Exhibit 10.1

LEASE

3911/3931 SVB, LLC,

a California limited liability company

as Landlord,

and

LIGAND PHARMACEUTICALS INCORPORATED,

a Delaware corporation,

as Tenant.

3911 Sorrento Valley Boulevard

San Diego, California 92121

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TABLE OF CONTENTS

 

     Page  

ARTICLE 1 PREMISES, BUILDING, PROJECT, AND COMMON AREAS

     4   

1.1 Premises, Building, Project and Common Areas

     4   

1.2 Rentable Square Feet

     5   

ARTICLE 2 LEASE TERM

     5   

2.1 Initial Lease Term

     5   

2.2 Early Entry into the Premises Prior to the Lease Commencement Date

     6   

2.3 Option to Extend

     6   

ARTICLE 3 BASE RENT

     8   

ARTICLE 4 ADDITIONAL RENT

     9   

4.1 In General

     9   

4.2 Definitions of Key Terms Relating to Additional Rent

     9   

4.3 Allocation of Direct Expenses

     12   

4.4 Calculation and Payment of Additional Rent

     12   

4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible

     14   

ARTICLE 5 USE OF PREMISES

     15   

5.1 Permitted Use

     15   

5.2 Prohibited Uses

     15   

5.3 CC&Rs

     15   

ARTICLE 6 SERVICES AND UTILITIES

     16   

6.1 Tenant Utilities and Services

     16   

6.2 Utility Issues

     16   

6.3 Interruption of Use

     17   

ARTICLE 7 REPAIRS

     17   

7.1 Landlord’s Obligations

     17   

7.2 Tenant’s Obligations

     18   

ARTICLE 8 ADDITIONS AND ALTERATIONS

     18   

8.1 Landlord’s Consent to Alterations

     18   

8.2 Manner of Construction

     19   

8.3 Payment for Improvements

     20   

8.4 Construction Insurance

     20   

8.5 Landlord’s Property

     20   

ARTICLE 9 COVENANT AGAINST LIENS

     21   

ARTICLE 10 INDEMNIFICATION AND INSURANCE

     21   

10.1 Indemnification and Waiver 

     21   

 

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TABLE OF CONTENTS (cont.)

 

     Page  

10.2 Tenant’s Compliance With Landlord’s Fire and Casualty Insurance

     22   

10.3 Tenant’s Insurance

     22   

10.4 Form of Policies

     23   

10.5 Additional Insurance Obligations

     24   

10.6 Third-Party Contractors

     24   

10.7 Landlord’s Insurance

     24   

ARTICLE 11 DAMAGE AND DESTRUCTION

     24   

11.1 Repair of Damage to Premises by Landlord

     24   

11.2 Landlord’s Option to Repair

     25   

11.3 Waiver of Statutory Provisions

     26   

ARTICLE 12 NONWAIVER

     26   

ARTICLE 13 CONDEMNATION

     27   

ARTICLE 14 ASSIGNMENT AND SUBLETTING

     27   

14.1 Transfers

     27   

14.2 Landlord’s Consent

     28   

14.3 Transfer Premium

     29   

14.4 Landlord’s Option as to Subject Space

     30   

14.5 Effect of Transfer

     30   

14.6 Additional Transfers

     31   

14.7 Occurrence of Default

     31   

14.8 Deemed Consent Transfers

     31   

ARTICLE 15 SURRENDER OF PREMISES

     32   

15.1 Surrender of Premises

     32   

15.2 Removal of Tenant Property by Tenant

     32   

15.3 Removal of Tenant’s Property by Landlord

     32   

15.4 Landlord’s Actions on Premises

     33   

ARTICLE 16 HOLDING OVER

     33   

ARTICLE 17 ESTOPPEL CERTIFICATES

     34   

ARTICLE 18 SUBORDINATION

     34   

18.1 Subordination Generally

     34   

18.2 Existing Lender SNDA

     35   

ARTICLE 19 DEFAULTS

     35   

19.1 Events of Default

     35   

19.2 Remedies Upon Default

     36   

19.3 Subleases of Tenant 

     37   

 

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TABLE OF CONTENTS (cont.)

 

     Page  

19.4 Efforts to Relet

     37   

ARTICLE 20 COVENANT OF QUIET ENJOYMENT

     37   

ARTICLE 21 SECURITY DEPOSIT

     38   

ARTICLE 22 INTENTIONALLY OMITTED

     38   

ARTICLE 23 SIGNS

     38   

23.1 Premises Identification and Building Directory Signage

     38   

23.2 Prohibited Signage and Other Items

     38   

ARTICLE 24 COMPLIANCE WITH LAW

     39   

ARTICLE 25 LATE CHARGES

     39   

ARTICLE 26 LANDLORD’S RIGHT TO CURE DEFAULT

     40   

26.1 Landlord’s Cure

     40   

26.2 Tenant’s Reimbursement

     40   

ARTICLE 27 ENTRY BY LANDLORD

     40   

ARTICLE 28 TENANT PARKING

     41   

ARTICLE 29 MISCELLANEOUS PROVISIONS

     42   

29.1 Terms

     42   

29.2 Binding Effect

     42   

29.3 No Air Rights

     42   

29.4 INTENTIONALLY OMITTED

     42   

29.5 Transfer of Landlord’s Interest

     42   

29.6 Prohibition Against Recording

     43   

29.7 Relationship of Parties

     43   

29.8 Application of Payments

     43   

29.9 Time of Essence

     43   

29.10 Partial Invalidity

     43   

29.11 No Warranty

     43   

29.12 Landlord Exculpation

     43   

29.13 Entire Agreement

     44   

29.14 Force Majeure

     44   

29.15 Waiver of Redemption by Tenant

     44   

29.16 Notices

     44   

29.17 Joint and Several

     45   

29.18 Authority

     45   

29.19 Attorneys’ Fees

     45   

29.20 Governing Law

     45   

 

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TABLE OF CONTENTS (cont.)

 

     Page  

29.21 Submission of Lease

     46   

29.22 Brokers

     46   

29.23 Independent Covenants

     46   

29.24 Project or Building Name and Signage

     46   

29.25 Counterparts

     46   

29.26 Confidentiality

     46   

29.27 Transportation Management

     46   

29.28 Building Renovations

     47   

29.29 Tenant’s Representations

     47   

29.30 Hazardous Materials

     48   

29.31 LEED Certification

     49   

29.32 Financial Information

     50   

29.33 California Certified Access Specialist Inspection

     50   

29.34 Utility Information

     50   

29.35 Communication Equipment

     50   

EXHIBITS:

 

A    –    SITE PLAN OF PROJECT A-1    –    OUTLINE OF PREMISES B    –    TENANT
WORK LETTER C    –    NOTICE OF LEASE TERM DATES D    –    RULES AND REGULATIONS

 

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INDEX

 

     Page(s)  

Abated Rent

     8   

Abatement Event

     16   

Abatement Notice

     16   

Additional Landlord Work

     Exhibit B   

Additional Rent

     8   

Alterations

     18   

Anti-Terrorism Laws

     46   

Applicable Laws

     38   

Approved Working Drawings

     Exhibit B   

Architect

     Exhibit D   

Bank Prime Loan

     39   

Base Building

     19   

Base Rent

     8   

Brokers

     44   

Building

     1   

Building Common Areas

     4   

Building Structure

     17   

Building Systems

     17   

Casualty

     24   

CC&Rs

     15   

Code

     Exhibit B   

Common Areas

     4   

Communication Equipment

     49   

Communication Equipment Notice

     49   

Conceptual Plan

     Exhibit B   

Construction Drawings

     Exhibit B   

Contractor

     Exhibit B   

Control

     31   

Delivery Date

     Exhibit B   

Direct Expenses

     9   

Eligibility Period

     17   

Engineers

     Exhibit B   

Environmental Laws

     47   

Environmental Permits

     47   

Estimate

     13   

Estimate Statement

     12   

Estimated Payments

     13   

Executive Order

     46   

Expense Year

     9   

Final Retention

     Exhibit B   

Final Space Plan

     Exhibit B   

Final Working Drawings

     Exhibit B   

Fire Exit Door

     Exhibit D   

Fire Exit Door Allowance 

     Exhibit D   

 

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     Page(s)  

Fire Exit Doors Allowance Items

     Exhibit B   

Force Majeure

     43   

Hazardous Material(s)

     47   

HVAC Unit Allowance

     Exhibit D  

HVAC Unit Allowance Items

     Exhibit B   

HVAC Units

     15   

Improvement Allowance

     Exhibit D   

Interest Notice

     6   

Interest Rate

     39   

Landlord

     1   

Landlord Delay

     Exhibit B   

Landlord Parties

     20   

Landlord Repair Notice

     24   

Landlord’s Work

     Exhibit B   

Lease

     1   

Lease Commencement Date

     5   

Lease Expiration Date

     5   

Lease Term

     5   

LEED

     10   

Mail

     43   

Major Alterations

     18   

Market Rent

     6   

Monthly Disbursement Request

     Exhibit B   

Net Worth

     31   

Notices

     43   

Operating Expenses

     9   

Option

     6   

Option Rent

     6   

Option Rent Notice

     6   

Option Term

     6   

Original Tenant

     6   

Outside Agreement Date

     7   

Parking Ratio

     3   

Patio Area

     4   

Permits

     Exhibit B   

Permitted Chemicals

     47   

Permitted Transferee

     30   

Permitted Transferee Assignee

     31   

Permitted Use

     3   

Premises

     4   

Prohibited Person

     46   

Project

     4   

Project Common Areas

     4   

Renovations

     45   

Rent 

     8   

 

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     Page(s)  

Review Period

     13   

Rules and Regulations

     14   

Security Deposit

     36   

SNDA

     34   

Statement

     12   

Subject Space

     27   

Substantial Completion

     Exhibit B   

Summary

     1   

Systems

     5   

Tax Expenses

     11   

Tenant

     1   

Tenant Improvement Allowance Items

     Exhibit B   

Tenant Improvements

     Exhibit B   

Tenant Parties

     5   

Tenant’s Acceptance

     6   

Tenant’s Agents

     Exhibit B   

Tenant’s Share

     12   

Third Party Contractor

     23   

Transfer Costs

     29   

Transfer Notice

     27   

Transfer Premium

     28   

Transferee

     27   

Transfers

     27   

Uncontrollable Delay

     Exhibit B   

USA Patriot Act

     46   

Utility Bill Notice

     49   

Utility Bills

     49   

Utility Providers

     49   

Warranty Period

     5   

 

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LEASE

This LEASE (the “Lease”), dated as of the date set forth in Section 1 of the
Summary of Basic Lease Information (the “Summary”), below, is made by and
between 3911/3931 SVB, LLC, a California limited liability company (“Landlord”),
and LIGAND PHARMACEUTICALS INCORPORATED, a Delaware corporation (“Tenant”).

SUMMARY OF BASIC LEASE INFORMATION

 

TERMS OF LEASE    DESCRIPTION 1. Effective Date:    November 3, 2015 2.
Premises:        2.1 Building:    That certain office project (the “Building”)
located at 3911 Sorrento Valley Boulevard, San Diego, California 92008.     2.2
Premises:    4,847 rentable square feet of space located in the Building. The
Building contains 53,168 rentable square feet. The Premises is further outlined
in Exhibit A-1 to the Lease.     2.3 Project:    As further set forth in
Section 1.1.2 of this Lease, the Building and the Common Areas, and the land
(which is improved with landscaping, parking facilities and other improvements)
upon which the Building and the Common Areas are located, as the same may be
further reconfigured or developed by Landlord. 3.Lease Term (Article 2):   
  3.1 Length of Term:    Approximately eighty-four (84) months.

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    3.2 Lease Commencement Date:
   Subject to the condition that Landlord has completed the Landlord Work (as
defined in Section 1 of the Tenant Work Letter), the earlier of (i) May 1, 2016,
subject to any Landlord Delay or Uncontrollable Delay (as defined in Section 5.5
of the Tenant Work Letter), (ii) the date Tenant first commences to conduct
business in the Premises, or (iii) the date of Substantial Completion (as
defined in Section 5 of the Tenant Work Letter) of the Premises.
    3.3 Lease Expiration Date:    The last day of the calendar month in which
the eighty-fourth (84th) monthly anniversary of the Lease Commencement Date
occurs; provided, however, to the extent the Lease Commencement Date occurs on
the first day of a calendar month, then the Lease Expiration Date shall be the
day immediately preceding the eighty-fourth (84th) monthly anniversary of the
Lease Commencement Date.     3.4 Option Term:    One (1) five (5)-year option to
extend the initial Lease Term, as more particularly set forth in Section 2.3 of
this Lease. 4. Base Rent (Article 3):   

 

Months During
Lease Term

   Annual
Base Rent      Monthly
Installment of
Base Rent      Monthly Rental
Rate per Rentable
Square Foot  

1 – 12

   $ 125,052.60       $ 10,421.05 *     $ 2.15   

13 – 24

   $ 128,804.18       $ 10,733.68       $ 2.21   

25 – 36

   $ 132,668.30       $ 11,055.69       $ 2.28   

37 – 48

   $ 136,648.35       $ 11,387.36       $ 2.35   

49 – 60

   $ 140,747.80       $ 11,728.98       $ 2.42   

61 – 72

   $ 144,970.24       $ 12,080.85       $ 2.49   

73 – 84

   $ 149,319.34       $ 12,443.28       $ 2.57   

 

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* Including any partial month at the beginning of the Lease Term and subject to
abatement as provided in Article 3 hereof.

 

5. Operating Expenses and Tax
    Expenses (Article 4):    As provided in Article 4. However, utilities
serving the Premises may be separately metered and directly paid by Tenant to
the applicable utility provider as further provided in Article 6 below.
6. Tenant’s Share of Direct Expenses
    (Article 4):    9.12% (i.e., 4,847 rentable square feet within the
Premises/53,168 rentable square feet within the Building). 7. Permitted Use
(Article 5):    Tenant shall use the Premises solely for general office use,
research and development uses, and uses incidental thereto (the “Permitted
Use”); provided, however, that notwithstanding anything to the contrary set
forth hereinabove, and as more particularly set forth in the Lease, Tenant shall
be responsible for operating and maintaining the Premises pursuant to, and in no
event may Tenant’s Permitted Use violate, (A) the “Rules and Regulations,” as
that term is set forth in Section 5.2 of this Lease, (B) all “Applicable Laws,”
as that term is set forth in Article 24 of this Lease, (C) all applicable
zoning, building codes and the “CC&Rs,” as that term is set forth in Section 5.3
of this Lease, and (D) the character of the Project as a high-quality office
building. 8. Security Deposit (Article 21):    $12,443.28. 9. Parking Pass Ratio
(Article 28):    3.65 unreserved parking passes for every 1,000 usable square
feet of the Premises (i.e., eighteen (18) unreserved parking passes) as further
provided in Article 28, at no cost to Tenant (the “Parking Ratio”). In addition,
Tenant may convert up to four (4) unreserved parking passes to reserved parking
spaces subject to the terms and conditions of Article 28.

 

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10. Address of Tenant (Section 29.16):    Ligand Pharmaceuticals Inc. 11119
North Torrey Pines Road, Suite 200 La Jolla, California 92037 Attn: Charles
Berkman 11. Address of Landlord
    (Section 29.16):    See Section 29.16 of the Lease.

ARTICLE 1

PREMISES, BUILDING, PROJECT, AND COMMON AREAS

1.1 Premises, Building, Project and Common Areas.

1.1.1 The Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the premises set forth in Section 2.2 of the Summary (the
“Premises”). The outline of the Premises is set forth in Exhibit A-1 attached
hereto and the Premises has the number of rentable square feet as set forth in
Section 2.2 of the Summary. The Premises includes those certain exterior patio
areas located adjacent thereto (the “Patio Area”). The installation of any
improvements, furniture or equipment in the Patio Area shall be governed by
Article 8 of this Lease, except that any such improvements shall be approved by
Landlord in its sole discretion. Although the square footage of the Patio Area
is not included in the rentable square footage of the Premises as specified in
Section 2.2 of the Summary, such Patio Area shall be considered to be a portion
of the Premises under all other provisions of this Lease (including, without
limitation, Article 10 of this Lease) and Tenant shall be responsible to
maintain and repair such Patio Area in a neat and clean condition. The parties
hereto hereby acknowledge that the purpose of Exhibit A-1 is to show the
approximate location of the Premises in the “Building,” as that term is defined
in Section 1.1.2, below, only, and such Exhibit is not meant to constitute an
agreement, representation or warranty as to the construction of the Premises,
the precise area thereof or the specific location of the “Common Areas,” as that
term is defined in Section 1.1.3, below, or the elements thereof or of the
accessways to the Premises or the “Project,” as that term is defined in
Section 1.1.2, below.

1.1.2 The Building and The Project. The Premises are a part of the building set
forth in Section 2.1 of the Summary (the “Building”). The term “Project,” as
used in this Lease, shall mean (i) the Building and the Common Areas, (ii) the
land (which is improved with landscaping, parking facilities and other
improvements) upon which the Building and the Common Areas are located, and
(iii) at Landlord’s discretion, any additional real property, areas, land,
buildings or other improvements added thereto. A site plan for the Project is
attached hereto as Exhibit A. The parties hereto hereby acknowledge that the
purpose of Exhibit A is to show the approximate location of certain features of
the Project only, and such Exhibit is not meant to constitute an agreement,
representation or warranty as to any specific areas or features of the Project.

 

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1.1.3 Common Areas. Tenant shall have the non-exclusive right to use in common
with other tenants in the Project, and subject to the Rules and Regulations
referred to in Article 5 of this Lease, those portions of the Project which are
provided, from time to time, for use in common by Landlord, Tenant and any other
tenants of the Project (such areas, together with such other portions of the
Project designated by Landlord, in its discretion, are collectively referred to
herein as the “Common Areas”). The Common Areas shall consist of the “Project
Common Areas” and the “Building Common Areas” (as those terms are defined
below). The term “Project Common Areas,” as used in this Lease, shall mean the
portion of the Project designated as such by Landlord. The term “Building Common
Areas,” as used in this Lease, shall mean the portions of the Common Areas
located within the Building designated as such by Landlord. Landlord reserves
the right to close temporarily, make alterations or additions to, or change the
location of elements of the Project and the Common Areas. Except when and where
Tenant’s right of access is specifically excluded in this Lease, and subject to
Landlord’s security requirements, repairs made by Landlord to the Project and
Articles 11 and 13 below, Tenant shall have the right of access to the Premises,
the Building Common Areas, and the Project parking facilities twenty-four
(24) hours per day, seven (7) days per week during the “Lease Term,” as that
term is defined in Section 2.1, below.

1.1.4 Building Condition. Landlord, at Landlord’s sole cost, shall deliver the
Premises to Tenant with the roof, electrical, lighting, fire sprinkler and
plumbing systems serving the Premises (together, the “Systems”) in good working
condition as of the Effective Date. Except as provided in this Section 1.1.4
below and Section 1 of Tenant Work Letter attached hereto as Exhibit B, the
taking of possession of the Premises by Tenant shall conclusively establish that
the Systems, the Premises and the Project were at such time in good and sanitary
order, condition and repair; provided, however, if Tenant discovers during
Tenant’s completion of the Tenant Improvements or during the first thirty
(30) days after the Lease Commencement Date (the “Warranty Period”) that any
portion of the Systems do not have a remaining useful life of at least the Lease
Term (as reasonably determined by Tenant and independently verified by a
third-party contractor selected by Landlord and reasonably approved by Tenant),
and provided that Tenant gives Landlord written notice thereof during the
Warranty Period, then Landlord shall be responsible for, at no cost to Tenant,
replacing such portions of the Systems. Notwithstanding the foregoing, in no
event shall Landlord be obligated to replace any portion of the Systems to the
extent such need for replacement arises from the acts or omissions of Tenant or
Tenant Parties.

1.2 Rentable Square Feet. The parties hereby stipulate that the Premises
contains the number of rentable square feet set forth in Section 2.2 of the
Summary, and recognize that such square footage includes the allocation of
certain Common Areas on a proportionate basis. Such square footage is not
subject to adjustment or remeasurement by Landlord or Tenant. Accordingly, there
shall be no adjustment in the Base Rent or other amounts set forth in this Lease
which are determined based upon rentable square feet of the Premises.

ARTICLE 2

LEASE TERM

2.1 Initial Lease Term. The term of this Lease (the “Lease Term”) shall be as
set forth in Section 3.1 of the Summary, shall commence on the date set forth in
Section 3.2 of the

 

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Summary (the “Lease Commencement Date”), and shall expire on the date set forth
in Section 3.3 of the Summary (the “Lease Expiration Date”) unless this Lease is
sooner terminated as hereinafter provided. At any time during the Lease Term,
Landlord may deliver to Tenant a notice in the form as set forth in Exhibit C,
attached hereto, as a confirmation only of the information set forth therein,
which Tenant shall execute and return to Landlord within ten (10) business days
of receipt thereof.

2.2 Early Entry into the Premises Prior to the Lease Commencement Date. Provided
that Tenant and its agents do not unreasonably interfere with Landlord’s work in
the Premises, Landlord shall allow Tenant access to the Premises beginning on
the Effective Date subject to the terms and conditions of Tenant Work Letter.
Prior to Tenant’s entry into the Premises as permitted by the terms of this
Section 2.2, Tenant shall submit certificates of insurance reasonably acceptable
to Landlord and shall submit a schedule to Landlord (and Landlord’s contractor,
if so requested by Landlord), for their approval, which schedule shall detail
the timing and purpose of Tenant’s entry. Tenant shall hold Landlord harmless
from and indemnify, protect and defend Landlord against any loss or damage to
the Project or Premises and against injury to any persons caused by Tenant’s
actions pursuant to this Section 2.2.

2.3 Option to Extend. Landlord hereby grants the Tenant named in this Lease and
any Permitted Transferees (defined below) (together, the “Original Tenant”) one
(1) option (“Option”) to extend the Lease Term for the entire Premises for a
period of five (5) years (“Option Term”), which Option shall be exercisable only
by written notice delivered by Tenant to Landlord as set forth below. The rights
contained in this Section 2.3 shall be personal to the Original Tenant and may
only be exercised by the Original Tenant (and not any assignee, sublessee or
other transferee of the Original Tenant’s interest in this Lease, unless
otherwise agreed to in writing by Landlord upon the occurrence of a Transfer
(defined below)) if the Original Tenant or the approved Transferee (defined
below), as the case may be, occupies the entire Premises as of the date of
Tenant’s Acceptance (as defined in Section 2.3.2 below).

2.3.1 Option Rent. The rent payable by Tenant during the Option Term (“Option
Rent”) shall be equal to the “Market Rent” (defined below). “Market Rent” shall
mean the applicable Base Rent, and all escalations, Direct Expenses, Additional
Rent, other charges and concessions at which tenants, as of the commencement of
the Option Term, are entering into leases for non-sublease space which is not
encumbered by expansion rights and which is comparable in size, location,
quality and amenities to the Premises in renewal transactions, for a term
comparable to the Option Term, which comparable space is located in high-quality
office buildings comparable to the Project in the Sorrento Valley/Sorrento Mesa
submarket of San Diego, California, taking into consideration the value of the
existing improvements in the Premises to Tenant, as compared to the value of the
existing improvements in such comparable space, with such value to be based upon
the age, quality and layout of the improvements and the extent to which the same
could be utilized by Tenant with consideration given to any improvements
existing in the Premises that are specifically suitable to Tenant.

2.3.2 Exercise of Option. The Option shall be exercised by Tenant only in the
following manner: (i) Tenant shall not be in default under this Lease on the
delivery date of the Interest Notice and Tenant’s Acceptance after notice and
past any cure period provided in this Lease; (ii) Tenant shall deliver written
notice (“Interest Notice”) to Landlord not more than

 

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twelve (12) months nor less than nine (9) months prior to the expiration of the
Lease Term, stating that Tenant is interested in exercising the Option;
(iii) within fifteen (15) business days of Landlord’s receipt of Tenant’s
written notice, Landlord shall deliver notice (“Option Rent Notice”) to Tenant
setting forth the Option Rent; and (iv) if Tenant desires to exercise such
Option, Tenant shall provide Landlord written notice within five (5) business
days after receipt of the Option Rent Notice (“Tenant’s Acceptance”) and upon,
and concurrent with such exercise, Tenant may, at its option, object to the
Option Rent contained in the Option Rent Notice. Tenant’s failure to deliver the
Interest Notice or Tenant’s Acceptance on or before the dates specified above
shall be deemed to constitute Tenant’s election not to exercise the Option. If
Tenant timely and properly exercises its Option, the Lease Term shall be
extended for the Option Term upon all of the terms and conditions set forth in
this Lease, except that the rent for the Option Term shall be as indicated in
the Option Rent Notice unless Tenant, concurrently with Tenant’s Acceptance,
objects to the Option Rent contained in the Option Rent Notice, in which case
the parties shall follow the procedure and the Option Rent shall be determined,
as set forth in Section 2.3.3 below.

2.3.3 Determination of Option Rent. If Tenant timely and appropriately objects
to Landlord’s determination of the Option Rent in Tenant’s Acceptance, Landlord
and Tenant shall attempt to agree upon the Option Rent using their best
good-faith efforts. If Landlord and Tenant fail to reach agreement within
twenty-one (21) days following Tenant’s Acceptance (“Outside Agreement Date”),
then each party shall make a separate determination of the Option Rent which
shall be submitted to each other and to arbitration in accordance with the
following terms:

2.3.3.1 Landlord and Tenant shall each appoint, within ten (10) days of the
Outside Agreement Date, one arbitrator who shall by profession be a current real
estate broker or appraiser of comparable commercial properties in the Sorrento
Valley/Sorrento Mesa submarket of San Diego, California, and who has been active
in such field over the last five (5) years. The determination of the arbitrators
shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted
Option Rent is the closest to the actual Market Rent as determined by the
arbitrators, taking into account the requirements of Section 2.3.2 above (i.e.,
the arbitrators may only select Landlord’s or Tenant’s determination of Option
Rent and shall not be entitled to make a compromise determination).

2.3.3.2 The two (2) arbitrators so appointed shall within five (5) business days
of the date of the appointment of the last appointed arbitrator agree upon and
appoint a third (3rd) arbitrator who shall be qualified under the same criteria
set forth hereinabove for qualification of the initial two (2) arbitrators.

2.3.3.3 The three (3) arbitrators shall within fifteen (15) days of the
appointment of the third (3rd) arbitrator reach a decision as to whether the
parties shall use Landlord’s or Tenant’s submitted Market Rent, and shall notify
Landlord and Tenant thereof.

2.3.3.4 The decision of the majority of the three (3) arbitrators shall be
binding upon Landlord and Tenant.

 

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2.3.3.5 If either Landlord or Tenant fails to appoint an arbitrator within ten
(10) days after the applicable Outside Agreement Date, the arbitrator appointed
by one (1) of them shall reach a decision, notify Landlord and Tenant thereof,
and such arbitrator’s decision shall be binding upon Landlord and Tenant.

2.3.3.6 If the two (2) arbitrators fail to agree upon and appoint a third
(3rd) arbitrator, or both parties fail to appoint an arbitrator, then the
appointment of the third (3rd) arbitrator or any arbitrator shall be dismissed
and the matter to be decided shall be forthwith submitted to arbitration under
the provisions of the American Arbitration Association, but subject to the
instruction set forth in this Section 2.3.3.

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

ARTICLE 3

BASE RENT

Tenant shall pay, without prior notice or demand, to Landlord or Landlord’s
agent at the management office of the Project, or, at Landlord’s option, at such
other place as Landlord may from time to time designate in writing, by a wire
transfer of immediately available funds or a check for currency which, at the
time of payment, is legal tender for private or public debts in the United
States of America, base rent (“Base Rent”) as set forth in Section 4 of the
Summary, payable in equal monthly installments as set forth in Section 4 of the
Summary in advance on or before the first day of each and every calendar month
during the Lease Term, without any setoff or deduction except as expressly
provided for in this Lease. The Base Rent for the first full calendar month of
the Lease Term shall be paid at the time of Tenant’s execution of this Lease. If
the Lease Commencement Date is not the first day of a month, Rent for the
partial month commencing as of the Lease Commencement Date shall be prorated
based upon the actual number of days in such month and shall be due and payable
upon the Lease Commencement Date. All other payments required to be made under
this Lease that require proration on a time basis shall also be prorated based
upon the actual number of days in such month. Notwithstanding anything to the
contrary contained herein and provided that Tenant is not in then default under
this Lease after expiration of applicable cure periods, Landlord hereby agrees
to abate Tenant’s obligation to pay Base Rent for the second (2nd) through and
including the seventh (7th) full calendar months of the Lease Term. Such abated
Base Rent may be referred to herein as the “Abated Rent.” During such abatement
period, Tenant shall still be responsible for the payment of all of its other
monetary obligations under this Lease including, without limitation, any
obligations to pay Additional Rent. In the event of a default by Tenant under
the terms of this Lease that results in early termination of this Lease, then as
a part of the recovery set forth in Section 19.2 below, Landlord shall be
entitled to the recovery of the unamortized portion of the Abated Rent.
Amortization pursuant to the immediately preceding sentences shall be calculated
on an eighty-four (84) month amortization schedule commencing as of the Lease
Commencement Date based upon equal monthly payments of principal and interest,
with interest imputed on the outstanding principal balance at the rate of eight
percent (8%) per annum.

 

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ARTICLE 4

ADDITIONAL RENT

4.1 In General. In addition to paying the Base Rent specified in Article 3 of
this Lease, and at the same time and in the same manner, Tenant shall pay
“Tenant’s Share” of the annual “Direct Expenses,” as those terms are defined in
Sections 4.2.5 and 4.2.1, respectively, of this Lease. Such payments by Tenant,
together with any and all other amounts payable by Tenant to Landlord pursuant
to this Lease, are hereinafter collectively referred to as the “Additional
Rent,” and the Base Rent and the Additional Rent are herein collectively
referred to as “Rent.” All amounts due under this Article 4 as Additional Rent
shall be payable for the same periods and in the same manner as the Base Rent.
Without limitation on other obligations of Tenant which survive the expiration
of the Lease Term, the obligations of Tenant to pay the Additional Rent provided
for in this Article 4 shall survive the expiration of the Lease Term. For
purposes of clarity and avoidance of doubt, Landlord and Tenant agree and intend
that this Lease be a “triple net” Lease, and, except as otherwise expressly
provided herein, the provisions for payment of Direct Expenses by means of
periodic payment of Tenant’s Share of Direct Expenses are intended to pass on to
Tenant and reimburse Landlord for Tenant’s Share of all such Direct Expenses for
the Project, as such terms are defined below. It is understood by Tenant that,
to the extent services are provided to Tenant which are not included in
Operating Expenses (e.g., utilities to the Premises payable separately by Tenant
pursuant to Article 6 below), Tenant shall be solely responsible for all costs
and expenses in connection therewith.

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

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

4.2.2 “Expense Year” shall mean each calendar year in which any portion of the
Lease Term falls, through and including the calendar year in which the Lease
Term expires.

4.2.3 “Operating Expenses” shall mean all necessary and reasonable expenses,
costs and amounts of every kind and nature which Landlord pays or accrues during
any Expense Year because of or in connection with the ownership, management,
maintenance, security, repair, replacement, renovation, restoration or operation
of the Project, or any portion thereof. Without limiting the generality of the
foregoing, Operating Expenses shall specifically include any and all of the
following: (i) the cost of supplying all utilities (but excluding the cost of
utilities payable separately by Tenant and other tenants pursuant to Article 6
below), the cost of operating, repairing, replacing, maintaining, renovating and
restoring the utility, telephone, mechanical, sanitary, storm drainage, and the
cost of maintenance and service contracts in connection with the Project;
(ii) the cost of licenses, certificates, permits and inspections in connection
with the Project; (iii) the cost of all insurance carried by Landlord and its
property manager in connection with the Project, including all deductibles;
(iv) the cost of landscaping, relamping, and all supplies, tools, equipment and
materials used in the operation, repair and maintenance of the Project, or any
portion thereof; (v) costs incurred in connection with the management,
operation, maintenance, replacement, renovation and repair of parking areas
servicing the Project; (vi) fees and other costs, including management fees,
consulting fees, legal

 

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fees and accounting fees (directly related to such work), of all contractors and
consultants in connection with the management, operation, maintenance,
replacement, renovation, repair and restoration of the Project; (vii) payments
under any equipment rental agreements; (viii) wages, salaries and other
compensation and benefits, including taxes levied thereon, of all persons
engaged in the operation, management, maintenance and security of the Project
(or, if such persons are involved in the operation, management, maintenance or
security of other projects, the wages, salaries and other compensation and
benefits of such persons will be based upon the percentage or such person’s
actual time devoted to work on the Project); (ix) costs under any instrument
pertaining to the sharing of costs by the Project; (x) operation, repair,
maintenance, renovation, replacement and restoration of all systems and
equipment and components thereof of the Project; (xi) unless separately
contracted for by Tenant directly with the applicable service provider, the cost
of janitorial, alarm, security and other services; (xii) costs of replacement,
renovation, restoration and repair of wall and floor coverings, ceiling tiles
and fixtures in Common Areas; (xiii) cost of operation of any Project amenities
which may include, without limitation, any subsidies paid or losses resulting
from the operation of any such amenities; (xiv) the cost of capital improvements
or other costs incurred in connection with the Project (A) which are intended to
effect economies in the operation or maintenance of the Project, or any portion
thereof, (B) that are required to comply with present or anticipated
conservation programs, (C) which are replacements or modifications of
nonstructural items located in the Common Areas required to keep the Common
Areas in good order or condition, (D) that are required under any Applicable
Laws, except for capital repairs, replacements or other improvements required
under Laws in effect as of the Lease Commencement Date, or (E) which are
required in order for the Project, or any portion thereof, to obtain or maintain
a certification under the U.S. Green Building Council’s Leadership in Energy and
Environmental Design (“LEED”), or other applicable certification agency in
connection with Landlord’s sustainability practices for the Project (as such
sustainability practices are to be determined by Landlord, in its sole and
absolute discretion, from time to time); provided, however, that any capital
expenditure shall be amortized with interest at the Interest Rate over its
useful life as Landlord shall reasonably determine in accordance with sound real
estate management and accounting practices, consistently applied.
Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses
shall not, however, include:

(a) costs, including marketing costs, legal fees, space planners’ fees,
advertising and promotional expenses, and brokerage fees incurred in connection
with the leasing of the Project, and costs, including permit, license and
inspection costs, incurred with respect to the installation of improvements made
for tenants occupying space in the Project or incurred in renovating or
otherwise improving, decorating, painting or redecorating vacant space for
tenants or other occupants of the Project (excluding, however, such costs
relating to any Common Areas of the Project);

(b) except as set forth in item (xiv) above, capital costs and costs of
depreciation, interest and principal payments on mortgages and other debt costs;

(c) costs for which the Landlord is reimbursed by any tenant or occupant of the
Project or by insurance by its carrier or any tenant’s carrier or by anyone
else;

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

 

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(e) costs associated with the operation of the business of the partnership or
entity which constitutes the Landlord, as the same are distinguished from the
costs of operation of the Project (which Project operational costs shall
specifically include, but not be limited to, accounting costs associated with
the operation of the Project), costs associated with the operation of the
business of the partnership or entity which constitutes the Landlord (including
costs of partnership accounting and legal matters), costs of selling,
syndicating, financing or mortgaging Landlord’s interest in the Project, and
costs incurred in connection with any disputes between Landlord and its
employees, between Landlord and Project management, or between Landlord and
other tenants or occupants, and Landlord’s general corporate overhead and
general and administrative expenses; and

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

(g) any ground lease rental;

(h) overhead and profit increment paid to Landlord or to subsidiaries or
affiliates of Landlord for goods or services in or to the Building to the extent
the same exceeds the amount generally excepted to be the cost of such goods or
services rendered by comparably qualified, unaffiliated third parties;

(i) depreciation of the Building;

(j) payments of interest or principal under any mortgage or deed of trust
encumbering the Building;

(k) costs arising from the presence of Hazardous Materials in or about the
Premises, the Building or the Project;

(l) reserves for bad debts or for future improvements, repairs or additions;

(m) increased costs of performance arising from the gross negligence or willful
misconduct of Landlord or Landlord’s employees, agents or contractors;

(n) costs arising from Landlord’s charitable or political contributions;

(o) costs of acquiring or leasing any sculpture, paintings, fountains and other
objects of art; and

(p) any bad debt loss or rent loss.

If the Project is not at least one hundred percent (100%) occupied during all or
a portion of any Expense Year, Landlord shall make an appropriate adjustment to
the components of Operating Expenses for such year that vary with the occupancy
of the Project to determine the amount of Operating Expenses that would have
been incurred had the Project been one hundred percent (100%) occupied; and the
amount so determined shall be deemed to have been the amount of Operating
Expenses for such year.

 

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4.2.4 Taxes.

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

4.2.4.2 Any costs and expenses (including, without limitation, reasonable
attorneys’ fees) incurred in attempting to protest, reduce or minimize Tax
Expenses shall be included in Tax Expenses in the Expense Year such expenses are
paid. If Tax Expenses for any period during the Lease Term or any extension
thereof are increased after payment thereof for any reason, including, without
limitation, error or reassessment by applicable governmental or municipal
authorities, Tenant shall pay Landlord upon demand Tenant’s Share of any such
increased Tax Expenses. Notwithstanding anything to the contrary contained in
this Section 4.2.4, there shall be excluded from Tax Expenses (i) all excess
profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and other taxes
to the extent applicable to Landlord’s general or net income (as opposed to
rents, receipts or income attributable to operations at the Project), (ii) any
items included as Operating Expenses, and (iii) any items paid by Tenant under
Section 4.5 of this Lease.

4.2.5 “Tenant’s Share” shall mean the percentage set forth in Section 6 of the
Summary. Tenant’s Share was calculated by dividing the number of rentable square
feet of the Premises by the total rentable square feet in the Building. The
number of rentable square feet in the Project is stipulated by the parties to be
as specified in Section 2.2 of the Summary. The number of rentable square feet
of the Project for purposes of calculating Tenant’s Share shall not be subject
to adjustment or remeasurement by Landlord or Tenant.

4.3 Allocation of Direct Expenses. Landlord may, but shall not be obligated to,
construct additional building(s) on the Project. If Landlord does elect to
construct additional building(s), those Direct Expenses attributable to the
Project as a whole (and not attributable solely to the Building or any other
building) shall be allocated by Landlord to the Building and to such other
building(s) on an equitable basis and any Direct Expenses attributable solely to
the Building or such other building(s) shall be allocated entirely to the
Building or such other building(s), as applicable.

4.4 Calculation and Payment of Additional Rent. For any Expense Year ending or
commencing within the Lease Term, Tenant shall pay to Landlord, as Additional
Rent, Tenant’s Share of Direct Expenses for such Expense Year, in the manner set
forth in Section 4.4.1, below.

 

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

4.4.2 Statement of Estimated Direct Expenses. In addition, Landlord shall give
Tenant a yearly expense estimate statement (the “Estimate Statement”), within
one hundred twenty (120) days following the end of an Expense Year, which shall
set forth in general major categories Landlord’s reasonable estimate (the
“Estimate”) of what the total amount of Direct Expenses for the then-current
Expense Year shall be and the estimated payments due from Tenant for such
Expense Year (the “Estimated Payments”). Landlord may revise any Estimate
Statement or Estimated Payments theretofore delivered to the extent necessary.
Thereafter, Tenant shall pay, within thirty (30) days after receipt of the
Estimate Statement, a fraction of the Estimated Payments for the then-current
Expense Year (reduced by any amounts paid pursuant to the second to last
sentence of this Section 4.4.2). Such fraction shall have as its numerator the
number of months which have elapsed in such current Expense Year, including the
month of such payment, and twelve (12) as its denominator. Until a new Estimate
Statement is furnished, Tenant shall pay monthly, with the monthly Base Rent
installments, an amount equal to one-twelfth (1/12) of the total Estimated
Payments set forth in the previous Estimate Statement delivered by Landlord to
Tenant.

4.4.3 Tenant’s Audit Right. Within ninety (90) days after receipt of a Statement
by Tenant (“Review Period”), if Tenant disputes the amount set forth in the
Statement, Tenant’s employees or an independent certified public accountant
(which accountant is a member of a nationally or regionally recognized
accounting firm and is not retained on a contingency fee basis), designated by
Tenant, may, after reasonable notice to Landlord and at reasonable times,
inspect Landlord’s records at Landlord’s offices, provided that Tenant is not
then in default after expiration of all applicable cure periods and provided
further that Tenant and such accountant or representative shall, and each of
them shall use their commercially reasonable efforts to cause their respective
agents and employees to, maintain all information contained in Landlord’s
records in strict confidence. Notwithstanding the foregoing, Tenant shall only
have

 

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the right to review Landlord’s records one (1) time during any twelve (12) month
period. Tenant’s failure to dispute the amounts set forth in any Statement
within the Review Period shall be deemed to be Tenant’s approval of such
Statement and Tenant, thereafter, waives the right or ability to dispute the
amounts set forth in such Statement. If after such inspection, but within thirty
(30) days after the Review Period, Tenant notifies Landlord in writing that
Tenant still disputes such amounts, a certification as to the proper amount
shall be made in accordance with Landlord’s standard accounting practices, at
Tenant’s expense, by an independent certified public accountant selected by
Landlord and who is a member of a nationally or regionally recognized accounting
firm. Landlord shall cooperate in good faith with Tenant and the accountant to
show Tenant and the accountant the information upon which the certification is
to be based. However, if such certification by the accountant proves that the
Direct Expenses set forth in the Statement were overstated by more than ten
percent (10%), then the cost of the accountant and the cost of such
certification shall be paid for by Landlord. Promptly following the parties
receipt of such certification, the parties shall make such appropriate payments
or reimbursements, as the case may be, to each other, as are determined to be
owing pursuant to such certification.

4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible.

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

4.5.2 If the improvements in the Premises, whether installed and/or paid for 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 standard” in other space in the Building are assessed, then
the Tax Expenses levied against Landlord or the property 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 4.5.1,
above.

4.5.3 Notwithstanding any contrary provision herein, Tenant shall pay prior to
delinquency any (i) rent tax or sales tax, service tax, transfer tax or value
added tax, or any other applicable tax on the rent or services herein or
otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises or any portion of the Project, including
the Project parking facilities; or (iii) taxes assessed upon this transaction or
any document to which Tenant is a party creating or transferring an interest or
an estate in the Premises.

 

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ARTICLE 5

USE OF PREMISES

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

5.2 Prohibited Uses. The uses prohibited under this Lease shall include, without
limitation, use of the Premises or a portion thereof for (i) offices of any
agency or bureau of the United States or any state or political subdivision
thereof; (ii) offices or agencies of any foreign governmental or political
subdivision thereof; (iii) offices of any health care professionals or service
organization; (iv) schools or other training facilities which are not ancillary
to corporate, executive or professional office use; (v) retail or restaurant
uses; or (vi) communications firms such as radio and/or television stations.
Tenant shall not, without the prior written consent of Landlord (which consent
shall not be unreasonably withheld, conditioned or delayed), allow the average
occupancy density of the Premises to be in excess of reasonable occupancy
densities of similar spaces, as reasonably determined by Landlord; it being
agreed and acknowledged by Tenant that (i) in no event shall Tenant permit
average occupancy density of the Premises to violate any governmental permit or
zoning requirements or any requirements of any insurance policy affecting the
Premises or the Building, and (ii) it shall be reasonable for Landlord to
withhold its consent to any increase in average occupancy density of the
Premises if such density will have a materially, adverse impact on the parking
facilities of the Project. Tenant further covenants and agrees that Tenant shall
not use, or suffer or permit any person or persons to use, the Premises or any
part thereof for any use or purpose contrary to the provisions of the rules and
regulations set forth in Exhibit D (“Rules and Regulations”), attached hereto,
or in violation of Applicable Laws; provided, however, Landlord shall not
enforce, change or modify the Rules and Regulations in a discriminatory manner
and Landlord agrees that the Rules and Regulations shall not be unreasonably
modified or enforced in a manner which will unreasonably interfere with the
normal and customary conduct of Tenant’s business. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way damage the
reputation of the Project or unreasonably obstruct or interfere with the rights
of other tenants or occupants of the Building, or injure or annoy them or use or
allow the Premises to be used for any improper, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises.

5.3 CC&Rs. Tenant acknowledges that the Project may be subject to any future
covenants, conditions, and restrictions (the “CC&Rs”) which Landlord, in
Landlord’s discretion, deems reasonably necessary or desirable, but provided
that such CC&Rs do not materially impair Tenant’s rights or expand Tenant’s
obligations under this Lease, and Tenant agrees that this Lease shall be subject
and subordinate to such CC&Rs. Landlord shall have the right to require Tenant
to execute and acknowledge, within fifteen (15) business days of a request by
Landlord, a “Recognition of Covenants, Conditions, and Restriction,” in
commercially reasonable form, agreeing to and acknowledging the CC&Rs. Tenant
shall not be entitled to utilize its own private security services or personnel
located outside of the Premises, without Landlord’s prior approval.

 

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ARTICLE 6

SERVICES AND UTILITIES

6.1 Tenant Utilities and Services. Tenant shall pay the costs of all water, gas,
heat, light, power, telephone, refuse disposal and all other utilities and
services supplied to the Premises. Landlord shall have the right to require
Tenant to install, at Tenant’s sole expense, separate meters (or other submeter,
device or monitor for the measurement of utility usage) for any utility. If
separate meters are installed, Tenant shall make payment directly to the entity
providing such utility to the Premises. If, however, separate meters are not
installed and the Premises are submetered, then Landlord shall determine and
Tenant shall pay the amount reasonably determined by Landlord to be Tenant’s
equitable share of the monthly charge for such utility, based upon readings of
such submeter. If any utility is not separately metered or submetered, the cost
of such utility shall be included in Operating Expenses. Landlord shall provide,
as an Operating Expense, janitorial and cleaning services to indoor and outdoor
Common Areas, but shall not provide janitorial service to the Premises. Tenant
shall be responsible for retaining a bonded janitorial vendor designated by
Landlord, and reasonably approved by Tenant, to provide janitorial service to
the Premises, at Tenant’s sole cost. Landlord may, but shall not be obligated
to, also retain such janitorial vendor to provide janitorial service to other
areas of the Project. Furthermore Tenant shall be responsible for cleanliness of
any Patio Areas and should Tenant fail to keep such areas to a level of
cleanliness reasonably acceptable to Landlord, Landlord may perform work
necessary to cause such areas to meet Landlord’s standards and Tenant shall be
responsible for Landlord’s cost thereof. The Premises shall be serviced by
separate heating, ventilation and air conditioning units (“HVAC Units”).
Landlord shall, as an Operating Expense, maintain and repair the HVAC Units in
the Project. However, if Landlord determines that any HVAC Units serving the
Premises must be replaced, the cost of such replacement shall be borne by Tenant
and shall be payable in monthly installments as part of Operating Expenses to
the extent accruing during the Term of this Lease and the cost to replace the
HVAC Units shall be amortized pursuant to Section 4.2.3(xiv) above

6.2 Utility Issues. Tenant will design Tenant’s electrical system serving any
equipment producing nonlinear electrical loads to accommodate such nonlinear
electrical loads, including, but not limited to, oversizing neutral conductors,
derating transformers and/or providing power-line filters. In the event that
Tenant desires to upgrade or add onto the existing electrical wiring and
facilities in the Premises, then subject to Landlord’s consent, not to be
unreasonably withheld, Tenant shall have the right, at its sole cost and
expense, and as an Alteration in accordance with Article 8 of this Lease, to
perform such upgrades or additions (including, without limitation, the cost of
all permits, approvals, and any other electrical transformers, circuit breakers,
or other electrical facilities, which shall be required to be installed or
upgraded in any other portion of the Project in connection with such upgrades or
additions). Engineering plans shall include a calculation of Tenant’s fully
connected electrical design load with and without demand factors and shall
indicate the number of watts of unmetered and submetered loads. Tenant shall
bear the cost of replacement of lamps, starters and ballasts for lighting
fixtures within the Premises. Tenant shall, at its sole cost and expense,
cooperate fully with Landlord at all times and abide by all regulations and
requirements that Landlord may reasonably prescribe for the service, repair,
maintenance, proper functioning and protection of the HVAC, electrical,
mechanical and plumbing systems serving the Building and the Premises.

 

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6.3 Interruption of Use. Except as otherwise provided elsewhere in this Lease
with specific reference to Section 6.3 below, Tenant agrees that Landlord shall
not be liable for damages, by abatement of Rent or otherwise, for failure to
furnish or delay in furnishing any service (including telephone and
telecommunication services), or for any diminution in the quality or quantity
thereof; and such failures or delays or diminution shall never be deemed to
constitute an eviction or disturbance of Tenant’s use and possession of the
Premises or relieve Tenant from paying Rent or performing any of its obligations
under this Lease. Furthermore, Landlord shall not be liable under any
circumstances for a loss of, or injury to, property or for injury to, or
interference with, Tenant’s business, including, without limitation, loss of
profits, however occurring, through or in connection with or incidental to a
failure to furnish any of the services or utilities as set forth in this
Article 6. An “Abatement Event” shall be defined as an event that prevents
Tenant from using the Premises or any portion thereof, as a result of any
failure to provide services or access to the Premises, where all of the
following occurs: (i) Tenant does not actually use the Premises or such portion
thereof, (ii) such event is not caused by the negligence or willful misconduct
of Tenant or Tenant Parties, and (iii) such event is caused by the negligence or
willful misconduct of Landlord. Tenant shall give Landlord notice (“Abatement
Notice”) of any such Abatement Event, and if such Abatement Event continues
beyond the “Eligibility Period” (as that term is defined below), then the Base
Rent and Tenant’s Share of Direct shall be abated entirely or reduced, as the
case may be, after expiration of the Eligibility Period for such time that
Tenant continues to be so prevented from using, and does not use, the Premises
or a portion thereof, in the proportion that the rentable area of the portion of
the Premises that Tenant is prevented from using, and does not use, bears to the
total rentable area of the Premises; provided, however, in the event that Tenant
is prevented from using, and does not use, a portion of the Premises for a
period of time in excess of the Eligibility Period and the remaining portion of
the Premises is not sufficient to allow Tenant to effectively conduct its
business therein, and if Tenant does not conduct its business from such
remaining portion, then for such time after expiration of the Eligibility Period
during which Tenant is so prevented from effectively conducting its business
therein, the Base Rent and Tenant’s Share of Direct Expenses shall be abated
entirely for such time as Tenant continues to be so prevented from using, and
does not use, the Premises. If, however, Tenant reoccupies any portion of the
Premises during such period, the Base Rent and Tenant’s Share of Direct Expenses
allocable to such reoccupied portion, based on the proportion that the rentable
area of such reoccupied portion of the Premises bears to the total rentable area
of the Premises, shall be payable by Tenant from the date Tenant reoccupies such
portion of the Premises. The term “Eligibility Period” shall mean a period of
five (5) consecutive business days after Landlord’s receipt of any Abatement
Notice(s). Such right to abate Base Rent and Tenant’s Share of Direct Expenses
shall be Tenant’s sole and exclusive remedy at law or in equity for an Abatement
Event. If a fire or other casualty results in Tenant’s inability to use the
Premises or a portion thereof, the terms and conditions of Article 11 below
shall apply rather than this Section 6.3.

ARTICLE 7

REPAIRS

7.1 Landlord’s Obligations. Landlord shall maintain the structural portions of
the Building, defined as the foundation, floor/ceiling slabs, exterior walls,
roof structure (excluding the membrane), steel columns and beams (collectively,
the “Building Structure”), the basic systems of the Building (collectively, the
“Building Systems”) and the Common Areas.

 

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Notwithstanding anything in this Lease to the contrary, Tenant shall be required
to repair the Building Structure to the extent any damage thereto is caused due
to Tenant’s use of the Premises.

7.2 Tenant’s Obligations. Except as provided in Section 7.1, Tenant, at its sole
cost, shall keep the Premises in good order, condition and repair during the
Lease Term, including without limitation: the Patio Areas, any system that
serves the Premises exclusively; all glass, glazing, windows, window moldings,
partitions, doors and door hardware; all interior painting; and all fixtures and
appurtenances in the Premises. It is the intention of Landlord and Tenant that
Tenant shall maintain the Premises, at all times during the Lease Term, in
substantially the same condition as received, at Tenant’s expense, reasonable
wear and tear and casualty excepted. If Tenant fails to maintain the Premises or
make required repairs, Landlord may, after written notice to Tenant and Tenant’s
failure to so maintain and repair within five (5) days thereafter (unless more
than five (5) days is required to effectuate such repair, in which case Tenant
shall have the time reasonably required to complete the repair, so long as
Tenant commences the repair during the five (5) day period and diligently
completes such repair), but need not, cause such maintenance to be performed or
make such repairs and replacements (as applicable), and Tenant shall pay
Landlord the cost thereof, including a percentage of the cost thereof (to be
uniformly established for the Building and/or the Project, but not to exceed
five percent (5%) of the cost of such work) sufficient to reimburse Landlord for
all overhead, general conditions, fees and other costs or expenses arising from
Landlord’s involvement with such repairs and replacements forthwith upon being
billed for same. Landlord may, but shall not be required to, enter the Premises
at all reasonable times to cause such maintenance to be performed or make such
repairs, alterations, improvements or additions to the Premises or to the
Project or to any equipment located in the Project as Landlord shall desire or
deem necessary or as Landlord may be required to do by governmental or
quasi-governmental authority or court order or decree; provided, however, except
for (i) emergencies, (ii) repairs, alterations, improvements or additions
required by governmental or quasi-governmental authorities or court order or
decree, or (iii) repairs which are the obligation of Tenant hereunder, any such
entry into the Premises by Landlord shall be performed in a manner so as not to
materially interfere with Tenant’s use of, or access to, the Premises; provided
that, with respect to items (ii) and (iii) above, Landlord shall use
commercially reasonable efforts to not materially interfere with Tenant’s use
of, or access to, the Premises. Tenant hereby waives any and all rights under
and benefits of subsection 1 of Section 1932 and Sections 1941 and 1942 of the
California Civil Code or under any similar law, statute, or ordinance now or
hereafter in effect.

ARTICLE 8

ADDITIONS AND ALTERATIONS

8.1 Landlord’s Consent to Alterations. Tenant may not make any improvements,
alterations, additions or changes to the Premises or any mechanical, plumbing or
HVAC facilities or systems pertaining to the Premises (collectively, the
“Alterations”) without first procuring the prior written consent of Landlord to
such Alterations, which consent shall be requested by Tenant not less than
fifteen (15) business days prior to the commencement thereof, and which consent
shall not be unreasonably withheld by Landlord, provided it shall be deemed
reasonable for Landlord to withhold its consent to any Alteration which affects
the structural portions or the systems or equipment of the Building, may affect
Landlord’s repair and

 

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maintenance obligations with respect to the structural portions or systems or
equipment of the Building or is visible from the exterior of the Building
(collectively, the “Major Alterations”). Notwithstanding the foregoing,
Landlord’s consent shall not be required with respect to any interior
Alterations to the Premises which (i) are not Major Alterations, (ii) cost less
than Two Dollars ($2.00) per rentable square foot of the Premises for any one
(1) job, (iii) do not adversely affect the value of the Premises or Building,
and (iv) do not require a permit of any kind, as long (A) Tenant delivers to
Landlord notice and a copy of any final plans, specifications and working
drawings for any such Alterations at least ten (10) days prior to commencement
of the work thereof, and (B) the other conditions of this Article 8 are
satisfied, including, without limitation, conforming to Landlord’s rules,
regulations, and insurance requirements which govern contractors.

8.2 Manner of Construction. Landlord may impose, as a condition of its consent
to any and all Alterations or repairs of the Premises or about the Premises,
such requirements as Landlord in its reasonable discretion may deem desirable,
including, but not limited to, the requirement that Tenant utilize for such
purposes only contractors reasonably approved by Landlord, and the requirement
that upon Landlord’s timely request (as more particularly set forth in
Section 8.5, below), Tenant shall, at Tenant’s expense, remove such Alterations
upon the expiration or any early termination of the Lease Term and return the
affected portion of the Premises to a Building-standard improved condition as
determined by Landlord, provided that Landlord notified Tenant at time of
approving such Alterations that the removal will be required. Tenant shall
construct such Alterations and perform such repairs in a good and workmanlike
manner, in conformance with any and all applicable federal, state, county or
municipal laws, rules and regulations and pursuant to a valid building permit,
issued by the City of San Diego, California, all in conformance with Landlord’s
construction rules and regulations; provided, however, that prior to commencing
to construct any Alteration, Tenant shall meet with Landlord to discuss
Landlord’s design parameters and code compliance issues. In the event Tenant
performs any Alterations in the Premises which require or give rise to
governmentally required changes to the “Base Building,” as that term is defined
below, then Landlord shall, at Tenant’s expense, make such changes to the Base
Building. Since all or a portion of the Project is or may become in the future
certified under the LEED rating system (or other applicable certification
standard) (all in Landlord’s sole and absolute discretion), Tenant expressly
acknowledges and agrees that without limitation as to other grounds for Landlord
withholding its consent to any proposed Alteration, Landlord shall have the
right to withhold its consent to any proposed Alteration in the event that such
Alteration is not compatible with such certification or recertification of the
Project under such LEED rating system (or other applicable certification
standard). The “Base Building” shall mean the Building Structure and the
Building Systems. In performing the work of any such Alterations, Tenant shall
have the work performed in such manner so as not to obstruct access to the
Project or any portion thereof, by any other tenant of the Project, and so as
not to obstruct the business of Landlord or other tenants in the Project. Tenant
shall not use (and upon notice from Landlord shall cease using) contractors,
services, workmen, labor, materials or equipment that, in Landlord’s reasonable
judgment, would disturb labor harmony with the workforce or trades engaged in
performing other work, labor or services in or about the Building, the Project
or the Common Areas. In addition to Tenant’s obligations under Article 9 of this
Lease, upon completion of any Alterations, Tenant agrees to cause a Notice of
Completion to be recorded in the office of the Recorder of the County of San
Diego, California in accordance with Section 8182 of the Civil Code of the State
of California or any

 

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successor statute, and Tenant shall deliver to the Project construction manager
a reproducible CAD copy of the “as built” drawings of the Alterations, to the
extent applicable, as well as all permits, approvals and other documents issued
by any governmental agency in connection with the Alterations.

8.3 Payment for Improvements. If payment is made directly to contractors, Tenant
shall (i) comply with Landlord’s requirements for final lien releases and
waivers in connection with Tenant’s payment for work to contractors, and
(ii) sign Landlord’s standard contractor’s rules and regulations. If Tenant
orders any work directly from Landlord, Tenant shall pay to Landlord an amount
equal to five percent (5%) of the cost of such work to compensate Landlord for
all overhead, general conditions, fees and other costs and expenses arising from
Landlord’s involvement with such work. If Tenant does not order any work
directly from Landlord, Tenant shall reimburse Landlord for Landlord’s
reasonable, actual, out-of-pocket costs and expenses actually incurred in
connection with Landlord’s review of such work.

8.4 Construction Insurance. In addition to the requirements of Article 10 of
this Lease, in the event that Tenant makes any Alterations, prior to the
commencement of such Alterations, Tenant shall provide Landlord with evidence
that Tenant or its contractor carries “Builder’s All Risk” insurance in an
amount reasonably approved by Landlord covering the construction of such
Alterations, and such other insurance as Landlord may reasonably require, it
being understood and agreed that all of such Alterations shall be insured by
Tenant pursuant to Article 10 of this Lease immediately upon completion thereof.
In addition, Landlord may, in its reasonable discretion, require Tenant to
obtain a lien and completion bond or some alternate form of security
satisfactory to Landlord in an amount sufficient to ensure the lien-free
completion of any Alterations costing in excess of $100,000 to complete, but
specifically excluding the Tenant Improvements.

8.5 Landlord’s Property. Landlord and Tenant hereby acknowledge and agree that
(i) all Alterations, improvements, fixtures, equipment and/or appurtenances
which may be installed or placed in or about the Premises, from time to time,
shall be at the sole cost of Tenant and shall be and become part of the Premises
and the property of Landlord, and (ii) all Tenant Improvements to be constructed
in the Premises shall, upon completion of the same, be and become a part of the
Premises and the property of Landlord. Furthermore, Landlord may only require
Tenant, with regard to the Alterations, by written notice to Tenant, given at
the time of Landlord’s consent to such items (or, with respect to Alterations
not requiring Landlord’s consent, within three (3) business days after Tenant’s
written notice to Landlord of such Alterations as provided in Section 8.1,
above) at Tenant’s expense, to remove any such timely identified Alterations in
the Premises, and to repair any damage to the Premises and Building caused by
such removal and return the affected portion of the Premises to a building
standard improved condition as determined by Landlord. If Tenant fails to
complete such removal and/or the repair any damage caused by the removal of any
Alterations or other improvements in the Premises, either (A) Tenant shall be
deemed to be holding over in the Premises and Rent shall continue to accrue in
accordance with the terms of Article 16, below, until such work shall be
completed, or (B) Landlord may do so and may charge the cost thereof to Tenant.
Tenant hereby protects, defends, indemnifies and holds Landlord harmless from
any liability, cost, obligation, expense or claim of lien in any manner relating
to the installation, placement, removal or financing of any such Alterations,
other improvements, fixtures and/or equipment in, on or about

 

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the Premises by or on behalf of Tenant, which obligations of Tenant shall
survive the expiration or earlier termination of this Lease.

ARTICLE 9

COVENANT AGAINST LIENS

Tenant shall keep the Project, Building and Premises free from any liens or
encumbrances arising out of the work performed, materials furnished or
obligations incurred by or on behalf of Tenant, and shall protect, defend,
indemnify and hold Landlord harmless from and against any claims, liabilities,
judgments or costs (including, without limitation, reasonable attorneys’ fees
and costs) arising out of same or in connection therewith. Tenant shall give
Landlord notice at least fifteen (15) business days prior to the commencement of
any such work on the Premises (or such additional time as may be necessary under
applicable laws) to afford Landlord the opportunity of posting and recording
appropriate notices of non-responsibility. Tenant shall remove any such lien or
encumbrance by bond or otherwise within twenty (20) days after notice by
Landlord, and if Tenant shall fail to do so, Landlord may pay the amount
necessary to remove such lien or encumbrance, without being responsible for
investigating the validity thereof. The amount so paid shall be deemed
Additional Rent under this Lease payable upon demand, without limitation as to
other remedies available to Landlord under this Lease. Nothing contained in this
Lease shall authorize Tenant to do any act which shall subject Landlord’s title
to the Building or Premises to any liens or encumbrances whether claimed by
operation of law or express or implied contract. Any claim to a lien or
encumbrance upon the Building or Premises arising in connection with any such
work or respecting the Premises not performed by or at the request of Landlord
shall be null and void, or at Landlord’s option shall attach only against
Tenant’s interest in the Premises and shall in all respects be subordinate to
Landlord’s title to the Project, Building and Premises.

ARTICLE 10

INDEMNIFICATION AND INSURANCE

10.1 Indemnification and Waiver. Tenant hereby assumes all risk of damage to
property or injury to persons in, upon or about the Premises and agrees that
Landlord, its partners, subpartners and their respective officers, agents,
servants, employees, and independent contractors (collectively, “Landlord
Parties”) shall not be liable for, and are hereby released from any
responsibility for, any damage either to person or property or resulting from
the loss of use thereof, which damage is sustained by Tenant or by other persons
claiming through Tenant. Landlord and the Landlord Parties shall not be liable
for injury to Tenant’s business or loss of income therefrom, however occurring
(including, without limitation, from any failure or interruption of services or
utilities or as a result of the negligence of Landlord or the Landlord Parties).
Tenant shall indemnify, defend, protect, and hold harmless the Landlord Parties
from and against any and all loss, cost, damage, expense and liability
(including without limitation court costs and reasonable attorneys’ fees)
incurred in connection with or arising from: (a) any act, omission, or
negligence of Tenant or any person claiming under Tenant or its partners or
subpartners and their respective officers, agents, servants, employees,
contractors, subcontractors, representatives and independent contractors
(together, “Tenant Parties”); (b) any breach, violation, or non-performance by
Tenant of any term, covenant, or provision of this Lease or any Applicable Laws;
(c) any injury or damage to the person or property of Tenant

 

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or Tenant Parties; provided that the foregoing indemnity shall not apply to the
extent of the gross negligence or willful misconduct of Landlord or the Landlord
Parties. Further, Tenant’s agreement to indemnify Landlord pursuant to this
Section 10.1 is not intended and shall not relieve any insurance carrier of its
obligations under policies required to be carried pursuant to the provisions of
this Lease, to the extent such policies cover the matters subject to the
Tenant’s indemnification obligations; nor shall they supersede any inconsistent
agreement of the parties set forth in any other provision of this Lease. The
provisions of this Section 10.1 shall survive the expiration or sooner
termination of this Lease with respect to any claims or liability arising in
connection with any event occurring prior to such expiration or termination.

10.2 Tenant’s Compliance With Landlord’s Fire and Casualty Insurance. Tenant
shall, at Tenant’s expense, comply with Landlord’s insurance company
requirements pertaining to the use of the Premises. If Tenant’s conduct or use
of the Premises causes any increase in the premium for such insurance policies
then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant’s
expense, shall comply with all rules, orders, regulations or requirements of the
American Insurance Association (formerly the National Board of Fire
Underwriters) and with any similar body.

10.3 Tenant’s Insurance. Tenant shall maintain the following coverages in the
following amounts at all times following the date which is the earlier to occur
of (i) Tenant’s entry into the Premises to perform any work therein, or (ii) the
Lease Commencement Date, and continuing thereafter throughout the Lease Term.
The required evidence of coverage must be delivered to Landlord on or before the
date required under Section 10.4(I) subsections (x) and (y), or Section 10.4(II)
below (as applicable). Such policies shall be for a term of at least one
(1) year, or the length of the remaining term of this Lease, whichever is less.

10.3.1 Commercial General Liability Insurance, including Broad Form contractual
liability covering the insured against claims of bodily injury, personal injury
and property damage (including loss of use thereof) based upon or arising out of
Tenant’s operations, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be written on an “occurrence” basis.
Landlord and any other party the Landlord so specifies that has a material
financial interest in the Project, including Landlord’s property manager,
managing agent, ground lessor and/or lender, if any, shall be named as
additional insureds as their interests may appear using Insurance Service
Organization’s form CG2011 or a comparable form approved by Landlord. Tenant’s
insurance coverage shall be primary and any insurance carried by Landlord shall
be excess and non-contributing. The policy shall include severability of
interest and cross-liability (separation of insureds) endorsements. This policy
shall include coverage for all liabilities assumed under this Lease as an
insured contract for the performance of all of Tenant’s indemnity obligations
under this Lease. The limits of said insurance shall not, however, limit the
liability of Tenant nor relieve Tenant of any obligation hereunder. Limits of
liability insurance shall not be less than the following; provided, however,
such limits may be achieved through the use of an Umbrella/Excess Policy:

 

Bodily Injury and Property Damage Liability 

  

$2,000,000 each occurrence,

$5,000,000 aggregate

 

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Personal Injury and Advertising Liability

   $3,000,000 each occurrence

10.3.2 Property Insurance covering (i) all office furniture, personal property,
business and trade fixtures, office equipment, free-standing cabinet work,
movable partitions, merchandise and all other items of Tenant’s business
personal property on the Premises installed by, for, or at the expense of
Tenant, (ii) the Tenant Improvements, and (iii) all Alterations in the Premises.
Such insurance shall be written on a Special Form basis, for the full
replacement cost value (subject to deductible amounts not to exceed $10,000.00),
without deduction for depreciation of the covered items and in amounts that meet
any co-insurance clauses of the policies of insurance and shall include coverage
for (a) all perils included in the CP 10-30-04-02 Coverage Special Form, and
(b) water damage from any cause whatsoever (excluding naturally occurring floods
(i.e. from heavy rainfall, rather than from a leaking pipe)), including, but not
limited to, backup or overflow from sprinkler leakage, bursting, leaking or
stoppage of any pipes, explosion, and backup of sewers and drainage. Landlord
makes no representation that the limits or forms of coverage of insurance
specified herein are adequate to cover Tenant’s property, business operations or
obligations under this Lease.

10.3.3 Property Insurance Subrogation. Landlord and Tenant intend that their
respective property loss risks shall be borne by insurance carriers to the
extent above provided (and, in the case of Tenant, by an insurance carrier
satisfying the requirements of Section 10.4(i) below), and Landlord and Tenant
hereby agree to look solely to, and seek recovery only from, their respective
insurance carriers in the event of a property loss to the extent that such
coverage is agreed to be provided hereunder. The parties each hereby waive all
rights and claims against each other for such losses, and waive all rights of
subrogation of their respective insurers (and this waiver shall apply to the
deductibles under such insurance). Landlord and Tenant hereby represent and
warrant that their respective property insurance policies include a waiver of
(i) subrogation by the insurers, and (ii) all rights based upon an assignment
from its insured, against Landlord and/or any of the Landlord Parties or Tenant
(as the case may be) in connection with any property loss risk thereby insured
against. Landlord and Tenant agree that such waivers and releases were freely
bargained for and willingly and voluntarily agreed to by Landlord and Tenant and
do not constitute a violation of public policy

10.3.4 Business Income Interruption for one year (1) plus Extra Expense
insurance in such amounts as will reimburse Tenant for actual sustained loss
attributable to the risks outlined in Section 10.3.2 above.

10.3.5 Worker’s Compensation or other similar insurance pursuant to all
applicable state and local statutes and regulations, and Employer’s Liability
with minimum limits of not less than $1,000,000 each accident/employee/disease.

10.4 Form of Policies. The minimum limits of policies of insurance required of
Tenant under this Lease shall in no event limit the liability of Tenant under
this Lease. Such insurance shall (i) be issued by an insurance company having an
AM Best rating of not less than A X, or which is otherwise acceptable to
Landlord and licensed to do business in the State of California, (ii) be in form
and content reasonably acceptable to Landlord and complying with the

 

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requirements of Section 10.3, and (iii) provide that said insurance shall not be
canceled or coverage changed unless Tenant provides thirty (30) days’ prior
written notice to Landlord and any mortgagee of Landlord, the identity of whom
has been provided to Tenant in writing. Tenant shall deliver certificates of
such insurance and applicable endorsements which meet the requirements of this
Article 10 to Landlord on or before (I) the earlier to occur of: (x) the Lease
Commencement Date, and (y) the date Tenant and/or Tenant Parties first enter the
Premises for occupancy, construction of improvements, alterations, or any other
move-in activities, and (II) five (5) business days after the renewal of such
policies. In the event Tenant shall fail to procure such insurance, or to
deliver such certificates and applicable endorsements, Landlord may, at its
option, after written notice to Tenant and Tenant’s failure to obtain such
insurance within five (5) days thereafter, procure such policies for the account
of Tenant and the sole benefit of Landlord, and the cost thereof shall be paid
to Landlord after delivery to Tenant of bills therefor.

10.5 Additional Insurance Obligations. Tenant shall carry and maintain during
the entire Lease Term, at Tenant’s sole cost and expense, increased amounts of
the insurance required to be carried by Tenant pursuant to this Article 10 and
such other reasonable types of insurance coverage and in such reasonable amounts
covering the Premises and Tenant’s operations therein, as may be reasonably
requested by Landlord. Notwithstanding the foregoing, Landlord’s request shall
only be considered reasonable if such increased coverage amounts and/or such new
types of insurance are consistent with the requirements of a majority of
comparable building in the vicinity of the Building.

10.6 Third-Party Contractors. Tenant shall obtain and deliver to Landlord, Third
Party Contractor’s certificates of insurance and applicable endorsements at
least seven (7) business days prior to the commencement of work in or about the
Premises by any vendor or any other third-party contractor (collectively, a
“Third Party Contractor”). All such insurance shall (a) name Landlord as an
additional insured under such party’s liability policies as required by
Section 10.3.1 above and this Section 10.6, (b) provide a waiver of subrogation
in favor of Landlord with respect to property damage, (c) be primary and any
insurance carried by Landlord shall be excess and non-contributing, and
(d) comply with Landlord’s reasonable minimum insurance requirements for
contractors and include products and completed operations coverage.

10.7 Landlord’s Insurance. During the Lease Term, Landlord shall maintain
property insurance covering the Buildings within the Project for the full
replacement cost thereof (excluding the property which Tenant is obligated to
insure pursuant to the terms hereof). Landlord shall also maintain commercial
general liability and property damage insurance with respect to the operation of
the Project. Such insurance shall be in such amounts and with such deductibles
as Landlord reasonably deems appropriate. Landlord may, but shall not be
obligated to, obtain and carry any other form or forms of insurance as Landlord
or Landlord’s mortgagees or deed of trust beneficiaries may determine prudent.

ARTICLE 11

DAMAGE AND DESTRUCTION

11.1 Repair of Damage to Premises by Landlord. Tenant shall promptly notify
Landlord of any damage to the Premises resulting from fire or any other
casualty. If the

 

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Premises or any Common Areas serving or providing access to the Premises shall
be damaged by fire or other casualty (collectively, a “Casualty”), Landlord
shall use commercially reasonable efforts to promptly and diligently, subject to
reasonable delays for insurance adjustment or other matters beyond Landlord’s
reasonable control, and subject to all other terms of this Article 11, restore
the Base Building and such Common Areas. Such restoration shall be to
substantially the same condition of the Base Building and the Common Areas prior
to the Casualty, except for modifications required by zoning and building codes
and other laws or by the holder of a mortgage on the Building or Project or any
other modifications to the Common Areas deemed desirable by Landlord, which are
consistent with the character of the Project. Upon the occurrence of any damage
to the Premises, upon notice (the “Landlord Repair Notice”) to Tenant from
Landlord, Tenant shall assign to Landlord (or to any party designated by
Landlord) all insurance proceeds applicable to Tenant Improvements and
Alterations payable to Tenant under Tenant’s insurance required under
Section 10.3.2 of this Lease, and Landlord shall repair any injury or damage to
the Tenant Improvements and Alterations and shall return such Tenant
Improvements and Alterations to their original condition; provided that if the
cost of such repair of Tenant Improvements and Alterations by Landlord exceeds
the amount of insurance proceeds received by Landlord from Tenant’s insurance
carrier, as assigned by Tenant, the cost of such repairs shall be paid by Tenant
to Landlord prior to Landlord’s commencement of repair of the damage. In the
event that Landlord does not deliver the Landlord Repair Notice within sixty
(60) days following the date the Casualty becomes known to Landlord, Tenant
shall, at its sole cost and expense, repair any injury or damage to the Tenant
Improvements and Alterations installed in the Premises and shall return such
Tenant Improvements and Alterations to their original condition. Landlord shall
not be liable for any inconvenience or annoyance to Tenant or its visitors, or
injury to Tenant’s business resulting in any way from such damage or the repair
thereof; provided however, that if such Casualty shall have damaged the Premises
or Common Areas necessary to Tenant’s occupancy to such an extent that Tenant is
unable to use and occupy the same, and the Premises are not occupied by Tenant
as a result thereof, then during the time and to the extent the Premises are
unfit for occupancy, Rent shall be abated in proportion to the ratio that the
number of rentable square feet of the Premises which is unfit for occupancy for
the purposes permitted under this Lease bears to the total rentable square feet
of the Premises (or if so much of the Premises are damaged that the remainder of
the Premises is not usable by Tenant, then all of the Rent shall abate during
the repairs). In the event that Landlord shall not deliver the Landlord Repair
Notice, Tenant’s right to rent abatement pursuant to the preceding sentence
shall terminate as of the date which is reasonably determined by Landlord to be
the date Tenant should have completed repairs to the Premises assuming Tenant
used reasonable due diligence in connection therewith.

11.2 Landlord’s Option to Repair. Notwithstanding the terms of Section 11.1 of
this Lease, Landlord may elect not to rebuild and/or restore the Premises,
Building and/or Project, and instead terminate this Lease, by notifying Tenant
in writing of such termination within sixty (60) days after the date of
discovery of the damage, such notice to include a termination date giving Tenant
sixty (60) days to vacate the Premises, but Landlord may so elect only if the
Building or Project shall be damaged by the Casualty, whether or not the
Premises are affected, and one or more of the following conditions is present:
(i) in Landlord’s reasonable judgment, repairs cannot reasonably be completed
within one hundred eighty (180) days after the date of discovery of the damage
(when such repairs are made without the payment of overtime or other premiums);
(ii) the holder of any mortgage on the Building or Project or ground lessor with

 

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respect to the Building or Project shall require that the insurance proceeds or
any portion thereof be used to retire the mortgage debt; (iii) the damage is not
fully covered by Landlord’s insurance policies, except for deductible amounts
and out of pocket expenditures by Landlord of $250,000; or (iv) the damage
occurs during the last eighteen (18) months of the Lease Term (in which event,
Tenant may also elect to terminate this Lease subject to the conditions of
(a)-(c) of this Section 11.2 below); provided, however, that if Landlord does
not elect to terminate this Lease pursuant to Landlord’s termination right as
provided above, and the repairs cannot, in the reasonable opinion of Landlord,
be completed within one hundred eighty (180) days after being commenced, Tenant
may elect, no earlier than sixty (60) days after the date of the damage and not
later than ninety (90) days after the date of such damage, to terminate this
Lease by written notice to Landlord effective as of the date specified in the
notice, which date shall not be less than thirty (30) days nor more than sixty
(60) days after the date such notice is given by Tenant. Notwithstanding the
provisions of this Section 11.2, Tenant shall have the right to terminate this
Lease under this Section 11.2 only if each of the following conditions is
satisfied: (a) the damage to the Project by the Casualty was not caused by the
gross negligence or intentional act of Tenant or Tenant Parties; (b) Tenant is
not then in default under this Lease; and (c) as a result of the damage, Tenant
cannot reasonably conduct business from the Premises. In the event this Lease is
terminated in accordance with the terms of this Section 11.2, Tenant shall
assign to Landlord (or to any party designated by Landlord) all insurance
proceeds payable to Tenant under Tenant’s insurance required under items (ii)
and (iii) of Section 10.3.2 of this Lease.

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

ARTICLE 12

NONWAIVER

No provision of this Lease shall be deemed waived by either party hereto unless
expressly waived in a writing signed thereby. The waiver by either party hereto
of any breach of any term, covenant or condition herein contained shall not be
deemed to be a waiver of any subsequent breach of same or any other term,
covenant or condition herein contained. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular Rent so accepted, regardless of
Landlord’s knowledge of such preceding breach at the time of acceptance of such
Rent. No acceptance of a lesser amount than the Rent herein stipulated shall be
deemed a waiver of Landlord’s right to receive the full amount due, nor shall
any endorsement or statement on any check or payment or any letter accompanying
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord’s right to recover
the full amount due. No receipt of monies by Landlord from Tenant after the
termination of this Lease shall in

 

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any way alter the length of the Lease Term or of Tenant’s right of possession
hereunder, or after the giving of any notice shall reinstate, continue or extend
the Lease Term or affect any notice given Tenant prior to the receipt of such
monies, it being agreed that after the service of notice or the commencement of
a suit, or after final judgment for possession of the Premises, Landlord may
receive and collect any Rent due, and the payment of said Rent shall not waive
or affect said notice, suit or judgment.

ARTICLE 13

CONDEMNATION

If the whole or any part of the Premises, Building or Project shall be taken by
power of eminent domain or condemned by any competent authority for any public
or quasi-public use or purpose, or if any adjacent property or street shall be
so taken or condemned, or reconfigured or vacated by such authority in such
manner as to require the use, reconstruction or remodeling of any part of the
Premises, Building or Project, or if Landlord shall grant a deed or other
instrument in lieu of such taking by eminent domain or condemnation, Landlord
shall have the option to terminate this Lease effective as of the date
possession is required to be surrendered to the authority. If more than twenty
percent (20%) of the rentable square feet of the Premises is taken, or if access
to the Premises is substantially impaired, in each case for a period in excess
of one hundred eighty (180) days, Tenant shall have the option to terminate this
Lease effective as of the date possession is required to be surrendered to the
authority. Tenant shall not because of such taking assert any claim against
Landlord or the authority for any compensation because of such taking and
Landlord shall be entitled to the entire award or payment in connection
therewith, except that Tenant shall have the right to file any separate claim
available to Tenant for any taking of Tenant’s personal property and fixtures
belonging to Tenant and removable by Tenant upon expiration of the Lease Term
pursuant to the terms of this Lease, and for moving expenses, so long as such
claims do not diminish the award available to Landlord or its mortgagee, and
such claim is payable separately to Tenant. All Rent shall be apportioned as of
the date of such termination. If any part of the Premises shall be taken, and
this Lease shall not be so terminated, the Rent shall be proportionately abated.
Tenant hereby waives any and all rights it might otherwise have pursuant to
Section 1265.130 of The California Code of Civil Procedure. Notwithstanding
anything to the contrary contained in this Article 13, in the event of a
temporary taking of all or any portion of the Premises for a period of one
hundred and eighty (180) days or less, then this Lease shall not terminate but
the Rent shall be abated for the period of such taking in proportion to the
ratio that the number of rentable square feet of the Premises taken bears to the
total rentable square feet of the Premises (or if so much of the Premises are
taken that the remainder of the Premises is not usable by Tenant, then all of
the Rent shall abate during the taking). Landlord shall be entitled to receive
the entire award made in connection with any such temporary taking.

ARTICLE 14

ASSIGNMENT AND SUBLETTING

14.1 Transfers. Tenant shall not, without the prior written consent of Landlord
(which, as more particularly set forth in Section 14.2, below, shall not be
unreasonably withheld, conditioned, or delayed), assign, mortgage, pledge,
hypothecate, encumber, or permit any lien to attach to, or otherwise transfer,
this Lease or any interest hereunder, permit any assignment, or

 

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other transfer of this Lease or any interest hereunder by operation of law,
sublet the Premises or any part thereof, or enter into any license or concession
agreements or otherwise permit the occupancy or use of the Premises or any part
thereof by any persons other than Tenant and its employees and contractors (all
of the foregoing are hereinafter sometimes referred to collectively as
“Transfers” and any person to whom any Transfer is made or sought to be made is
hereinafter sometimes referred to as a “Transferee”). If Tenant desires
Landlord’s consent to any Transfer, Tenant shall notify Landlord in writing,
which notice (the “Transfer Notice”) shall include (i) the proposed effective
date of the Transfer, which shall not be less than thirty (30) days nor more
than one hundred eighty (180) days after the date of delivery of the Transfer
Notice, (ii) a description of the portion of the Premises to be transferred (the
“Subject Space”), (iii) all of the terms of the proposed Transfer and the
consideration therefor, including calculation of the “Transfer Premium”, as that
term is defined in Section 14.3 below, in connection with such Transfer, the
name and address of the proposed Transferee, and a copy of all existing executed
and/or proposed documentation pertaining to the proposed Transfer, including all
existing operative documents to be executed to evidence such Transfer or the
agreements incidental or related to such Transfer, and (iv) current financial
statements of the proposed Transferee certified by an officer, partner or owner
thereof, business credit and personal references and history of the proposed
Transferee and any other information reasonably required by Landlord which will
enable Landlord to determine the financial responsibility, character, and
reputation of the proposed Transferee, nature of such Transferee’s business and
proposed use of the Subject Space. Any Transfer made without Landlord’s prior
written consent shall, at Landlord’s option, be null, void and of no effect, and
shall, at Landlord’s option, constitute a default by Tenant under this Lease.
Whether or not Landlord consents to any proposed Transfer, Tenant shall pay
Landlord’s review and processing fees, as well as any reasonable professional
fees (including, without limitation, attorneys’, accountants’, architects’,
engineers’ and consultants’ fees) incurred by Landlord, within thirty (30) days
after written request by Landlord, in an amount not to exceed Two Thousand Five
Hundred and 00/100 Dollars ($2,500.00) in the aggregate, but such limitation of
fees shall only apply to the extent such Transfer is in the ordinary course of
business. Landlord and Tenant hereby agree that a proposed Transfer shall not be
considered “in the ordinary course of business” if such Transfer involves the
review of documentation by Landlord on more than two (2) occasions.

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

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

14.2.2 The Transferee intends to use the Subject Space for purposes which are
not permitted under this Lease;

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

 

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14.2.4 If an assignment, the Transferee is not a party of reasonable financial
worth and/or financial stability in light of the responsibilities to be
undertaken in connection with the Transfer on the date consent is requested;

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

14.2.6 Either the proposed Transferee, or any person or entity which directly or
indirectly, controls, is controlled by, or is under common control with, the
proposed Transferee, (i) occupies space in the Project at the time of the
request for consent, or (ii) is negotiating with Landlord to lease space in the
Project at such time, or (iii) has negotiated with Landlord during the six
(6)-month period immediately preceding the Transfer Notice (and Landlord has
available space in the Project meeting such proposed Transferee’s needs at the
time of the request for consent).

If Landlord consents to any Transfer pursuant to the terms of this Section 14.2,
Tenant may within six (6) months after Landlord’s consent, but not later than
the expiration of said six (6)-month period, enter into such Transfer of the
Premises or portion thereof, upon substantially the same terms and conditions as
are set forth in the Transfer Notice furnished by Tenant to Landlord pursuant to
Section 14.1 of this Lease, provided that if there are any changes in the terms
and conditions from those specified in the Transfer Notice (i) such that
Landlord would initially have been entitled to refuse its consent to such
Transfer under this Section 14.2, or (ii) which would cause the economic terms
of the proposed Transfer to be at least five percent (5%) more favorable to the
Transferee than the economic terms set forth in Tenant’s original Transfer
Notice, Tenant shall again submit the Transfer to Landlord for its approval and
other action under this Article 14. Notwithstanding anything to the contrary in
this Lease, if Tenant or any proposed Transferee claims that Landlord has
unreasonably withheld or delayed its consent under Section 14.2 or otherwise has
breached or acted unreasonably under this Article 14, their sole remedies shall
be a declaratory judgment and an injunction for the relief sought without any
monetary damages, and Tenant hereby waives all other remedies, including,
without limitation, any right at law or equity to terminate this Lease.

14.3 Transfer Premium. If Landlord consents to a Transfer, as a condition
thereto which the parties hereby agree is reasonable, Tenant shall pay to
Landlord fifty percent (50%) of any “Transfer Premium,” as that term is defined
in this Section 14.3, received by Tenant from such Transferee. “Transfer
Premium” shall mean all rent, additional rent or other consideration payable by
such Transferee in connection with the Transfer in excess of the Rent payable by
Tenant under this Lease during the term of the Transfer on a per rentable square
foot basis if less than all of the Premises is transferred, after deducting the
reasonable expenses incurred by Tenant for (i) any changes, alterations and
improvements to the Premises made by Tenant in connection with the Transfer,
(ii) any brokerage commissions paid by Tenant in connection with the Transfer,
(iii) any attorneys’ fees incurred by Tenant in connection with the Transfer,
(iv) any costs of advertising the space which is the subject of the Transfer,
and (v) any review and processing fees paid to Landlord in connection with such
Transfer (collectively, the “Transfer Costs”). “Transfer Premium” shall also
include, but not be limited to, key money, bonus money or other cash
consideration paid by Transferee to Tenant in connection with such Transfer, and
any payment in excess of fair market value for services rendered by Tenant to
Transferee or for

 

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tangible assets (as opposed to intellectual property), fixtures, inventory,
equipment, or furniture transferred by Tenant to Transferee in connection with
such Transfer. In the calculations of the Rent (as it relates to the Transfer
Premium calculated under this Section 14.3), the Rent paid during each annual
period for the Subject Space, shall be computed after adjusting such rent to the
actual effective rent to be paid, taking into consideration any and all
leasehold concessions granted in connection therewith, including, but not
limited to, any rent credit and improvement allowance. For purposes of
calculating any such effective rent all such concessions shall be amortized on a
straight-line basis over the relevant term.

14.4 Landlord’s Option as to Subject Space. Notwithstanding anything to the
contrary contained in this Article 14, except in the case of a Transfer to a
Permitted Transferee, Landlord shall have the option, by giving written notice
to Tenant within ten (10) business days after receipt of any Transfer Notice
that proposes a Transfer of fifty percent (50%) or more of the portion of the
Premises then not subject to a sublease, to recapture the Subject Space from
Tenant. Such recapture notice shall cancel and terminate this Lease with respect
to the Subject Space as of the date stated in the Transfer Notice as the
effective date of the proposed Transfer. Landlord shall only have the right to
recapture any Subject Space that is less than fifty percent (50%) of the portion
of the Premises that is then not subject to a sublease. In addition and provided
that Tenant delivers to Landlord the Transfer Notice at least ten (10) business
days prior to Tenant commencing any public marketing of the Subject Space, then
Landlord shall provide such recapture notice, if at all, prior to Tenant
commencing any public marketing of the Subject Space. In the event of a
recapture by Landlord, if this Lease shall be canceled with respect to less than
the entire Premises, the Rent reserved herein shall be prorated on the basis of
the number of rentable square feet retained by Tenant in proportion to the
number of rentable square feet contained in the Premises, and this Lease as so
amended shall continue thereafter in full force and effect, and upon request of
either party, the parties shall execute written confirmation of the same. If
Landlord declines, or fails to elect in a timely manner to recapture the Subject
Space under this Section 14.4, then, provided Landlord has consented to the
proposed Transfer, Tenant shall be entitled to proceed to transfer the Subject
Space to the proposed Transferee.

14.5 Effect of Transfer. If Landlord consents to a Transfer, (i) this Lease
shall in no way be deemed to have been modified, (ii) such consent shall not be
deemed consent to any further Transfer by either Tenant or a Transferee,
(iii) Tenant shall deliver to Landlord, promptly after execution, an original
executed copy of all documentation pertaining to the Transfer in form reasonably
acceptable to Landlord, (iv) Tenant shall furnish upon Landlord’s request a
complete statement, certified by an independent certified public accountant, or
Tenant’s chief financial officer, setting forth in detail the computation of any
Transfer Premium Tenant has derived and shall derive from such Transfer, and
(v) no Transfer relating to this Lease or agreement entered into with respect
thereto, whether with or without Landlord’s consent, shall relieve Tenant or any
guarantor of the Lease from any liability under this Lease, including, without
limitation, in connection with the Subject Space. Landlord or its authorized
representatives shall have the right at all reasonable times to audit the books,
records and papers of Tenant relating to any Transfer, and shall have the right
to make copies thereof. If the Transfer Premium respecting any Transfer shall be
found understated, Tenant shall, within thirty (30) days after demand, pay the
deficiency, and if understated by more than three percent (3%), Tenant shall pay
Landlord’s costs of such audit.

 

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14.6 Additional Transfers. For purposes of this Lease, the term “Transfer” shall
also include (i) if Tenant is a partnership, the withdrawal or change,
voluntary, involuntary or by operation of law, of more than twenty-five percent
(25%) or more of the partners, or transfer of more than twenty-five percent
(25%) or more of partnership interests, within a twelve (12)-month period, or
the dissolution of the partnership without immediate reconstitution thereof, and
(ii) if Tenant is a closely held corporation (i.e., whose stock is not publicly
held and not traded through an exchange or over the counter), (A) the
dissolution, merger, consolidation or other reorganization of Tenant or (B) the
sale or other transfer of an aggregate of more than fifty percent (50%) or more
of the voting shares of Tenant (other than to immediate family members by reason
of gift or death), within a twelve (12)-month period, or (C) the sale, mortgage,
hypothecation or pledge of an aggregate of more than twenty-five percent
(25%) or more of the value of the unencumbered assets of Tenant within a twelve
(12)-month period.

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

14.8 Deemed Consent Transfers. Notwithstanding anything to the contrary
contained in this Lease, (A) an assignment or subletting of all or a portion of
the Premises to an affiliate of Tenant (an entity which is controlled by,
controls, or is under common control with, Tenant as of the date of this Lease),
(B) a sale of corporate shares of capital stock in Tenant in connection with an
initial public offering of Tenant’s stock on a nationally-recognized stock
exchange, (C) an assignment of the Lease to an entity which acquires all or
substantially all of the stock or assets of Tenant, or (D) an assignment of the
Lease to an entity which is the resulting entity of a merger or consolidation of
Tenant during the Lease Term, shall not be deemed a Transfer requiring
Landlord’s consent under this Article 14 (any such assignee or sublessee
described in items (A) through (D) of this Section 14.8 hereinafter referred to
as a “Permitted Transferee”), provided that (i) Tenant notifies Landlord at
least thirty (30) days prior to the effective date of any such assignment or
sublease and promptly supplies Landlord with any documents or information
reasonably requested by Landlord regarding such Transfer or Permitted Transferee
as set forth above, (ii) Tenant is not in default, beyond the applicable notice
and cure period,

 

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(iii) such Permitted Transferee shall be of a character and reputation
consistent with the quality of the Building, (iv) such Permitted Transferee
shall have, and shall demonstrate to Landlord that Permitted Transferee has (by
providing Landlord certified financial statements of Permitted Transferee), a
tangible net worth (not including goodwill as an asset) computed in accordance
with generally accepted accounting principles (“Net Worth”) at least equal to
the Net Worth of Original Tenant on the date of this Lease, (v) no assignment or
sublease relating to this Lease, whether with or without Landlord’s consent,
shall relieve Tenant from any liability under this Lease, and (vi) the liability
of such Permitted Transferee under either an assignment or sublease shall be
joint and several with Tenant. An assignee of Tenant’s entire interest in this
Lease who qualifies as a Permitted Transferee may also be referred to herein as
a “Permitted Transferee Assignee.” “Control,” as used in this Section 14.8,
shall mean the ownership, directly or indirectly, of more than fifty percent
(50%) of the voting securities of, or possession of the right to vote, in the
ordinary direction of its affairs, of more than fifty percent (50%) of the
voting interest in, any person or entity.

ARTICLE 15

SURRENDER OF PREMISES; OWNERSHIP AND

REMOVAL OF TRADE FIXTURES

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

15.2 Removal of Tenant Property by Tenant. Upon the expiration of the Lease
Term, or upon any earlier termination of this Lease, Tenant shall, subject to
the provisions of this Article 15, quit and surrender possession of the Premises
to Landlord in broom clean condition, reasonable wear and tear and repairs which
are specifically made the responsibility of Landlord hereunder excepted.
Furthermore, Tenant shall comply with its obligations with respect to Tenant
Improvements and Alterations as specified in Section 8.5 above. Upon such
expiration or termination, Tenant shall, without expense to Landlord, remove or
cause to be removed from the Premises all debris and rubbish, and such items of
furniture, equipment, business and trade fixtures, free-standing cabinet work,
server and telephone equipment, movable partitions and other articles of
personal property owned by Tenant or installed or placed by Tenant at its
expense in the Premises, and such similar articles of any other persons claiming
under Tenant, as Landlord may, in its sole discretion, require to be removed,
and Tenant shall repair at its own expense all damage to the Premises and
Building resulting from such removal.

15.3 Removal of Tenant’s Property by Landlord. Whenever Landlord shall re-enter
the Premises as provided in this Lease, any personal property of Tenant not
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upon the expiration of the Lease Term, or within forty-eight (48) hours after a
termination by reason of Tenant’s default as provided in this Lease, shall be
deemed abandoned by Tenant and may be disposed of by Landlord in accordance with
Sections 1980 through 1991 of the California Civil Code and Section 1174 of the
California Code of Civil Procedure, or in accordance with any laws or judicial
decisions which may supplement or supplant those provisions from time to time.

15.4 Landlord’s Actions on Premises. Provided Landlord complies with the
obligations under Section 15.3 above, Tenant hereby waives, and releases
Landlord from, all claims for damages or other liability in connection with
Landlord’s or its agents’ or representatives’ reentering and taking possession
of the Premises or removing, retaining, storing or selling the property of
Tenant as herein provided, and Tenant hereby indemnifies and holds Landlord
harmless from any such damages or other liability, and no such re-entry shall be
considered or construed to be a forcible entry.

ARTICLE 16

HOLDING OVER

If Tenant holds over after the expiration of the Lease Term or earlier
termination thereof, without the express consent of Landlord, such tenancy
shall, at Landlord’s option, be either a tenancy at sufferance or from
month-to-month, and shall not constitute a renewal hereof or an extension for
any further term, and in such case Rent shall be payable at a monthly rate equal
to the product of (i) the Rent applicable during the last rental period of the
Lease Term under this Lease, and (ii) one hundred twenty-five percent (125%).
Such tenancy shall be subject to every other applicable term, covenant and
agreement contained herein. Nothing contained in this Article 16 shall be
construed as consent by Landlord to any holding over by Tenant, and Landlord
expressly reserves the right to require Tenant to surrender possession of the
Premises to Landlord as provided in this Lease upon the expiration or other
termination of this Lease. The provisions of this Article 16 shall not be deemed
to limit or constitute a waiver of any other rights or remedies of Landlord
provided herein or at law. If Tenant holds over without Landlord’s express
written consent, and tenders payment of rent for any period beyond the
expiration of the Lease Term by way of check (whether directly to Landlord, its
agents, or to a lock box) or wire transfer, Tenant acknowledges and agrees that
the cashing of such check or acceptance of such wire shall be considered
inadvertent and not be construed as creating a month-to-month tenancy, provided
Landlord refunds such payment to Tenant promptly upon learning that such check
has been cashed or wire transfer received. Tenant acknowledges that any holding
over without Landlord’s express written consent may compromise or otherwise
affect Landlord’s ability to enter into new leases with prospective tenants
regarding the Premises. Therefore, if Tenant fails to surrender the Premises
upon the termination or expiration of this Lease, in addition to any other
liabilities to Landlord accruing therefrom, Tenant shall protect, defend,
indemnify and hold Landlord harmless from all loss, costs (including reasonable
attorneys’ fees) and liability resulting from such failure, including, without
limiting the generality of the foregoing, any claims made by any succeeding
tenant founded upon such failure to surrender and any lost profits to Landlord
resulting therefrom.

 

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ARTICLE 17

ESTOPPEL CERTIFICATES

Within ten (10) business days following a request in writing by Landlord, Tenant
shall execute, acknowledge and deliver to Landlord an estoppel certificate,
which, as submitted by Landlord, shall be in commercially reasonable form as
determined by Landlord (or in such form as may be required by any prospective
mortgagee or purchaser of the Project, or any portion thereof), indicating
therein any exceptions thereto that may exist at that time, and shall also
contain any other information reasonably requested by Landlord or Landlord’s
mortgagee or prospective mortgagee with respect to this Lease. Any such
certificate may be relied upon by any prospective mortgagee or purchaser of all
or any portion of the Project. Tenant shall execute and deliver whatever other
instruments may be reasonably required for such purposes. At any time during the
Lease Term, Landlord may require Tenant to provide Landlord with a current
financial statement and financial statements of the two (2) years prior to the
current financial statement year. So long as Tenant is Ligland Pharmaceuticals
Incorporated and continues to be publicly traded, Landlord acknowledges that
Tenant’s financial statements are available online. Such statements shall be
prepared in accordance with generally accepted accounting principles and, if
such is the normal practice of Tenant, shall be audited by an independent
certified public accountant. Failure of Tenant to timely execute, acknowledge
and deliver such estoppel certificate or other instruments shall constitute an
acceptance of the Premises and an acknowledgment by Tenant that statements
included in the estoppel certificate are true and correct, without exception.

ARTICLE 18

SUBORDINATION

18.1 Subordination Generally. This Lease shall be subject and subordinate to any
easement agreements and covenants, conditions and restrictions recorded against
the land underlying the Project, and to all present and future ground or
underlying leases of the Building or Project and to the lien of any mortgage,
trust deed or other encumbrances now or hereafter in force against the Building
or Project or any part thereof, if any, and to all renewals, extensions,
modifications, consolidations and replacements thereof, and to all advances made
or hereafter to be made upon the security of such mortgages or trust deeds,
unless the holders of such mortgages, trust deeds or other encumbrances, or the
lessors under such ground lease or underlying leases, require in writing that
this Lease be superior thereto. Tenant covenants and agrees in the event any
proceedings are brought for the foreclosure of any such mortgage or deed in lieu
thereof (or if any ground lease is terminated), to attorn, without any
deductions or set-offs whatsoever, to the lienholder or purchaser or any
successors thereto upon any such foreclosure sale or deed in lieu thereof (or to
the ground lessor), if so requested to do so by such purchaser or lienholder or
ground lessor, and to recognize such purchaser or lienholder or ground lessor as
the lessor under this Lease, provided such lienholder or purchaser or ground
lessor shall agree to accept this Lease and not disturb Tenant’s occupancy, so
long as Tenant timely pays the rent and observes and performs the terms of this
Lease to be observed and performed by Tenant. Landlord’s interest herein may be
assigned as security at any time to any lienholder. Tenant shall, within ten
(10) business days of request by Landlord, execute such further instruments or
assurances as Landlord may reasonably deem necessary to evidence or confirm the
subordination or superiority of this Lease to any such mortgages, trust deeds,
ground leases or underlying

 

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leases; provided, however, that the subordination of this Lease to any such
mortgages, trust deeds, ground leases or underlying leases entered into after
the date of this Lease shall be upon the express condition that so long as
Tenant is not in default of the Lease beyond applicable notice and cure periods,
Tenant’s possession and enjoyment of the Premises and Tenant’s rights under this
Lease shall not be disturbed or interfered with in the event of any foreclosure
or exercise of any rights under any such mortgages, trust deeds, ground leases
or underlying leases subject to the terms of a commercially reasonable SNDA
(defined below). Tenant waives the provisions of any current or future statute,
rule or law which may give or purport to give Tenant any right or election to
terminate or otherwise adversely affect this Lease and the obligations of the
Tenant hereunder in the event of any foreclosure proceeding or sale.

18.2 Existing Lender SNDA. Landlord shall use commercially reasonable efforts to
deliver to Tenant a commercially reasonable subordination, non-disturbance and
attornment agreement (“SNDA”) executed by the beneficiaries under any deeds of
trust which encumber the Premises as of the Effective Date hereof.

ARTICLE 19

DEFAULTS; REMEDIES

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

19.1.1 Any failure by Tenant to pay any Rent or any other charge required to be
paid under this Lease, or any part thereof, within five (5) days after such
amount is due and owing; or

19.1.2 Except where a specific time period is otherwise set forth for Tenant’s
performance in this Lease, in which event the failure to perform by Tenant
within such time period shall be a default by Tenant under this Section 19.1.2,
any failure by Tenant to observe or perform any other provision, covenant or
condition of this Lease to be observed or performed by Tenant where such failure
continues for twenty (20) days after written notice thereof from Landlord to
Tenant; provided that if the nature of such default is such that the same cannot
reasonably be cured within a twenty (20) day period, Tenant shall not be deemed
to be in default if it diligently commences such cure within such period and
thereafter diligently proceeds to rectify and cure such default, but in no event
exceeding a period of time in excess of forty-five (45) days after written
notice thereof from Landlord to Tenant; or

19.1.3 To the extent permitted by law, (i) Tenant or any guarantor of this Lease
being placed into receivership or conservatorship, or becoming subject to
similar proceedings under Federal or State law, or (ii) a general assignment by
Tenant or any guarantor of this Lease for the benefit of creditors, or (iii) the
taking of any corporate action in furtherance of bankruptcy or dissolution
whether or not there exists any proceeding under an insolvency or bankruptcy
law, or (iv) the filing by or against Tenant or any guarantor of any proceeding
under an insolvency or bankruptcy law, unless in the case of such a proceeding
filed against Tenant or any guarantor the same is dismissed within sixty
(60) days, or (v) the appointment of a trustee or receiver to take possession of
all or substantially all of the assets of Tenant or any guarantor, unless
possession is restored to Tenant or such guarantor within thirty (30) days, or
(vi) any execution or other

 

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judicially authorized seizure of all or substantially all of Tenant’s assets
located upon the Premises or of Tenant’s interest in this Lease, unless such
seizure is discharged within thirty (30) days; or

19.1.4 The failure by Tenant to observe or perform according to the provisions
of Articles 5, 14, 17 or 18 of this Lease where such failure continues for more
than five (5) business days after notice from Landlord.

Tenant expressly acknowledges and agrees that the notice periods provided herein
are in lieu of, and not in addition to, any notice periods provided by law.

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

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

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

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

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

(d) Any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant’s failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom; and

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

The term “rent” as used in this Section 19.2 shall be deemed to be and to mean
all sums of every nature required to be paid by Tenant pursuant to the terms of
this Lease, whether to Landlord or to others. As used in Sections 19.2.1(a) and
(b), above, the “worth at the time of award” shall be computed by allowing
interest at the Interest Rate. As used in Section 19.2.1(c), above, the “worth
at the time of award” shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%).

 

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

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

19.3 Subleases of Tenant. If Landlord elects to terminate this Lease on account
of any default by Tenant, as set forth in this Article 19, Landlord shall have
the right to terminate any and all subleases, licenses, concessions or other
consensual arrangements for possession entered into by Tenant and affecting the
Premises or may, in Landlord’s sole discretion, succeed to Tenant’s interest in
such subleases, licenses, concessions or arrangements. In the event of
Landlord’s election to succeed to Tenant’s interest in any such subleases,
licenses, concessions or arrangements, Tenant shall, as of the date of notice by
Landlord of such election, have no further right to or interest in the rent or
other consideration receivable thereunder.

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

ARTICLE 20

COVENANT OF QUIET ENJOYMENT

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

 

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ARTICLE 21

SECURITY DEPOSIT

Concurrent with Tenant’s execution of this Lease, Tenant shall deposit with
Landlord a security deposit (the “Security Deposit”) in the amount set forth in
Section 8 of the Summary, as security for the faithful performance by Tenant of
all of its obligations under this Lease. If Tenant defaults with respect to any
provisions of this Lease, including, but not limited to, the provisions relating
to the payment of Rent, the removal of property and the repair of resultant
damage, Landlord may, without notice to Tenant, but shall not be required to
apply all or any part of the Security Deposit for the payment of any Rent or any
other sum in default and Tenant shall, upon demand therefor, restore the
Security Deposit to its original amount. Any unapplied portion of the Security
Deposit shall be returned to Tenant, or, at Landlord’s option, to the last
assignee of Tenant’s interest hereunder, within sixty (60) days following the
expiration of the Lease Term. Tenant shall not be entitled to any interest on
the Security Deposit. Tenant hereby irrevocably waives and relinquishes any and
all rights, benefits, or protections, if any, Tenant now has, or in the future
may have, under Section 1950.7 of the California Civil Code, any successor
statute, and all other provisions of law, now or hereafter in effect, including,
but not limited to, any provision of law which (i) establishes the time frame by
which a landlord must refund a security deposit under a lease, or (ii) provides
that a landlord may claim from a security deposit only those sums reasonably
necessary to remedy defaults in the payment of rent, to repair damage caused by
a tenant, or to clean the subject premises. Tenant acknowledges and agrees that
(A) any statutory time frames for the return of a security deposit are
superseded by the express period identified in this Article 21, above, and
(B) rather than be so limited, Landlord may claim from the Security Deposit
(i) any and all sums expressly identified in this Article 21, above, and
(ii) any additional sums reasonably necessary to compensate Landlord for any and
all losses or damages caused by Tenant’s default of this Lease, including, but
not limited to, all damages or rent due upon termination of this Lease pursuant
to Section 1951.2 of the California Civil Code.

ARTICLE 22

INTENTIONALLY OMITTED

ARTICLE 23

SIGNS

23.1 Premises Identification and Building Directory Signage. Tenant shall be
entitled, at Tenant’s sole cost and expense, to Building-standard identification
signage outside of Tenant’s Premises on the floor on which Tenant’s Premises are
located and one (1) line in the Building directory. The location, quality,
design, style, and size of such signage shall be consistent with the Landlord’s
Building standard signage program. Any change in Tenant’s signage shall be at
Tenant’s sole cost and expense.

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

ARTICLE 24

COMPLIANCE WITH LAW

Tenant shall not do anything or suffer anything to be done in or about the
Premises or the Project which will in any way conflict with any law, statute,
ordinance or other governmental rule, regulation or requirement, including,
without limitation, the Americans With Disabilities Act of 1990, as amended, now
in force or which may hereafter be enacted or promulgated which are applicable
to the Premises or the Project, including those pertaining to Hazardous
Materials (collectively, “Applicable Laws”). At its sole cost and expense,
Tenant shall promptly comply with all such Applicable Laws applicable to the
Premises or Tenant’s business operations, other than the making of structural
changes or changes to the Building Structure and the Building Systems or
anything inside or outside of the Premises, which changes will be made by
Landlord at its expense, but subject to reimbursement as an Operating Expense to
the extent permitted by Article 4; however, if such changes are required due to
the particular nature of Tenant’s use of the Premises or due to Tenant’s
Alterations or the Tenant Improvements and relate to the interior of the
Premises, Tenant shall, as Additional Rent, reimburse Landlord for the cost
thereof within thirty (30) days following receipt of an invoice therefor. Should
any standard or regulation now or hereafter be imposed on Landlord or Tenant by
a state, federal or local governmental body charged with the establishment,
regulation and enforcement of occupational, health or safety standards for
employers, employees, landlords or tenants, then Tenant agrees, at its sole cost
and expense, to comply promptly with such standards or regulations. The judgment
of any court of competent jurisdiction or the admission of Tenant in any
judicial action, regardless of whether Landlord is a party thereto, that Tenant
has violated any of said governmental measures, shall be conclusive of that fact
as between Landlord and Tenant. If cited for noncompliance by a governmental
authority, and provided that Landlord does not dispute said citation or
notification, or otherwise seek a variance or similar relief therefrom, Landlord
shall comply with all Applicable Laws relating to the path of travel in the
Common Areas, provided that the compliance with such Applicable Laws is not the
responsibility of Tenant under this Lease or otherwise caused or triggered by
Tenant’s activities or work on or about the Premises or the Project, and
provided further that Landlord’s failure to comply therewith would (x) prohibit
Tenant from obtaining or maintaining a certificate of occupancy for the
Premises, (y) would unreasonably and materially affect the safety of Tenant’s
employees or create a significant health hazard for Tenant’s employees, or
(z) violate an affirmative mandate (directed specifically to the Project) of an
applicable governmental authority. Except as otherwise provided in this
Article 24 below, Landlord shall be permitted to include in Operating Expenses
any costs or expenses incurred by Landlord under this Article 24 to the extent
consistent with the terms of Section 4.2.3, above.

ARTICLE 25

LATE CHARGES

If any installment of Rent or any other sum due from Tenant shall not be
received by Landlord or Landlord’s designee within five (5) business days of the
date due, then Tenant shall pay to Landlord a late charge equal to ten percent
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attorneys’ fees incurred by Landlord by reason of Tenant’s failure to pay Rent
and/or other charges when due hereunder; provided, however, with regard to the
first such failure in any twelve (12) month period, Landlord will waive such
late charge to the extent Tenant cures such failure within five (5) business
days following Tenant’s receipt of written notice from Landlord that the same
was not received when due. The late charge shall be deemed Additional Rent and
the right to require it shall be in addition to all of Landlord’s other rights
and remedies hereunder or at law and shall not be construed as liquidated
damages or as limiting Landlord’s remedies in any manner. In addition to the
late charge described above, any Rent or other amounts owing hereunder which are
not paid within five (5) days after the date they are due shall bear interest
from the date when due until paid at the Interest Rate. For purposes of this
Lease, the “Interest Rate” shall be an annual rate equal to the lesser of
(i) the annual “Bank Prime Loan” rate cited in the Federal Reserve Statistical
Release Publication H.15(519), published weekly (or such other comparable index
as Landlord and Tenant shall reasonably agree upon if such rate ceases to be
published), plus four (4) percentage points, and (ii) the highest rate permitted
by applicable law.

ARTICLE 26

LANDLORD’S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

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

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

ARTICLE 27

ENTRY BY LANDLORD

Landlord reserves the right at all reasonable times and upon at least
twenty-four (24) hours prior notice (which may be given verbally) to Tenant
(except in the case of an emergency) to enter the Premises to (i) inspect them;
(ii) show the Premises to prospective purchasers, or to current or prospective
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during the last twelve (12) months of the Lease Term, to prospective tenants;
(iii) post notices of nonresponsibility; or (iv) alter, improve or repair the
Premises or the Building, or for structural alterations, repairs or improvements
to the Building or the Building’s systems and equipment. Notwithstanding
anything to the contrary contained in this Article 27, Landlord may enter the
Premises at any time to (A) perform services required of Landlord; (B) take
possession due to any breach of this Lease in the manner provided herein;
(C) show the lobby of the Premises to any of Landlord’s invitees or prospective
tenants; and (D) perform any covenants of Tenant which Tenant fails to perform.
Landlord may make any such entries without the abatement of Rent, except as
otherwise provided in this Lease, and may take such reasonable steps as required
to accomplish the stated purposes; provided, however, except for
(x) emergencies, (y) repairs, alterations, improvements or additions required by
governmental or quasi-governmental authorities or court order or decree, or
(z) repairs which are the obligation of Tenant hereunder, any such entry shall
be performed in a manner so as not to unreasonably interfere with Tenant’s use
of the Premises and shall be performed after normal business hours if reasonably
practical. With respect to items (y) and (z) above, Landlord shall use
commercially reasonable efforts to not materially interfere with Tenant’s use
of, or access to, the Premises. In an emergency, Landlord shall have the right
to use any means that Landlord may deem proper to open the doors in and to the
Premises. Any entry into the Premises by Landlord in the manner hereinbefore
described shall not be deemed to be a forcible or unlawful entry into, or a
detainer of, the Premises, or an actual or constructive eviction of Tenant from
any portion of the Premises. No provision of this Lease shall be construed as
obligating Landlord to perform any repairs, alterations or decorations except as
otherwise expressly agreed to be performed by Landlord herein. Landlord will
exercise its rights pursuant to this Article 27 in a manner so as to minimize
any unreasonable interference with Tenant’s use of the Premises. Tenant hereby
waives any claims for damages or for any injuries or inconvenience to or
interference with Tenant’s business, lost profits, any loss of occupancy or
quiet enjoyment of the Premises, and any other loss occasioned by Landlord’s
entry into the Premises.

ARTICLE 28

TENANT PARKING

Tenant shall be entitled to utilize, commencing on the Lease Commencement Date
and continuing throughout the initial Lease Term and any renewal or extension
thereof, the parking passes set forth in Section 9 of the Summary, which parking
passes shall pertain to the Project parking facilities. Tenant shall have the
option, upon written notice to Landlord and at Tenant’s cost, to convert up to
four (4) of such unreserved parking passes to reserved parking spaces at
locations adjacent to the Premises, as reasonably determined by Landlord. During
the initial Lease Term, unreserved parking shall be at no additional charge,
except that Landlord may, at Landlord’s option and at Landlord’s sole
discretion, elect to install gates or other access control systems, at
Landlord’s cost, for access to the Project parking facilities, in which case
Landlord may require Tenant pay to Landlord a deposit for any entry system
mechanism selected by Landlord (e.g., fob, access card, etc.). Notwithstanding
the foregoing, Tenant shall be responsible for the full amount of any taxes
imposed by any governmental authority in connection with the use of such parking
passes by Tenant or the use of the Project parking facilities by Tenant.
Tenant’s continued right to use the parking passes is conditioned upon Tenant
and Tenant Parties abiding by all rules and regulations which are prescribed
from time to time for the orderly operation and use of the Project parking
facilities where the parking passes

 

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are located, including any sticker or other identification system established by
Landlord, Tenant’s use of commercially reasonable efforts to cause Tenant
Parties also comply with such rules and regulations and Tenant not being in
default under this Lease. Landlord specifically reserves the right to change the
size, configuration, design, layout and all other aspects of the Project parking
facilities, and the location of any of Tenant’s reserved parking spaces, at any
time and Tenant acknowledges and agrees that Landlord may, without incurring any
liability to Tenant and without any abatement of Rent under this Lease, from
time to time, temporarily close-off or restrict access to the Project parking
facilities for purposes of permitting or facilitating any such construction,
alteration or improvements as long as such restriction is not imposed in a
manner that is discriminatory to Tenant and is imposed in a similar manner on
other tenants of the Project. Landlord may delegate its responsibilities
hereunder to a parking operator in which case such parking operator shall have
all the rights of control attributed hereby to the Landlord. The parking passes
provided to Tenant pursuant to this Article 28 are provided to Tenant solely for
use by Tenant’s own personnel, employees, agents, contractors, and invitees, and
such passes may not be transferred, assigned, subleased or otherwise alienated
by Tenant without Landlord’s prior approval.

ARTICLE 29

MISCELLANEOUS PROVISIONS

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

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

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

29.4 INTENTIONALLY OMITTED.

29.5 Transfer of Landlord’s Interest. Tenant acknowledges that Landlord has the
right to transfer all or any portion of its interest in the Project or Building
and in this Lease, and Tenant agrees that in the event of any such transfer,
Landlord shall automatically be released from all liability under this Lease not
accrued as of the date of the transfer and Tenant agrees to look solely to such
transferee for the performance of Landlord’s obligations hereunder after the

 

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date of transfer and such transferee shall be deemed to have fully assumed and
be liable for all obligations of this Lease to be performed by Landlord,
including the return of any Security Deposit, and Tenant shall attorn to such
transferee. Tenant further acknowledges that Landlord may assign its interest in
this Lease to a mortgage lender as additional security and agrees that such an
assignment shall not release Landlord from its obligations hereunder and that
Tenant shall continue to look to Landlord for the performance of its obligations
hereunder.

29.6 Prohibition Against Recording. Neither this Lease, nor any memorandum,
affidavit or other writing with respect thereto, shall be recorded by Tenant or
by anyone acting through, under or on behalf of Tenant.

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

29.8 Application of Payments. Landlord shall have the right to apply payments
received from Tenant pursuant to this Lease, regardless of Tenant’s designation
of such payments, to satisfy any obligations of Tenant hereunder, in such order
and amounts as Landlord, in its sole discretion, may elect, it nevertheless
being acknowledged that Tenant may be free to make any such payments “under
protest.”

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

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

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

29.12 Landlord Exculpation. The liability of Landlord or the Landlord Parties to
Tenant for any default by Landlord under this Lease or arising in connection
herewith or with Landlord’s operation, management, leasing, repair, renovation,
alteration or any other matter relating to the Project or the Premises shall be
limited solely and exclusively to an amount which is equal to the net interest
of Landlord (following payment of any outstanding liens and/or mortgages,
whether attributable to sales or insurance proceeds or otherwise) in the Project
(including any insurance or rental proceeds which Landlord receives). Neither
Landlord, nor any of the Landlord Parties shall have any other liability
therefor. The limitations of liability contained in this Section 29.12 shall
inure to the benefit of Landlord’s and the Landlord Parties’

 

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present and future partners, beneficiaries, officers, directors, trustees,
shareholders, agents and employees, and their respective partners, heirs,
successors and assigns. Under no circumstances shall any present or future
partner of Landlord (if Landlord is a partnership), or trustee or beneficiary
(if Landlord or any partner of Landlord is a trust), have any liability for the
performance of Landlord’s obligations under this Lease. Notwithstanding any
contrary provision herein, neither Landlord nor the Landlord Parties shall be
liable under any circumstances for consequential damages injury or damage to, or
interference with, Tenant’s business, including but not limited to, loss of
profits, loss of rents or other revenues, loss of business opportunity, loss of
goodwill or loss of use, in each case, however occurring.

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

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

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

29.16 Notices. All notices, demands, statements, designations, approvals or
other communications (collectively, “Notices”) given or required to be given by
either party to the other hereunder or by law shall be in writing, shall be
(A) sent by United States certified or registered mail, postage prepaid, return
receipt requested (“Mail”), (B) delivered by a nationally recognized overnight
courier, or (C) delivered personally. Any Notice shall be sent, transmitted, or
delivered, as the case may be, to Tenant at the appropriate address set forth in
Section 10 of the Summary, or to such other place as Tenant may from time to
time designate in a Notice to Landlord, or to Landlord at the addresses set
forth below, or to such other places as Landlord may from time to time designate
in a Notice to Tenant. Any Notice will be deemed given (i) three (3) days after
the date it is posted if sent by Mail, (ii) the date the overnight courier
delivery is made or refused, or (iii) the date personal delivery is made or
refused. If Tenant is notified of the identity and address of Landlord’s
mortgagee or ground or underlying lessor,

 

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Tenant shall give to such mortgagee or ground or underlying lessor written
notice of any default by Landlord under the terms of this Lease by registered or
certified mail, and such mortgagee or ground or underlying lessor shall be given
a reasonable opportunity to cure such default prior to Tenant’s exercising any
remedy available to Tenant. As of the date of this Lease, any Notices to
Landlord must be sent, transmitted, or delivered, as the case may be, to the
following addresses:

3911/3931 SVB, LLC

c/o Cruzan Properties- Investments (T), LLC

221 15th Street

Del Mar, CA 92014

Attention: Dennis S. Cruzan

29.17 Joint and Several. If more than one person or entity constitutes Tenant,
the obligations imposed upon Tenant under this Lease shall be joint and several.

29.18 Authority. Tenant hereby represents and warrants that Tenant is a duly
formed and existing entity qualified to do business in California and that
Tenant has full right and authority to execute and deliver this Lease and that
each person signing on behalf of Tenant is authorized to do so. Tenant shall,
within ten (10) days after request from Landlord, deliver to Landlord
satisfactory evidence of such authority and, if a corporation or limited
liability company, also deliver to Landlord satisfactory evidence of (i) good
standing in Tenant’s state of formation and (ii) qualification to do business in
California.

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

29.20 Governing Law; WAIVER OF TRIAL BY JURY. This Lease shall be construed and
enforced in accordance with the laws of the State of California. IN ANY ACTION
OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I) THE
JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA, (II) SERVICE
OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN THE INTEREST
OF SAVING TIME AND EXPENSE, AND TO THE EXTENT PERMITTED BY LAW, TRIAL WITHOUT A
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES
HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING
OUT OF OR IN CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND
TENANT, TENANT’S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY
OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY.

 

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

29.22 Brokers. Landlord and Tenant hereby warrant to each other that they have
had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease, excepting only RE:Align, Inc. (representing Tenant)
and CBRE, Inc. (representing Landlord) (collectively, the “Brokers”), and that
they know of no other real estate broker or agent who is entitled to a
commission in connection with this Lease. Each party agrees to indemnify and
defend the other party against and hold the other party harmless from any and
all claims, demands, losses, liabilities, lawsuits, judgments, costs and
expenses (including, without limitation, reasonable attorneys’ fees) with
respect to any leasing commission or equivalent compensation alleged to be owing
on account of any dealings with any real estate broker or agent, other than the
Brokers, occurring by, through, or under the indemnifying party.

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

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

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

29.26 Confidentiality. Tenant acknowledges that the content of this Lease and
any related documents are confidential information. Except as required by law,
court order, or pursuant to good corporate practice, Tenant shall keep such
confidential information strictly confidential and shall not disclose such
confidential information to any person or entity other than Tenant’s employees,
their financial, legal, and space planning consultants.

29.27 Transportation Management. Tenant shall fully comply with all present or
future programs intended to manage parking, transportation or traffic in and
around the Building, and in connection therewith, Tenant shall take responsible
action for the transportation planning and management of all employees located
at the Premises by working directly with Landlord, any governmental
transportation management organization or any other transportation-related
committees or entities.

 

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29.28 Building Renovations. It is specifically understood and agreed that
Landlord has made no representation or warranty to Tenant and has no obligation
and has made no promises to alter, remodel, improve, renovate, repair or
decorate the Premises, Building, or any part thereof and that no representations
respecting the condition of the Premises or the Building have been made by
Landlord to Tenant except as specifically set forth herein. However, Tenant
hereby acknowledges that Landlord is currently renovating or may during the
Lease Term renovate, improve, alter, or modify or construct additional
buildings, parking facilities or other improvements within (collectively, the
“Renovations”) the Project, the Building and/or the Premises including without
limitation the parking structure, common areas, systems and equipment, roof, and
structural portions of the same, and in connection with any Renovations,
Landlord may, among other things, temporarily erect scaffolding or other
necessary structures in the Building, limit or eliminate access to portions of
the Project, including portions of the common areas, or perform work in the
Building, which work may create noise, dust or leave debris in the Building.
Tenant hereby agrees that such Renovations and Landlord’s actions in connection
with such Renovations shall in no way constitute a constructive eviction of
Tenant nor entitle Tenant to any abatement of Rent. Landlord shall have no
responsibility or for any reason be liable to Tenant for any direct or indirect
injury to or interference with Tenant’s business arising from the Renovations,
nor shall Tenant be entitled to any compensation or damages from Landlord for
loss of the use of the whole or any part of the Premises or of Tenant’s personal
property or improvements resulting from the Renovations or Landlord’s actions in
connection with such Renovations, or for any inconvenience or annoyance
occasioned by such Renovations or Landlord’s actions.

29.29 Tenant’s Representations.

29.29.1 Tenant represents and warrants to Landlord that neither Tenant nor any
of its respective constituent owners or affiliates currently are, or shall be at
any time during the Term hereof, in violation of any laws relating to terrorism
or money laundering (collectively, the “Anti-Terrorism Laws”), including without
limitation Executive Order No. 13224 on Terrorist Financing, effective 24, 2001
and relating to Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism (the “Executive Order”) and/or
the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56) (the “USA
Patriot Act”).

29.29.2 Tenant covenants that neither Tenant nor any of its respective
constituent owners or affiliates is or shall be during the Term hereof a
“Prohibited Person,” which is defined as follows: (A) a person or entity that is
listed in the Annex to, or is otherwise subject to, the provisions of the
Executive Order; (B) a person or entity owned or controlled by, or acting for or
on behalf of, any person or entity that is listed in the Annex to, or is
otherwise subject to the provisions of, the Executive Order; (C) a person or
entity with whom Landlord is prohibited from dealing with or otherwise engaging
in any transaction by any Anti-Terrorism Law, including without limitation the
Executive Order and the USA Patriot Act; (D) a person or entity who commits,
threatens or conspires to commit or support “terrorism” as defined in
Section 3(d) of the Executive Order; (E) a person or entity that is named as a
“specially designated national and blocked person” on the then-most current list
published by the U.S. Treasury Department Office of Foreign Assets Control at
its official website, http://www.treas.gov/offices/eotffc/ofac/sdn/t11sdn.pdf,
or at any replacement website or other

 

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replacement official publication of such list; and (F) a person or entity who is
affiliated with a person or entity listed in items (A) through (E), above.

29.29.3 At any time and from time-to-time during the Term, Tenant shall deliver
to Landlord, within ten (10) days after receipt of a written request therefor, a
written certification or such other evidence reasonably acceptable to Landlord
evidencing and confirming Tenant’s compliance with this Section 29.29.

29.30 Hazardous Materials.

29.30.1 Definitions. For purposes of this Lease, the following definitions shall
apply: “Hazardous Material(s)” shall mean any solid, liquid or gaseous substance
or material that is described or characterized as a toxic or hazardous
substance, waste, material, pollutant, contaminant or infectious waste, or any
matter that in certain specified quantities would be injurious to the public
health or welfare, or words of similar import, in any of the “Environmental
Laws,” as that term is defined below, or any other words which are intended to
define, list or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity or reproductive
toxicity and includes, without limitation, asbestos, petroleum (including crude
oil or any fraction thereof, natural gas, natural gas liquids, liquefied natural
gas, or synthetic gas usable for fuel, or any mixture thereof), petroleum
products, polychlorinated biphenyls, urea formaldehyde, radon gas, nuclear or
radioactive matter, medical waste, soot, vapors, fumes, acids, alkalis,
chemicals, microbial matters (such as molds, fungi or other bacterial matters),
biological agents and chemicals which may cause adverse health effects,
including but not limited to, cancers and /or toxicity. “Environmental Laws”
shall mean any and all federal, state, local or quasi-governmental laws (whether
under common law, statute or otherwise), ordinances, decrees, codes, rulings,
awards, rules, regulations or guidance or policy documents now or hereafter
enacted or promulgated and as amended from time to time, in any way relating to
(i) the protection of the environment, the health and safety of persons
(including employees), property or the public welfare from actual or potential
release, discharge, escape or emission (whether past or present) of any
Hazardous Materials or (ii) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Hazardous Materials.

29.30.2 Compliance with Environmental Laws. Tenant represents and warrants that,
except as herein set forth, it will not use, store or dispose of any Hazardous
Materials in or on the Premises. However, notwithstanding the preceding
sentence, Landlord agrees that Tenant may use, store and properly dispose of
commonly available cleaners and chemicals to maintain the Premises and Tenant’s
routine office operations (such as printer toner, copier toner and ordinary
cleaning supplies) (hereinafter the “Permitted Chemicals”) in commercially
reasonable amounts and in compliance with Environmental Laws. Tenant shall
indemnify Landlord and the Landlord Parties and agrees to defend and hold
Landlord and the Landlord Parties harmless from and against any and all claims,
judgments, damages, penalties, fines, costs, liabilities or losses which may
arise from the use, storage or disposal of any Hazardous Materials in or on the
Premises by Tenant or Tenant Parties.

29.30.3 Tenant Hazardous Materials. Tenant will (i) obtain and maintain in full
force and effect all Environmental Permits (as defined below) that may be
required from time to

 

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time under any Environmental Laws applicable to Tenant or the Premises, and
(ii) be and remain in compliance with all terms and conditions of all such
Environmental Permits and with all other Environmental Laws. “Environmental
Permits” means, collectively, any and all permits, consents, licenses, approvals
and registrations of any nature at any time required pursuant to, or in order to
comply with any Environmental Law. On or before the Lease Commencement Date and
on each annual anniversary of the Commencement Date thereafter, as well as at
any other time following Tenant’s receipt of a reasonable request from Landlord,
Tenant agrees to deliver to Landlord a list of all Hazardous Materials
anticipated to be used by Tenant in the Premises and the quantities thereof. At
any time following Tenant’s receipt of a request from Landlord, Tenant shall
promptly complete a “hazardous materials questionnaire” using the form
then-provided by Landlord. Upon the expiration or earlier termination of this
Lease, Tenant agrees to promptly remove from the Premises, the Building and the
Project, at its sole cost and expense, any and all Hazardous Materials,
including any equipment or systems containing Hazardous Materials, which are
installed, brought upon, stored, used, generated or released upon, in, under or
about the Premises, the Building, and/or the Project or any portion thereof by
Tenant and/or any Tenant Parties (such obligation to survive the expiration or
sooner termination of this Lease). Nothing in this Lease shall impose any
liability on Tenant for any Hazardous Materials brought onto the Premises,
Building or Project after the Lease Commencement Date by any third parties not
under Tenant’s control.

29.30.4 Landlord’s Right of Environmental Audit. Landlord may, upon reasonable
notice to Tenant, be granted access to and enter the Premises no more than once
annually to perform or cause to have performed an environmental inspection, site
assessment or audit. Such environmental inspector or auditor may be chosen by
Landlord, in its sole discretion, and be performed at Landlord’s sole expense.
To the extent that the report prepared upon such inspection, assessment or
audit, indicates the presence of Hazardous Materials in violation of
Environmental Laws, or provides recommendations or suggestions to prohibit the
release, discharge, escape or emission of any Hazardous Materials at, upon,
under or within the Premises, or to comply with any Environmental Laws, Tenant
shall promptly, at Tenant’s sole expense, comply with such recommendations or
suggestions, including, but not limited to performing such additional
investigative or subsurface investigations or remediation(s) as recommended by
such inspector or auditor. Notwithstanding the above, if at any time, Landlord
has actual notice or reasonable cause to believe that Tenant has violated, or
permitted any violations of any Environmental Law, or upon the expiration or
termination of this Lease, then Landlord will be entitled to perform its
environmental inspection, assessment or audit at such time, notwithstanding the
above mentioned annual limitation, and Tenant must reimburse Landlord for the
cost or fees incurred as Additional Rent.

29.31 LEED Certification. Landlord may, in Landlord’s sole and absolute
discretion, elect to apply to obtain or maintain a LEED certification for the
Project (or portion thereof), or other applicable certification in connection
with Landlord’s sustainability practices for the Project (as such sustainability
practices are to be determined by Landlord, in its sole and absolute discretion,
from time to time). In the event that Landlord elects to pursue such an
aforementioned certification, Tenant shall cooperate with the Landlord’s efforts
in connection therewith and provide Landlord with any documentation it may need
in order to obtain or maintain the aforementioned certification (which
cooperation may include, but shall not be limited to, the sharing of
documentation pertaining to any Alterations or improvements

 

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undertaken by Tenant in the Project with Landlord, and the sharing of Tenant’s
billing information pertaining to trash removal and recycling related to
Tenant’s operations in the Project).

29.32 Financial Information. Within ten (10) days after written request from
Landlord, Tenant shall deliver to Landlord such financial statements as are
reasonably required by Landlord to verify the financial capacity of Tenant or
any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall
deliver to any lender or proposed purchaser of the Premises designated by
Landlord any financial statements required by such party to facilitate the sale,
financing or refinancing of the Premises. Tenant shall represent and warrant to
Landlord that each such financial statement is a true and accurate statement as
of the date of such statement. All such financial statements shall be received
in confidence and shall be used only for the purposes set forth herein. So long
as Tenant is Ligland Pharmaceuticals Incorporated and continues to be publicly
traded, Landlord acknowledges that Tenant’s financial statements are available
online and this Section 29.32 shall not apply.

29.33 California Certified Access Specialist Inspection. Landlord hereby informs
Tenant that the Project has not undergone inspection by a Certified Access
Specialist (as defined in the California Code of Regulations).

29.34 Utility Information. Upon written notice from Landlord (“Utility Bill
Notice”), Landlord may require Tenant to provide Landlord with copies of bills
received by Tenant with respect to a period of up to eighteen (18) months prior
to the date of the Utility Bill Notice from electricity, natural gas or similar
utility providers (collectively, “Utility Providers”) relating to utility usage
at the Premises (collectively, “Utility Bills”). Tenant shall provide such
Utility Bills to Landlord within ten (10) days after Landlord’s delivery of a
Utility Bill Notice to Tenant. In addition, Tenant hereby authorizes Landlord to
obtain copies of the Utility Bills directly from the Utility Providers, and
Tenant hereby authorizes each Utility Provider to provide Utility Bills and
related utility usage information for the Premises directly to Landlord. From
time to time within ten (10) days after Landlord’s written request, Tenant shall
execute and deliver to Landlord further assurances requested by Landlord
authorizing Utility Providers to provide to Landlord Utility Bills and other
information relating to utility usage at the Premises.

29.35 Communication Equipment. If Tenant desires to use the roof of the Project
to install communication equipment to be used from the Premises, Tenant may so
notify Landlord in writing (“Communication Equipment Notice”), which
Communication Equipment Notice shall generally describe the specifications for
the equipment desired by Tenant. Upon Landlord’s receipt of the Communication
Equipment Notice, and subject to all Applicable Laws, Tenant and Tenant’s
contractors (which shall first be reasonably approved by Landlord) shall have
the right and access to install, repair, replace, remove, operate and maintain
one (1) so-called “satellite dish” or other similar device, such as antennae
(collectively, “Communication Equipment”) no greater than one (1) meter in
diameter, together with aesthetic screening designated by Landlord and all
cable, wiring, conduits and related equipment, for the purpose of receiving and
sending radio, television, computer, telephone or other communication signals,
at a location on the roof of the Project designated by Landlord. Landlord shall
have the right to require Tenant to relocate the Communication Equipment at any
time to another location on the roof of the Project reasonably approved by
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Tenant shall retain Landlord’s designated roofing contractor to make any
necessary penetrations and associated repairs to the roof in order to preserve
Landlord’s roof warranty. Tenant’s installation and operation of the
Communication Equipment shall be governed by the following terms and conditions:

29.35.1 Tenant’s right to install, replace, repair, remove, operate and maintain
the Communication Equipment shall be subject to all Applicable Laws and
covenants, conditions and restrictions and Landlord makes no representation that
such covenants, conditions and restrictions and Applicable Laws permit such
installation and operation.

29.35.2 All plans and specifications for the Communication Equipment shall be
subject to Landlord’s reasonable approval.

29.35.3 All costs of installation, operation and maintenance of the
Communication Equipment and any necessary related equipment (including, without
limitation, costs of obtaining any necessary permits and connections to the
Project’s electrical system) shall be borne by Tenant.

29.35.4 It is expressly understood that Landlord retains the right to use the
roof of the Project for any purpose whatsoever provided that Landlord shall not
unduly interfere with Tenant’s use of the Communication Equipment.

29.35.5 Tenant shall use the Communication Equipment so as not to cause any
interference to other tenants in the Project or with any other tenant’s
Communication Equipment, and not to damage the Project or interfere with the
normal operation of the Project.

29.35.6 Landlord shall not have any obligations with respect to the
Communication Equipment. Landlord makes no representation that the Communication
Equipment will be able to receive or transmit communication signals without
interference or disturbance (whether or not by reason of the installation or use
of similar equipment by others on the roof of the Project) and Tenant agrees
that Landlord shall not be liable to Tenant therefor. Tenant shall not lease or
otherwise make the Communication Equipment available to any third party and the
Communication Equipment shall be only for Tenant’s use in connection with the
conduct of Tenant’s business in the Premises.

29.35.7 Tenant shall (i) be solely responsible for any damage caused as a result
of the Communication Equipment, (ii) promptly pay any tax, license or permit
fees charged pursuant to any laws or regulations in connection with the
installation, maintenance or use of the Communication Equipment and comply with
all precautions and safeguards recommended by all governmental authorities, and
(iii) pay for all necessary repairs, replacements to or maintenance of the
Communication Equipment.

29.35.8 The Communication Equipment shall remain the sole property of Tenant.
Tenant shall remove the Communication Equipment and related equipment at
Tenant’s sole cost and expense upon the expiration or sooner termination of this
Lease or upon the imposition of any governmental law or regulation which may
require removal, and shall repair the Project upon such removal to the extent
required by such work of removal. If Tenant fails to remove the Communication
Equipment and repair the Project within fifteen (15) days after the

 

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expiration or earlier termination of this Lease, Landlord may do so at Tenant’s
expense. The provisions of this Section 29.35.8 shall survive the expiration or
earlier termination of this Lease.

29.35.9 The Communication Equipment shall be deemed to constitute a portion of
the Premises for purposes of Article 10 of this Lease.

29.35.10 Upon request from Landlord, Tenant agrees to execute a license
agreement with Landlord or Landlord’s rooftop management company regarding
Tenant’s installation, use and operation of the Communication Equipment, which
license agreement shall be in commercially reasonable form and shall incorporate
the terms and conditions of this Section 29. Tenant acknowledges that such
license agreement will require Tenant to pay a one-time initial oversight fee to
Landlord or the rooftop management company in connection with the installation
of the Communication Equipment.

[SIGNATURES ON FOLLOWING PAGE]

 

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

 

  “LANDLORD”:  

3911/3931 SVB, LLC,

a California limited liability company

                           By:  

CMN Master (T) LLC,

a California limited liability company,

its Sole Member

    By:   

Cruzan Properties - Investments (T), LLC,

a California limited liability company,

its Managing Member

      By:  

/s/ Dennis S. Cruzan

      Name:    Dennis S. Cruzan       Its:   Member   “TENANT”:  

LIGAND PHARMACEUTICALS INCORPORATED,

a Delaware corporation

  By:  

/s/ Charles Berkman

  Name: Charles Berkman   Its: VP, General Counsel & Secretary   By:   

/s/ Matthew W. Foehr

  Name: Matthew W. Foehr   Its: President & Chief Operating Officer

 

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EXHIBIT A

SITE PLAN OF PROJECT

 

LOGO [g30180dsp066.jpg]

This Exhibit A is provided for informational purposes only and is intended to be
only an approximation of the layout of the Project and shall not be deemed to
constitute any representation by Landlord as to the exact layout or
configuration of the Project.

 

EXHIBIT A

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EXHIBIT A-1

OUTLINE OF PREMISES

 

LOGO [g30180dsp067.jpg]

This Exhibit A-1 is provided for informational purposes only and is intended to
be only an approximation of the layout of the Premises and shall not be deemed
to constitute any representation by Landlord as to the exact layout or
configuration of the Premises.

 

EXHIBIT A-1

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EXHIBIT B

TENANT WORK LETTER

This Tenant Work Letter shall set forth the terms and conditions relating to the
construction of the Tenant Improvements in the Premises. This Tenant Work Letter
is essentially organized chronologically and addresses the issues of the
construction of the Premises, in sequence, as such issues will arise during the
actual construction of the Premises.

SECTION 1

LANDLORD’S INITIAL CONSTRUCTION IN THE PREMISES

Immediately following the signing of the Lease by both Tenant and Landlord,
Landlord shall deliver the Premises to Tenant for Tenant’s construction of the
Tenant Improvements (as defined below) therein (the “Delivery Date”). Landlord,
at Landlord’s sole cost and outside of the Tenant Improvements, agrees to
install a double-dour main entry to the Premises in a location reasonably
approved by Landlord and Tenant (the “Additional Landlord Work”); provided,
however, the parties agree and acknowledge that such double-door main entry
(i) shall be between grid lines four and five on those certain documents
prepared in connection with Landlord obtaining the shell renovation permits,
(ii) shall not be located in a window bay with an existing structural grade
beam, and (iii) shall include, at Tenant’s sole cost and expense, electrified
hardware with integrated request-to-exit so that a card reader system can be
installed. The Additional Landlord Work shall include, at Landlord’s cost and
expense, the installation of (a) a concrete pedestrian walkway from the Project
parking areas to the new, main entry of the Premises, which such walkway shall
reasonably match the Project’s existing concrete, (b) a four-foot (4’) entry
canopy feature selected by Landlord, and (c) a single pair of herculite entry
doors with such doors having, at Tenant’s sole cost and expense, electrified
hardware with integrated request-to-exit so that a card reader system can be
installed. The Additional Landlord Work shall be installed in the Project using
Building-standard specifications, and the exact scope of the Additional Landlord
Work shall be determined by Landlord in its reasonable discretion. Tenant agrees
and acknowledges that Landlord shall perform the Additional Landlord Work after
the delivery of possession to the Premises to Tenant reasonably coordinated with
Tenant’s construction schedule, and in no event shall the completion of the
Additional Landlord Work be deemed (1) a constructive eviction or (2) in any way
delay the Lease Commencement Date.

Landlord shall, at Landlord’s sole cost, (i) have constructed the shell of the
Building, (ii) deliver the Premises in broom-clean condition, free of debris and
equipment and with all Building Systems, structural elements of the Premises
roof and the Building slab in good working condition and repair, and (iii) cause
the Project and the Premises to comply with applicable building codes including,
without limitation, applicable requirements of the Americans with Disabilities
Act (collectively, the “Code”) on an unoccupied basis as of the Effective Date
(provided that compliance with Code requirements within the Premises applicable
on an occupied basis including, without limitation, Title 24 requirements shall
be performed by Tenant as a component of the Tenant Improvements and chargeable
to the Tenant Improvement Allowance). Except as otherwise provided in the Lease,
Landlord shall be responsible for any Code, Title 24 or other related work in
the Common Areas, which amounts shall not be charged

 

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against the Tenant Improvement Allowance. The work to be performed by Landlord
under this Section 1 is collectively referred to as the “Landlord’s Work”.

SECTION 2

TENANT IMPROVEMENTS

2.1 Improvement Allowance. Tenant shall be entitled to a one-time improvement
allowance (the “Improvement Allowance”) in the amount of $218,115.00 (based on
$45.00 per rentable square foot of the Premises) for the costs relating to the
initial design and construction of Tenant’s improvements which are permanently
affixed to the Premises (the “Tenant Improvements”), including without
limitation the cost to complete the new demising wall within the Premises as
shown on the Conceptual Plan (defined below) and the other Tenant Improvement
Allowance Items described in Section 2.2 below. In addition to the Improvement
Allowance, Tenant shall be entitled to a one-time improvement allowance (the
“HVAC Unit Allowance”) in the amount of $23,023.25 (based on $4.75 per rentable
square foot of the Premises) for the costs relating to the initial design and
installation of the HVAC Units. In addition, Landlord and Tenant agree and
acknowledge that Tenant shall design and install an additional entrance into the
Premises (the “Fire Exit Door”) for the purposes of meeting Code requirements as
part of the Tenant Improvements. Tenant may install the Fire Exit Door, at
Tenant’s option, either (i) on the wall of the Premises where the “exit” to the
Premises is shown on the Conceptual Plan across from the wall where the main
entrance to the Premises is shown on the Conceptual Plan, or (ii) on the wall of
the Premises where the “finance office” is shown on the Conceptual Plan. The
exact location, design and specifications of the Fire Exit Door shall be subject
to Landlord’s approval as provided in Section 3 below. In connection with the
Fire Exit Door, and in addition to the Improvement Allowance and the HVAC Unit
Allowance, Tenant shall be entitled to a one-time improvement allowance (the
“Fire Exit Door Allowance”) in the amount of either (a) $7,000.00 if Tenant
constructs the Fire Exit Door on the wall described in (i) above, or (b) if
Tenant constructs the Fire Exit Door on the wall described in (ii) above, the
difference between the budgeted cost to design and install the Fire Exit Door as
provided below less $7,000.00. In furtherance of the foregoing, if Tenant elects
to construct the Fire Exit Door on the wall described in (ii) above, then prior
to commencing any work related thereto, Tenant shall provide Landlord a budget
for the cost to design and install the Fire Exit Door, which such budget shall
be subject to Landlord’s prior written approval, not to be unreasonably
withheld, conditioned or delayed. Upon Landlord’s written approval of such
budget, the amount of the Fire Exit Door Allowance shall be set as provided in
(b) above. In no event shall Landlord be obligated to make disbursements
pursuant to this Tenant Work Letter for the Tenant Improvements, the HVAC Units
or the Fire Exit Door, as the case may be, in a total amount which exceeds the
Tenant Improvement Allowance, the HVAC Unit Allowance or the Fire Exit Door
Allowance, respectively, and in no event shall Tenant be entitled to any credit
for any unused portion of the Tenant Improvement Allowance, the HVAC Unit
Allowance or the Fire Exit Door Allowance not used by Tenant by Tenant by the
date which is twelve (12) months after the Lease Commencement Date.
Notwithstanding anything to the contrary contained herein, in addition to the
Improvement Allowance, the HVAC Unit Allowance and the Fire Exit Door Allowance,
Landlord shall, concurrently with Landlord’s execution of the Lease, reimburse
Tenant in the amount of $0.15 per rentable square foot ($727.05) of the Premises
to pay for the

 

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Architect (defined below) for a preliminary test fit, which amount will not be
deducted from the Improvement Allowance.

2.2 Disbursement of the Improvement Allowance, the HVAC Unit Allowance and the
Fire Exit Door Allowance. Except as otherwise set forth in this Tenant Work
Letter, the Tenant Improvement Allowance shall be disbursed by Landlord (each of
which disbursements shall be made pursuant to Landlord’s disbursement process
provided below) for costs related to the construction of the Tenant Improvements
(including, without limitation, the cost to install electrified hardware with
integrated request-to-exit on any doors serving the Premises so that a card
reader system can be installed) and for the following items and costs
(collectively, the “Tenant Improvement Allowance Items”): (i) payment of the
fees of the “Architect” and the “Engineers,” as those terms are defined in
Section 3.1 of this Tenant Work Letter in connection with the preparation and
review of the “Construction Drawings,” as that term is defined in Section 3.1 of
this Tenant Work Letter; (ii) the cost of permits; (iii) the cost of any changes
to the Construction Drawings or Tenant Improvements required by Code; (iv) costs
of moving Tenant’s property and equipment to the Premises; (v) cost of
installation and fabrication of Tenant’s signage described in Section 23 of the
Lease; and (vi) the cost of Tenant’s project management/construction management
consultant, should Tenant elect to engage one, and if so, such project
management/construction management consultant shall be subject to Landlord’s
prior written approval, not to be unreasonably withheld, conditioned or delayed.
Except as otherwise set forth in this Tenant Work Letter, the HVAC Unit
Allowance shall be disbursed by Landlord (each of which disbursements shall be
made pursuant to Landlord’s disbursement process provided below) for costs
related to the construction of the HVAC Units and for the following items and
costs (collectively, the “HVAC Unit Allowance Items”): (a) the cost of the HVAC
Units and the thermostat specified in Section 4.5 below, (b) the cost of permits
related to the HVAC Units; and (c) the cost of installing the HVAC Units. During
the construction of the Tenant Improvements and the installation of the HVAC
Units, Landlord shall make monthly disbursements of the Tenant Improvement
Allowance for Tenant Improvement Allowance Items and disbursements of the HVAC
Unit Allowance for HVAC Unit Allowance Items for the benefit of Tenant and shall
authorize the release of monies for the benefit of Tenant as follows. Except as
otherwise set forth in this Tenant Work Letter, the Fire Exit Door Allowance
shall be disbursed by Landlord (each of which disbursements shall be made
pursuant to Landlord’s disbursement process provided below) for costs related to
the design and installation of the Fire Exit and for the following items and
costs (collectively, the “Fire Exit Door Allowance Items”): (1) the cost of the
Fire Exit Door, (2) the cost of permits related to the Fire Exit Door; and
(3) the cost of installing the Fire Exit Door. During the construction of the
Tenant Improvements and the installation of the HVAC Units and the Fire Exit
Door, Landlord shall make monthly disbursements of the Tenant Improvement
Allowance for Tenant Improvement Allowance Items and disbursements of the HVAC
Unit Allowance for HVAC Unit Allowance Items and disbursements of the Fire Exit
Door Allowance for the Fire Exit Door Allowance Items for the benefit of Tenant
and shall authorize the release of monies for the benefit of Tenant as follows.
Landlord shall not be entitled to charge any construction management fee in
connection with the Tenant Improvements, the HVAC Units or the Fire Exit Door.

2.2.1 Monthly Disbursements. On or before the first day of each calendar month
during the construction of the Tenant Improvements (or such other date as
Landlord may designate), Tenant shall deliver to Landlord (each, a “Monthly
Disbursement Request”): (i) a

 

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request for payment of the “Contractor,” as that term is defined in Section 4.1
of this Tenant Work Letter, approved by Tenant, in a form to be provided by
Landlord, showing the schedule, by trade, of percentage of completion of the
Tenant Improvements in the Premises, detailing the portion of the work completed
and the portion not completed; (ii) invoices from all of “Tenant’s Agents,” as
that term is defined in Section 4.2 of this Tenant Work Letter, for labor
rendered and materials delivered to the Premises; (iii) executed conditional
mechanic’s lien releases from all of Tenant’s Agents which shall comply with the
appropriate provisions, as reasonably determined by Landlord, of California
Civil Code Section 8132 and unconditional lien releases for work previously paid
for by Landlord, which shall comply with all applicable law, as reasonably
determined by Landlord; and (iv) all other information reasonably requested by
Landlord. Tenant’s request for payment shall be deemed Tenant’s acceptance and
approval of the work furnished and/or the materials supplied as set forth in
Tenant’s payment request. Within thirty (30) days following Landlord’s receipt
of a complete and accurate Monthly Disbursement Request, Landlord shall deliver
a check to Tenant in payment of the lesser of: (A) the amounts so requested by
Tenant, as set forth in this Section 2.2.1, above, less a ten percent
(10%) retention (the aggregate amount of such retentions to be known as the
“Final Retention”), and (B) the balance of any remaining available portion of
the Tenant Improvement Allowance, the HVAC Unit Allowance or the Fire Exit Door
Allowance (not including the Final Retention), provided that Landlord does not
dispute any request for payment based on non-compliance of any work with the
“Approved Working Drawings,” as that term is defined in Section 3.4 below, or
due to any substandard work, or for any other reason. Landlord’s payment of such
amounts shall not be deemed Landlord’s approval or acceptance of the work
furnished or materials supplied as set forth in Tenant’s payment request.

2.2.2 Final Retention. Subject to the provisions of this Tenant Work Letter, a
check for the Final Retention payable to Tenant shall be delivered by Landlord
to Tenant within thirty (30) days after Landlord receives a complete and
accurate Monthly Disbursement Request for the Final Retention, provided that
(i) Tenant delivers to Landlord properly executed mechanics lien releases in
compliance with both California Civil Code Section 8136 and Section 8138,
(ii) Landlord has reasonably determined that no substandard work exists which
adversely affects the mechanical, electrical, plumbing, heating, ventilating and
air conditioning, life-safety or other systems of the Project, the curtain wall
of the Building, the structure or exterior appearance of the Project, or any
other tenant’s use of such other tenant’s leased premises in the Project,
(iii) Architect delivers to Landlord a certificate, in a form reasonably
acceptable to Landlord, certifying that the construction of the Tenant
Improvements in the Premises has been substantially completed, and (iv) Tenant
delivers to Landlord a copy of the permitted CAD plan (in .DWG format) and
reproducible (PDF) copies of any red-line plans from the field, with such plans
provided no more than thirty (30) days from Substantial Completion.

2.2.3 Other Terms. Landlord shall only be obligated to make disbursements from
the Tenant Improvement Allowance, the HVAC Unit Allowance or the Fire Exit Door
Allowance to the extent costs are incurred by Tenant for Tenant Improvement
Allowance Items, the HVAC Unit Allowance Items and the Fire Exit Door Allowance
Items, respectively. All Tenant Improvements, the HVAC Units and the Fire Exit
Door shall be deemed Landlord’s property. Within ten (10) days after the
completion of the Approved Working Drawings, Tenant shall deliver to Landlord a
reasonably detailed budget of the cost to complete the Tenant Improvements and
install the HVAC Units and the Fire Exit Door. If the total estimated cost of

 

EXHIBIT B

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Tenant Improvement Allowance Items, the HVAC Unit Allowance Items and the Fire
Exit Door Allowance Items exceed the Tenant Improvement Allowance, the HVAC Unit
Allowance or the Fire Exit Door Allowance, respectively, then Landlord shall
distribute the Tenant Improvement Allowance, the HVAC Unit Allowance and the
Fire Exit Door Allowance on a proportionate pari passu basis. By way of example
only, if the total cost of the Tenant Improvement Allowance Items is $50.00 per
rentable square foot and the total cost the HVAC Unit Allowance Items is $6.00
per rentable square foot, then (i) relative to the Tenant Improvement Allowance
Items, Landlord shall fund ninety percent (90%) of each Monthly Disbursement
Request and the Final Retention, and Tenant shall fund ten percent (10%) of each
Monthly Disbursement Request and the Final Retention, and (ii) relative to the
HVAC Unit Allowance Items, Landlord shall fund seventy-nine percent (79%) of
each Monthly Disbursement Request and the Final Retention, and Tenant shall fund
twenty-one percent (21%) of each Monthly Disbursement Request and the Final
Retention.

SECTION 3

CONSTRUCTION DRAWINGS

3.1 Selection of Architect/Construction Drawings. Tenant has retained ID Studios
(the “Architect”) to prepare the “Construction Drawings,” as that term is
defined in this Section 3.1. Tenant shall also retain the engineering
consultants reasonably approved by Landlord (the “Engineers”) to prepare all
plans and engineering working drawings relating to the structural, mechanical,
electrical, plumbing, HVAC and lifesafety work of the Tenant Improvements. The
plans and drawings to be prepared by Architect and the Engineers hereunder shall
be known collectively as the “Construction Drawings.” All Construction Drawings
shall comply with the drawing format and specifications as reasonably determined
by Landlord, and shall be subject to Landlord’s reasonable approval. In
furtherance of the foregoing, the Construction Drawings shall be in .DWG format.
Tenant and Architect shall verify, in the field, the dimensions and conditions
as shown on the relevant portions of the base building plans, and Tenant and
Architect shall be solely responsible for the same, and Landlord shall have no
responsibility in connection therewith. Landlord’s review of the Construction
Drawings as set forth in this Section 3, shall be for its sole purpose and shall
not imply Landlord’s review of the same, or obligate Landlord to review the
same, for quality, design, Code compliance or other like matters. Accordingly,
notwithstanding that any Construction Drawings are reviewed by Landlord or its
consultants, and notwithstanding any advice or assistance which may be rendered
to Tenant by Landlord or Landlord’s consultants, Landlord shall have no
liability whatsoever in connection therewith and shall not be responsible for
any omissions or errors contained in the Construction Drawings.

3.2 Final Space Plan. Tenant’s conceptual plan showing the Tenant Improvements
in the Premises (the “Conceptual Plan”) is attached hereto as Schedule 1 and
incorporated herein by this reference. Landlord hereby approves the Conceptual
Plan. Tenant and the Architect shall prepare the final space plan (based on the
approved Conceptual Plan) for the Tenant Improvements in the Premises, as such
Tenant Improvements may be modified to accommodate the Fire Exit Door
(collectively, the “Final Space Plan”), which Final Space Plan shall include a
layout and designation of the Fire Exit Door, all offices, rooms and other
partitioning, their intended use, and equipment to be contained therein, and
shall deliver the Final Space Plan to

 

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Landlord for Landlord’s approval. Landlord shall approve or disapprove any draft
of the Final Space Plan within five (5) business days after Landlord’s receipt
thereof. If Landlord disapproves any draft of the Final Space Plan, Landlord’s
disapproval shall indicate the reasonable reasons for such disapproval and
Tenant shall resubmit the Final Space Plan with the modifications required by
Landlord. This process shall continue until the Final Space Plan is approved by
Landlord.

3.3 Final Working Drawings. Upon Landlord’s approval of the Final Space Plan,
Tenant shall cause the Architect and the Engineers to complete the architectural
and engineering drawings for the Premises, and the final architectural working
drawings in a form which is complete to allow subcontractors to bid on the work
and to obtain all applicable permits (collectively, the “Final Working
Drawings”) and shall submit the same to Landlord for Landlord’s approval. Tenant
may also concurrently submit the Final Work Drawings to the City for issuance of
the Permit with any comments received from Landlord addressed in Tenant’s plan
check resubmittal. Within ten (10) business days following Landlord’s receipt of
the Final Working Drawings, Landlord shall provide Tenant with its approval,
disapproval or approval with conditions of such Final Working Drawings. If
Landlord disapproves any draft of the Final Working Drawings, Landlord’s
disapproval shall indicate the reasonable reasons for such disapproval and
Tenant shall resubmit the Final Working Drawings with the modifications required
by Landlord. This process shall continue until the Final Working Drawings are
approved by Landlord.

3.4 Permits. The Final Working Drawings shall be approved by Landlord (the
“Approved Working Drawings”) prior to the commencement of the construction of
the Tenant Improvements. Tenant shall cause the Architect to promptly submit the
Approved Working Drawings to the appropriate municipal authorities for all
applicable building permits necessary to allow “Contractor,” as that term is
defined in Section 4.1, below, to commence and fully complete the construction
of the Tenant Improvements (collectively, the “Permits”). No material changes,
modifications or alterations in the Approved Working Drawings (other than
immaterial field changes) may be made without the prior written consent of
Landlord, which consent shall not be unreasonably withheld. Any such requested
changes shall be reviewed and approved, disapproved or conditionally approved by
Landlord within five (5) business days after receipt and Landlord’s failure to
respond within this five (5) business day period shall be deemed approval
thereof.

SECTION 4

CONSTRUCTION OF THE TENANT IMPROVEMENTS

4.1 Contractor. A general contractor shall be retained by the Tenant to
construct the Tenant Improvements. Such general contractor (“Contractor”) shall
be selected by the Tenant and approved by Landlord, such approval not to be
unreasonably withheld, conditioned or delayed.

4.2 Tenant’s Agents. All subcontractors, vendors and suppliers used by the
Tenant (such subcontractors, vendors, and the Contractor to be known
collectively as “Tenant’s Agents”) must be approved in writing by Landlord,
which approval shall not be unreasonably

 

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withheld or delayed. If Landlord does not approve any of the Tenant’s proposed
subcontractors, Tenant shall submit other proposed subcontractors for Landlord’s
written approval.

4.3 Construction of Tenant Improvements by Contractor. Tenant shall
independently retain, in accordance with Section 4.1 above, Contractor to
construct the Tenant Improvements in accordance with the Approved Working
Drawings. Upon request from Tenant, Landlord shall assist Tenant in the drafting
of bid documents and coordination of bidding processes for the general
contractor and subcontractors, provide weekly site visits, lead weekly project
meetings and shall otherwise be available for consultation during construction
and compilation of a punchlist. Any such services by Landlord shall be at no
cost to Tenant and Landlord shall not charge a construction supervision fee.
However, Tenant, the Contractor and all of Tenant’s Agents shall abide by
Landlord’s construction rules and regulations which may include, without
limitation, a requirement that any work that Landlord determines may be noisy,
may cause vibrations or may otherwise disrupt other occupants of the Building
must be performed on an after-hours basis with any such construction rules and
regulations, if any, provided to Tenant by Landlord prior to Lease execution.

4.4 Indemnification & Insurance.

4.4.1 Indemnity. Tenant’s indemnity of Landlord as set forth in Article 10 of
the Lease shall also apply with respect to any and all costs, losses, damages,
injuries and liabilities related in any way to any act or omission of Tenant or
Tenant’s Agents.

4.4.2 Requirements of Tenant’s Agents. The Contractor and each of Tenant’s
subcontractors shall guarantee to Tenant and for the benefit of Landlord that
the portion of the Tenant Improvements for which it is responsible shall be free
from any defects in workmanship and materials for a period of not less than one
(1) year from the date of completion thereof. All such warranties or guarantees
as to materials or workmanship of or with respect to the Tenant Improvements
shall be contained in the contract or subcontract and shall be written such that
such guarantees or warranties shall inure to the benefit of both Landlord and
Tenant, as their respective interests may appear, and can be directly enforced
by either. Tenant covenants to give to Landlord any assignment or other
assurances which may be necessary to effect such right of direct enforcement.

4.4.3 Insurance Requirements.

4.4.3.1 General Coverages. All of Tenant’s Agents shall carry worker’s
compensation insurance covering all of their respective employees, and shall
also carry public liability insurance, including property damage, with
reasonable limits as are typically carried by contractors and subcontractors and
otherwise, in form and with companies as are required to be carried by Tenant as
set forth in Article 10 of the Lease.

4.4.3.2 Special Coverages. Tenant or the Contractor shall carry “Builder’s All
Risk” insurance in an amount approved by Landlord covering the construction of
the Tenant Improvements, and such other insurance as Landlord may require. Such
insurance shall be in amounts and shall include such extended coverage
endorsements as may be reasonably required by Landlord.

 

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4.4.3.3 General Terms. Certificates for all insurance carried pursuant to this
Section 4.4.3 shall be delivered to Landlord before the commencement of
construction of the Tenant Improvements and before the Contractor’s equipment is
moved onto the site. In the event that the Tenant Improvements are damaged by
any cause during the course of the construction thereof, Tenant shall promptly
repair the same at Tenant’s sole cost and expense.

4.5 HVAC Unit Requirements. The HVAC Units to be installed by Tenant pursuant to
this Tenant Work Letter shall be Diakin DCH commercial, heat pump units with
coated aluminum coils and four (4) to six (6) tons of capacity or units similar
in size and properly designed for the Premises. In connection therewith, Tenant
shall install in the Premises a Model D4271GT thermostat with Wi-Fi capability.

SECTION 5

MISCELLANEOUS

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

5.2 Landlord’s Representative. Prior to commencement of construction of Tenant
Improvements, Landlord shall designate a representative with respect to the
matters set forth in this Tenant Work Letter, who, until further notice to the
Tenant, shall have full authority and responsibility to act on behalf of the
Landlord as required in this Tenant Work Letter.

5.3 Time of the Essence in This Tenant Work Letter. Unless otherwise indicated,
all references herein to a “number of days” shall mean and refer to calendar
days.

5.4 Substantial Completion. For purposes of this Lease, “Substantial Completion”
of the Tenant Improvements in the Premises shall occur upon the date of the
later of (i) the issuance of Certificate of Occupancy for the Premises or
(ii) completion of construction of the Tenant Improvements in the Premises
pursuant to the Approved Working Drawings, with the exception of any punch list
items and any tenant fixtures, work-stations, built-in furniture, or equipment
to be installed by Tenant.

5.5 Landlord Delay and Uncontrollable Delay. The fixed dates specified in
Section 3.2 of the Summary shall be extended one (1) day for each day that
Tenant is delayed in completing the Tenant Improvements in any portion of the
Premises as a result of an “Uncontrollable Delay” or a “Landlord Delay”. The
term “Uncontrollable Delay” shall mean only an actual delay in the completion of
the Tenant Improvements resulting from Force Majeure. The term “Landlord Delay”
shall mean only an actual delay in the completion of the Tenant Improvements
which is caused by (a) the failure of Landlord to provide responses to requests
by Tenant for authorizations or approvals (e.g., approvals, disapprovals or
conditional approvals) within the time period set forth in this Tenant Work
Letter, (b) the failure by Landlord to pay the Improvement Allowance when due
under this Tenant Work Letter, (c) Landlord’s failure to provide Tenant with
possession of the applicable portion of the Premises for the

 

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purposes of constructing the Tenant Improvements therein after the Final Working
Drawings for such portion have been approved by Landlord and Tenant and Tenant
has received all Permits, or (d) Landlord’s failure to deliver the Premises at
the time required by subsection (c) above with Landlord’s Work complete as
required pursuant to this Tenant Work Letter. Notwithstanding anything to the
contrary contained herein, neither an Uncontrollable Delay nor a Landlord Delay
shall include any of the foregoing delays to the extent caused by the acts,
omissions, or misconduct of Tenant or Tenant’s Agents. No Uncontrollable Delay
or Landlord Delay (except for (a) above) shall be deemed to have occurred unless
Tenant has given Landlord written notice that an act or omission on the part of
Landlord or its agents is about to occur or has occurred (with respect to an
alleged Landlord Delay) or that an event giving rise to an Uncontrollable Delay
is about to occur or has occurred (with respect to an Uncontrollable Delay)
which will cause a delay in the completion of the Tenant Improvements and
Landlord has failed to cure such delay (with respect to a Landlord Delay) or has
failed to remedy the situation giving rise to a potential Uncontrollable Delay
(with respect to an Uncontrollable Delay) within one (1) business day after
Landlord’s receipt of such notice, in which case the number of days of delay
after such notice shall be a Landlord Delay or an Uncontrollable Delay as
applicable. Any Landlord failure to provide authorization or approval under
(a) above shall be an automatic Landlord Delay and shall not require notice from
Tenant or any cure right for Landlord prior to being deemed as a Landlord Delay.

 

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SCHEDULE 1 TO EXHIBIT B

Conceptual Plan

 

LOGO [g30180dsp077.jpg]

 

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EXHIBIT C

NOTICE OF LEASE TERM DATES

 

To:                                              

 

                                              

 

                                              

 

                                              

 

Re: Lease dated November 3, 2015 (the “Lease”), by and between 3911/3931 SVB,
LLC, a California limited liability company (“Landlord”), and LIGAND
PHARMACEUTICALS INCORPORATED, a Delaware corporation (“Tenant”), for 4,712
rentable square feet of space (the “Premises”) in the office building located at
3911 Sorrento Valley Boulevard, San Diego, California 92121 (the “Building”).

Ladies and Gentlemen:

Notwithstanding any provision to the contrary contained in the Lease, this
letter is to confirm and agree upon the following:

 

1. Tenant has accepted the above-referenced Premises as being delivered in
accordance with the Lease, and there is no deficiency in construction.

 

2. The Lease Term shall commence on or has commenced on                     for
a term of                     ending on                     .

 

3. Rent commenced to accrue on                         , in the initial amount
of                     .

 

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

 

5. Your rent checks should be made payable to                     at
                    .

 

6. The number of rentable square feet of the Premises is 4,847.

 

7. Tenant’s Share of Direct Expenses with respect to the Premises is 9.12% of
the Building.

 

8. Capitalized terms used herein that are defined in the Lease shall have the
same meaning when used herein. Tenant confirms that the Lease has not been
modified or altered except as set forth herein, and the Lease is in full force
and effect. Landlord and Tenant acknowledge and agree that to each party’s
actual knowledge, neither party is in default nor violation of any covenant,
provision, obligation, agreement or condition in the Lease.

 

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If the provisions of this letter correctly set forth our understanding, please
so acknowledge by signing at the place provided below on the enclosed copy of
this letter and returning the same to Landlord.

 

“LANDLORD”:

3911/3931 SVB, LLC,

a California limited liability company

By:   CMN Master (T) LLC,  

a California limited liability company,

its Sole Member

  By:   Cruzan Properties - Investments (T), LLC,    

a California limited liability company,

its Managing Member

    By:                                                               Name:
Dennis S. Cruzan     Its: Member

Agreed to and Accepted as of             , 20    .

 

“TENANT”: LIGAND PHARMACEUTICALS INCORPORATED, a Delaware corporation

 

By:  

 

Name:  

 

Its:  

 

By:  

 

Name:  

 

Its:  

 

 

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EXHIBIT D

RULES AND REGULATIONS

Tenant shall faithfully observe and comply with the following Rules and
Regulations. Landlord shall not be responsible to Tenant for the nonperformance
of any of said Rules and Regulations by or otherwise with respect to the acts or
omissions of any other tenants or occupants of the Project.

In the event of any conflict between the Rules and Regulations and the other
provisions of this Lease, the latter shall control.

1. Tenant shall not alter any lock or install any new or additional locks or
bolts on any doors or windows of the Premises without obtaining Landlord’s prior
written consent. Tenant shall bear the cost of any lock changes or repairs
required by Tenant. Two keys will be furnished by Landlord for the Premises, and
any additional keys required by Tenant must be obtained from Landlord at a
reasonable cost to be established by Landlord. Upon the termination of this
Lease, Tenant shall restore to Landlord all keys of stores, offices, and toilet
rooms, either furnished to, or otherwise procured by, Tenant and in the event of
the loss of keys so furnished, Tenant shall pay to Landlord the cost of
replacing same or of changing the lock or locks opened by such lost key if
Landlord shall deem it necessary to make such changes.

2. Landlord reserves the right to install, close and keep locked gates at the
entrance to the Project and Common Areas during such hours as are customary.
Tenant, its employees and agents must be sure that the doors to the Building are
securely closed and locked when leaving the Premises if it is after the normal
hours of business for the Project. In case of invasion, mob, riot, public
excitement, or other commotion, Landlord reserves the right to prevent access to
the Project during the continuance thereof by any means it deems appropriate for
the safety and protection of life and property.

3. No furniture, freight or equipment of any kind shall be brought into the
Project without prior notice to Landlord. All moving activity into or out of the
Building shall be scheduled with Landlord and done only at such time and in such
manner as Landlord reasonably designates. Landlord shall have the right to
prescribe the weight, size and position of all safes and other heavy property
brought into the Building and also the times and manner of moving the same in
and out of the Building. Safes and other heavy objects shall, if considered
necessary by Landlord, stand on supports of such thickness as is necessary to
properly distribute the weight. Landlord will not be responsible for loss of or
damage to any such safe or property in any case. Any damage to any part of the
Building, its contents, occupants or visitors by moving or maintaining any such
safe or other property shall be the sole responsibility and expense of Tenant.

4. Furniture, packages, supplies, equipment or merchandise deliveries will be
received in the Premises only at the times, by such personnel, and in the areas
through entrances and exits as shall be reasonably designated by Landlord.
Tenant shall not make deliveries to or from their Premises in a manner that
might interfere with the use of Common Areas, other

 

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tenants’ use of their premises in the Building, or any use which is inconsistent
with good business practice.

5. Except as otherwise provided in the Lease, no sign, advertisement, notice or
handbill shall be exhibited, distributed, painted or affixed by Tenant on any
part of the Premises or the Building without the prior written consent of the
Landlord. Tenant shall not disturb, solicit, peddle, or canvass any occupant of
the Building and shall cooperate with Landlord and its agents of Landlord to
prevent same.

6. Any toilet rooms, urinals, wash bowls and other apparatus shall not be used
for any purpose other than that for which they were constructed, and no foreign
substance of any kind whatsoever shall be thrown therein. The expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by the tenant who, or whose employees, agents, visitors or licensees shall
have caused same.

7. Tenant shall not overload the floor of the Premises or mark, drive nails or
screws, or drill into the partitions, woodwork or drywall or in any way deface
the Premises or any part thereof without Landlord’s prior written consent.
Tenant shall not purchase spring water, ice, towel, linen, or other like
services from any person or persons not approved by Landlord.

8. Except for vending machines intended for the sole use of Tenant’s employees
and invitees, no vending machine or machines other than fractional horsepower
office machines shall be installed, maintained or operated upon the Premises
without the written consent of Landlord. Additionally, such vending machines, or
similar equipment, shall not be placed in a location which is visible from
outside the Tenant’s Premises.

9. Tenant shall not use or keep in or on the Premises, or the Building any
kerosene, gasoline, explosive material, corrosive material, material capable of
emitting toxic fumes, or other inflammable or combustible fluid chemical,
substitute or material. Tenant shall provide material safety data sheets for any
Hazardous Material used or kept on the Premises.

10. Tenant shall not use, keep or permit to be used or kept, any foul or noxious
gas or substance in or on the Premises, or permit or allow the Premises to be
occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors, or vibrations, or interfere
with other tenants or those having business therein, whether by the use of any
musical instrument, radio, phonograph, or in any other way. Tenant shall not
throw anything out of doors, windows or skylights or down passageways.

11. Landlord shall have the right at any time to exclude or eject from the
Project, animals of any kind, except service animals legally required to be
permitted, bicycles or other wheeled vehicles (other than bicycles in the
designated area described below), except wheelchairs. Owners of pets and service
animals must keep such animals leashed at all times and properly dispose of all
animal wastes. Bicycles shall be permitted to be stored on a first-come, first
serve basis in Landlord’s designated bicycle storage area. Tenant hereby waives
all claims against Landlord and knowingly assumes the risk of loss of or damage
to any property in the bicycle storage area.

 

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12. No cooking shall be done or permitted on the Premises (except as provided in
the following sentence in any kitchen which is part of the Tenant Improvements
or Alterations), nor shall any portion of the Premises be used for living
quarters, lodging, or for any improper, objectionable or immoral purposes.
Notwithstanding the foregoing, Underwriters’ laboratory-approved equipment and
microwave ovens may be used in the Premises for heating food and brewing coffee,
tea, hot chocolate and similar beverages for employees and visitors, provided
that such use is in accordance with all applicable federal, state, county and
city laws, codes, ordinances, rules and regulations.

13. The Premises shall not be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the use of the Premises
provided for in the Summary. Storage of such merchandise shall not be placed in
a location which is visible from outside the Tenant’s Premises. Tenant shall not
occupy or permit any portion of the Premises to be occupied as an office for a
messenger-type operation or dispatch office, public stenographer or typist, or
for the manufacture or sale of liquor, narcotics, or tobacco in any form, or as
a medical office, or as a barber or manicure shop, or as an employment bureau.
Tenant shall not engage or pay any employees on the Premises except those
actually working for such tenant on the Premises nor advertise for laborers
giving an address at the Premises.

14. Landlord reserves the right to exclude or expel from the Building any person
who, in the judgment of Landlord, is intoxicated or under the influence of
liquor or drugs, or who shall in any manner do any act in violation of any of
these Rules and Regulations.

15. Tenant, its employees and agents shall not loiter in or on the entrances,
corridors, sidewalks, lobbies, courts, halls, vestibules or any Common Area in
any way which would obstruct the ingress and egress to the Building.

16. Tenant shall store all its trash and garbage within the interior of the
Premises. No material shall be placed in the trash boxes or receptacles if such
material is of such nature that it may not be disposed of in the ordinary and
customary manner of removing and disposing of trash and garbage in San Diego,
California without violation of any law or ordinance governing such disposal. If
the Premises is or becomes infested with vermin as a result of the use or any
misuse or neglect of the Premises by Tenant, its agents, servants, employees,
contractors, visitors or licensees, Tenant shall forthwith, at Tenant’s expense,
cause the Premises to be exterminated from time to time to the reasonable
satisfaction of Landlord and shall employ Landlord’s exterminator service
contractor.

17. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.

18. No awnings or other projection shall be attached to the outside walls of the
Building without the prior written consent of Landlord, and no curtains, blinds,
shades or screens shall be attached to or hung in, or used in connection with,
any window or door of the Premises other than Building-standard. All electrical
ceiling fixtures hung in the Premises or spaces along the perimeter of the
Building must be of a quality, type, design and bulb color approved in advance
in writing by Landlord. Neither the interior nor exterior of any windows shall
be coated or otherwise sun screened without the prior written consent of
Landlord.

 

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19. Tenant may install and maintain, at Tenant’s sole cost and expense, outdoor
furniture and fixtures in such dedicated outdoor areas within Tenant’s Premises
in configurations approved by Landlord in Landlord’s sole discretion. All such
furnishings, fixtures, and equipment must comply with Landlord’s outdoor
furniture plan wherein furniture quality, type, design, models, finishes and
specifications are predetermined for Project-wide aesthetic consistency. Tenant
shall not install, plant or alter foliage in any way without prior written
consent of Landlord.

20. The sashes, sash doors, skylights, windows, and doors that reflect or admit
light and air into the Premises, passageways or other public places in the
Building shall not be covered or obstructed by Tenant, nor shall any bottles,
parcels or other articles be placed on the windowsills or against the vertical
glazing.

21. Tenant must comply with requests by the Landlord concerning the informing of
their employees of items of importance to the Landlord.

22. Smoking is prohibited in all areas of the Project, including the Building
and Premises.

23. Tenant hereby assumes all responsibility for the protection of Tenant and
its agents, employees, contractors, invitees and guests, and the property
thereof, from acts of third parties (excluding any Landlord Parties), including
keeping doors locked and other means of entry to the Premises closed, whether or
not Landlord, at its option, elects to provide security protection for the
Building or any portion thereof. Tenant further assumes the risk that any safety
and security devices, services and programs which Landlord elects, in its sole
discretion, to provide may not be effective, or may malfunction or be
circumvented by an unauthorized third party, and Tenant shall, in addition to
its other insurance obligations under this Lease, obtain its own insurance
coverage to the extent Tenant desires protection against losses related to such
occurrences. Tenant shall cooperate in any reasonable safety or security program
developed by Landlord or required by law.

24. All office equipment of any electrical or mechanical nature shall be placed
by Tenant in the Premises in settings that absorb or prevent any vibration,
noise and annoyance.

25. Tenant shall not use in any space or in the Common Areas of the Project, any
hand trucks except those equipped with rubber tires and rubber side guards.

26. No auction, liquidation, fire sale, going-out-of-business or bankruptcy sale
shall be conducted in the Premises.

27. Tenant shall install and maintain, at Tenant’s sole cost and expense, an
adequate, visibly marked and properly operational fire extinguisher next to any
duplicating or photocopying machines or similar heat producing equipment, which
may or may not contain combustible material, in the Premises.

28. Parking areas shall be utilized only for the parking vehicles no longer than
full-size passenger automobiles. Parking of any, trailer, recreational vehicle
or any vehicle longer

 

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than a standard full-sized passenger vehicle is prohibited without the prior
written consent of Landlord.

29. To the extent “Visitor Parking” spaces are provided in the Project, such
designated “Visitor Parking” spaces shall be subject to a maximum usage period
of 4 hours at any one time; provided, however, the foregoing limitation shall
not apply to any parking passes converted to reserved visitor parking spaces by
Tenant as provided in Article 28 of the Lease.

30. Project parking areas are not to be utilized for the maintenance, washing,
detailing or cleaning of vehicles without the prior written consent of Landlord.

31. Tenant grade level loading areas as permitted by Landlord under this Lease
are to be kept free and clear of debris. Except for the act of loading and
unloading deliveries, any roll-up door(s), designed for loading, are to remain
closed at all times. In no event shall the use of loading areas and roll-up
door(s) interfere with surrounding parking spaces or other tenants’ rightful use
of the Common Areas.

32. Tenant shall only conduct the sale of goods or services within Tenant’s
Premises and not at any time elsewhere in the Building or Common Areas.

33. Tenant shall not use Project Common Area Wi-Fi disproportionately such as
for “streaming” or for amphitheater needs.

34. Tenant shall not utilize the Building or affiliated logos or other images
for Tenant’s benefit or promotion, excepting physical street address, without
Landlord’s written consent, which consent shall not be unreasonably withheld.

Landlord reserves the right at any time to change or rescind any one or more of
these Rules and Regulations, or to make such other and further reasonable Rules
and Regulations (applicable to Tenant to the extent not inconsistent with the
other provisions of this Lease and upon thirty (30) days prior written notice)
as in Landlord’s commercially reasonable business judgment may from time to time
be necessary for the management, safety, care and cleanliness of the Premises,
Building and the Common Areas, and for the preservation of good order therein,
as well as for the convenience of other occupants and tenants therein. Landlord
may waive any one or more of these Rules and Regulations for the benefit of any
particular tenants (provided Landlord does not enforce the Rules and Regulations
in a discriminatory manner against Tenant), but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of any other
tenant, nor prevent Landlord from thereafter enforcing any such Rules or
Regulations against any or all tenants of the Building. Tenant shall be deemed
to have read these Rules and Regulations and to have agreed to abide by them as
a condition of its occupancy of the Premises.

 

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