Exhibit 10.11

 

NET COMMERCIAL LEASE

This Lease dated January 7, 2017, for reference purposes only, is by and between
JCN PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP (“Lessor”) and AUDENTES
THERAPEUTICS, INC.  a Delaware corporation (“Lessee”).

IT IS HEREBY AGREED:

Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the
premises described in Paragraph 1 below for the term and subject to the
covenants, agreements and conditions hereinafter set forth. Lessee covenants, as
a material part of the consideration for this Lease, to keep and perform all
said covenants and conditions by it to be kept and performed and that this Lease
is made upon the condition of such performance.

1.Definitions. Unless the context otherwise specifies or requires, the following
terms shall have the following meanings:

A.Building. The term “Building” shall mean the land and other real property and
improvements located in 528-534 Eccles Avenue, South San Francisco, California,
the surrounding grounds and parking and driveway areas, including the common
easement roadway (“the “Common Roadway”) adjacent to the Building, which
location is shown on Exhibit C attached hereto and incorporated herein by this
reference.

B.Premises. The term “Premises” shall mean those sections of the Building
outlined in yellow on the floor plans attached hereto as Exhibit A, and
incorporated herein by this reference, commonly referred to as 528B Eccles
Avenue, South San Francisco, CA consisting of approximately 39,599 square feet
and the exclusive use of thirty-six (36) (which number includes 14 parking
spaces on which items of personal property belonging to Lessee’s predecessor
in  interest such as generators and trash enclosures) parking spaces marked on
Exhibit B, attached hereto and incorporated herein by this reference, or as
designated from tíme to time by Lessor. For purposes of Lessee’s
responsibilities under this Lease, the Premises also includes the grounds
surrounding the Premises particularly the two exterior concrete blocks and the
walkway located adjacent to the East and North exterior walls of the
Premises.  Lessee shall have access to the Premises 24 hours per day, 7 days per
week.

C.Lessee's Percentage Share. The term “Lessee's Percentage Share”, except when
said term refers to the cost of maintaining the Common Roadway, shall mean
thirty-six and twenty-seven one hundredths percent (36.27%). Lessor and Lessee
acknowledge that Lessee's

 

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Percentage Share, except when said term refers to the cost of maintaining the
Common Roadway, has been obtained by dividing the net rental area of the
Premises, which Lessor and Lessee agree is 39,559 square feet, by the total net
rental area of the Building, which Lessor and Lessee agree is 109,056 square
feet, and multiplying such quotient by 100.  Lessee’s Percentage Share shall not
be subject to change, except for physical additions or deletions to the Premises
or Building, or caused by condemnation or destruction.

D.Lessee's Percentage Share of Common Roadway. The term “Lessee's Percentage
Share” when said term refers to the cost of maintaining the Common Roadway shall
mean twenty-one and seven one hundredths percent (21.07%). Lessor and Lessee
acknowledge that Lessee's Percentage Share, when said term refers to the cost of
maintaining the Common Roadway, has been obtained by dividing the net rental of
the Premises, which Lessor and Lessee agree is 39,559 square feet, by the total
square footage of the two buildings which use the Common Roadway which Lessor
and Lessee agree is 187,770, and multiplying such quotient by 100.

E. Common Area Maintenance and Repair Costs. The term "Common Area Maintenance
and Repair Costs ”  shall mean all commercially reasonable costs of maintaining
and repairing, including the cost of any maintenance or service contract, the
Building's water, sewer, ventilating and air-conditioning systems (unless such
system only serves the Premises, or any part thereof, in which event Lessee
shall maintain said system), common entryways, doors and passage ways, the
plumbing and sewer system and sewer lines which extend from the Premises and the
Building, the grounds surrounding the Building (including landscaping whether
located adjacent to the Building or elsewhere on the parcel on which the
Building is located), the parking areas and driveways and the Common Roadway
(including but not limited to the resealing, re-striping and re-paving  of all
such areas and filling in pot holes), fences, the drain and gutter pipes at the
roof level, and all other Common Areas. Such term shall also include the cost of
washing the exterior walls or painting or repairing such walls for the purpose
of removing any graffiti which may appear thereon and management fee of three
and three quarters percent (3.75%) of the Base Monthly Rent each month during
the term of this Lease if John C. Nickel should die or become incapacitated to
the extent he cannot reasonably manage the Building or if the Building is sold.

(1)Common Area Maintenance and Repair Costs shall not include the following:

 

(a)The cost of installing, operating and maintaining any

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specialty service, such as daycare, cafeteria, athletic or recreational club;

(b)The cost of any work or service performed for any tenant of the Building
(other than Lessee) to a materially greater extent or in a materially more
favorable manner than that furnished generally to the tenants and other
occupants (including Lessee);

(c)The cost of any repairs, alterations, additions, changes, replacements and
other items which are made in order to prepare for a new tenant’s occupancy
unless any such cost is required because of Alterations undertaken to the
Premises by Lessee;

(d)The cost of any repair in accordance with the casualty and condemnation
sections of this Lease, except for deductibles under any insurance policy
carried by Lessor;

(e)Any costs representing an amount paid to a corporation related to Lessor
which is in excess of the amount which would have been paid in the absence of
such relationship;

(f)Interest and penalties due to late payment of any amounts owed by Lessor,
except such as may be incurred as a result of Lessee’s failure to timely pay
Lessee’s Percentage Share of Real Property Taxes, Insurance premiums or Common
Area Maintenance and Repair Costs;

(g)Costs related to the existence and maintenance of Lessor as a legal entity,
except to the extent attributable to the operation and management of the
Premises or Building;

 

(2) Lessee, at its sole cost and expense shall have the right during business
hours to examine and/or audit the books and documents evidencing the Common Area
Maintenance and Repair Costs for both the Building and the common roadway once
every calendar year.   Lessee at Lessee’s sole cost may also have the records
maintained by Lessor for the Common Area Maintenance and Repair Costs audited by
a reputable certified public accountant once every calendar year.    If any such
audit should disclose that Lessee has been overcharged by Lessor for Lessee’s
Percentage Share of Common Area Maintenance and Repair Costs for the Building or
Lessee’s Common Area Maintenance and Repair Costs for the common roadway for any
year, Lessee shall be credited for such overpayment, plus interest at the rate
of 10% per annum. If such audit should disclose that Lessee has been
undercharged by Lessor for any year, then Lessee shall pay to Lessor all such
undercharged amounts within thirty (30) days with interest thereon at 10%

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per annum. If the amount of any overcharge for the combined total of Lessee’s
Percentage Share of Common Area Maintenance and Repair Costs and maintaining the
Common Roadway exceeds ten percent (10%) of Lessee’s Percentage Share of Common
Area Maintenance Costs and the cost of maintaining the Common Roadway for that
year, Lessor shall promptly reimburse Lessee for the reasonable costs of such
audit. The provisions of this Paragraph 1E(2) shall survive the expiration or
earlier termination of this Lease.

2.Term; Delivery of Possession

A.The term of this Lease shall begin on June 1, 2017 (“Commencement Date”), and
shall end, unless sooner term terminated as hereinafter provided, on May 31,
2027.  

B.Lessor and Lessee acknowledge that Lessee has been in possession of a portion
of the Premises as a subtenant of a prior tenant pursuant to a subletting
agreement with that Tenant (the “Sublease”).     Therefore, so long as the
Sublease is not terminated prior to its expiration date, Lessee will be deemed
to have received possession of the portion of the Premises it occupies pursuant
to the Sublease.

C.If possession of that portion of the Premises which Lessee does not occupy
pursuant to the Sublease is not delivered to Lessee on the Commencement Date,
Base Monthly Rent of $405.00 per day shall be abated until the date on which
Lessor delivers possession of that portion of the Premises to Lessee.

3.Rent and General Provisions Regarding Payments.

A.   Lessee shall pay the following rent (“Base Monthly Rent”) to Lessor in
advance no later than the first day of each month during the term of this Lease,
commencing on the Commencement Date, for the rental of the Premises (except as
provided in subparagraph 2C above):

From June 1, 2017, through May 1, 2018$52,945.00 per month

From June 1, 2018, through May 1, 2019$54,534.00 per month

From June 1, 2019, through May 1, 2020 $56,170.00 per month

From June 1, 2020  through May 1, 2021$57,855.00 per month

From June 1, 2021  through May 1, 2022$59,591.00 per month

From June 1, 2022  through May 1, 2023$61,378.00 per month

From June 1, 2023  through May 1, 2024$63,220.00 per month

From June 1, 2024 through May 1, 2025$65,117.00 per month

From June 1, 2025 through May 1, 2026$67,070.00 per month

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From June 1, 2026 through May 1, 2027 $69,082.00 per month

B.All payments of Base Monthly Rent and all other sums due to be paid by Lessee
to Lessor under this Lease, all of which are sometimes collectively referred to
as “rent”, shall be paid to Lessor, without prior demand, prior notice,
deduction or offset (except as may be otherwise provided in this Lease), in
lawful money of the United States of America at Lessor’s address for notices
hereunder (or to such other person or at such other place as Lessor may from
time to time designate in writing).   Lessee may also pay rent by automatic
clearing house (“ACH”) transfer. All rent, if not received by Lessor at said
address or by ACH transfer within five (5) calendar days of the date the payment
is due (such five (5) day period to include the due date), shall bear interest,
from the due date until so received, at the rate of ten percent (10%) per annum.
Lessee shall pay to Lessor the sum of Thirty Dollars ($30.00) for each check
tendered by Lessee which is not honored for payment by Lessee's bank for
whatever reason and the statutory penalties if Lessor elects to pursue said
remedy.   In addition, Lessee shall pay to Lessor a late charge of five percent
(5%) of the total amount of the payment due for each payment of Base Monthly
Rent or other sum due pursuant to this Lease if said sum is not received by
Lessor within five (5) calendar days of the date the payment is due (such five
(5) day period to include the due date). Lessor and Lessee agree that Lessor
will incur damages and expenses on account of any such late payment, including
but not limited to added staff time to collect the sums due, accounting and
legal expenses and interest or other charges, and that the amount of such
damages and expenses will be extremely difficult and impractical to ascertain.
Accordingly, the parties agree that the five percent (5%) late charge is a
reasonable estimate of said expenses and damages.   

C.All sums received by Lessor from Lessee shall be applied first to the oldest
outstanding monetary obligation owed by Lessee to Lessor and any other
designation of the manner in which said payment is to be applied by Lessee shall
be void and of no effect.

D.If the term of this Lease commences on a day other than the first day of a
calendar month or ends on a day other than the last day of a calendar month, all
rent due for such fractional month or months shall be prorated based on the
actual number of days in that month.

E.Lessee shall pay to Lessor Lessee’s Percentage share of Common Area
Maintenance and Repair Costs and Lessee’s Percentage Share of the cost of
maintaining and repairing the Common Roadway, computed and billed quarterly in
arrears.

4.Use. The Premises may only be used for the research, development and
manufacturing of human pharmaceutical products using gene therapy technology and
related office

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and distribution functions.   The Premises shall be used for no other purpose,
without the prior written consent of Lessor which consent shall not be
unreasonably withheld, conditioned or delayed.   Lessor has made no warranty or
representation that the Premises may be used for the use Lessee intends to make
of the Premises and further makes no representation or warranty regarding the
legality of the improvements made by the prior tenant to the Premises.

5.Security Deposit and Reporting Requirements.

A. No later than fifteen (15) business days prior to the Commencement Date,
Lessee shall deposit with Lessor the sum of $600,000.00 as a security deposit
(the “Security Deposit”). Of the required sum, at least $300,000 shall be
immediately available funds (i.e.., wire transfer, cashiers’ check or certified
check).  The balance of Security Deposit may be in the form of a letter of  
credit containing no more conditions that those contained in the letter of
credit given by Solstice Neurosciences, LLC to Lessor under the sublease
pursuant to which Lessee occupies the Premises prior to Commencement Date.  The
Security Deposit shall be held by Lessor as security for the faithful
performance by Lessee of all of the provisions of this Lease to be performed or
observed by Lessee. No portion of the Security Deposit may be used by Lessee for
any monetary obligation owed by Lessee during the term of this Lease and any
extension thereof, particularly the rent due for the last month of the term of
this Lease or any extension thereof. If Lessee fails to pay rent or other
charges hereunder, or otherwise defaults with respect to any provision of this
Lease, Lessor may use, apply or retain all or any portion of the Security
Deposit for the payment of said obligation or of any other sum to which Lessor
may become obligated by reason of Lessee's default, or to compensate Lessor for
any loss or damage which Lessor may suffer thereby.

B.    If Lessor so uses or applies all or any portion of the Security Deposit
during the term of this Lease or any extension thereof, Lessee shall within
fifteen (15) days after demand therefor deposit cash with Lessor in an amount
sufficient to restore the Security Deposit to the full amount thereof. Lessee's
failure to do so shall be deemed a failure to pay rent and shall constitute a
material breach of this Lease. Lessor shall not be required to keep the Security
Deposit separate from its general accounts.

C.   If Lessee performs all of Lessee's obligations hereunder, the Security
Deposit, or so much thereof as has not theretofore been applied by Lessor, shall
be returned, without payment of interest or other increment for its use, to
Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's
interest hereunder) after the expiration of the term hereof and

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after Lessee has vacated the Premises and they are returned to Lessor in the
condition in which they are obliged to be returned to Lessor. No trust
relationship is created herein between Lessor and Lessee with respect to the
Security Deposit.

D.   If Lessee ceases being a publicly traded company or if its financial
statements are not readily available to Lessor, on the internet, Lessee will
provide Lessor with one mid fiscal year interim complete financial statement and
one audited annual statement, within 10 days of their preparation, each year
throughout the term of the Lease including any option period, which statements
shall be kept confidential by Lessor and Lessor’s consultants.

6.Limitations on Use. Lessee's use of the Premises shall be in accordance with
the following:

A.Cancellation of insurance; increase in insurance rates. Lessee shall

not do, bring, or keep anything in or about the Premises that will cause a
cancellation of any insurance covering the Premises and the Building.   If the
rate of any insurance carried by Lessor is increased as a result of any activity
of Lessee at the Premises, or if any lender of  Lessor shall require Lessor to
carry additional insurance as a result of any activity of Lessee at the
Premises, Lessor shall notify Lessee of said event at least fifteen (15)  days
prior to the date on which such premium is due and Lessee shall pay a sum
equal  to the total difference between the original premium and the increased
premium to Lessor within five (5)  days before the date Lessor is obligated to
pay said premium on the insurance. If Lessee should so request, Lessor shall
deliver to Lessee a statement from Lessor’s insurance carrier or lender stating
that the rate increase or requirement of additional insurance was caused
primarily by an activity of Lessee on the Premises.

B.Compliance with Laws. Lessee shall, at Lessee’s sole cost and expense, comply
with all laws, governmental regulations and restrictions of record concerning
the Premises or Lessee’s use of and activities in the Premises, including
without limitation, the obligation at Lessee’s cost to alter, maintain, or
restore the Premises, in compliance and conformity with all laws and
governmental requirements relating to the condition, use, or occupancy of the
Premises during the term of this Lease or any extension thereof, whether
foreseen or unforeseen, regardless of the cost, and regardless of when during
the term the work is required, including, without limitation the United States
Americans With Disabilities Act, California Title 24 of the California Building
Code, and all laws regulating the production of pharmaceuticals or drugs and
regulations issued by the Food and Drug Administration of the United States
Government or any other state, federal or local  governmental agency with
jurisdiction with respect thereto.  

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C.Limits on Hazardous Materials. Lessee shall not store, or permit the storage,
or use, or permit the use, of Hazardous Materials in such a manner which would
result in contamination, in violation of any law or regulation, described in
Paragraph 6.C.(1) below, of the Building, the Premises, or the surrounding soil
or air, or cause a substantial risk of fire, explosion, or release of hazardous,
noxious or corrosive fumes in or about the Premises or the Building or within
fifty (50) feet thereof, or conduct, or permit to be conducted, any hazardous
activities which would involve contamination of the Building, Premises or
surrounding soil or air in violation of any law or regulation described in
Paragraph 6.C.(1) below, or cause a substantial risk of fire, explosion, flood
or noxious, hazardous, or corrosive fumes in or about the Premises or Building
or the Common Roadway or within fifty (50) feet thereof or endanger the good
health of any occupant or invitee to the Building or Premises or user of Common
Roadway. In addition to, and not by way of limitation of, Lessee’s obligations
set forth in this Lease, Lessee shall at all times comply with all local, state
and national laws regarding the manufacture, transportation, storage, use and
disposal of all Hazardous Materials.

(1)As used in this Lease, the term “Hazardous Material (s) ” shall include the
following: any substance or material defined as “hazardous” or “toxic” by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9601 et seq.), as amended from time to time; the Hazardous
Materials Transportation Act (42 U.S.C. Section 1801 et seq.), as amended from
time to time; the Resource Conservation and Recovery Act (42 U.S.C. Section 6901
et seq.), as amended from time to time; the Hazardous Waste Control Law,
California Health & Safety Code Section 25100 et seq., as amended from time to
time; the Safe Drinking Water and Toxic Enforcement Act of 1986, as amended from
time to time; any rules and regulations promulgated under the foregoing
statutes; rules and regulations of the Environmental Protection Agency, the
California Water Quality Control Board, the Department of Labor, the California
Department of Industrial Relations, the Department of Transportation, the
Department of Agriculture, the Consumer Product Safety Commission, the
Department of Health and Human Services, the Food and Drug Administration any
other governmental agency now or hereafter authorized to regulate or protect the
environment or human health or safety; and any other federal, state, or local
law, statute, ordinance, or regulation now in effect or later enacted to protect
the environment or human health or safety (collectively, “Environmental
Laws”).  Lessor represents to Lessee that as of the Commencement Date it is not
in default under any deed of trust encumbering the Building, that the Premises
are not subject to any pending litigation, and there is no right of first
refusal to lease or purchase the Building.

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(2)Lessee shall keep adequate records to demonstrate that all Hazardous
Materials are being properly handled, used, stored, transported and disposed of
in accordance with all applicable laws and regulations and shall make said
records available to Lessor promptly after receiving a request therefor from
Lessor.  No more than once per year, Lessor shall have the right to appoint a
consultant, at Lessee's expense, whose fee shall not exceed $5,000.00, upon no
less than thirty (30) days’ written notice to Lessee, to conduct an
investigation to determine whether Hazardous Materials are located in or about
the Premises or whether Hazardous Materials have been released in such a manner
as would violate applicable laws and regulations, and determine the corrective
measures, if any, required to remove such Hazardous Materials. Lessee, at its
expense, shall comply with all recommendations of such consultant.   If and to
the extent Lessee is not in violation of applicable laws. Lessor and Lessor’s
consultant shall use good faith efforts not to unreasonably disturb Lessee’s use
and enjoyment of the Premises during any such investigation.

(3)Without limiting the applicability of any other indemnity provision of this
Lease, Lessee shall indemnify, defend and hold Lessor harmless from all costs,
expenses and liabilities, including reasonable attorneys’ fees as incurred by
Lessor, arising from any violation by Lessee of the provisions of this
Subparagraph 6C.

(4)Without limiting the foregoing, in the event Hazardous Materials brought onto
the Premises by, or with the knowledge of, Lessee result in contamination of the
Building, the Premises or any air, water or soil in or about the Building or the
Premises in violation of any law or regulation described in Paragraph 6.C.(1)
(except for Hazardous Materials that pre-existed before June 30, 2015), Lessee
shall, at its sole cost, promptly take all actions necessary to return the
Premises and/or the Building to the condition existing prior to the
contamination and into compliance with all laws and regulations described in
Paragraph 6.C.(1). Any remedial action or disposal shall be undertaken in
accordance with all applicable laws and regulations.

(5)Lessee shall promptly notify Lessor in writing of any discovery by Lessee,
its agents or employees, of the release of any Hazardous Material onto the
Premises or the Building and transmit to Lessor copies of all non-routine
reports from any governmental agency having jurisdiction over any activity of
Lessee in the Premises regarding any violations or suspected violations of any
laws or regulations governing Lessee’s use of and activities within the
Premises. Lessee shall furthermore promptly notify in writing Lessor of any
non-routine inquiry, test, investigation or enforcement proceeding by or against
Lessee or the Premises concerning a

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Hazardous Material (each, a “Proceeding”). Lessee shall transmit to Lessor
copies of any reports from any governmental agency having jurisdiction in
connection with any such Proceeding. Lessee agrees that Lessor, as owner of the
Building, shall have the right to take such actions as Lessor reasonably
believes are necessary to protect its interest in the Building with respect to
any such Proceeding. Lessee acknowledges that Lessor, as the owner of the
Building, at its election, shall have the sole right, at Lessee’s expense, to
negotiate, defend, approve and appeal any action taken or order issued in
connection with any such Proceeding or with regard to a Hazardous Material by an
applicable governmental authority.

D.Waste; Nuisance. Lessee shall not use the Premises in any manner that will
constitute waste or nuisance (including, without limitation, the use of
loudspeakers or sound or light apparatus that can be heard or seen outside the
Premises, or the emission of noxious odors from the Premises) or interference
with use or access of other tenants in the Building or of owners or occupants of
adjacent properties. In the event any use of the Premises by Lessee attracts the
attention of the public and the public enters or attempts to enter the Premises,
the Building or the grounds surrounding the Building in a manner that would, if
done by Lessee or any of Lessee's invitees, violate the provisions of
Subparagraph E below, Lessee shall take all reasonable steps to abate such
activities which shall be deemed to be a nuisance and Lessor shall allow Lessee
a reasonable time to address such issues and take corrective measures.

E.Compliance with Rules Issued by Lessor. Lessee shall use the driveway(s) and
Common Roadway so as not to impede any ingress or egress by other vehicles, and
shall park all vehicles only in areas designated for such vehicles. Lessee shall
also comply with all reasonable rules which have been or which may hereinafter
be promulgated by Lessor regarding the use of the Common Roadway, driveways and
parking areas, which rules will apply equally to all who have rights to use the
Common Roadway. Lessee hereby consents to Lessor towing any such vehicles which
do not comply with this subparagraph or the above described rules. Lessee shall
also refrain from storing any property on the grounds surrounding the Premises
or on driveways or parking areas or allowing the use of any such grounds except
as means for ingress and egress from the Premises or the Building.

F.No Retail Sales. Lessee shall not conduct any retail sales of any goods or
products from the Premises.

7.Personal Property Taxes. Lessee shall pay before delinquency all taxes,
assessments, license fees and other charges that are levied and assessed against
Lessee's personal

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property installed or located in or on the Premises, and that become payable
during the term. Within thirty (30) days after written request by Lessor, Lessee
shall furnish Lessor with satisfactory evidence of these payments.

8.Real Property Taxes Payable by Lessee.

A.Lessee shall pay to Lessor as additional rent, Lessee’s Percentage Share of
all Real Property Taxes. As used herein, the term “Real Property Taxes” shall
include any form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license fee, commercial rental tax, improvement bond or
bonds, levy or tax (other than: (i) any penalties or interest on taxes except to
the extent caused by Lessee’s failure to pay any part thereof; (ii) documentary
transfer taxes imposed on the sale or exchange of the Building; and (iii)
franchise, inheritance, death, gift, income or estate taxes) imposed upon the
Building by any authority having the direct or indirect power to tax, including
any city, county, state, or federal government, any school, agricultural,
sanitary, fire, street, drainage, or other improvement district thereof, levied
against any legal or equitable interest of Lessor in the Building or any portion
thereof, Lessor's right to rent or other income therefrom , and/or Lessor's
business of leasing the Premises or Building.  The term “Real Property Taxes”
shall also include any tax, fee, levy, assessment or charge, or any increase
therein, imposed by reason of events occurring, or changes in applicable law
taking effect during the term of this Lease, including but not limited to a
change in the ownership of the Building or the improvements therein, the
execution of this Lease, or any modification, amendment or transfer thereof, and
whether or not contemplated by the parties to this Lease.  

B.Lessee’s liability hereunder to pay any tax shall be prorated on a daily basis
to account for any fractional portion of a tax period included in the term of
this Lease term or any extension thereof at its commencement and expiration.

C.Lessor shall notify Lessee, at least twenty-five (25) days before any taxes
must be paid before incurring a penalty, of Lessee’s Percentage Share of the
Real Property Taxes and whether Lessor has elected to pay said taxes in the
permitted installments or in one lump sum prior to the date on which the first
installment is due. Lessee shall pay Lessee’s Percentage Share of said taxes as
shown in Lessor's notice at least ten (10) days prior to the date said taxes
must be paid before incurring a penalty. If Lessee is given at least twenty-five
(25) days’ notice prior to the date on which said taxes must be paid before
incurring a penalty and Lessee fails to pay the sums required within ten (10)
days of the date of the written notice, Lessee shall pay to

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Lessor, as additional rent, all interest and penalties assessed by the taxing
authority if Lessor has failed to make the timely payment of said taxes, in
addition to the late charge provided for in Paragraph 3.

D.Lessee shall also reimburse Lessor for all of any increases in Real Property
Taxes caused by an increase in the valuation of the Building due to the
construction by Lessee of improvements to the Premises and measured by the value
of such increased valuation.  

9.Repairs.

A.Lessee's Responsibilities.

(1)On the Commencement Date, Lessee shall accept the Premises in their “as is”
condition and in the condition in which Lessor is obligated to deliver them.
Lessee acknowledges that it has been in possession of the Premises since June
30, 2015, and that Lessor has not had possession of the Premises nor any
responsibility to repair or maintain the Premises since 1997.  Lessee shall, at
all times during the term hereof, and at Lessee’s sole cost and expense, keep
the Premises and every part thereof in good condition and repair, ordinary wear
and tear, damage by fire, earthquake, or act of God excepted, Lessee hereby
waives all rights to make repairs at the expense of Lessor or in lieu thereof to
vacate the Premises as provided by California Civil Code Section 1942 or any
other law, statute or ordinance now or hereafter in effect.   Said obligation on
the part of Lessee includes, but is not limited to, maintaining, repairing
and/or replacing internal columns, windows, fixtures, ballasts, lamps and light
bulbs, roll-up doors, and the plumbing, electrical, and heating, ventilating and
air-conditioning systems serving exclusively the Premises (whether or not the
damaged portion of the Premises or the means of repairing the same are
reasonably or readily accessible to Lessee and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises).  

(2)Unless otherwise directed by Lessor in accordance with the terms of Paragraph
10, Lessee shall, at the end of the term of this Lease or any extension thereof,
surrender to Lessor the Premises and all alterations, additions and improvements
thereto in good condition which condition includes, without limitation,
replacement of burnt-out lamps and ballasts, all roll up doors and dock levelers
serviced and in good repair, the concrete floor in smooth condition and all
interior walls in good condition and repair. Notwithstanding the foregoing,
Lessee may remove Lessee’s trade fixtures upon termination of the Lease, so long
as Lessee repairs any damage caused thereby to the Premises.  Lessor has no
obligation and has made no promise to

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alter, remodel, improve, repair, decorate or paint the Premises or any part
thereof.   No representations respecting the condition of the Premises or the
Building have been made by Lessor to Lessee, except as specifically herein set
forth.

(3)Commencing on the Commencement Date, Lessee shall pay to Lessor Lessee's
Percentage Share of Common Area Maintenance and Repair Costs as additional rent
hereunder within fifteen (15) days of receiving a written notification from
Lessor of Lessee’s Percentage Share of said costs.

B.Lessor's Responsibilities.

(1)Lessor shall at Lessor's expense (which shall not be included in Common Area
Maintenance Costs unless expressly permitted pursuant to Section 1E above)
maintain the roof (including the roof membrane), the foundation, the structural
portions of the Building excluding internal support columns, and the exterior
walls of the Building. Lessor’s financial responsibility for the roof is for the
structure and membrane alone and does not include the costs of the maintenance
of the drain pipes from the roof or other structures appurtenant thereto.
Lessor’s financial responsibility for the exterior walls does not include
maintenance, repair or replacement of the interior portion of the exterior
walls, the interior partition walls, studs, sheet rock, or any windows, window
frames, or plate glass or doors or any damage directly caused by the act or
omission of Lessee or the costs of repairing any vandalism to the exterior walls
or roof - all of which remain the responsibility of Lessee. Except in cases of
an emergency posing a danger to persons or property or which materially
interfere with the conduct of Lessee’s business, Lessor shall have no obligation
to make repairs under this subparagraph until twenty (20) days after receipt of
written notice of the need for such repairs from Lessee.   If the repairs cannot
be completed within twenty days after receipt of such notice, Lessor shall not
be in default hereunder if Lessor commences the repairs within the twenty days
and continues thereafter to complete the repairs or if said repairs cannot be
completed timely due to factors beyond the reasonable control of Lessor.  

(2)Lessor, at Lessee’s expense shall maintain and repair all common areas
(including lobbies and passage ways), grounds (including landscaping, parking
areas, driveways and fences), drain pipes from the roof or other structures
appurtenant thereto, any utility systems or services or portions thereof which
serve the Building as well as the Premises and any damage caused by vandalism to
the roof or exterior walls. If Lessee damages the internal columns in the
Premises and fails within thirty (30) days after written notice from Lessor to
commence the

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repair or replacement of said columns, Lessor at Lessor's option may enter the
Premises and cause said repairs to be made. Lessee shall reimburse Lessor for
the full cost of said repairs within thirty (30) days of being given written
notice by Lessor of the amount of the cost of said repairs.

(3)If Lessor (or its employees, agents or contractors) undertakes work to the
Building and that work directly causes damage to utility lines serving the
Premises resulting in a termination of such utilities serving the Premises which
causes Lessee to cease its operations in the Premises, if said interruption
lasts longer than two business days,  Lessee shall be entitled to a rebate of
Base Monthly Rent for each additional business day it does not have utility
services and it cannot operate its business in the Premises.  

10.Alterations.

A.Lessee shall not make any alterations or additions to the Premises
(“Alterations”) without first obtaining Lessor's written consent. To obtain such
consent, Lessee shall comply with each and every provision of the Work Letter
attached hereto as Exhibit D and incorporated herein by this reference and any
other agreements between Lessor and Lessee and/or other parties pertaining to
the improvement, alteration, or maintenance of the Premises.     

B.Any permitted alterations shall remain on and be surrendered with the Premises
on expiration or termination of the term of this Lease or any extension thereof,
except that (1) Lessor may elect at least one hundred and eighty (180) days
prior to the expiration of the term or any extension thereof to require Lessee
to remove any or all alterations that Lessee or its predecessor in interest has
made to the Premises; or (2) Lessor may immediately demand the removal of such
alterations if this Lease is terminated prior to the end of the term of the
Lease or any extension thereof or if Lessee abandons the Premises.   If Lessor
requires the removal of any or all of Lessee’s Alterations pursuant to the terms
of this Paragraph 10, Lessee at its sole cost shall restore the Premises to
empty warehouse space or the condition specified by Lessor before the last day
of the then existing term or the deadline set forth in Lessors’ notice if this
Lease is terminated prior the expiration of its term or any extension thereof.
With respect to any improvement that involved the installation of bolts or other
insertions into the concrete floor of the Premises,  if Lessor requires the
removal of the improvements associated with said bolts or insertions,   Lessee
agrees that it must return the concrete slab to a flat, useable surface by
removing each anchor bolt or insertion so that its top is below the top of the
concrete slab, filling the spalled areas and any holes and leveling surface with
epoxy grout to make the resulting concrete slab level throughout and thereafter
cleaning and sealing the concrete slab with a product

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of a quality equal to or superior to All Crete" or Thompson Concrete Seal. If
Lessee fails to remove any of its alterations designated by Lessor and to so
restore the Premises and Lessor incurs costs to restore the Premises or to
remove additions or alterations made by Lessee, Lessee shall reimburse Lessor
for all such costs incurred and shall also pay Lessor the current amount of Base
Monthly Rent prorated for each day after the expiration of the then-current term
that Lessor must occupy the Premises for the purpose of removing Lessee's
Alterations or making repairs.

C.Lessor’s consent shall not be required for any single improvement of a
cosmetic nature costing less than $100,000 in any twelve month period.

D.If Lessee makes any Alterations to the Premises as provided in this Paragraph
10, the Alterations shall not be commenced until five (5) business days after
Lessor has received written notice from Lessee stating the date the installation
of the Alterations are to commence so that Lessor may post and record an
appropriate notice(s) of non-responsibility.

E.Lessee’s right to make Alterations, and the consent of Lessor given as
required by this Paragraph 10 and the Work Letter, shall be deemed conditioned
upon Lessee complying in the making of such Alterations with all requirements of
federal, state and local laws and ordinances governing the manner in which such
Alterations are made. Lessee shall complete of any such work according to
applicable building codes and other applicable governmental regulations in a
worker-like and expeditious manner.

F.Lessee shall pay all costs for any and all Alterations done by it or caused to
be done by it on the Premises as permitted by this Lease. Lessor shall have no
obligation or responsibility to make any alterations or improvements to the
Premises except as specifically provided in this Lease. Lessee shall keep the
Premises free and clear of all mechanics liens resulting from any Alterations
done by or for Lessee. Lessee shall have the right to contest the correctness or
the validity of any such lien if, upon demand by Lessor, Lessee promptly
procures (in no event later than 20 days from the date of the recordation of the
lien) and records a lien release bond issued by a corporation authorized to
issue surety bonds in California in an amount equal to one and one-half times
the amount of the claim of lien. The bond shall meet the requirements of Civil
Code Sections 8150 and 8152 and shall provide for the payment of any sum that
the claimant may recover on the claim (together with costs of suit, if it
recovers in the action).

G.As a condition for giving its consent for any non-cosmetic Alterations costing
in excess of $500,000 for any improvement or construction projects within any
twelve

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(12) month period,  Lessor may require that Lessee either: (1) create an escrow
account with a professional escrow company for the payment of all contractors
and equipment suppliers and make a deposit into that account of the full amount
of the anticipated cost of said Alterations; or (2) obtain a completion bond in
the full amount of the cost of the Alterations.   Following any deposit into an
escrow account, Lessee may only withdraw such said funds from the escrow account
in accordance with the terms of the escrow agreement entered into between Lessor
and Lessee and the escrow company, provided that said agreement provides that no
funds will be released to Lessee unless and until all costs of the subject
Alterations project have been paid.   If Lessee is required to and elects to
obtain a completion bond, the form of the bond and its amount must be reasonably
approved in advance by Lessor.

H.If at any time a mechanics or materialman’s lien is recorded against the
Building and Lessee fails to procure and record a lien release bond issued by a
corporation authorized to issue surety bonds in California in an amount equal to
one and one-half times the amount of the claim of lien which bond meets the
requirements set forth in Subparagraph F above,  Lessee may not make any further
non-cosmetic Alterations to the Premises, or purchase any additional equipment
which purchase would expose the Building to a lien resulting from the purchase
and installation of equipment in an amount in excess of $50,000.00 in any twelve
month period without first obtaining the prior approval of Lessor.   Lessor may,
as a condition for giving its approval, require that Lessee meet the conditions
set forth in subparagraph G above (i.e., creating an escrow account or obtaining
a completion bond).

11.Utilities and Services. Lessee shall make all arrangements for and pay for
all utilities and services furnished to or used by it at or about the Premises,
including, without limitation, gas, electricity, water, telephone service, meter
fees, and trash collection, and for all connection charges.  The foregoing
includes the requirement that Lessee install a water meter or sub-meter to
monitor all of Lessee’s use of water in the Premises.   Lessor shall not be
responsible for or have any liability whatsoever to Lessee arising in any way
from any interruption of any utility or service furnished to the Premises
regardless of duration and regardless of whether the interruption in any way
affects Lessee’s ability to conduct its business within the Premises, unless the
interruption was directly caused by some work directly undertaken by Lessor (or
its employees, agents or contractors) at the Premises or at the Building, in
which event the remedy stated in paragraph 9.B.(3) above shall apply.

12.Exculpation of Lessor. Except to the extent caused by the gross negligence or

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willful misconduct of Lessor, its employees, agents or contractors, Lessor shall
not be liable to Lessee for any damage to Lessee or Lessee’s property from any
cause. Lessee waives all claims against Lessor for damage to person or property
arising for in any manner and for any reason, except that Lessor shall be liable
to Lessee for damage to Lessee resulting from the  willful neglect or gross
negligence of Lessor or its employees, agents or contractors.  

13.Indemnity. Lessee shall be liable to Lessor for damage resulting from the
negligence or misconduct of Lessee or its employees, agents or contractors.  
Lessee shall indemnify, defend and hold Lessor, its agents, assigns, employees
and contractors, harmless from all damages arising out of any damage to any
person or property occurring in or about the Premises during the term of this
Lease of any extension thereof and from all claims arising from the business of
Lessee or its use and occupancy of the Premises.   Lessor shall indemnify,
defend and hold Lessee, its agents, assigns, employees and contractors, harmless
from all damages arising out of any damage to any person or property occurring
in or about the common areas of the Building or the Common Roadway during the
term of this Lease and any extension thereof arising from the gross negligence
or willful misconduct of Lessor or its employees, agents or contractors. .

14.Insurance.

A.Lessee’s Liability Insurance. Throughout the term of this Lease and any
extension thereof, Lessee shall, at its sole expense, maintain primary
commercial public liability insurance, including coverage for bodily injury,
property damage, emotional distress, wrongful death and personal injury, with a
combined single combined liability limit of not less than Five Million Dollars
($5,000,000), insuring Lessor and Lessee against all liability of Lessee and its
employees, agents and authorized representatives arising out of and in
connection with Lessee's use or occupancy of the Premises.   Lessor and, at
Lessor’s request its lender, shall be named as an additional insured under all
policies used to meet this requirement. Lessee shall deliver to Lessor on or
before the Commencement Date and annually thereafter Certificates of Insurance
evidencing that all insurance required to be maintained by Lessee under this
Lease has been obtained and is in full force and effect.

B.Lessee’s Personal Property, Fire and Plate Glass Insurance. Lessee, at its
sole expense, shall maintain on all its personal property, Lessee's
improvements, and alterations, in, on, or about the Premises, a policy of
standard fire insurance, providing “all risk” or “special form” coverage
(including coverage for vandalism and malicious mischief), to the extent of at
least one hundred percent (100%) of their full replacement value. The proceeds
from any such

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policy shall be used by Lessee for the replacement of its personal property and
for the restoration of its improvements or alterations. Lessor shall be named as
an additional insured on all insurance maintained pursuant to this Subparagraph
on Lessee’s leasehold improvements and any alterations made to the Premises.

C.Fire, Multi-Peril Insurance on Premises. Lessor shall maintain on the Building
with a combination of primary and excess liability coverage a Commercial Package
Policy, including but not limited to standard fire, multi-peril, income
replacement and rental loss, and excess liability insurance, to the extent of at
least full replacement value of the Building and commercial general Liability
coverage in an amount of not less than $5,000,000.    Lessor may also obtain
earthquake insurance for damage to the Building and Lessee shall be required to
pay Lessee's Percentage Share of any such premium. The insurance policy or
policies shall be issued in the name of Lessor, and Lessor's lender, if
required.

D.Payment of Premiums. Lessee shall pay to Lessor Lessee's Percentage Share of
all premiums paid by Lessor for maintaining the insurance described in
subparagraph C above. Reimbursement shall be made by Lessee within fifteen (15)
after Lessor notifies Lessee of Lessee's Percentage Share of such costs, which
notice shall include a copy of the invoice for the premium.   Lessee's
obligation to pay the insurance premium costs shall be prorated for any partial
year at the commencement and expiration of the term.

E.Waiver of Subrogation. The parties release each other, and their respective
authorized representatives, from any claims for damage to any person or to the
Premises and to the fixtures, personal property, Lessee's improvements, and
alterations of either Lessor or Lessee in or on the Premises that are caused by
or result from risks insured against under any insurance policies carried by the
parties at the time of any such damage.  Each party shall cause each insurance
policy obtained by it to provide that the insurance company waives all right of
recovery by way of subrogation against either party in connection with any
damage covered by any policy. Neither party shall be liable to the other for any
damage caused by fire or any of the risks insured against under any insurance
policy required by this Lease.

F.General Terms of Lessee's insurance. All insurance obtained by Lessee pursuant
to this Lease shall be primary and non-contributory with respect to any other
insurance that may be available to Lessor. All public liability insurance and
property damage insurance required to be carried by Lessee shall insure
performance by Lessee of the indemnity provisions of paragraph 13 of this Lease.
Lessor (and Lessor's lenders, if required by any such lender holding

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a security interest in the Building at any time during the term of this Lease or
any extension thereof) shall be named as additional insureds under such policy
or policies, and every policy shall contain cross-liability endorsements.

G.Other Insurance Matters. All the insurance required of Lessee under this Lease
shall:

(1)Be issued by insurance companies authorized to do business in the State of
California, with a Best’s rating of not less than A- VII; and

(2)Be issued as a primary policy.

In addition, Lessee will endeavor to  obtain from its carrier an endorsement in
which the carrier agrees to provide thirty (30) days written notice to Lessor
and Lessor's lender if so required by Lessor, , before cancellation or change in
the coverage, scope, or amount of any policy.   If Lessee’s carrier refuses to
provide such endorsement, Lessee shall provide to Lessor notice of any
cancellation of the insurance required by this Paragraph 14 to be carried by
Lessee to Lessor within three (3) business days of its receipt of such notice of
cancellation or its failure to pay any premium for any such required insurance,
whichever is earlier.

 

15.Destruction.

A.If, during the term, the Premises are totally or partially destroyed from a
risk covered by the insurance described in Paragraph 14.C. above, rendering the
Premises totally or partially inaccessible or unusable, Lessor shall restore the
Premises, but not Lessee’s Alterations or any other tenant improvements present
in the Premises on the Commencement Date. The restoration work will commence as
soon as reasonably practical after the destruction given the time constraints
arising from the need for Lessor to collect proceeds for the reconstruction from
its insurance carrier, obtain engineering studies and acceptable building plans
and apply for and obtain permits, etc.

(1) Such destruction shall not terminate this Lease provided, however, that :
(1) the work, if there is a total destruction must be completed within one (1)
year from the date of the event causing the destruction; or (2) if a partial
destruction, the work must be completed within nine (9) months from the date of
the event causing the destruction. If Lessor cannot complete the rebuilding
within the foregoing time limits or if laws in effect at the time of destruction
do not permit such restoration, either party may terminate this Lease
immediately by giving notice to the other party. If a partial destruction occurs
during the last twelve (12) months

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of the Lease term and the work cannot be completed within sixty (60) days from
the date of the event causing the destruction, Lessee may terminate this Lease
immediately by giving notice to Lessor. If Lessor intends to rebuild the
Premises, Lessor shall give written notice of such fact to Lessee within
forty-five (45) days of the event of destruction, including in said notice an
estimate of when the rebuilding will be completed. If Lessee does not object in
writing to the time estimates given by Lessor within fifteen (15) business days
of the notice from Lessor, this Lease may not be terminated if, in fact, the
work is substantially completed within thirty (30 days of the estimated date of
completion and Lessor delivers possession of the damaged portion of the Premises
or the Premises, as applicable, to Lessee.

(2) If the cost of the restoration exceeds the amount of proceeds anticipated to
be received from the insurance required under Paragraph 14, Lessor may elect to
terminate this Lease by giving notice to Lessee within fifteen (15) days after
determining that the restoration cost will exceed the insurance proceeds. ln the
case of destruction to the Premises only, if Lessor elects to terminate this
Lease, Lessee, within fifteen (15) days after receiving Lessor's notice to
terminate, may elect to pay to Lessor in cash, at the time Lessee notifies
Lessor of its election, the difference between the amount of insurance proceeds
and the cost of restoration, in which case Lessor shall restore the Premises.
Lessor shall give Lessee satisfactory evidence that all sums contributed by
Lessee as provided in this subparagraph have been expended by Lessor in paying
the cost of restoration.    If Lessor elects to terminate this Lease and Lessee
does not elect to contribute toward the cost of restoration as provided in this
subparagraph, this Lease shall terminate.

B.If, during the term, the Premises are totally or partially destroyed from a
risk not covered by the insurance described in Paragraph 14, rendering the
Premises totally or partially inaccessible or unusable, Lessor shall have the
option of restoring the Premises or terminating this Lease.   In the case of
uninsured destruction to the Premises only, if Lessor elects to terminate this
Lease, Lessee, within thirty (30) days after receiving Lessor’s written notice
to terminate, may elect to pay to Lessor in cash or immediately available funds,
at the time Lessee notifies Lessor of its election, the difference between ten
percent (10%) of the then replacement cost of the Premises and the actual cost
of restoration, in which case Lessor shall restore the Premises upon receipt of
the required funds from Lessee. Lessor shall give Lessee satisfactory evidence
that all sums contributed by Lessee as provided in this subparagraph have been
expended by Lessor in paying the cost of restoration.

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If Lessor elects to terminate this Lease and Lessee does not elect to contribute
toward the cost of restoration as provided in this subparagraph, this Lease
shall terminate.

C.If Lessor is required or elects to restore the Premises as provided in this
Paragraph 15, Lessor shall not be required to restore Alterations made by Lessee
or Lessee’s predecessor in interest, Lessee’s trade fixtures and equipment
whether installed or not within the Premises, and Lessee's personal property,
such excluded items being the sole responsibility of Lessee to restore.

D.In case of destruction and Lessor elects or is required to restore the
Premises, there shall be an abatement of Base Monthly Rent, Common Area
Maintenance Costs and other rent on the unusable portion of the Premises from
the date of destruction to substantial completion of the work.  

E.Notwithstanding anything to the contrary in this Paragraph, Lessee may elect
to terminate the Lease if either: (1) there is a total destruction and the work
cannot be completed within one year from the date of the event causing the
destruction; (2) if there is a partial destruction and the work cannot be
completed within nine (9) months from the date of the event causing the
destruction; or (3) if there is a partial destruction during the last twelve
(12) months of the term and the work cannot be completed within sixty (60) days
from the date of the event causing the destruction.

F.Lessee waives the provisions of Civil Code Section 1932(2) and Civil Code
Section 1933(4) with respect to any destruction of the Premises.

16.Condemnation - Definitions.

A.Definitions.

(1)“Condemnation” means: (a) the exercise of any governmental power, whether by
legal proceedings or otherwise, by a Condemnor (as defíned below); and (b) a
voluntary sale or transfer by Lessor to any Condemnor, either under threat of
Condemnation or while legal proceedings for Condemnation are pending.

(2)“Date of Taking” means the date the Condemnor has the right to possession of
the property being condemned.

(3)“Award” means all compensation, sums, or anything of value awarded, paid, or
received on a total or partial condemnation.

(4)Condemnor means any public or quasi-public authority, or private corporation
or individual, having the power of condemnation.

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B.If, during the term or during the period of time between the execution of this
Lease and the date the term commences, there is any taking of all or any part of
the Premises or any interest in this Lease by Condemnation the rights and
obligations of the parties shall be determined pursuant to this Paragraph 16.

If the Premises are totally taken by condemnation, this Lease shall terminate on
the Date of taking. If any portion of the Premises is taken by Condemnation this
Lease shall remain in effect, except that Lessee can elect to terminate this
Lease if the remaining portion of the Premises, the Building or other
improvements or the parking areas on the land on which the Building is located
is rendered unsuitable for Lessee’s continued use of the Premises, as determined
by Lessee in its sole discretion. lf Lessee elects to terminate this Lease,
Lessee must exercise its right to terminate pursuant to this Paragraph 16.B by
giving notice to Lessor within thirty (30) days after the nature and the extent
of taking have been finally determined.  If Lessee elects to terminate this
Lease as provided in this Paragraph, Lessee also shall notify Lessor of the
termination, which date shall not be earlier than thirty (30) days nor later
than ninety (90) days after Lessee has notified Lessor of its election to
terminate; except that this Lease shall terminate on the date of taking if the
date of taking falls on a date before the date of termination as designated by
Lessee.  If Lessee does not terminate this Lease within the thirty (30) day
period, this Lease shall continue in full force and effect except that Base
Monthly Rent and the Common Area Maintenance Costs shall be reduced.

C.If any portion of the Premises is taken by condemnation and this Lease remains
in full force and effect, on the date of taking the Base Monthly Rent and the
Common Area Maintenance Costs shall be reduced by an amount that is in the same
ratio to Base Monthly Rent and the Common Area Maintenance Costs as the value of
the area of portion of the Premises taken bears to the total value of the
Premises immediately before the date of taking.

D.Each party waives the provisions of Code of Civil Procedure Section 1265.130
allowing either party to petition the Superior Court to terminate this Lease in
the event of a partial taking of the Premises.

E.If there is a partial taking of the Premises and this Lease remains in full
force and effect, Lessor at its cost shall accomplish all necessary restoration.
Base Monthly Rent and the Common Area Maintenance Costs shall be abated or
reduced during the period from the date of taking until the completion of
restoration, but all other obligations of Lessee under this Lease shall remain
in full force and effect. The abatement or reduction of Base Monthly Rent and

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the Common Area Maintenance Costs shall be based on the extent to which the
restoration interferes with Lessee’s use of the Premises.

F.The award shall belong to and be paid to Lessor, except that Lessee shall
receive from the award a sum attributable to: (i) Lessee’s relocation expenses;
(ii) loss of business goodwill; (iii) Lessee’s equipment and trade fixtures; and
(iv) Lessee's improvements or alterations made to the Premises by Lessee in
accordance with this Lease, which Lessee’s improvements or alterations Lessee
has the right to remove from the Premises pursuant to the provisions of this
Lease but elects not to remove; or, if Lessee elects to remove any such Lessee’s
improvements or alterations, a sum for reasonable removal and relocation costs
not to exceed the market value of such improvements or alterations.

G.The taking of the Premises or any part of the Premises by military or other
public authority shall constitute a taking of the Premises by condemnation only
when the use and occupancy by the taking authority has continued for longer than
one hundred eighty (180) consecutive days. During the one hundred eighty (180)
day period all the provisions of this Lease shall remain in full force and
effect, except that Base Monthly Rent and the Common Area Maintenance Costs
shall be abated or reduced during such period of taking based on the extent to
which the taking interferes with Lessee’s use of the Premises, and Lessor shall
be entitled to whatever award may be paid for the use and occupation of the
Premises for the period involved.

17.Assignment and Subletting.

A.Definitions. The occurrence of any of the following, whether voluntarily or
involuntarily, because of death, divorce or disability, or by operation of law
or otherwise, shall constitute a “Transfer” of this Lease:   (i) any direct or
indirect sale, assignment, conveyance, alienation, sublease, hypothecation,
encumbrance, mortgaging or other transfer of Lessee's interest in this Lease or
in the Premises, or any part thereof or interest therein, including but not
limited to any parking space assigned to Lessee; (ii) if Lessee is a Legal
Entity (as defined below), the direct or indirect sale, assignment, conveyance,
alienation, encumbrance, mortgaging or other Transfer of any of the Ownership
Interests (as defined below) in such Legal Entity, (iii) if Lessee is a Legal
Entity, some or all of whose Ownership Interests are owned by another Legal
Entity, the occurrence of any of the events described in the preceding phrase
(ii) with respect to such constituent Legal Entity, (iv) the cumulative transfer
of more than twenty-five percent (25%) of the assets belonging to Lessee or more
than twenty-five percent (25%) of its issued and outstanding shares; or (v) if
any other person or entity (except Lessee’s authorized representatives,

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agents, contractors, employees, invitees or guests) occupies or uses all or any
part of the Premises.

(1) As used herein, the term “Legal Entity” means any corporation, partnership,
limited liability company, trust, association or other legal entity, and the
term “Ownership Interest” means any share of stock, general or limited
partnership interest, membership interest, beneficial interest or other
ownership interest therein, as the case may be.    A “Transfer” includes a
transfer of any interest in this Lease held by any subtenant, assignee,
transferee or other person claiming an interest in Lessee’s interest in this
Lease. The provisions of this Paragraph 17 apply fully to any Transfer by any
subtenant, assignee or other holder of any interest in Lessee's interest in this
Lease.

(2)  Notwithstanding the foregoing, a Transfer shall not include: (i) if and for
so long as Lessee is a Legal Entity whose Ownership Interests are traded on any
public securities exchange, the Transfer of any of the Ownership Interests of
such Legal Entity on said exchange; or (ii) if Lessee is a corporation, limited
liability company or limited partnership, the cumulative transfer up to
twenty-five percent (25%) of the shares/stock, membership interests or limited
partnership interests therein;  (iii) the Transfer of this Lease to a Legal
Entity wholly owned or controlled by Lessee, or under common control with
Lessee, (iv) any Transfer required after the completion of a public offering of
the shares/stock in Lessee or successor entity of Lessee; or (v) any other event
that results in an immaterial change in the ownership and control of Lessee or
Lessee's interest in this Lease.   With respect to any of the foregoing
exemptions from the definition of “Transfer” which shall be defined as an Exempt
Transfer,  Lessee shall  inform Lessor at least thirty (30) days in advance of
the effective date of the Exempt Transfer of the identity of the proposed
transferee, the proposed effective date of the Exempt Transfer, and provide
sufficient information to demonstrate to Lessor’s reasonable satisfaction that
the Exempt Transfer meets all the requirements of this subparagraph (2) for a
Transfer that does not require Lessor’s consent.      Lessor agrees to execute a
commercially reasonable nondisclosure agreement if required in connection with
an Exempt Transfer.

B.Lessee shall not engage in or permit any Transfer of this Lease absent full
compliance with all of the terms and provisions of this Paragraph 17. Any
Transfer of this Lease occurring without full compliance with all of the terms
and conditions of this Paragraph 17 shall be voidable at the option of the
Lessor, and shall constitute a material and incurable default on the part of
Lessee under this Lease.    

C.Prior to engaging in or permitting any Transfer other than an Exempt

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Transfer, Lessee shall give notice of any intended Transfer to Lessor and shall
provide Lessor with the following information in writing: (i) the name, address
and ownership of the proposed transferee, (ii) the current balance sheet,
statement of cash flows, report of any litigation in which the proposed
Transferee is a party or is a judgment debtor, aged schedule of accounts
receivable and payable, profit and loss statements, statement that all taxes
payable by the proposed transferee are current, and all notes, if any, to all
financial and profit and loss statements for the proposed transferee or any
other person to be liable for the Lessee's obligations under this Lease covering
the prior three years (or for such shorter period as the proposed transferee or
other person may have been in existence), all certified as true and correct by
the proposed transferee, other person or an authorized officer thereof, (iii) a
full description of the terms and conditions of the proposed Transfer, including
copies of any and all documents and instruments, any purchase and sale
agreements, sublease agreements, assignment agreements and all other writings
concerning the proposed Transfer, (iv) a description of the proposed use of the
Premises by the proposed transferee, including any required or desired
alterations or improvements to the Premises that may be undertaken by such
transferee in order to facilitate its proposed use, and (v) any other
information, documentation or evidence that may be reasonably requested by
Lessor.  Lessor agrees that it shall hold all such information in confidence if
requested to do so by Lessee and shall execute any reasonable confidentiality
agreement presented on behalf of and for the benefit of any proposed transferee.

D. In connection with any proposed or requested consent to Transfer, other than
an Exempt Transfer, Lessee shall pay to Lessor a transfer fee of $1,000.00
(payment of which shall accompany Lessee's request for Transfer), plus all of
Lessor's reasonable attorneys' fees expended in connection with the proposed
Transfer not to exceed $5,000.00.  

E. For non-Exempt Transfers, within ten (10) business days after the submission
of all required information described in Paragraph 17 C above, Lessor shall give
notice to Lessee of its election under Paragraph 17.G.

F.Notwithstanding any other provision of this Paragraph 17, with respect to any
Transfer pursuant to which all or a controlling share of Lessee’s issued and
outstanding shares of stock and/or all of its assets are to be acquired by a
third party,  upon receipt of the information required by Paragraph 17C,  Lessor
shall approve the Transfer within the time period set forth in Paragraph 17E
above, provided the  proposed transferee (i) possesses a net worth prior to the
completion of the contemplated transfer of this Lease equal to or greater than
the net worth of

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Lessee on the Commencement Date (the term “net worth” shall mean a tangible net
worth (not including goodwill as an asset) computed in accordance with generally
accepted accounting principles (excluding goodwill as an asset); and (ii)  will
assume in writing on the date when the contemplated Transfer closes all of
Lessee’s obligations under this Lease and under all of Lessee’s collateral
financial obligations and/or provide security reasonably acceptable to Lessor
for all such obligations and covenant that the Transfer will in no way diminish
or impair any security held by Lessor under this Lease or any other obligation
pertaining to the Premises; and (iii) will not use the Premises for the testing
or manufacture of pharmaceuticals or other products listed by governmental
agencies as having a greater danger to human life or well being than those
originally disclosed by Lessor to Lessee on or about July 2015 and
permitted  within the Premises; and (iv)  will not allow a use that has a
greater danger of release of Hazardous Materials in or about the Premises or the
Building than that done by Lessee.  

G.Upon receiving a request for Transfer of this Lease which Transfer must be
approved by Lessor, and compliance by Lessee with all the requirements of this
Paragraph 17, Lessor shall have the right to do any of the following:

(1)Lessor may consent to the proposed Transfer, subject to any reasonable
conditions on such Transfer, which reasonable conditions may include without
limitation: (a) that the proposed transferee assume in writing all of Lessee's
obligations under the Lease (without, however, releasing Lessee therefrom); (b)
in the case of a proposed sublease, that the subtenant agree that Lessor shall
have the right to enforce any and all of the terms of the sublease directly
against such subtenant, and if this Lease is terminated prior to the expiration
of the sublease, that at the election of Lessor, the sublease shall not
terminate and the subtenant will attorn to the Lessor; (c) that one half of all
sums or other consideration received by Lessee from the Transferee for the right
to use and occupy the Premises in excess of the rent paid to Lessor be paid as
additional rent by Lessee to Lessor at the same time that Lessee pays Base
Monthly Rent to Lessor;   (d)  that any existing Events of Defaults under this
Lease be cured prior to the effective date of the Transfer; and (f) that the
Transferee provide additional security deposits or other collateral or
guarantees reasonably acceptable to Lessor..

(2)Lessor may deny its consent to the proposed Transfer, except with respect to
an Exempt on any reasonable ground. Such grounds shall include, without
limitation, any one or more of the following, and shall be conclusively deemed
to be reasonable as to Lessee: (a) that the proposed transferee's financial
condition is insufficient to support all of the financial

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and other obligations of the Lease; (b) that the use to which the Premises will
be put by the proposed transferee is inconsistent with the terms of the Lease or
otherwise will materially and adversely affect any interest of Lessor; (c) that
the nature of the proposed transferee's proposed or likely use of the Premises
would involve any increased risk of the use, release or mishandling of Hazardous
Materials; or (d) that Lessor has not received assurances acceptable to Lessor
in its sole discretion that all past due amounts owing from Lessee to Lessor (if
any) will be paid and all other Events of Default on the part of Lessee (if any)
will be cured prior to the effective date of the proposed Transfer.

H.Lessee acknowledges and agrees that each of the rights of Lessor set forth in
Paragraph 17 in the event of a proposed Transfer is a reasonable restriction on
Transfer for purposes of California Civil Code Section 1951.4.

I.Any consent to any proposed Transfer, whether conditional or unconditional,
shall not be deemed to be a consent to any other or further Transfer of this
Lease, or any other Transfer of this Lease on the same or other conditions (if
any). No Transfer of this Lease shall in any way diminish, impair or release any
of the liabilities and obligations of Lessee, any guarantor or any other person
liable for all or any portion of the Lessee's obligations under this Lease.

18.Lessee’s Default. The occurrence of any one of the following events (each an
“Event of Default”) shall constitute a material breach of this Lease by Lessee:

A.Lessee’s failure to pay Base Monthly Rent when due.

B.If Lessee shall fail to pay any other sum (all of which sums shall be deemed
to be additional rent hereunder) to Lessor when due

C.Lessee’s breach of any non-monetary obligation of this Lease.

D.Lessee’s failure to perform any other provisions of this Lease if the failure
to perform is not cured within thirty (30) days after notice has been given to
Lessee. lf the default cannot reasonably be cured within thirty (30) days,
Lessee shall not be in default of this Lease if Lessee commences to cure the
default within the thirty (30) day period and diligently and in good faith
continues to cure the default thereafter.

E.If this Lease or any estate of Lessee hereunder shall be levied upon under any
attachment or execution and such attachment or execution is not vacated within
fifteen (15) days.

If within thirty (30) days after the commencement of any proceeding against
Lessee seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief

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under any present or future statute, law or regulation, such proceeding shall
not have been dismissed, or if, within thirty (30) days after the appointment of
a receiver or liquidator of Lessee or of any material part of its properties
such appointment shall not have been vacated.

19.Lessor’s Remedies.   If an Event of Default shall occur, Lessor shall have
the following remedies. These remedies are not exclusive; they are cumulative in
addition to any remedies now or later allowed by law.

A.Lessor may continue this Lease in full force and effect, and this Lease will
continue in effect as long as Lessor does not terminate Lessee’s right to
possession, and Lessor shall have the right to collect rent when due. During the
period Lessee is in default, Lessor may enter the Premises and relet them, or
any part of them, to third parties for Lessee’s account. Lessee shall be liable
immediately to Lessor for all costs Lessor incurs in reletting the Premises,
including, without limitation, brokers commissions, expenses of remodeling the
Premises required by the reletting, and like costs. Reletting can be for a
period shorter or longer than the remaining term of this Lease or any extension
thereof, except that Lessee shall only be responsible for brokers commissions up
until the remaining term of this Lease has expired. Lessee shall pay to Lessor
the rent due under this Lease on the dates the rent is due, less the rent Lessor
receives from any reletting. No act by Lessor allowed by this subparagraph shall
terminate this Lease unless Lessor notifies Lessee that Lessor elects to
terminate this Lease.

B.Lessor may terminate Lessee’s right to possession of the Premises at any time
by giving a written termination notice to Lessee, and on the date specified in
such notice (which shall be not less than five (5) days after the giving of such
notice) Lessee’s right to possession shall terminate and this Lease shall
terminate, unless on or before such date all arrears of rent and all other sums
payable by Lessee under this Lease and all costs and expenses incurred by or on
behalf of Lessor hereunder shall have been paid by Lessee and all other breaches
of this Lease by Lessee at the time existing shall have been fully remedied to
the satisfaction of Lessor. No act by Lessor other than giving notice to Lessee
shall terminate this Lease. Acts of maintenance, efforts to relet the Premises,
or the appointment of a receiver on Lessor’s initiative to protect Lessor’s
interest under this Lease shall not constitute a termination of Lessee’s right
to possession. On termination, Lessor has the right to recover from Lessee:

(1)The worth, at the time of the award, of the unpaid rent that had been earned
at the time of termination of this Lease;

(2)The worth, at the time of the award, of the amount by which the

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unpaid rent that would have been earned after the date of termination of this
Lease until the time of award exceeds the amount of the loss of rent that Lessee
proves could have been reasonably avoided;

(3)The worth, at the time of the award, of the amount by which the unpaid rent
for the balance of the term after the time of award exceeds the amount of the
loss of rent that Lessee proves could have been reasonably avoided; and

(4)Any other amount, and court costs, necessary to compensate Lessor for all
detriment proximately caused by Lessee’s default. “The worth, at the time of the
award” as used in (i) and (ii) of this subparagraph is to be computed by
allowing interest at the rate of ten percent (10%) per annum. “The worth, at the
time of award” as referred to in (iii) of this subparagraph is to be computed by
discounting the amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award, plus one percent (1%).

C.Lessor, at any time after an Event of Default, may cure said default at
Lessee’s cost. If Lessor at any time, by reason of Lessee’s default, pays any
sum or does any act that requires the payment of any sum, the sum paid by Lessor
shall be due immediately from Lessee to Lessor at the time the sum is paid, and
if paid at a later date shall bear interest at the rate of ten percent (10%) per
annum from the date the sum is paid by Lessor until Lessor is reimbursed by
Lessee. The sum, together with interest on it, shall be deemed to be additional
rent.

D.Lessor shall have the following additional remedies:

(1)In the event that a late charge is payable hereunder, whether or not
collected, for three (3) installments of Base Monthly Rent or if Lessee fails to
pay any other monetary obligation of Lessee under this Lease, Lessee shall pay
to Lessor, if Lessor shall so request, in addition to any other payments
required under this Lease, a monthly advance installment, payable at the same
time as the Base Monthly Rent, as estimated by Lessor, for Lessee’s Percentage
Share of Real Property Tax and insurance premium expenses which are payable by
Lessee under the terms of this Lease. Such fund shall be established to insure
payment when due, before delinquency, of Lessee's Percentage Share of Real
Property Tax and insurance premiums. All moneys paid to Lessor under this
subparagraph may be intermingled with other moneys of Lessor and shall not bear
interest. In the event of a default in the obligations of Lessee under this
Lease, then any balance remaining from funds paid to Lessor under the provisions
of this subparagraph may, at the option of Lessor, be applied to the payment of
any monetary default of Lessee in lieu of being applied to the payment of real
property taxes

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and insurance premiums.

(2)   In the event that a late charge is payable hereunder, whether or not
collected, for three (3) installments of Base Monthly Rent in any twelve month
period, Lessor may demand and Lessee shall pay to Lessor an amount equal to two
months of Base Monthly Rent, in the amount of Base Monthly Rent then due, as an
addition to the Security Deposit to be held pursuant to the terms of paragraph 5
of this Lease.  Lessee hereby waives its rights to demand a trial by jury in any
action for unlawful detainer filed by Lessor.

E.          Lessee hereby waives its rights to demand a trial by jury in any
action for unlawful detainer by Lessor.

F. Any monetary judgment or award against Lessee under this Lease shall bear
interest at the rate of ten percent (10%) per annum regardless of the Court
entering or enforcing such judgment or award.

20.Lessor’s Default. Lessor shall be in default of this Lease if it fails or
refuses to perform any provision of this Lease that it is obligated to perform
if the failure to perform is not cured within thirty (30) days after notice of
the default has been given by Lessee to Lessor. If the default cannot reasonably
be cured within thirty (30) days, Lessor shall not be in default of this Lease
if Lessor commences to cure the default within the thirty (30) day period and
diligently and in good faith continues to cure the default.

21.Limitation of Lessor’s Liability.  If Lessor is in default of this Lease, and
as a consequence Lessee recovers a money judgment against Lessor, the judgment
shall be satisfied only out of the proceeds of sale received on execution of the
judgment and levy against the right, title and interest of Lessor in the
Building or out of rent or other income from the Building receivable by Lessor
or out of the consideration received by Lessor from the sale or other
disposition of all or any part of Lessor’s right, title and interest in the
Building. Lessor shall not be personally liable for any deficiency.

22.Lessor’s Entry on Premises. Lessor and its authorized representatives shall
have the right to enter the Premises at all reasonable times, after reasonable
written notice to Lessee, but in no event less than one (1) business day’s
written notice, except in the case of an emergency when no notice will be
required, for any of the following purposes:

A.To determine whether the Premises are in good condition and whether Lessee is
complying with its obligations under this Lease.

B.To do any necessary maintenance, repair, replacement or alteration to the

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Premises or the Building.

C.To serve, post, or keep posted any notices required or allowed under the
provisions of this Lease.

D.To post “for sale” signs and “for rent” or “for lease” signs on the exterior
of the Building at any time during the term (except that “for rent” and “for
lease” signs may only be posted in the last 12 months of the term unless there
has been an Event of Default).

E.To place signs on the exterior of the Building identifying the owner or
manager or managing agent of the Building or complex.

F.To show the Premises to prospective brokers, agents, buyers, tenants or
persons interested in an exchange, at any time during the term (except that
Lessor may not show the Premises to potential tenants or their brokers until the
last 12 months of the term unless there has been an Event of Default).  Lessor
shall not be liable in any manner for any inconvenience, disturbance, loss of
business, nuisance, or other damage arising out of Lessor’s entry on the
Premises as provided in this Paragraph 22. Lessee shall not be entitled to an
abatement or reduction of rent if Lessor exercises any rights reserved in this
Paragraph 22, unless occasioned by Lessor’s gross negligence or intentional
wrongful conduct or that of Lessor’s employees, agents or contractors.
Notwithstanding the foregoing, Lessor shall use good faith efforts to ensure all
such entries do not unreasonably disturb Lessee’s use and enjoyment of the
Premises.

23.Subordination.    This Lease is and shall be subordinate to any encumbrance
now of record or recorded after the date of this Lease affecting the Building,
other improvements and land of which the Premises are a part. Such subordination
is effective without any further act on the part of Lessee. Within ten (10)
business days after full execution of this Lease, Lessor must obtain and deliver
to Lessee a non-disturbance and attornment agreement, executed by Lessor’s
lender providing in substance that this Lease shall not be terminated by
Lessor’s lender so long as Lessee has not committed an Event of Default which
Event of Default has not been cured after the giving of the appropriate notice
required by Paragraph 19 hereof.   and that if any lender instructs Lessee to
pay any rent to said lender said payment will be deemed to be the payment of
such rental obligation under this Lease.   Lessee shall from time to time on
request from Lessor execute and deliver any commercially reasonable documents or
instruments that may be required by a lender to effectuate any subordination of
this Lease to any encumbrance now of record or recorded after the date of this
Lease on the condition that any such instrument contain a quiet enjoyment clause
guaranteeing Lessee’s rights hereunder so long as Lessee does not commit an

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Event of Default which is not cured after the giving of the appropriate notice
required by Paragraph 19 hereof. Lessee’s failure to so execute any such
document after ten (10) business days' notice to Lessee requesting such
execution shall be deemed to be an Event of Default under this Lease.

24.     Right to Estoppel Certificates. Within ten (10) business days after
written notice from Lessor, Lessee shall execute and deliver to Lessor, a
certificate stating that there are no defaults under the Lease, or itemizing any
defaults Lessee contends exists, that the Lease is unmodified and in full force
and effect, or in full force and effect as modified, and state the modifications
and any other information reasonably required by a lender or purchaser,
including but not limited to the amount of Base Monthly Rent, the date to which
Base Monthly Rent has been paid in advance, and the amount of the Security
Deposit or any prepaid rent. Failure to deliver the certificate within the ten
(10) business days shall be conclusive as to Lessee that this Lease is in full
force and effect and has not been modified except as may be represented by
Lessor. If Lessee fails to deliver the certificate within the ten (10) business
days, Lessee irrevocably constitutes and appoints Lessor as its special
attomey-in-fact to execute and deliver the certificate to any third party.

25.Notice. Except for notices regarding an Event of Default or notice required
by Paragraphs 18 and 19 of this Lease, any notice demand, request, consent,
approval, or communication that either party desires or is required to give to
the other party or any other person shall be in writing and either served
personally or by overnight delivery with a recognized delivery service.   Any
notices required by Paragraphs 18 and 19 or regarding an Event of Default shall
be served by overnight delivery with a recognized delivery service to Lessee’s
agent for service of process as set forth at the end of this Lease. The
foregoing notwithstanding, any payment of rent designed to cure an Event of
Default shall be transmitted to Lessor either by (i) personal delivery
(including a delivery service such as Federal Express) and not by first class
mail or (ii) automated clearing house (ACH transfer) or other electronic funds
transfer.

Any notice demand, request, consent, approval, or communication that either
party desires or is required to give to the other party shall be addressed to
the other party at the address set forth at the end of this Lease. Either party
may change its address by notifying the other party of the change of address.
Lessee hereby appoints as its agent to receive the service of all unlawful
detainer proceedings and notices thereunder its agent for service of process set
forth at the end of this Lease. Service shall be deemed completed five (5)
calendar days after the deposit

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of the summons and complaint in the mails as set forth herein and there shall be
no further extension of time on account of mailing.

26.Waiver. The waiver by either party of any breach of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant, or condition herein contained, nor shall any custom or practice which
may grow up between the parties in the administration of the terms hereof be
construed to waive or to lessen the right of either party to insist upon
performance by the other in strict accordance with said terms. The subsequent
acceptance of rent hereunder by Lessor shall not be deemed to be a waiver of any
preceding breach by Lessee of any term, covenant or condition of this Lease,
regardless of Lessor’s knowledge of such preceding breach the time of acceptance
of such rent.

27.Sale of Premises. lf Lessor sells or transfers its interest in the Premises,
upon the consummation of the sale or transfer, Lessor shall be released from any
liability thereafter accruing under this Lease if Lessor’s successor has assumed
in writing, for the benefit of Lessee, Lessor’s obligations under this Lease. If
any letter of credit or prepaid rent has been paid by Lessee, Lessor can
transfer the letter of credit or prepaid rent to Lessor’s successor and on such
transfer Lessor shall be discharged from any further liability in reference to
the security deposit or prepaid rent, if any.

28.Attorneys’ Fees. If either party commences an action against the other party
arising out of or in connection with this Lease, the prevailing party shall be
entitled to have and recover from the losing party reasonable attorneys’ fees
and costs of suit. In any proceedings initiated by or against Lessee under the
United States Bankruptcy Code, Lessor shall be entitled to recover any and all
reasonable attorneys' fees and expenses arising from or in connection with
proceedings for the assumption, rejection, or assignment of this Lease, stay
relief, or other protection of Lessor’s interests, regardless of any default
under the Lease.

29.Surrender of Premises. On expiration of the term, Lessee shall surrender to
Lessor the Premises and all Lessee’s Alterations and equipment in good condition
(except for ordinary wear and tear) unless Lessor has required Lessee to remove
its Alterations and equipment.    The surrender of the Premises will only be
deemed to have occurred when Lessee delivers all keys to the Premises to Lessor,
or reimburses Lessor a reasonable amount for any lost or stolen keys. Lessee
shall remove all of its personal property and trade fixtures prior to the
expiration of the term of this Lease or any extension thereof or upon the
earlier termination of this Lease. Lessee

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shall perform at its expense all restoration and repairs made necessary by the
removal of any Alterations and equipment as required by this Lease and any other
agreements between the Lessor and Lessee.  

In the event Lessee fails to remove all of its equipment and personal property,
in addition to any other remedies Lessor may have, Lessor may elect to retain or
dispose of said personal property and equipment in any manner Lessor in its sole
discretion may decide.  Without waiving any other remedy, Lessor shall if it so
elects to by notice to Lessee title to any or all of Lessee’s equipment and
personal property and retain or dispose of the same.  Lessee waives all claims
against Lessor for any damage to Lessee resulting from Lessor’s retention or
disposition of any such personal property. Lessee shall also be liable to Lessor
for Lessor’s costs for storing, removing, and disposing of any personal
property.

If Lessee falls to surrender the Premises to Lessor on expiration of the term as
required by this paragraph 29, Lessee shall hold Lessor harmless from all
damages resulting from Lessee's failure to surrender the Premises, including,
without limitation, lost rental value and any claims made by a new tenant
resulting from Lessee’s failure to surrender the Premises.

30.Holding Over. lf Lessee, with Lessor’s consent, remains in possession of the
Premises after expiration or termination of the term, or after the date in any
notice given by Lessor to Lessee terminating this Lease, such possession by
Lessee shall be deemed to be a month-to-month tenancy terminable on ninety (90)
days' notice given at any time by either party.  All provisions of this Lease
except that pertaining to term shall apply to the month-to-month tenancy, and
except that Base Monthly Rent shall be equal to one hundred and fifty percent
(150%) of Base Monthly Rent payable immediately prior to the expiration or
termination of this Lease. If Lessee holds over without Lessor’s consent,
Lessor’s damages shall also include the per diem rental value of the Premises
measured by one hundred and fifty percent (150%) of the Base Monthly Rent due in
the last month of the term divided by 30 plus the daily cost of Lessee’s
Percentage Share of Common Area Maintenance and Repair Costs, Real Property
Taxes and insurance premiums.

 

31.Option to Extend Term.     Lessor hereby grants to Lessee an option (the
“Option”) to extend the term of this Lease for two (2) five (5) year terms (the
“Extension Periods”).  The first Extension Period shall commence upon the
expiration of the initial term hereof and the second Extension Period shall
commence upon the expiration of the first Extension Period.  The terms and
conditions of the Option are as follows.

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A.Exercise of Option.  The Option shall be exercised by Lessee giving to Lessor
written notice of such exercise at least one hundred eighty (180) days prior to
the expiration of the original term of this Lease for the first Extension Period
and, for the second Extension Period, one hundred eighty (180) days prior to the
expiration of the first Extension Period. Lessee shall have no right to exercise
the Option for the second Extension Period if Lessee has not exercised the
Option for the first Extension Period.

B.Terms and Conditions.  All terms and conditions of this Lease shall continue
to be binding upon Lessor and Lessee during the Extension Periods except that
the Base Monthly Rent during first Extension Period shall be as follows:

Months 1-12:$71,154.00 per month

Months 13-24: $73,289.00 per month

Months 25-36: $75,488.00 per month

Months 36-48: $77,752.00 per month

Months 48-60: $80,085.00 per month

Base Monthly Rent for the second Extension Period shall be as follows:

Months 1-12: $83,288.00 per month

Months 13-24:$86,620.00 per month

Months 25-36:$90,085.00 per month

Months 36-48:$93,688.00 per month

Months 48-60:$97,436.00 per month

C.Option Not Assignable Separate From Lease.  The Option herein granted to
Lessee is not assignable separate and apart from this Lease and may not be
exercised in the event of an assignment of the Lease by anyone other than the
successors or assigns of Lessee

D.Assumption of Restoration Obligations.    Lessee’s exercise of either Option
shall be deemed to include Lessee’s assumption of all obligations to restore the
Premises pursuant to Paragraph 10 and to continue to securitize said obligation
to the full amount of the cost of both decommissioning any laboratory or
manufacturing facility and removal of all Alterations and other improvements in
a manner acceptable to Lessor.   Lessee’s failure to provide such security shall
make the Option voidable at Lessor’s option even if Lessee has exercised the
Option

 

E.Effect of Default on Option.

(1)Lessee shall have no right to exercise the Option, notwithstanding any

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provision in the grant of option to the contrary during the time that an Event
of Default exists or if Lessor in the twelve months prior the day on which
Lessee exercises the Option Lessor has given to Lessee two (2) or more notices
to cure an Event of Default or if during the last twenty four (24) months of the
original term Lessee has incurred a late charge on account of the late payment
of Base Monthly Rent on three (3) or more separate occasions.    

(2)The period of time within which the Option may be exercised shall not be
extended or enlarged by reason of Lessee's inability to exercise such Option
because of the provisions of the above paragraph.

(3)All rights of Lessee under the provisions of the grant of option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, an Event of Default occurs and Lessee fails to cure the default
within the period of time stated in the notice given by Lessor to Lessee to cure
the notice  or Lessee fails to commence to cure a non-monetary default within
fifteen (15) days after the date that Lessor gives notice to Lessee of such
default and/or Lessee fails thereafter to diligently prosecute said cure to
completion.

32.   Consent of Parties. Whenever consent or approval of either party is
required, that party shall not unreasonably withhold or delay such consent or
approval.

33.   Time of Essence. Time is of the essence of each provision of this Lease

34.   Successors. This Lease shall be binding on and inure to the benefit of the
parties and their successors and assigns.

35.Covenants and Conditions. All provisions, whether covenants or conditions, on
the part of the Lessee shall be deemed to be both covenants and conditions.

36.   California Law. This Lease shall be construed and interpreted in
accordance with the laws of the State of California.

37.   Entire Agreement. This Lease cannot be amended or modified except by a
written agreement.

38.  Captions. The captions of this Lease shall have no effect on its
interpretation.

39.   Number. When required by the context of this Lease, the singular shall
include the plural, and vice versa.

40.  Joint and Several Obligations. “Party” shall mean Lessor or Lessee; and if
more than one person or entity is Lessor or Lessee, the obligations imposed on
that party shall be joint and several.

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41.   Authority. lf either party signs as a corporation, partnership, trust,
limited liability company or similar entity each of the persons executing this
Lease on behalf of such party does hereby covenant and warrant that such party
is duly authorized and existing,  that the company is qualified to do business
in the State of California and is in good standing in the State of California,
that the company has full right and authority to enter into this Lease, and that
the  party signing this Lease and that every person signing on behalf of the
company is authorized to do so.

42.   Complete Agreement. There are no oral agreements between Lessor and Lessee
affecting this Lease, and this Lease supersedes and cancels any and all previous
negotiations, arrangements, brochures, and understandings, if any, between
Lessor and Lessee or displayed by Lessor to Lessee, except for those relating to
the nature of the materials to be tested and manufactured within the Premises,
with respect to the subject matter of this Lease. There are no other
representations between Lessor and Lessee other than those contained in this
Lease, and all reliance with respect to any representations is solely upon the
representations contained in this Lease.

43.   Real Estate Brokers. Lessee represents that it has not had dealings with
any real estate broker, finder or other person with respect to this Lease in any
manner except Jon Faller, Faller Real Estate.    Lessee shall indemnify, defend
and hold Lessor harmless from all damages and costs resulting from any claims
that may be asserted against Lessor by any broker, finder or other person with
which Lessee has or purportedly has dealt.

44.  Addresses for Notices. Any notices required to be sent pursuant to this
Lease shall be sent to the parties al the following addresses unless changed
pursuant to the notification provisions of this Lease.

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TO LESSOR:      

    

JCN Partners, a California Limited Partners

c/o John C. Nickel Properties

 

          

 

If by USPS

 

JCN Partners, a California Limited Partners

c/o John C. Nickel Properties

 

AND

 

JCN Partners, a California Limited Partners

c/o John C. Nickel Properties

 

With Copy to:

 

Nancy C. Lenvin

Utrecht & Lenvin, LLP

 

TO LESSEE

 

Audentes Therapeutics, Inc.

600 California Street, Suite 1700

San Francisco, CA 94108

Attn:  David Nagler

 

 

With a copy to

 

Linda L. Shelby

Valence Law Group

 

 

 

45.Counterparts. This Lease may be signed in multiple counterparts whích, when
signed by all parties, shall constitute a binding agreement.

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46.   Access Disclosure. Pursuant to California Civil Code Section 1938, Lessor
represents as follows:  The Premises and the Building have to been inspected by
a Certified Access Specialist as defined in Section 55.52 of the California
Civil Code.

47.   Quiet Possession. Subject to payment by Lessee of the rent and performance
of all of the covenants, conditions and provisions on Lessee’s part to be
observed and performed under this Lease, Lessee shall have quiet possession and
quiet enjoyment of the Premises during the term hereof.

          48.  Lease Memorandum.  The parties agree that they will execute and
record a memorandum of lease substantially in the form annexed hereto as Exhibit
E.  

IN WITNESS W HEREOF, the parties have executed this agreement as of the date
first set forth above.

 

Dated: January 7, 2017

 

JCN PARTNERS, a California Limited Partnership

 

By: /s/ John C. Nickel

Name: John C. Nickel

Title: General Partner

_________________________________

 

Dated: January 7, 2017

 

AUDENTES THERAPEUTICS, INC, a Delaware Corporation

 

By:_/s/ Matthew Patterson

Name: Matthew Patterson

Title: President and CEO

 

By:  

 

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Name:

 

 

 

Title:

 

40

 

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EXHIBIT A

[g2017031022201551133027.jpg]

 

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EXHIBIT B

[g2017031022201552933028.jpg]

 

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EXHIBIT C

(Reserved)

 

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EXHIBIT D

WORK LETTER

This Work Letter is to set forth:

(i)how the Alterations in the Premises are to be constructed;

(ii)who will undertake the construction of the Alterations; and

(iii)who will pay for the construction of the Alterations.

Except as defined in this Work Letter to the contrary, all terms utilized in
this Work Letter will have the same meaning ascribed to them in the Lease.  When
work, services, consents or approvals are to be provided by or on behalf of
Lessor, the term “Lessor” will include Lessor’s agents, contractors, employees
and affiliates.

(A)Lessee’s Work.  Lessee shall be responsible for the construction of all
Alterations, subject to the terms and conditions hereinafter provided:

(1)Base Building Plans.   The Parties acknowledge that Lessor may not have base
building plans (“Base Building Plans”) and that any plans should be obtained by
Lessee’s predecessor in interest.    

(2)Plans and Specifications.  

 

(a) Lessee will give Lessor at least thirty (30) days prior written notice of
its intent to submit Plans for Alterations to Lessor, which notice will provide
a summary of the planned Alterations so that Lessor can notify its design
professionals and engineers of the up-coming need for their services.

(b)Lessee shall cause to be prepared and delivered to Lessor by reputable and
qualified architects and engineers (who shall be approved by Lessor, which
approval will not be unreasonably withheld, conditioned or delayed), the
following plans and specifications (“Plans”) for all Alterations Lessee desires
to have in the Premises (“Lessee’s Work”):

(i)Architectural drawings (consisting of floor construction plan, ceiling
lighting and layout, power, and telephone plan).

(ii)Mechanical drawings (consisting of ventilating and cooling systems,
electrical, telephone, cabling and plumbing).

(iii)Finish drawings and schedule (consisting of wall finishes and floor
finishes and miscellaneous details).

 

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All such Plans shall be submitted to Lessor in a state ready for Lessor’s review
and approval, which shall not be unreasonably withheld, conditioned or
delayed.   Lessee shall deliver to Lessor five (5) sets of all Plans provided
for Lessor’s review, at least one of which shall be a hard copy, with the
balance to be in electronic CAD format. Lessee shall electronically transmit at
least two of such Plans to such construction professionals engaged by Lessor to
assist Lessor in the review of such Plans.   Lessor shall approve or disapprove
of such Plans within ten (10) business days after its receipt thereof, provided
Lessee had given Lessor the notice required by 2(a) above.  .In the case of
disapproval, Lessor shall state its reasons for such disapproval. Lessor and
Lessee agree to cooperate and consult with each other on a regular basis in
connection with the preparation of such Plans and during construction
of  Lessee’s Work.  

(b)All Plans shall comply with all: (1) laws and regulations promulgated by any
governmental authority having jurisdiction over Lessee’s Work and the proposed
resulting use of the Alterations; and (2) the requirements of Lessor’s fire
insurance underwriters.  Neither review nor approval by Lessor of the Plans
shall constitute a representation or warranty by Lessor that such Plans either:
(i) are complete or suitable for their intended purpose; or (ii) comply with
applicable laws, ordinances, codes and regulations, it being expressly agreed by
Lessee that Lessor assumes no responsibility or liability whatsoever to Lessee
or to any other person or entity for such completeness, suitability or
compliance, except to the extent that any such work is performed specifically at
and in accordance with the specific direction of Lessor or its management agent.
  Lessee shall not make any material changes in the Plans (“Changes”), whether
before commencement of construction or during construction, without Lessor’s
prior written approval, which approval shall not be unreasonably withheld,
conditioned or delayed.  Lessor shall approve or disapprove any such changes
within five (5) business days after its receipt thereof. In  the case of
disapproval, Lessor shall state its reasons for such disapproval.  If Lessor
fails to notify Lessee of its approval or disapproval within said five business
day period, Lessee shall deliver a second notice requesting approval of the
Changes to Lessor.  .       Lessor’s failure to approve or disapprove the
Changes within the second five (5) business day notice period shall be deemed
approval of the Changes.   Upon completion of the Lessee’s Work, Lessee shall
deliver to Lessor the as-built drawings in both hard copy and electronic format.

(3)Performance of Lessee’s Work.

 

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(a)Lessor shall have the right to approve Lessee’s general contractor (the
“Contractor”)  and any subcontractors whose work will affect the Building
systems  for the performance of the Lessee’s Work, which approval will not be
unreasonably withheld, conditioned or delayed.  Lessor  may require Lessee to
give assurances reasonably satisfactory to Lessor that Lessee’s Contractor and
its subcontractors shall be reputable, maintain proper insurance (including but
not limited to Worker’s Compensation, Employers Liability Insurance, and
Comprehensive General Liability Insurance in customary forms and amounts
reasonably acceptable to Lessor)  and shall not jeopardize labor
harmony.  Lessor may also require Lessee to submit reasonably satisfactory
insurance certificates to Lessor.  Lessee shall pay to Lessor, within thirty
(30) days after receipt of any invoice therefore, together with reasonable
supporting documentation, Lessor’s actual “out of pocket” costs payable to third
parties reasonably incurred by Lessor for reviewing the Plans.  

(b)Subject to approval of Lessee’s Plans as provided in this Work Letter above
and after the filing of the Plans with the appropriate governmental agencies,
Lessee shall, at Lessee’s sole costs and expense, except as otherwise provided
herein, cause its Contractor to commence, as soon as reasonably practicable, to
construct and install and pursue to completion in the Premises  Lessee’s Work in
accordance with the Plans (as modified by any Changes reasonably approved by
Lessor as provided herein ) and without any material deviation from the Plans
(as modified by any such Changes).  Lessee agrees that it shall be responsible
for its Contractors and subcontractors, and that all work performed by such
parties shall be performed and completed in a good, diligent and workmanlike
manner.

(c)To the extent Lessee employs any other contractors from time to time to do
work in the Premises, Lessee shall cause such contractors to secure and pay for
Worker’s Compensation, Employers Liability Insurance, and Comprehensive General
Liability Insurance in customary forms and amounts reasonably acceptable to
Lessor.  All policies shall be endorsed to include Lessor and its employees and
agents as additional insured.  Certificates of such insurance shall be delivered
to Lessor prior to Lessee commencing any work in the Premises.

 

 

 

 

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EXHIBIT E

RECORDING REQUESTED BY:

 

AND WHEN RECORDED RETURN TO:

 

 

(Space above line for Recorder's use)

______________________________________________________________________________

MEMORANDUM OF LEASE

 

JCN PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP (“Lessor”) and AUDENTES
THERAPEUTICS,  INC.  a Delaware corporation (“Lessee”), executed that Lease
dated as of ____________________, 2015 (the “Lease”) for premises commonly known
as:

528B Eccles Avenue, South San Francisco, California

Lessor and Lessee agree as follows:

1.The Commencement Date of the Lease is ______________________________.

2..The end of the Initial Lease Term and the date on which this Lease will
expire is ______________________.  

3.Lessee has two (2) five (5) options to extend the term of the Lease.

Dated:

LESSOR:

JCN PARTNERS, a California Limited Partnership

By_____________

Name: __________________

Title: ___________________

 

LESSEE:

Audentes Therapeutics, Inc., a Delaware corporation

 

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By: /s/ Matthew Patterson

Name: Matthew Patterson

Its: President and CEO

 

[A notary public or other officer completing this

certificate verifies only the identity of the individual

who signed the document to which this certificate

is attached, and not the truthfulness, accuracy,

or validity of that document.]

 

STATE OF CALIFORNIA)

) ss.

COUNTY OF ________)

 

On ____________________, 20__ before me, ______________________________________,
notary public, personally appeared ___________________________, who proved to me
on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.

 

I certify under PENALTY OF PERJURY under the laws of the State of California
that the foregoing paragraph is true and correct.

 

Witness my hand and official seal.

Signature

 

[Seal]

 

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

 

 

[A notary public or other officer completing this

certificate verifies only the identity of the individual

who signed the document to which this certificate

is attached, and not the truthfulness, accuracy,

or validity of that document.]

 

STATE OF CALIFORNIA)

) ss.

COUNTY OF ________)

 

On ____________________, 20__ before me, ______________________________________,
notary public, personally appeared ___________________________, who proved to me
on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.

 

I certify under PENALTY OF PERJURY under the laws of the State of California
that the foregoing paragraph is true and correct.

 

Witness my hand and official seal.

Signature

 

[Seal]