Exhibit 10.1

FIRST AMENDMENT TO LEASE

This First Amendment to Lease (“Amendment”) is entered into, and dated for
reference purposes, as of May 2, 2014 (the “Execution Date”) by and between
METROPOLITAN LIFE INSURANCE COMPANY, a New York corporation (“Landlord”), and
ACELRX PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”), with reference
to the following facts (“Recitals”):

A. Landlord and Tenant are the parties to that certain lease which is comprised
of the following: that certain Lease, dated December 21, 2011, entered into by
and between Tenant, as tenant, and Landlord, as landlord (the “Existing Lease”),
for certain “Existing Premises” described therein containing approximately
13,787 rentable square feet and commonly known as a portion of the Building
(located at 301 Galveston Drive, Redwood City, California), all as more
particularly described in the Existing Lease.

B. Landlord and Tenant desire to provide for (i) the extension of the Term of
the Existing Lease; (ii) the lease to Tenant of Expansion Space (defined below)
for the extended term specified herein; and (iii) other amendments of the
Existing Lease as more particularly set forth below.

NOW, THEREFORE, in consideration of the foregoing, and of the mutual covenants
set forth herein and of other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:

SECTION 1. SCOPE OF AMENDMENT; DEFINED TERMS. Except as expressly provided in
this Amendment, the Existing Lease shall remain in full force and effect. Should
any inconsistency arise between this Amendment and the Existing Lease as to the
specific matters which are the subject of this Amendment, the terms and
conditions of this Amendment shall control. All capitalized terms used in this
Amendment and not defined herein shall have the meanings set forth in the
Existing Lease unless the context clearly requires otherwise; provided, however,
that the term “Lease” as used herein and, from and after the Execution Date, in
the Existing Lease shall refer to the Existing Lease as modified by this
Amendment.

SECTION 2. EXTENSION OF TERM. Landlord and Tenant acknowledge and agree that,
notwithstanding any provision of the Existing Lease to the contrary, the current
Term pursuant to the Existing Lease will expire on May 8, 2016, and that the
Term of the Lease is hereby extended for the period of twenty (20) months and
twenty-two (22) days (the “Extended Term”) commencing on May 9, 2016 (the
“Extension Commencement Date”) and expiring January 31, 2018 (hereafter, the
“Expiration Date” in lieu of the date provided in the Existing Lease), unless
sooner terminated pursuant to the terms of the Lease. Landlord and Tenant
acknowledge and agree that this Amendment provides all rights and obligations of
the parties with respect to extension of the current Term, whether or not in
accordance with any other provisions, if any, of the Existing Lease regarding
renewal or extension. The Option to Extend set forth in Section 3 of Rider 2 of
the Existing Lease shall continue in full force and effect.

SECTION 3. MONTHLY BASE RENT FOR EXTENDED TERM. Notwithstanding any provision of
the Existing Lease to the contrary, commencing on the Extension Commencement
Date and continuing through the Expiration Date of the Extended Term, the amount
of Monthly Base Rent payable by Tenant for the Existing Premises shall be as
follows:

 

Period from/to

   Monthly Base Rent  

May 9, 2016 to May 8, 2017

   $ 35,961.55   

May 9, 2017 to January 31, 2018

   $ 37,040.40   

SECTION 4. TENANT’S SHARE. During the remainder of the current Term and the
Extended Term, Tenant shall pay all Rent Adjustments payable under the Lease,
including Tenant’s Share of Operating Expenses, for the Existing Premises.
Notwithstanding any provisions of the Existing Lease to the contrary,

 

1

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

Tenant’s Share with respect to the Existing Premises shall continue to be as set
forth in Section 1.01(16) of the Existing Lease and as follows: Tenant’s
Building Share shall be 52.25%, Tenant’s Phase Share shall be 5.85% and Tenant’s
Project Share shall be 2.56%.

SECTION 5. “AS IS” CONDITION. Notwithstanding any provision of the Existing
Lease to the contrary, Tenant hereby leases for the Extended Term and accepts
the Existing Premises in its “AS IS” condition existing on the Execution Date,
without any express or implied representations or warranties of any kind by
Landlord, its brokers, manager or agents, or the employees of any of them
regarding the Existing Premises; and Landlord shall not have any obligation to
construct or install any tenant improvements or alterations or to pay for any
such construction or installation in the Existing Premises.

SECTION 6. INCREASE IN THE SECURITY. Notwithstanding any provision of the
Existing Lease to the contrary, upon execution of this Amendment Tenant shall
pay Landlord Fifty Thousand and 00/100 Dollars ($50,000.00) to be held by
Landlord to increase the amount of the cash portion of the Security required in
Section 1.01(14), Article Five and Section 2.3 of Rider 2 of the Existing Lease
from the amount of Thirty Thousand and 00/100 Dollars ($30,000.00) to the amount
of Eighty Thousand and 00/100 Dollars ($80,000.00), which greater amount is the
cash portion of the Security hereafter required under the Lease. The parties’
rights and obligations with respect to the One Hundred Fifty and 00/100 Thousand
Dollar ($150,000.00) Letter of Credit portion of the Security set forth in
Section 1.01(14), Article Five and Section 2.3 of Rider 2 of the Existing Lease
shall remain in full force and effect.

SECTION 7. DELETION. Notwithstanding any provisions of the Existing Lease to the
contrary, the Existing Lease is hereby amended to delete the Offer Right set
forth in Section 5 of Rider 2 of the Existing Lease.

SECTION 8. LEASE OF EXPANSION SPACE.

(a) Landlord hereby leases to Tenant and Tenant hereby hires from Landlord
Expansion Space (defined below) upon and subject to all of the terms, covenants
and conditions of the Existing Lease except as expressly provided herein.
“Expansion Space” is the part of the Building as shown on Exhibit A to this
Amendment. Landlord and Tenant hereby agree that (i) the Expansion Space is
conclusively presumed to be 12,106 rentable square feet; and (ii) this Amendment
provides all rights and obligations of the parties with respect to expansion of
the Existing Premises, whether or not in accordance with any other expansion
rights previously granted to Tenant; and upon execution hereof, any and all
other rights to expand are null, void and of no force or effect.

(b) Construction; Commencement Date; Term; Rent; Other Provisions.
Notwithstanding any provision of the Existing Lease to the contrary, the
following provisions shall govern the Expansion Space:

(1) Condition; Construction. Except as set forth in the Workletter (as defined
below) and except to the extent of any tenant improvement allowance described
below: (i) Landlord shall deliver the Expansion Space to Tenant in its AS IS
condition, without any express or implied representations or warranties of any
kind by Landlord, its brokers, manager or agents, or the employees of any of
them regarding the Expansion Space; and (ii) Landlord shall not have any
obligation to construct or install any tenant improvements or alterations or to
pay for any such construction or installation.

(2) Allowance. Landlord shall provide Tenant with a tenant improvement allowance
in accordance with Exhibit B to this Amendment (the “Workletter”).

(3) Commencement Date; Term. The Expansion Space Commencement Date shall mean
August 1, 2014 (the “Expansion Space Commencement Date”) and, upon the Expansion
Space Commencement Date, the Expansion Space becomes a part of the Premises, and
Tenant’s obligation to pay rent with respect to the Expansion Space commences.
The Term of the Lease of the Expansion Space (the “Expansion Space Term”) shall
continue until the Expiration Date, i.e. January 31, 2018, unless sooner
terminated pursuant to the terms of the Lease.

 

2

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

(c) Monthly Base Rent for Expansion Space Commencement Date. Notwithstanding any
provision of the Existing Lease to the contrary, Monthly Base Rent for the
Expansion Space is payable at the time and in the manner required for Monthly
Base Rent in the Existing Lease, but the amounts are additional to rent payable
under the Existing Lease, and the amount of Monthly Base Rent due and payable by
Tenant for the Expansion Space on the Expansion Space Commencement Date and
monthly thereafter for the Expansion Space Term shall be as follows:

 

Period from/to

   Monthly  

August 1, 2014 to July 31, 2015

   $ 23,001.40   

August 1, 2015 to July 31, 2016

   $ 23,691.44   

August 1, 2016 to July 31, 2017

   $ 24,402.18   

August 1, 2017 to January 31, 2018

   $ 25,134.25   

Tenant shall pay Landlord the initial installment of such Monthly Base Rent for
the Expansion Space concurrently with execution of this Amendment.

(d) Tenant’s Share of Operating Expenses & Rent Adjustment Deposit.
Notwithstanding any other provision of the Existing Lease to the contrary,
Landlord and Tenant acknowledge and agree that commencing on and after the
Expansion Space Commencement Date and continuing for the duration of the
Expansion Space Term:

(1) with respect to the Expansion Space Tenant shall additionally pay Tenant’s
Share of Operating Expenses for the Expansion Space at the time and in the
manner required for such payments in the Existing Lease, except that for
payments as to the Expansion Space only, Tenant’s Building Share shall be 46.75%
based on 25,893 square feet of Rentable Area of the Building, Tenant’s Phase
Share shall be 5.14% based on 235,620 square feet of Rentable Area of the Phase
and Tenant’s Project Share shall be 2.25% based on 537,445 square feet of
Rentable Area of the Project.

(2) Tenant shall correspondingly pay Rent Adjustment Deposits for the Expansion
Space at the same time and in the same manner as Tenant is required to pay Rent
Adjustment Deposits with respect to the Existing Premises.

SECTION 9. LIMITATION OF LANDLORD’S LIABILITY. Notwithstanding any provision of
the Existing Lease to the contrary (including, without limitation, Section 27.08
of the Existing Lease), Tenant agrees, on its behalf and on behalf of its
successors and assigns, that any liability or obligation of Landlord in
connection with this Lease shall only be enforced against Landlord’s equity
interests in the Project up to a maximum of Two Million Dollars ($2,000,000.00)
and in no event against any other assets of the Landlord, or Landlord’s officers
or directors or partners, and that any liability of Landlord with respect to
this Lease shall be so limited and Tenant shall not be entitled to any judgment
in excess of such amount.

SECTION 10. TIME OF ESSENCE. Without limiting the generality of any other
provision of the Existing Lease, time is of the essence to each and every term
and condition of this Amendment.

SECTION 11. BROKERS. Notwithstanding any other provision of the Existing Lease
to the contrary, Tenant represents that in connection with this Amendment it is
represented by Jones Lang LaSalle (“Tenant’s Broker”) and, except for Tenant’s
Broker and Landlord’s Broker identified below, Tenant has not dealt with any
real estate broker, sales person, or finder in connection with this Amendment,
and no such person initiated or participated in the negotiation of this
Amendment. Tenant hereby indemnifies and agrees to protect, defend and hold
Landlord and Cornish & Carey Commercial Newmark Knight Frank (“Landlord’s
Broker”) harmless from and against all claims, losses, damages, liability, costs
and expenses (including, without limitation, attorneys’ fees and expenses) by
virtue of any broker, agent or other person claiming a

 

3

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

commission or other form of compensation by virtue of alleged representation of,
or dealings or discussions with, Tenant with respect to the subject matter of
this Amendment, except for Landlord’s Broker. Tenant is not obligated to pay or
fund any amount to Landlord’s Broker, and Landlord hereby agrees to pay such
commission, if any, to which Landlord’s Broker is entitled in connection with
the subject matter of this Amendment pursuant to Landlord’s separate written
agreement with Landlord’s Broker. The provisions of this Section shall survive
the expiration or earlier termination of the Lease.

SECTION 12. ATTORNEYS’ FEES. Each party to this Amendment shall bear its own
attorneys’ fees and costs incurred in connection with the discussions preceding,
negotiations for and documentation of this Amendment. In the event that either
party brings any suit or other proceeding with respect to the subject matter or
enforcement of this Amendment or the Lease, the parties acknowledge and agree
that the provisions of Section 11.03 of the Existing Lease shall apply.

SECTION 13. EFFECT OF HEADINGS; RECITALS: EXHIBITS. The titles or headings of
the various parts or sections hereof are intended solely for convenience and are
not intended and shall not be deemed to or in any way be used to modify, explain
or place any construction upon any of the provisions of this Amendment. Any and
all Recitals set forth at the beginning of this Amendment are true and correct
and constitute a part of this Amendment as if they had been set forth as
covenants herein. Exhibits, schedules, plats and riders hereto which are
referred to herein are a part of this Amendment.

SECTION 14. ENTIRE AGREEMENT; AMENDMENT. This Amendment taken together with the
Existing Lease, together with all exhibits, schedules, riders and addenda to
each, constitutes the full and complete agreement and understanding between the
parties hereto and shall supersede all prior communications, representations,
understandings or agreements, if any, whether oral or written, concerning the
subject matter contained in this Amendment and the Existing Lease, as so
amended, and no provision of the Lease as so amended may be modified, amended,
waived or discharged, in whole or in part, except by a written instrument
executed by all of the parties hereto.

SECTION 15. OFAC. Landlord advises Tenant hereby that the purpose of this
Section is to provide to the Landlord information and assurances to enable
Landlord to comply with the law relating to OFAC.

Tenant hereby represents, warrants and covenants to Landlord, either that
(i) Tenant is regulated by the SEC, FINRA or the Federal Reserve (a “Regulated
Entity”) or (ii) neither Tenant nor any person or entity that directly or
indirectly (a) controls Tenant or (b) has an ownership interest in Tenant of
twenty-five percent (25%) or more, appears on the list of Specially Designated
Nationals and Blocked Persons (“OFAC List”) published by the Office of Foreign
Assets Control (“OFAC”) of the U.S. Department of the Treasury.

If, in connection with the Lease, there is one or more Guarantors of Tenant’s
obligations under the Lease, then Tenant further represents, warrants and
covenants either that (i) any such Guarantor is a Regulated Entity or
(ii) neither Guarantor nor any person or entity that directly or indirectly
(a) controls such Guarantor or (b) has an ownership interest in such Guarantor
of twenty-five percent (25%) or more, appears on the OFAC List.

Tenant covenants that during the term of the Lease to provide to Landlord
information reasonably requested by Landlord including without limitation,
organizational structural charts and organizational documents which Landlord may
deem to be necessary (“Tenant OFAC Information”) in order for Landlord to
confirm Tenant’s continuing compliance with the provisions of this Section.
Tenant represents and warrants that the Tenant OFAC Information it has provided
or to be provided to Landlord or Landlord’s Broker in connection with the
execution of this Amendment is true and complete.

SECTION 16. RATIFICATION. Tenant represents to Landlord that: (a) the Existing
Lease is in full force and effect and has not been modified except as provided
by this Amendment; (b) as of the Execution Date, there are no uncured defaults
or unfulfilled obligations on the part of Landlord or Tenant; and (c) Tenant is
currently in possession of the entire Premises as of the Execution Date, and
neither the Premises, nor any part thereof, is occupied by any subtenant or
other party other than Tenant.

 

4

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

SECTION 17. AUTHORITY. Each party represents and warrants to the other that it
has full authority and power to enter into and perform its obligations under
this Amendment, that the person executing this Amendment is fully empowered to
do so, and that no consent or authorization is necessary from any third party.
Landlord may request that Tenant provide Landlord evidence of Tenant’s
authority.

SECTION 18. DISCLOSURE REGARDING CERTIFIED ACCESS SPECIALIST. Pursuant to
California Civil Code Section 1938, Landlord hereby notifies Tenant that as of
the date of this Amendment, the Existing Premises and the Expansion Space have
not undergone inspection by a “Certified Access Specialist” to determine whether
the Existing Premises and the Expansion Space meet all applicable
construction-related accessibility standards under California Civil Code
Section 55.53.

SECTION 19. ENERGY UTILITY USAGE. If Tenant is billed directly by a public
utility with respect to Tenant’s energy usage at the Existing Premises and the
Expansion Space, then, upon request, Tenant shall provide monthly energy utility
usage for the Existing Premises and the Expansion Space to Landlord for the
period of time requested by Landlord (in electronic or paper format) or, at
Landlord’s option, provide any written authorization or other documentation
required for Landlord to request information regarding Tenant’s energy usage
with respect to the Existing Premises and the Expansion Space directly from the
applicable utility company.

SECTION 20. COUNTERPARTS. This Amendment may be executed in duplicates or
counterparts, or both, and such duplicates or counterparts together shall
constitute but one original of the Amendment, and the signature of any party to
any counterpart shall be deemed a signature to, and may be appended to, any
other counterpart. Each duplicate and counterpart shall be equally admissible in
evidence, and each original shall fully bind each party who has executed it.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

5

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

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
date first set forth above.

 

TENANT:    

ACELRX PHARMACEUTICALS, INC.,

a Delaware corporation

    By:  

/s/ Richard King

    Print Name:   Richard King     Title:   President & CEO     (Chairman of
Board, President or Vice President)     By:  

/s/ Timothy E. Morris

    Print Name:   Timothy E. Morris     Title:   CFO     (Secretary, Assistant
Secretary, CFO or Assistant Treasurer) LANDLORD:     METROPOLITAN LIFE INSURANCE
COMPANY,     a New York corporation     By:  

/s/ Leland Low

    Print Name:   Leland Low     Title:   Director

 

6

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

EXHIBIT A

EXPANSION SPACE

 

LOGO [g7223151.jpg]

 

A-1

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

EXHIBIT B

WORKLETTER AGREEMENT

(TENANT BUILD)

 

1. “AS IS” Condition; Delivery.

Except to the extent expressly provided in this Workletter, Landlord shall
deliver the Expansion Space broom clean in its current “as built” configuration
with existing build-out of the tenant space, with the Expansion Space and the
Building (including the “Base Building”, as defined below) in their AS IS
condition, without any express or implied representations or warranties of any
kind by Landlord, its brokers, manager or agents, or the employees of any of
them; and Landlord shall not have any obligation to construct or install any
tenant improvements or alterations or to pay for any such construction or
installation. This WorkLetter, including, without limitation, Section 2 hereof,
governs the parties’ obligations with respect to the Tenant Improvements to be
performed in the Expansion Space (it being agreed that the terms of
Section 7.01(b) of the Original Lease apply with regard to any improvements or
alterations performed in the Existing Premises, if any).

 

2. Landlord Work.

There shall be no Landlord Work, except as provided in this Section 2.
Notwithstanding anything in Section 7.01(b) of the Original Lease to the
contrary, Landlord, at its sole cost and expense (and subject to inclusion in
Operating Expenses to the extent permitted by Article 4 of the Original Lease),
shall be responsible for correcting any violations of Laws (including Title III
of the ADA), as interpreted and enforced to apply to the exterior Common Areas
of the Building as of the date Landlord delivers possession of the Expansion
Space to Tenant (the “Delivery Date”), to the extent such violations of Laws are
existing as of the Delivery Date in the exterior Common Areas of the Building
(with any such corrections referred to herein as the “Required Upgrades”).
Landlord shall have the right to contest any alleged Required Upgrades in good
faith, including, without limitation, the right to apply for and obtain a waiver
or deferment of compliance, the right to assert any and all defenses allowed by
Law and the right to appeal any decisions, judgments or rulings to the fullest
extent permitted by Law; provided that Landlord shall diligently prosecute any
such contest and appeal. Landlord, after the exhaustion of any and all rights to
appeal or contest, will make or pay for (as applicable) all Required Upgrades
required in accordance with this Section. In the event that Tenant becomes aware
of Required Upgrades, Tenant shall give prompt, written, reasonably detailed
notice thereof to Landlord (“Upgrade Notice”). Following Landlord’s receipt of
Tenant’s Upgrade Notice, Landlord shall use commercially reasonable and diligent
efforts, subject to Landlord’s right to dispute or appeal, in good faith, the
Required Upgrades as set forth above, to complete the Required Upgrades as soon
as practicable following the date of receipt of Tenant’s Upgrade
Notice. Landlord and Tenant agree to reasonably cooperate with each other in
order to enable the Required Upgrades to be performed in a timely manner and
with as little inconvenience to the construction of the Tenant Improvements as
is reasonably possible, and Tenant agrees to use commercially reasonable efforts
to continue its planning and construction of the Tenant Improvements during the
period of such Required Upgrades to the extent practicable and permitted by
Law. Provided that Landlord is proceeding with diligence to complete the
Required Upgrades in accordance with the foregoing provisions, Landlord shall
not be subject to any liability for any delays in completion of the Required
Upgrades, nor shall Landlord be in default hereunder, nor shall such delay
entitle Tenant to any credit or abatement of rent, but Landlord shall continue
to proceed with diligence to complete the Required Upgrades as soon as
practicable. For the avoidance of doubt, Landlord’s obligation to pay for the
Required Upgrades as set forth above shall include (but not be limited to) the
obligation to pay for the following: any required changes to the parking lot
slope and the performance of any upgrades required to the sidewalk or ramp
located outside the single door point of egress marked with a “*LR” (Landlord’s
Responsibility) on the plan attached hereto as Exhibit B-1.

 

B-1

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

3. Tenant’s Plans.

3.1. Description. At its expense, Tenant shall employ:

(i) one or more architects reasonably satisfactory to Landlord and licensed by
the State of California (“Tenant’s Architect”) to prepare architectural drawings
and specifications for all layout and Expansion Space improvements not included
in, or requiring any change or addition to, the AS IS condition or Landlord Work
(if any);

(ii) one or more engineers reasonably satisfactory to Landlord and licensed by
the State of California (“Tenant’s Engineers”) to prepare mechanical and
electrical working drawings and specifications for all Expansion Space
improvements not included in, or requiring any change or addition to, the AS IS
condition or Landlord Work (if any);

(iii) the structural engineer designated by Landlord and licensed by the State
of California to prepare structural working drawings and specifications for all
Expansion Space improvements not included in, or requiring any change or
addition to the AS IS condition or Landlord Work (if any); and

(iv) the fire and life-safety engineer designated by Landlord and licensed by
the State to prepare structural working drawings and specifications for all
Expansion Space improvements not included in, or requiring any change or
addition to the AS IS condition or Landlord Work (if any).

All such drawings and specifications are referred to herein as “Tenant’s Plans”.
A draft of Tenant’s Plans are attached hereto as Exhibit B-1. Tenant’s Plans
shall be in form and detail sufficient to secure all applicable governmental
approvals. Tenant’s Architect shall be responsible for coordination of all
engineering work for Tenant’s Plans and shall coordinate with any consultants of
Tenant (the use of which is subject to Landlord’s consent), and Landlord’s space
planner or architect to assure the consistency of Tenant’s Plans with the Base
Building and Landlord Work (if any).

Tenant shall pay Landlord, within ten (10) days of receipt of each invoice from
Landlord, the cost incurred by Landlord for Landlord’s architects and engineers
to review Tenant’s Plans for consistency of same with the Base Building and
Landlord Work (if any); provided, however, there shall be no review cost for
Tenant’s Plans with respect to the mechanical and electrical working drawings if
Tenant employs Landlord’s Mechanical Engineer and Landlord’s Electrical Engineer
for such services. Tenant’s Plans shall also include the following:

(a) Final Space Plan: The “Final Space Plan” for the Expansion Space shall
include a full and accurate description of room titles, floor loads, alterations
to the Base Building or Landlord Work (if any) or requiring any change or
addition to the AS IS condition, and the dimensions and location of all
partitions, doors, aisles, plumbing (and furniture and equipment to the extent
same affect floor loading). The Final Space Plan shall (i) be compatible with
the design, construction, systems and equipment of the Base Building and
Landlord Work, if any; (ii) specify only materials, equipment and installations
which are new and of a grade and quality no less than existing components of the
Building where they were originally installed (collectively, (i) and (ii) may be
referred to as “Building Standards”), (iii) comply with Laws, (iv) be capable of
logical measurement and construction, and (v) contain all such information as
may be required for the preparation of the Mechanical and Electrical Working
Drawings and Specifications (including, without limitation, a capacity and usage
report, from Landlord’s engineers pursuant to Section 3.1(b). below, for all
mechanical and electrical systems in the Expansion Space). Following approval by
Landlord, the Final Space Plan shall be reviewed and approved by the City
Building and Fire Departments, and shall be placed on file with the Building
Department, registered with a preliminary plan check number.

(b) Mechanical and Electrical Working Drawings and Specifications: Tenant shall
employ engineers approved by Landlord to prepare Mechanical and Electrical
Working Drawings and Specifications showing complete plans for electrical, fire
and life-safety, automation, plumbing, water, and air cooling, ventilating,
heating and temperature control and shall employ Landlord’s Mechanical Engineer
and Landlord’s Electrical Engineer to prepare a capacity and usage report
(“Capacity Report”) for all mechanical and electrical systems in the Expansion
Space.

 

B-2

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

(c) Issued for Construction Documents: The “Issued for Construction Documents”
shall consist of all drawings (1/8” scale) and specifications necessary to
construct all Expansion Space improvements including, without limitation,
architectural and structural working drawings and specifications and Mechanical
and Electrical Working Drawings and Specifications and all applicable
governmental authorities plan check corrections.

3.2. Approval by Landlord. Tenant’s Plans and any revisions thereof shall be
subject to Landlord’s approval, which approval or disapproval:

(i) shall not be unreasonably withheld, provided however, that Landlord may
disapprove Tenant’s Plans in its sole and absolute discretion if they
(a) adversely affect the structural integrity of the Building, (b) adversely
affect any of the Building Systems (as defined below), the Common Areas or any
other tenant space (whether or not currently occupied), (c) fail to fully comply
with Laws, (d) affect the exterior appearance of the Building, or (e) provide
for improvements which do not meet or exceed the Building Standards, or
(f) involve any installation on the roof, or otherwise affect the roof, roof
membrane or any warranties regarding either. Building Systems collectively shall
mean the structural, electrical, mechanical (including, without limitation,
heating, ventilating and air conditioning), plumbing, fire and life-safety
(including, without limitation, fire protection system and any fire alarm),
communication, utility, gas (if any), security (if any), and elevator (if any)
systems in the Building.

(ii) shall not be delayed beyond ten (10) business days with respect to initial
submissions and major change orders (those which impact Building Systems or any
other item listed in subpart (i) of Section 3.2 above) and beyond five
(5) business days with respect to required revisions and any other change
orders.

If Landlord disapproves of any of Tenant’s Plans, Landlord shall advise Tenant
of what Landlord disapproves in reasonable detail. After being so advised by
Landlord, Tenant shall submit a redesign, incorporating the revisions required
by Landlord, for Landlord’s approval. The approval procedure shall be repeated
as necessary until Tenant’s Plans are ultimately approved. Approval by Landlord
shall not be deemed to be a representation or warranty by Landlord with respect
to the safety, adequacy, correctness, efficiency or compliance with Laws of
Tenant’s Plans. Tenant shall be fully and solely responsible for the safety,
adequacy, correctness and efficiency of Tenant’s Plans and for the compliance of
Tenant’s Plans with any and all Laws.

3.3. Landlord Cooperation. Landlord shall cooperate with Tenant and make good
faith efforts to coordinate Landlord’s construction review procedures to
expedite the planning, commencement, progress and completion of Tenant Work
(defined below). Landlord shall complete its review of each stage of Tenant’s
Plans and any revisions thereof and communicate the results of such review
within the time periods set forth in Section 3.2 above.

3.4. City Requirements. Any changes in Tenant’s Plans which are made in response
to requirements of the applicable governmental authorities and/or changes which
affect the Base Building shall be immediately submitted to Landlord for
Landlord’s review and approval.

3.5. “As-Built” Drawings and Specifications. A CADD-DXF diskette file and a set
of mylar reproducibles of all “as-built” drawings and specifications of the
Expansion Space (reflecting all field changes and including, without limitation,
architectural, structural, mechanical and electrical drawings and
specifications) prepared by Tenant’s Architect and Engineers or by Contractors
(defined below) shall be delivered by Tenant at Tenant’s expense to the Landlord
within thirty (30) days after completion of the Tenant Work. If Landlord has not
received such drawings and diskette(s) within thirty (30) days, Landlord may
give Tenant written notice of such failure. If Tenant does not produce the
drawings and diskette(s) within ten (10) days after Landlord’s written notice,
Landlord may, at Tenant’s sole cost which may be deducted from the Allowance,
produce the drawings and diskette(s) using Landlord’s personnel, managers, and
outside consultants and contractors. Landlord shall receive an hourly rate
reasonable for such production.

 

B-3

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

3.6. Lender’s Certificate. Tenant shall cause Tenant’s Architect to provide to
Landlord’s lender(s), within ten (10) days after request of Landlord, a
certificate, in form and substance satisfactory to such lender(s), certifying
that, as of the date of the certificate, Tenant Work and its use fully comply
with all Laws in effect at the time Tenant took occupancy.

 

4. Tenant Work.

4.1. Tenant Work Defined. All tenant improvement work required by the Issued for
Construction Documents (including, without limitation, any approved changes,
additions or alterations pursuant to Section 7 below) is referred to in this
Workletter as “Tenant Work” (and all improvements so required and resulting
therefrom may sometimes in the Lease, or otherwise, be referred to as “Tenant
Improvements”).

4.2. Tenant to Construct. Tenant shall construct all Tenant Work pursuant to
this Workletter, and except to the extent modified by or inconsistent with
express provisions of this Workletter, pursuant with the provisions of the terms
and conditions of Article Nine of the Lease, governing Tenant Alterations
(except to the extent modified by this Workletter) and all such Tenant Work
shall be considered “Tenant Alterations” for purposes of the Lease.

4.3. Construction Contract. All contracts and subcontracts for Tenant Work shall
include any terms and conditions required by Landlord.

4.4. Contractor. Tenant shall select one or more contractors (“Contractor”) and
one or more subcontractors (“Subcontractors”) to perform the Tenant Work,
subject to Landlord’s prior written approval, which shall not be unreasonably
withheld.

4.5. Division of Landlord Work and Tenant Work. Tenant Work is defined in
Section 4.1. above and Landlord Work, if any, is defined in Section 2.

 

5. Tenant’s Expense; Allowance.

Tenant shall pay for all Tenant Work, including, without limitation, the costs
of design thereof, whether or not all such costs are included in the “Permanent
Improvement Costs” (defined below). Subject to the terms and conditions of this
Workletter, Tenant shall apply the “Allowance” (defined below) to payment of the
Permanent Improvement Costs. The term “Permanent Improvement Costs” shall mean
the actual and reasonable costs of construction of that Tenant Work which
constitutes permanent improvements to the Expansion Space, actual and reasonable
costs of design thereof, costs incurred by Landlord for Landlord’s architects
and engineers pursuant to Section 3.1, and Landlord’s construction
administration fee (defined in Section 8.12 below), and shall exclude costs of
“Tenant’s FF& E” (defined below). For purposes of this Workletter, “Tenant’s FF&
E” shall mean furniture, furnishings, telephone systems, computer systems,
equipment, any other personal property or fixtures, and installation thereof.
Landlord shall provide Tenant a tenant improvement allowance (“Allowance”) in
the amount of Twenty and 00/100 Dollars ($20.00) per square foot of the Rentable
Area of the Expansion Space. The Allowance shall be used solely to reimburse
Tenant for the Permanent Improvement Costs. If Tenant does not utilize one
hundred percent (100%) of the Allowance for Permanent Improvement Costs and
submit full and complete application(s) for disbursement thereof pursuant to
Section 6 below on or before December 31, 2014, Tenant shall have no right to
the unused portion of the Allowance.

 

6. Application and Disbursement of the Allowance.

6.1. Tenant shall prepare a budget for all Tenant Work, including the Permanent
Improvement Costs and all other costs of the Tenant Work (“Budget”), which
Budget shall be subject to the reasonable approval of Landlord. Such Budget
shall be supported by a guaranteed maximum price construction contract and such
other documentation as Landlord may require to evidence the total costs.
Further, prior to any disbursement of the Allowance by Landlord, Tenant shall
pay and disburse its own funds for all that portion of

 

B-4

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

the Permanent Improvement Costs equal to the sum of (i) the Permanent
Improvement Costs in excess of the Allowance; plus (ii) the amount of
“Landlord’s Retention” (defined below). “Landlord’s Retention” shall mean an
amount equal to fifteen percent (15%) of the Allowance, which Landlord shall
retain out of the Allowance and shall not be obligated to disburse unless and
until after Tenant has completed the Tenant Work and complied with Section 6.4
below. No disbursement of the Allowance shall be made unless Tenant has provided
Landlord with (a) bills and invoices covering all labor and material expended
and used, (b) an affidavit from Tenant stating that all of such bills and
invoices have either been paid in full by Tenant or are due and owing, and all
such costs qualify as Permanent Improvement Costs, (c) contractors affidavit
covering all labor and materials expended and used, (d) Tenant, contractors and
architectural completion affidavits (as applicable), and (e) valid mechanics’
lien releases and waivers pertaining to any completed portion of the Tenant Work
which shall be conditional or unconditional, as applicable, all as provided
pursuant to Section 6.2 and 6.4 below.

6.2. Upon Tenant’s full compliance with the provisions of Section 6, and if
Landlord determines that there are no applicable or claimed stop notices (or any
other statutory or equitable liens of anyone performing any of Tenant Work or
providing materials for Tenant Work) or actions thereon, Landlord shall disburse
the applicable portion of the Allowance as follows:

(a) In the event of conditional releases, to the respective contractor,
subcontractor, vendor, or other person who has provided labor and/or services in
connection with the Tenant Work, upon the following terms and conditions:
(i) such costs are included in the Budget, are Permanent Improvement Costs, are
covered by the Allowance, and Tenant has completed and delivered to Landlord a
written request for payment, in form reasonably approved by Landlord, setting
forth the exact name of the contractor, subcontractor or vendor to whom payment
is to be made and the date and amount of the bill or invoice, (ii) the request
for payment is accompanied by the documentation set forth in Section 6.1; and
(iii) Landlord, or Landlord’s appointed agent, has inspected and approved the
work for which Tenant seeks payment; or

(b) In the event of unconditional releases, directly to Tenant upon the
following terms and conditions: (i) Tenant seeks reimbursement for costs of
Tenant Work which have been paid by Tenant, are included in the Budget, are
Permanent Improvement Costs, and are covered by the Allowance; (ii) Tenant has
completed and delivered to Landlord a request for payment, in form reasonably
approved by Landlord, setting forth the name of the contractor, subcontractor or
vendor paid and the date of payment, (iii) the request for payment is
accompanied by the documentation set forth in Section 6.1.; and (iv) Landlord,
or Landlord’s appointed agent, has inspected and approved the work for which
Tenant seeks reimbursement.

6.3. Tenant shall provide Landlord with the aforementioned documents by the 15th
of the month and payment shall be made by the 30th day of the month following
the month in which such documentation is provided.

6.4. Prior to Landlord disbursing the Landlord’s Retention to Tenant, Tenant
shall submit to Landlord the following items within thirty (30) days after
completion of the Tenant Work: (i) “As Built” drawings and specifications
pursuant to Section 3.5 above, (ii) all unconditional lien releases from all
general contractor(s) and subcontractor(s) performing work, (iii) a “Certificate
of Completion” prepared by Tenant’s Architect, and (iv) a final budget with
supporting documentation detailing all costs associated with the Permanent
Improvement Costs.

 

7. Changes, Additions or Alterations.

If Tenant desires to make any non-de minimis change, addition or alteration or
desires to make any change, addition or alteration to any of the Building
Systems after approval of the Issued for Construction Documents, Tenant shall
prepare and submit to Landlord plans and specifications with respect to such
change, addition or alteration. Any such change, addition or alteration shall be
subject to Landlord’s approval in accordance with the provisions of Section 3.2
of this Workletter. Tenant shall be responsible for any submission to and plan
check and permit requirements of the applicable governmental authorities.

 

B-5

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

8. Miscellaneous.

8.1. Scope. Except as otherwise set forth in the Lease, this Workletter shall
not apply to any space added to the Expansion Space by Lease option or
otherwise.

8.2. Tenant Work shall include (at Tenant’s expense) for all of the Expansion
Space:

(a) Building approved lighting sensor controls as necessary to meet applicable
Laws;

(b) Building Standard fluorescent fixtures in all Building office areas;

(c) Building Standard meters for each of electricity and chilled water used by
Tenant shall be connected to the Building’s system and shall be tested and
certified prior to Tenant’s occupancy of the Expansion Space by a State
certified testing company;

(d) Building Standard ceiling systems (including tile and grid) and;

(e) Building Standard air conditioning distribution and Building Standard air
terminal units.

8.3. Sprinklers. Subject to any terms, conditions and limitations set forth
herein, Landlord shall provide an operative sprinkler system consisting of
mains, laterals, and heads “AS IS” on the date of delivery of the Expansion
Space to Tenant. Tenant shall pay for piping distribution, drops and relocation
of, or additional, sprinkler system heads and Building fire hose or fire hose
valve cabinets, if Tenant’s Plans and/or any applicable Laws necessitate such.

8.4. Floor Loading. Floor loading capacity shall be within building designing
capacity. Tenant may exceed floor loading capacity with Landlord’s consent, at
Landlord’s sole discretion and must, at Tenant’s sole cost and expense,
reinforce the floor as required for such excess loading.

8.5. Work Stoppages. If any work on the Real Property other than Tenant Work is
delayed, stopped or otherwise affected by construction of Tenant Work, Tenant
shall immediately take those actions necessary or desirable to eliminate such
delay, stoppage or effect on work on the Real Property other than Tenant Work.

8.6. Life-safety. Tenant (or Contractor) shall employ the services of a fire and
life-safety subcontractor reasonably satisfactory for all fire and life-safety
work at the Building.

8.7. Locks. Tenant agrees to purchase from Landlord or its agent all cylinders
and keys used in locks used in the Expansion Space.

8.8 Authorized Representatives. Tenant has designated Jim Welch to act as
Tenant’s representative with respect to the matters set forth in this
Workletter. In the event that and for so long as more than one individual is so
designated, notices or requests from Landlord shall be sufficiently given or
delivered if given or delivered to either individual, each individual is hereby
authorized to act individually and alone, and each shall have full authority and
responsibility to act on behalf of Tenant as required in this Workletter. Tenant
may add or delete authorized representatives upon five (5) business days notice
to Landlord.

8.9. Access to Expansion Space. After Landlord has recovered possession of the
Expansion Space from any prior tenant, commencing on May 15, 2014 (the “Early
Possession Date”), Tenant and its architects, engineers, consultants, and
contractors shall have access at reasonable times and upon advance notice and
coordination with the Building management, to the Expansion Space for the
purpose of inspecting the Expansion Space and planning Tenant Work. Such access,
and all acts and omissions in connection with it, shall be subject to and
governed by all other provisions of the Lease, including, without limitation,
Tenant’s indemnification obligations, insurance obligations, etc, except for the
payment of Base Rent and Additional Rent.

 

B-6

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

8.10. Fee. Landlord shall receive a fee equal to one percent (1.0%) of Tenant’s
construction contract for all costs, including, without limitation, materials,
labor, supervision, profit, overhead or general conditions in connection with
the construction of the Tenant Work. Such fee is in addition to Tenant’s
reimbursement of costs incurred by Landlord pursuant to other provisions hereof,
including, without limitation, for Landlord’s architects and engineers to review
Tenant’s Plans. Such fee may be deducted from the Allowance.

8.11. Unions. Tenant shall utilize union contractors and/or subcontractors.

 

9. Force and Effect.

The terms and conditions of this Workletter shall be construed to be a part of
the Lease and shall be deemed incorporated in the Lease by this reference.
Should any inconsistency arise between this Workletter and the Lease as to the
specific matters which are the subject of this Workletter, the terms and
conditions of this Workletter shall control.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

B-7

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

EXHIBIT B-1

DRAFT OF TENANT’S PLANS

 

LOGO [g7223152.jpg]

 

B-8