Exhibit 10.39

 

 

 

 

 

 

 

 

 

LEASE

 

by and between

 

BMR-217TH PLACE LLC,

a Delaware limited liability company

 

and

 

SONUS PHARMACEUTICALS, INC.

a Delaware corporation

 

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LEASE

THIS LEASE (this “Lease”) is entered into as of this 21st day of November, 2006
(the “Execution Date”), by and between BMR-217TH PLACE LLC, a Delaware limited
liability company (“Landlord”), and SONUS PHARMACEUTICALS, INC., a Delaware
corporation (“Tenant”).

RECITALS

A.            WHEREAS, Landlord has entered into a purchase agreement to acquire
certain real property (the “Property”) and the improvements thereon located at
1522 217th Place SE in Bothell, Washington, including the building located
thereon (the “Building”) in which the Premises (as defined below) are located;
and

B.            WHEREAS, provided Landlord acquires the Property, Landlord wishes
to lease to Tenant, and Tenant desires to lease from Landlord, certain premises
located in the Building (the “Premises”), consisting of approximately 37,699
rentable square feet of office and laboratory space, pursuant to the terms and
conditions of this Lease, as detailed below.

AGREEMENT

NOW, THEREFORE, Landlord and Tenant, in consideration of the mutual promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
agree as follows:

1.             Lease of Premises.  Landlord hereby leases to Tenant, and Tenant
hereby leases from Landlord, the Premises, as generally shown on Exhibit A
attached hereto.  Tenant and its agents, servants, employees and invitees shall
have unobstructed access to the Premises (subject to reasonable security
measures, emergencies, casualties and other provisions of this Lease)
twenty-four (24) hours a day, 365 or 366 days a year.  The Property and all
landscaping, parking facilities and other improvements and appurtenances related
thereto, including, without limitation, the Building, are hereinafter
collectively referred to as the “Project.”  All portions of the Project that are
for the non-exclusive use of tenants of the Building, including, without
limitation, driveways, sidewalks, parking areas, landscaped areas, service
corridors, stairways, elevators, public restrooms and public lobbies, are
hereinafter referred to as “Common Area.”  The Property is legally described on
Exhibit F attached hereto.

2.             Basic Lease Provisions.  For the convenience of the parties,
certain basic provisions of this Lease are set forth herein.  The provisions set
forth herein are subject to the remaining terms and conditions of this Lease and
are to be interpreted in light of such remaining terms and conditions.

2.1.          This Lease shall take effect upon the date of execution and
delivery hereof by all parties hereto and, except as specifically otherwise
provided within this Lease, each of the provisions hereof shall be binding upon
and inure to the benefit of Landlord and Tenant from the date of execution and
delivery hereof by all parties hereto.

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2.2.          In the definitions below, each Rentable Area (as defined below) is
expressed in rentable square footage.  Rentable Area and Tenant’s Pro Rata Share
are all subject to adjustment as provided in this Lease. 

Definition or Provision

 

Means the Following (As of the Term
Commencement Date)

Rentable Area of Premises

 

37,699 square feet

Rentable Area of Building

 

67,340 square feet

Tenant’s Pro Rata Share of Building

 

55.98%

 

2.3.          INITIAL MONTHLY AND ANNUAL INSTALLMENTS OF BASIC ANNUAL RENT FOR
THE PREMISES (“BASIC ANNUAL RENT”), SUBJECT TO ADJUSTMENT UNDER THIS LEASE:

Rentable S.F.

 

Per Rentable S.F.

 

Total Annual

 

Total Monthly

37,699

 

$35

 

$1,319,465

 

$109,955.42

 

2.4.          [INTENTIONALLY OMITTED]

2.5.          Estimated Term Commencement Date:  September 1, 2007

2.6.          Estimated Term Expiration Date:  September 30, 2017

2.7.          Security Deposit:  An amount equal to the first (1st) four (4)
months of Basic Annual Rent payable by Tenant, subject to increase or decrease
in accordance with the terms hereof

2.8.          Permitted Use:  General office, research, development, all uses
reasonably related to the development of pharmaceutical and biological drug
products (including, without limitation, laboratory and vivarium use),
manufacturing, production and distribution use in conformity with Applicable
Laws (as defined below)

 

2.9.

Address for Rent Payment:

 

BMR-217th Place LLC

 

 

 

 

17140 Bernardo Center Drive, Suite 222

 

 

 

 

San Diego, California 92128

 

 

 

 

Attn: Chief Accounting Officer

 

2.10.

Address for Notices to Landlord:

 

BMR-217th Place LLC

 

 

 

 

17140 Bernardo Center Drive, Suite 222

 

 

 

 

San Diego, California 92128

 

 

 

 

Attn: General Counsel/Real Estate

 

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2.11.

Address for Notices to Tenant:

 

Sonus Pharmaceuticals, Inc.

 

 

 

 

22026 20th Avenue, SE

 

 

 

 

Bothell, Washington  98021

 

 

 

 

Attn:  Alan Fuhrman, SVP/CFO

2.12.        The following Exhibits are attached hereto and incorporated herein
by reference:

Exhibit A                                               Premises

Exhibit B                                                 Acknowledgement of
Term Commencement Date and Term Expiration Date

Exhibit C                                                 Tenant’s Personal
Property

Exhibit D                                                Rules and Regulations

Exhibit E                                                  Form of Estoppel
Certificate

Exhibit F                                                  Legal Description of
Property

Exhibit G                                                 Work Letter

Exhibit H                                                Form of Letter of
Credit

3.             Term.

3.1.          This Lease shall take effect upon the date of execution and
delivery hereof by all parties hereto and, except as specifically otherwise
provided within this Lease, each of the provisions hereof shall be binding upon
and inure to the benefit of Landlord and Tenant from the date of execution and
delivery hereof by all parties hereto.

3.2.          The actual term of this Lease (the “Term”) shall be that period
from the actual Term Commencement Date (as defined in Section 4.2 below) through
the last day of the one hundred twentieth (120th) calendar month following the
month during which the actual Term Commencement Date occurs, which last day
shall be the actual Term Expiration Date.

4.             Possession and Commencement Date.

4.1.          Landlord shall tender possession of the Premises to Tenant on the
Estimated Term Commencement Date, with the work required of Landlord described
in the Work Letter attached hereto as Exhibit G (the “Work Letter”) to be
Substantially Complete (as defined below); provided that such work shall not be
required to be Substantially Complete during the Installation Period (as defined
below).  Tenant agrees that in the event such work is not Substantially Complete
on or before the Estimated Term Commencement Date for any reason, then (a) this
Lease shall not be void or voidable, (b) Landlord shall not be liable to Tenant
for any loss or damage resulting therefrom, (c) the Term Expiration Date shall
be extended accordingly and (d) Tenant shall not be responsible for the payment
of any Rent (as defined below) until the actual Term Commencement Date as
described in Section 4.2 occurs.  The work required of Landlord described in the
Work Letter (both Landlord’s Work and the Shell and Core Work) shall be deemed
Substantially Complete, as that term is used in this Article 4 and elsewhere in
this Lease, if Landlord has (y) completed all of Landlord’s Work and the Shell
and Core Work (subject only to a punchlist of items that do not materially and
substantially interfere with Tenant’s use of the Premises) and provided to
Tenant a certificate of Substantial Completion from the architect that

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includes a certification to Tenant that the Tenant Improvements are
substantially complete in accordance with the Approved Plans (as defined in the
Work Letter), except for minor punch list items, and (z) received a temporary
certificate of occupancy from the municipality(ies) in which the Property is
located, or would have received the temporary occupancy certificate or
certificate of Substantial Completion but for delays or failure of Tenant or
Tenant’s architect to deliver items in accordance with the Work Letter.  The
term “Substantially Complete” or “Substantial Completion” means that the Tenants
Improvements satisfy the requirements of clauses (y) and (z) above.

4.2.          The “Term Commencement Date” shall be the day Landlord tenders
possession of the Premises to Tenant, but no earlier than the later of (a) the
date on which the Tenant Improvements are Substantially Complete and (b) the
date Tenant has had access to the Premises for four (4) weeks (the “Installation
Period”) solely to install furniture, fixtures and equipment in the Premises
(during which period Tenant shall have no obligation to pay any Basic Annual
Rent or Tenant’s Pro Rata Share of Operating Expenses), not to occupy the
Premises.  Tenant shall execute and deliver to Landlord written acknowledgment
of the actual Term Commencement Date and the Term Expiration Date, in the form
attached as Exhibit B hereto, within forty (40) days after Tenant takes
occupancy of the Premises.  Failure to execute and deliver such acknowledgment,
however, shall not affect the Term Commencement Date or Landlord’s or Tenant’s
liability hereunder.

4.3.          During the Installation Period and any other period prior to the
Term Commencement Date that Landlord permits (such permission not to be
unreasonably withheld, conditioned or delayed) Tenant to enter upon the Premises
for the purpose of installing improvements or placing personal property, Tenant
shall furnish to Landlord evidence reasonably satisfactory to Landlord that the
insurance coverages required of Tenant under the provisions of Article 21 are in
effect, and such entry shall be subject to all the terms and conditions of this
Lease other than the payment of Basic Annual Rent or Additional Rent (as defined
below), except as required under Section 4.2.

4.4.          Possession of areas of the Premises reasonably necessary for
utilities, services, safety and operation of the Building is reserved to
Landlord.

5.             Rent and Tenant Improvement Allowance.

5.1.          Tenant shall pay to Landlord as Basic Annual Rent for the
Premises, commencing on the Term Commencement Date, the sums set forth in
Section 2.3, subject to the rental adjustments provided in Article 6 hereof. 
Basic Annual Rent and TI Rent (defined below) shall be paid in equal monthly
installments (as set forth in Section 2.3 for Basic Annual Rent), subject to the
rental adjustments provided in Article  6 hereof, each in advance on the first
day of each and every calendar month during the Term.

5.2.          Landlord shall cause to be constructed the tenant improvements in
the Premises (the “Tenant Improvements”) pursuant to the Work Letter at a cost
to Landlord (the “Tenant Improvement Allowance”) not to exceed Six Million Five
Hundred Ninety-Seven Thousand Three Hundred Twenty-Five Dollars ($6,597,325)
(based upon One Hundred Seventy-Five

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Dollars ($175) per rentable square foot, as adjusted based on the finally
determined Rentable Area of the Premises), which amount shall include the costs
of (a) construction, (b) project management by Landlord (which fee shall equal
three percent (3%) of the Tenant Improvement Allowance actually paid by Landlord
but not less than 3% of the product of the Rentable Area of the Premises times
One Hundred Twenty-Five Dollars ($125) per rentable square foot), (c) space
planning, architect, engineering and other related services and (d) building
permits and other planning and inspection fees.  The Tenant Improvement
Allowance shall consist of an allowance of (x) One Hundred Twenty-Five Dollars
($125) per rentable square foot, which shall be expended first, (y) an
additional Twenty-Five Dollars ($25) per rentable square foot, which shall be
expended second (“Tranche 2”), and (z) an additional Twenty-Five Dollars ($25)
per rentable square foot, which shall be expended third (“Tranche 3”).  If the
total cost of the Tenant Improvements exceeds the Tenant Improvement Allowance,
then the overage shall be paid by Tenant to Landlord prior to the Term
Commencement Date.  Tenant shall have until December 31, 2007, to expend the
unused portion of the Tenant Improvement Allowance, after which date Landlord’s
obligation to fund such costs shall expire.  Tenant shall pay to Landlord, as
Additional Rent (the “TI Rent”), Tranche 2 or so much thereof as is actually
paid by Landlord amortized over the final one hundred twenty (120) months of the
initial Term at a rate of ten percent (10%) per annum, and Tranche 3 or so much
thereof as is actually paid by Landlord amortized over the final one hundred
twenty (120) months of the initial Term at a rate of twelve percent (12%) per
annum.

5.3.          The Tenant Improvement Allowance shall be paid by Landlord as
provided in the Work Letter.

5.4.          In addition to Basic Annual Rent, Tenant shall pay to Landlord as
additional rent (“Additional Rent”) at times hereinafter specified in this Lease
(a) Tenant’s pro rata share, as set forth in Section 2.2 (“Tenant’s Pro Rata
Share”), of Operating Expenses as provided in Article 7 and (b) any other
amounts that Tenant assumes or agrees to pay under the provisions of this Lease
that are owed to Landlord, including, without limitation, any and all other sums
that may become due by reason of any default of Tenant or failure on Tenant’s
part to comply with the agreements, terms, covenants and conditions of this
Lease to be performed by Tenant, after notice and the lapse of any applicable
cure periods.

5.5.          Basic Annual Rent, TI Rent and Additional Rent shall together be
denominated “Rent.”  Rent shall be paid to Landlord, without abatement,
deduction or offset, in lawful money of the United States of America at the
office of Landlord as set forth in Section 2.10 or to such other person or at
such other place as Landlord may from time designate in writing.  In the event
the Term commences or ends on a day other than the first day of a calendar
month, then the Rent for such fraction of a month shall be prorated for such
period on the basis of a thirty (30) day month and shall be paid at the
then-current rate for such fractional month.

6.             Rent Adjustments.  The Basic Annual Rent and TI Rent shall be
subject to an annual upward adjustment of three percent (3%) of the then-current
Basic Annual Rent and TI Rent, respectively.  The first such adjustment shall
become effective commencing with that monthly rental installment that is due on
the first (1st) day of the 13th calendar month following the month during which
the actual Term Commencement Date occurs, and subsequent adjustments shall

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become effective on every successive annual anniversary of the first adjustment
for so long as this Lease continues in effect.

7.             Operating Expenses.

7.1.          As used herein, the term “Operating Expenses” shall include:

(a)           Government impositions including, without limitation, property tax
costs consisting of real and personal property taxes and assessments, including
amounts due under any improvement bond upon the Building or the Project,
including the parcel or parcels of real property upon which the Building and
areas serving such Building are located or assessments in lieu thereof imposed
by any federal, state, regional, local or municipal governmental authority,
agency or subdivision (each, a “Governmental Authority”) are levied; taxes on or
measured by gross rentals received from the rental of space in the Building;
taxes based on the square footage of the Premises, the Building or the Project,
as well as any parking charges, utilities surcharges or any other costs levied,
assessed or imposed by, or at the direction of, or resulting from Applicable
Laws (as defined below) or interpretations thereof, promulgated by any
Governmental Authority in connection with the use or occupancy of the Building
or the parking facilities serving the Building; taxes on this transaction or any
document to which Tenant is a party creating or transferring an interest in the
Premises; any fee for a business license to operate an office building; and any
expenses, including the reasonable cost of attorneys or experts, reasonably
incurred by Landlord in seeking reduction by the taxing authority of the
applicable taxes, less tax refunds obtained as a result of an application for
review thereof.  Operating Expenses shall not include any net income, franchise,
capital stock, estate or inheritance taxes, or taxes that are the personal
obligation of Tenant or of another tenant of the Project; and

(b)           All other costs of any kind paid or incurred by Landlord in
connection with the operation or maintenance of the Building and the Project
including, by way of example and not of limitation, costs of repairs and
replacements to improvements within the Project as appropriate to maintain the
Project as required hereunder; costs of utilities furnished to the Common Areas;
sewer fees; cable television; trash collection; cleaning, including windows;
heating; ventilation; air-conditioning; maintenance of landscaping and grounds;
maintenance of drives and parking areas; maintenance of the roof; security
services and devices; building supplies; maintenance or replacement of equipment
utilized for operation and maintenance of the Project; license, permit and
inspection fees; sales, use and excise taxes on goods and services purchased by
Landlord in connection with the operation, maintenance or repair of the Project
or Building systems and equipment; telephone, postage, stationery supplies and
other expenses incurred in connection with the operation, maintenance or repair
of the Project; accounting, legal and other professional fees and expenses
incurred in connection with the Project; costs of furniture, draperies,
carpeting, landscaping and other customary and ordinary items of personal
property provided by Landlord for use in Common Areas; capital expenditures,
provided, however, that any capital expenditures in excess of One Hundred
Thousand Dollars ($100,000) shall be amortized on a straight line basis over the
useful life thereof in accordance with GAAP (but in no event longer than ten
(10) years); costs of complying with all federal, state, municipal and local
laws, codes, ordinances, rules and regulations of governmental authorities,
committees, associations, or other regulatory committees, agencies or governing
bodies having jurisdiction

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over the Property, the Building, the Premises, Landlord or Tenant, including
both statutory and common law and hazard waste rules and regulations
(“Applicable Laws”); insurance premiums, including premiums for public
liability, property casualty, earthquake and environmental coverages; portions
of insured losses paid by Landlord as part of the deductible portion of a loss
pursuant to the terms of insurance policies up to a maximum deductible amount of
Two Hundred Fifty Thousand Dollars ($250,000) per occurrence for environmental
insurance and Fifty Thousand Dollars ($50,000) per occurrence for all other
policies; service contracts; costs of services of independent contractors
retained to do work of a nature referenced above; and costs of compensation
(including employment taxes and fringe benefits) of all persons who perform
regular and recurring duties connected with the day-to-day operation and
maintenance of the Project, its equipment, the adjacent walks, landscaped areas,
drives and parking areas, including, without limitation, janitors, floor waxers,
window washers, watchmen, gardeners, sweepers and handymen.

Notwithstanding the foregoing, Operating Expenses shall not include any leasing
commissions, finder’s fees, attorneys’ fees, entertainment and travel expenses
and other costs incurred by Landlord in leasing or attempting to lease space in
the Building; expenses that relate to preparation, improvement, decoration,
painting or redecorating of rental space for a tenant or other occupants of the
Building; expenses of initial development and construction, including, but not
limited to, grading, paving, landscaping and decorating (as distinguished from
maintenance, repair and replacement of the foregoing); the cost of compliance
with Applicable Laws in effect as of the Term Commencement Date to the extent
the Building or Project was not in compliance as of the Term Commencement Date;
the cost of compliance with Applicable Laws to the extent that such cost would
not have been incurred but for the construction of additions to the Building
involving the moving of perimeter walls of the Building, adding additional
floors to the Building, or constructing additional buildings on the Property;
expenses for the defense of Landlord’s title to the Property or Building; the
cost of maintenance, repair and replacement of the foundation and structural
walls; any repair, rebuilding or other work necessitated by condemnation, fire,
windstorm, act of terrorism, or other casualty or hazard, the cost of which
exceeds Ten Thousand Dollars ($10,000), except to the extent of any insurance
deductible payable by Tenant under this Lease; the cost of insurance premiums
for insurance coverage not typically carried on buildings comparable to the
Building in the greater Seattle area (provided that Landlord shall be allowed to
include as Operating Expenses the costs of environmental and earthquake
insurance); accounting, legal and other professional fees and expenses relating
to other tenants or the refinance or sale of the Property; interest upon loans
to Landlord or secured by a mortgage or deed of trust covering the Project or a
portion thereof (provided that interest upon a government assessment or
improvement bond payable in installments shall constitute an Operating Expense
under Section 7.1); costs arising from Landlord’s charitable or political
contributions; salaries of executive officers of Landlord; Landlord’s general
corporate overhead, except as it relates to the specific management of the
Building; any ground lease rental; costs incurred by Landlord with respect to
goods and services other than parking (including utilities sold and supplied to
tenants and occupants of the Building) to the extent that Landlord is reimbursed
for such costs other than through the Operating Expense pass-through provisions
of such tenants’ leases; expenses in connection with services or other benefits
that are not offered to Tenant or for which Tenant is charged directly and that
are provided to another tenant or occupant of the Building; fines or

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penalties incurred by Landlord due to the violation by Landlord of (i) any
Applicable Laws (provided that costs of complying with Applicable Laws may be
included unless otherwise specifically excluded herein) or (ii) the terms and
conditions of any lease of space in the Building; overhead and profit increments
paid to subsidiaries or affiliates of Landlord for services provided to the
Building to the extent the cost of such services exceeds the costs that would
generally be charged for such services if rendered on a competitive basis (based
upon a standard of similar office buildings in the general market area of the
Premises) by unaffiliated third parties capable of providing such service;
advertising and promotional expenditures; depreciation of the Building or the
improvements therein; costs resulting from the negligence or willful misconduct
of Landlord; and depreciation claimed by Landlord for tax purposes (provided
that this exclusion of depreciation is not intended to delete from Operating
Expenses actual costs of repairs and replacements and reasonable reserves in
regard thereto that are provided for in Section 7.1).

“Applicable Laws” means all laws, codes, ordinances, rules and regulations of
governmental authorities having jurisdiction over the Property, the Building,
the Premises, Landlord or Tenant.

7.2.          Tenant shall pay to Landlord on the first day of each calendar
month of the Term, as Additional Rent, (a) the Property Management Fee (as
defined below) and (b) Landlord’s estimate of Tenant’s Pro Rata Share of
Operating Expenses with respect to the Building and the Project, as applicable,
for such month.

(x)            The “Property Management Fee” shall equal two percent (2%) of the
Basic Annual Rent due from Tenant.

(y)           Within ninety (90) days after the conclusion of each calendar year
(or such longer period as may be reasonably required by Landlord), Landlord
shall furnish to Tenant a statement showing in reasonable detail the actual
Operating Expenses and Tenant’s Pro Rata Share of Operating Expenses for the
previous calendar year.  Any additional sum due from Tenant to Landlord shall be
due and payable within thirty (30) days after Tenant’s receipt of such
statement.  If the amounts paid by Tenant pursuant to this Section 7.2 exceed
Tenant’s Pro Rata Share of Operating Expenses for the previous calendar year,
then Landlord shall credit the difference against the Rent next due and owing
from Tenant; provided that, if the Lease term has expired, Landlord shall
accompany said statement with payment for the amount of such difference.

(z)            Any amount due under this Section 7.2 for any period that is less
than a full month shall be prorated (based on a thirty (30)-day month) for such
fractional month.

7.3.          Landlord’s annual statement shall be final and binding upon Tenant
unless Tenant, within sixty (60) days after Tenant’s receipt thereof, shall
contest any item therein by giving written notice to Landlord, specifying each
item contested and the reasons therefor.  If, during such sixty (60)-day period,
Tenant reasonably and in good faith questions or contests the correctness of
Landlord’s statement of Tenant’s Pro Rata Share of Operating Expenses, Landlord
shall provide Tenant with reasonable access to Landlord’s books and records to
the extent

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relevant to determination of Operating Expenses, and such information as
Landlord reasonably determines to be responsive to Tenant’s written inquiries. 
In the event that, after Tenant’s review of such information, Landlord and
Tenant cannot agree upon the amount of Tenant’s Pro Rata Share of Operating
Expenses, then Tenant shall have the right to have an independent public
accounting firm hired by Tenant on an hourly basis and not on a contingent-fee
basis (at Tenant’s sole cost and expense) and approved by Landlord (which
approval Landlord shall not unreasonably withhold, condition or delay) audit and
review such of Landlord’s books and records for the year in question as directly
relate to the determination of Operating Expenses for such year (the
“Independent Review”).  Landlord shall make such books and records available at
the location where Landlord maintains them in the ordinary course of its
business.  Landlord need not provide copies of any books or records but Tenant
may copy those portions of the books or records provided by Landlord to Tenant
at Tenant’s expense.  Tenant shall commence the Independent Review within
fifteen (15) days after the date Landlord has given Tenant access to Landlord’s
books and records for the Independent Review.  Tenant shall complete the
Independent Review and notify Landlord in writing of Tenant’s specific
objections to Landlord’s calculation of Operating Expenses (including Tenant’s
accounting firm’s written statement of the basis, nature and amount of each
proposed adjustment) no later than six (6) months after Landlord has first given
Tenant access to Landlord’s books and records for the Independent Review. 
Landlord shall review the results of any such Independent Review.  The parties
shall endeavor to agree promptly and reasonably upon Operating Expenses taking
into account the results of such Independent Review.  If, as of  ninety (90)
days after Tenant has submitted the Independent Review to Landlord, the parties
have not agreed on the appropriate adjustments to Operating Expenses, then the
parties shall engage a mutually agreeable independent third party accountant
with at least ten (10) years’ experience in commercial real estate accounting in
Western Washington (the “Accountant”).  If the parties cannot agree on the
Accountant, each shall within ten (10) days after such impasse appoint an
Accountant (different from the accountant and accounting firm that conducted the
Independent Review) and, within ten (10) days after the appointment of both such
Accountants, those two Accountants shall select a third (which cannot be the
accountant and accounting firm that conducted the Independent Review).  If
either party fails to timely appoint an Accountant, then the Accountant the
other party appoints shall be the sole Accountant.  Within ten (10) days after
appointment of the Accountant(s), Landlord and Tenant shall each simultaneously
give the Accountants (with a copy to the other party) its determination of
Operating Expenses, with such supporting data or information as each submitting
party determines appropriate.  Within ten (10) days after such submissions, the
Accountants shall by majority vote select either Landlord’s or Tenant’s
determination of Operating Expenses.  The Accountants may not select or
designate any other determination of Operating Expenses.  The determination of
the Accountant(s) shall bind the parties.  If the parties agree or the
Accountant(s) determine that Tenant’s Pro Rata Share of Operating Expenses
actually paid for the calendar year in question exceeded Tenant’s obligations
for such calendar year, then Landlord shall, at Tenant’s option, either (a)
credit the excess to the next succeeding installments of estimated Additional
Rent or (b) pay the excess to Tenant within thirty (30) days after delivery of
such results.  If the parties agree or the Accountant(s) determine that Tenant’s
payments of Tenant’s Pro Rata Share of Operating Expenses for such calendar year
were less than Tenant’s obligation for the calendar year, then Tenant shall pay
the deficiency to the Landlord within thirty (30) days after delivery of such
results.  Tenant agrees to pay the cost of

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such audit; provided that, if the audit reveals that Landlord’s determination of
Tenant’s Pro Rata Share of Operating Expenses was at least five percent (5%) in
error in Landlord’s favor, Landlord shall pay the reasonable costs of such
audit.

7.4.          Tenant shall not be responsible for Operating Expenses
attributable to the time period prior to the Term Commencement Date; provided,
however, that if Landlord shall permit Tenant possession of the Premises prior
to the Term Commencement Date (exclusive of the Installation Period), Tenant
shall be responsible for Tenant’s Pro Rata Share of Operating Expenses from such
earlier date of possession.  Tenant’s responsibility for Tenant’s Pro Rata Share
of Operating Expenses shall continue to the latest of (a) the date of
termination of the Lease or (b) the date Tenant has fully vacated the Premises.

7.5.          Operating Expenses for the calendar year in which Tenant’s
obligation to share therein commences and for the calendar year in which such
obligation ceases shall be prorated on a basis reasonably determined by
Landlord.  Expenses such as taxes, assessments and insurance premiums that are
incurred for an extended time period shall be prorated based upon the time
periods to which they apply so that the amounts attributed to the Premises
relate in a reasonable manner to the time period wherein Tenant has an
obligation to share in Operating Expenses.

8.             Rentable Area.

8.1.          The Rentable Area of the Project is determined by making separate
calculations of the Rentable Area of each floor of all buildings and totaling
the Rentable Area of all floors within the buildings. The Rentable Area of a
floor is calculated by measuring to the outside finished surface of each
permanent outer building wall where it intersects the floor. The full area
calculated as set forth above is included as Rentable Area of the Project
without deduction for (a) columns or projections, (b) vertical penetrations
(including stairs, elevator shafts, flues, pipe shafts, vertical ducts, and the
like) and their enclosing walls, (c) corridors, equipment rooms, restrooms,
entrance ways, elevator lobbies and the like, and each of their enclosing walls,
and (d) any other unusable area of any nature.

8.2.          Promptly after Substantial Completion of the Tenant Improvements,
Landlord’s architect shall certify to Tenant the Rentable Area of the Premises
and the Rentable Area of the Building and shall provide to Tenant a copy of the
drawings and calculations upon which such Rentable Areas are based.  If the
Rentable Area of the Premises determined under this paragraph is different than
the Rentable Area of the Premises set forth in Section 2.2, then the Basic
Annual Rent under Section 2.3, the Security Deposit under Section 2.7 and the
Tenant Improvement Allowance under Section 5 shall be adjusted to reflect the
Rentable Area of the Premises determined under this paragraph.

8.3.          Tenant’s Pro Rata Share shall be recalculated in the event of any
change in the Rentable Area of the Premises or the total Rentable Area in the
Project.  It is anticipated that Landlord may construct another building on the
Property, in which event Tenant’s Pro Rata Share shall be adjusted with respect
to Operating Expenses benefiting the entire Property (e.g., real property taxes
and insurance) such that all of the Rentable Area in the Project is taken into
account.  If the recalculation of Tenant’s Pro Rata Share is certified by a
licensed architect as

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being correct, then Tenant shall be bound by such certification.  Landlord shall
provide to Tenant a copy of the drawings and calculations upon which the
recalculation of Tenant’s Pro Rata Share is based.

9.             Security Deposit.

9.1.          Tenant has deposited with Landlord the sum set forth in
Section 2.7 (the “Security Deposit”), which sum shall be held by Landlord as
security for the faithful performance by Tenant of all of the terms, covenants
and conditions of this Lease to be kept and performed by Tenant during the
Term.  If Tenant defaults with respect to any provision of this Lease,
including, but not limited to, any provision relating to the payment of Rent,
then Landlord may (but shall not be required to) use, apply or retain all or any
part of the Security Deposit for the payment of any Rent or any other sum in
default, or to compensate Landlord for any other loss or damage that Landlord
may suffer by reason of Tenant’s default.  If any portion of the Security
Deposit is so used or applied, then Tenant shall, within fifteen (15) days
following demand therefor, deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to its original amount, and Tenant’s failure to do
so shall be a material breach of this Lease.

9.2.          In the event of bankruptcy or other debtor-creditor proceedings
against Tenant, the Security Deposit shall be deemed to be applied first to the
payment of Rent and other charges due Landlord for all periods prior to the
filing of such proceedings.

9.3.          Landlord may deliver to any purchaser of Landlord’s interest in
the Premises the funds deposited hereunder by Tenant, and thereupon Landlord
shall be discharged from any further liability with respect to such deposit. 
This provision shall also apply to any subsequent transfers.

9.4.          If Tenant shall fully and faithfully perform every provision of
this Lease to be performed by it, then the Security Deposit, or any balance
thereof, shall be returned to Tenant (or, at Landlord’s option, to the last
assignee of Tenant’s interest hereunder) within thirty (30) days after the
expiration or earlier termination of this Lease.

9.5.          [Intentionally omitted]

9.6.          If the Security Deposit shall be in cash, Landlord shall deposit
the Security Deposit into an interest-bearing account at a banking organization
selected by Landlord.  All interest and dividends, if any, accruing on the
Security Deposit, less a one percent (1%) per annum charge on the Security
Deposit for administrative expenses (but in no event greater than the amount of
interest actually accrued on the Security Deposit during such annual period),
shall be added to, held and included within the term Security Deposit and,
provided that no Default shall have occurred and be continuing, shall accrue to
the account of Tenant and be disbursed to Tenant annually.  Landlord shall not
be required to credit Tenant with any interest for any period during which
Landlord does not receive interest on the Security Deposit.

9.7.          THE SECURITY DEPOSIT MAY BE IN THE FORM OF CASH, A LETTER OF
CREDIT OR ANY OTHER SECURITY INSTRUMENT ACCEPTABLE TO LANDLORD IN ITS SOLE
DISCRETION.  TENANT MAY AT ANY TIME, EXCEPT

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DURING DEFAULT, DELIVER A LETTER OF CREDIT (THE “L/C SECURITY”) AS THE ENTIRE
SECURITY DEPOSIT, AS FOLLOWS.

(A)           IF TENANT ELECTS TO DELIVER L/C SECURITY, THEN TENANT SHALL
PROVIDE LANDLORD, AND MAINTAIN IN FULL FORCE AND EFFECT THROUGHOUT THE TERM, A
LETTER OF CREDIT IN THE FORM OF EXHIBIT H, OR SUCH OTHER FORM AS IS REASONABLY
ACCEPTABLE TO LANDLORD, ISSUED BY AN ISSUER REASONABLY SATISFACTORY TO LANDLORD,
IN THE AMOUNT OF THE SECURITY DEPOSIT, WITH AN INITIAL TERM OF AT LEAST ONE (1)
YEAR.  IF, AT THE TERM EXPIRATION DATE, ANY RENT REMAINS UNCALCULATED OR UNPAID,
THEN:  (A) LANDLORD SHALL WITH REASONABLE DILIGENCE COMPLETE ANY NECESSARY
CALCULATIONS; (B) TENANT SHALL EXTEND THE EXPIRY DATE OF SUCH L/C SECURITY FROM
TIME TO TIME AS LANDLORD REASONABLY REQUIRES; AND (C) IN SUCH EXTENDED PERIOD,
LANDLORD SHALL NOT UNREASONABLY REFUSE TO CONSENT TO AN APPROPRIATE REDUCTION OF
THE L/C SECURITY.  TENANT SHALL REIMBURSE LANDLORD’S LEGAL COSTS (AS ESTIMATED
BY LANDLORD’S COUNSEL), NOT TO EXCEED ONE THOUSAND FIVE HUNDRED DOLLARS
($1,500), IN HANDLING LANDLORD’S ACCEPTANCE OF L/C SECURITY OR ITS REPLACEMENT
OR EXTENSION.

(B)           IF TENANT DELIVERS TO LANDLORD SATISFACTORY L/C SECURITY IN PLACE
OF THE ENTIRE SECURITY DEPOSIT, LANDLORD SHALL REMIT TO TENANT ANY CASH SECURITY
DEPOSIT LANDLORD PREVIOUSLY HELD.

(C)           LANDLORD MAY DRAW UPON THE L/C SECURITY, AND HOLD AND APPLY THE
PROCEEDS IN THE SAME MANNER AND FOR THE SAME PURPOSES AS THE SECURITY DEPOSIT,
IF:  (A) AN UNCURED DEFAULT EXISTS; (B) AS OF THE DATE THIRTY (30) DAYS BEFORE
ANY L/C SECURITY EXPIRES (EVEN IF SUCH SCHEDULED EXPIRY DATE IS AFTER THE TERM
EXPIRATION DATE) TENANT HAS NOT DELIVERED TO LANDLORD AN AMENDMENT OR
REPLACEMENT FOR SUCH L/C SECURITY, REASONABLY SATISFACTORY TO LANDLORD,
EXTENDING THE EXPIRY DATE TO THE EARLIER OF (I) ONE (1) MONTH AFTER THE
THEN-CURRENT TERM EXPIRATION DATE OR (II) THE DATE ONE YEAR AFTER THE
THEN-CURRENT EXPIRY DATE OF THE L/C SECURITY; (C) THE L/C SECURITY PROVIDES FOR
AUTOMATIC RENEWALS, LANDLORD ASKS TENANT AND THE ISSUER TO CONFIRM THE CURRENT
L/C SECURITY EXPIRY DATE, AND THE ISSUER FAILS TO DO SO WITHIN THIRTY (30)
BUSINESS DAYS; (D) TENANT FAILS TO PAY (WHEN AND AS LANDLORD REASONABLY
REQUIRES) ANY BANK CHARGES FOR LANDLORD’S TRANSFER OF THE L/C SECURITY; OR
(E) THE ISSUER OF THE L/C SECURITY CEASES, OR ANNOUNCES THAT IT WILL CEASE, TO
MAINTAIN AN OFFICE IN THE CITY WHERE LANDLORD MAY PRESENT DRAFTS UNDER THE L/C
SECURITY.  THIS PARAGRAPH DOES NOT LIMIT ANY OTHER PROVISIONS OF THIS LEASE
ALLOWING LANDLORD TO DRAW THE L/C SECURITY UNDER SPECIFIED CIRCUMSTANCES.

(D)           TENANT SHALL NOT SEEK TO ENJOIN, PREVENT, OR OTHERWISE INTERFERE
WITH LANDLORD’S DRAW UNDER L/C SECURITY, EVEN IF IT VIOLATES THIS LEASE.  TENANT
ACKNOWLEDGES THAT THE ONLY EFFECT OF A WRONGFUL DRAW WOULD BE TO SUBSTITUTE A
CASH SECURITY DEPOSIT FOR L/C SECURITY, CAUSING TENANT NO LEGALLY RECOGNIZABLE
DAMAGE.  LANDLORD SHALL HOLD THE PROCEEDS OF ANY DRAW IN THE SAME MANNER AND FOR
THE SAME PURPOSES AS A CASH SECURITY DEPOSIT.  IN THE EVENT OF A WRONGFUL DRAW,
THE PARTIES SHALL COOPERATE TO ALLOW TENANT TO POST REPLACEMENT L/C SECURITY
SIMULTANEOUSLY WITH THE RETURN TO TENANT OF THE WRONGFULLY DRAWN SUMS, AND
LANDLORD SHALL UPON REQUEST CONFIRM IN WRITING TO THE ISSUER OF THE L/C SECURITY
THAT LANDLORD’S DRAW WAS ERRONEOUS.

(E)           IF LANDLORD TRANSFERS ITS INTEREST IN THE PREMISES, THEN TENANT
SHALL AT TENANT’S EXPENSE, WITHIN FIVE BUSINESS DAYS AFTER RECEIVING A REQUEST
FROM LANDLORD, DELIVER (AND, IF THE ISSUER REQUIRES, LANDLORD SHALL CONSENT TO)
AN AMENDMENT TO THE L/C SECURITY NAMING

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LANDLORD’S GRANTEE AS SUBSTITUTE BENEFICIARY.  IF THE REQUIRED SECURITY CHANGES
WHILE L/C SECURITY IS IN FORCE, THEN TENANT SHALL DELIVER (AND, IF THE ISSUER
REQUIRES, LANDLORD SHALL CONSENT TO) A CORRESPONDING AMENDMENT TO THE L/C
SECURITY.

10.           Use.

10.1.        Tenant shall use the Premises for the purpose set forth in Section
2.8 (the “Permitted Use”), and shall not use the Premises, or permit or suffer
the Premises to be used, for any other purpose without Landlord’s prior written
consent, which consent Landlord may withhold in its sole and absolute
discretion.

10.2.        Tenant shall not use or occupy the Premises in violation of
Applicable Laws; zoning ordinances; or the certificate of occupancy issued for
the Building, and shall, upon ten (10) days’ written notice from Landlord,
discontinue any use of the Premises that is declared or claimed by any
Governmental Authority having jurisdiction to be a violation of any of the
above, or that in Landlord’s reasonable opinion violates any of the above. 
Tenant shall comply with any direction of any Governmental Authority having
jurisdiction that shall, by reason of the nature of Tenant’s use or occupancy of
the Premises, impose any duty upon Tenant or Landlord with respect to the
Premises or with respect to the use or occupation thereof.

10.3.        Tenant shall not do or permit to be done anything that will
invalidate or increase the cost of any fire, environmental, extended coverage or
any other insurance policy covering the Building and the Project, and shall
comply with all rules, orders, regulations and requirements of the insurers of
the Building and the Project, and Tenant shall promptly, upon demand, reimburse
Landlord for any additional premium charged for such policy by reason of
Tenant’s failure to comply with the provisions of this Article; provided,
however, that no action of Tenant that increases the cost of any insurance shall
constitute a Default so long as Tenant pays such increased cost.

10.4.        Tenant shall keep all doors opening onto public corridors closed,
except when in use for ingress and egress.

10.5.        No additional locks or bolts of any kind shall be placed upon any
of the doors or windows by Tenant, nor shall any changes be made to existing
locks or the mechanisms thereof without Landlord’s prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed.  Tenant
shall, upon termination of this Lease, return to Landlord all keys to offices
and restrooms either furnished to or otherwise procured by Tenant.  In the event
any key so furnished to Tenant is lost, Tenant shall pay to Landlord the cost of
replacing the same or of changing the lock or locks opened by such lost key if
Landlord shall reasonably deem it necessary to make such change.

10.6.        No awnings or other projections shall be attached to any outside
wall of the Building.  No curtains, blinds, shades or screens shall be attached
to or hung in, or used in connection with, any window or door of the Premises
other than Landlord’s standard window coverings.  Neither the interior nor
exterior of any windows shall be coated or otherwise sunscreened without
Landlord’s prior written consent, nor shall any bottles, parcels or other

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articles be placed on the windowsills.  No equipment, furniture or other items
of personal property shall be placed on any exterior balcony without Landlord’s
prior written consent.

10.7.        NO SIGN, ADVERTISEMENT OR NOTICE (“SIGNAGE”) SHALL BE EXHIBITED,
PAINTED OR AFFIXED BY TENANT ON ANY PART OF THE PREMISES OR THE BUILDING WITHOUT
LANDLORD’S PRIOR WRITTEN CONSENT, NOT TO BE UNREASONABLY WITHHELD, CONDITIONED
OR DELAYED.  INTERIOR SIGNS ON DOORS AND THE DIRECTORY TABLET SHALL BE
INSCRIBED, PAINTED OR AFFIXED FOR TENANT BY LANDLORD AT TENANT’S SOLE COST AND
EXPENSE, AND SHALL BE OF A SIZE, COLOR AND TYPE AND BE LOCATED IN A PLACE
REASONABLY ACCEPTABLE TO LANDLORD.  THE DIRECTORY TABLET SHALL BE PROVIDED
EXCLUSIVELY FOR THE DISPLAY OF THE NAME AND LOCATION OF TENANTS ONLY.  TENANT
SHALL NOT PLACE ANYTHING ON THE EXTERIOR OF THE CORRIDOR WALLS OR CORRIDOR DOORS
OTHER THAN LANDLORD’S STANDARD LETTERING.  TENANT SHALL BE ENTITLED TO TENANT’S
PRO RATA SHARE OF THE MAXIMUM BUILDING FAÇADE SIGNAGE PERMITTED BY APPLICABLE
LAWS, THE COST OF WHICH SHALL BE AT TENANT’S SOLE EXPENSE (WHICH EXPENSE SHALL
BE INCLUDED IN THE COSTS (AS DEFINED IN THE WORK LETTER)).  THE DESIGN AND
PLACEMENT OF TENANT’S BUILDING FAÇADE SIGNAGE SHALL BE REVIEWED AND APPROVED BY
LANDLORD AND TENANT AS PART OF LANDLORD’S WORK PLANS AND SHALL, IF APPROVED, BE
MADE PART OF THE APPROVED PLANS AS DEFINED IN THE WORK LETTER. 

10.8.        Tenant shall cause any office equipment or machinery to be
installed in the Premises so as to reasonably prevent sounds or vibrations
therefrom from extending into the Common Areas or other offices in the
Building.  Further, Tenant shall not place any equipment weighing one hundred
(100) pounds or greater per square foot of equipment footprint within the
Premises, other than on the ground floor thereto, without Landlord’s prior
written approval (which approval shall not be unreasonably withheld, conditioned
or delayed), and such equipment shall be placed in a location designed to carry
the weight of such equipment.

10.9.        Tenant shall not (a) do or permit anything to be done in or about
the Premises that shall in any way obstruct or interfere with the rights of
other tenants or occupants of the Building or the Project, or injure or annoy
them, or (b) use or allow the Premises to be used for immoral, unlawful or
objectionable purposes, nor shall Tenant knowingly cause, maintain or permit any
nuisance or waste in, on or about the Premises, the Building or the Project.

10.10.      Notwithstanding any other provision herein to the contrary, Landlord
shall correct, repair or replace any non-compliance of the Building exterior,
the Tenant Improvements and the Common Area with all applicable building permits
and codes in effect as of the Term Commencement Date, including, without
limitation, the provisions of Title III of the Americans With Disabilities Act
(“ADA”) in effect as of the Term Commencement Date.  Said costs of compliance
shall be at Landlord’s sole cost and shall not be part of Operating Expenses,
but shall constitute Costs (as defined in the Work Letter) to the extent that
such costs are part of the Approved Budget (as defined in the Work Letter) for
the Tenant Improvements, as the Approved Budget may be amended pursuant to the
Work Letter.  Landlord shall correct, repair or replace any non-compliance of
the Building exterior and the Common Area with any revisions or amendments to
the ADA that become effective after the Term Commencement Date, provided that
the cost of such repairs or replacements (amortized over the useful life thereof
in accordance with GAAP, but in no event longer than ten (10) years) shall be
included as Operating Expenses payable by Tenant.  Tenant shall be responsible,
at its sole cost and expense, for all other ADA compliance for the Premises,
including, without limitation, in connection with Tenant’s

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construction of any alterations or other improvements in the Premises and the
operation of Tenant’s business and employment practices in the Premises.  The
repairs, corrections or replacements required of Landlord or of Tenant under the
foregoing provisions of this Section 10.10 shall be made promptly following
notice of non-compliance from any Governmental Authority.  The provisions of
this Section 10.10 shall survive the expiration or earlier termination of this
Lease with respect to any obligation accrued under this Section 10.10 before the
date of expiration or earlier termination of this Lease.

11.           Brokers.

11.1.        Tenant represents and warrants that it has had no dealings with any
real estate broker or agent in connection with the negotiation of this Lease
other than Flinn Ferguson (“Tenant’s Broker”), and that it knows of no other
real estate broker or agent that is or might be entitled to a commission in
connection with this Lease.  Landlord shall compensate Tenant’s Broker in
relation to this Lease pursuant to a separate agreement between Landlord and
Tenant’s Broker or Landlord’s Broker (as defined below).  Landlord represents
and warrants that it has had no dealings with any real estate broker or agent in
connection with the negotiation of this Lease other than EDG Commercial Real
Estate (“Landlord’s Broker”), and that it knows of no other real estate broker
or agent that is or might be entitled to a commission in connection with this
Lease.  Landlord shall compensate Landlord’s Broker in relation to this Lease
pursuant to a separate agreement between Landlord and Landlord’s Broker.

11.2.        Tenant represents and warrants that no broker or agent has made any
representation or warranty relied upon by Tenant in Tenant’s decision to enter
into this Lease, other than as contained in this Lease.

11.3.        Tenant acknowledges and agrees that the employment of brokers by
Landlord is for the purpose of solicitation of offers of leases from prospective
tenants and that no authority is granted to any broker to furnish any
representation (written or oral) or warranty from Landlord unless expressly
contained within this Lease.  Landlord is executing this Lease in reliance upon
Tenant’s representations, warranties and agreements contained within Sections
11.1 and 11.2.

11.4.        TENANT AGREES TO INDEMNIFY, DEFEND AND HOLD LANDLORD HARMLESS FROM
ANY AND ALL COST OR LIABILITY FOR COMPENSATION CLAIMED BY ANY OTHER BROKER OR
AGENT, OTHER THAN TENANT’S BROKER, EMPLOYED OR ENGAGED BY IT OR CLAIMING TO HAVE
BEEN EMPLOYED OR ENGAGED BY IT.

11.5.        LANDLORD AGREES TO INDEMNIFY, DEFEND AND HOLD TENANT HARMLESS FROM
ANY AND ALL COST OR LIABILITY FOR COMPENSATION CLAIMED BY ANY OTHER BROKER OR
AGENT, OTHER THAN LANDLORD’S BROKER, EMPLOYED OR ENGAGED BY IT OR CLAIMING TO
HAVE BEEN EMPLOYED OR ENGAGED BY IT.

12.           Holding Over.

12.1.        If, with Landlord’s prior written consent, Tenant holds possession
of all or any part of the Premises after the Term, Tenant shall become a tenant
from month to month after the expiration or earlier termination of the Term, and
in such case Tenant shall continue to pay (a) the Basic Annual Rent in
accordance with Article 5, as adjusted in accordance with Article 6, and

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(b) Tenant’s Pro Rata Share of Operating Expenses.  Any such month-to-month
tenancy shall be subject to every other term, covenant and agreement contained
herein.

12.2.        Notwithstanding the foregoing, if Tenant remains in possession of
the Premises after the expiration or earlier termination of the Term without
Landlord’s prior written consent, Tenant shall become a tenant at sufferance
subject to the terms and conditions of this Lease, except that the monthly rent
shall be equal to one hundred fifty percent (150%) of the Rent in effect during
the last thirty (30) days of the Term.

12.3.        Acceptance by Landlord of Rent after the expiration or earlier
termination of the Term shall not result in an extension, renewal or
reinstatement of this Lease.

12.4.        The foregoing provisions of this Article 12 are in addition to and
do not affect Landlord’s right of reentry or any other rights of Landlord
hereunder or as otherwise provided by Applicable Laws.

13.           Taxes on Tenant’s Property.

13.1.        Tenant shall pay prior to delinquency any and all taxes levied
against any personal property or trade fixtures placed by Tenant in or about the
Premises.

13.2.        If any such taxes on Tenant’s personal property or trade fixtures
are levied against Landlord or Landlord’s property or, if the assessed valuation
of the Building or the Property is increased by inclusion therein of a value
attributable to Tenant’s personal property or trade fixtures, and if Landlord,
after ten (10) days’ written notice to Tenant, pays the taxes based upon any
such increase in the assessed valued of the Building or the Project, then Tenant
shall, within thirty (30) days after receipt of a written demand, repay to
Landlord such increased portion of the taxes so paid by Landlord.

13.3.        If any improvements in or alterations to the Premises, whether
owned by Landlord or Tenant and whether or not affixed to the real property so
as to become a part thereof, are assessed for real property tax purposes at a
valuation higher than the valuation at which improvements conforming to
Landlord’s building standards (the “Building Standard”) in other spaces in the
Building are assessed, then the real property taxes and assessments levied
against Landlord or the Building by reason of such excess assessed valuation
shall be deemed to be taxes levied against personal property of Tenant and shall
be governed by the provisions of Section 13.2 above.  Any such excess assessed
valuation due to improvements in or alterations to space in the Building leased
by other tenants of Landlord shall not be included in the Operating Expenses
defined in Article 7, but shall be treated, as to such other tenants, as
provided in this Section 13.3.  If the records of the County Assessor are
available and sufficiently detailed to serve as a basis for determining whether
said Tenant improvements or alterations are assessed at a higher valuation than
the Building Standard, then such records shall be binding on both Landlord and
Tenant.

14.           Condition of Premises.  Tenant acknowledges that neither Landlord
nor any agent of Landlord has made any representation or warranty with respect
to the condition of the Premises,

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the Building or the Project, or with respect to the suitability of the Premises,
the Building or the Project for the conduct of Tenant’s business.  Tenant’s
taking of possession of the Premises shall, except as otherwise agreed to in
writing by Landlord and Tenant and as provided by the Work Letter, conclusively
establish that the Premises, the Building and the Project were at such time in
good, sanitary and satisfactory condition and repair.  Notwithstanding the
foregoing, Landlord shall use commercially reasonable efforts to enforce any
warranties for the Core and Shell Work and Landlord’s Work, and, provided that
Tenant shall notify Landlord of deficiencies in the Core and Shell Work within
sixty (60) days after the Term Commencement Date, Landlord shall correct any
such deficiencies that existed as of the Term Commencement Date at Landlord’s
sole cost and expense.

15.           Common Areas and Parking Facilities.

15.1.        Tenant shall have the non-exclusive right, in common with others,
to use the Common Areas, subject to the rules and regulations adopted by
Landlord and attached hereto as Exhibit D, together with such other reasonable
and nondiscriminatory rules and regulations as are hereafter promulgated by
Landlord in its reasonable discretion (the “Rules and Regulations”) so long as
such Rules and Regulations do not materially interfere with or prevent Tenant
from operating the Premises for the Permitted Use.  Tenant shall faithfully
observe and comply with the Rules and Regulations.  Landlord shall not be
responsible to Tenant for the violation or non-performance by any other tenant
or any agent, employee or invitee thereof of any of the Rules and Regulations.

15.2.        Tenant shall have a non-exclusive, revocable license, without
charge, to use Tenant’s Pro Rata Share of parking facilities serving the
Building in common on an unreserved basis with other tenants of the Building and
the Project.  Landlord shall continuously provide Tenant with parking spaces
located on the Property and sufficient in number to at least satisfy the minimum
parking requirements of Applicable Laws.  Landlord shall designate visitor
parking stalls near the entrance of the Building for use by visitors of all
tenants of the Building or the Property.

15.3.        Tenant agrees not to unreasonably overburden the parking facilities
and agrees to cooperate with Landlord and other tenants in the use of the
parking facilities.  Landlord reserves the right to reasonably determine that
parking facilities are becoming overcrowded and to limit Tenant’s use thereof. 
Upon such determination, Landlord may reasonably allocate parking spaces among
Tenant and other tenants of the Building or the Project.  Nothing in this
Section, however, is intended to create an affirmative duty on Landlord’s part
to monitor parking.

15.4.        Landlord reserves the right to modify the Common Areas, including
the right to add or remove exterior and interior landscaping and to subdivide
real property so long as such modifications do not materially interfere with or
prevent Tenant from operating the Premises for the Permitted Use or materially
increase Tenant’s Pro Rata Share of Operating Expenses.  Tenant acknowledges
that Landlord specifically reserves the right to allow the exclusive use of
corridors and restroom facilities located on specific floors to one or more
tenants occupying such floors; provided, however, that Tenant shall not be
deprived of the use of the corridors reasonably

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required to serve the Premises or of restroom facilities serving the floor upon
which the Premises are located.

16.           Utilities and Services.

16.1.        Tenant shall pay for all water (including the cost to service,
repair and replace reverse osmosis, de-ionized and other treated water), gas,
heat, light, power, telephone, internet service, cable television, other
telecommunications and other utilities supplied to the Premises, together with
any fees, surcharges and taxes thereon.  To the extent permitted by the local
utilities, all utilities serving the Premises shall be separately metered.  All
accounts for separately metered utilities shall be in Tenant’s name, and Tenant
shall be responsible for paying for such utilities directly to the provider
thereof.  If any such utility is not separately metered to Tenant, Tenant shall
pay a reasonable proportion (to be determined by Landlord) of all charges of
such utility jointly metered with other premises as part of Tenant’s Pro Rata
Share of Operating Expenses or, in the alternative, Landlord may, at its option,
monitor the usage of such utilities by Tenant and charge Tenant with the cost of
purchasing, installing and monitoring such metering equipment, which cost shall
be paid by Tenant as Additional Rent.

16.2.        Landlord shall not be liable for, nor shall any eviction of Tenant
result from the failure to furnish any such utility or service, whether or not
such failure is caused by accident; breakage; repair; strike, lockout or other
labor disturbance or labor dispute of any character; act of terrorism; shortage
of materials, which shortage is not unique to Landlord or Tenant, as the case
may be; governmental regulation, moratorium or other governmental action; or
Landlord’s inability, despite the exercise of reasonable diligence to furnish
any such utility or service (collectively, “Force Majeure”).  In the event of
such failure, Tenant shall not be entitled to any abatement or reduction of
Rent, nor shall Tenant be relieved from the operation of any covenant or
agreement of this Lease.

16.3.        Tenant shall pay for, prior to delinquency of payment therefor, any
utilities and services that may be furnished to the Premises during or, if
Tenant occupies the Premises after the expiration or earlier termination of the
Term, after the Term.

16.4.        Tenant shall not, without Landlord’s prior written consent (not to
be unreasonably withheld, conditioned or delayed), use any device in the
Premises (including, without limitation, data processing machines) that will in
any way (a) increase the amount of ventilation, air exchange, gas, steam,
electricity or water beyond the existing capacity of the Building as
proportionately allocated to the Premises based upon Tenant’s Pro Rata Share as
usually furnished or supplied for the use set forth in Section 2.8 or (b) exceed
Tenant’s Pro Rata Share of the Building’s capacity to provide such utilities or
services.

16.5.        If Tenant shall require utilities or services in excess of those
usually furnished or supplied for tenants in similar spaces in the Building by
reason of Tenant’s equipment or extended hours of business operations, then
Tenant shall first procure Landlord’s consent (not to be unreasonably withheld,
conditioned or delayed) for the use thereof, which consent Landlord may
condition upon the availability of such excess utilities or services, and Tenant
shall pay as Additional Rent an amount equal to the cost of providing such
excess utilities and services.

 

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16.6.        Utilities and services provided by Landlord to the Premises that
are separately metered shall be paid by Tenant directly to the supplier of such
utility or service.

16.7.        Landlord shall provide water in Common Areas for drinking and
lavatory purposes only; provided, however, that if Landlord reasonably
determines that Tenant requires, uses or consumes water for any purpose other
than ordinary drinking and lavatory purposes, Landlord may install a water meter
and thereby measure Tenant’s water consumption for all purposes.  Tenant shall
pay Landlord for the actual costs of such meter and the installation thereof
and, throughout the duration of Tenant’s occupancy of the Premises, Tenant shall
keep said meter and installation equipment in good working order and repair at
Tenant’s sole cost and expense.  If Tenant fails to so maintain such meter and
equipment, Landlord may repair or replace the same and shall collect the costs
therefor from Tenant.  Tenant agrees to pay for water consumed, as shown on said
meter (at cost and without any mark-up by Landlord), within fifteen (15) days
after Tenant’s receipt of bills therefor.  If Tenant fails to timely make such
payments, Landlord may pay such charges and collect the same from Tenant.  Any
such costs or expenses incurred, or payments made by Landlord for any of the
reasons or purposes hereinabove stated, shall be deemed to be Additional Rent
payment by Tenant and collectible by Landlord as such.

16.8.        Landlord reserves the right to stop service of the elevator,
plumbing, ventilation, air conditioning and electric systems, when Landlord
deems reasonably necessary or desirable, due to accident, emergency or the need
to make repairs, alterations or improvements, until such repairs, alterations or
improvements shall have been completed, and Landlord shall further have no
responsibility or liability for failure to supply elevator facilities, plumbing,
ventilation, air conditioning or electric service when prevented from doing so
by Force Majeure or a failure by a third party to deliver gas, oil or another
suitable fuel supply, or Landlord’s inability by exercise of reasonable
diligence to obtain gas, oil or another suitable fuel; provided, however,
Landlord shall use commercially reasonable efforts to minimize interference with
Tenant’s use and operation of the Premises for the Permitted Use.  Without
limiting the foregoing, it is expressly understood and agreed that any covenants
on Landlord’s part to furnish any service pursuant to any of the terms,
covenants, conditions, provisions or agreements of this Lease, or to perform any
act or thing for the benefit of Tenant, shall not be deemed breached if Landlord
is unable to furnish or perform the same by virtue of Force Majeure.

17.           Alterations.

17.1.        Tenant may make, at its expense and without Landlord’s prior
consent, such cosmetic improvements or alterations to the Premises (such as
carpeting, painting, non-load-bearing partitions, and installation or relocation
of freestanding workstations, and installation of Tenant’s equipment) (“Cosmetic
Improvements”) that do not exceed Fifty Thousand Dollars ($50,000) in any one
instance or Two Hundred Fifty Thousand Dollars ($250,000) in any twelve (12)
month period.  Except in accordance with the preceding sentence, Tenant shall
make no alterations, additions or improvements in or to the Premises after the
Term Commencement Date (“Alterations”) without Landlord’s prior written
approval, which approval Landlord shall not unreasonably withhold, condition or
delay; provided, however, that in the event any proposed Alteration affects (a)
any structural portions of the Building, including exterior walls, roof,
foundation or core of the Building, (b) the exterior of the Building or (c) any
Building systems,

 

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including elevator, plumbing, air conditioning, heating, electrical, security,
life safety and power, then Landlord may withhold its approval with respect
thereto in its sole and absolute discretion.  Tenant shall, in making any such
Alterations, use only those architects, contractors, suppliers and mechanics of
which Landlord has given prior written approval, which approval shall not be
unreasonably withheld, conditioned or delayed.  In seeking Landlord’s approval,
Tenant shall provide Landlord, at least fourteen (14) days in advance of any
proposed construction, with plans, specifications, bid proposals, work
contracts, requests for laydown areas and such other information concerning the
nature and cost of the Alterations as Landlord may reasonably request.

17.2.        Tenant shall not construct or permit to be constructed partitions
or other obstructions that might interfere with free access to mechanical
installation or service facilities of the Building, or interfere with the moving
of Landlord’s equipment to or from the enclosures containing such installations
or facilities.

17.3.        Tenant shall accomplish any work performed on the Premises or the
Building in such a manner as to permit any fire sprinkler system and fire water
supply lines to remain fully operable at all times.

17.4.        Any work performed on the Premises or the Building by Tenant or
Tenant’s contractors shall be done at such times and in such manner as Landlord
may from time to time reasonably designate.  Tenant covenants and agrees that
all work done by Tenant or Tenant’s contractors shall be performed in full
compliance with Applicable Laws.  Within thirty (30) days after completion of
any Alterations, Tenant shall provide Landlord with complete “as-built” drawing
print sets and electronic CADD files on disc (or files in such other current
format in common use as Landlord reasonably approves or requires) showing any
changes in the Premises.

17.5.        Before commencing any work, Tenant shall give Landlord at least
fourteen (14) days’ prior written notice of the proposed commencement of such
work and shall, if required by Landlord, secure, at Tenant’s own cost and
expense, a completion and lien indemnity bond reasonably satisfactory to
Landlord for said work.

17.6.        All Alterations, attached equipment, decorations, fixtures, trade
fixtures, additions and improvements, subject to Section 17.8, attached to or
built into the Premises, made by either of the parties, including, without
limitation, all floor and wall coverings, built-in cabinet work and paneling,
sinks and related plumbing fixtures, laboratory benches, exterior venting fume
hoods and walk-in freezers and refrigerators, ductwork, conduits, electrical
panels and circuits, shall, unless, prior to such construction or installation,
Landlord elects otherwise, become the property of Landlord upon the expiration
or earlier termination of the Term, and shall remain upon and be surrendered
with the Premises as a part thereof; provided, however, that all business and
trade fixtures, machinery and equipment purchased at Tenant’s expense (exclusive
of those purchased from the Tenant Improvement Allowance) shall be the property
of Tenant and may be removed by Tenant at the end of the Term.  The Premises
shall at all times remain the property of Landlord and shall be surrendered to
Landlord upon the expiration or earlier termination of this Lease.  All trade
fixtures, equipment, Tenant Improvements, Alterations and Signage installed by
or under Tenant shall be the property of Landlord, except as provided above.

 

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17.7.        Tenant shall repair any damage to the Premises caused by Tenant’s
removal of any property from the Premises.  During any such restoration period,
Tenant shall pay Rent to Landlord as provided herein as if said space were
otherwise occupied by Tenant.  The provisions of this Section shall survive the
expiration or earlier termination of this Lease.

17.8.        Except as to (a) those items listed on Exhibit C attached hereto,
(b) other business and trade fixtures, machinery and equipment that are not
affixed to the Building and that Tenant can prove were purchased at Tenant’s
expense, and (c) other business and trade fixtures, machinery and equipment that
are affixed to the Building and that Tenant can prove were purchased at Tenant’s
expense and of which Tenant has delivered written notice to Landlord at the time
the item is affixed to the Building, all business and trade fixtures, machinery
and equipment, built-in furniture and cabinets, together with all additions and
accessories thereto, installed in and upon the Premises shall be and remain the
property of Landlord and shall not be moved by Tenant at any time during the
Term.  Tenant shall complete and deliver Exhibit C to Landlord within thirty
(30) days after the Term Commencement Date, which Exhibit C shall be subject to
Landlord’s reasonable approval.  Exhibit C may include both items located in the
Premises at the time of delivery of Exhibit C and items which Tenant anticipates
it will acquire during the Term.  If Tenant acquires during the Term items
listed (in the case of property affixed to a building, with particularity) in
Exhibit C, then such items shall remain the property of Tenant and may be
removed by Tenant from the Premises even if Tenant does not notify Landlord of
the items at the time the items are affixed to the Building.  If Tenant shall
fail to remove any of its effects from the Premises prior to termination of this
Lease, then Landlord may, at its option, remove the same in any manner that
Landlord shall choose and store said effects without liability to Tenant for
loss thereof or damage thereto, and Tenant shall pay Landlord, within fifteen
(15) days after Tenant’s receipt of a written demand, any costs and expenses
incurred due to such removal and storage or Landlord may, at its sole option and
without notice to Tenant, sell such property or any portion thereof at private
sale and without legal process for such price as Landlord may obtain and apply
the proceeds of such sale against any (a) amounts due by Tenant to Landlord
under this Lease and (b) any expenses incident to the removal, storage and sale
of said personal property.

17.9.        Notwithstanding any other provision of this Article 17 to the
contrary, in no event shall Tenant remove any improvement from the Premises as
to which Landlord contributed payment, including, without limitation, the Tenant
Improvements made pursuant to the Work Letter without Landlord’s prior written
consent, which consent Landlord may withhold in its sole and absolute
discretion.

17.10.      Tenant shall pay to  Landlord an amount equal to three percent (3%)
of the cost to Tenant of all Alterations made by Tenant that require Landlord’s
approval to cover Landlord’s overhead and expenses for plan review,
coordination, scheduling and supervision thereof.  For purposes of payment of
such sum, Tenant shall submit to Landlord copies of all bills, invoices and
statements covering the costs of such Alterations, accompanied by payment to
Landlord of the fee set forth in this Section.  Tenant shall reimburse Landlord
for any extra reasonable expenses incurred by Landlord by reason of faulty work
done by Tenant or its contractors, or by reason of delays caused by such work,
or by reason of inadequate clean-up.

 

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17.11.      Within sixty (60) days after final completion of any Alterations
performed by Tenant with respect to the Premises, Tenant shall submit to
Landlord documentation showing the amounts expended by Tenant with respect to
such Alterations performed by Tenant with respect to the Premises, together with
supporting documentation reasonably acceptable to Landlord.

17.12.      TENANT SHALL REQUIRE ITS CONTRACTORS AND SUBCONTRACTORS PERFORMING
WORK ON THE PREMISES TO NAME LANDLORD AND ITS AFFILIATES AND LENDERS AS
ADDITIONAL INSUREDS ON THEIR RESPECTIVE INSURANCE POLICIES.

18.           Repairs and Maintenance.

18.1.        Landlord shall repair and maintain in good operating condition the
structural and exterior portions and Common Areas of the Building and the
Project, including, without limitation, roofing and covering materials,
foundations, exterior walls, plumbing and plumbing fixtures, fire sprinkler
systems (if any), heating, ventilating, air conditioning, elevators, and
electrical systems, unless installed by Tenant (Landlord’s Work, even if paid
for by Tenant, shall not be deemed to be “installed by Tenant”).  Except as
otherwise provided under Article 7, any costs related to the repair or
maintenance activities specified in this Section 18.1 shall be included as a
part of Operating Expenses, unless such repairs or maintenance is required in
whole or in part because of any act, neglect, fault or omissions of Tenant, its
agents, servants, employees or invitees, in which case Tenant shall pay to
Landlord the cost of such repairs and maintenance.

18.2.        Except for services of Landlord, if any, required by Section 18.1,
Tenant shall at Tenant’s sole cost and expense maintain and keep the Premises
and every part thereof in good condition and repair, damage thereto from
ordinary wear and tear excepted.  Tenant shall, upon the expiration or sooner
termination of the Term, surrender the Premises to Landlord in as good of a
condition as when received, ordinary wear and tear and casualty damage
excepted.  Landlord shall have no obligation to alter, remodel, improve, repair,
decorate or paint the Premises or any part thereof, other than pursuant to the
terms and provisions of the Work Letter.

18.3.        Landlord shall not be liable for any failure to make any repairs or
to perform any maintenance that is an obligation of Landlord unless such failure
shall persist for thirty (30) days (or such shorter time as may be reasonable in
case of emergency) after Tenant provides Landlord with written notice of the
need of such repairs or maintenance; provided, however, that if the nature of
Landlord’s obligation is such that more than thirty (30) days are required for
its performance, then Landlord shall not be deemed to be in default if it
commences performance within the thirty (30) day period and thereafter
diligently pursues the cure to completion.

18.4.        Repairs under this Article 18 that are obligations of Landlord are
subject to allocation among Tenant and other tenants as Operating Expenses,
except as otherwise provided in this Article 18.

18.5.        This Article 18 relates to repairs and maintenance arising in the
ordinary course of operation of the Building and the Project and any related
facilities.  In the event of fire,

 

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earthquake, flood, vandalism, war, terrorism, natural disaster or similar cause
of damage or destruction, Article 22 shall apply in lieu of this Article 18.

19.           Liens.

19.1.        Subject to the immediately succeeding sentence, Tenant shall keep
the Premises, the Building and the Project free from any liens arising out of
work performed, materials furnished or obligations incurred by Tenant.  Tenant
further covenants and agrees that any mechanic’s lien filed against the
Premises, the Building or the Project for work claimed to have been done for, or
materials claimed to have been furnished to, shall be discharged or bonded by
Tenant within ten (10) days after Tenant’s receipt of written notice of the
filing thereof, at Tenant’s sole cost and expense.

19.2.        Should Tenant fail to discharge or bond against any lien of the
nature described in Section 19.1 in compliance with such Section, Landlord may,
at Landlord’s election, pay such claim or post a bond or otherwise provide
security to eliminate the lien as a claim against title, and Tenant shall
reimburse Landlord for the costs thereof as Additional Rent within fifteen (15)
days after Tenant’s receipt of written notice thereof.

19.3.        In the event that Tenant leases or finances the acquisition of
office equipment, furnishings or other personal property of a removable nature
utilized by Tenant in the operation of Tenant’s business, Tenant shall ensure
that any Uniform Commercial Code financing statement executed by Tenant shall,
upon its face or by exhibit thereto, indicate that such financing statement is
applicable only to removable personal property of Tenant located within the
Premises.  In no event shall the address of the Building be furnished on a
financing statement without qualifying language as to applicability of the lien
only to removable personal property located in an identified suite leased by
Tenant.  Should any holder of a financing statement executed by Tenant record or
place of record a financing statement that constitutes a lien against any
interest of Landlord or against equipment that may be located other than within
an identified suite leased by Tenant, Tenant shall, within fifteen (15) days
after its receipt of written notice of the filing of such financing statement,
cause (a) a copy of the lender security agreement or other documents to which
the financing statement pertains to be furnished to Landlord to facilitate
Landlord’s ability to demonstrate that the lien of such financing statement is
not applicable to Landlord’s interest and (b) Tenant’s lender to amend such
financing statement and any other documents of record to clarify that any liens
imposed thereby are not applicable to any interest of Landlord in the Premises,
the Building or the Project.

20.           Indemnification and Exculpation.

20.1.        Tenant agrees to indemnify, defend and save  Landlord harmless from
and against any and all demands, claims, liabilities, losses, costs, expenses,
actions, causes of action, damages or judgments, and all reasonable expenses
(including, without limitation, reasonable attorneys’ fees, charges and
disbursements) incurred in investigating or resisting the same (collectively,
“Claims”) arising from injury or death to any person or injury to any property
occurring within or about the Premises, the Building or the Property arising out
of Tenant’s or Tenant’s employees’, agents’ or guests’ use or occupancy of the
Premises or a breach or default

 

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by Tenant in the performance of any of its obligations hereunder, except to the
extent, if any, caused by the willful misconduct or negligence of Landlord, its
agents, employees or contractors.

20.2.        Notwithstanding any provision of Section 20.1 to the contrary,
Landlord shall not be liable to Tenant for, and Tenant assumes all risk of,
damage to personal property or scientific research, including, without
limitation, loss of records kept by Tenant within the Premises and damage or
losses caused by fire, electrical malfunction, gas explosion or water damage of
any type (including, without limitation, broken water lines, malfunctioning fire
sprinkler systems, roof leaks or stoppages of lines), unless any such loss is
due to the gross negligence or willful misconduct of Landlord, its agents or
employees.  Tenant further waives any claim for injury to Tenant’s business or
loss of income relating to any such damage or destruction of personal property
as described in this Section 20.2.

20.3.        Landlord shall not be liable for any damages arising from any act,
omission or neglect of any other tenant in the Building or the Project, or of
any other third party.

20.4.        Tenant acknowledges that security devices and services, if any,
while intended to deter crime, may not in given instances prevent theft or other
criminal acts.  Landlord shall not be liable for injuries or losses caused by
criminal acts of third parties, and Tenant assumes the risk that any security
device or service may malfunction or otherwise be circumvented by a criminal. 
If Tenant desires protection against such criminal acts, then Tenant shall, at
Tenant’s sole cost and expense, obtain appropriate insurance coverage.

20.5.        Notwithstanding anything in this Article 20 to the contrary, in the
event of the concurrent negligence of Tenant, its agents, employees, subtenants,
invitees, licensees, or contractors on the one hand, and that of Landlord, and
Landlord’s officers, directors or partners, contractors, employees and agents
(including any management company and its employees) on the other hand, which
concurrent negligence results in injury or damage to persons or property and
relates to the construction, alteration, repair, addition to, subtraction from,
improvement to or maintenance of the Premises, Common Areas or Building, each
party’s obligation to indemnify the other as set forth in this Article 20 shall
be limited to the extent of the indemnifying party’s negligence and that of its
agents, employees, subtenants, invitees, licensees or contractors, including its
proportional share of costs, reasonable attorneys’ fees, and expenses incurred
in connection with any claim, action or proceeding brought with respect to such
injury or damage.

20.6.        The provisions of this Article 20 shall survive the expiration or
earlier termination of this Lease.

21.           Insurance; Waiver of Subrogation.

21.1.        Landlord shall maintain insurance for the Building and the Project
in amounts equal to full replacement cost (exclusive of the costs of excavation,
foundations and footings, and without reference to depreciation taken by
Landlord upon its books or tax returns) or such lesser coverage as Landlord may
elect, provided that such coverage shall not be less than ninety percent (90%)
of such full replacement cost or the amount of such insurance Landlord’s lender,
mortgagee or beneficiary (each, a “Lender”), if any, requires Landlord to
maintain, providing

 

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protection against any peril generally included within the classification “Fire
and Extended Coverage,” together with insurance against sprinkler damage (if
applicable), vandalism and malicious mischief.  Landlord, subject to
availability thereof, shall further insure, if Landlord deems it appropriate,
coverage against flood, environmental hazard, earthquake, loss or failure of
building equipment, rental loss during the period of repairs or rebuilding,
workmen’s compensation insurance and fidelity bonds for employees employed to
perform services for the Building or the Property.  Notwithstanding the
foregoing, Landlord may, but shall not be deemed required to, provide insurance
for any improvements installed by Tenant or that are in addition to the standard
improvements customarily furnished by Landlord, without regard to whether or not
such are made a part of or are affixed to the Building.  Any costs incurred by
Landlord pursuant to this Section 21.1 shall constitute a portion of Operating
Expenses, subject to the limitations of Article 7.

21.2.        In addition, Landlord shall carry public liability insurance with a
single limit of not less than Two Million Dollars ($2,000,000) for death or
bodily injury, or property damage with respect to the Project.  Any costs
incurred by Landlord pursuant to this Section 21.2 shall constitute a portion of
Operating Expenses.

21.3.        Tenant shall, at its own cost and expense, procure and maintain in
effect, beginning on the Term Commencement Date or the date of occupancy,
whichever occurs first, and continuing throughout the Term (and occupancy by
Tenant, if any, after termination of this Lease) comprehensive general liability
insurance with limits of not less than Five Million Dollars ($5,000,000) per
occurrence and Five Million Dollars ($5,000,000) in the aggregate for death or
bodily injury and property damage with respect to the Premises.

21.4.        The insurance required to be purchased and maintained by Tenant
pursuant to this Lease shall name Landlord, BioMed Realty, L.P., BioMed Realty
Trust, Inc., and their respective officers, employees, agents, general partners,
members and Lenders (“Landlord Parties”) as additional insureds.  Said insurance
shall be with companies having a rating of not less than policyholder rating of
A- and financial category rating of at least Class VII in “Best’s Insurance
Guide.”  Tenant shall obtain for Landlord from the insurance companies or cause
the insurance companies to furnish certificates of coverage to Landlord.  No
such policy shall be cancelable or subject to reduction of coverage or other
modification or cancellation except after thirty (30) days’ prior written notice
to Landlord from the insurer.  All such policies shall be written as primary
policies, not contributing with and not in excess of the coverage that Landlord
may carry.  Tenant’s policy may be a “blanket policy” that specifically provides
that the amount of insurance shall not be prejudiced by other losses covered by
the policy.  Tenant shall, at least ten (10) days prior to the expiration of
such policies, furnish Landlord with renewal certificates of insurance.  Tenant
agrees that if Tenant does not take out and maintain such insurance, Landlord
may (but shall not be required to) procure said insurance on Tenant’s behalf and
at its cost to be paid by Tenant as Additional Rent.

21.5.        Tenant assumes the risk of damage to any fixtures, goods,
inventory, merchandise, equipment and leasehold improvements, and Landlord shall
not be liable for injury to Tenant’s business or any loss of income therefrom,
relative to such damage, all as more particularly set forth within this Lease. 
Tenant shall, at Tenant’s sole cost and expense, carry such insurance as

 

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Tenant desires for Tenant’s protection with respect to personal property of
Tenant or business interruption.

21.6.        In each instance where insurance is to name Landlord Parties as
additional insureds, Tenant shall, upon Landlord’s written request, also
designate and furnish certificates evidencing such Landlord Parties as
additional insureds to (a) any Lender of Landlord holding a security interest in
the Building or the Project, (b) the landlord under any lease whereunder
Landlord is a tenant of the real property upon which the Building is located if
the interest of Landlord is or shall become that of a tenant under a ground
lease rather than that of a fee owner, and (c) any management company retained
by Landlord to manage the Project.

21.7.        Landlord and Tenant each hereby waive any and all rights of
recovery against the other or against the officers, directors, employees, agents
and representatives of the other on account of loss or damage occasioned by such
waiving party or its property or the property of others under such waiving
party’s control, in each case to the extent that such loss or damage is insured
against under any fire and extended coverage insurance policy that either
Landlord or Tenant may have in force at the time of such loss or damage or that
would have been insured against had the waiving party carried the insurance
required under this Lease.  Such waivers shall continue so long as their
respective insurers so permit.  Any termination of such a waiver shall be by
written notice to the other party, containing a description of the circumstances
hereinafter set forth in this Section 21.7.  Landlord and Tenant, upon obtaining
the policies of insurance required or permitted under this Lease, shall give
notice to the insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease.  If such policies shall not be
obtainable with such waiver or shall be so obtainable only at a premium over
that chargeable without such waiver, then the party seeking such policy shall
notify the other of such conditions, and the party so notified shall have ten
(10) days thereafter to either (a) procure such insurance with companies
reasonably satisfactory to the other party or (b) agree to pay such additional
premium (in Tenant’s case, in the proportion that the area of the Premises bears
to the insured area).  If the parties do not accomplish either (a) or (b), then
this Section 21.7 shall have no effect during such time as such policies shall
not be obtainable or the party in whose favor a waiver of subrogation is desired
refuses to pay the additional premium.  If such policies shall at any time be
unobtainable, but shall be subsequently obtainable, then neither party shall be
subsequently liable for a failure to obtain such insurance until a reasonable
time after notification thereof by the other party.  If the release of either
Landlord or Tenant, as set forth in the first sentence of this Section 21.7,
shall contravene Applicable Laws, then the liability of the party in question
shall be deemed not released but shall be secondary to the other party’s
insurer.

21.8.        Landlord may require insurance policy limits required under this
Lease to be raised to conform with requirements of Landlord’s Lender or to bring
coverage limits to levels then being required of new tenants within the Project.

22.           Damage or Destruction.

22.1.        In the event of a partial destruction of the Building or the
Project by fire or other perils covered by extended coverage insurance not
exceeding twenty-five percent (25%) of the full insurable value thereof, and
provided that (a) the damage thereto is such that the Building or

 

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the Project may be repaired, reconstructed or restored within a period of six
(6) months from the date of the happening of such casualty and (b) Landlord
shall receive insurance proceeds sufficient to cover the cost of such repairs
(except for any deductible amount provided by Landlord’s policy, which
deductible amount, if paid by Landlord, shall constitute an Operating Expense),
Landlord shall commence and proceed diligently with the work of repair,
reconstruction and restoration of the Building or the Project, as applicable,
and this Lease shall continue in full force and effect.

22.2.        In the event of any damage to or destruction of the Building or the
Project other than as described in Section 22.1, Landlord may elect to repair,
reconstruct and restore the Building or the Project, as applicable, in which
case this Lease shall continue in full force and effect.  If Landlord elects not
to repair the Building or the Project, as applicable, then this Lease shall
terminate as of the date of such damage or destruction.

22.3.        Landlord shall give written notice to Tenant within forty-five (45)
days following the date of damage or destruction of its election not to repair,
reconstruct or restore the Building or the Project, as applicable, and if the
notice states that Landlord elects to so repair, reconstruct or restore, the
notice shall set forth the anticipated period for repairing the casualty damage
and the date such repair will be complete.  If the anticipated repair period
will not be completed within a period of twelve (12) months from the date of the
happening of such casualty and if the damage is so extensive as to reasonably
prevent Tenant’s substantial use and enjoyment of the Premises, then Tenant may
elect to terminate this Lease by written notice to Landlord within ten (10) days
following delivery of the written notice from Landlord.

22.4.        Upon any termination of this Lease under any of the provisions of
this Article 22, the parties shall be released thereby without further
obligation to the other from the date possession of the Premises is surrendered
to the Landlord, except with regard to (a) items occurring prior to the damage
or destruction and (b) provisions of this Lease that, by their express terms,
survive the expiration or earlier termination hereof.

22.5.        In the event of repair, reconstruction and restoration as provided
in this Article 22, all Rent to be paid by Tenant under this Lease shall be
abated proportionately, beginning on the date of the damage or destruction of
the Building or the Project, based on the extent to which Tenant’s use of the
Premises is impaired beginning on such date and continuing until substantial
completion of such repair, reconstruction or restoration, unless Landlord
provides Tenant with other space during the period of repair that, in Tenant’s
reasonable opinion, is suitable for the temporary conduct of Tenant’s business.

22.6.        Notwithstanding anything to the contrary contained in this
Article 22, should Landlord be delayed or prevented from completing the repair,
reconstruction or restoration of the damage or destruction to the Premises after
the occurrence of such damage or destruction by Force Majeure, then the time for
Landlord to commence or complete repairs shall be extended on a day-for-day
basis; provided, however, that, at Landlord’s election, Landlord shall be
relieved of its obligation to make such repair, reconstruction or restoration. 
Tenant shall be released from any obligations under this Lease (except with
regard to those provisions that, by their express terms, survive the expiration
or earlier termination hereof) if, on the date that is twelve (12)

 

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months after the date of damage or destruction, the repair, reconstruction or
restoration required to be performed by Landlord to provide Tenant use of the
Premises is not then Substantially Complete.

22.7.        If Landlord is obligated to or elects to repair, reconstruct or
restore as herein provided, then Landlord shall be obligated to make such
repair, reconstruction or restoration only with regard to those portions of the
Premises, the Building or the Project that were originally provided at
Landlord’s expense, including, without limitation, the Landlord’s Work to the
extent paid for out of the Tenant Improvement Allowance.  The repair,
reconstruction or restoration of improvements not originally provided by
Landlord or at Landlord’s expense shall be the obligation of Tenant.  In the
event Tenant has elected to upgrade certain improvements from the Building
Standard, Landlord shall, upon the need for replacement due to an insured loss,
provide only the Building Standard, unless Tenant again elects to upgrade such
improvements and pay any incremental costs related thereto, except to the extent
that excess insurance proceeds, if received, are adequate to provide such
upgrades, in addition to providing for basic repair, reconstruction and
restoration of the Premises, the Building and the Project.

22.8.        Notwithstanding anything to the contrary contained in this
Article 22, Landlord shall not have any obligation whatsoever to repair,
reconstruct or restore the Premises if the damage resulting from any casualty
covered under this Article 22 occurs during the last eighteen (18) months of the
Term or any extension hereof, or to the extent that insurance proceeds are not
available therefor.  Further, if the damage resulting from any casualty covered
under this Article 22 occurs during the last eighteen (18) months of the Term or
any extension hereof and if the damage is so extensive as to reasonably prevent
Tenant’s use and enjoyment of the Premises for three (3) months or more, Tenant
may in its sole discretion terminate this Lease by written notice delivered to
Landlord within thirty (30) days from the date of the happening of such
casualty.

22.9.        Landlord’s obligation, should it elect or be obligated to repair or
rebuild, shall be limited to the Property and the Building; provided that Tenant
shall, at its expense, replace or fully repair all of Tenant’s personal property
and any alterations installed by Tenant existing at the time of such damage or
destruction.  If the Property or the Building is to be repaired in accordance
with the foregoing, Landlord shall make available to Tenant any portion of
insurance proceeds it receives that are allocable to the alterations constructed
by Tenant pursuant to this Lease, provided Tenant is not then in default under
this Lease.

23.           Eminent Domain.

23.1.        In the event the whole of the Premises, or such part thereof as
shall substantially interfere with the Tenant’s use and occupancy thereof, shall
be taken for any public or quasi-public purpose by any lawful power or authority
by exercise of the right of appropriation, condemnation or eminent domain, or
sold to prevent such taking, Tenant or Landlord may terminate this Lease
effective as of the date possession is required to be surrendered to said
authority.

 

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23.2.        In the event of a partial taking of the Building or the Project, or
of drives, walkways or parking areas serving the Building or the Project for any
public or quasi-public purpose by any lawful power or authority by exercise of
right of appropriation, condemnation, or eminent domain, or sold to prevent such
taking, then, without regard to whether any portion of the Premises occupied by
Tenant was so taken, Landlord may elect to terminate this Lease as of such
taking if such taking is, in Landlord’s reasonable opinion, of a material nature
such as to make it uneconomical to continue use of the unappropriated portion
for purposes of renting office or laboratory space.

23.3.        Tenant shall be entitled to any award that is specifically awarded
as compensation for (a) the taking of Tenant’s personal property that was
installed at Tenant’s expense, (b) the value of the loss of Tenant’s goodwill,
(c) the costs of Tenant moving to a new location, and (d) other awards granted
to it and not out of or part of Landlord’s award.  Except as set forth in the
previous sentence, any award for such taking shall be the property of Landlord.

23.4.        If, upon any taking of the nature described in this Article 23,
this Lease continues in effect, then Landlord shall promptly proceed to restore
the Premises, the Building and the Project, as applicable, to substantially
their same condition prior to such partial taking.  To the extent such
restoration is feasible, as determined by Landlord in its sole and absolute
discretion, the Rent shall be decreased proportionately to reflect the loss of
any portion of the Premises no longer available to Tenant.

24.           Defaults and Remedies.

24.1.        Late payment by Tenant to Landlord of Rent and other sums due shall
cause Landlord to incur costs not contemplated by this Lease, the exact amount
of which shall be extremely difficult and impracticable to ascertain.  Such
costs include, but are not limited to, processing and accounting charges and
late charges that may be imposed on Landlord by the terms of any mortgage or
trust deed covering the Premises.  Therefore, if any installment of Rent due
from Tenant is not received by Landlord within five (5) days after the date such
payment is due, Tenant shall pay to Landlord an additional sum of  five percent
(5%) of the overdue Rent as a late charge; provided, however, that with respect
to the first late payment in any twelve (12) month period, no late charge shall
be due unless Tenant fails to pay the overdue amount within three (3) business
days after written notice from Landlord.  The parties agree that this late
charge represents a fair and reasonable estimate of the costs that Landlord
shall incur by reason of late payment by Tenant.

24.2.        No payment by Tenant or receipt by Landlord of a lesser amount than
the Rent payment herein stipulated shall be deemed to be other than on account
of the Rent, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as Rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord’s
right to recover the balance of such Rent or pursue any other remedy provided in
this Lease or in equity or at law.  If a dispute shall arise as to any amount or
sum of money to be paid by Tenant to Landlord hereunder, Tenant shall have the
right to make payment “under protest,” such payment shall not be regarded as a
voluntary payment, and there shall

 

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survive the right on the part of Tenant to institute suit for recovery of the
payment paid under protest.

24.3.        If Tenant fails to pay any sum of money required to be paid by it
hereunder, or shall fail to perform any other act on its part to be performed
hereunder, Landlord may, without waiving or releasing Tenant from any
obligations of Tenant, but shall not be obligated to, make such payment or
perform such act; provided that such failure by Tenant continues for five (5)
days after Landlord delivers notice to Tenant demanding performance by Tenant;
or provided that such failure by Tenant unreasonably interfered with the use of
the Building by any other tenant or with the efficient operation of the
Building, or resulted or could have resulted in a violation of Applicable Laws
or the cancellation of an insurance policy maintained by Landlord.  In addition
to the late charge described in Section 24.1, Tenant shall pay to Landlord as
Additional Rent all sums so paid or incurred by Landlord, together with interest
thereon, from the date such sums were paid or incurred, at the annual rate equal
to ten percent (10%) per annum or the highest rate permitted by Applicable Laws,
whichever is less.

24.4.        The occurrence of any one or more of the following events shall
constitute a “Default” hereunder by Tenant:

(a)           The abandonment or vacation of the Premises by Tenant;

(b)           The failure by Tenant to make any payment of Rent, as and when
due, where such failure shall continue for a period of five (5) days after
written notice thereof from Landlord to Tenant;

(c)           The failure by Tenant to observe or perform any obligation or
covenant contained herein (other than described in Subsections 24.4(a) and
24.4(b)) to be performed by Tenant, where such failure shall continue for a
period of thirty (30) days after written notice thereof from Landlord to Tenant;
provided that, if the nature of Tenant’s default is such that it reasonably
requires more than thirty (30) days to cure, Tenant shall not be deemed to be in
default if Tenant shall commence such cure within said thirty (30) day period
and thereafter diligently prosecute the same to completion; and provided,
further, that such cure is completed no later than ninety (90) days from the
date of Tenant’s receipt of written notice from Landlord;

(d)           Tenant makes an assignment for the benefit of creditors;

(e)           A receiver, trustee or custodian is appointed to or does take
title, possession or control of all or substantially all of Tenant’s assets;

(f)            Tenant files a voluntary petition under the United States
Bankruptcy Code or any successor statute (the “Bankruptcy Code”);

(g)           Any involuntary petition if filed against Tenant under any chapter
of the Bankruptcy Code and is not dismissed within one hundred twenty (120)
days;

(h)           Failure to deliver an estoppel certificate in accordance with
Article 29; or

 

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(i)            Tenant’s interest in this Lease is attached, executed upon or
otherwise judicially seized and such action is not released within one hundred
twenty (120) days of the action.

Notices given under this Section 24.4 shall specify the alleged default and
shall demand that Tenant perform the provisions of this Lease or pay the Rent
that is in arrears, as the case may be, within the applicable period of time, or
quit the Premises.  No such notice shall be deemed a forfeiture or a termination
of this Lease unless Landlord elects otherwise in such notice.

24.5.        In the event of a Default by Tenant, and at any time thereafter,
with or without notice or demand and without limiting Landlord in the exercise
of any right or remedy that Landlord may have, Landlord shall be entitled to
terminate Tenant’s right to possession of the Premises by any lawful means, in
which case this Lease shall terminate and Tenant shall immediately surrender
possession of the Premises to Landlord.  In such event, Landlord shall have the
immediate right to re-enter and remove all persons and property, and such
property may be removed and stored in a public warehouse or elsewhere at the
cost and for the account of Tenant, all without service of notice or resort to
legal process and without being deemed guilty of trespass or becoming liable for
any loss or damage that may be occasioned thereby.  In the event that Landlord
shall elect to so terminate this Lease, then Landlord shall be entitled to
recover from Tenant all damages incurred by Landlord by reason of Tenant’s
default, including, without limitation:

(a)           The worth at the time of award of any unpaid Rent that had accrued
at the time of such termination; plus

(b)           The worth at the time of award of the amount by which the unpaid
Rent that would have accrued during the period commencing with termination of
the Lease and ending at the time of award exceeds that portion of the loss of
Landlord’s rental income from the Premises that Tenant proves could have been
reasonably avoided; plus

(c)           The worth at the time of award of the amount by which the unpaid
Rent for the balance of the Term after the time of award exceeds that portion of
the loss of Landlord’s rental income from the Premises that Tenant proves could
have been reasonably avoided; plus

(d)           Any other amount necessary to compensate Landlord for all the
detriment caused by Tenant’s failure to perform its obligations under this Lease
or that in the ordinary course of things would be likely to result therefrom,
including, without limitation, the cost of restoring the Premises to the
condition required under the terms of this Lease; plus

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

As used in Subsections 24.5(a) and 24.5(b), “worth at the time of award” shall
be computed by allowing interest at the rate specified in Section 24.1.  As used
in Subsection 24.5(c) above, the “worth at the time of the award” shall be
computed by taking the present value of such amount,

 

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using the discount rate of the Federal Reserve Bank of San Francisco at the time
of the award plus one (1) percentage point.

24.6.        If Landlord does not elect to terminate this Lease as provided in
Section 24.5, then Landlord may, from time to time, recover all Rent as it
becomes due under this Lease.  At any time thereafter, Landlord may elect to
terminate this Lease and to recover damages to which Landlord is entitled.

24.7.        In the event Landlord elects to terminate this Lease and relet the
Premises, Landlord may execute any new lease in its own name.  Tenant hereunder
shall have no right or authority whatsoever to collect any Rent from such
tenant.  The proceeds of any such reletting shall be applied as follows:

(a)           First, to the payment of any indebtedness other than Rent due
hereunder from Tenant to Landlord, including, without limitation, storage
charges or brokerage commissions owing from Tenant to Landlord as the result of
such reletting;

(b)           Second, to the payment of the costs and expenses of reletting the
Premises, including (i) alterations and repairs that Landlord deems reasonably
necessary and advisable and (ii) reasonable attorneys’ fees, charges and
disbursements incurred by Landlord in connection with the retaking of the
Premises and such reletting;

(c)           Third, to the payment of Rent and other charges due and unpaid
hereunder; and

(d)           Fourth, to the payment of future Rent and other damages payable by
Tenant under this Lease.

24.8.        All of Landlord’s rights, options and remedies hereunder shall be
construed and held to be nonexclusive and cumulative.  Landlord shall have the
right to pursue any one or all of such remedies, or any other remedy or relief
that may be provided by Applicable Laws, whether or not stated in this Lease. 
No waiver of any default of Tenant hereunder shall be implied from any
acceptance by Landlord of any Rent or other payments due hereunder or any
omission by Landlord to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect defaults
other than as specified in said waiver.

24.9.        Landlord’s termination of (a) this Lease or (b) Tenant’s right to
possession of the Premises shall not relieve Tenant of any liability to Landlord
that has previously accrued or that shall arise based upon events that occurred
prior to the later to occur of (i) the date of Lease termination or (ii) the
date Tenant surrenders possession of the Premises.

24.10.      To the extent permitted by Applicable Laws, Tenant waives any and
all rights of redemption granted by or under any present or future Applicable
Laws if Tenant is evicted or dispossessed for any cause, or if Landlord
otherwise obtains possession of the Premises due to Tenant’s default hereunder.

 

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24.11.      Landlord shall not be in default under this Lease unless Landlord
fails to perform obligations required of Landlord within a reasonable time, but
in no event shall such failure continue for more than thirty (30) days after
written notice from Tenant specifying the nature of Landlord’s failure;
provided, however, that if the nature of Landlord’s obligation is such that more
than thirty (30) days are required for its performance, then Landlord shall not
be in default if Landlord commences performance within such thirty (30) day
period and thereafter diligently prosecutes the cure to completion.

24.12.      In the event of any default by Landlord, Tenant shall give notice by
registered or certified mail to any (a) beneficiary of a deed of trust or (b)
mortgagee under a mortgage covering the Premises, the Building or the Project
and to any landlord of any lease of land upon or within which the Premises, the
Building or the Project is located, and shall offer such beneficiary, mortgagee
or landlord a reasonable opportunity to cure the default, including time to
obtain possession of the Building by power of sale or a judicial action if such
should prove necessary to effect a cure; provided that Landlord shall furnish to
Tenant in writing, upon written request by Tenant, the names and addresses of
all such persons who are to receive such notices, and provided, further, that
the terms of this paragraph shall not require Tenant to postpone the exercise of
its remedies under this Lease or otherwise available at law or in equity in the
event that the nature of Landlord’s default materially interferes with or
prevents Tenant from operating the Premises for the Permitted Use.

25.           Assignment or Subletting.

25.1.        Except as hereinafter expressly permitted, Tenant shall not, either
voluntarily or by operation of Applicable Laws, directly or indirectly sell,
hypothecate, assign, pledge, encumber or otherwise transfer this Lease, or
sublet the Premises or any part hereof (each, a “Transfer”), without Landlord’s
prior written consent, which consent Landlord may not unreasonably withhold,
condition or delay.

25.2.        In the event Tenant desires to effect a Transfer, then, at least
thirty (30) but not more than one hundred twenty (120) days prior  to the date
when Tenant desires the assignment or sublease to be effective (the “Transfer
Date”), Tenant shall provide written notice to Landlord (the “Transfer Notice”)
containing information (including references) concerning the character of the
proposed transferee, assignee or sublessee; the Transfer Date; any ownership or
commercial relationship between Tenant and the proposed transferee, assignee or
sublessee; and the consideration and all other material terms and conditions of
the proposed Transfer, all in such detail as Landlord shall reasonably require. 
Tenant shall also tender to Landlord reasonable attorneys’ fees and other costs
or overhead expenses not to exceed One Thousand Five Hundred Dollars ($1,500)
incurred by Landlord in reviewing Tenant’s request for such Transfer.

25.3.        Landlord, in determining whether consent should be given to a
proposed Transfer, may give consideration to (a) the financial strength of such
transferee, assignee or sublessee (notwithstanding Tenant remaining liable for
Tenant’s performance), and (b) any change in use that such transferee, assignee
or sublessee proposes to make in the use of the Premises.  In no event shall
Landlord be deemed to be unreasonable for declining to consent to a Transfer to
a transferee, assignee or sublessee of poor reputation, lacking financial
qualifications (provided the

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proposed transferee is of lesser creditworthiness than Tenant as of the
Execution Date or the date of the proposed Transfer) or seeking a change in the
Permitted Use.  Notwithstanding anything contained in this Lease to the
contrary, (w) no Transfer shall be consummated on any basis such that the rental
or other amounts to be paid by the occupant, assignee, manager or other
transferee thereunder would be based, in whole or in part, on the income or
profits derived by the business activities of such occupant, assignee, manager
or other transferee; (x) Tenant shall not furnish or render any services to an
occupant, assignee, manager or other transferee with respect to whom transfer
consideration is required to be paid, or manage or operate the Premises or any
capital additions so transferred, with respect to which transfer consideration
is being paid; (y) Tenant shall not consummate a Transfer with any person in
which Landlord owns an interest, directly or indirectly (by applying
constructive ownership rules set forth in Section 856(d)(5) of the Internal
Revenue Code (the “Revenue Code”)); and (z) Tenant shall not consummate a
Transfer with any person or in any manner that could cause any portion of the
amounts received by Landlord pursuant to this Lease or any sublease, license or
other arrangement for the right to use, occupy or possess any portion of the
Premises to fail to qualify as “rents from real property” within the meaning of
Section 856(d) of the Revenue Code, or any similar or successor provision
thereto, or agree to perform services for a transferee, assignee or sublessee
that would cause any other income of Landlord to fail to qualify as income
described  in Section 856(c)(2) of the Revenue Code.

25.4.        As conditions precedent to Tenant subleasing the Premises or to
Landlord considering a request by Tenant to Tenant’s transfer of rights or
sharing of the Premises, Landlord may require any or all of the following:

(a)           Tenant shall remain fully liable under this Lease during the
unexpired Term;

(b)           Tenant shall provide Landlord with evidence reasonably
satisfactory to Landlord that the value of Landlord’s interest under this Lease
shall not be diminished or reduced by the proposed Transfer.  Such evidence
shall include, without limitation, evidence respecting the relevant business
experience and financial responsibility and status of the proposed transferee,
assignee or sublessee;

(c)           Tenant shall reimburse Landlord for Landlord’s actual costs and
expenses, including, without limitation, reasonable attorneys’ fees, charges and
disbursements incurred in connection with the review, processing and
documentation of such request;

(d)           If Tenant’s transfer of rights or sharing of the Premises provides
for the receipt by, on behalf of or on account of Tenant of any consideration of
any kind whatsoever (including, without limitation, a premium rental for a
sublease or lump sum payment for an assignment, but excluding Tenant’s
reasonable costs in marketing and subleasing the Premises) in excess of the
rental and other charges due to Landlord under this Lease, Tenant shall pay
fifty percent (50%) of all of such excess to Landlord, after deductions for any
transaction costs incurred by Tenant, including marketing expenses, tenant
improvement or refurbishment allowances actually provided by Tenant,
alterations, cash concessions, brokerage commissions,

 

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attorneys’ fees and free rent.  If said consideration consists of cash paid to
Tenant, payment to Landlord shall be made upon receipt by Tenant of such cash
payment;

(e)           The proposed transferee, assignee or sublessee shall agree that,
in the event Landlord gives such proposed transferee, assignee or sublessee
notice that Tenant is in default under this Lease, such proposed transferee,
assignee or sublessee shall thereafter make all payments otherwise due Tenant
directly to Landlord, which payments shall be received by Landlord without any
liability being incurred by Landlord, except to credit such payment against
those due by Tenant under this Lease, and any such proposed transferee, assignee
or sublessee shall agree to attorn to Landlord or its successors and assigns
should this Lease be terminated for any reason; provided, however, that in no
event shall Landlord or its Lenders, successors or assigns be obligated to
accept such attornment;

(f)            Landlord’s consent to any such Transfer shall be effected on
Landlord’s forms;

(g)           Tenant shall not then be in default hereunder in any respect;

(h)           Such proposed transferee, assignee or sublessee’s use of the
Premises shall be the same as the Permitted Use;

(i)            Landlord shall not be bound by any provision of any agreement
pertaining to the Transfer, except for Landlord’s written consent to the same;

(J)            TENANT SHALL PAY ALL TRANSFER AND OTHER TAXES (INCLUDING INTEREST
AND PENALTIES) ASSESSED OR PAYABLE FOR ANY TRANSFER;

(K)           LANDLORD’S CONSENT (OR WAIVER OF ITS RIGHTS) FOR ANY TRANSFER
SHALL NOT WAIVE LANDLORD’S RIGHT TO CONSENT TO ANY LATER TRANSFER;

(l)            Tenant shall deliver to Landlord one executed copy of any and all
written instruments evidencing or relating to the Transfer; and

(m)          A list of Hazardous Materials (as defined in Section 39.7 below),
certified by the proposed transferee, assignee or sublessee to be true and
correct, that the proposed transferee, assignee or sublessee intends to use or
store in the Premises.  Additionally, Tenant shall deliver to Landlord, on or
before the date any proposed transferee, assignee or sublessee takes occupancy
of the Premises, all of the items relating to Hazardous Materials of such
proposed transferee, assignee or sublessee as described in Section 38.2.

25.5.        Any Transfer that is not in compliance with the provisions of this
Article 25 shall be void and shall, at the option of Landlord, terminate this
Lease; provided, however, that Landlord shall first give Tenant ten (10) days’
notice of the reason the Transfer is not in compliance and this Lease shall
remain in full force and effect if Tenant, before expiration of such ten (10)
days’ notice, either corrects the reason the Transfer is not in compliance or
terminates the Transfer.

 

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25.6.        The consent by Landlord to a Transfer shall not relieve Tenant or
proposed transferee, assignee or sublessee from obtaining Landlord’s consent to
any further Transfer, nor shall it release Tenant or any proposed transferee,
assignee or sublessee of Tenant from full and primary liability under this
Lease.

25.7.        Notwithstanding any Transfer, Tenant shall remain fully and
primarily liable for the payment of all Rent and other sums due or to become due
hereunder, and for the full performance of all other terms, conditions and
covenants to be kept and performed by Tenant.  The acceptance of Rent or any
other sum due hereunder, or the acceptance of performance of any other term,
covenant or condition thereof, from any person or entity other than Tenant shall
not be deemed a waiver of any of the provisions of this Lease or a consent to
any Transfer.

25.8.        [Intentionally omitted]

25.9.        If Tenant sublets the Premises or any portion thereof, Tenant
hereby immediately and irrevocably assigns to Landlord, as security for Tenant’s
obligations under this Lease, all rent from any such subletting, and appoints
Landlord as assignee and attorney-in-fact for Tenant, and Landlord (or a
receiver for Tenant appointed on Landlord’s application) may collect such rent
and apply it toward Tenant’s obligations under this Lease; provided that, until
the occurrence of a Default by Tenant, Tenant shall have the right to collect
such rent.

25.10.      Notwithstanding anything to the contrary in this Article 25, Tenant
may engage in the following Transfers (collectively, “Permitted Transfers”) 
without the prior written consent of Landlord and without regard to the terms of
Section 25.4 but subject to the terms of Section 25.7; provided (i) Tenant is
not in default under this Lease; (ii) such proposed transferee uses the Premises
for the Permitted Use; (iii) such proposed transferee is of equal or greater
creditworthiness than Tenant as of the Execution Date and the date of the
proposed Transfer and (iv) Tenant gives Landlord written notice at least thirty
(30) days prior to the effective date of the proposed assignment or sublease:

(a)           A Transfer to a parent, subsidiary, affiliate, division or other
entity controlling, controlled by or under common control with Tenant;

(b)           A Transfer to a successor entity related to Tenant by merger,
consolidation, reorganization or government action; and

(c)           A Transfer to an entity that acquires substantially all of the
assets of Tenant.

25.11.      For the purpose of this Lease, for so long as stock in Tenant is
traded on a nationally recognized stock exchange, any sale or transfer of
Tenant’s capital stock, redemption or issuance of additional stock of any class
shall not be deemed a Transfer of any kind; provided, however, that transfer of
more than fifty percent (50%) of Tenant’s capital stock in a single transaction
or a single series of transactions pursuant to a resolution of the Board of
Directors of Tenant shall be deemed to be a Permitted Transfer subject to the
terms of Section 25.10, except

 

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that the acquirer of the stock shall be the entity subject to the
creditworthiness test under Section 25.10(iii).

26.           Attorneys’ Fees.  If either party commences an action against the
other party arising out of or in connection with this Lease, then the
substantially prevailing party shall be entitled to have and recover from the
other party reasonable attorneys’ fees, charges and disbursements and costs of
suit.

27.           Bankruptcy.  In the event a debtor, trustee or debtor in
possession under the Bankruptcy Code, or another person with similar rights,
duties and powers under any other Applicable Laws, proposes to cure any default
under this Lease or to assume or assign this Lease and is obliged to provide
adequate assurance to Landlord that (a) a default shall be cured, (b) Landlord
shall be compensated for its damages arising from any breach of this Lease and
(c) future performance of Tenant’s obligations under this Lease shall occur,
then such adequate assurances shall include any or all of the following, as
designated by Landlord in its sole and absolute discretion:

27.1.        Those acts specified in the Bankruptcy Code or other Applicable
Laws as included within the meaning of “adequate assurance,” even if this Lease
does not concern a shopping center or other facility described in such
Applicable Laws;

27.2.        A prompt cash payment to compensate Landlord for any monetary
defaults or actual damages arising directly from a breach of this Lease;

27.3.        A cash deposit in an amount at least equal to the then-current
amount of the Security Deposit; or

27.4.        The assumption or assignment of all of Tenant’s interest and
obligations under this Lease.

28.           Definition of Landlord.  With regard to obligations imposed upon
Landlord pursuant to this Lease, the term “Landlord,” as used in this Lease,
shall refer only to Landlord or Landlord’s then-current successor-in-interest. 
In the event of any transfer, assignment or conveyance of Landlord’s interest in
this Lease or in Landlord’s fee title to or leasehold interest in the Property,
as applicable, the Landlord herein named (and in case of any subsequent
transfers or conveyances, the subsequent Landlord) shall be automatically freed
and relieved, from and after the date of such transfer, assignment or
conveyance, from all liability for the performance of any covenants or
obligations contained in this Lease thereafter to be performed by Landlord and,
without further agreement, the transferee, assignee or conveyee of Landlord’s
interest in this Lease or in Landlord’s fee title to or leasehold interest in
the Property, as applicable, shall be deemed to have assumed and agreed to
observe and perform any and all covenants and obligations of Landlord hereunder
during the tenure of its interest in the Lease or the Property.  Landlord or any
subsequent Landlord may transfer its interest in the Premises or this Lease
without Tenant’s consent.

29.           Estoppel Certificate.  Tenant shall, within ten (10) business days
of receipt of written notice from Landlord, execute, acknowledge and deliver a
statement in writing substantially in

 

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the form attached to this Lease as Exhibit E, or on any other form reasonably
requested by a proposed Lender or purchaser, (a) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and certifying that this Lease as so modified is in full force
and effect) and the dates to which rental and other charges are paid in advance,
if any, (b) acknowledging that there are not, to Tenant’s knowledge, any uncured
defaults on the part of Landlord hereunder, or specifying such defaults if any
are claimed, and (c) setting forth such further information with respect to this
Lease or the Premises as may reasonably be requested thereon.  Any such
statement may be relied upon by any prospective purchaser or encumbrancer of all
or any portion of the real property of which the Premises are a part.  Tenant’s
failure to deliver such statement within such the prescribed time shall, at
Landlord’s option, constitute a Default under this Lease, and, in any event,
shall be binding upon Tenant that the Lease is in full force and effect and
without modification except as may be represented by Landlord in any certificate
prepared by Landlord and delivered to Tenant for execution.

30.           Joint and Several Obligations.  If more than one entity executes
this Lease as Tenant, then:

30.1.        Each of them is jointly and severally liable for the keeping,
observing and performing of all of the terms, covenants, conditions, provisions
and agreements of this Lease to be kept, observed or performed by Tenant; and

30.2.        The term “Tenant” as used in this Lease shall mean and include each
of them, jointly and severally.  The act of, notice from, notice to, refund to,
or signature of any one or more of them with respect to the tenancy under this
Lease, including, without limitation, any renewal, extension, expiration,
termination or modification of this Lease, shall be binding upon each and all of
the persons executing this Lease as Tenant with the same force and effect as if
each and all of them had so acted, so given or received such notice or refund,
or so signed.

31.           Limitation of Landlord’s Liability.

31.1.        If Landlord is in default under this Lease and, as a consequence,
Tenant recovers a monetary judgment against Landlord, the judgment shall be
satisfied only out of (a) the proceeds of sale received on execution of the
judgment and levy against the right, title and interest of Landlord in the
Building and the Project of which the Premises are a part, (b) rent or other
income from such real property receivable by Landlord or (c) the consideration
received by Landlord from the sale, financing, refinancing or other disposition
of all or any part of Landlord’s right, title or interest in the Building or the
Project of which the Premises are a part.

31.2.        Subject to the remainder of this Section 31.2, only Landlord shall
be liable for any deficiency due to Landlord’s default under this Lease.  If
Landlord is a partnership or joint venture, then the partners of such
partnership shall not be personally liable for Landlord’s obligations under this
Lease, and no partner of Landlord shall be sued or named as a party in any suit
or action, and service of process shall not be made against any partner of
Landlord except as may be necessary to secure jurisdiction of the partnership or
joint venture.  If Landlord is a corporation, then the shareholders, directors,
officers, employees and agents of such corporation

 

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shall not be personally liable for Landlord’s obligations under this Lease, and
no shareholder, director, officer, employee or agent of Landlord shall be sued
or named as a party in any suit or action, and service of process shall not be
made against any shareholder, director, officer, employee or agent of Landlord. 
If Landlord is a limited liability company, then the members of such limited
liability company shall not be personally liable for Landlord’s obligations
under this Lease, and no member of Landlord shall be sued or named as a party in
any suit or action, and service of process shall not be made against any member
of Landlord except as may be necessary to secure jurisdiction of the limited
liability company.  No partner, shareholder, director, employee, member or agent
of Landlord shall be required to answer or otherwise plead to any service of
process, and no judgment shall be taken or writ of execution levied against any
partner, shareholder, director, employee or agent of Landlord.

31.3.        Each of the covenants and agreements of this Article 31 shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by Applicable Laws and shall survive the expiration or earlier
termination of this Lease.

32.           Project Control by Landlord.

32.1.        Landlord reserves full control over the Building and the Project to
the extent not inconsistent with (a) Tenant’s enjoyment of the Premises as
provided by this Lease and (b) Tenant’s use of the Premises for the Permitted
Use.  This reservation includes, without limitation, Landlord’s right to
subdivide the Project, convert the Building and other potential buildings within
the Project to condominium units, grant easements and licenses to third parties,
and maintain or establish ownership of the Building separate from fee title to
the Property.  Landlord shall at all times during construction activity maintain
reasonable access to the Premises and Common Areas serving the Premises.

32.2.        Tenant and Landlord shall each, at the other’s reasonable request,
promptly execute such further documents as may be reasonably appropriate and
necessary to enable the other to carry out its obligations under this Lease;
provided that neither party shall have any obligation under this paragraph to
execute any document that creates additional liability or cost for such party or
that deprives Tenant of the quiet enjoyment and use of the Premises as provided
by this Lease.

32.3.        Landlord may, at any and all reasonable times during non-business
hours (or during business hours if Tenant so requests), and upon twenty-four
(24) hours’ prior notice (provided that no time restrictions shall apply or
advance notice be required if an emergency necessitates immediate entry), enter
the Premises to (a) inspect the same and to determine whether Tenant is in
compliance with its obligations hereunder, (b) supply any service Landlord is
required to provide hereunder, (c) show the Premises to prospective purchasers
or tenants during the final year of the Term, (d) post notices of
nonresponsibility, (e) access the telephone equipment, electrical substation and
fire risers and (f) alter, improve or repair any portion of the Building other
than the Premises for which access to the Premises is reasonably necessary.  In
connection with any such alteration, improvement or repair as described in
Subsection 32.3(f) above, Landlord may erect in the Premises or elsewhere in the
Project scaffolding and other structures reasonably required for the alteration,
improvement or repair work to be performed.  In

 

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no event shall Tenant’s Rent abate as a result of Landlord’s activities pursuant
to this Section 32.3; provided, however, that all such activities shall be
conducted in such a manner so as to cause as little interference to Tenant as is
reasonably possible.  Landlord shall at all times retain a key with which to
unlock all of the doors in the Premises.  If an emergency necessitates immediate
access to the Premises, Landlord may use whatever force is necessary to enter
the Premises, and any such entry to the Premises shall not constitute a forcible
or unlawful entry to the Premises, a detainer of the Premises, or an eviction of
Tenant from the Premises or any portion thereof.

33.           Quiet Enjoyment.  So long as Tenant is not in default under this
Lease, Landlord or anyone acting through or under Landlord shall not disturb
Tenant’s occupancy of the Premises, except as permitted by this Lease.  So long
as Tenant is not in default under this Lease, Landlord warrants that Tenant
shall hold and enjoy the Premises peaceably and quietly, except as permitted by
this Lease.  The foregoing express covenant shall be in addition to and not in
derogation of any implied or other rights of quiet enjoyment Tenant may have
under Applicable Laws.  Nothing in this Section 33 shall prohibit Landlord from
undertaking construction on the Property (including construction of additional
buildings) in accordance with this Lease

34.           Subordination and Attornment.

34.1.        This Lease shall be subject and subordinate to the lien of any
mortgage, deed of trust, or lease in which Landlord is tenant hereafter in force
against the Building or the Project (collectively referred to as “Senior
Interests”) and to all advances made or hereafter to be made upon the security
thereof without the necessity of the execution and delivery of any further
instruments on the part of Tenant to effectuate such subordination, so long as
the holders of such Senior Interests do not disturb Tenant’s possession of the
Premises in violation of this Lease so long as Tenant performs its obligations
under this Lease.  Landlord represents to Tenant that, as of the Execution Date,
there is no mortgage, deed of trust, or lease in which Landlord is tenant in
force against the Building or the Project.

34.2.        Notwithstanding the foregoing, Tenant shall execute and deliver
upon demand such further instrument or instruments evidencing such subordination
of this Lease to the lien of any such mortgage or mortgages or deeds of trust or
lease in which Landlord is tenant as may be required by Landlord, on condition
that the holder of the Senior Interest agrees to not disturb Tenant’s possession
of the Premises in violation of this Lease so long as Tenant performs its
obligations under this Lease.  However, if any such mortgagee, beneficiary or
Landlord under lease wherein Landlord is tenant so elects, this Lease shall be
deemed prior in lien to any such lease, mortgage, or deed of trust upon or
including the Premises regardless of date and Tenant shall execute a statement
in writing to such effect at Landlord’s request.  If Tenant fails to execute any
document reasonably required from Tenant under this Section within fifteen (15)
days after Tenant’s receipt of written request therefor, Tenant hereby
constitutes and appoints Landlord or its special attorney-in-fact to execute and
deliver any such document or documents in the name of Tenant.  Such power is
coupled with an interest and is irrevocable.

34.3.        [Intentionally omitted]

 

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34.4.        In the event any proceedings are brought for foreclosure, or in the
event of the exercise of the power of sale under any mortgage or deed of trust
made by the Landlord covering the Premises, Tenant’s possession of the Premises
under this Lease shall continue undisturbed so long as Tenant performs its
obligations under this Lease and the Tenant shall at the election of the
purchaser at such foreclosure or sale attorn to the purchaser upon any such
foreclosure or sale and recognize such purchaser as the Landlord under this
Lease.

35.           Surrender.

35.1.        No surrender of possession of any part of the Premises shall
release Tenant from any of its obligations hereunder, unless such surrender is
accepted in writing by Landlord.

35.2.        The voluntary or other surrender of this Lease by Tenant shall not
effect a merger with Landlord’s fee title or leasehold interest in the Premises,
the Building or the Property, unless Landlord consents in writing, and shall, at
Landlord’s option, operate as an assignment to Landlord of any or all subleases.

35.3.        The voluntary or other surrender of any ground or other underlying
lease that now exists or may hereafter be executed affecting the Building or the
Project, or a mutual cancellation thereof or of Landlord’s interest therein by
Landlord and its lessor shall not effect a merger with Landlord’s fee title or
leasehold interest in the Premises, the Building or the Property and shall, at
the option of the successor to Landlord’s interest in the Building or the
Project, as applicable, operate as an assignment of this Lease.

36.           Waiver and Modification.  No provision of this Lease may be
modified, amended or supplemented except by an agreement in writing signed by
Landlord and Tenant.  The waiver by Landlord of any breach by Tenant of any
term, covenant or condition herein contained shall not be deemed to be a waiver
of any subsequent breach of the same or any other term, covenant or condition
herein contained.

37.           Waiver of Jury Trial and Counterclaims.  The parties waive trial
by jury in any action, proceeding or counterclaim brought by the other party
hereto related to matters arising out of or in any way connected with this
Lease; the relationship between Landlord and Tenant; Tenant’s use or occupancy
of the Premises, the Building or the Project; or any claim of injury or damage
related to this Lease or the Premises, the Building or the Project.

38.           [Intentionally omitted]

39.           Hazardous Materials.

39.1.        Tenant shall not cause or permit any Hazardous Materials (as
hereinafter defined) to be brought upon, kept or used in or about the Premises,
the Building or the Project in violation of Applicable Laws by Tenant, its
agents, employees, contractors or invitees.  If Tenant breaches such obligation,
or if the presence of Hazardous Materials as a result of such a breach results
in contamination of the Premises, the Building, the Project or any adjacent
property, or (only if Tenant leases the entire Building) if contamination of the
Premises by Hazardous Materials otherwise occurs during the term of this Lease
or any extension or renewal hereof or holding over

 

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hereunder, then Tenant shall indemnify, save, defend and hold Landlord, its
agents and contractors harmless from and against any and all claims, judgments,
damages, penalties, fines, costs, liabilities and losses (including, without
limitation, diminution in value of the Premises, the Building, the Project or
any portion thereof; damages for the loss or restriction on use of rentable or
usable space or of any amenity of the Premises or Project; damages arising from
any adverse impact on marketing of space in the Premises, the Building or the
Project; and sums paid in settlement of claims, attorneys’ fees, consultants’
fees and experts’ fees) that arise during or after the Term as a result of such
breach or contamination.  This indemnification of Landlord by Tenant includes,
without limitation, costs incurred in connection with any investigation of site
conditions or any cleanup, remedial, removal or restoration work required by any
Governmental Authority because of Hazardous Materials present in the air, soil
or groundwater above, on or under the Premises for which Tenant is liable under
the terms of this Lease.  Without limiting the foregoing, if the presence of any
Hazardous Materials in, on, under or about the Premises, the Building, the
Project or any adjacent property caused or permitted by Tenant results in any
contamination of the Premises, the Building, the Project or any adjacent
property, then Tenant shall promptly take all actions at its sole cost and
expense as are necessary to return the Premises, the Building, the Project and
any adjacent property to their respective condition existing as of the Term
Commencement Date; provided that Landlord’s written approval of such action
shall first be obtained, which approval Landlord shall not unreasonably
withhold, condition or delay; and provided, further, that it shall be reasonable
for Landlord to withhold its consent if such actions could have a material
adverse long-term or short-term effect on the Premises, the Building or the
Project.

39.2.        Landlord acknowledges that it is not the intent of this Article 39
to prohibit Tenant from operating its business as described in Section 2.8
above.  Tenant may operate its business according to the custom of Tenant’s
industry so long as the use or presence of Hazardous Materials is strictly and
properly monitored according to Applicable Laws.  As a material inducement to
Landlord to allow Tenant to use Hazardous Materials in connection with its
business, Tenant agrees to deliver to Landlord prior to the Term Commencement
Date a list identifying each type of Hazardous Material to be present on the
Premises (which list may also include Hazardous Materials that Tenant
anticipates may be present on the Premises in future) and setting forth any and
all governmental approvals or permits required in connection with the presence
of such Hazardous Material on the Premises (the “Hazardous Materials List”). 
Tenant shall deliver to Landlord an updated Hazardous Materials List on or prior
to each annual anniversary of the Term Commencement Date and shall also deliver
an updated Hazardous Materials List before any Hazardous Materials not already
listed on the Hazardous Materials List are brought onto the Premises.  Tenant
shall deliver to Landlord true and correct copies of the following documents
(hereinafter referred to as the “Documents”) relating to the handling, storage,
disposal and emission of Hazardous Materials prior to the Term Commencement Date
or, if unavailable at that time, concurrent with the receipt from or submission
to any Governmental Authority:  permits; approvals; reports and correspondence;
storage and management plans; notices of violations of Applicable Laws; plans
relating to the installation of any storage tanks to be installed in or under
the Premises, the Building or the Project (provided that installation of storage
tanks shall only be permitted after Landlord has given Tenant its written
consent to do so, which consent Landlord shall not unreasonably withhold,
condition or

 

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delay); and all closure plans or any other documents required by any and all
Governmental Authority for any storage tanks installed in, on or under the
Premises, the Building or the Project for the closure of any such storage
tanks.  Tenant shall not be required, however, to provide Landlord with any
portion of the Documents containing information of a proprietary nature that, in
and of themselves, do not contain a reference to any Hazardous Materials or
activities related to Hazardous Materials.  Upon Landlord’s written request,
Tenant agrees that it shall enter into a written agreement with other tenants of
the Building and the Project concerning the equitable allocation of fire control
areas (as defined in the Uniform Building Code as adopted by the city or
municipality(ies) in which the Project is located (the “UBC”)) within the
Building and the Project for the storage of Hazardous Materials, provided that
Tenant shall be entitled to no less than its Pro Rata Share of such fire control
areas based on Tenant’s Pro Rata Share of the Building or the Project, as
applicable.  In the event that Tenant’s use of Hazardous Materials is such that
it utilizes fire control areas in the Building or the Project in excess of
Tenant’s Pro Rata Share of the Building or the Project, as applicable, as set
forth in Section 2.2, or the share to which it is entitled under any agreement
with other tenants (if greater), Tenant agrees that it shall, at its sole cost
and expense and upon Landlord’s written request, establish and maintain a
separate area of the Premises classified by the UBC as an “H” occupancy area for
the use and storage of Hazardous Materials or take such other action as is
necessary to ensure that its share of the fire control areas of the Building and
the Project is not greater than Tenant’s Pro Rata Share of the Building or the
Project, as applicable, or the share to which it is entitled under any agreement
with other tenants (if greater).

39.3.        Notwithstanding the provisions of Section 39.1 above, if (a) Tenant
or any proposed transferee, assignee or sublessee of Tenant has been required by
any prior landlord, Lender or Governmental Authority to take remedial action in
connection with Hazardous Materials contaminating a property if the
contamination resulted from such party’s action or omission or use of the
property in question or (ii) Tenant or any proposed transferee, assignee or
sublessee is subject to an enforcement order issued by any Governmental
Authority in connection with the use, disposal or storage of Hazardous
Materials, then Landlord shall have the right to terminate this Lease (with
respect to any such matter involving Tenant), unless Tenant is diligently taking
all action necessary to comply with all requirements of the applicable
Governmental Authority and promptly achieves compliance, or withhold its consent
to any proposed transfer, assignment or subletting (with respect to any such
matter involving a proposed transferee, assignee or sublessee) unless such
proposed transferee, assignee or sublessee has either already taken or is then
diligently taking all action necessary to comply with all requirements of the
applicable Governmental Authority.

39.4.        Upon at least twenty-four (24) hours’ prior notice to Tenant, prior
to the expiration of the Term, Landlord shall have the right to conduct
appropriate tests of the Premises, the Building and the Project during normal
business hours to demonstrate that Hazardous Materials in violation of
Applicable Laws are present due to Tenant or Tenant’s agents, employees or
invitees.  Only if Hazardous Materials in violation of Applicable Laws are
present due to Tenant or Tenant’s agents, employees or invitees, Tenant shall
pay all reasonable costs of such tests of the Premises.

 

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39.5.        If underground or other storage tanks presently located on the
Premises or hereafter placed on the Premises are used by Tenant for the storage
of Hazardous Materials, then Tenant shall monitor such storage tanks, maintain
appropriate records, implement reporting procedures, properly close any such
underground storage tanks, and take or cause to be taken all other steps
necessary or required under the Applicable Laws.

39.6.        Tenant’s obligations under this Article 39 shall survive the
expiration or earlier termination of the Lease.  During any period of time
needed by Tenant or Landlord after the termination of this Lease to complete the
removal from the Premises of any such Hazardous Materials, Tenant shall continue
to pay Rent in accordance with this Lease, which Rent shall be prorated daily.

39.7.        As used herein, the term “Hazardous Material” means any hazardous
or toxic substance, material or waste that is or becomes regulated by any
Governmental Authority.    Landlord represents and warrants to Tenant that
Landlord has no knowledge of any Hazardous Material on or about the Premises,
Building or Property in violation of Applicable Laws except as may be disclosed
in (a) that certain Phase I Environmental Site Assessment prepared by URS and
dated as of September 13, 2006, (b) that certain letter regarding Results of
Limited Lead Wipe Sampling from Environmental Resources Management dated as of
October 4, 2006, and (c) that certain letter regarding Results of Limited
Confirmation Lead Wipe Sampling from Environmental Resources Management dated as
of November 7, 2006, a true and complete copy of each of which has been
delivered to Tenant.

39.8.        Notwithstanding anything to the contrary in this Lease, Tenant
shall have no liability or responsibility with respect to any Hazardous
Materials that (a) result from violations of Applicable Laws relating to the
Premises, the Building or the Project, which violations existed as of the Term
Commencement Date or (b) were present in, on, under or about any part of the
Premises, Building or Project as of the Term Commencement Date or after the Term
Commencement Date, and, with regards to (a) and (b), were not caused by Tenant
or its agents, employees, consultants, contractors, licenses or invitees
(collectively, “Pre-Existing Matters”).   Landlord indemnifies Tenant with
regard to any Claims related to the Pre-Existing Matters that arise from an
enforcement action by any Governmental Authority.  There shall not be included
in Operating Expenses any site characterization, investigation, remediation or
other costs relating to any Hazardous Material for which Tenant has no liability
or responsibility under this paragraph.

40.           [Intentionally omitted]

41.           Miscellaneous.

41.1.        Where applicable in this Lease, the singular includes the plural
and the masculine or neuter includes the masculine, feminine and neuter.  The
section headings of this Lease are not a part of this Lease and shall have no
effect upon the construction or interpretation of any part hereof.

 

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

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

41.4.        Each provision of this Lease performable by Tenant or Landlord
shall be deemed both a covenant and a condition.

41.5.        Whenever consent or approval of either party is required, that
party shall not unreasonably withhold, condition or delay such consent or
approval, except as may be expressly set forth to the contrary.

41.6.        The terms of this Lease are intended by the parties as a final
expression of their agreement with respect to the terms as are included herein,
and may not be contradicted by evidence of any prior or contemporaneous
agreement.

41.7.        Any provision of this Lease that shall prove to be invalid, void or
illegal shall in no way affect, impair or invalidate any other provision hereof,
and all other provisions of this Lease shall remain in full force and effect and
shall be interpreted as if the invalid, void or illegal provision did not exist.

41.8.        Either party may, but shall not be obligated to, record a short
form memorandum of this Lease without the other’s consent.  Neither party shall
record this Lease.  The party recording the memorandum shall be responsible for
the cost of recording any memorandum of this Lease, including any transfer or
other taxes incurred in connection with said recordation.

41.9.        The language in all parts of this Lease shall be in all cases
construed as a whole according to its fair meaning and not strictly for or
against either Landlord or Tenant.

41.10.      Each of the covenants, conditions and agreements herein contained
shall inure to the benefit of and shall apply to and be binding upon the parties
hereto and their respective heirs; legatees; devisees; executors;
administrators; and permitted successors, assigns, sublessees.  Nothing in this
Section 40.10 shall in any way alter the provisions of this Lease restricting
assignment or subletting.

41.11.      Any notice, consent, demand, bill, statement or other communication
required or permitted to be given hereunder shall be in writing and shall be
given by personal delivery, overnight delivery with a reputable nationwide
overnight delivery service, or certified mail (return receipt requested), and if
given by personal delivery, shall be deemed delivered upon receipt; if given by
overnight delivery, shall be deemed delivered one (1) business day after deposit
with a reputable nationwide overnight delivery service; and, if given by
certified mail (return receipt requested), shall be deemed delivered three (3)
business days after the time the notifying party deposits the notice with the
United States Postal Service.  Any notices given pursuant to this Lease shall be
addressed to Tenant at the Premises, or to Landlord or Tenant at

 

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the addresses shown in Sections 2.10 and 2.11, respectively.  Either party may,
by notice to the other given pursuant to this Section, specify additional or
different addresses for notice purposes.

41.12.      This Lease shall be governed by, construed and enforced in
accordance with the laws of the State in which the Premises are located, without
regard to such State’s conflict of law principles.

41.13.      That individual or those individuals signing this Lease guarantee,
warrant and represent that said individual or individuals have the power,
authority and legal capacity to sign this Lease on behalf of and to bind all
entities, corporations, partnerships, limited liability companies, joint
venturers or other organizations and entities on whose behalf said individual or
individuals have signed.

41.14.      To induce Landlord to enter into this Lease, Tenant agrees that it
shall promptly furnish to Landlord the most recent unaudited year-end financial
statements reflecting Tenant’s current financial condition (or audited, if
available); provided, however, that Tenant shall have no obligation to provide
such financial statements so long as Tenant is a publicly held company.  Tenant
represents and warrants that all financial statements, records and information
furnished by Tenant to Landlord in connection with this Lease are true, correct
and complete in all respects.  Landlord shall not disclose any nonpublic
information in such financial statements or give a copy of such financial
statements to any third party, except (a) if required by Applicable Laws or in
any judicial proceeding (provided that Landlord has given Tenant reasonable
notice of such requirement, if feasible) or (b) to Landlord’s attorneys,
accountants and other bona fide consultants or advisers, lenders, and
prospective purchasers of the Property.

41.15.      This Lease may be executed in one or more counterparts, each of
which, when taken together, shall constitute one and the same document.

41.16.      [Intentionally omitted]

41.17.      THIS LEASE IS SUBJECT TO ANY RECORDED COVENANTS, CONDITIONS OR
RESTRICTIONS ON THE PROJECT OR PROPERTY (THE “CC&RS”).  TENANT SHALL COMPLY WITH
THE CC&RS ON CONDITION THAT (A) A COPY OF SUCH CC&RS IS PROVIDED TO TENANT AND
(B) WITH RESPECT TO CC&RS ENTERED INTO AFTER THE DATE HEREOF, THAT SUCH CC&RS DO
NOT MATERIALLY INTERFERE WITH TENANT’S USE AND ENJOYMENT OF THE PREMISES.

42.           Option to Extend Term.  Tenant shall have the option (“Option”) to
extend the Term of this Lease as to the entire Premises (and no less than the
entire Premises) upon the following terms and conditions.  Any extension of the
Term pursuant to any Option shall be on all the same terms and conditions as
this Lease, except as follows:

42.1.        Tenant shall have two (2) options to extend the Term of this Lease
by five (5) years (each an “Option Period”) on the same terms and conditions as
this Lease.  Basic Annual Rent for each Option Period shall equal the fair
market rental value (“FMV”) of the Premises as of the first (1st) day of each
Option Period, taking into account, among other things, base rent, annual rental
rate increases, tenant improvements and leasing commissions for comparable

 

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laboratory research buildings in the Bothell, Washington, area; provided,
however, that in no event shall Basic Annual Rent for any Option Period equal
less than one hundred three percent (103%) of the Basic Annual Rent at the
expiration of the then-current Lease term.  If Landlord and Tenant cannot agree
on the FMV for purposes of any Option Period, then they shall engage a mutually
agreeable independent third party appraiser with at least ten (10) years’
experience in appraising the rental value of leased commercial premises (for
research and development and laboratory uses) in the Bothell, Washington, area
(the “Appraiser”).  If the parties cannot agree on the Appraiser, each shall
within ten (10) days after such impasse appoint an Appraiser and, within ten
(10) days after the appointment of both such Appraisers, those two Appraisers
shall select a third.  If either party fails to timely appoint an Appraiser,
then the Appraiser the other party appoints shall be the sole Appraiser.  Within
ten (10) days after appointment of all Appraiser(s), Landlord and Tenant shall
each simultaneously give the Appraisers (with a copy to the other party) its
determination of FMV, with such supporting data or information as each
submitting party determines appropriate.  Within ten (10) days after such
submissions, the Appraisers shall by majority vote select either Landlord’s or
Tenant’s FMV.  The Appraisers may not select or designate any other FMV.  The
determination of the Appraiser(s) shall bind the parties.

42.2.        The Option is not assignable separate and apart from this Lease.

42.3.        The Option is conditional upon Tenant giving Landlord written
notice of its election to exercise the Option at least nine (9) months prior to
the end of the expiration of the initial term of this Lease or the prior Option
Period, as applicable.  Time shall be of the essence as to Tenant’s exercise of
any Option.  Tenant assumes full responsibility for maintaining a record of the
deadlines to exercise any Option.  Tenant acknowledges that it would be
inequitable to require Landlord to accept any exercise of any Option after the
date provided for in this paragraph.

42.4.        Notwithstanding anything contained in this Article 42, Tenant shall
not have the right to exercise the Option:

(a)           During the time commencing from the date Landlord delivers to
Tenant a written notice that Tenant is in default under any provisions of this
Lease and continuing until Tenant has cured the specified default to Landlord’s
reasonable satisfaction; or

(b)           At any time after any Default as described in Article 24 of the
Lease (provided, however, that, for purposes of this Subsection 42.4(b),
Landlord shall not be required to provide Tenant with notice of such Default)
and continuing until Tenant cures any such Default, if such Default is
susceptible to being cured;

(c)           Unless due to a Permitted Transfer, in the event that Tenant no
longer occupies the entire Premises, or has assigned the Lease with respect to
more than fifty percent (50%) of the Premises, or has sublet more than fifty
percent (50%) of the Premises; or

(d)           In the event that Tenant has defaulted in the performance of its
obligations under this Lease two (2) or more times and a service or late charge
has become payable under

 

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Section 24.1 for each of such defaults during the twelve (12)-month period
immediately prior to the date that Tenant intends to exercise the Option,
whether or not Tenant has cured such defaults.

42.5.        The period of time within which Tenant may exercise an Option shall
not be extended or enlarged by reason of Tenant’s inability to exercise such
Option because of the provisions of Section 42.4.

42.6.        All of Tenant’s rights under the provisions of the Option shall
terminate and be of no further force or effect even after Tenant’s due and
timely exercise of the Option if, after such exercise, but prior to the
commencement date of the new term, (a) Tenant fails to pay to Landlord a
monetary obligation of Tenant for a period of twenty (20) days after written
notice from Landlord to Tenant, (b) Tenant fails to commence to cure a default
(other than a monetary default) within thirty (30) days after the date Landlord
gives notice to Tenant of such default or (c) Tenant has defaulted under this
Lease two (2) or more times and a service or late charge under Section 24.1 has
become payable for any such default, whether or not Tenant has cured such
defaults.

43.           RIGHT OF FIRST REFUSAL.  TENANT SHALL HAVE A RIGHT OF FIRST
REFUSAL (“ROFR”) AS TO ANY RENTABLE PREMISES IN THE BUILDING OR IN ANY OTHER
BUILDING THAT LANDLORD MAY CONSTRUCT ON THE PROPERTY FOR WHICH LANDLORD IS
SEEKING A TENANT (“AVAILABLE PREMISES”).  TO THE EXTENT THAT LANDLORD RENEWS OR
EXTENDS A THEN-EXISTING LEASE WITH ANY THEN-EXISTING TENANT OF ANY SPACE, OR
ENTERS INTO A NEW LEASE WITH SUCH THEN-EXISTING TENANT FOR THE SAME PREMISES,
THE AFFECTED SPACE SHALL NOT BE DEEMED TO BE AVAILABLE PREMISES.  IN THE EVENT
LANDLORD ENTERS INTO A SIGNED LETTER OF INTENT FOR ANY AVAILABLE PREMISES,
LANDLORD SHALL PROVIDE WRITTEN NOTICE THEREOF TO TENANT (THE “NOTICE OF OFFER”),
SPECIFYING THE TERMS AND CONDITIONS CONTAINED IN SUCH LETTER OF INTENT.

43.1.        WITHIN TEN (10) BUSINESS DAYS FOLLOWING ITS RECEIPT OF A NOTICE OF
OFFER, TENANT SHALL ADVISE LANDLORD IN WRITING WHETHER TENANT ELECTS TO LEASE
THE AVAILABLE PREMISES ON THE TERMS AND CONDITIONS SET FORTH IN THE NOTICE OF
OFFER.  IF TENANT FAILS TO NOTIFY LANDLORD OF TENANT’S ELECTION WITHIN SAID TEN
(10) BUSINESS DAY PERIOD, THEN TENANT SHALL BE DEEMED TO HAVE ELECTED NOT TO
LEASE THE AVAILABLE PREMISES.

43.2.        IF TENANT TIMELY NOTIFIES LANDLORD THAT TENANT ELECTS TO LEASE THE
AVAILABLE PREMISES ON THE TERMS AND CONDITIONS SET FORTH IN THE NOTICE OF OFFER,
THEN LANDLORD SHALL LEASE THE AVAILABLE PREMISES TO TENANT UPON THE TERMS AND
CONDITIONS SET FORTH IN THE NOTICE OF OFFER.

43.3.        If Tenant notifies Landlord that Tenant elects not to lease the
Available Premises on the terms and conditions set forth in the Notice of Offer,
or if Tenant fails to notify Landlord of Tenant’s election within the ten (10)
business day period described above, then Landlord shall have the right to
consummate the lease of the Available Premises on the same terms as set forth in
the Notice of Offer within one hundred eighty (180) days following Tenant’s
election (or deemed election) not to lease the Available Premises.  If Landlord
does not lease the Available Premises within said one hundred eighty (180)-day
period, then Tenant’s ROFR shall be fully reinstated, and Landlord shall not
thereafter lease the Available Premises without first complying with the
procedures set forth in this Article 43.

 

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43.4.        Notwithstanding anything in this Article 43 to the contrary, Tenant
shall not exercise the ROFR during such period of time that Tenant is in default
under any provision of this Lease.  Any attempted exercise of the ROFR during a
period of time in which Tenant is so in default shall be void and of no effect. 
In addition, Tenant shall not be entitled to exercise the ROFR if Landlord has
given Tenant two (2) or more notices of default under this Lease, whether or not
the defaults are cured, during the twelve (12) month period prior to the date on
which Tenant seeks to exercise the ROFR.

43.5.        Notwithstanding anything in this Lease to the contrary, except in
connection with a Permitted Transfer, Tenant shall not assign or transfer the
ROFR, either separately or in conjunction with an assignment or transfer of
Tenant’s interest in the Lease, without Landlord’s prior written consent, which
consent Landlord may withhold in its sole and absolute discretion.

44.           Authority.  Tenant and each person executing this Lease on behalf
of Tenant hereby covenants and warrants that (a) Tenant is duly incorporated or
otherwise established or formed and validly existing under the laws of its state
of incorporation, establishment or formation, (b) Tenant has and is duly
qualified to do business in the state in which the Property is located,
(c) Tenant has full corporate, partnership, trust, association or other
appropriate power and authority to enter into this Lease and to perform all
Tenant’s obligations hereunder and (d) each person (and all of the persons if
more than one signs) signing this Lease on behalf of Tenant is duly and validly
authorized to do so.

45.           Confidentiality.  Tenant shall not disclose any terms or
conditions of this Lease (including Rent) or give a copy of this Lease to any
third party, and Landlord shall not release to any third party any nonpublic
financial information or nonpublic information about Tenant’s ownership
structure that Tenant gives Landlord, except (a) if required by Applicable Laws
or in any judicial proceeding, provided that the releasing party has given the
other party reasonable notice of such requirement, if feasible, (b) to a party’s
attorneys, accountants, brokers and other bona fide consultants or advisers,
provided such third parties agree to be bound by this paragraph or (c) to bona
fide prospective assignees or subtenants of this Lease, provided they agree in
writing to be bound by this paragraph.  Landlord agrees that, upon prior (if
possible) written notice to Landlord, Tenant may disclose this Lease and its
terms to the extent necessary to comply with Securities and Exchange Commission
disclosure requirements.

46.           Odors and Exhaust.  Tenant acknowledges that Landlord would not
enter into this Lease with Tenant unless Tenant assured Landlord that under no
circumstances will any other occupants of the Building or Project (including
persons legally present in any outdoor areas of the Project) be subjected to
odors or fumes (whether or not noxious), and that the Building and Project will
not be damaged by any exhaust, in each case from Tenant’s operations, including
in Tenant’s vivarium, if any.  Landlord and Tenant therefore agree as follows:

46.1.        Tenant shall not cause or permit (or conduct any activities that
would cause) any release of any odors or fumes of any kind from the Premises.

46.2.        If the Building has a ventilation system that in Landlord’s
reasonable judgment is adequate, suitable, and appropriate to vent the Premises
in a manner that does not release odors

 

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affecting any indoor or outdoor part of the Project, Tenant shall vent the
Premises through such system.  If Landlord at any time determines that any
existing ventilation system is inadequate, or if no ventilation system exists,
Tenant shall in compliance with Applicable Laws vent all fumes and odors from
the Premises (and remove odors from Tenant’s exhaust stream) as Landlord
requires.  The placement and configuration of all ventilation exhaust pipes,
louvers and other equipment shall be subject to Landlord’s approval, not to be
unreasonably withheld, conditioned or delayed.  Tenant acknowledges Landlord’s
legitimate desire to maintain the Project (indoor and outdoor areas) in an
odor-free manner, and Landlord may reasonably require Tenant to abate and remove
all odors in a manner that goes beyond the requirements of Applicable Laws.

46.3.        Tenant shall, at Tenant’s sole cost and expense, provide odor
eliminators and other devices (such as filters, air cleaners, scrubbers and
whatever other equipment may in Landlord’s judgment be necessary or appropriate
from time to time) to remove, eliminate and abate any odors, fumes or other
substances in Tenant’s exhaust stream that, in Landlord’s reasonable judgment,
emanate from Tenant’s Premises.  Any work Tenant performs under this paragraph
shall constitute Alterations.

46.4.        Tenant’s responsibility to remove, eliminate and abate odors, fumes
and exhaust shall continue throughout the Term.  Landlord’s approval of the
Tenant Improvements shall not preclude Landlord from requiring additional
measures to eliminate odors, fumes and other adverse impacts of Tenant’s exhaust
stream (as Landlord may designate in Landlord’s discretion).  Tenant shall
install additional equipment as Landlord requires from time to time under the
preceding sentence.  Such installations shall constitute Alterations.

46.5.        If Tenant fails to install satisfactory odor control equipment
within ten (10) business days after Landlord’s demand made at any time, then
Landlord may, without limiting Landlord’s other rights and remedies, require
Tenant to cease and suspend any operations in the Premises that, in Landlord’s
reasonable determination, cause odors, fumes or exhaust.  For example, if
Landlord determines that Tenant’s production of a certain type of product causes
odors, fumes or exhaust, and Tenant does not install satisfactory odor control
equipment within ten (10) business days after Landlord’s request, then Landlord
may require Tenant to stop producing such type of product in the Premises unless
and until Tenant has installed odor control equipment satisfactory to Landlord.

47.           HVAC.  For the Premises, Landlord shall (a) maintain and operate
the heating, ventilating and air conditioning systems (“HVAC”); and (b) furnish
HVAC as reasonably required for reasonably comfortable occupancy and use of the
Premises for the Permitted Use twenty-four (24) hours a day, 365 or 366 days a
year.

48.           Excavation.  If any excavation shall be made upon land adjacent to
or under the Building, or shall be reasonably authorized to be made by Landlord
upon no less than five (5) days’ prior written notice to Tenant (except in the
event of an emergency), Tenant shall afford to the person causing or authorized
to cause such excavation, license to enter the Premises for the purpose of
performing such work as said person shall deem necessary or desirable to
preserve and protect the Building from injury or damage and to support the same
by proper foundations, without any

 

50

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claim for damages or liability against Landlord and without reducing or
otherwise affecting Tenant’s obligations under this lease.

49.           Names.  Landlord reserves the right to change the name of the
Project or the Building in its sole discretion.

50.           Acquisition of Property.  This Lease is subject to the condition
precedent that Landlord successfully acquires fee ownership of the Property no
later than December 15, 2007.  Landlord shall promptly notify Tenant of the date
that Landlord acquires fee ownership of the Property.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date
first above written.

LANDLORD:

 

BMR-217TH PLACE LLC,

a Delaware limited liability company

 

By:

/s/ Gary A Kreitzer

 

Name:

Gary A Kreitzer

 

Title:

Executive V.P.

 

TENANT:

SONUS PHARMACEUTICALS, INC.,

a Delaware corporation

 

By:

/s/ Michael A. Martino

 

Name:

Michael A. Martino

 

Title:

President & CEO

 

 

 

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ACKNOWLEDGEMENT

STATE OF

 

§

 

 

§

COUNTY OF

 

§

 

On                , 200      , before me, a Notary Public in and for said state,
personally appeared                      , personally known to me(or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, in that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.

WITNESS my hand and official seal.

 

 

 

, Notary Public

 

 

 

 

 

ACKNOWLEDGEMENT

STATE OF

 

§

 

 

§

COUNTY OF

 

§

 

On                , 200      , before me, a Notary Public in and for said state,
personally appeared                      , personally known to me(or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, in that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.

WITNESS my hand and official seal.

 

 

 

, Notary Public

 

53

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EXHIBIT A

PREMISES

 

A-1

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EXHIBIT B

ACKNOWLEDGEMENT OF TERM COMMENCEMENT DATE

AND TERM EXPIRATION DATE

THIS ACKNOWLEDGEMENT OF TERM COMMENCEMENT DATE AND TERM EXPIRATION DATE is
entered into as of [        ], 20[    ], with reference to that certain Lease
(the “Lease”) dated as of November 21, 2006, by SONUS PHARMACEUTICALS, INC., a
Delaware corporation (“Tenant”), in favor of BMR-217TH PLACE LLC, a Delaware
limited liability company (“Landlord”).  All capitalized terms used herein
without definition shall have the meanings ascribed to them in the Lease.

Tenant hereby confirms the following:

1.             Tenant accepted possession of the Premises on [        ],
20[    ].

2.             To Tenant’s knowledge, the Premises are in good order, condition
and repair[, except [        ]].

3.             The Tenant Improvements required to be constructed by Landlord
under the Lease have been substantially completed.

4.             All conditions of the Lease to be performed by Landlord as a
condition to the full effectiveness of the Lease have been satisfied, and
Landlord has fulfilled all of its duties in the nature of inducements offered to
Tenant to lease the Premises [, except [        ]].

5.             In accordance with the provisions of Section 4.2 of the Lease,
the Term Commencement Date is [        ], 20[    ], and, unless the Lease is
terminated prior to the Term Expiration Date pursuant to its terms, the Term
Expiration Date shall be [        ], 20[    ].

6.             Tenant commenced occupancy of the Premises for the Permitted Use
on [        ], 20[    ].

7.             The Lease is in full force and effect, and the same represents
the entire agreement between Landlord and Tenant concerning the Premises[,
except [        ]].

8.             Tenant has no existing defenses against the enforcement of the
Lease by Landlord, and there exist no offsets or credits against Rent owed or to
be owed by Tenant.

9.             The obligation to pay Rent is presently in effect and all Rent
obligations on the part of Tenant under the Lease commenced to or shall commence
to accrue on [        ], 20[    ].

10.           The undersigned Tenant has not made any prior assignment,
transfer, hypothecation or pledge of the Lease or of the rents thereunder or
sublease of the Premises or any portion thereof.

B-1

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[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

B-2

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IN WITNESS WHEREOF, the parties hereto have executed this Acknowledgment of Term
Commencement Date and Term Expiration Date as of [        ], 20[    ].

TENANT:

 

SONUS PHARMACEUTICALS, INC.,

a Delaware corporation

 

By:

 

 

Name:

 

 

Title:

 

 

 

B-3

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EXHIBIT C

TENANT’S PERSONAL PROPERTY

[To be attached]

C-1

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EXHIBIT D

RULES AND REGULATIONS

NOTHING IN THESE RULES AND REGULATIONS (“RULES AND REGULATIONS”) SHALL SUPPLANT
ANY PROVISION OF THE LEASE.  IN THE EVENT OF A CONFLICT OR INCONSISTENCY BETWEEN
THESE RULES AND REGULATIONS AND THE LEASE, THE LEASE SHALL PREVAIL.

1.             Except as specifically provided in the Lease to which these Rules
and Regulations are attached, no sign, placard, picture, advertisement, name or
notice shall be installed or displayed on any part of the outside of the
Premises or the Building without Landlord’s prior written consent, not to be
unreasonably withheld, conditioned or delayed. Landlord shall have the right to
remove, at Tenant’s sole cost and expense and without notice, any sign installed
or displayed in violation of this rule.

2.             If Landlord objects in writing to any curtains, blinds, shades,
screens or hanging plants or other similar objects attached to or used in
connection with any window or door of the Premises or placed on any windowsill,
which window, door or windowsill is (a) visible from the exterior of the
Premises and (b) not included in plans approved by Landlord, then Tenant shall
promptly remove said curtains, blinds, shades, screens or hanging plants or
other similar objects at its sole cost and expense.

3.             Tenant shall not obstruct any sidewalks or entrances to the
Building, or any halls, passages, exits, entrances or stairways within the
Premises, in any case that are required to be kept clear for health and safety
reasons.

4.             No deliveries shall be made that impede or interfere with other
tenants in or the operation of the Project.

5.             Tenant shall not place a load upon any floor of the Premises that
exceeds the load per square foot that (a) such floor was designed to carry or
(b) that is allowed by Applicable Laws.  Fixtures and equipment that cause
noises or vibrations that may be transmitted to the structure of the Building to
such a degree as to be objectionable to other tenants shall be placed and
maintained by Tenant, at Tenant’s sole cost and expense, on vibration
eliminators or other devices sufficient to eliminate such noises and vibrations
to levels reasonably acceptable to Landlord and other tenants of the Building.

6.             Tenant shall not use any method of heating or air conditioning
other than that shown in the Tenant Improvement plans.

7.             Tenant shall not install any radio, television or other antenna,
cell or other communications equipment, or any other devices on the roof or
exterior walls of the Premises except to the extent shown on approved Tenant
Improvements plans.  Tenant shall not interfere with radio, television or other
communications from or in the Premises or elsewhere.

D-1

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8.             Canvassing, peddling, soliciting and distributing handbills or
any other written material within, on or around the Project (other than within
the Premises) are prohibited, and Tenant shall cooperate, at no cost or expense
to Tenant, to prevent such activities.

9.             Tenant shall store all of its trash, garbage and Hazardous
Materials within its Premises or in designated receptacles outside of the
Premises.  Tenant shall not place in any such receptacle any material that
cannot be disposed of in the ordinary and customary manner of trash, garbage and
Hazardous Materials disposal.

10.           The Premises shall not be used for any improper, immoral or
objectionable purpose.  No cooking shall be done or permitted on the Premises;
provided, however, that Tenant may use (a) equipment approved in accordance with
the requirements of insurance policies that Landlord or Tenant is required to
purchase and maintain pursuant to the Lease for brewing coffee, tea, hot
chocolate and similar beverages, (b) microwave ovens for employees’ use and (c)
equipment shown on Tenant Improvement plans approved by Landlord; provided,
further, that any such equipment and microwave ovens are used in accordance with
Applicable Laws.

11.           Tenant shall not, without Landlord’s prior written consent, not to
be unreasonably withheld, conditioned or delayed, use the name of the Project,
if any, in connection with or in promoting or advertising Tenant’s business
except as Tenant’s address.

12.           Tenant shall comply with all safety, fire protection and
evacuation procedures and regulations established by Landlord or any
Governmental Authority.

13.           Tenant assumes any and all responsibility for protecting the
Premises from theft, robbery and pilferage, which responsibility includes
keeping doors locked and other means of entry to the Premises closed.

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

15.           These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms
covenants, agreements and conditions of the Lease.

16.           Landlord reserves the right to make such other and reasonable
rules and regulations as, in its judgment, may from time to time be needed for
safety and security, the care and cleanliness of the Project, or the
preservation of good order therein; provided, however, that Landlord shall
provide written notice to Tenant of such rules and regulations prior to them
taking effect; and provided, further, that such rules and regulations do not
materially interfere with or prevent Tenant from operating the Premises for the
Permitted Use. Tenant agrees to abide by these Rules and Regulations and any
additional rules and regulations issued or adopted by Landlord.

D-2

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17.           Tenant shall be responsible for the observance of these Rules and
Regulations by Tenant’s employees, agents, clients, customers, invitees and
guests.

 

D-3

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EXHIBIT E

FORM OF ESTOPPEL CERTIFICATE

To:                              BMR-217TH PLACE LLC

17140 Bernardo Center Drive, Suite 222

San Diego, CA 92128

Attention: General Counsel/Real Estate

BioMed Realty, L.P.

c/o BioMed Realty Trust, Inc.

17140 Bernardo Center Drive, Suite 222

San Diego, CA 92128

Re:                               Suite [     ] (the “Premises”) at 1522
217th Place SE, Bothell, Washington (the “Property”)

The undersigned tenant (“Tenant”) hereby certifies to you as follows:

1.             Tenant is a tenant at the Property under a lease (the “Lease”)
for the Premises dated as of November 21, 2006.  The Lease has not been
cancelled, modified, assigned, extended or amended [except as follows: 
[           ]], and there are no other agreements, written or oral, affecting or
relating to Tenant’s lease of the Premises or any other space at the Property. 
The lease term expires on [         ], 20[      ].

2.             Tenant took possession of the Premises, currently consisting of
[           ] square feet, on [           ], 20[    ], and commenced to pay rent
on [        ], 20[     ].  Tenant has full possession of the Premises, has not
assigned the Lease or sublet any part of the Premises, and does not hold the
Premises under an assignment or sublease[, except as follows:  [           ]].

3.             All base rent, rent escalations and additional rent under the
Lease have been paid through [          ], 20[     ].  There is no prepaid
rent[, except $[           ]][, and the amount of security deposit is
$[              ] [in cash][in the form of a letter of credit]].  Tenant
currently has no right to any future rent abatement under the Lease.

4.             Base rent is currently payable in the amount of $[           ]
per month.

5.             Tenant is currently paying estimated payments of additional rent
of $[             ] per month on account of real estate taxes, insurance,
management fees and common area maintenance expenses.

6.             All work to be performed for Tenant under the Lease has been
performed as required under the Lease and has been accepted by Tenant[, except
[            ]], and all allowances to be paid to Tenant, including allowances
for tenant improvements, moving expenses or other items, have been paid.

E-1

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7.             The Lease is in full force and effect, free from default and free
from any event that could become a default under the Lease, and Tenant has no
claims against the landlord or offsets or defenses against rent, and there are
no disputes with the landlord [, except [           ]]. Tenant has received no
notice of prior sale, transfer, assignment, hypothecation or pledge of the Lease
or of the rents payable thereunder[, except [            ]].

8.             [Tenant has the following expansion rights or options for the
Property:  [           ].][Tenant has no rights or options to purchase the
Property.]

9.             To Tenant’s knowledge, no hazardous wastes have been generated,
treated, stored or disposed of by or on behalf of the Tenant in, on or around
the Premises or the Project in violation of any environmental laws.

10.           The undersigned has executed this Estoppel Certificate with the
knowledge and understanding that [INSERT NAME OF LANDLORD, PURCHASER OR LENDER,
AS APPROPRIATE] or its assignee is acquiring the Property in reliance on this
certificate and that the undersigned shall be bound by this certificate.  The
statements contained herein may be relied upon by [INSERT NAME OF PURCHASER OR
LENDER, AS APPROPRIATE], [LANDLORD], BioMed Realty, L.P., BioMed Realty Trust,
Inc., and any mortgagee of the Property and their respective successors and
assigns.

Any capitalized terms not defined herein shall have the respective meanings
given in the Lease.

Dated this [        ] day of [          ], 20[    ].

[           ],

a [          ]

 

By:

 

 

Name:

 

 

Title:

 

 

 

E-2

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EXHIBIT F

LEGAL DESCRIPTION OF PROPERTY

[See attached]

 

F-1

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EXHIBIT G

WORK LETTER

This Work Letter (the “Work Letter”) is made and entered into as of the 21st day
of November, 2006, by and between BMR-217TH PLACE LLC, a Delaware limited
liability company (“Landlord”), and SONUS PHARMACEUTICALS, INC., a Delaware
corporation (“Tenant”), and is attached to and made a part of that certain Lease
dated as of November 21, 2006 (the “Lease”), by and between Landlord and Tenant
for the Premises located at 1522 217th Place SE in Bothell, Washington.  All
capitalized terms used but not otherwise defined herein shall have the meanings
given them in the Lease.

1.             General Requirements.

1.1.          Tenant’s Authorized Representative.  Tenant designates Alan
Fuhrman and Wayne Rebich (each a “Tenant’s Authorized Representative”) as the
persons authorized to initial all plans, drawings, change orders and approvals
pursuant to this Work Letter.  Landlord shall not be obligated to respond to or
act upon any such item until such item has been initialed by one of Tenant’s
Authorized Representatives.  Neither Tenant nor Tenant’s Authorized
Representatives shall be authorized to direct Landlord’s contractors in the
performance of Landlord’s Work (as defined below).

1.2.          Schedule.  The schedule for design and development of Landlord’s
Work (as defined below), including, without limitation, the time periods for
preparation and review of construction documents, approvals and performance,
shall generally be in accordance with that certain schedule prepared by Landlord
and Tenant attached as Exhibit A to this Work Letter (the “Schedule”).  The
Schedule shall be subject to adjustment as mutually agreed upon in writing by
the parties, or as provided in this Work Letter.

1.3.          Architects, Consultants and Contractors.  The architect,
engineering consultants, design team, general contractor and subcontractors
responsible for the construction of Landlord’s Work shall be selected by
Landlord and approved by Tenant.  Tenant’s approval of the same shall not be
unreasonably withheld, conditioned or delayed.  Tenant hereby approves of SAB
Architects as Landlord’s architect and Sierra Construction as Landlord’s general
contractor.

2.             Landlord’s Work.

2.1.          Landlord’s Work Plans.  All Tenant Improvements shall be performed
by Landlord (“Landlord’s Work”) at Tenant’s sole cost and expense and without
cost to Landlord (except for the Tenant Improvement Allowance) and in accordance
with the Approved Plans (as defined below).  Landlord’s Work shall be completed
in a good and workmanlike manner of a nature and character not less than the
quality of tenant improvements in a Class A laboratory research building in the
Bothell area.  The design drawings, plans and specifications listed on Schedule
2.1 to this Work Letter (the “Landlord’s Work Plans”) are the initial list of
plans that Landlord shall develop and submit to Tenant for approval.  Landlord
shall prepare and submit to Tenant for approval an initial draft of Landlord’s
Work Plans that are sufficiently complete to

G-1

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apply for a building permit for Landlord’s Work (the “Draft Plans”) no later
than February 12, 2007.  The Draft Plans shall contain sufficient information
and detail to accurately describe Landlord’s proposed design to Tenant and such
other information as Tenant may reasonably request.  Tenant shall be solely
responsible for ensuring that the Landlord’s Work Plans and the Draft Plans
satisfy Tenant’s requirements for the Tenant Improvements.

2.2.          Tenant Approval of Plans.  Tenant shall notify Landlord in writing
within five (5) business days after receipt of the first draft of the Draft
Plans whether Tenant approves or objects to the Draft Plans and of the manner,
if any, in which the Draft Plans are unacceptable.  Tenant shall not object to
any Draft Plans that satisfy the requirements set forth in Section 2.1.  If
Tenant properly objects to the Draft Plans, then Landlord shall revise the Draft
Plans and cause Tenant’s objections to be remedied in the revised Draft Plans
(the “Approved Plans”).  Landlord shall promptly deliver to Tenant a copy of the
Approved Plans with a statement in writing identifying them as the Approved
Plans.  If Tenant believes that Tenant’s objections to the Draft Plans have not
been appropriately remedied in the Approved Plans, then Tenant shall notify
Landlord in writing within five (5) business days after receipt of the Approved
Plans of the manner in which the Approved Plans are unacceptable.  Landlord
shall revise the Approved Plans and cause Tenant’s proper objections to be
remedied.

2.3.          Completion of Landlord’s Work.  Landlord shall perform and
complete Landlord’s Work (a) in strict conformance with the Approved Plans,
except for Minor Variations (as defined below), (b) otherwise in compliance with
the Lease and (c) in accordance with Applicable Laws, Landlord’s insurance
carriers and the board of fire underwriters having jurisdiction over the Project
and the Premises.  Landlord shall exercise commercially reasonable efforts to
complete construction of Landlord’s Work within the Approved Budget (defined
below), including, without limitation, competitive bidding by subcontractors and
vendors (when Landlord deems it appropriate), prudent job oversight, enforcement
of the obligations of Landlord’s contractor, and regular reviews of performance
against the Schedule and Approved Budget.  Within thirty (30) days after
completion of Landlord’s Work, Landlord shall provide Tenant with any available
“as-built” or construction (if no as-built available) drawing print sets and
electronic CADD files on disc (or files in such other current format in common
use) showing the Premises.

2.4.          Conditions to Performance of Landlord’s Work.  Prior to the
commencement of Landlord’s Work, Landlord shall submit to Tenant for Tenant’s
approval (which approval Tenant shall not unreasonably withhold) a list (the
“Contractor List”) of project managers, contractors and subcontractors that will
perform Landlord’s Work.  Tenant shall give Landlord notice in writing of its
approval or disapproval of the Contractor List within five (5) business days
after Tenant’s receipt of the same.  If Tenant properly disapproves of one or
more parties on the Contractor List within such five (5) business day period,
Landlord shall revise the Contractor List and resubmit the same to Tenant for
Tenant’s approval in accordance with the preceding two sentences.

2.5.          Requests for Consent.  Unless a different time period is expressly
provided, Tenant and Landlord shall each respond to all requests for consents,
approvals or directions

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pursuant to this Work Letter within five (5) business days following receipt of
such request.  Failure to respond within such five (5) business day period shall
be deemed approval.

2.6.          Shell and Core Work.  Landlord’s Work/Tenant Improvements shall
not include renovations to be made to the Building by Landlord before
performance of the Landlord’s Work and at Landlord’s sole cost and expense
(“Shell and Core Work”).  The Shell and Core Work is described in Schedule 2.6
to this Work Letter.

3.             Each Party’s Obligations.  Each of Landlord and Tenant shall
perform promptly such of its obligations contained in this Work Letter as are to
be performed by it.  Tenant shall also observe and perform all of its
obligations under this Lease from the Term Commencement Date.  The parties
acknowledge that the Approved Budget, the Approved Plans and the Contractor’s
List must be completed and approved not later than April 23, 2007, in order for
Landlord’s Work to be Substantially Complete by September 1, 2007.  Landlord
shall generally hold a weekly construction (or pre-construction, as applicable)
meeting beginning promptly after the Execution Date and attended by key
personnel (e.g., Landlord representative, Landlord’s architect, contractor,
project manager, consultants, etc., as may be appropriate from time to time) to
discuss and coordinate matters related to the Tenant Improvements, including,
without limitation:  the status of the design work and permit applications, the
status of the contracting and purchasing, the schedule for the performance of
the Tenant Improvements, decisions regarding selection of contractors and
vendors, the status of construction, change order requests, construction issues,
selection of materials, and Costs incurred and estimated to be incurred compared
to the Approved Budget.  Tenant is invited and encouraged to attend all of the
weekly construction meetings.  Landlord shall promptly provide to Tenant on
Tenant’s request any information reasonably requested by Tenant concerning the
status of construction or any other aspect of the Tenant Improvements including
the Costs (defined below).  Tenant shall diligently and promptly review all
information provided to it concerning the Tenant Improvements, attend meetings
as requested by Landlord, and timely respond to Landlord requests, including
making itself available to Landlord to discuss construction matters as they
arise.

4.             Completion of Landlord’s Construction Obligations.

4.1.          The date on which Landlord’s Work is Substantially Complete shall
be referred to as the “TI Substantial Completion Date.”  Tenant shall accept the
Premises in the condition in which they exist as of the TI Substantial
Completion Date.  Tenant’s taking possession and acceptance of the Premises
shall not constitute a waiver of any warranty of any construction defect in
regard to workmanship (including installation of equipment) or materials
(exclusive of equipment provided by manufacturers) of the Premises completed by
or on behalf of Landlord, any noncompliance of Landlord’s Work with Applicable
Laws, or the failure of Landlord’s Work to be completed substantially in
accordance with the Approved Plans (subject to Minor Variations and such other
Changes as are permitted hereunder).  Tenant shall have until twelve (12) months
after the TI Substantial Completion Date within which to notify Landlord of any
such construction defect or non-compliance with Approved Plans discovered by
Tenant, and Landlord shall timely correct the same.  Landlord shall use
reasonable efforts to cause the applicable contractor to remedy any such
construction defect or non-compliance within thirty (30) days thereafter. 
Notwithstanding the foregoing, Landlord shall not be in default under the

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Lease if (a) by the nature of such defect or noncompliance, more than thirty
(30) days are required to correct and remedy such construction defect or
noncompliance and Landlord commences its remedial action within such thirty (30)
day period and thereafter diligently and continuously prosecutes such curative
and remedial action to completion or (b) the applicable contractor, despite
Landlord’s efforts, fails to remedy such defect or non-compliance within such
thirty (30) day period, but Landlord otherwise, at Landlord’s expense with
respect to any such construction defect or noncompliance with Approved Plans,
thereafter commences remedial action diligently and continuously prosecutes such
curative and remedial action to completion.  Tenant shall be entitled to receive
the benefit of all construction warranties and manufacturer’s equipment
warranties relating to equipment installed in the Premises.  If requested by
Tenant, Landlord shall attempt to obtain extended warranties from manufacturers
and suppliers of such equipment, but the cost of any such extended warranties
shall be borne solely by Tenant.  Landlord shall diligently pursue any claims
arising out of latent defects in the Landlord’s Work.  Landlord shall promptly
undertake and complete, or cause to be completed, all punch list items.  Prior
to commencing Landlord’s Work, Landlord shall provide, or shall cause Landlord’s
contractors and subcontractors to provide, to Tenant, in addition to any
insurance required of Landlord pursuant to the Lease, statutory Workers’
Compensation insurance as required by Applicable Laws.

5.             Tenant Improvement Allowance.

5.1.          Application of Tenant Improvement Allowance.  All costs, expenses
and fees incurred by or on behalf of Landlord to any third party arising from,
out of, or in connection with the Tenant Improvements (collectively, the
“Costs”), including the costs of (a) construction, (b) space planning,
architect, engineering and other related services and (c) building permits and
other planning and inspection fees, shall, subject to the terms of this
paragraph regarding Excess TI Costs, be deducted from the Tenant Improvement
Allowance.  The Costs shall also include a project management fee payable to
Landlord in an amount equal to three percent (3%) of the Tenant Improvement
Allowance, which fee shall be paid monthly in an amount equal to three percent
(3%) of the Tenant Improvement Allowance disbursed the previous month.  If at
any time the Costs exceed the Tenant Improvement Allowance or if the aggregate
amount of the Approved Budget exceeds the Tenant Improvement Allowance, then
Tenant shall deposit in an escrow account bearing interest in favor of Tenant,
pursuant to escrow instructions reasonably acceptable to Landlord, and as a
condition precedent to Landlord’s obligation to complete the Tenant
Improvements, one hundred percent (100%) of the then-current Costs or Approved
Budget, as the case may be, in excess of the Tenant Improvement Allowance (the
“Excess TI Costs”).  If Tenant timely fails to deposit any sum due to Landlord
under this Work Letter, Landlord shall have all of the rights and remedies set
forth in the Lease for nonpayment of Rent (including, but not limited to, the
right to interest at the Default Rate and the right to assess a late charge),
and for purposes of any litigation instituted with regard to such amounts the
same will be considered Rent.  Funds so deposited in escrow by Tenant shall be
disbursed to pay for Costs in excess of the Tenant Improvement Allowance
following disbursement by Landlord of the full amount of the Tenant Improvement
Allowance, and any amount on deposit in escrow that is not required to pay any
such excess Costs following the final completion of the Landlord’s Work

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(including all punch list items) shall be promptly returned to Tenant.  Landlord
shall disburse the Tenant Improvement Allowance to pay the Costs as such Costs
are due.

5.2.          Approval of Budget for Landlord’s Work.  Notwithstanding anything
to the contrary set forth elsewhere in this Work Letter or the Lease, Landlord
shall not have any obligation to commence construction of the Tenant
Improvements or to advance any portion of the Tenant Improvement Allowance until
Tenant shall have approved in writing the budget for the Landlord’s Work (the
“Approved Budget”) and the Approved Plans.  Landlord shall not be obligated to
pay for costs or expenses relating to Landlord’s Work that exceed the amount of
the Tenant Improvement Allowance, and all such excess costs and expenses shall
be paid by Tenant pursuant to Section 5.1.  Notwithstanding the foregoing,
Landlord shall pay all excess costs and expenses arising due to a breach by
Landlord of construction contracts or supplier agreements with respect to
Landlord’s Work.

5.3.          Cost Statements.  Each month Landlord shall prepare, approve and
submit to Tenant (a) a statement setting forth the total amount of Costs
expended and the total amount applied against the Tenant Improvement Allowance
and the total amount funded from the escrow (if any) described in Section 5.1,
(b) a detailed summary of the Landlord’s Work performed, including percentage of
Landlord’s Work completed, using AIA standard form Application for Payment (G
702) executed by the general contractor and by the architect, and (c) the
estimated Costs to complete Landlord’s Work and the source of funds to pay such
Costs.  Landlord shall provide Tenant with copies of the draw requests from
Landlord’s construction loan, if any.

5.4.          Application of the Tenant Improvement Allowance.  Landlord may
apply the Tenant Improvement Allowance for the payment of Costs of the Tenant
Improvements within the Premises (including, without limitation, construction of
standard laboratory improvements; finishes; building fixtures; building permits;
and architectural, engineering, design and consulting fees), in each case as
reflected in the Approved Budget and the Approved Plans and for any Minor
Variations.  In no event shall the Tenant Improvement Allowance be applied to
any costs of the Tenant Improvements relating to the purchase of any furniture,
personal property or other non-building system equipment.

6.             Changes.  Any changes to Landlord’s Work (each, a “Change”)
requested by Landlord or Tenant after Tenant approves the Approved Plans in
writing shall be requested and instituted in accordance with the provisions of
this Section 6 and shall be subject to the reasonable written approval of the
other party, except for any Minor Variations.

6.1.          Changes Requested by Landlord.

(a)           Landlord may request Changes after Tenant approves the Approved
Plans by notifying Tenant thereof in writing in substantially the same form as
the AIA standard change order form (a “Landlord Change Order Request”), which
Landlord Change Order Request shall detail the nature and extent of any
requested Changes.  If the nature of a Change requires revisions to the Approved
Plans, then Landlord shall be solely responsible for the cost and expense of
such revisions (except for Minor Variations).

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(b)           Tenant shall reject any Landlord Change Order Requests by written
notice to Landlord within the later of (i) five (5) business days after receipt
of the Landlord Change Order Request and (ii) five (5) business days after
receipt of the information to be provided by Landlord under Section 6.3, which
notice shall detail the manner in which the Landlord Change Order Request is
unacceptable.  If Tenant properly rejects any Landlord Change Order Request,
then Landlord shall revise the Landlord Change Order Request and cause Tenant’s
objections to be remedied.  If Tenant does not timely reject in writing a
Landlord Change Order Request, then such Landlord Change Order Request shall be
deemed approved by Tenant.

(c)           In recognition and consideration of the fact that the Premises and
Tenant Improvements have not been constructed as of the date hereof, it is
hereby agreed by the parties hereto that the Landlord may make Minor Variations
(as herein defined) in the size, design, engineering, configuration and siting
of Landlord’s Work, and such Minor Variations shall not render the Lease void or
voidable, nor shall any such Minor Variations entitle the Tenant to any
reduction or abatement in Rent, anything herein contained and any rule of law or
equity to the contrary notwithstanding (except as provided in this Lease with
respect to re-measurement of Rentable Area).  “Minor Variations” shall mean any
non-material modifications to Landlord’s Work which do not require any material
change to the Schedule or Approved Budget, to the extent such modifications are
reasonably required to (i) comply with Applicable Laws or to obtain or comply
with any required permit, (ii) comply with any request by Tenant for
modifications to Landlord’s Work, (iii) comport with good design, engineering
and construction practices (provided such variations are not material) or (iv)
make reasonable adjustments for field deviations encountered in the construction
of Landlord’s Work.

6.2.          Changes Requested by Tenant.  Tenant may request Changes after
Tenant approves the Approved Plans by notifying Landlord thereof in writing in
substantially the same form as the AIA standard change order form (a “Tenant
Change Order Request”), which Tenant Change Order Request shall detail the
nature and extent of any requested Changes.  If the nature of a Change requires
revisions to the Approved Plans, then Tenant shall be solely responsible for the
cost and expense of such revisions.  To the extent that the Tenant Improvement
Allowance is insufficient to pay for the cost of such Change, Tenant shall
reimburse Landlord for all additional costs and expenses payable by Landlord to
complete Landlord’s Work due to a Tenant-requested Change in accordance with the
payment provisions of this Work Letter.  Tenant Change Order Requests shall be
signed by Tenant’s Authorized Representative.

6.3.          Preparation of Estimates.  Landlord shall, before proceeding with
any Change, use commercially reasonable efforts to prepare as soon as is
reasonably practicable (but in no event more than five (5) business days after
delivering a Landlord Change Order Request to Tenant or receipt of a Tenant
Change Order Request) an estimate of the increased costs or savings that would
result from such Change, as well as an estimate of such Change’s effects on the
Schedule.  Subject to Section 6.1(c), Tenant shall have five (5) business days
after receipt of such information from Landlord to (a) in the case of a Landlord
Change Order Request, approve or reject such Landlord Change Order Request in
writing or (b) in the case of a Tenant Change Order Request, notify Landlord in
writing of Tenant’s decision either to proceed with or abandon the
Tenant-requested Change.

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7.             Miscellaneous.

7.1.          Headings, Etc.  Where applicable in this Work Letter, the singular
includes the plural and the masculine or neuter includes the masculine, feminine
and neuter.  The section headings of this Work Letter are not a part of this
Work Letter and shall have no effect upon the construction or interpretation of
any part hereof.

7.2.          Time of the Essence.  Time is of the essence with respect to the
performance of every provision of this Work Letter in which time of performance
is a factor.

7.3.          Covenants.  Each provision of this Work Letter performable by
Landlord shall be deemed both a covenant and a condition.

7.4.          Consent.  Whenever consent or approval of either party is
required, that party shall not unreasonably withhold, condition or delay such
consent or approval, except as may be expressly set forth to the contrary.

7.5.          Entire Agreement.  The terms of this Work Letter are intended by
the parties as a final expression of their agreement with respect to the terms
as are included herein, and may not be contradicted by evidence of any prior or
contemporaneous agreement, other than the Lease.

7.6.          Invalid Provisions.  Any provision of this Work Letter that shall
prove to be invalid, void or illegal shall in no way affect, impair or
invalidate any other provision hereof, and all other provisions of this Work
Letter shall remain in full force and effect and shall be interpreted as if the
invalid, void or illegal provision did not exist.

7.7.          Construction.  The language in all parts of this Work Letter shall
be in all cases construed as a whole according to its fair meaning and not
strictly for or against either Landlord or Tenant.

7.8.          Assigns.  Each of the covenants, conditions and agreements herein
contained shall inure to the benefit of and shall apply to and be binding upon
the parties hereto and their respective heirs; legatees; devisees; executors;
administrators; and permitted successors, assigns, sublessees.  Nothing in this
Section 7.8 shall in any way alter the provisions of the Lease restricting
assignment or subletting.

7.9.          Authority.  That individual or those individuals signing this Work
Letter guarantee, warrant and represent that said individual or individuals have
the power, authority and legal capacity to sign this Work Letter on behalf of
and to bind all entities, corporations, partnerships, limited liability
companies, joint venturers or other organizations and entities on whose behalf
said individual or individuals have signed.

7.10.        Counterparts.  This Work Letter may be executed in one or more
counterparts, each of which, when taken together, shall constitute one and the
same document.

 [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter to be
effective on the date first above written.

LANDLORD:

BMR-217TH PLACE LLC,
a Delaware limited liability company

By:          /s/ Gary A Kreitzer

Name:     Gary A Kreitzer

Title:       Executive V.P.

 

TENANT:

SONUS PHARMACEUTICALS, INC.,
a Delaware corporation

By:          /s/ Michael A. Martino

Name:     Michael A. Martino

Title:       President & CEO

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EXHIBIT A

SCHEDULE

[To be attached]

G-9

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SCHEDULE 2.1

LANDLORD’S WORK PLANS

Architectural Drawings

1.               Floor and reflected ceiling plans

2.               Elevations (exterior and interior)

3.               Sections (building and wall)

4.               Details (exterior and interior)

5.               Schedules (doors, windows, finishes, etc.)

Engineering Drawings

1.               Mechanical

2.               Plumbing

3.               Electrical

4.               Fire protection

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SCHEDULE 2.6

SHELL AND CORE WORK

Sitework

·                  The existing interior improvements shall be completely
demolished. This shall include all walls, flooring, and ceilings. The interior
shall be taken back to a broom finish shell condition.

 

·                  The traffic gates and tire device shall be demolished.

 

·                  Cut-in tilt panels for 4 new windows shall be added.

 

·                  Landscaping cleanup, tree removal for 15 trees and other
visual appealing work shall be performed.

 

·                  The existing parking lot shall be restriped and seal coated
and minor asphalt patching shall occur. Extruded curbs shall be replaced.

 

·                  The existing sidewalks shall be pressure washed.

 

·                  A shallow footing drain shall be added along the south side
of building to improve the drainage.

 

·                  Cut & patch for new power upgrade primary service run from
transformer to loading dock shall be installed.

 

·                  The main water service shall be upsized to 3”.

 

·                  A double detector check valve shall be added to the existing
fire water line if required.

 

·                  A loop fire water line around building shall be
added/improved if required.

Concrete

·                  An allowance for footings/grade beams for 4 concrete brace
frames shall be included.

Masonry

·                  Minor tuck-point and repair of masonry cracks shall occur.

Metals

·                  4 steel brace frames for lateral structural upgrades shall
occur.

Carpentry

·                  We will construct a new electrical room exterior to the
building at the loading dock.  Metal stud framed, exterior plywood covered in
EIFS/stucco and a new door and frame shall be added.

Thermal and Moisture Protection

·                  We shall remove and replace the built-up roofing.  This
includes increasing roof insulation to R-21.

 

·                  We shall replace roof cap flashings.

 

·                  Minor caulking repair shall occur.

DOORS & WINDOWS

·                  4 new cut-in windows shall be added.

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·                  A framed covered walkway at the main building entry shall be
added.

Finishes

·                  We shall clean and repaint exterior concrete walls and the
roof screen.  We shall clean and reseal brick.  This includes epoxy repair of
cracking at loading dock spandrel panels.

·                  Main entry lobby upgrades, including new stair, flooring,
finishes, and lighting shall be performed.

Elevators

·                  We shall add a new passenger elevator at main lobby entry
area, which includes pit, shaft walls, and electrical work.

Mechanical

·                  We shall demolish two old existing rooftop HVAC units

Electrical

·                  We shall upgrade the existing electrical service to 3000A, by
adding a new 3000A MDP at the new electrical room (off loading dock), then
re-feed the existing 2000A switchboard and 800A switchboard from the new
service.

 

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EXHIBIT H

FORM OF LETTER OF CREDIT

[On letterhead or L/C letterhead of Issuer.]

LETTER OF CREDIT

Date:           , 200    

(the “Beneficiary”)

 

 

 

 

Attention:

 

 

L/C. No.:

 

 

Loan No. :

 

 

 

 

Ladies and Gentlemen:

We establish in favor of Beneficiary our irrevocable and unconditional Letter of
Credit numbered as identified above (the “L/C”) for an aggregate amount of
$       , expiring at     :00 p.m. on          or, if such day is not a Banking
Day, then the next succeeding Banking Day (such date, as extended from time to
time, the “Expiry Date”). “Banking Day” means a weekday except a weekday when
commercial banks in                 are authorized or required to close.

We authorize Beneficiary to draw on us (the “Issuer”) for the account of
         (the “Account Party”), under the terms and conditions of this L/C.

Funds under this L/C are available by presenting the following documentation
(the “Drawing Documentation”): (a) the original L/C and (b) a sight draft
substantially in the form of Exhibit A, with blanks filled in and bracketed
items provided as appropriate. No other evidence of authority, certificate, or
documentation is required.

Drawing Documentation must be presented at Issuer’s office at
                    on or before the Expiry Date by personal presentation,
courier or messenger service, or fax. Presentation by fax shall be effective
upon electronic confirmation of transmission as evidenced by a printed report
from the sender’s fax machine. After any fax presentation, but not as a
condition to its effectiveness, Beneficiary shall with reasonable promptness
deliver the original Drawing Documentation by any other means.  Issuer will on
request issue a receipt for Drawing Documentation.

We agree, irrevocably, and irrespective of any claim by any other person, to
honor drafts drawn under and in conformity with this L/C, within the maximum
amount of this L/C, presented

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to us on or before the Expiry Date, provided we also receive (on or before the
Expiry Date) any other Drawing Documentation this L/C requires.

We shall pay this L/C only from our own funds by check or wire transfer, in
compliance with the Drawing Documentation.

If Beneficiary presents proper Drawing Documentation to us on or before the
Expiry Date, then we shall pay under this L/C at or before the following time
(the “Payment Deadline”): (a) if presentment is made at or before noon of any
Banking Day, then the close of such Banking Day; and (b) otherwise, the close of
the next Banking Day.  We waive any right to delay payment beyond the Payment
Deadline. If we determine that Drawing Documentation is not proper, then we
shall so advise Beneficiary in writing, specifying all grounds for our
determination, within one Banking Day after the Payment Deadline.

Partial drawings are permitted. This L/C shall, except to the extent reduced
thereby, survive any partial drawings.

We shall have no duty or right to inquire into the validity of or basis for any
draw under this L/C or any Drawing Documentation.  We waive any defense based on
fraud or any claim of fraud.

The Expiry Date shall automatically be extended by one year (but never beyond
         the “Outside Date”) unless, on or before the date 30 days before any
Expiry Date, we have given Beneficiary notice that the Expiry Date shall not be
so extended (a “Nonrenewal Notice”). We shall promptly upon request confirm any
extension of the Expiry Date under the preceding sentence by issuing an
amendment to this L/C, but such an amendment is not required for the extension
to be effective. We need not give any notice of the Outside Date.

Beneficiary may from time to time without charge transfer this L/C, in whole but
not in part, to any transferee (the “Transferee”).  Issuer shall look solely to
Account Party for payment of any fee for any transfer of this L/C.  Such payment
is not a condition to any such transfer. Beneficiary or Transferee shall
consummate such transfer by delivering to Issuer the original of this L/C and a
Transfer Notice substantially in the form of Exhibit B, purportedly signed by
Beneficiary, and designating Transferee.  Issuer shall promptly reissue or amend
this L/C in favor of Transferee as Beneficiary. Upon any transfer, all
references to Beneficiary shall automatically refer to Transferee, who may then
exercise all rights of Beneficiary.  Issuer expressly consents to any transfers
made from time to time in compliance with this paragraph.

Any notice to Beneficiary shall be in writing and delivered by hand with receipt
acknowledged or by overnight delivery service such as FedEx (with proof of
delivery) at the above address, or such other address as Beneficiary may specify
by written notice to Issuer. A copy of any such notice shall also be delivered,
as a condition to the effectiveness of such notice, to:                   (or
such replacement as Beneficiary designates from time to time by written notice).

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No amendment that adversely affects Beneficiary shall be effective without
Beneficiary’s written consent.

This L/C is subject to and incorporates by reference: (a) the Uniform Customs
and Practice for Documentary Credits, International Chamber of Commerce
Publication No. 500 (the “UCP”); and (b) to the extent not inconsistent with the
UCP, Article 5 of the Uniform Commercial Code of the State of New York.

Very truly yours,

[Issuer Signature]

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EXHIBIT A

FORM OF SIGHT DRAFT

[BENEFICIARY LETTERHEAD]

TO:

[Name and Address of Issuer]

SIGHT DRAFT

AT SIGHT, pay to the Order of                    , the sum of                  
United States Dollars ($                 ). Drawn under [Issuer] Letter of
Credit No.                  dated                 .

[Issuer is hereby directed to pay the proceeds of this Sight Draft solely to the
following account:                                         .]

[Name and signature block, with signature or purported signature of Beneficiary]

Date:                        

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EXHIBIT B

FORM OF TRANSFER NOTICE

[BENEFICIARY LETTERHEAD]

TO:

[Name and Address of Issuer] (the “Issuer”)

TRANSFER NOTICE

By signing below, the undersigned, Beneficiary (the “Beneficiary”) under
Issuer’s Letter of Credit No.                    dated                    (the
“L/C”), transfers the L/C to the following transferee (the “Transferee”):

[Transferee Name and Address]

The original L/C is enclosed. Beneficiary directs Issuer to reissue or amend the
L/C in favor of Transferee as Beneficiary. Beneficiary represents and warrants
that Beneficiary has not transferred, assigned, or encumbered the L/C or any
interest in the L/C, which transfer, assignment, or encumbrance remains in
effect.

[Name and signature block, with signature or purported signature of Beneficiary]

Date:                        ]

 

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