision as to whether the parties shall use
Landlord’s or Tenant’s submitted Option Rent, and shall notify Landlord and
Tenant thereof.

2.2.3.4 The decision of the majority of the three arbitrators shall be binding
upon Landlord and Tenant.

2.2.3.5 If either Landlord or Tenant fails to appoint an Advocate Arbitrator
within fifteen (15) days after the Outside Agreement Date, then either party may
petition the presiding judge of the Superior Court of San Diego County to
appoint such Advocate Arbitrator subject to the criteria in Section 2.2.3.1 of
this Lease, or if he or she refuses to act, either party may petition any judge
having jurisdiction over the parties to appoint such Advocate Arbitrator.

2.2.3.6 If the two (2) Advocate Arbitrators fail to agree upon and appoint the
Neutral Arbitrator, then either party may petition the presiding judge of the
Superior Court of San Diego County to appoint the Neutral Arbitrator, subject to
criteria in Section 2.2.3.2 of this Lease, or if he or she refuses to act,
either party may petition any judge having jurisdiction over the parties to
appoint such arbitrator.

2.2.3.7 The cost of the arbitration shall be paid by Landlord and Tenant
equally.

2.2.3.8 In the event that the Option Rent shall not have been determined
pursuant to the terms hereof prior to the commencement of the Option Term,
Tenant shall be required to pay the Option Rent initially provided by Landlord
to Tenant, and upon the final determination of the Option Rent, the payments
made by Tenant shall be reconciled with the actual amounts of Option Rent due,
and the appropriate party shall make any corresponding payment to the other
party.

2.3 Termination Right.

2.3.1 Exercise of Termination Right. Tenant shall have the one-time right to
terminate and cancel this Lease effective the last day of the ninety-first
(91st) full calendar month of the Lease Term (the “Termination Date”), provided
that, not later than nine (9) months prior to the Termination Date, Landlord
receives (i) written notice from Tenant (the “Termination Notice”) that Tenant
intends to terminate this Lease pursuant to the terms of this Section 2.3, which
Termination Notice shall set forth the Termination Date, and (ii) cash in the
amount of the “Termination Fee,” as that term is defined below, as consideration
for such early termination. Upon Tenant’s delivery of the Termination Notice to
Landlord, all of Tenant’s rights under Section 2.2 (with respect to the Option
Term) and all of Tenant’s rights to any future Additional Tenant Improvement
Allowance disbursements shall automatically terminate and be of no further force
and effect regardless of whether this Lease thereafter shall be terminated in
accordance with the terms of this Section 2.3. As used in this Lease, the
“Termination Fee” shall be equal to the sum of (a) as of the Termination Date,
the unamortized amount of the Additional Tenant Improvement Allowance expended
by Landlord in connection with this Lease and not reimbursed by Tenant (which
amount shall be amortized with interest at (I) 9% per annum with respect to the
“First Tier Additional Tenant Improvement Allowance,” as that term is defined in
Section 2.1.2.1 of the Tenant Work Letter, over the number of months as set
forth in sub-item (x) of Section 2.1.2.1 of the Tenant Work Letter, (II) 10% per
annum with respect to the “Second Tier Additional Tenant Improvement Allowance,”
as that term is defined in Section 2.1.2.2 of the Tenant Work Letter, over the
number of months as set forth in sub-item (x) of Section 2.1.2.2 of the Tenant
Work Letter, and (III) 11% per annum with respect to the “Third Tier Additional
Tenant Improvement Allowance,” as that term is defined in Section 2.1.2.3 of the
Tenant Work Letter, over the number of months as set forth in sub-item (x) of
Section 2.1.2.3 of the Tenant Work Letter), and (b) an amount equal to six
(6) month’s of the Base Rent and Tenant’s Share of Direct Expenses at the rental
rate in effect (or which would have been in effect but for the Tenant’s
termination of this Lease) as of the six (6) months following the Termination
Date.

2.3.2 Termination of Lease. Provided that Tenant timely elects to terminate this
Lease in accordance with Section 2.3.1, above, this Lease shall automatically
terminate and be of no further force or effect, and Landlord and Tenant shall be
relieved of their respective obligations under this Lease, as of the Termination
Date, except with respect to those obligations set forth in this Lease which
specifically survive the expiration or earlier termination of this Lease,
including, without limitation, the payment by Tenant of all amounts owed by
Tenant under this Lease. The termination right contained in this Section 2.3
shall be personal to the Original Tenant and an affiliate assignee (pursuant to
Section 14.8, below), and may only be exercised by Original Tenant or such
affiliate assignee (and not by any other assignee, sublessee or Transferee of
Tenant’s interest in this Lease).

 

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2.3.3 No Tenant Default. Notwithstanding anything to the contrary contained in
this Section 2.3, (i) Tenant shall have no right to exercise the termination
right set forth in this Section 2.3 if Tenant is in default under this Lease as
of the date of Tenant’s delivery to Landlord of the Termination Notice, and (ii)
if Tenant is in default under the Lease following Tenant’s delivery to Landlord
of the Termination Notice but prior to the Termination Date, then, at Landlord’s
option, the Termination Notice shall be null and void and of no further force or
effect, and Landlord shall have the right to retain the Termination Fee as a
security deposit, to be held by Landlord under this Lease as part of, and an
addition to, the Security Deposit.

3. BASE RENT

3.1 In General. Tenant shall pay, without prior notice or demand, to Landlord or
Landlord’s agent at the management office of the Project, or, at Landlord’s
option, at such other place as Landlord may from time to time designate in
writing, by a check for currency which, at the time of payment, is legal tender
for private or public debts in the United States of America, base rent (“Base
Rent”) as set forth in Section 4 of the Summary, payable in equal monthly
installments as set forth in Section 4 of the Summary in advance on or before
the first day of each and every calendar month during the Lease Term, without
any setoff or deduction whatsoever. The Base Rent and the estimated “Tenant’s
Share” of “Direct Expenses,” as those terms are defined in Article 4, below, for
the first full month of the Lease Term shall be paid at the time of Tenant’s
execution of this Lease. If any Rent payment date (including the Lease
Commencement Date) falls on a day of the month other than the first day of such
month or if any payment of Rent is for a period which is shorter than one month,
the Rent for any fractional month shall accrue on a daily basis for the period
from the date such payment is due to the end of such calendar month or to the
end of the Lease Term at a rate per day which is equal to 1/365 of the
applicable annual Rent. All other payments or adjustments required to be made
under the terms of this Lease that require proration on a time basis shall be
prorated on the same basis.

3.2 Abated Base Rent. Notwithstanding any provision to the contrary contained in
Section 3.1 above, provided that Tenant is not in default under this Lease,
Tenant shall be entitled to an abatement (the “Base Rent Abatement”) of one
hundred percent (100%) of the Base Rent otherwise due for the Premises during
the second (2nd), third (3rd), fourth (4th), fifth (5th), thirteenth (13th),
fourteenth (14th) and fifteenth (15th) full calendar months of the Lease Term
(collectively, the “Base Rent Abatement Period”), for a total Base Rent
Abatement amount equal to $686,373.00 in the aggregate; provided, however, that
Landlord may, upon thirty (30) days’ prior notice to Tenant and at Landlord’s
sole option, elect to accelerate Base Rent Abatement that will occur in a future
month by converting such amount into a credit against Rent and applying the same
to an earlier Lease Month(s) as designated by Landlord in such notice. The Base
Rent Abatement right set forth in this Section 3.2 has been granted to Tenant as
additional consideration for Tenant’s agreement to enter into this Lease and
comply with the terms and conditions otherwise required under this Lease. If
Tenant shall be in default under this Lease, or if this Lease is terminated for
any reason other than Landlord’s breach of this Lease, then the dollar amount of
the unapplied portion of the Base Rent Abatement as of the date of such default
or termination, as the case may be, shall be converted to a credit to be applied
to the Base Rent applicable at the end of the Lease Term and Tenant shall
immediately be obligated to begin paying Base Rent for the Premises in full.

4. ADDITIONAL RENT

4.1 General Terms.

4.1.1 Direct Expenses; Additional Rent. In addition to paying the Base Rent
specified in Article 3 of this Lease, Tenant shall pay “Tenant’s Share” of the
annual “Direct Expenses,” as those terms are defined in Sections 4.2.6 and 4.2.2
of this Lease, respectively. Such payments by Tenant, together with any and all
other amounts payable by Tenant to Landlord pursuant to the terms of this Lease,
are hereinafter collectively referred to as the “Additional Rent”, and the Base
Rent and the Additional Rent are herein collectively referred to as “Rent.” All
amounts due under this Article 4 as Additional Rent shall be payable for the
same periods and in the same manner as the Base Rent. Without limitation on
other obligations of Tenant which survive the expiration of the Lease Term, the
obligations of Tenant to pay the Additional Rent provided for in this Article 4
shall survive the expiration of the Lease Term.

4.1.2 Triple Net Lease. Landlord and Tenant acknowledge that, except as
otherwise provided to the contrary in this Lease, it is their intent and
agreement that this Lease be a “TRIPLE net” lease and that as such, the
provisions contained in this Lease are intended to pass on to Tenant or
reimburse Landlord for the costs and expenses reasonably associated with this
Lease, the Building and the Project, and Tenant’s operation therefrom. To the
extent such costs and expenses payable by Tenant cannot be charged directly to,
and paid by, Tenant, such costs and expenses shall be paid by Landlord but
reimbursed by Tenant as Additional Rent.

4.2 Definitions of Key Terms Relating to Additional Rent. As used in this
Article 4, the following terms shall have the meanings hereinafter set forth:

4.2.1 Intentionally Deleted.

 

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4.2.2 “Direct Expenses” shall mean “Operating Expenses” and “Tax Expenses.”

4.2.3 “Expense Year” shall mean each calendar year in which any portion of the
Lease Term falls, through and including the calendar year in which the Lease
Term expires, provided that Landlord, upon notice to Tenant, may change the
Expense Year from time to time to any other twelve (12) consecutive month
period, and, in the event of any such change, Tenant’s Share of Direct Expenses
shall be equitably adjusted for any Expense Year involved in any such change.

4.2.4 “Operating Expenses” shall mean all expenses, costs and amounts of every
kind and nature which Landlord pays or accrues during any Expense Year because
of or in connection with the ownership, management, maintenance, security,
repair, replacement, restoration or operation of the Project, or any portion
thereof. Without limiting the generality of the foregoing, Operating Expenses
shall specifically include any and all of the following: (i) the cost of
supplying all utilities, the cost of operating, repairing, maintaining, and
renovating the utility, telephone, mechanical, sanitary, storm drainage, and
elevator systems, and the cost of maintenance and service contracts in
connection therewith; (ii) the cost of licenses, certificates, permits and
inspections and the cost of contesting any governmental enactments which may
affect Operating Expenses, and the costs incurred in connection with a
governmentally mandated transportation system management program or similar
program; (iii) the cost of all insurance carried by Landlord in connection with
the Project and Premises as reasonably determined by Landlord; (iv) the cost of
landscaping, relamping, and all supplies, tools, equipment and materials used in
the operation, repair and maintenance of the Project, or any portion thereof;
(v) the cost of parking area operation, repair, restoration, and maintenance;
(vi) fees and other costs, including management and/or incentive fees,
consulting fees, legal fees and accounting fees, of all contractors and
consultants in connection with the management, operation, maintenance and repair
of the Project; (vii) payments under any equipment rental agreements and the
fair rental value of any management office space; (viii) subject to item (f),
below, wages, salaries and other compensation and benefits, including taxes
levied thereon, of all persons engaged in the operation, maintenance and
security of the Project; (ix) costs under any instrument pertaining to the
sharing of costs by the Project; (x) operation, repair, maintenance and
replacement of all systems and equipment and components thereof of the Project;
(xi) the cost of janitorial, alarm, security and other services, replacement of
wall and floor coverings, ceiling tiles and fixtures in common areas,
maintenance and replacement of curbs and walkways, repair to roofs and
re-roofing; (xii) amortization (including interest on the unamortized cost) over
the reasonable useful life of such item as Landlord shall reasonably determine
in accordance with sound real estate management and accounting principles,
consistently applied, of the cost of acquiring or the rental expense of personal
property used in the maintenance, operation and repair of the Project, or any
portion thereof; (xiii) the cost of capital improvements or other costs incurred
in connection with the Project (A) which are intended to effect economies in the
operation or maintenance of the Project, or any portion thereof, or to reduce
current or future Operating Expenses or to enhance the safety or security of the
Project or its occupants, (B) that are required to comply with present or
anticipated conservation programs, (C) which are replacements or modifications
of nonstructural items located in the Common Areas required to keep the Common
Areas in good order or condition, or (D) that are required under any
governmental law or regulation; provided, however, that any capital expenditure
shall be amortized (including interest on the amortized cost) over its
reasonable useful life as Landlord shall reasonably determine in accordance with
sound real estate management and accounting principles, consistently applied;
and (xiv) costs, fees, charges or assessments imposed by, or resulting from any
mandate imposed on Landlord by, any federal, state or local government for fire
and police protection, trash removal, community services, or other services
which do not constitute “Tax Expenses” as that term is defined in Section 4.2.5,
below, (xv) cost of tenant relation programs reasonably established by Landlord,
and (xvi) payments under any easement, license, operating agreement,
declaration, restrictive covenant, or instrument pertaining to the sharing of
costs by the Building, including, without limitation, any covenants, conditions
and restrictions affecting the property, and reciprocal easement agreements
affecting the property, any parking licenses, and any agreements with transit
agencies affecting the Property (collectively, “Underlying Documents”).
Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses
shall not, however, include:

(a) costs, including legal fees, space planners’ fees, advertising and
promotional expenses (except as otherwise set forth above), and brokerage fees
incurred in connection with the original construction or development, or
original or future leasing of the Project, and costs, including permit, license
and inspection costs, incurred with respect to the installation of tenant
improvements made for new tenants initially occupying space in the Project after
the Lease Commencement Date or incurred in renovating or otherwise improving,
decorating, painting or redecorating vacant space for tenants or other occupants
of the Project (excluding, however, such costs relating to any common areas of
the Project or parking facilities);

(b) except as set forth in items (xii), (xiii), and (xiv) above, depreciation,
interest and principal payments on mortgages and other debt costs, if any,
penalties and interest;

(c) costs for which the Landlord is reimbursed by any tenant or occupant of the
Project or by insurance by its carrier or any tenant’s carrier or by anyone
else, and electric power costs for which any tenant directly contracts with the
local public service company;

(d) any bad debt loss, rent loss, or reserves for bad debts or rent loss;

 

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(e) costs associated with the operation of the business of the partnership or
entity which constitutes the Landlord, as the same are distinguished from the
costs of operation of the Project (which shall specifically include, but not be
limited to, accounting costs associated with the operation of the Project).
Costs associated with the operation of the business of the partnership or entity
which constitutes the Landlord include costs of partnership accounting and legal
matters, costs of defending any lawsuits with any mortgagee (except as the
actions of the Tenant may be in issue), costs of selling, syndicating,
financing, mortgaging or hypothecating any of the Landlord’s interest in the
Project, and costs incurred in connection with any disputes between Landlord and
its employees, between Landlord and Project management, or between Landlord and
other tenants or occupants;

(f) the wages and benefits of any employee who does not devote substantially all
of his or her employed time to the Project unless such wages and benefits are
prorated to reflect time spent on operating and managing the Project vis-a-vis
time spent on matters unrelated to operating and managing the Project; provided,
that in no event shall Operating Expenses for purposes of this Lease include
wages and/or benefits attributable to personnel above the level of Project
manager;

(g) amount paid as ground rental for the Project by the Landlord;

(h) except for a Project management fee to the extent allowed pursuant to item
(l) below, overhead and profit increment paid to the Landlord or to subsidiaries
or affiliates of the Landlord for services in the Project to the extent the same
exceeds the costs of such services rendered by qualified, first-class
unaffiliated third parties on a competitive basis;

(i) any compensation paid to clerks, attendants or other persons in commercial
concessions operated by the Landlord, provided that any compensation paid to any
concierge at the Project shall be includable as an Operating Expense;

(j) rentals and other related expenses incurred in leasing air conditioning
systems, elevators or other equipment which if purchased the cost of which would
be excluded from Operating Expenses as a capital cost, except equipment not
affixed to the Project which is used in providing engineering, janitorial or
similar services and, further excepting from this exclusion such equipment
rented or leased to remedy or ameliorate an emergency condition in the Project;

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

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

(m) rent for any office space occupied by Project management personnel to the
extent the size or rental rate of such office space exceeds the size or fair
market rental value of office space occupied by management personnel of the
comparable buildings in the vicinity of the Building, with adjustment where
appropriate for the size of the applicable project;

(n) personal injury or property damage costs arising from the negligence or
willful misconduct of Landlord in connection with this Lease; and

(o) costs incurred to comply with laws relating to the removal of hazardous
material (as defined under applicable law) which was in existence in the
Building or on the Project prior to the Lease Commencement Date, and was of such
a nature that a federal, State or municipal governmental authority, if it had
then had knowledge of the presence of such hazardous material, in the state, and
under the conditions that it then existed in the Building or on the Project,
would have then required the removal of such hazardous material or other
remedial or containment action with respect thereto; and costs incurred to
remove, remedy, contain, or treat hazardous material, which hazardous material
is brought into the Building or onto the Project after the date hereof by
Landlord or any other tenant of the Project and is of such a nature, at that
time, that a federal, State or municipal governmental authority, if it had then
had knowledge of the presence of such hazardous material, in the state, and
under the conditions, that it then exists in the Building or on the Project,
would have then required the removal of such hazardous material or other
remedial or containment action with respect thereto.

4.2.5 Taxes.

4.2.5.1 “Tax Expenses” shall mean all federal, state, county, or local
governmental or municipal taxes, fees, charges or other impositions of every
kind and nature, whether general, special, ordinary or extraordinary (including,
without limitation, real estate taxes, general and special assessments, transit
taxes, leasehold taxes or taxes based upon the receipt of rent, including gross
receipts or sales taxes applicable to the receipt of rent, unless required to be
paid by Tenant, personal property taxes imposed upon the fixtures, machinery,
equipment, apparatus, systems and equipment, appurtenances, furniture and other
personal property used in connection with the Project, or any portion thereof),
which shall be paid or accrued during any Expense Year

 

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(without regard to any different fiscal year used by such governmental or
municipal authority) because of or in connection with the ownership, leasing and
operation of the Project, or any portion thereof.

4.2.5.2 Tax Expenses shall include, without limitation: (i) Any tax on the rent,
right to rent or other income from the Project, or any portion thereof, or as
against the business of leasing the Project, or any portion thereof; (ii) Any
assessment, tax, fee, levy or charge in addition to, or in substitution,
partially or totally, of any assessment, tax, fee, levy or charge previously
included within the definition of real property tax; (iii) Any assessment, tax,
fee, levy, or charge allocable to or measured by the area of the Premises or the
Rent payable hereunder, including, without limitation, any business or gross
income tax or excise tax with respect to the receipt of such rent, or upon or
with respect to the possession, leasing, operating, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises, or any portion
thereof; and (iv) Any assessment, tax, fee, levy or charge, upon this
transaction or any document to which Tenant is a party, creating or transferring
an interest or an estate in the Premises or the improvements thereon.

4.2.5.3 Any costs and expenses (including, without limitation, reasonable
attorneys’ and consultants’ fees) incurred in attempting to protest, reduce or
minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such
expenses are incurred. Tax refunds shall be credited against Tax Expenses and
refunded to Tenant regardless of when received, based on the Expense Year to
which the refund is applicable, provided that in no event shall the amount to be
refunded to Tenant for any such Expense Year exceed the total amount paid by
Tenant as Additional Rent under this Article 4 for such Expense Year. If Tax
Expenses for any period during the Lease Term or any extension thereof are
increased after payment thereof for any reason, including, without limitation,
error or reassessment by applicable governmental or municipal authorities,
Tenant shall pay Landlord upon demand Tenant’s Share of any such increased Tax
Expenses. Notwithstanding anything to the contrary contained in this Section
4.2.5, there shall be excluded from Tax Expenses (i) all excess profits taxes,
franchise taxes, gift taxes, capital stock taxes, inheritance and succession
taxes, estate taxes, federal and state income taxes, and other taxes to the
extent applicable to Landlord’s net income (as opposed to rents, receipts or
income attributable to operations at the Project), (ii) any items included as
Operating Expenses, and (iii) any items paid by Tenant under Section 4.5 of this
Lease.

4.2.6 “Tenant’s Share” shall mean the percentage set forth in Section 6 of the
Summary.

4.3 Allocation of Direct Expenses. The parties acknowledge that the Building may
in the future be a part of a multi-building project and that the costs and
expenses incurred in connection with the Project (i.e., the Direct Expenses)
should be shared between the Building and the other buildings in the Project.
Accordingly, as set forth in Section 4.2 above, Direct Expenses (which consist
of Operating Expenses and Tax Expenses) are determined annually for the Project
as a whole, and a portion of the Direct Expenses, which portion shall be
determined by Landlord on an equitable basis, shall be allocated to the Building
(as opposed to other buildings in the Project). Such portion of Direct Expenses
allocated to the Building shall include all Direct Expenses attributable solely
to the Building and an equitable portion of the Direct Expenses attributable to
the Project as a whole, and shall not include Direct Expenses attributable
solely to other buildings in the Project.

4.4 Calculation and Payment of Additional Rent. Tenant shall pay to Landlord, in
the manner set forth in Section 4.4.1, below, and as Additional Rent, Tenant’s
Share of Direct Expenses for each Expense Year.

4.4.1 Statement of Actual Direct Expenses and Payment by Tenant. Landlord shall
use commercially reasonable efforts to give to Tenant within one hundred twenty
(120) days following the end of each Expense Year, a statement (the “Statement”)
which shall state the Direct Expenses incurred or accrued for such preceding
Expense Year, and which shall indicate the amount of Tenant’s Share of Direct
Expenses. Upon receipt of the Statement for each Expense Year commencing or
ending during the Lease Term, Tenant shall pay, with its next installment of
Base Rent due, the full amount of Tenant’s Share of Direct Expenses for such
Expense Year, less the amounts, if any, paid during such Expense Year as
“Estimated Direct Expenses,” as that term is defined in Section 4.4.2, below,
and if Tenant paid more as Estimated Direct Expenses than the actual Tenant’s
Share of Direct Expenses, Tenant shall receive a credit in the amount of
Tenant’s overpayment against Rent next due under this Lease. The failure of
Landlord to timely furnish the Statement for any Expense Year shall not
prejudice Landlord or Tenant from enforcing its rights under this Article 4.
Even though the Lease Term has expired and Tenant has vacated the Premises, when
the final determination is made of Tenant’s Share of Direct Expenses for the
Expense Year in which this Lease terminates, Tenant shall immediately pay to
Landlord such amount, and if Tenant paid more as Estimated Direct Expenses than
the actual Tenant’s Share of Direct Expenses, Landlord shall, within thirty
(30) days, deliver a check payable to Tenant in the amount of the overpayment.
The provisions of this Section 4.4.1 shall survive the expiration or earlier
termination of the Lease Term.

4.4.2 Statement of Estimated Direct Expenses. In addition, Landlord shall use
commercially reasonable efforts to give to Tenant within one hundred twenty
(120) days following the end of each Expense Year a yearly expense estimate
statement (the “Estimate Statement”) which shall set forth Landlord’s reasonable
estimate (the “Estimate”) of what the total amount of Direct Expenses for the
then-current Expense Year shall be and the estimated Tenant’s Share of Direct
Expenses (the “Estimated Direct Expenses”). The failure of Landlord to timely
furnish the Estimate Statement for any Expense Year shall not preclude Landlord
from

 

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enforcing its rights to collect any Estimated Direct Expenses under this Article
4, nor shall Landlord be prohibited from revising any Estimate Statement or
Estimated Direct Expenses theretofore delivered to the extent necessary.
Thereafter, Tenant shall pay, with its next installment of Base Rent due, a
fraction of the Estimated Direct Expenses for the then-current Expense Year
(reduced by any amounts paid pursuant to the last sentence of this
Section 4.4.2). Such fraction shall have as its numerator the number of months
which have elapsed in such current Expense Year, including the month of such
payment, and twelve (12) as its denominator. Until a new Estimate Statement is
furnished (which Landlord shall have the right to deliver to Tenant at any
time), Tenant shall pay monthly, with the monthly Base Rent installments, an
amount equal to one-twelfth (1/12) of the total Estimated Direct Expenses set
forth in the previous Estimate Statement delivered by Landlord to Tenant.

4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible. Tenant
shall be liable for and shall pay ten (10) days before delinquency, taxes levied
against Tenant’s equipment, furniture, fixtures and any other personal property
located in or about the Premises. If any such taxes on Tenant’s equipment,
furniture, fixtures and any other personal property are levied against Landlord
or Landlord’s property or if the assessed value of Landlord’s property is
increased by the inclusion therein of a value placed upon such equipment,
furniture, fixtures or any other personal property and if Landlord pays the
taxes based upon such increased assessment, which Landlord shall have the right
to do regardless of the validity thereof but only under proper protest if
requested by Tenant, Tenant shall upon demand repay to Landlord the taxes so
levied against Landlord or the proportion of such taxes resulting from such
increase in the assessment, as the case may be.

4.6 Audit of Direct Expenses. Upon Tenant’s written request (an “Audit Request”)
given not more than sixty (60) days after Tenant’s receipt of a Statement for a
particular Expense Year, and provided that Tenant is not then in default under
this Lease, Landlord shall furnish Tenant with such reasonable supporting
documentation in connection with said Direct Expenses. Landlord shall provide
said information to Tenant within sixty (60) days after Tenant’s written request
therefor. Within sixty (60) days after receipt of such information by Tenant
(the “Review Period”), if Tenant disputes the amount of Direct Expenses set
forth in the Statement, an independent certified public accountant (which
accountant (A) is a certified public accountant, (B) is a member of a nationally
recognized accounting firm, (C) is not working on a contingency fee basis, and
(D) is reasonably acceptable to, and approved by Landlord (which approval shall
not be unreasonably withheld or delayed)), designated and paid for by Tenant,
may, after reasonable notice to Landlord and at reasonable times, inspect
Landlord’s records with respect to the Statement at Landlord’s offices, provided
that Tenant is not then in default under this Lease and Tenant has paid all
amounts required to be paid under the applicable Estimate Statement and
Statement, as the case may be. In connection with such inspection, Tenant and
Tenant’s agents must agree in advance to follow Landlord’s reasonable rules and
procedures regarding inspections of Landlord’s records, and shall execute a
commercially reasonable confidentiality agreement regarding such inspection.
Tenant’s failure to dispute the amount of Direct Expenses set forth in any
Statement within the Review Period shall be deemed to be Tenant’s approval of
such Statement and Tenant, thereafter, waives the right or ability to dispute
the amounts set forth in such Statement. If after such inspection, Tenant still
disputes such Additional Rent, a determination as to the proper amount shall be
made, at Tenant’s expense, by an independent certified public accountant (the
“Accountant”) selected by Landlord and subject to Tenant’s reasonable approval;
provided that if such determination by the Accountant proves that Direct
Expenses were overstated by more than five percent (5%), then the cost of the
Accountant and the cost of such determination shall be paid for by Landlord with
interest at the “Default Rate,” as that term is defined in Article 25, below. If
the parties agree or the Accountant determines that Tenant’s payments of Direct
Expenses for such calendar year were in excess of the actual Direct Expenses for
such calendar year, then Landlord shall, at Landlord’s option, either (a) credit
such excess to Tenant’s next succeeding installment(s) of Estimated Direct
Expenses until such excess has been exhausted, or (b) deliver a check payable to
Tenant in the amount of such excess within thirty (30) days after such agreement
or determination. If the parties agree or the Accountant determines that
Tenant’s payments of Direct Expenses for such calendar year were less than the
actual Direct Expenses, then Tenant shall pay the deficiency to Landlord within
thirty (30) days after such agreement or determination. Tenant hereby
acknowledges that Tenant’s sole right to inspect Landlord’s books and records
and to contest the amount of Direct Expenses payable by Tenant shall be as set
forth in this Section 4.6, and Tenant hereby waives any and all other rights
pursuant to applicable law to inspect such books and records and/or to contest
the amount of Direct Expenses payable by Tenant.

5. USE OF PREMISES

5.1 Permitted Use. Tenant shall use the Premises solely for the Permitted Use
set forth in Section 7 of the Summary and Tenant shall not use or permit the
Premises or the Project to be used for any other purpose or purposes whatsoever
without the prior written consent of Landlord, which may be withheld in
Landlord’s sole discretion.

5.2 Prohibited Uses. Tenant further covenants and agrees that Tenant shall not
use, or suffer or permit any person or persons to use, the Premises or any part
thereof for any use or purpose in violation of the laws of the United States of
America, the State of California, or the ordinances, regulations or requirements
of the local municipal or county governing body or other lawful authorities
having jurisdiction over the Project) including, without limitation, any such
laws, ordinances, regulations or requirements relating to hazardous materials or
substances, as those terms are defined by applicable laws now or hereafter in
effect, or any Underlying Documents. Landlord shall have the right to impose
reasonable and customary rule and regulations (which shall be enforced by
Landlord in a non-discriminatory manner) regarding the use of the Project, as
reasonably deemed necessary by Landlord with respect

 

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to the orderly operation of the Project, and Tenant shall comply with such
reasonable rules and regulations. Tenant shall not do or permit anything to be
done in or about the Premises which will in any way damage the reputation of the
Project or obstruct or interfere with the rights of other tenants or occupants
of the Building, or injure or annoy them or use or allow the Premises to be used
for any improper, unlawful or objectionable purpose, nor shall Tenant cause,
maintain or permit any nuisance in, on or about the Premises. Tenant shall
comply with, and Tenant’s rights and obligations under the Lease and Tenant’s
use of the Premises shall be subject and subordinate to, all recorded easements,
covenants, conditions, and restrictions now or hereafter affecting the Project.

5.3 Hazardous Materials.

5.3.1 Tenant’s Obligations.

5.3.1.1 Prohibitions. As a material inducement to Landlord to enter into this
Lease with Tenant, Tenant has fully and accurately completed Landlord’s
Pre-Leasing Environmental Exposure Questionnaire (the “Environmental
Questionnaire”), which is attached as Exhibit F. Tenant agrees that except for
those chemicals or materials, and their respective quantities, specifically
listed on the Environmental Questionnaire, neither Tenant nor Tenant’s
employees, contractors and subcontractors of any tier, entities with a
contractual relationship with Tenant (other than Landlord), or any entity acting
as an agent or sub-agent of Tenant (collectively, “Tenant’s Agents”) will
produce, use, store or generate any “Hazardous Materials,” as that term is
defined below, on, under or about the Premises, nor cause or permit any
Hazardous Material to be brought upon, placed, stored, manufactured, generated,
blended, handled, recycled, used or “Released,” as that term is defined below,
on, in, under or about the Premises. If any information provided to Landlord by
Tenant on the Environmental Questionnaire, or otherwise relating to information
concerning Hazardous Materials is false, incomplete, or misleading in any
material respect, the same shall be deemed a default by Tenant under this Lease.
Upon request by Landlord, Tenant shall deliver to Landlord an updated
Environmental Questionnaire at least once a year; provided that, regardless of
whether such request is made by Landlord, Tenant shall deliver to Landlord an
updated Environmental Questionnaire to the extent any information therein needs
to be updated in any material respect, provided that “material” shall mean any
changes in the Hazardous Materials usage including, but not limited to, in terms
of their hazardous character, handling profile, usage and quantity. Landlord’s
prior written consent shall be required to any Hazardous Materials use for the
Premises not described on the initial Environmental Questionnaire, such consent
to be withheld in Landlord’s sole discretion. Tenant shall not install or permit
any underground storage tank on the Premises. For purposes of this Lease,
“Hazardous Materials” means all flammable explosives, petroleum and petroleum
products, waste oil, radon, radioactive materials, toxic pollutants, asbestos,
polychlorinated biphenyls (“PCBs”), medical waste, chemicals known to cause
cancer or reproductive toxicity, pollutants, contaminants, hazardous wastes,
toxic substances or related materials, including without limitation any
chemical, element, compound, mixture, solution, substance, object, waste or any
combination thereof, which is or may be hazardous to human health, safety or to
the environment due to its radioactivity, ignitability, corrosiveness,
reactivity, explosiveness, toxicity, carcinogenicity, infectiousness or other
harmful or potentially harmful properties or effects, or defined as, regulated
as or included in, the definition of “hazardous substances,” “hazardous wastes,”
“hazardous materials,” or “toxic substances” under any Environmental Laws. The
term “Hazardous Materials” for purposes of this Lease shall also include any
mold, fungus or spores, whether or not the same is defined, listed, or otherwise
classified as a “hazardous material” under any Environmental Laws, if such mold,
fungus or spores may pose a risk to human health or the environment or
negatively impact the value of the Premises. For purposes of this Lease,
“Release” or “Released” or “Releases” shall mean any release, deposit,
discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping,
pouring, emptying, escaping, dumping, disposing, or other movement of Hazardous
Materials into the environment. Landlord represents and warrant to Tenant that,
to Landlord’s actual knowledge, without duty of investigation or inquiry, there
is no Hazardous Material on, in, or under the Premises as of the Lease
Commencement Date in violation of Environmental Laws. For purposes of the
foregoing, Landlords “actual knowledge” shall mean the current actual (as
opposed to constructive) knowledge of Michael Dorris (“Landlord’s
Representative”). No duty of inquiry or investigation on the part of Landlord or
Landlord’s Representative will be required or implied by the making of any
representation or warranty which is so limited to matters within Landlord’s
actual knowledge, and in no event shall Landlord’s Representative have any
personal liability therefor.

5.3.1.2 Notices to Landlord. Tenant shall notify Landlord in writing as soon as
possible but in no event later than five (5) days after (i) the occurrence of
any actual, alleged or threatened Release of any Hazardous Material in, on,
under, from, about or in the vicinity of the Premises (whether past or present),
regardless of the source or quantity of any such Release, or (ii) Tenant becomes
aware of any regulatory actions, inquiries, inspections, investigations,
directives, or any cleanup, compliance, enforcement or abatement proceedings
(including any threatened or contemplated investigations or proceedings)
relating to or potentially affecting the Premises, or (iii) Tenant becomes aware
of any claims by any person or entity relating to any Hazardous Materials in,
on, under, from, about or in the vicinity of the Premises, whether relating to
damage, contribution, cost recovery, compensation, loss or injury. Collectively,
the matters set forth in clauses (i), (ii) and (iii) above are hereinafter
referred to as “Hazardous Materials Claims”. Tenant shall promptly forward to
Landlord copies of all orders, notices, permits, applications and other
communications and reports in connection with any Hazardous Materials Claims.
Additionally, Tenant shall promptly advise Landlord in writing of Tenant’s
discovery of any occurrence or condition on, in, under or about the Premises
that could subject Tenant or Landlord to any liability, or restrictions on
ownership, occupancy, transferability or use of the Premises under any
“Environmental Laws,” as that term is defined below. Tenant shall not enter into
any legal proceeding or other action, settlement, consent decree or other
compromise with respect to

 

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any Hazardous Materials Claims without first notifying Landlord of Tenant’s
intention to do so and affording Landlord the opportunity to join and
participate, at Landlord’s sole cost and expense, as a party if Landlord so
elects, in such proceedings and in no event shall Tenant enter into any
agreements which are binding on Landlord or the Premises without Landlord’s
prior written consent. Landlord shall have the right to appear at and
participate in, any and all legal or other administrative proceedings concerning
any Hazardous Materials Claim. For purposes of this Lease, “Environmental Laws”
means all applicable present and future laws relating to the protection of human
health, safety, wildlife or the environment, including, without limitation,
(i) all requirements pertaining to reporting, licensing, permitting,
investigation and/or remediation of emissions, discharges, Releases, or
threatened Releases of Hazardous Materials, whether solid, liquid, or gaseous in
nature, into the air, surface water, groundwater, or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of Hazardous Materials; and (ii) all requirements
pertaining to the health and safety of employees or the public. Environmental
Laws include, but are not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 USC § 9601, et seq., the Hazardous
Materials Transportation Authorization Act of 1994, 49 USC § 5101, et seq., the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976, and Hazardous and Solid Waste Amendments of 1984, 42 USC § 6901, et
seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act
of 1977, 33 USC § 1251, et seq., the Clean Air Act of 1966, 42 USC § 7401, et
seq., the Toxic Substances Control Act of 1976, 15 USC § 2601, et seq., the Safe
Drinking Water Act of 1974, 42 USC §§ 300f through 300j, the Occupational Safety
and Health Act of 1970, as amended, 29 USC § 651 et seq., the Oil Pollution Act
of 1990, 33 USC § 2701 et seq., the Emergency Planning and Community
Right-To-Know Act of 1986, 42 USC § 11001 et seq., the National Environmental
Policy Act of 1969, 42 USC § 4321 et seq., the Federal Insecticide, Fungicide
and Rodenticide Act of 1947, 7 USC § 136 et seq., California
Carpenter-Presley-Tanner Hazardous Substance Account Act, California Health &
Safety Code §§ 25300 et seq., Hazardous Materials Release Response Plans and
Inventory Act, California Health & Safety Code, §§ 25500 et seq., Underground
Storage of Hazardous Substances provisions, California Health & Safety Code, §§
25280 et seq., California Hazardous Waste Control Law, California Health &
Safety Code, §§ 25100 et seq., and any other state or local law counterparts, as
amended, as such applicable laws, are in effect as of the Lease Commencement
Date, or thereafter adopted, published, or promulgated.

5.3.1.3 Releases of Hazardous Materials. If any Release of any Hazardous
Material in, on, under, from or about the Premises shall occur at any time
during the Lease and/or if any other Hazardous Material condition exists at the
Premises that requires response actions of any kind (other than Hazardous
Materials brought onto the Premises by Landlord or Landlord’s agents or an
Existing Hazardous Materials condition for which Landlord is expressly
responsible under this Section 5), in addition to notifying Landlord as
specified above, Tenant, at its own sole cost and expense, shall (i) immediately
comply with any and all reporting requirements imposed pursuant to any and all
Environmental Laws, (ii) provide a written certification to Landlord indicating
that Tenant has complied with all applicable reporting requirements, (iii) take
any and all necessary investigation, corrective and remedial action in
accordance with any and all applicable Environmental Laws, utilizing an
environmental consultant approved by Landlord, all in accordance with the
provisions and requirements of this Section 5.3, including, without limitation,
Section 5.3.4, and (iv) take any such additional investigative, remedial and
corrective actions as Landlord shall in its reasonable discretion deem necessary
such that the Premises are remediated to the condition existing prior to such
Release.

5.3.1.4 Indemnification.

5.3.1.4.1 In General. Without limiting in any way Tenant’s obligations under any
other provision of this Lease, Tenant shall be solely responsible for and shall
protect, defend, indemnify and hold the Landlord Parties harmless from and
against any and all claims, judgments, losses, damages, costs, expenses,
penalties, enforcement actions, taxes, fines, remedial actions, liabilities
(including, without limitation, actual attorneys’ fees, litigation, arbitration
and administrative proceeding costs, expert and consultant fees and laboratory
costs) including, without limitation, consequential damages and sums paid in
settlement of claims, which arise during or after the Lease Term, whether
foreseeable or unforeseeable, that arise during or after the Lease Term in whole
or in part, foreseeable or unforeseeable, directly or indirectly arising out of
or attributable to the presence, use, generation, manufacture, treatment,
handling, refining, production, processing, storage, Release or presence of
Hazardous Materials in, on, under or about the Premises by Tenant or Tenant’s
Agents. Landlord agrees to indemnify, defend, protect and hold harmless Tenant
from and against any liability, obligation, damage or costs, including without
limitation, attorneys’ fees and costs, resulting directly or indirectly from any
use, presence, removal or disposal of any Hazardous Materials to the extent such
liability, obligation, damage or costs was a result of actions caused or
knowingly permitted by Landlord or a Landlord Party.

5.3.1.4.2 Limitations. Notwithstanding anything in Section 5.3.1.4, above, to
the contrary, Tenant’s indemnity of Landlord as set forth in Section 5.3.1.4,
above, shall not be applicable to (a) any claims that result from the activities
of Landlord, its contractors or agents on or about the Premises after the Lease
Commencement Date, and (b) claims based upon Hazardous Materials which may exist
in, on or about the Premises as of the date of this Lease (“Existing Hazardous
Materials”), except to the extent that Tenant’s construction activities and/or
Tenant’s other acts or omissions (including Tenant’s failure to remove,
remediate or otherwise treat or “Clean-up,” as that term is defined in
Section 5.3.4, below, the subject Existing Hazardous Materials during the
tenancy of the Premises) caused or exacerbated the subject claim (a “Tenant
Caused Release of Existing Hazardous Materials”).

 

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5.3.1.5 Compliance with Environmental Laws. Without limiting the generality of
Tenant’s obligation to comply with applicable laws as otherwise provided in this
Lease, Tenant shall, at its sole cost and expense, comply with all Environmental
Laws applicable to its use of the Premises; provided however that Tenant shall
not be liable for or obligated to remove or remediate any Existing Hazardous
Materials (other than a Tenant Caused Release of Existing Hazardous Materials)
or Hazardous Materials brought onto the Premises by Landlord or Landlord’s
agents. Tenant shall obtain and maintain any and all necessary permits,
licenses, certifications and approvals appropriate or required for the use,
handling, storage, and disposal of any Hazardous Materials used, stored,
generated, transported, handled, blended, or recycled by Tenant on the Premises.
Landlord shall have a continuing right, without obligation, to require Tenant to
obtain, and to review and inspect any and all such permits, licenses,
certifications and approvals, together with copies of any and all Hazardous
Materials management plans and programs, any and all Hazardous Materials risk
management and pollution prevention programs, and any and all Hazardous
Materials emergency response and employee training programs respecting Tenant’s
use of Hazardous Materials. Upon request of Landlord, Tenant shall deliver to
Landlord a narrative description explaining the nature and scope of Tenant’s
activities involving Hazardous Materials and showing to Landlord’s satisfaction
compliance with all Environmental Laws and the terms of this Lease.

5.3.2 Assurance of Performance.

5.3.2.1 Environmental Assessments In General. Landlord may, but shall not be
required to, engage from time to time such contractors as Landlord determines to
be appropriate to perform environmental assessments of a scope reasonably
determined by Landlord (an “Environmental Assessment”) to ensure Tenant’s
compliance with the requirements of this Lease with respect to Hazardous
Materials. .

5.3.2.2 Costs of Environmental Assessments. All costs and expenses incurred by
Landlord in connection with any such Environmental Assessment initially shall be
paid by Landlord; provided that if any such Environmental Assessment shows that
Tenant has failed to comply with the provisions of this Section 5.3, then all of
the costs and expenses of such Environmental Assessment shall be reimbursed by
Tenant as Additional Rent within ten (10) days after receipt of written demand
therefor.

5.3.3 Tenant’s Obligations upon Surrender. At the expiration or earlier
termination of the Lease Term, Tenant, at Tenant’s sole cost and expense, shall:
(i) cause an Environmental Assessment of the Premises to be conducted in
accordance with Section 15.3; (ii) to the extent required by Environmental Laws,
cause all Hazardous Materials to be removed from the Premises and disposed of in
accordance with all Environmental Laws and as necessary to allow the Premises to
be used for any purpose; and (iii) cause to be removed all containers installed
or used by Tenant or Tenant’s Agents to store any Hazardous Materials on the
Premises, and cause to be repaired any damage to the Premises caused by such
removal.

5.3.4 Clean-up.

5.3.4.1 Environmental Reports; Clean-Up. If any written report, including any
report containing results of any Environmental Assessment (an “Environmental
Report”) shall indicate (i) the presence of any Hazardous Materials as to which
either Tenant or Landlord has a removal or remediation obligation under this
Section 5.3, and (ii) that as a result of same, the investigation,
characterization, monitoring, assessment, repair, closure, remediation, removal,
or other clean-up (the “Clean-up”) of any Hazardous Materials is required,
Tenant shall immediately prepare and submit to Landlord within thirty (30) days
after receipt of the Environmental Report a comprehensive plan, subject to
Landlord’s reasonable written approval, specifying the actions to be taken by
Tenant to perform the Clean-up so that the Premises are restored to the
conditions required by this Lease. Upon Landlord’s approval of the Clean-up
plan, Tenant shall, at Tenant’s sole cost and expense, without limitation on any
rights and remedies of Landlord under this Lease, immediately implement such
plan with a consultant reasonably acceptable to Landlord and proceed to Clean-Up
Hazardous Materials in accordance with all applicable laws and as required by
such plan and this Lease. If, within thirty (30) days after receiving a copy of
such Environmental Report, Tenant fails either (a) to complete such Clean-up, or
(b) with respect to any Clean-up that cannot be completed within such thirty-day
period, fails to proceed with diligence to prepare the Clean-up plan and
complete the Clean-up as promptly as practicable, then Landlord shall have the
right, but not the obligation, and without waiving any other rights under this
Lease, to carry out any Clean-up recommended by the Environmental Report or
required by any governmental authority having jurisdiction over the Premises,
and recover all of the costs and expenses thereof from Tenant as Additional
Rent, payable within ten (10) days after receipt of written demand therefor. If
an Environmental Report indicates that Clean-up of any Existing Hazardous
Materials (other than a Tenant Caused Release of Existing Hazardous Materials)
which is required by Environmental Laws, then Landlord, at its sole cost and
expense, shall notify Tenant of, and thereafter implement, Landlord’s Clean-up
plan, which Clean-up plan, including the scope and timing thereof, shall cause
the Premises to be restored substantially in the condition existing prior to
commencing Landlord’s Clean-up plan.

5.3.4.2 Rent Abatement. Tenant shall continue to pay all Rent due or accruing
under this Lease during any Clean-up of Hazardous Materials as to which Tenant
has a removal or remediation obligation under this Section 5.3, and shall not be
entitled to any reduction, offset or deferral of any Base Rent or Additional
Rent due or accruing under this Lease during any such Clean-up. During the
Clean-up of Existing Hazardous Materials as to which Landlord has a removal or
remediation obligation under this

 

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Section 5.3, Landlord may temporarily close all or a portion of the Premises to
facilitate the Clean-up, and the provisions regarding Rent abatement set forth
in Section 19.5.2 shall apply thereto except that Tenant shall not be required
to provide notice to Landlord and the applicable abatement shall commence on the
first day that all or a portion of the Premises are closed.

5.3.4.3 Surrender of Premises. Tenant shall complete any Clean-up prior to
surrender of the Premises upon the expiration or earlier termination of this
Lease. Tenant shall obtain and deliver to Landlord a letter or other written
determination from the overseeing governmental authority confirming that the
Clean-up has been completed in accordance with all requirements of such
governmental authority and that no further response action of any kind is
required for the unrestricted use of the Premises (“Closure Letter”). Upon the
expiration or earlier termination of this Lease, Tenant shall also be obligated
to close all permits obtained in connection with Hazardous Materials in
accordance with applicable laws.

5.3.4.4 Failure to Timely Clean-Up. Should any Clean-up for which Tenant is
responsible not be completed, or should Tenant not receive the Closure Letter
and any governmental approvals required under Environmental Laws in conjunction
with such Clean-up prior to the expiration or earlier termination of this Lease,
then Tenant shall be liable to Landlord as a holdover tenant (as more
particularly provided in Article 16) until Tenant has fully complied with its
obligations under this Section 5.3.

5.3.5 Confidentiality. Unless compelled to do so by applicable law, Tenant
agrees that Tenant shall not disclose, discuss, disseminate or copy any
information, data, findings, communications, conclusions and reports regarding
the environmental condition of the Premises to any Person (other than Tenant’s
consultants, attorneys, property managers and employees that have a need to know
such information), including any governmental authority, without the prior
written consent of Landlord. In the event Tenant reasonably believes that
disclosure is compelled by applicable law, it shall provide Landlord ten
(10) days’ advance notice of disclosure of confidential information so that
Landlord may, at its own cost, attempt to obtain a protective order. Tenant may
additionally release such information to bona fide prospective purchasers or
lenders, subject to any such parties’ written agreement to be bound by the terms
of this Section 5.3.

5.3.6 Copies of Environmental Reports. Within thirty (30) days of receipt
thereof, Tenant shall provide Landlord with a copy of any and all environmental
assessments, audits, studies and reports regarding Tenant’s activities with
respect to the Premises, or ground water beneath the Land, or the environmental
condition or Clean-up thereof. Tenant shall be obligated to provide Landlord
with a copy of such materials without regard to whether such materials are
generated by Tenant or prepared for Tenant, or how Tenant comes into possession
of such materials.

5.3.7 Intentionally Omitted.

5.3.8 Signs, Response Plans, Etc. Tenant shall be responsible for posting on the
Premises any signs required under applicable Environmental Laws. Tenant shall
also complete and file any business response plans or inventories required by
any applicable laws. Tenant shall concurrently file a copy of any such business
response plan or inventory with Landlord.

5.3.9 Survival. Each covenant, agreement, representation, warranty and
indemnification made by each of Tenant and Landlord set forth in this
Section 5.3 shall survive the expiration or earlier termination of this Lease
and shall remain effective until all of Tenant’s obligations under this
Section 5.3 have been completely performed and satisfied.

6. SERVICES AND UTILITIES

6.1 In General. Tenant will be responsible, at its sole cost and expense, for
the furnishing of all services and utilities to the Premises, including, but not
limited to heating, ventilation and air-conditioning, electricity, water,
telephone, janitorial and interior Building security services.

6.1.1 All utilities (including without limitation, electricity, gas, sewer and
water) to the Building are separately metered at the Premises and shall be paid
directly by Tenant to the applicable utility provider.

6.1.2 Landlord shall not provide janitorial services for the Premises. Tenant
shall be solely responsible for performing all janitorial services and other
cleaning of the Premises, all in compliance with applicable laws. The janitorial
and cleaning of the Premises shall be adequate to maintain the Premises in a
manner consistent with First Class Life Sciences Projects.

Tenant shall cooperate fully with Landlord at all times and abide by all
regulations and requirements that Landlord may reasonably prescribe for the
proper functioning and protection of the HVAC, electrical, mechanical and
plumbing systems. Provided that Landlord agrees to provide and maintain and keep
in continuous service utility connections to the Project, including electricity,
water and sewage connections, Landlord shall have no obligation to provide any
services or utilities to the Building, including, but not limited to heating,
ventilation and air-conditioning, electricity, water, telephone, janitorial and
interior Building security services.

 

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6.2 Interruption of Use. Tenant agrees that Landlord shall not be liable for
damages, by abatement of Rent or otherwise, for failure to furnish or delay in
furnishing any service (including telephone and telecommunication services), or
for any diminution in the quality or quantity thereof, when such failure or
delay or diminution is occasioned, in whole or in part, by breakage, repairs,
replacements, or improvements, by any strike, lockout or other labor trouble, by
inability to secure electricity, gas, water, or other fuel at the Building or
Project after reasonable effort to do so, by any riot or other dangerous
condition, emergency, accident or casualty whatsoever, by act or default of
Tenant or other parties, or by any other cause; and such failures or delays or
diminution shall never be deemed to constitute an eviction or disturbance of
Tenant’s use and possession of the Premises or relieve Tenant from paying Rent
or performing any of its obligations under this Lease. Furthermore, Landlord
shall not be liable under any circumstances for a loss of, or injury to,
property or for injury to, or interference with, Tenant’s business, including,
without limitation, loss of profits, however occurring, through or in connection
with or incidental to a failure to furnish any of the services or utilities as
set forth in this Article 6.

6.3 Energy Performance Disclosure Information. Tenant hereby acknowledges that
Landlord may be required to disclose certain information concerning the energy
performance of the Building pursuant to California Public Resources Code
Section 25402.10 and the regulations adopted pursuant thereto (collectively the
“Energy Disclosure Requirements”). Tenant hereby acknowledges prior receipt of
the Data Verification Checklist, as defined in the Energy Disclosure
Requirements (the “Energy Disclosure Information”), and agrees that Landlord has
timely complied in full with Landlord’s obligations under the Energy Disclosure
Requirements. Tenant acknowledges and agrees that (i) Landlord makes no
representation or warranty regarding the energy performance of the Building or
the accuracy or completeness of the Energy Disclosure Information, (ii) the
Energy Disclosure Information is for the current occupancy and use of the
Building and that the energy performance of the Building may vary depending on
future occupancy and/or use of the Building, and (iii) Landlord shall have no
liability to Tenant for any errors or omissions in the Energy Disclosure
Information. If and to the extent not prohibited by applicable laws, Tenant
hereby waives any right Tenant may have to receive the Energy Disclosure
Information, including, without limitation, any right Tenant may have to
terminate this Lease as a result of Landlord’s failure to disclose such
information. Further, Tenant hereby releases Landlord from any and all losses,
costs, damages, expenses and/or liabilities relating to, arising out of and/or
resulting from the Energy Disclosure Requirements, including, without
limitation, any liabilities arising as a result of Landlord’s failure to
disclose the Energy Disclosure Information to Tenant prior to the execution of
this Lease. Tenant’s acknowledgment of the AS-IS condition of the Premises
pursuant to the terms of this Lease shall be deemed to include the energy
performance of the Building. Tenant further acknowledges that pursuant to the
Energy Disclosure Requirements, Landlord may be required in the future to
disclose information concerning Tenant’s energy usage to certain third parties,
including, without limitation, prospective purchasers, lenders and tenants of
the Building (the “Tenant Energy Use Disclosure”). Tenant hereby (A) consents to
all such Tenant Energy Use Disclosures, and (B) acknowledges that Landlord shall
not be required to notify Tenant of any Tenant Energy Use Disclosure. Further,
Tenant hereby releases Landlord from any and all losses, costs, damages,
expenses and liabilities relating to, arising out of and/or resulting from any
Tenant Energy Use Disclosure. The terms of this Section 6.3 shall survive the
expiration or earlier termination of this Lease.

7. REPAIRS

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

7.2 Service Contracts. All Building Systems, including HVAC, elevators, main
electrical, plumbing and fire/life-safety systems, shall be maintained, repaired
and replaced by Tenant (i) in a commercially reasonable first-class condition,
(ii) in accordance

 

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with any applicable manufacturer specifications relating to any particular
component of such Building Systems, (iii) in accordance with applicable Laws.
Tenant shall contract with a qualified, experienced professional third party
service companies (a “Service Contract”). Tenant shall regularly, in accordance
with commercially reasonable standards, generate and maintain preventive
maintenance records relating to each Building’s mechanical and main electrical
systems, including life safety, elevators and the central plant (“Preventative
Maintenance Records”). In addition, upon Landlord’s request, Tenant shall
deliver a copy of all current Service Contracts to Landlord and/or a copy of the
Preventative Maintenance Records.

7.3 Landlord’s Right to Perform Tenant’s Repair Obligations. Tenant shall notify
Landlord in writing at least thirty (30) days prior to performing any material
Tenant’s Repair Obligations, including without limitation, any Tenant’s Repair
Obligation which affect the Building Systems or which is reasonably anticipated
to cost more than $100,000.00. Upon receipt of such notice from Tenant, Landlord
shall have the right to either (i) perform such material Tenant’s Repair
Obligation by delivering notice of such election to Tenant within thirty
(30) days following receipt of Tenant’s notice, and Tenant shall pay Landlord
the cost thereof (including Landlord’s reasonable supervision fee) within thirty
(30) days after receipt of an invoice therefor, or (ii) require Tenant to
perform such Tenant’s Repair Obligation at Tenant’s sole cost and expense. If
Tenant fails to perform any Tenant’s Repair Obligation within a reasonable time
period, as reasonably determined by Landlord, then Landlord may, but need not,
following delivery of notice to Tenant of such election, make such Tenant Repair
Obligation, and Tenant shall pay Landlord the cost thereof, (including
Landlord’s reasonable supervision fee) within thirty (30) days after receipt of
an invoice therefor.

7.4 Landlord Repair Obligations. Landlord shall be responsible for repairs to
the exterior walls, foundation and roof of the Building, the structural portions
of the floors of the Building, except to the extent that such repairs are
required due to the negligence or willful misconduct of Tenant (the “Landlord
Repair Obligation”); provided, however, that if such repairs are due to the
negligence or willful misconduct of Tenant, Landlord shall nevertheless make
such repairs at Tenant’s expense, or, if covered by Landlord’s insurance, Tenant
shall only be obligated to pay any deductible in connection therewith.

8. ADDITIONS AND ALTERATIONS

8.1 Landlord’s Consent to Alterations. Tenant may not make any improvements,
alterations, additions or changes to the Premises or any mechanical, plumbing or
HVAC facilities or systems pertaining to the Premises (collectively, the
“Alterations”) without first procuring the prior written consent of Landlord to
such Alterations, which consent shall be requested by Tenant not less than
thirty (30) days prior to the commencement thereof, and which consent shall not
be unreasonably withheld by Landlord, provided it shall be deemed reasonable for
Landlord to withhold its consent to any Alteration which adversely affects the
structural portions or the systems or equipment of the Building or is visible
from the exterior of the Building. Notwithstanding the foregoing, Tenant shall
be permitted to make Alterations following ten (10) business days notice to
Landlord, but without Landlord’s prior consent, to the extent that such
Alterations (i) do not affect the building systems or equipment, (ii) are not
visible from the exterior of the Building, and (iii) cost less than $50,000.00
for a particular job of work. The construction of the initial improvements to
the Premises shall be governed by the terms of the Tenant Work Letter and not
the terms of this Article 8.

8.2 Manner of Construction. Landlord may impose, as a condition of its consent
to any and all Alterations or repairs of the Premises or about the Premises,
such requirements as Landlord in its reasonable discretion may deem desirable,
including, but not limited to, the requirement that in accordance with the terms
of Section 8.5, below, Tenant shall, at Tenant’s expense, remove such
Alterations upon the expiration or any early termination of the Lease Term.
Tenant shall construct such Alterations and perform such repairs in a good and
workmanlike manner, in conformance with any and all applicable federal, state,
county or municipal laws, rules and regulations and pursuant to a valid building
permit, issued by the city in which the Building is located (or other applicable
governmental authority). Tenant shall not use (and upon notice from Landlord
shall cease using) contractors, services, workmen, labor, materials or equipment
that, in Landlord’s reasonable judgment, would disturb labor harmony with the
workforce or trades engaged in performing other work, labor or services in or
about the Building or the Common Areas. Upon completion of any Alterations (or
repairs), Tenant shall deliver to Landlord final lien waivers from all
contractors, subcontractors and materialmen who performed such work. In addition
to Tenant’s obligations under Article 9 of this Lease, upon completion of any
Alterations, Tenant agrees to cause a Notice of Completion to be recorded in the
office of the Recorder of the County of San Diego in accordance with
Section 8182 of the Civil Code of the State of California or any successor
statute, and Tenant shall deliver to the Project construction manager a
reproducible copy of the “as built” drawings of the Alterations as well as all
permits, approvals and other documents issued by any governmental agency in
connection with the Alterations.

8.3 Payment for Improvements. If Tenant orders any work directly from Landlord,
Tenant shall pay to Landlord an amount equal to five percent (5%) of the cost of
such work to compensate Landlord for all overhead, general conditions, fees and
other costs and expenses arising from Landlord’s involvement with such work. If
Tenant does not order any work directly from Landlord, Tenant shall reimburse
Landlord for Landlord’s reasonable, actual, out-of-pocket costs and expenses
actually incurred in connection with Landlord’s review of such work.

 

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8.4 Construction Insurance. In addition to the requirements of Article 10 of
this Lease, in the event that Tenant makes any Alterations, prior to the
commencement of such Alterations, Tenant shall provide Landlord with evidence
that Tenant carries “Builder’s All Risk” insurance in an amount approved by
Landlord covering the construction of such Alterations, and such other insurance
as Landlord may reasonably require, it being understood and agreed that all of
such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease
immediately upon completion thereof. In addition, Tenant’s contractors and
subcontractors shall be required to carry (i) Commercial General Liability
Insurance in an amount approved by Landlord, with Landlord, and, at Landlord’s
option, Landlord’s property manager and project manager, as additional insureds
in an amount approved by Landlord, and otherwise in accordance with the
requirements of Article 10 of this Lease, and (ii) workers compensation
insurance with a waiver of subrogation in favor of Landlord . Landlord may, in
its discretion, require Tenant to obtain a lien and completion bond or some
alternate form of security satisfactory to Landlord in an amount sufficient to
ensure the lien-free completion of such Alterations and naming Landlord as a
co-obligee.

8.5 Landlord’s Property. All Alterations, improvements, fixtures, equipment
and/or appurtenances which may be installed or placed in or about the Premises,
from time to time, shall be at the sole cost of Tenant and shall be and become
the property of Landlord and remain in place at the Premises following the
expiration or earlier termination of this Lease. Notwithstanding the foregoing,
Landlord may, by written notice to Tenant prior to the end of the Lease Term, or
given following any earlier termination of this Lease, require Tenant, at
Tenant’s expense, to remove any Alterations and/or improvements and/or systems
and equipment within the Premises and to repair any damage to the Premises and
Building caused by such removal and return the affected portion of the Premises
to a building standard tenant improved condition as determined by Landlord;
provided; however, that notwithstanding the foregoing, upon request by Tenant at
the time of Tenant’s request for Landlord’s consent to any Alteration or
improvement, Landlord shall notify Tenant whether the applicable Alteration or
improvement will be required to be removed pursuant to the terms of this
Section 8.5 and Tenant shall have no removal obligations for Alterations or
improvements identified in such notice as not requiring removal by Landlord. If
Tenant fails to complete any required removal and/or to repair any damage caused
by the removal of any Alterations and/or improvements and/or systems and
equipment in the Premises and return the affected portion of the Premises to a
building standard tenant improved condition as reasonably determined by
Landlord, Landlord may do so and may charge the cost thereof to Tenant. Tenant
hereby protects, defends, indemnifies and holds Landlord harmless from any
liability, cost, obligation, expense or claim of lien in any manner relating to
the installation, placement, removal or financing of any such Alterations,
improvements, fixtures and/or equipment in, on or about the Premises, which
obligations of Tenant shall survive the expiration or earlier termination of
this Lease.

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

10. INSURANCE

10.1 Indemnification and Waiver. Subject to the waiver of subrogation provisions
set forth in Section 10.5, and except to the extent arising from the gross
negligence or willful misconduct of Landlord or the “Landlord Parties,” as that
term is defined below, or Landlord’s breach of this Lease, Tenant hereby assumes
all risk of damage to property or injury to persons in, upon or about the
Premises from any cause whatsoever and agrees that Landlord, its partners,
subpartners and their respective officers, agents, servants, employees, lenders,
any property manager and independent contractors (collectively, “Landlord
Parties”) shall not be liable for, and are hereby released from any
responsibility for, any damage either to person or property or resulting from
the loss of use thereof, which damage is sustained by Tenant or by other persons
claiming through Tenant. Except to the extent arising from the gross negligence
or willful misconduct of Landlord or the Landlord Parties or Landlord’s breach
of this Lease, Tenant shall indemnify, defend, protect, and hold harmless the
Landlord Parties from any and all claims, loss, cost, damage, injury, expense
and liability (including without limitation court costs and reasonable
attorneys’ fees) incurred in connection with or arising from any cause in, on or
about the Premises, any acts, omissions or negligence of Tenant or of any person
claiming by, through or under Tenant, or of the contractors, agents, servants,
employees, invitees, guests or licensees of Tenant or any such person, in, on or
about the Project or any breach of the terms of this Lease, either prior to,
during, or after the expiration of the Lease Term. Should Landlord be named as a
defendant in any suit brought against Tenant in connection with or arising out
of Tenant’s occupancy of the Premises, Tenant shall pay to Landlord its
reasonable costs and expenses incurred in such suit, including without
limitation, its actual professional fees such as reasonable appraisers’,
accountants’ and attorneys’ fees. The provisions of this Section 10.1 shall
survive the expiration or sooner termination of this Lease with respect to any
claims or liability arising in connection with any event occurring prior to such
expiration or termination.

 

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10.2 Tenant’s Compliance With Landlord’s Property Insurance. Landlord shall
insure the Building during the Lease Term against loss or damage under a
building property and general liability insurance policy. Such coverage shall be
in such amounts, from such companies, and on such other terms and conditions, as
Landlord may from time to time reasonably determine. Additionally, at the option
of Landlord, such insurance coverage may include the risks of earthquakes and/or
flood damage and additional hazards, a rental loss endorsement and one or more
loss payee endorsements in favor of the holders of any mortgages or deeds of
trust encumbering the interest of Landlord in the Building or the ground or
underlying lessors of the Building, or any portion thereof. Tenant shall, at
Tenant’s expense, comply with all insurance company requirements pertaining to
the use of the Premises. If Tenant’s conduct or use of the Premises causes any
increase in the premium for such insurance policies then Tenant shall reimburse
Landlord for any such increase. Tenant, at Tenant’s expense, shall comply with
all rules, orders, regulations or requirements of the American Insurance
Association (formerly the National Board of Fire Underwriters) and with any
similar body.

10.3 Tenant’s Insurance. Tenant shall maintain the following coverages in the
following amounts.

10.3.1 Commercial General Liability Insurance on an occurrence form covering the
insured against claims of bodily injury, personal injury and property damage
(including loss of use thereof) arising out of Tenant’s operations, and
contractual liabilities including a contractual coverage, and including products
and completed operations coverage, for limits of liability on a per location
basis of not less than:

 

Bodily Injury and

Property Damage Liability

  

$2,000,000 each occurrence

$2,000,000 annual aggregate

 

 

 

 

 

Personal Injury Liability

  

$2,000,000 each occurrence

$2,000,000 annual aggregate

 

10.3.2 Property Insurance covering (i) all office furniture, business and trade
fixtures, office equipment, free-standing cabinet work, movable partitions,
merchandise and all other items of Tenant’s property on the Premises installed
by, for, or at the expense of Tenant, (ii) the “Tenant Improvements,” as that
term is defined in the Tenant Work Letter, and any other improvements which
exist in the Premises as of the Lease Commencement Date (excluding the “Base
Building,” as that term is defined below) (the “Original Improvements”), and
(iii) all other improvements, alterations and additions to the Premises. Such
insurance shall be written on an “all risks” of physical loss or damage basis,
for the full replacement cost value (subject to reasonable deductible amounts)
new without deduction for depreciation of the covered items and in amounts that
meet any co-insurance clauses of the policies of insurance and shall include
coverage for damage or other loss caused by fire or other peril including, but
not limited to, vandalism and malicious mischief, theft, water damage of any
type, including sprinkler leakage, bursting or stoppage of pipes, and explosion.
As used in this Lease, the “Base Building” shall include the structural portions
of the Building, and the elevators, exit stairwells and the systems and
equipment located in the internal core of the Building.

10.3.3 Business Income Interruption for one (1) year plus Extra Expense
insurance in such amounts as will reimburse Tenant for actual direct or indirect
loss of earnings attributable to the risks outlined in Section 10.3.2 above.

10.3.4 Worker’s Compensation and Employer’s Liability or other similar insurance
pursuant to all applicable state and local statutes and regulations. The policy
shall include a waiver of subrogation in favor of Landlord, its employees,
Lenders and any property manager or partners.

10.4 Form of Policies. The minimum limits of policies of insurance required of
Tenant under this Lease shall in no event limit the liability of Tenant under
this Lease. Such insurance shall (i) name Landlord, its subsidiaries and
affiliates, its property manager (if any) and any other party the Landlord so
specifies, as an additional insured, including Landlord’s managing agent (but
only with regard to commercial liability and general property insurance), if
any; (ii) be issued by an insurance company having a rating of not less than
A:IX in Best’s Insurance Guide or which is otherwise acceptable to Landlord and
licensed to do business in the State of California; (iv) be primary insurance as
to all claims thereunder and provide that any insurance carried by Landlord is
excess and is non-contributing with any insurance required of Tenant; (v) be in
form and content reasonably acceptable to Landlord; and (vi) provide that said
insurance shall not be canceled or coverage changed unless thirty (30) days’
prior written notice shall have been given to Landlord and any mortgagee of
Landlord (unless such cancellation is the result of non-payment of premiums).
Tenant shall deliver said policy or policies or certificates thereof to Landlord
on or before the Lease Commencement Date and at least ten (10) days before the
expiration dates thereof. In the event Tenant shall fail to procure such
insurance, or to deliver such policies or certificate, Landlord may, at its
option, procure such policies for the account of Tenant, and the cost thereof
shall be paid to Landlord within five (5) days after delivery to Tenant of bills
therefor.

10.5 Subrogation. Landlord and Tenant hereby agree to look solely to, and seek
recovery only from, their respective insurance carriers in the event of a
property or business interruption loss to the extent that such coverage is
agreed to be provided hereunder. The parties each hereby waive all rights and
claims against each other for such losses, and waive all rights of subrogation
of their

 

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respective insurers, provided such waiver of subrogation shall not affect the
right to the insured to recover thereunder. The parties agree that their
respective insurance policies do now, or shall, contain the waiver of
subrogation.

10.6 Additional Insurance Obligations. Tenant shall carry and maintain during
the entire Lease Term, at Tenant’s sole cost and expense, increased amounts of
the insurance required to be carried by Tenant pursuant to this Article 10 and
such other reasonable types of insurance coverage and in such reasonable amounts
covering the Premises and Tenant’s operations therein, as may be reasonably
requested by Landlord or Landlord’s lender, but in no event in excess of the
amounts and types of insurance then being required by landlords of buildings
comparable to and in the vicinity of the Building.

11. DAMAGE AND DESTRUCTION

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

11.2 Landlord’s Option to Repair. Notwithstanding the terms of Section 11.1 of
this Lease, Landlord may elect not to rebuild and/or restore the Premises,
Building and/or Project, and instead terminate this Lease, by notifying Tenant
in writing of such termination within forty-five (45) days after the date of
discovery of the damage, such notice to include a termination date giving Tenant
sixty (60) days to vacate the Premises, but Landlord may so elect only if the
Building or Project shall be damaged by fire or other casualty or cause, whether
or not the Premises are affected, and one or more of the following conditions is
present: (i) in Landlord’s reasonable judgment, repairs cannot reasonably be
completed within one hundred eighty (180) days after the date of discovery of
the damage (when such repairs are made without the payment of overtime or other
premiums); (ii) the holder of any mortgage on the Building or Project or ground
lessor with respect to the Building or Project shall require that the insurance
proceeds or any portion thereof be used to retire the mortgage debt, or shall
terminate the ground lease, as the case may be; (iii) the damage is not fully
covered by Landlord’s insurance policies, after the payment by Landlord of any
deductible under the applicable insurance policy in an amount equal to Five
Hundred Thousand and 00/100 Dollars ($500,000.00); (iv) Landlord decides to
rebuild the Building or Common Areas so that they will be substantially
different structurally or architecturally; (v) the damage occurs during the last
twelve (12) months of the Lease Term; or (vi) any owner of any other portion of
the Project, other than Landlord, does not intend to repair the damage to such
portion of the Project; provided, however, that if Landlord does not elect to
terminate this Lease pursuant to Landlord’s termination right as provided above,
and the repairs cannot, in the reasonable opinion of Landlord, be completed
within one hundred eighty (180) days after being commenced, Tenant may elect, no
earlier than sixty (60) days after the date of the damage and not later than
ninety (90) days after the date of such damage, to terminate this Lease by
written notice to Landlord effective as of the date specified in the notice,
which date shall not be less than thirty (30) days nor more than sixty (60) days
after the date such notice is given by Tenant. Notwithstanding the provisions of
this Section 11.2, Tenant shall have the right to terminate this Lease

 

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under this Section 11.2 only if each of the following conditions is satisfied:
(a) the damage to the Project by fire or other casualty was not caused by the
gross negligence or intentional act of Tenant or its partners or subpartners and
their respective officers, agents, servants, employees, and independent
contractors; (b) Tenant is not then in default under this Lease; (c) as a result
of the damage, Tenant cannot reasonably conduct business from the Premises; and,
(d) as a result of the damage to the Project, Tenant does not occupy or use the
Premises at all.

11.3 Waiver of Statutory Provisions. The provisions of this Lease, including
this Article 11, constitute an express agreement between Landlord and Tenant
with respect to any and all damage to, or destruction of, all or any part of the
Premises, the Building or the Project, and any statute or regulation of the
State of California, including, without limitation, Sections 1932(2) and 1933(4)
of the California Civil Code, with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any other statute or regulation, now or hereafter in effect,
shall have no application to this Lease or any damage or destruction to all or
any part of the Premises, the Building or the Project.

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

13. CONDEMNATION If the whole or any part of the Premises, Building or Project
shall be taken by power of eminent domain or condemned by any competent
authority for any public or quasi-public use or purpose, or if any adjacent
property or street shall be so taken or condemned, or reconfigured or vacated by
such authority in such manner as to require the use, reconstruction or
remodeling of any part of the Premises, Building or Project, or if Landlord
shall grant a deed or other instrument in lieu of such taking by eminent domain
or condemnation, Landlord shall have the option to terminate this Lease
effective as of the date possession is required to be surrendered to the
authority. Tenant shall not because of such taking assert any claim against
Landlord or the authority for any compensation because of such taking and
Landlord shall be entitled to the entire award or payment in connection
therewith, except that Tenant shall have the right to file any separate claim
available to Tenant for any taking of Tenant’s personal property and fixtures
belonging to Tenant and removable by Tenant upon expiration of the Lease Term
pursuant to the terms of this Lease, and for moving expenses, so long as such
claims do not materially diminish the award available to Landlord, its ground
lessor with respect to the Building or Project or its mortgagee, and such claim
is payable separately to Tenant. All Rent shall be apportioned as of the date of
such termination. If any part of the Premises shall be taken, and this Lease
shall not be so terminated, the Rent shall be proportionately abated. Tenant
hereby waives any and all rights it might otherwise have pursuant to
Section 1265.130 of The California Code of Civil Procedure. Notwithstanding
anything to the contrary contained in this Article 13, in the event of a
temporary taking of all or any portion of the Premises for a period of one
hundred and eighty (180) days or less, then this Lease shall not terminate but
the Base Rent and the Additional Rent shall be abated for the period of such
taking in proportion to the ratio that the amount of rentable square feet of the
Premises taken bears to the total rentable square feet of the Premises. Landlord
shall be entitled to receive the entire award made in connection with any such
temporary taking.

14. ASSIGNMENT AND SUBLETTING

14.1 Transfers. Tenant shall not, without the prior written consent of Landlord,
which will not be unreasonably withheld, assign, mortgage, pledge, hypothecate,
encumber, or permit any lien to attach to, or otherwise transfer, this Lease or
any interest hereunder, permit any assignment, or other transfer of this Lease
or any interest hereunder by operation of law, sublet the Premises or any part
thereof, or enter into any license or concession agreements or otherwise permit
the occupancy or use of the Premises or any part thereof by any persons other
than Tenant and its employees and contractors (all of the foregoing are
hereinafter sometimes referred to collectively as “Transfers” and any person to
whom any Transfer is made or sought to be made is hereinafter sometimes referred
to as a “Transferee”). If Tenant desires Landlord’s consent to any Transfer,
Tenant shall notify Landlord in writing, which notice (the “Transfer Notice”)
shall include (i) the proposed effective date of the Transfer, which shall not
be less than thirty (30) days nor more than one hundred eighty (180) days after
the date of delivery of the Transfer Notice, (ii) a description of the portion
of the Premises to be transferred (the “Subject Space”), (iii) all of the terms
of the proposed Transfer and the consideration therefor, including calculation
of the “Transfer Premium”, as that term is defined in Section 14.3 below, in
connection with such

 

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Transfer, the name and address of the proposed Transferee, and a copy of all
existing executed and/or proposed documentation pertaining to the proposed
Transfer, and (iv) current financial statements of the proposed Transferee
certified by an officer, partner or owner thereof, business credit and personal
references and history of the proposed Transferee and any other information
reasonably required by Landlord which will enable Landlord to determine the
financial responsibility, character, and reputation of the proposed Transferee,
nature of such Transferee’s business and proposed use of the Subject Space. Any
Transfer made without Landlord’s prior written consent shall, at Landlord’s
option, be null, void and of no effect, and shall, at Landlord’s option,
constitute a default by Tenant under this Lease. Whether or not Landlord
consents to any proposed Transfer, Tenant shall pay Landlord’s reasonable review
and processing fees, as well as any reasonable professional fees (including,
without limitation, attorneys’, accountants’, architects’, engineers’ and
consultants’ fees) incurred by Landlord, not to exceed Two Thousand and 00/100
Dollars ($2,000.00) for a Transfer in the ordinary course of business, within
thirty (30) days after written request by Landlord.

14.2 Landlord’s Consent. Landlord shall not unreasonably withhold, condition or
delay its consent to any proposed Transfer of the Subject Space to the
Transferee on the terms specified in the Transfer Notice. Without limitation as
to other reasonable grounds for withholding consent, the parties hereby agree
that it shall be reasonable under this Lease and under any applicable law for
Landlord to withhold consent to any proposed Transfer where one or more of the
following apply:

14.2.1 The Transferee is of a character or reputation or engaged in a business
which is not consistent with the quality of the Building or the Project;

14.2.2 The Transferee is either a governmental agency or instrumentality
thereof;

14.2.3(A) If the Transferee is an assignee, the Transferee, (i) if such
Transferee is a public company, has a market capitalization less than Tenant’s
market capitalization as of the date of this Lease (which the parties hereby
agree is $385,000,000.00) (“Tenant’s Market Capitalization”), and (ii) if such
Transferee is not a public company, has a tangible net worth (not including
goodwill as an asset) computed in accordance with generally accepted accounting
principles which is less than the equivalent to Tenant’s Market Capitalization,
and (B) if the Transferee is a sublessee, the Transferee is not a party of
reasonable financial worth and/or financial stability in light of the
responsibilities to be undertaken in connection with the Transfer on the date
consent is requested; or

14.2.4 The proposed Transfer would cause a violation of another lease for space
in the Project, or would give an occupant of the Project a right to cancel its
lease.

If Landlord consents to any Transfer pursuant to the terms of this Section 14.2
(and does not exercise any recapture rights Landlord may have under Section 14.4
of this Lease), Tenant may within six (6) months after Landlord’s consent, but
not later than the expiration of said six-month period, enter into such Transfer
of the Premises or portion thereof, upon substantially the same terms and
conditions as are set forth in the Transfer Notice furnished by Tenant to
Landlord pursuant to Section 14.1 of this Lease, provided that if there are any
changes in the terms and conditions from those specified in the Transfer Notice
such that Landlord would initially have been entitled to refuse its consent to
such Transfer under this Section 14.2, Tenant shall again submit the Transfer to
Landlord for its approval and other action under this Article 14 (including
Landlord’s right of recapture, if any, under Section 14.4 of this Lease).
Notwithstanding anything to the contrary in this Lease, if Tenant or any
proposed Transferee claims that Landlord has unreasonably withheld or delayed
its consent under Section 14.2 or otherwise has breached or acted unreasonably
under this Article 14, their sole remedies shall be a suit for contract damages
(other than damages for injury to, or interference with, Tenant’s business
including, without limitation, loss of profits, however occurring) or
declaratory judgment and an injunction for the relief sought, and Tenant hereby
waives all other remedies, including, without limitation, any right at law or
equity to terminate this Lease, on its own behalf and, to the extent permitted
under all applicable laws, on behalf of the proposed Transferee.

14.3 Transfer Premium. If Landlord consents to a Transfer, as a condition
thereto which the parties hereby agree is reasonable, Tenant shall pay to
Landlord fifty percent (50%) of any “Transfer Premium,” as that term is defined
in this Section 14.3, received by Tenant from such Transferee. “Transfer
Premium” shall mean all rent, additional rent or other consideration payable by
such Transferee in connection with the Transfer in excess of the Rent and
Additional Rent payable by Tenant under this Lease during the term of the
Transfer on a per rentable square foot basis if less than all of the Premises is
transferred, and after deduction of (i) any costs of improvements made to the
Subject Space in connection with such Transfer, (ii) brokerage commissions and
reasonable marketing costs paid in connection with such Transfer, (iii) rent
abatement granted to the Transferee, and (iii) reasonable legal fees incurred in
connection with such Transfer. “Transfer Premium” shall also include, but not be
limited to, key money, bonus money or other cash consideration paid by
Transferee to Tenant in connection with such Transfer, and any payment in excess
of fair market value for fixtures, equipment, or furniture transferred by Tenant
to Transferee in connection with such Transfer; provided that any payments for
services rendered by Tenant to Transferee or for assets or inventory shall not
be used as a subterfuge by Tenant to avoid paying a Transfer Premium hereunder.
The determination of the amount of Landlord’s applicable share of the Transfer
Premium shall be made on a monthly basis as rent or other consideration is
received by Tenant under the Transfer.

 

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14.4 Landlord’s Option as to Subject Space. Notwithstanding anything to the
contrary contained in this Article 14, in the event Tenant contemplates a
Transfer which, together with all prior Transfers then remaining in effect,
would cause fifty percent (50%) or more of the Premises to be Transferred for
more than twenty five percent (25%) of the then remaining Lease Term (taking
into account any extension of the Lease Term which has irrevocably exercised by
Tenant), Tenant shall give Landlord notice (the “Intention to Transfer Notice”)
of such contemplated Transfer (whether or not the contemplated Transferee or the
terms of such contemplated Transfer have been determined). The Intention to
Transfer Notice shall specify the portion of and amount of rentable square feet
of the Premises which Tenant intends to Transfer (the “Contemplated Transfer
Space”), the contemplated date of commencement of the Contemplated Transfer (the
“Contemplated Effective Date”), and the contemplated length of the term of such
contemplated Transfer, and shall specify that such Intention to Transfer Notice
is delivered to Landlord pursuant to this Section 14.4 in order to allow
Landlord to elect to recapture the Contemplated Transfer Space. Thereafter,
Landlord shall have the option, by giving written notice to Tenant within thirty
(30) days after receipt of any Intention to Transfer Notice, to recapture the
Contemplated Transfer Space. Such recapture shall cancel and terminate this
Lease with respect to such Contemplated Transfer Space as of the Contemplated
Effective Date. In the event of a recapture by Landlord, if this Lease shall be
canceled with respect to less than the entire Premises, the Rent reserved herein
shall be prorated on the basis of the number of rentable square feet retained by
Tenant in proportion to the number of rentable square feet contained in the
Premises, and this Lease as so amended shall continue thereafter in full force
and effect, and upon request of either party, the parties shall execute written
confirmation of the same. If Landlord declines, or fails to elect in a timely
manner, to recapture such Contemplated Transfer Space under this Section 14.4,
then, subject to the other terms of this Article 14, for a period of nine
(9) months (the “Nine Month Period”) commencing on the last day of such thirty
(30) day period, Landlord shall not have any right to recapture the Contemplated
Transfer Space with respect to any Transfer made during the Nine Month Period,
provided that any such Transfer is substantially on the terms set forth in the
Intention to Transfer Notice, and provided further that any such Transfer shall
be subject to the remaining terms of this Article 14. If such a Transfer is not
so consummated within the Nine Month Period (or if a Transfer is so consummated,
then upon the expiration of the term of any Transfer of such Contemplated
Transfer Space consummated within such Nine Month Period), Tenant shall again be
required to submit a new Intention to Transfer Notice to Landlord with respect
any contemplated Transfer, as provided above in this Section 14.4.

14.5 Effect of Transfer. If Landlord consents to a Transfer, (i) the terms and
conditions of this Lease shall in no way be deemed to have been waived or
modified, (ii) such consent shall not be deemed consent to any further Transfer
by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord,
promptly after execution, an original executed copy of all documentation
pertaining to the Transfer in form reasonably acceptable to Landlord,
(iv) Tenant shall furnish upon Landlord’s request a complete statement,
certified by an independent certified public accountant, or Tenant’s chief
financial officer, setting forth in detail the computation of any Transfer
Premium Tenant has derived and shall derive from such Transfer, and (v) no
Transfer relating to this Lease or agreement entered into with respect thereto,
whether with or without Landlord’s consent, shall relieve Tenant or any
guarantor of the Lease from any liability under this Lease, including, without
limitation, in connection with the Subject Space. Landlord or its authorized
representatives shall have the right at all reasonable times to audit the books,
records and papers of Tenant relating to any Transfer, and shall have the right
to make copies thereof. If the Transfer Premium respecting any Transfer shall be
found understated, Tenant shall, within thirty (30) days after demand, pay the
deficiency, and if understated by more than five percent (5%), Tenant shall pay
Landlord’s costs of such audit.

14.6 Additional Transfers. For purposes of this Lease, the term “Transfer” shall
also include (i) if Tenant is a partnership, the withdrawal or change,
voluntary, involuntary or by operation of law, of fifty percent (50%) or more of
the partners, or transfer of fifty percent (50%) or more of partnership
interests, within a twelve (12)-month period, or the dissolution of the
partnership without immediate reconstitution thereof, and (ii) if Tenant is a
closely held corporation (i.e., whose stock is not publicly held and not traded
through an exchange or over the counter), (A) the dissolution, merger,
consolidation or other reorganization of Tenant or (B) the sale or other
transfer of an aggregate of fifty percent (50%) or more of the voting shares of
Tenant (other than to immediate family members by reason of gift or death),
within a twelve (12)-month period, or (C) the sale, mortgage, hypothecation or
pledge of an aggregate of fifty percent (50%) or more of the value of the
unencumbered assets of Tenant within a twelve (12)-month period.

14.7 Occurrence of Default. Any Transfer hereunder shall be subordinate and
subject to the provisions of this Lease, and if this Lease shall be terminated
during the term of any Transfer, Landlord shall have the right to: (i) treat
such Transfer as cancelled and repossess the Subject Space by any lawful means,
or (ii) require that such Transferee attorn to and recognize Landlord as its
landlord under any such Transfer. If Tenant shall be in default under this
Lease, Landlord is hereby irrevocably authorized, as Tenant’s agent and
attorney-in-fact, to direct any Transferee to make all payments under or in
connection with the Transfer directly to Landlord (which Landlord shall apply
towards Tenant’s obligations under this Lease) until such default is cured. Such
Transferee shall rely on any representation by Landlord that Tenant is in
default hereunder, without any need for confirmation thereof by Tenant. Upon any
assignment, the assignee shall assume in writing all obligations and covenants
of Tenant thereafter to be performed or observed under this Lease. No collection
or acceptance of rent by Landlord from any Transferee shall be deemed a waiver
of any provision of this Article 14 or the approval of any Transferee or a
release of Tenant from any obligation under this Lease, whether theretofore or
thereafter accruing. In no event shall Landlord’s enforcement of any provision
of this Lease against any Transferee be deemed a waiver of Landlord’s right to
enforce any term of this Lease against Tenant or any other person. If Tenant’s
obligations hereunder have been guaranteed, Landlord’s consent to any Transfer
shall not be effective unless the guarantor also consents to such Transfer.

 

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14.8 Non-Transfers. Notwithstanding anything to the contrary contained in this
Article 14, an assignment or subletting of all or a portion of the Premises to
an affiliate of Tenant (an entity which is controlled by, controls, or is under
common control with, Tenant), shall not be deemed a Transfer under this Article
14, provided that Tenant notifies Landlord of any such assignment or sublease
and promptly supplies Landlord with any documents or information requested by
Landlord regarding such assignment or sublease or such affiliate, and further
provided that such assignment or sublease is not a subterfuge by Tenant to avoid
its obligations under this Lease. “Control,” as used in this Section 14.8, shall
mean the ownership, directly or indirectly, of at least fifty-one percent
(51%) of the voting securities of, or possession of the right to vote, in the
ordinary direction of its affairs, of at least fifty-one percent (51%) of the
voting interest in, any person or entity. No such permitted assignment or
subletting shall serve to release Tenant from any of its obligations under this
Lease.

15. SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES

15.1 Surrender of Premises. No act or thing done by Landlord or any agent or
employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in writing by Landlord. The delivery of keys to the
Premises to Landlord or any agent or employee of Landlord shall not constitute a
surrender of the Premises or effect a termination of this Lease, whether or not
the keys are thereafter retained by Landlord, and notwithstanding such delivery
Tenant shall be entitled to the return of such keys at any reasonable time upon
request until this Lease shall have been properly terminated. The voluntary or
other surrender of this Lease by Tenant, whether accepted by Landlord or not, or
a mutual termination hereof, shall not work a merger, and at the option of
Landlord shall operate as an assignment to Landlord of all subleases or
subtenancies affecting the Premises or terminate any or all such sublessees or
subtenancies.

15.2 Removal of Tenant Property by Tenant. Upon the expiration of the Lease
Term, or upon any earlier termination of this Lease, Tenant shall, subject to
the provisions of this Article 15, quit and surrender possession of the Premises
to Landlord in as good order and condition as when Tenant took possession and as
thereafter improved by Landlord and/or Tenant, reasonable wear and tear and
repairs which are specifically made the responsibility of Landlord hereunder
excepted. Upon such expiration or termination, Tenant shall, without expense to
Landlord, remove or cause to be removed from the Premises all debris and
rubbish, and such items of furniture, equipment, free-standing cabinet work,
movable partitions and other articles of personal property owned by Tenant or
installed or placed by Tenant at its expense in the Premises, and such similar
articles of any other persons claiming under Tenant, as Landlord may, in its
sole discretion, require to be removed, and Tenant shall repair at its own
expense all damage to the Premises and Building resulting from such removal.

15.3 Environmental Assessment. In connection with its surrender of the Premises,
Tenant shall submit to Landlord, at least one hundred twenty (120) days prior to
the expiration date of this Lease (or in the event of an earlier termination of
this Lease, as soon as reasonably possible following such termination), an
environmental Assessment of the Premises by a competent and experienced
environmental engineer or engineering firm reasonably satisfactory to Landlord
(pursuant to a contract approved by Landlord and providing that Landlord can
rely on the Environmental Assessment), which (i) evidences that the Premises are
in a clean and safe condition and free and clear of any Hazardous Materials; and
(ii) includes a review of the Premises by an environmental consultant for
asbestos, mold, fungus, spores, and other moisture conditions, on-site chemical
use, and lead-based paint. If such Environmental Assessment reveals that
remediation or Clean-up is required under any Environmental Laws, Tenant shall
submit a remediation plan prepared by a recognized environmental consultant and
shall be responsible for all costs of remediation and Clean-up, as more
particularly provided in Section 5.3, above.

15.4 Condition of the Building and Premises Upon Surrender. In addition to the
above requirements of this Article 15, upon the expiration of the Lease Term, or
upon any earlier termination of this Lease, Tenant shall, surrender the Premises
and Building such that the same are in compliance with all Applicable Laws and
with Tenant having complied with all of Tenant’s obligations under this Lease,
including those relating to improvement, repair, maintenance, compliance with
law, testing and other related obligations of Tenant set forth in Article 7 of
this Lease. In the event that the Building and Premises shall be surrendered in
a condition which does not comply with the terms of this Section 15.4, because
Tenant failed to comply with its obligations set forth in Lease, then following
thirty (30) days notice to Tenant, during which thirty (30) day period Tenant
shall have the right to cure such noncompliance, Landlord shall be entitled to
expend all reasonable costs in order to cause the same to comply with the
required condition upon surrender and Tenant shall immediately reimburse
Landlord for all such costs upon notice and Tenant shall be deemed during the
period that Tenant or Landlord, as the case may be, perform obligations relating
to the Surrender Improvements to be in holdover under Article 16 of this Lease.

16. HOLDING OVER If Tenant holds over after the expiration of the Lease Term or
earlier termination thereof, with the express or implied consent of Landlord,
such tenancy shall be from month-to-month only, and shall not constitute a
renewal hereof or an extension for any further term. If Tenant holds over after
the expiration of the Lease Term of earlier termination thereof, without the
express or implied consent of Landlord, such tenancy shall be deemed to be a
tenancy by sufferance only, and shall not constitute a renewal hereof or an
extension for any further term. In either case, Rent shall be payable at a
monthly rate equal to one hundred fifty percent (150%) of the Rent applicable
during the last rental period of the Lease Term under this Lease. Such
month-to-month tenancy

 

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or tenancy by sufferance, as the case may be, shall be subject to every other
applicable term, covenant and agreement contained herein. Nothing contained in
this Article 16 shall be construed as consent by Landlord to any holding over by
Tenant, and Landlord expressly reserves the right to require Tenant to surrender
possession of the Premises to Landlord as provided in this Lease upon the
expiration or other termination of this Lease. The provisions of this Article 16
shall not be deemed to limit or constitute a waiver of any other rights or
remedies of Landlord provided herein or at law. If Tenant fails to surrender the
Premises upon the termination or expiration of this Lease, in addition to any
other liabilities to Landlord accruing therefrom, Tenant shall protect, defend,
indemnify and hold Landlord harmless from all loss, costs (including reasonable
attorneys’ fees) and liability resulting from such failure, including, without
limiting the generality of the foregoing, any claims made by any succeeding
tenant founded upon such failure to surrender and any lost profits to Landlord
resulting therefrom.

17. ESTOPPEL CERTIFICATES Within ten (10) business days following a request in
writing by Landlord (“Initial Estoppel Request Period”), Tenant shall execute,
acknowledge and deliver to Landlord an estoppel certificate, which, as submitted
by Landlord, shall be substantially in the form of Exhibit D, attached hereto
(or such other form as may be required by any prospective mortgagee or purchaser
of the Project, or any portion thereof), indicating therein any exceptions
thereto that may exist at that time, and shall also contain any other
information reasonably requested by Landlord or Landlord’s mortgagee or
prospective mortgagee. Any such certificate may be relied upon by any
prospective mortgagee or purchaser of all or any portion of the Project. Tenant
shall execute and deliver whatever other instruments may be reasonably required
for such purposes. At any time during the Lease Term, Landlord may require
Tenant to provide Landlord with a current financial statement and financial
statements of the two (2) years prior to the current financial statement year.
Such statements shall be prepared in accordance with generally accepted
accounting principles and, if such is the normal practice of Tenant, shall be
audited by an independent certified public accountant. If Tenant fails to
deliver such estoppel certificate prior to the expiration of the Initial
Estoppel Request Period, then Landlord shall provide written notice of the same
to Tenant pursuant to Section 19.1.4 or Section 19.1.2, as applicable, below,
and Tenant shall thereafter deliver such certificate to Landlord within the time
period for cure set forth in such applicable Section. Failure of Tenant to
timely execute, acknowledge and deliver such estoppel certificate or other
instruments shall constitute an acceptance of the Premises and an acknowledgment
by Tenant that statements included in the estoppel certificate are true and
correct, without exception.

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

19. DEFAULTS; REMEDIES

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

19.1.1 Any failure by Tenant to pay any Rent or any other charge required to be
paid under this Lease, or any part thereof, when due unless such failure is
cured within five (5) business days after written notice of such failure; or

19.1.2 Except where a specific time period is otherwise set forth for Tenant’s
performance in this Lease, in which event the failure to perform by Tenant
within such time period shall be a default by Tenant under this Section 19.1.2,
any failure by Tenant to observe or perform any other provision, covenant or
condition of this Lease to be observed or performed by Tenant where such failure
continues for thirty (30) days after written notice thereof from Landlord to
Tenant; provided that if the nature of such default is such that the same cannot
reasonably be cured within a thirty (30) day period, Tenant shall not be deemed
to be in default if it diligently commences such cure within such period and
thereafter diligently proceeds to rectify and cure such default; or

19.1.3 Abandonment or vacation of all or a substantial portion of the Premises
by Tenant; or

 

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19.1.4 The failure by Tenant to observe or perform according to the provisions
of Articles 5, 14, 17 or 18 of this Lease where such failure continues for more
than five (5) business days after notice from Landlord (which, as it applies to
Article 17, only if Landlord is required to provide the estoppel certificate in
order to consummate any sale, financing or third party transaction, and
otherwise Section 19.1.2 shall apply); or

19.1.5 Tenant’s failure to occupy the Premises within ten (10) business days
after the Lease Commencement Date.

The notice periods provided herein are in lieu of, and not in addition to, any
notice periods provided by law.

19.2 Remedies Upon Default. Upon the occurrence of any event of default by
Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity (all of which remedies shall be distinct, separate
and cumulative), the option to pursue any one or more of the following remedies,
each and all of which shall be cumulative and nonexclusive, without any notice
or demand whatsoever.

19.2.1 Terminate this Lease, in which event Tenant shall immediately surrender
the Premises to Landlord, and if Tenant fails to do so, Landlord may, without
prejudice to any other remedy which it may have for possession or arrearages in
rent, enter upon and take possession of the Premises and expel or remove Tenant
and any other person who may be occupying the Premises or any part thereof,
without being liable for prosecution or any claim or damages therefor; and
Landlord may recover from Tenant the following:

(i) The worth at the time of award of the unpaid rent which has been earned at
the time of such termination; plus

(ii) The worth at the time of award of the amount by which the unpaid rent which
would have been earned after termination until the time of award exceeds the
amount of such rental loss that Tenant proves could have been reasonably
avoided; plus

(iii) The worth at the time of award of the amount by which the unpaid rent for
the balance of the Lease Term after the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided; plus

(iv) Any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant’s failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom, specifically including but not limited to, brokerage commissions and
advertising expenses incurred, expenses of remodeling the Premises or any
portion thereof for a new tenant, whether for the same or a different use, and
any special concessions reasonably made to obtain a new tenant; and

(v) At Landlord’s election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law.

The term “rent” as used in this Section 19.2 shall be deemed to be and to mean
all sums of every nature required to be paid by Tenant pursuant to the terms of
this Lease, whether to Landlord or to others. As used in Sections 19.2.1(i) and
(ii), above, the “worth at the time of award” shall be computed by allowing
interest at the rate set forth in Article 25 of this Lease, but in no case
greater than the maximum amount of such interest permitted by law. As used in
Section 19.2.1(iii) above, the “worth at the time of award” shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).

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

19.2.3 Landlord shall at all times have the rights and remedies (which shall be
cumulative with each other and cumulative and in addition to those rights and
remedies available under Sections 19.2.1 and 19.2.2, above, or any law or other
provision of this Lease), without prior demand or notice except as required by
applicable law, to seek any declaratory, injunctive or other equitable relief,
and specifically enforce this Lease, or restrain or enjoin a violation or breach
of any provision hereof.

19.3 Subleases of Tenant. Whether or not Landlord elects to terminate this Lease
on account of any default by Tenant, as set forth in this Article 19, Landlord
shall have the right to terminate any and all subleases, licenses, concessions
or other consensual arrangements for possession entered into by Tenant and
affecting the Premises or may, in Landlord’s sole discretion, succeed to
Tenant’s interest in such subleases, licenses, concessions or arrangements. In
the event of Landlord’s election to succeed to Tenant’s

 

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interest in any such subleases, licenses, concessions or arrangements, Tenant
shall, as of the date of notice by Landlord of such election, have no further
right to or interest in the rent or other consideration receivable thereunder.

19.4 Efforts to Relet. No re-entry or repossession, repairs, maintenance,
changes, alterations and additions, reletting, appointment of a receiver to
protect Landlord’s interests hereunder, or any other action or omission by
Landlord shall be construed as an election by Landlord to terminate this Lease
or Tenant’s right to possession, or to accept a surrender of the Premises, nor
shall same operate to release Tenant in whole or in part from any of Tenant’s
obligations hereunder, unless express written notice of such intention is sent
by Landlord to Tenant. Tenant hereby irrevocably waives any right otherwise
available under any law to redeem or reinstate this Lease.

19.5 Landlord Default.

19.5.1 General. Notwithstanding anything to the contrary set forth in this
Lease, Landlord shall not be in default in the performance of any obligation
required to be performed by Landlord pursuant to this Lease unless Landlord
fails to perform such obligation within thirty (30) days after the receipt of
notice from Tenant specifying in detail Landlord’s failure to perform; provided,
however, if the nature of Landlord’s obligation is such that more than thirty
(30) days are required for its performance, then Landlord shall not be in
default under this Lease if it shall commence such performance within such
thirty (30) day period and thereafter diligently pursue the same to completion.
Upon any such default by Landlord under this Lease, Tenant may, except as
otherwise specifically provided in this Lease to the contrary, exercise any of
its rights provided at law or in equity.

19.5.2 Abatement of Rent. In the event that Tenant is prevented from using, and
does not use, the Premises or any portion thereof, as a result of (i) any
repair, maintenance or alteration performed by Landlord, or which Landlord
failed to perform, after the Lease Commencement Date and required by this Lease,
which substantially interferes with Tenant’s use of the Premises, or (ii) any
failure to provide services, utilities or access to the Premises as required by
this Lease, each as a direct result of Landlord’s negligence or willful
misconduct (and except to the extent such failure is caused in whole or in part
by the action or inaction of Tenant) (either such set of circumstances as set
forth in items (i) or (ii), above, to be known as an “Abatement Event”), then
Tenant shall give Landlord notice of such Abatement Event, and if such Abatement
Event continues for ten (10) consecutive business days after Landlord’s receipt
of any such notice (the “Eligibility Period”) and Landlord does not diligently
commence and pursue to completion the remedy of such Abatement Event, then the
Base Rent, Tenant’s Share of Direct Expenses, and Tenant’s obligation, if any,
to pay for parking (to the extent not utilized by Tenant) shall be abated or
reduced, as the case may be, after expiration of the Eligibility Period for such
time that Tenant continues to be so prevented from using, and does not use for
the normal conduct of Tenant’s business, the Premises or a portion thereof, in
the proportion that the rentable area of the portion of the Premises that Tenant
is prevented from using, and does not use, bears to the total rentable area of
the Premises; provided, however, in the event that Tenant is prevented from
using, and does not use, a portion of the Premises for a period of time in
excess of the Eligibility Period and the remaining portion of the Premises is
not sufficient to allow Tenant to effectively conduct its business therein, and
if Tenant does not effectively conduct its business from such remaining portion,
then for such time after expiration of the Eligibility Period during which
Tenant is so prevented from effectively conducting its business therein, the
Base Rent and Tenant’s Share of Direct Expenses for the entire Premises and
Tenant’s obligation to pay for parking shall be abated for such time as Tenant
continues to be so prevented from using, and does not use, the Premises. If,
however, Tenant reoccupies any portion of the Premises during such period, the
Rent allocable to such reoccupied portion, based on the proportion that the
rentable area of such reoccupied portion of the Premises bears to the total
rentable area of the Premises, shall be payable by Tenant from the date Tenant
reoccupies such portion of the Premises. To the extent an Abatement Event is
caused by an event covered by Articles 5, 11 or 13 of this Lease, then Tenant’s
right to abate rent shall be governed by the terms of such Article 5, 11 or 13,
as applicable, and the Eligibility Period shall not be applicable thereto. Such
right to abate Base Rent and Tenant’s Share of Direct Expenses shall be Tenant’s
sole and exclusive remedy for rent abatement at law or in equity for an
Abatement Event. Except as provided in this Section 19.5.2, nothing contained
herein shall be interpreted to mean that Tenant is excused from paying Rent due
hereunder.

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

21. SECURITY DEPOSIT Concurrently with Tenant’s execution of this Lease, Tenant
shall deposit with Landlord a security deposit (the “Security Deposit”) in the
amount set forth in Section 8 of the Summary, as security for the faithful
performance by Tenant of all of its obligations under this Lease. If Tenant
defaults with respect to any provisions of this Lease, including, but not
limited to, the provisions relating to the payment of Rent, the removal of
property and the repair of resultant damage in accordance with this Lease,
Landlord may, without notice to Tenant, but shall not be required to apply all
or any part of the Security Deposit for the payment of any Rent or any other sum
in default and Tenant shall, upon demand therefor, restore the Security Deposit
to its original amount. Any

 

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unapplied portion of the Security Deposit shall be returned to Tenant, or, at
Landlord’s option, to the last assignee of Tenant’s interest hereunder, within
sixty (60) days following the expiration of the Lease Term. Tenant shall not be
entitled to any interest on the Security Deposit. Tenant hereby irrevocably
waives and relinquishes any and all rights, benefits, or protections, if any,
Tenant now has, or in the future may have, under Section 1950.7 of the
California Civil Code, any successor statute, and all other provisions of law,
now or hereafter in effect (except for Section 1950.7(b) of the California Civil
Code, which provision Tenant does not waive), including, but not limited to, any
provision of law which (i) establishes the time frame by which a landlord must
refund a security deposit under a lease, and/or (ii) provides that a 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 a tenant or to clean
the subject premises. Tenant acknowledges and agrees that (a) any statutory time
frames for the return of a security deposit are superseded by the express period
identified in this Article 21, above, and (b) rather than be so limited,
Landlord may claim from the Security Deposit (1) any and all sums expressly
identified in this Article 21, above, and (2) any additional sums reasonably
necessary to compensate Landlord for any and all losses or damages caused by
Tenant’s default of this Lease, including, but not limited to, all damages or
rent due upon termination of Lease pursuant to Section 1951.2 of the California
Civil Code.

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

23. SIGNS

23.1 Exterior Signage. Subject to Landlord’s prior written approval, which shall
not be unreasonably withheld, conditioned or delayed, and provided all signs are
in keeping with the quality, design and style of the Building and Project,
Tenant, at its sole cost and expense, may install identification signage on the
exterior and in the interior of the Building (including interior directional,
lobby and/or directory signage) (collectively, “Tenant Signage”); provided,
however, in no event shall Tenant’s Signage include an “Objectionable Name,” as
that term is defined in Section 23.3, of this Lease. All such signage shall be
subject to Tenant’s obtaining all required governmental approvals. All permitted
signs shall be maintained by Tenant at its expense in a first-class and safe
condition and appearance. Upon the expiration or earlier termination of this
Lease, Tenant shall remove all of its signs at Tenant’s sole cost and expense.
The graphics, materials, color, design, lettering, lighting, size, illumination,
specifications and exact location of Tenant’s Signage (collectively, the “Sign
Specifications”) shall be subject to the prior written approval of Landlord,
which approval shall not be unreasonably withheld, conditioned or delayed, and
shall be consistent and compatible with the quality and nature of the Project.
Tenant hereby acknowledges that, notwithstanding Landlord’s approval of Tenant’s
Signage, Landlord has made no representation or warranty to Tenant with respect
to the probability of obtaining all necessary governmental approvals and permits
for Tenant’s Signage. In the event Tenant does not receive the necessary
governmental approvals and permits for Tenant’s Signage, Tenant’s and Landlord’s
rights and obligations under the remaining terms and conditions of this Lease
shall be unaffected.

23.2 Objectionable Name. Tenant’s Signage shall not include a name or logo which
relates to an entity which is of a character or reputation, or is associated
with a political faction or orientation, which is inconsistent with the quality
of the Project, or which would otherwise reasonably offend a landlord of the
Comparable Buildings (an “Objectionable Name”). The parties hereby agree that
the following name, or any reasonable derivation thereof, shall be deemed not to
constitute an Objectionable Name: “Sorrento Therapeutics.”

23.3 Prohibited Signage and Other Items. Any signs, notices, logos, pictures,
names or advertisements which are installed and that have not been separately
approved by Landlord may be removed without notice by Landlord at the sole
expense of Tenant. Any signs, window coverings, or blinds (even if the same are
located behind the Landlord-approved window coverings for the Building), or
other items visible from the exterior of the Premises or Building, shall be
subject to the prior approval of Landlord, in its sole discretion.

23.4 Termination of Right to Tenant’s Signage. The rights contained in this
Article 23 shall be personal to Original Tenant and its Permitted Assignee, and
may only be exercised and maintained by such parties (and not any other
assignee, sublessee or other transferee of the Original Tenant’s interest in
this Lease) to the extent (x) they are not in default under this Lease (beyond
any applicable notice and cure period) and (y) if they occupy the entire
Premises.

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

 

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Building, only to the extent such obligations are triggered by Alterations made
by Tenant to the Premises to the extent such Alterations are not normal and
customary improvements for the Permitted Use, or triggered by the Tenant
Improvements to the extent such Tenant Improvements are not normal and customary
improvements for the Permitted Use, or triggered by Tenant’s use of the Premises
for non Permitted Use. Should any standard or regulation now or hereafter be
imposed on Landlord or Tenant by a state, federal or local governmental body
charged with the establishment, regulation and enforcement of occupational,
health or safety standards for employers, employees, landlords or tenants, then
Tenant agrees, at its sole cost and expense, to comply promptly with such
standards or regulations. Tenant shall be responsible, at its sole cost and
expense, to make all alterations to the Building and Premises as are required to
comply with the governmental rules, regulations, requirements or standards
described in this Article 24. The judgment of any court of competent
jurisdiction or the admission of Tenant in any judicial action, regardless of
whether Landlord is a party thereto, that Tenant has violated any of said
governmental measures, shall be conclusive of that fact as between Landlord and
Tenant. Notwithstanding anything to the contrary in this Article 24, Landlord
covenants to comply with the “Landlord Initial Compliance Obligations,” as that
term is defined in Section 1 of the Tenant Work Letter, as of the Lease
Commencement Date, and Landlord shall be responsible to promptly cure, at its
sole cost, any noncompliance of the Premises as of the Lease Commencement Date
with such foregoing covenant.

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

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

26.1 Landlord’s Cure. All covenants and agreements to be kept or performed by
Tenant under this Lease shall be performed by Tenant at Tenant’s sole cost and
expense and without any reduction of Rent, except to the extent, if any,
otherwise expressly provided herein. If Tenant shall fail to perform any
obligation under this Lease, and such failure shall continue in excess of the
time allowed under Section 19.1.2, above, unless a specific time period is
otherwise stated in this Lease, Landlord may, but shall not be obligated to,
make any such payment or perform any such act on Tenant’s part without waiving
its rights based upon any default of Tenant and without releasing Tenant from
any obligations hereunder.

26.2 Tenant’s Reimbursement. Except as may be specifically provided to the
contrary in this Lease, Tenant shall pay to Landlord, upon delivery by Landlord
to Tenant of statements therefor: (i) sums equal to expenditures reasonably made
and obligations incurred by Landlord in connection with the remedying by
Landlord of Tenant’s defaults pursuant to the provisions of Section 26.1;
(ii) sums equal to all losses, costs, liabilities, damages and expenses referred
to in Article 10 of this Lease; and (iii) sums equal to all expenditures made
and obligations incurred by Landlord in collecting or attempting to collect the
Rent or in enforcing or attempting to enforce any rights of Landlord under this
Lease or pursuant to law, including, without limitation, all reasonable legal
fees and other amounts so expended. Tenant’s obligations under this Section 26.2
shall survive the expiration or sooner termination of the Lease Term.

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

 

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

29. MISCELLANEOUS PROVISIONS

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

29.2 Binding Effect. Subject to all other provisions of this Lease, each of the
covenants, conditions and provisions of this Lease shall extend to and shall, as
the case may require, bind or inure to the benefit not only of Landlord and of
Tenant, but also of their respective heirs, personal representatives, successors
or assigns, provided this clause shall not permit any assignment by Tenant
contrary to the provisions of Article 14 of this Lease.

29.3 No Air Rights. No rights to any view or to light or air over any property,
whether belonging to Landlord or any other person, are granted to Tenant by this
Lease. If at any time any windows of the Premises are temporarily darkened or
the light or view therefrom is obstructed by reason of any repairs,
improvements, maintenance or cleaning in or about the Project, the same shall be
without liability to Landlord and without any reduction or diminution of
Tenant’s obligations under this Lease.

29.4 Modification of Lease. Should any current or prospective mortgagee or
ground lessor for the Building or Project require a modification of this Lease,
which modification will not cause an increased cost or expense to Tenant or in
any other way materially and adversely change the rights and obligations of
Tenant hereunder, then and in such event, Tenant agrees that this Lease may be
so modified and agrees to execute whatever documents are reasonably required
therefor and to deliver the same to Landlord within ten (10) business days
following a request therefor. At the request of Landlord or any mortgagee or
ground lessor, Tenant agrees to execute a short form of Lease and deliver the
same to Landlord within ten (10) business days following the request therefor.

29.5 Transfer of Landlord’s Interest. Tenant acknowledges that Landlord has the
right to transfer all or any portion of its interest in the Project or Building
and in this Lease, and Tenant agrees that in the event of any such transfer,
Landlord shall automatically be released from all liability under this Lease and
Tenant agrees to look solely to such transferee for the performance of
Landlord’s obligations hereunder after the date of transfer and such transferee
shall be deemed to have fully assumed and be liable for all obligations of this
Lease to be performed by Landlord, including the return of any Security Deposit,
and Tenant shall attorn to such transferee.

29.6 Prohibition Against Recording. Except as provided in Section 29.4 of this
Lease, neither this Lease, nor any memorandum, affidavit or other writing with
respect thereto, shall be recorded by Tenant or by anyone acting through, under
or on behalf of Tenant.

29.7 Landlord’s Title. Landlord’s title is and always shall be paramount to the
title of Tenant. Nothing herein contained shall empower Tenant to do any act
which can, shall or may encumber the title of Landlord.

29.8 Relationship of Parties. Nothing contained in this Lease shall be deemed or
construed by the parties hereto or by any third party to create the relationship
of principal and agent, partnership, joint venturer or any association between
Landlord and Tenant.

29.9 Application of Payments. Landlord shall have the right to apply payments
received from Tenant pursuant to this Lease, regardless of Tenant’s designation
of such payments, to satisfy any obligations of Tenant hereunder, in such order
and amounts as Landlord, in its sole discretion, may elect.

29.10 Time of Essence. Time is of the essence with respect to the performance of
every provision of this Lease in which time of performance is a factor.

 

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

29.12 No Warranty. In executing and delivering this Lease, Tenant has not relied
on any representations, including, but not limited to, any representation as to
the amount of any item comprising Additional Rent or the amount of the
Additional Rent in the aggregate or that Landlord is furnishing the same
services to other tenants, at all, on the same level or on the same basis, or
any warranty or any statement of Landlord which is not set forth herein or in
one or more of the exhibits attached hereto.

29.13 Landlord Exculpation. The liability of Landlord or the Landlord Parties to
Tenant for any default by Landlord under this Lease or arising in connection
herewith or with Landlord’s operation, management, leasing, repair, renovation,
alteration or any other matter relating to the Project or the Premises shall be
limited solely and exclusively to an amount which is equal to the lesser of
(a) the interest of Landlord in the Building or (b) the equity interest Landlord
would have in the Building if the Building were encumbered by third-party debt
in an amount equal to eighty percent (80%) of the value of the Building (as such
value is determined by Landlord), provided that in no event shall such liability
extend to any sales or insurance proceeds received by Landlord or the Landlord
Parties in connection with the Project, Building or Premises. Neither Landlord,
nor any of the Landlord Parties shall have any personal liability therefor, and
Tenant hereby expressly waives and releases such personal liability on behalf of
itself and all persons claiming by, through or under Tenant. The limitations of
liability contained in this Section 29.13 shall inure to the benefit of
Landlord’s and the Landlord Parties’ present and future partners, beneficiaries,
officers, directors, trustees, shareholders, agents and employees, and their
respective partners, heirs, successors and assigns. Under no circumstances shall
any present or future partner of Landlord (if Landlord is a partnership), or
trustee or beneficiary (if Landlord or any partner of Landlord is a trust), have
any liability for the performance of Landlord’s obligations under this Lease.
Notwithstanding any contrary provision herein, neither Landlord nor the Landlord
Parties shall be liable under any circumstances for injury or damage to, or
interference with, Tenant’s business, including but not limited to, loss of
profits, loss of rents or other revenues, loss of business opportunity, loss of
goodwill or loss of use, in each case, however occurring, or loss to inventory,
scientific research, scientific experiments, laboratory animals, products,
specimens, samples, and/or scientific, business, accounting and other records of
every kind and description kept at the premises and any and all income derived
or derivable therefrom.

29.14 Entire Agreement. It is understood and acknowledged that there are no oral
agreements between the parties hereto affecting this Lease and this Lease
constitutes the parties’ entire agreement with respect to the leasing of the
Premises and supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Landlord to Tenant with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this
Lease. None of the terms, covenants, conditions or provisions of this Lease can
be modified, deleted or added to except in writing signed by the parties hereto.

29.15 Right to Lease. Landlord reserves the absolute right to effect such other
tenancies in the Project as Landlord in the exercise of its sole business
judgment shall determine to best promote the interests of the Building or
Project. Tenant does not rely on the fact, nor does Landlord represent, that any
specific tenant or type or number of tenants shall, during the Lease Term,
occupy any space in the Building or Project.

29.16 Force Majeure. Any prevention, delay or stoppage due to strikes, lockouts,
labor disputes, acts of God, acts of war, terrorist acts, inability to obtain
services, labor, or materials or reasonable substitutes therefor, governmental
actions, civil commotions, fire or other casualty, and other causes beyond the
reasonable control of the party obligated to perform, except with respect to the
obligations imposed with regard to Rent and other charges to be paid by Tenant
pursuant to this Lease (collectively, a “Force Majeure”), notwithstanding
anything to the contrary contained in this Lease, shall excuse the performance
of such party for a period equal to any such prevention, delay or stoppage and,
therefore, if this Lease specifies a time period for performance of an
obligation of either party, that time period shall be extended by the period of
any delay in such party’s performance caused by a Force Majeure.

29.17 Waiver of Redemption by Tenant. Tenant hereby waives, for Tenant and for
all those claiming under Tenant, any and all rights now or hereafter existing to
redeem by order or judgment of any court or by any legal process or writ,
Tenant’s right of occupancy of the Premises after any termination of this Lease.

29.18 Notices. All notices, demands, statements, designations, approvals or
other communications (collectively, “Notices”) given or required to be given by
either party to the other hereunder or by law shall be in writing, shall be
(A) sent by United States certified or registered mail, postage prepaid, return
receipt requested (“Mail”), (B) transmitted by telecopy, if such telecopy is
promptly followed by a Notice sent by Mail, (C) delivered by a nationally
recognized overnight courier, or (D) delivered personally. Any Notice shall be
sent, transmitted, or delivered, as the case may be, to Tenant at the
appropriate address set forth in Section 10 of the Summary, or to such other
place as Tenant may from time to time designate in a Notice to Landlord, or to
Landlord at the

 

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addresses set forth below, or to such other places as Landlord may from time to
time designate in a Notice to Tenant. Any Notice will be deemed given (i) three
(3) days after the date it is posted if sent by Mail, (ii) the date the telecopy
is transmitted, (iii) the date the overnight courier delivery is made, or
(iv) the date personal delivery is made. As of the date of this Lease, any
Notices to Landlord must be sent, transmitted, or delivered, as the case may be,
to the following addresses:

HCP University Center West LLC

c/o HCP, Inc.

462 Stevens Avenue, Suite 107

Solana Beach, California 92075

Attention: Mike Dorris

with a copy to:

HCP University Center West LLC

c/o HCP, Inc.

3760 Kilroy Airport Way, Suite 300

Long Beach, CA 90806-2473

Attn: Legal Department and

Allen Matkins Leck Gamble Mallory & Natsis LLP

1901 Avenue of the Stars, Suite 1800

Los Angeles, California 90067

Attention: Anton N. Natsis, Esq.

29.19 Joint and Several. If there is more than one tenant, the obligations
imposed upon Tenant under this Lease shall be joint and several.

29.20 Authority. If Tenant is a corporation, trust or partnership, each
individual executing this Lease on behalf of Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in the State of California and that Tenant has full right and authority
to execute and deliver this Lease and that each person signing on behalf of
Tenant is authorized to do so. In such event, Tenant shall, within ten (10) days
after execution of this Lease, deliver to Landlord satisfactory evidence of such
authority and, if a corporation, upon demand by Landlord, also deliver to
Landlord satisfactory evidence of (i) good standing in Tenant’s state of
incorporation and (ii) qualification to do business in the State of California.

29.21 Attorneys’ Fees. In the event that either Landlord or Tenant should bring
suit for the possession of the Premises, for the recovery of any sum due under
this Lease, or because of the breach of any provision of this Lease or for any
other relief against the other, then all costs and expenses, including
reasonable attorneys’ fees, incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued on the date of the commencement of such action and
shall be enforceable whether or not the action is prosecuted to judgment.

29.22 Governing Law; WAIVER OF TRIAL BY JURY. This Lease shall be construed and
enforced in accordance with the laws of the State of California. IN ANY ACTION
OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I) THE
JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA, (II) SERVICE
OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN THE INTEREST
OF SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR
SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT’S USE OR OCCUPANCY OF THE
PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY
REMEDY. IN THE EVENT LANDLORD COMMENCES ANY SUMMARY PROCEEDINGS OR ACTION FOR
NONPAYMENT OF BASE RENT OR ADDITIONAL RENT, TENANT SHALL NOT INTERPOSE ANY
COUNTERCLAIM OF ANY NATURE OR DESCRIPTION (UNLESS SUCH COUNTERCLAIM SHALL BE
MANDATORY) IN ANY SUCH PROCEEDING OR ACTION, BUT SHALL BE RELEGATED TO AN
INDEPENDENT ACTION AT LAW.

29.23 Submission of Lease. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of, option for or option
to lease, and it is not effective as a lease or otherwise until execution and
delivery by both Landlord and Tenant.

29.24 Brokers. Landlord and Tenant hereby warrant to each other that they have
had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease, excepting only the real estate brokers or agents
specified in Section 12 of the

 

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Summary (the “Brokers”), and that they know of no other real estate broker or
agent who is entitled to a commission in connection with this Lease. Each party
agrees to indemnify and defend the other party against and hold the other party
harmless from any and all claims, demands, losses, liabilities, lawsuits,
judgments, costs and expenses (including without limitation reasonable
attorneys’ fees) with respect to any leasing commission or equivalent
compensation alleged to be owing on account of any dealings with any real estate
broker or agent, other than the Brokers, occurring by, through, or under the
indemnifying party. The terms of this Section 29.24 shall survive the expiration
or earlier termination of the Lease Term.

29.25 Independent Covenants. This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not be entitled to make any repairs or perform any acts hereunder
at Landlord’s expense or to any setoff of the Rent or other amounts owing
hereunder against Landlord.

29.26 Project or Building Name, Address and Signage. Landlord shall have the
right at any time to change the name and/or address of the Project or Building
and to install, affix and maintain any and all signs on the exterior and on the
interior of the Project or Building as Landlord may, in Landlord’s sole
discretion, desire. Tenant shall not use the name of the Project or Building or
use pictures or illustrations of the Project or Building in advertising or other
publicity or for any purpose other than as the address of the business to be
conducted by Tenant in the Premises, without the prior written consent of
Landlord.

29.27 Counterparts . This Lease may be executed in counterparts with the same
effect as if both parties hereto had executed the same document. Both
counterparts shall be construed together and shall constitute a single lease.

29.28 Confidentiality. Tenant acknowledges that the content of this Lease and
any related documents are confidential information. Tenant shall keep such
confidential information strictly confidential and shall not disclose such
confidential information to any person or entity other than Tenant’s financial,
legal, and space planning consultants.

29.29 Development of the Project.

29.29.1 Subdivision . Landlord reserves the right to subdivide all or a portion
of the buildings and Common Areas. Tenant agrees to execute and deliver, upon
demand by Landlord and in the form requested by Landlord, any additional
documents needed to conform this Lease to the circumstances resulting from a
subdivision and any all maps in connection therewith. Notwithstanding anything
to the contrary set forth in this Lease, the separate ownership of any buildings
and/or Common Areas by an entity other than Landlord shall not affect the
calculation of Direct Expenses or Tenant’s payment of Tenant’s Share of Direct
Expenses.

29.29.2 Construction of Property and Other Improvements. Tenant acknowledges
that portions of the Project may be under construction following Tenant’s
occupancy of the Premises, and that such construction may result in levels of
noise, dust, obstruction of access, etc. which are in excess of that present in
a fully constructed project. Tenant hereby waives any and all rent offsets or
claims of constructive eviction which may arise in connection with such
construction.

29.30 No Violation. Tenant hereby warrants and represents that neither its
execution of nor performance under this Lease shall cause Tenant to be in
violation of any agreement, instrument, contract, law, rule or regulation by
which Tenant is bound, and Tenant shall protect, defend, indemnify and hold
Landlord harmless against any claims, demands, losses, damages, liabilities,
costs and expenses, including, without limitation, reasonable attorneys’ fees
and costs, arising from Tenant’s breach of this warranty and representation.

29.31 Transportation Management. Tenant shall fully comply with all present or
future programs intended to manage parking, transportation or traffic in and
around the Project and/or the Building, and in connection therewith, Tenant
shall take responsible action for the transportation planning and management of
all employees located at the Premises by working directly with Landlord, any
governmental transportation management organization or any other
transportation-related committees or entities. Such programs may include,
without limitation: (i) restrictions on the number of peak-hour vehicle trips
generated by Tenant; (ii) increased vehicle occupancy; (iii) implementation of
an in-house ridesharing program and an employee transportation coordinator;
(iv) working with employees and any Project, Building or area-wide ridesharing
program manager; (v) instituting employer-sponsored incentives (financial or
in-kind) to encourage employees to rideshare; and (vi) utilizing flexible work
shifts for employees.

 

 

 

 

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed
the day and date first above written.

 

LANDLORD:

 

TENANT:

 

 

 

HCP UNIVERSITY CENTER WEST LLC,

 

SORRENTO THERAPEUTICS, INC.,

a Delaware limited liability company  

 

a Delaware corporation

 

 

 

 

 

By:

/s/ Jonathan M. Bergschneider

 

By:

/s/ Henry Ji

Jonathan M. Bergschneider

 

Henry Ji

Print Name

 

Print Name

 

 

 

 

 

Its:

EVP

 

Its:

President & CEO

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

Print Name

 

 

 

 

 

 

 

 

Its:

 

 

 

 

 

 

 

 

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