Exhibit 10.1

 

SORRENTO SUMMIT

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 HCPI/SORRENTO, LLC, a Delaware limited liability company ("Landlord"),
and NUVASIVE, INC., a Delaware corporation ("Tenant"), and, subject to the terms
of Section 2.3 of this Lease, amends, restates and supersedes that certain
Office Lease Agreement entered into by Landlord and Tenant as of November 6,
2007 (the "Initial Lease") in its entirety, as of the date of this Lease set
forth below, with respect to all of Landlord's and Tenant's respective rights,
duties and obligations thereunder relating to the Existing Premises, and the
Building and the Project (as such terms are hereinafter defined).

SUMMARY OF BASIC LEASE INFORMATION

 

TERMS OF LEASE

DESCRIPTION

1.           Date:

August 28, 2017.

2.           Project and Premises
(Article 1).

 

2.1         Project:

That certain separate legal parcel of real property currently identified as
Assessor’s Parcel No. 340-090-34, and which real property is commonly known as
or otherwise described as 7473, 7475 and 7475B Lusk Boulevard in San Diego,
California.  The current configuration of the Project is shown on the Project
Site Plan attached hereto as Exhibit A-1 (the “Site Plan”).  The Project
currently consists of the Lusk 1 Building and the Lusk 2 Building (as
hereinafter defined), the Parking Structure (as hereinafter defined) and the
other Common Areas (as defined in Section 1.1.3 of this Lease), exclusive,
however, of that portion of the Project depicted and identified on the Site Plan
as the Lusk 3 Construction Area (the "Construction Area"), which shall be
excluded from the Project for the purposes of the costs and expenses of
improvements, maintenance, repairs and modifications to or within the
Construction Area from the Lease Commencement Date until the Must-Take 2
Delivery Date (as defined in Section 1.4.3 of this Lease) for purposes of
determining the Operating Expenses of the Project as Additional Rent pursuant to
Section 4.2 of this Lease (with such costs and expenses of the Construction Area
to be included in the Development Costs, as defined in Section 1.4.4.3 of this
Lease, to the extent incurred and paid by Landlord prior to the Must-Take 2
Delivery Date).  

 

Commencing upon the Must-Take 2 Delivery Date, the "Project" shall mean and
include all of the Project Structures (as defined below), and all of the Common
Areas, including, without limitation, the Lusk 3 Building and all portions of
the Construction Area.

 

 

 

 

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2.2         Project Structures:

 

2.2.1         Buildings:

Lusk 1 Building: Those certain buildings (collectively, the "Lusk 1 Building")
located at 7475 Lusk Boulevard and 7475B Lusk Boulevard, San Diego, California,
and commonly known as Lusk 1 Building, which Lusk 1 Building contains
approximately 74,050 rentable square feet of space.

 

Lusk 2 Building: That certain building (the "Lusk 2 Building") located at 7473
Lusk Boulevard, San Diego, California, and commonly known as Lusk 2 Building,
which Lusk 2 Building contains approximately 149,891 rentable square feet of
space.

 

Lusk 3 Building: That certain building (the "Lusk 3 Building") to be constructed
by Landlord and delivered to Tenant in accordance with the terms of this Lease,
including without limitation Exhibit B-3, attached hereto, which is to be
located at the approximate location of the Amenity Building shown on the Site
Plan, which Lusk 3 Building shall contain approximately 28,000 rentable square
feet of space.

Unless otherwise set forth herein to the contrary, as used herein, the Lusk 1
Building and the Lusk 2 Building are sometimes referred to herein as the
"Existing Buildings"; and the Lusk 1 Building, Lusk 2 Building and the Lusk 3
Building shall each be known individually  as a "Building," and collectively, as
the "Buildings."

2.2.2         Parking Structure:

The existing parking structure of the Project in the location depicted on the
Site Plan. The Parking Structure and the Buildings are sometimes hereinafter
referred to collectively as the “Project Structures.”

 

 

 

 

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2.3         Premises:

All of the interior space within those portions of the Buildings leased from
time to time by Tenant in accordance with the terms and conditions of this Lease
(including, without limitation, all of the stairwells, connecting walkways,
lobbies and atriums of each Building that is entirely leased to Tenant pursuant
to this Lease), and as hereinafter provided:

a)    From the Lease Commencement Date until the Must-Take 1 Commencement Date
(as defined in Section 3.5 of this Summary), the Premises shall consist of the
Initial Premises, as hereinafter defined;

b)    From the Must-Take 1 Commencement Date until the earlier of (i) the
Must-Take 2 Commencement Date (as defined in Section 3.6 of this Summary), or
(ii) the Must-Take 3 Commencement Date (as defined in Section 3.7 of this
Summary), the Premises shall consist of the Initial Premises and the Must-Take
Space 1, as hereinafter defined, collectively;

c)    (i) If the Must-Take 2 Commencement Date occurs before the Must-Take 3
Commencement Date, then from the Must-Take 2 Commencement Date until the
Must-Take 3 Commencement Date, the Premises shall consist of the Initial
Premises, Must-Take Space 1 and Must-Take Space 2, as hereinafter defined,
collectively; or (ii) if the Must-Take 3 Commencement Date occurs before the
Must-Take 2 Commencement Date, then from the Must-Take 3 Commencement Date until
the Must-Take 2 Commencement Date, the Premises shall consist of the Initial
Premises, Must-Take Space 1 and Must-Take Space 3, as hereinafter defined,
collectively; and

d)    Commencing on the later of (i) the Must-Take 3 Commencement Date and
(ii) the Must-Take 2 Commencement Date, and for the remainder of the Lease Term,
the Premises shall consist of the Initial Premises, Must-Take Space 1, Must-Take
Space 2 and Must-Take Space 3, collectively.

2.3.1     Initial Premises:  

Approximately 145,225 rentable square feet of space located in the Buildings,
which was leased by Tenant from Landlord pursuant to the Initial Lease and which
Tenant will continue to occupy from and after the Lease Commencement Date
pursuant to this Lease, and which is comprised of (i) the entirety of the Lusk 1
Building (approximately 74,050 rentable square feet), and  (ii) approximately
71,175 rentable square feet of space located in the Lusk 2 Building (consisting
of (a) a portion of the basement, (b) a portion of the first (1st) floor, (c) a
portion of the second (2nd) floors, and (d) the entirety of the third (3rd)
floor), as more particularly identified in Exhibit A attached hereto.  

 

 

 

 

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2.3.2     Must-Take Space 1
   (Section 1.3):

Approximately 24,105 rentable square feet of space located on the second (2nd)
floor of the Lusk 2 Building, as more particularly identified in Exhibit A‑2
attached hereto, to be delivered to Tenant in accordance with the terms and
conditions of Section 1.3 of this Lease, including without limitation
Exhibit B-2 attached hereto.

2.3.3     Must-Take Space 2
 (Section 1.4):

All of the area of the Lusk 3 Building, as determined in accordance with Section
1.4 below, in the location generally depicted in Exhibit A-3 attached hereto, to
be delivered to Tenant in accordance with the terms and conditions of
Section 1.4 of this Lease, including without limitation Exhibit B-3 attached
hereto.

2.2.4     Must-Take Space 3
 (Section 1.5):

Approximately 54,611 rentable square feet of space located on the first (1st)
floor and basement level of the Lusk 2 Building as more particularly identified
in Exhibit A-4 attached hereto, to be delivered to Tenant in accordance with the
terms and conditions of Section 1.5 of this Lease and Exhibit B-2 attached
hereto.

3.           Lease Term
(Article 2).

 

3.1        Length of Term:

The Lease Term shall commence on the Lease Commencement Date and shall expire on
the Lease Expiration Date and is anticipated to be approximately seventeen (17)
years (in accordance with the estimated Must-Take 2 Commencement Date set forth
in Section 3.6 of this Summary), unless earlier terminated in accordance with
the terms and conditions of this Lease, and subject to the Tenant’s two (2)
options to extend the Lease Term for periods of five (5) years each.

3.2         Lease Commencement
Date:

The date upon which this Lease is fully signed and delivered by Landlord and
Tenant.  Within five (5) business days following the Lease Commencement Date,
Landlord shall deliver to Tenant a written memorandum in the form of
Exhibit C-1, attached hereto, which shall be executed by Landlord and Tenant in
counterpart.

3.3         Lease Expiration Date:

The last day of the calendar month in which the Lease Term is scheduled to
expire, which shall be determined as follows:  (i) if the Lease Commencement
Date occurs on or before the fifteenth (15th) day of a calendar month, then the
Lease Expiration Date shall be the last day of the calendar month immediately
preceding that calendar month in which the fifteenth (15th) anniversary of the
Lease Expiration Trigger Date occurs, or (ii) if the Lease Commencement Date
occurs after the fifteenth (15th) day of a calendar month, then the Lease
Expiration Date shall be the last day of the calendar month in which the
fifteenth (15th) anniversary of the Lease Expiration Trigger Date occurs.  

 

 

 

 

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3.4         Lease Expiration Trigger Date:

The date which is the earlier of (i) the Must-Take 2 Commencement Date (as
defined in Section 3.6 of this Summary, as such date may, (a) at Landlord's
option, be deemed to occur as a result of any Tenant Delays, or (b) at Tenant’s
option, delayed until January 1, 2019, in either case, in accordance with
Section 3.6 of this Summary), or (ii) December 31, 2019.  Notwithstanding
anything set forth in this Lease to the contrary, the foregoing date in this
Section 3.4(ii) of the Summary (i.e., December 31, 2019) shall be extended by
one (1) day for each day of Tenant Delay.  In addition, if the Must-Take 2
Commencement Date occurs after December 31, 2019 as a result of any Force
Majeure Delay (as defined in Exhibit B-3 attached hereto), then the Lease
Expiration Trigger Date shall remain December 31, 2019, solely with respect to
the expiration of the Lease Term for the Initial Premises, Must-Take Space 1 and
Must-Take Space 3 on December 31, 2034 (as such date may be extended by any
Tenant Delay in accordance with this Section 3.4 above, the “Partial Expiration
Date”), but the Lease Expiration Date shall be delayed for the remainder of the
Premises (i.e. Must-Take Space 2 only) by one (1) day for each day that the
Must-Take 2 Commencement Date is delayed beyond January 1, 2020 as a result of
any such Force Majeure Delay; provided, however, that if as a result of any
Force Majeure Delay the Lease Expiration Date for Must-Take Space 2 is scheduled
to occur after the Partial Expiration Date, then Tenant shall, by notice (the
“Waiver/Acceleration Notice”) delivered to Landlord no later than December 31,
2033, elect to either (a) waive the Partial Expiration Date for the Initial
Premises, Must-Take Space 1 and Must-Take Space 3 (the “Extension Space”); in
which event the Lease Expiration Date shall occur concurrently for such
Extension Space and the Must-Take Space 2 (with the Lusk 1 & 2 Base Rent for the
Extension Space during the period following the Partial Expiration Date to be
increased in accordance with Section 4.4 of this Summary), or (b) accelerate the
Lease Expiration Date for the entire Premises to occur on the Partial Expiration
Date by delivering payment to Landlord, concurrently with the timely delivery of
Tenant's Waiver/Acceleration Notice, of the "Must-Take Space 2 Buyout Amount,"
as is defined below.  The "Must-Take Space 2 Buyout Amount" shall mean an amount
equal to all Must-Take Space 2 Base Rent payments to be paid by Tenant under
this Lease from that date immediately following the Partial Expiration Date
until and including that date on which the Lease Expiration Date for Must-Take
Space 2 is scheduled to occur prior to Tenant’s delivery of the
Waiver/Acceleration Notice (the “Scheduled Expiration Date”), which amount shall
be discounted (using an annual discount rate equal to 6.75%) from the Scheduled
Expiration Date to January 1, 2034, resulting in the Must-Take Space 2 Buyout
Amount as a net present value estimate as of the outside date for Tenant's
election to accelerate the Scheduled Expiration Date to occur on the Partial
Expiration Date.  In the event of any disagreement between Landlord and Tenant
regarding Tenant’s calculation of the Must-Take Space 2 Buyout Amount, Tenant’s
timely delivery of payment in the amount estimated by Tenant in good faith
estimate shall satisfy the conditions of acceleration of the Lease Expiration
Date for the purposes of this Section 3.4, provided, however, that the exact
amount of the Must-Take Space 2 Buyout Amount shall be resolved between the
parties following Tenant’s delivery of the Waiver/Acceleration Notice and such
Must-Take Space 2 Buyout Amount, with any underpayment or overpayment to be paid
or credited in accordance with Section 4.4.1 of this Lease.  Notwithstanding
anything to the contrary in this Lease, if Tenant fails to timely deliver the
Waiver/Acceleration Notice in accordance with this Section 3.4, then Tenant
shall be deemed to have elected to waive the Partial Expiration Date with
respect to the Initial Premises, Must-Take Space 1 and Must-Take Space 3 as of
the Partial Expiration Date in which event the Lease Expiration Date shall occur
concurrently for such Extension Space and the Must-Take Space 2.

 

 

 

 

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3.5         Must-Take 1 Commencement Date
(Section 1.3.3):

 

The Must-Take 1 Delivery Date (as defined in Section 1.3.2 of this Lease). The
Must-Take 1 Commencement Date is estimated to occur on or about May 1, 2018.

3.6         Must-Take 2 Commencement Date
(Section 1.4.3):

The Must-Take 2 Delivery Date (as defined in Section 1.4.2 of this Lease),
provided that to the extent that any of the conditions of the Must-Take 2
Delivery Date (as set forth in Exhibit B-3 attached hereto) are delayed by any
Tenant Delays, at Landlord's option the Must-Take 2 Commencement Date shall be
deemed to have occurred on that date on which the Must-Take 2 Delivery Date
would have occurred but for such Tenant Delays. The Must-Take 2 Commencement
Date is currently estimated to occur on or about July 1, 2019.  Notwithstanding
anything to the contrary in this Lease, in the event that the conditions of the
Must-Take 2 Delivery Date are satisfied prior to January 1, 2019, Tenant shall
not be obligated to take possession of Must-Take Space 2 or commence the payment
of Must-Take Space 2 Base Rent or any Additional Rent for Must-Take Space 2
until January 1, 2019; provided, however, that in such event, the Must-Take 2
Commencement Date shall occur on the earlier of (i) the date upon which Tenant
first commences to occupy and conduct its business operations in Must-Take Space
2, or (ii) January 1, 2019.

3.7         Must-Take 3 Commencement Date
(Section 1.5.3):

The Must-Take 3 Delivery Date (as defined in Section 1.5.2 of this Lease). The
Must-Take 3 Commencement Date is currently estimated to occur on or about, but
not earlier than, April 1, 2019.

4.           Base Rent (Article 3):

 

4.1          Initial Premises Base Rent:

 

Period During
Lease Term

Annual
Base Rent

Monthly
Installment
of Base Rent

Lease Commencement Date – August 31, 2017

$5,364,468.60

$447,039.05

September 1, 2017 –
December 31, 2017

$5,525,402.66

$460,450.22

January 1, 2018 –
August 31, 2018

$5,862,872.66

$488,572.72

September 1, 2018 –
December 31, 2018

$6,028,634.74

$502,386.23

January 1, 2019 –
August 31, 2019

$5,691,164.74

$474,263.73

September 1, 2019 –
December 31, 2019

$4,487,452.56

$373,954.38

 

 

 

 

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Commencing on January 1, 2020 (the "2020 Rent Adjustment Date"), and continuing
throughout the remainder of the Lease Term, Lusk 1 & 2 Base Rent (as defined in
Section 4.4 of this Summary) shall be escalated annually throughout the Lease
Term by three percent (3%) on each anniversary of the Lusk 1 & 2 Rent Adjustment
Date.  As an attachment to the Must-Take 3 Commencement Date notice, in the form
attached hereto as Exhibit C-2, delivered by Landlord in accordance with
Section 1.5.5 of this Lease, Landlord shall provide to Tenant a Base Rent
schedule (the “Lusk 1 & 2 Base Rent Schedule”) showing the monthly amounts
payable by Tenant as Lusk 1 & 2 Base Rent for the duration of the Lease Term,
which shall be incorporated into this Lease pursuant to Tenant’s written
acknowledgment of such notice in accordance with Section 1.5.5 of this Lease,
and shall amend and supersede this Section 4.1 and Sections 4.2 – 4.5 of this
Summary (except that the provisions of Section 4.4 of this Summary shall remain
in effect with respect to any Extension Space), and Sections 4.9 – 4.10 of this
Summary.

4.2         Must-Take Space 1 Base Rent (Section 1.3.3):

The initial Annual Base Rent for Must-Take Space 1 shall be $723.150.00 (payable
in monthly installments of $60,262.50), shall commence to be due and payable by
Tenant on the Must-Take 1 Rent Commencement Date (as determined accordance with
Section 4.3 of this Summary), and shall be increased by three percent (3%) on
each Lusk 1 & 2 Rent Adjustment Date (as determined in accordance with
Section 4.5 of this Summary).

4.3         Must-Take 1 Rent Commencement Date (Section 1.3.2):

That date which is the later of (i) May 1, 2018, or (ii) the earlier of (a) the
date upon which Tenant first commences to occupy and conduct its business
operations in the Must-Take Space 1, or (b) the expiration of the Must-Take
Space 1 Fit-Out Period (as defined in Section 1.3.2 of the Lease).

4.4         Lusk 1 & 2 Base Rent (Article 3):

The Annual Base Rent payable by Tenant for that portion of the Premises located,
from time to time during the Lease Term, in the Lusk 1 Building and/or the Lusk
2 Building, consisting of the following:  (i) prior to the Must-Take 1 Rent
Commencement Date, the Initial Premises Base Rent; (ii) from the Must-Take 1
Rent Commencement Date until the date preceding the Must-Take 3 Rent
Commencement Date, the sum of the Initial Premises Base Rent and the Must-Take
Space 1 Base Rent; (iii) from the Must-Take 3 Rent Commencement Date until the
earlier of the Lease Expiration Date or the Partial Expiration Date (if
applicable), the sum of the Initial Premises Base Rent, the Must-Take Space 1
Base Rent and the Must-Take Space 3 Base Rent; and (iv) for any Extension Space,
if and to the extent that the Partial Expiration Date may be waived by Tenant in
accordance with Section 3.4 of this Summary, one hundred three percent (103%) of
that amount payable as the Lusk 1 & 2 Base Rent prior to the Partial Expiration
Date.

4.5         Lusk 1 & 2 Rent Adjustment Date
(Article 3):

The first day of January in each calendar year of the Lease Term following the
calendar year in which the Must-Take 1 Rent Commencement Date occurs.

 

 

 

 

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4.6         Must-Take Space 2 Base Rent (Article 3):

The Annual Base Rent for Must-Take Space 2 shall be determined in accordance
with Section 1.4.4 of the Lease, with monthly installments to commence to be due
and payable by Tenant on the Must-Take 2 Rent Commencement Date (as determined
accordance with Section 4.7 of this Summary), and shall be increased by three
percent (3%) on each Lusk 3 Rent Adjustment Date (as determined in accordance
with Section 4.8 of this Summary), separate from the annual escalation of the
Lusk 1 & 2 Base Rent and the annual escalation of any SMB Rent (as defined in
Section 1.6.2 of this Lease) in accordance with Section 4.11 of this Summary.

4.7         Must-Take 2 Rent Commencement Date (Section 1.4.2):

The earlier of (i) the date upon which Tenant first commences to occupy and
conduct its business operations in the Must-Take Space 3, and (ii) the
expiration of the Must-Take Space 2 Fit-Out Period (as defined in Section 1.4.2
of this Lease).

4.8         Lusk 3 Rent Adjustment Date
(Article 3):

The first day of the calendar month in each calendar year of the Lease Term
following the calendar year in which the Must-Take 2 Rent Commencement Date
occurs, determined as follows: (i) if the Must-Take 2 Rent Commencement Date
occurs on or before the fifteenth (15th) day of a calendar month, then the Lusk
3 Rent Adjustment Date shall be the first day of the calendar month in which the
anniversary of the Must-Take 2 Rent Commencement Date occurs, or (ii) if the
Must-Take 2 Commencement Date occurs after the fifteenth (15th) day of a
calendar month, then the Lusk 3 Rent Adjustment Date shall be the first day of
that calendar month immediately following the calendar month in which the
anniversary of the Must-Take 2 Rent Commencement Date occurs.

4.9         Must-Take Space 3 Base Rent (Article 3):

The initial Annual Base Rent for Must-Take Space 3 shall be at the same rate per
rentable square foot as the Must-Take Space 1.  As an example, if the Must-Take
1 Rent Commencement Date occurs on May 1, 2018, then the initial Must-Take Space
3 Base Rent shall be $1,687,479.90 (payable in monthly installments of
$140,623.33), which shall commence to be due and payable by Tenant on the
Must-Take 3 Rent Commencement Date (as determined accordance with Section 4.10
of this Summary), and shall be increased by three percent (3%) on each Lusk 1 &
2 Rent Adjustment Date occurring after the Must-Take 3 Commencement Date.  

4.10        Must-Take 3 Rent Commencement Date (Section 1.5.2):

The earlier of (i) the date upon which Tenant first commences to occupy and
conduct its business operations in the Must-Take Space 3, and (ii) the
expiration of the Must-Take Space 3 Fit-Out Period (as defined in Section 1.5.2
of this Lease).

 

 

 

 

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4.11        SMB Rent
(Section 1.6.2 & Article 3):

In the event, and to the extent (if any), that Tenant elects to use some or all
of the Site Modernization/Beautification Allowance, as defined in Exhibit B-4
attached hereto (the "SMB Work Letter"), as the Landlord's Common Area
Contribution (as defined in Section 5.3 of this Summary) toward SMB Costs (as
defined in Section 1.6.2.1 of this Lease) incurred by Landlord or Tenant for the
design, construction or installation of the Site Modernization/ Beautification
Work (as defined in the SMB Work Letter), additional Base Rent in the amount of
the SMB Rent (as determined in accordance with Section 1.6.2 of the Lease) shall
commence to be due and payable by Tenant, in monthly installments, on the SMB
Rent Commencement Date (as defined in Section 4.12 of this Summary), with such
additional Base Rent to increase by three percent (3%) on each anniversary
thereof, separate from the annual escalation of the Lusk 1 & 2 Base Rent and the
Must-Take Space 3 Base Rent.

4.12         SMB Rent Commencement Date:

In the event that SMB Rent becomes due and payable by Tenant in accordance with
the terms and conditions of Section 1.6.2 of this Lease, then such additional
Base Rent shall commence to be due and payable, in monthly installments, from
and after the "SMB Rent Commencement Date," as that term is defined in this
Section 4.12, below; provided, however, Tenant's obligation to make the first
(1st) payment of SMB Rent shall not occur until the first day of that calendar
month that is at least fifteen (15) days following Tenant's receipt of written
notice from Landlord, in the form of Exhibit C-3 attached to this Lease (“SMB
Rent Commencement Notice”), notifying Tenant:  (a) of the date that is the SMB
Rent Commencement Date, (b) of the amount payable on such date as the initial
monthly installment of SMB Rent, and (c) that the earlier of the following
events has occurred, pursuant to which SMB Rent will commence to be due and
payable under this Lease:  either (i) the Site Modernization/ Beautification
Work (or a complete phase of such work in accordance with the SMB Project
Schedule, as defined in, and attached, to the SMB Work Letter) has been
Substantially Completed by Landlord in accordance with the SMB Work Letter, or
(ii) Landlord has paid all of the Landlord's Common Area Contribution toward SMB
Costs in accordance with the SMB Work Letter (such earlier event in this
sub-item (c), the “SMB Rent Commencement Date”). Landlord shall, as an
attachment to any SMB Rent Commencement Date Notice, provide an itemized list of
SMB Cost Items and the amount of SMB Costs paid for by Landlord as the
Landlord’s Common Area Contribution, and an SMB Rent schedule (the “SMB Rent
Schedule”) showing the monthly amounts payable by Tenant as the SMB Rent for the
duration of the Lease Term, which shall be incorporated into this Lease pursuant
to Tenant’s written acknowledgment of such SMB Rent Commencement Date Notice in
accordance with Section 1.6.3 of this Lease, and the final SMB Rent Schedule
shall amend and supersede Section 4.11 and this Section 4.12 of this Summary.

 

 

 

 

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5.            Landlord's Contribution to Costs of
Tenant Improvements, Lusk 3 & SMB Costs
(Exhibits B-1 thru B-4)

 

 

5.1          Tenant Improvement Allowance (Exhibit B-1 & Exhibit B-2)

The Tenant Improvement Allowance is an amount equal to $11,731,640.00, which is
the maximum amount payable as Landlord's contribution to the cost of Tenant
Improvements and other costs to be paid or reimbursed by Landlord from the
Tenant Improvement Allowance in accordance with this Lease and Exhibit B-1 (the
"Initial Premises Work Letter") and Exhibit B-2 (the "Expansion Space Work
Letter") attached hereto, and which is calculated as the sum of the following:

 

Initial Premises:  An amount equal to $32.00 per rentable square foot of the
Initial Premises (i.e., $4,647,200.00 based upon 145,225 rentable square feet in
the Initial Premises).

 

Must-Take Space 1:  An amount equal to $90.00 per rentable square foot of the
Must-Take Space 1 (i.e., $2,169,450.00 based upon 24,105 rentable square feet in
the Must-Take Space 1).

 

Must-Take Space 3:  An amount equal to $90.00 per rentable square foot of the
Must-Take Space 3 (i.e., $4,914,990.00 based upon 54,611 rentable square feet in
the Must-Take Space 3).

 

Notwithstanding the foregoing, Tenant shall be permitted to allocate the Tenant
Improvement Allowance to and among costs and expenses payable by Tenant for
(i) amounts incurred by Landlord or Tenant for the design and construction of
the Tenant Improvements, and for costs incurred by Landlord or for the purchase,
delivery and installation of Tenant FF&E and any other Tenant Fit-Out Costs (as
such terms are defined in the Initial Premises Work Letter), (ii) some or all of
the BTS Over-Allowance Amount (as defined in Section 5.2 of this Summary)
payable by Tenant, if any, and (iii) a portion of the SMB Costs (and if Tenant
so elects, that portion of the Tenant Improvement Allowance allocated to SMB
Costs shall not be considered a Landlord's Common Area Contribution and shall
therefore be excluded from the calculation of SMB Rent), subject only to those
approval rights of Landlord expressly set forth in Exhibits B-1 thru B-4
attached hereto; provided, however, that the total amount payable by Landlord
from the Tenant Improvement Allowance for Tenant FF&E and Tenant Fit-Out Costs
(which may be utilized by Tenant in any portions of the Premises, as Tenant may
determine in its sole discretion) shall not exceed $4,478,820.00 (the
"Landlord's FF&E Limit").

 

 

 

 

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5.2         BTS Project Cost Limit
(Section 1.4 & Exhibit B-3):

Landlord shall construct the Must-Take Space 2 in accordance with Exhibit B-3
attached hereto (the "Lusk 3 Work Letter"), at Landlord's sole cost and expense;
provided that (i) Project Costs incurred by Landlord in accordance with
Section 1.4.4 of this Lease shall be subject to repayment by Tenant in the form
of the Must-Take Space 2 Base Rent, in accordance with Section 4.6 of this
Summary; and (ii) Landlord's total obligation for such Project Costs shall not
exceed $700 per rentable square foot of Must-Take Space 2 (i.e. $19,600,000.00
based upon an estimated 28,000 rentable square feet); and to the extent that
such Project Costs exceed such limit (the "BTS Project Cost Limit"), Tenant
shall pay for such excess Project Costs in accordance with Section 1.4.4.4 of
this Lease and the Lusk 3 Work Letter (the "BTS Over-Allowance
Amount").  Notwithstanding the foregoing, if and to the extent the Project Costs
exceed the BTS Project Cost Limit, Tenant shall have the right to apply a
portion of the Tenant Improvement Allowance to the portion of the Project Costs
in excess of the BTS Project Cost Limit, and any such application by Tenant
shall reduce the BTS Over-Allowance Amount on a dollar-for-dollar basis.  

5.3         Landlord's Common Area Contribution
(Section 1.5):

That amount, if any, that Landlord contributes from the Site
Modernization/Beautification Allowance (as hereinafter defined), as timely
requested by Tenant in accordance with this Section 5.3 below.  Landlord and
Tenant shall mutually agree upon the scope, design and schedule for the
Modernization/ Beautification Work to the Common Areas and exteriors of the
Project Structure in accordance with the SMB Work Letter, and Landlord shall
construct the Site Modernization/ Beautification Work in accordance therewith,
and the terms and conditions of Section 1.6 of this Lease, with the SMB Costs
(as defined in Section 1.6.2.1 of this Lease) to be incurred by Landlord, in an
amount equal to or greater than $5,000,000 in the aggregate, at Tenant's sole
cost and expense; provided that, to the extent such contribution of funds from
Landlord is timely requested by Tenant, as hereinafter provided, Landlord agrees
to contribute up to $4,000,000 (the "Site Modernization/ Beautification
Allowance") toward such SMB Costs, subject to Tenant's repayment of such
contribution in the form of SMB Rent in accordance with Section 4.11 of this
Summary.

 

 

 

 

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In the event and to the extent that Tenant elects to utilize some or all of the
Site Modernization/Beautification Allowance, if any, for the payment of SMB
Costs incurred by Landlord or Tenant for the design and construction  of the
Site Modernization/Beautification Work, Tenant shall deliver written notice of
such election (which notice shall indicate that amount of the Site
Modernization/ Beautification Allowance that Tenant elects to utilize for SMB
Costs), to Landlord no later than December 31, 2017; and (i) to the extent that
Tenant does not elect to utilize all of the entire Site Modernization/
Beautification Allowance for the SMB Costs of the Site
Modernization/Beautification Work pursuant to such written notice, such
remainder of the Site Modernization/Beautification Allowance shall cease to be
available for Tenant's payment of the SMB Costs, or (ii) in the event that
Tenant fails to timely deliver any written notice of Tenant's election to
utilize all or a portion of the Site Modernization/ Beautification Allowance for
SMB Costs, Tenant shall be deemed to have elected to fund the entire amount of
the SMB Costs utilizing its own funds and all of the Site Modernization/
Beautification Allowance shall cease to be available for payment of the SMB
Costs.  Notwithstanding any amount timely specified by Tenant for application
from the Site Modernization/Beautification Allowance to the SMB Costs in
accordance with this Section 5.3, SMB Rent shall be limited to that portion of
the Site Modernization/Beautification Allowance actually funded by Landlord to
pay the SMB Costs from such Tenant-requested amount (with such portion of the
SMB Costs funded by Landlord from the Site Modernization/ Beautification
Allowance sometimes referred to in this Lease and the SMB Work Letter as the
"Landlord's Common Area Contribution").

6.         Tenant's Share (Article 4):

 

Existing Buildings

 

Lease Commencement Date:

 

 

 

Must-Take 1 Commencement Date:

 

 

 

Must-Take 3 Commencement Date:

 

 

 

Lusk 3 Building:

 

 

 

Lusk 1 Building:  100%.

 

Lusk 2 Building:  47.4845%.

 

Lusk 1 Building:  100%.

 

Lusk 2 Building:  63.5662%.

 

Lusk 1 Building:  100%.

 

Lusk 2 Building:  100%.

See Section 1.4.4.7 of this Lease.

 

 

 

 

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7.           Permitted Use
(Article 5):

The Premises shall be used for any use permitted under Applicable Laws (as
hereinafter defined), including general office (which may include employee
training, employee lunch room and kitchen facilities with vending machines for
Tenant's exclusive use), research and development, surgical activities
associated with Tenant’s spinal and other neurological and orthopedic surgical
products, storage and use of medical, biological and other materials incidental
to such activities, light manufacturing of prototype products, shipping,
receiving, engineering, laboratory, storage and/or warehouse uses, including,
but not limited to, administrative offices and other lawful uses reasonably
related to or incidental to such specified uses (including, without limitation,
operation of on-site amenities such as a gym, conference center, and café),
provided that no incidental uses shall be permitted hereunder which (i) are not
consistent with incidental uses permitted in similar first class life sciences
projects in the Sorrento Mesa area of San Diego, California ("First Class Life
Sciences Projects"), as reasonably determined by Landlord, (ii) violate any
Applicable Laws (as defined in Article 24 of this Lease), or (iii) are otherwise
prohibited by any of the terms and conditions of this Lease.

8.            Letter of Credit
(Article 21):

$1,350,000.00

9.          Parking
(Article 28):

Prior to the Must-Take 1 Commencement Date:  Four (4) unreserved parking spaces
for every 1,000 usable square feet of the Premises, subject to the terms of
Article 28 of the Lease.

Prior to the Must-Take 3 Commencement Date:  Tenant's Share of the parking
spaces available for use in the Project, subject to the terms of Article 28 of
the Lease.  Tenant acknowledges that the construction of the Lusk 3 Building
shall reduce the total number of parking spaces available to use in the Project.

After the Must-Take 3 Commencement Date:  
All spaces available for use in the Project, subject to the terms of Article 28
of the Lease.

As long as Tenant is the sole tenant of the Project, Tenant shall have the right
to reasonably designate a portion of Tenant's Share of parking spaces of the
Project as reserved for Tenant’s guests, visitors or employees, subject to the
terms and conditions of Article 28 of this Lease.  

 

 

 

 

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10.         Address of Tenant
(Section 29.18):

NuVasive, Inc.
7475 Lusk Boulevard
San Diego, California

Attention: Global Leader of Facilities and Real Estate

With a copy to:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
3580 Carmel Mountain Road, Suite 300
San Diego, CA 92130
Attn: Scott Biel

Email: sbiel@mintz.com

11.         Address of Landlord
(Section 29.18):

See Section 29.18 of the Lease.

12.         Tenant's Broker(s)
(Section 29.24):

Savills Studley and Hughes Marino.

 

13.          Landlord's Broker(s)
(Section 29.24):

CBRE

 

 

 

 

 

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1.PREMISES, BUILDING, PROJECT, AND COMMON AREAS

1.1Premises, Building, Project and Common Areas.

1.1.1The Premises.  Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord those portions of the Buildings set forth in Section 2.3 of the
Summary (the "Premises"), consisting of the Initial Premises on the Lease
Commencement Date, as such Premises shall be expanded from time to time in
accordance with this Article 1.  The outline of the Initial Premises is set
forth in Exhibit A attached hereto; the outline of Must-Take Space 1 is set
forth in Exhibit A-2; the outline of Must-Take Space 2 is set forth in
Exhibit A-3; and the outline of Must-Take Space 3 is set forth in
Exhibit A-4.  The outline of the "Buildings" (including, but not limited to, the
planned location and configuration of the Lusk 3 Building, when completed), the
"Project Structures" and the "Project," as those terms are defined in in
Section 2.1 and Section 2.2 of the Summary, are further depicted on the Site
Plan attached hereto as Exhibit A-1.  Notwithstanding anything to the contrary
in this Lease, all of the trade fixtures, equipment and other personal property
of Tenant that is located in the Initial Premises or any other portion of the
Project as of the Lease Commencement Date is excluded from Tenant's leasehold
interest in the Premises pursuant to this Lease and shall remain the property of
Tenant, without any right or interest therein granted to Landlord by Tenant as a
result of Tenant's entering into this Lease for its continued occupancy of the
Initial Premises during the Lease Term.  The parties hereto agree that the lease
of the Premises is upon and subject to the terms, covenants and conditions
herein set forth, and Tenant covenants as a material part of the consideration
for this Lease to keep and perform each and all of such terms, covenants and
conditions by it to be kept and performed and that this Lease is made upon the
condition of such performance, subject to Tenant's right to receive notice of
any alleged breach or default of such performance obligations, as set forth in
Section 19.1 of this Lease.  The parties hereto hereby acknowledge that the
purpose of Exhibits A, A-1, A-2, A-3 and A-4 is to show the approximate location
of the Premises, Project Structures and Common Areas of the Project only, and
such Exhibit is not meant to constitute an agreement, representation or warranty
as to the precise location or configuration of the Premises or any of the
Buildings, Project Structures or the precise area thereof or the specific
location of the "Common Areas," as that term is defined in Section 1.1.3,
below.  Tenant hereby acknowledges that Tenant is currently in possession of the
Initial Premises pursuant to the Initial Lease, and except as specifically set
forth in this Lease and in the Tenant Work Letters attached hereto as
Exhibits B-1 thru B-4 (each, a "Tenant Work Letter" and collectively, the
"Tenant Work Letters"), neither Landlord nor Tenant shall be obligated to make
any alterations or perform any work of repairs or alterations to the Initial
Premises as a condition of the Lease Commencement Date, nor shall either of the
parties to this Lease be required to provide or pay for any improvement work or
services related to the improvement, repair, replacement or restoration of all
or any portion of the Initial Premises.  Except as specifically set forth in
this Lease and the Tenant Work Letters, (i) Tenant and Landlord each acknowledge
and agree that neither of them nor any of their respective agents has made any
representation or warranty regarding the condition of any portion of the Initial
Premises, the Buildings, the Project Structures or the Common Areas of the
Project, and (ii) Tenant acknowledges that neither Landlord nor any of its
agents has made any representation or warranty to Tenant with respect to the
suitability of any of the foregoing for the conduct of Tenant's business, except
as specifically set forth in this Lease and the Tenant Work Letter.  Except as
provided in the Expansion Space Work Letter with respect to the condition of
those HVAC Systems, electrical, lighting, fire sprinkler and plumbing systems of
the Existing Buildings serving the Must-Take Space 1 and Must-Take Space 3 as of
the Must-Take 1 Delivery Date and the Must-Take 3 Delivery Date, respectively,
the continued possession of the Initial Premises by Tenant as of the Lease
Commencement Date shall conclusively establish (without modifying Landlord's
maintenance, repair and restoration obligations under this Lease from and after
the Lease Commencement Date) that the Initial Premises and the Existing
Buildings were at such time in good and sanitary order, condition and repair.

1.1.2The Buildings and The Project.  The Buildings and the other Project
Structures are part of the Project as described in Section 2.1 of the Summary,
which is currently known as "Sorrento Summit."  Except for the Lusk 3 Building
and except for the "Site Modernization/Beautification Work," as that term is
defined in the SMB Work Letter, no additional buildings or structures shall be
constructed by Landlord at the Project during the Lease Term without Tenant's
prior written approval, which may be granted or withheld by Tenant in its sole
and absolute discretion as long as no Event of Default has occurred and is
continuing under this Lease.

 

 

 

 

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1.1.3Common Areas.  Tenant shall have the non-exclusive right to use in common
with other tenants in the Project (if any, and provided that, subject to any
existing tenant holding over, from and after the Must-Take 3 Commencement Date,
there shall be no other tenants of the Project, and Tenant’s right to use the
Common Areas shall be exclusive, without any right of Landlord to make such
Common Areas available for use by the public or any third parties, except as may
be expressly permitted under this Lease, during any portion of the Lease Term
when Tenant is the sole tenant of 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"); provided that the Common
Areas shall not include such portion of a Building that is or may be included in
the Premises during any portion of the Lease Term (e.g., the Common Areas shall
not include any portion of the Must-Take Space 3 prior to the Must-Take 3
Commencement Date), nor any portion of the Construction Area after the
construction of Must-Take Space 2 commences and prior to the Must-Take 2
Commencement Date, and during any period prior to commencement of construction
of the Must-Take Space 2 when the Construction Area is being used by Landlord
for storage of equipment or materials to be utilized in such construction.  The
manner in which the Common Areas are maintained and operated shall be at the
commercially-reasonable discretion of Landlord (unless otherwise expressly
provided in this Lease or the Work Letter).  To the extent reasonably necessary
to satisfy Landlord’s obligations under this Lease, 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, and to grant, without the
consent or joinder of Tenant, such easements, rights of way and dedications that
Landlord reasonably deems necessary for the orderly and efficient use and
management of the Project, and to otherwise amend the Underlying Documents (as
hereinafter defined) from time to time; provided that (i) in connection
therewith, Landlord shall perform such closures, alterations, additions or
changes in a commercially reasonable manner and, in connection therewith, shall
use commercially reasonable efforts to minimize any material adverse effect of
such activities on, and to mitigate any interference that cannot be avoided
using commercially reasonable efforts with, Tenant's use of and access to the
Premises, and (ii) Landlord shall notify Tenant in writing, as soon as
reasonably practicable (except in the event of an emergency), in advance of
taking any such actions.  Subject to the foregoing, Tenant shall abide by and
shall promptly observe and comply with, at its sole cost and expense, all
easements, declarations, restrictive covenants, and any other instruments of
record running with title to the land of the Project as are set forth on
Exhibit A-5 (as the same may be modified, amended, supplemented or replaced from
time to time, pursuant to the rights reserved to Landlord under (and subject to
the limitations of) this Section 1.1.3, the "Underlying Documents") with respect
to Tenant's use of the Common Areas.

1.2Rentable Square Feet of Premises. For purposes of this Lease, "rentable
square feet" in each portion of the Premises and the Buildings, as the case may
be, have been measured in accordance with the Standard Method for Measuring
Floor Area in Office Buildings, ANSI Z65.1-2010 (Method A) and its accompanying
guidelines ("BOMA 2010"). Landlord and Tenant hereby stipulate and agree that
the rentable area of the Initial Premises, Must-Take Space 1 and Must-Take Space
3, are as set forth in Sections 2.2, 2.2.1 and 2.2.3, respectively, of the
Summary and shall not be subject to remeasurement during the Lease Term except
in connection with a change in the physical size of the Premises or Buildings
resulting from an event of casualty or condemnation as provided in Articles 11
and 13 of this Lease.

1.3Must‑Take Space 1.  As of the Must-Take 1 Commencement Date, as determined in
accordance with Section 3.5 of the Summary, the Premises shall be expanded to
include both the Initial Premises and the Must‑Take Space 1, as set forth in the
Summary and this Section 1.3.

1.3.1Description of the Must-Take Space 1.  The Must‑Take Space 1 shall consist
of that space described in Section 2.3.2 of the Summary.  For purposes of this
Lease, the rentable square feet of the Must Take Space 1 shall be deemed to be
the amount set forth in Section 2.3.2 of the Summary.

1.3.2Delivery of the Must-Take Space 1.  Tenant shall accept delivery of the
Must-Take Space 1 from Landlord, and Landlord shall deliver the Must-Take Space
1 to Tenant, in the condition required by the applicable terms and conditions of
the Expansion Space Work Letter, upon the Substantial Completion of the Tenant
Improvements in the Must-Take Space 1, which is anticipated to occur on or about
May 1, 2018 (the date upon which Landlord delivers the Must-Take Space 1 to
Tenant following Substantial Completion of the Tenant Improvements to the
Must-Take Space 1 shall be known as the "Must‑Take 1 Delivery Date").  Landlord
shall use its commercially reasonable efforts to achieve site conditions that
allow Tenant to have reasonable non-exclusive access to the Must-Take Space 1
for the installation and testing of the IT cabling and hardware, and Tenant's
other equipment, fixtures and

 

 

 

 

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furnishings that are not included in the Tenant Improvements to the Must-Take
Space 1 (the "Tenant Must-Take 1 Fit-Out Work") at least sixty (60) days prior
to the Must-Take 1 Delivery Date; with such 60-day period (the "Must-Take Space
1 Fit-Out Period") commencing on the date on which (i) the Must-Take Space 1 is
in the condition required for such non-exclusive access by Tenant, and
(ii) Tenant is provided with such non-exclusive access following reasonable
advance notice of such date from Landlord; and further provided that Landlord
and Tenant shall each act reasonably and cooperate in good faith to coordinate
the Tenant Improvements to the Must-Take Space 1 and Tenant's Must-Take 1
Fit-Out Work to avoid any interference with, or delay of, their respective
activities in Must-Take Space 1 during the Must-Take Space 1 Fit-Out
Period.  Notwithstanding anything set forth in this Lease to the contrary,
Landlord may deny Tenant access to the Must-Take Space 1 during the Must-Take
Space 1 Fit-Out Period if such access by Tenant would interfere with Landlord's
construction of the Tenant Improvements in the Must-Take Space 1, and such
temporary denial of access shall not serve to delay of extend the Must-Take
Space 1 Fit-Out Period (or delay the Must-Take 1 Rent Commencement Date)
provided that Landlord reasonably cooperates with Tenant to provide access as
soon as possible once Tenant's access and work in the Must-Take Space 1 no
longer interferes with Landlord's construction of the Tenant Improvements in the
Must-Take Space 1.  Notwithstanding the foregoing, so long as Landlord
diligently pursues the Substantial Completion of the Tenant Improvements in the
Must-Take Space 1, Landlord shall have no liability to Tenant for any damages
resulting from any delay in achieving Substantial Completion of the Tenant
Improvements in the Must-Take Space 1 and delivery of exclusive possession of
the Must-Take Space 1 to Tenant by May 1, 2018.

1.3.3Rent and Term.  As of the Must-Take 1 Commencement Date, the Must-Take
Space 1 shall become part of the Premises for all purposes hereunder, and,
except as otherwise expressly provided in this Section 1.3, shall be subject to
every term and condition of this Lease.  The lease term for the Must-Take Space
1 shall commence on the Must-Take 1 Commencement Date; and the lease term for
the Must-Take Space 1 shall expire, unless earlier terminated, upon the Lease
Expiration Date; and Tenant shall commence payment of the Must-Take Space 1 Base
Rent and the Additional Rent for the Must-Take Space 1 (in addition to the
Initial Premises Base Rent and the Additional Rent for the Initial Premises) on
the Must-Take 1 Rent Commencement Date; and the amount of the Must-Take Space 1
Base Rent shall be increased on each Lusk 1 & 2 Rent Adjustment Date in
accordance with Section 4.2 of the Summary.  Notwithstanding the foregoing, and
for the avoidance of doubt as to the exact amount payable by Tenant as the
monthly installment of Initial Premises Base Rent and Must-Take Space 1 Base
Rent, promptly following the Must-Take 1 Rent Commencement Date, Landlord and
Tenant shall enter into an amendment to this Lease amending and restating
Sections 4.1 thru 4.3 of the Summary in the form of a Base Rent Schedule for the
Initial Premises and Must-Take Space 1, to be attached and incorporated as an
exhibit to this Lease, setting forth the exact Lusk 1 & 2 Adjustment Dates and
the related adjustments to Annual Base Rent and the monthly installments of
Annual Base Rent payable by Tenant for the Initial Premises and Must-Take Space
1, and the exact monthly installments of Base Rent payable by Tenant for the
Initial Premises and the Must-Take Space 1 for the duration of the Lease
Term.  Furthermore, for purposes of calculating Tenant's obligations under
Article 4 of this Lease, Tenant's Share of Building Direct Expenses for the Lusk
2 Building shall be increased in accordance with Section 6 of the Summary as of
the Must-Take 1 Commencement Date.  

1.3.4Improvement of Must-Take Space 1.  The Tenant Improvements of the Must-Take
Space 1 shall be constructed by Landlord, at Landlord's expense (subject to
Tenant's obligation to fund the costs of the Tenant Improvements to the
Must-Take Space 1 in excess of the Tenant Improvement Allowance allocated by
Tenant to such Tenant Improvements in accordance with Section 5.1 of the
Summary), in accordance with the applicable terms and conditions of Expansion
Space Work Letter.

1.3.5Other Terms.  Except as specifically set forth in this Lease and in the
Expansion Space Work Letter, as of the Must-Take 1 Commencement Date all other
terms of this Lease shall apply to the Must-Take Space 1 as though the Must-Take
Space 1 was originally part of the Premises.  No later than thirty (30) days
following the Must-Take 1 Commencement Date, Landlord shall deliver to Tenant a
notice in the form as set forth in Exhibit C-2, attached hereto, applicable to
the Must-Take Space 1, as a confirmation only of the information set forth
therein, which Tenant shall execute and return to Landlord within thirty (30)
days of receipt thereof.

1.4Must‑Take Space 2.  As of the Must-Take 2 Commencement Date, as determined in
accordance with Section 3.6 of the Summary, the Premises shall be expanded to
include the rentable square footage of the Must‑Take Space 2, as set forth in
the Summary and this Section 1.4.

1.4.1Description of the Must-Take Space 2.  The Must‑Take Space 2 shall consist
of the space set forth in Section 2.3.3 of the Summary, to be designed,
constructed and delivered in accordance with terms

 

 

 

 

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and conditions the Lusk 3 Work Letter.  Landlord and Tenant acknowledge that the
rentable square footage of the Must-Take Space 2 set forth in Section 2.3.3 of
the Summary is an estimate, and that the Must-Take Space 2 Base Rent shall be
determined in accordance with Section 1.4.4 below, payable in monthly
installments and subject to annual increases in accordance with Section 4.6 of
the Summary, regardless of the actual number of rentable square feet of
Must-Take Space 2 (although commission and "Must-Take Space 2 Land Value" (as
defined below) are based on the actual number of rentable square feet of
Must-Take Space 2).  Notwithstanding the foregoing, the Must-Take Space 2 shall
be measured, in accordance with BOMA 2010, and certified by Landlord's architect
upon the Substantial Completion of the Landlord's Work of the Must-Take Space 2
(the "Landlord's Lusk 3 Work").  Within 30 days after the Must-Take 2 Delivery
Date, Landlord shall give Tenant written notice of Landlord’s determination of
the rentable area of the Must-Take Space 2 according to BOMA 2010, along with a
copy of the plans and drawings (including access to electronic CAD format, if
available) on which such determination was based (the "RSF Notice"). Tenant
shall have the right to review Landlord's calculation (and Landlord shall
reasonably cooperate in making Landlord's space planner/architect available to
Tenant's space planner/architect for discussion of such calculation) during the
30-day period following Landlord's delivery of the RSF Notice, and to reasonably
object to such determination by written notice to Landlord within such 30-day
period.  Unless Tenant reasonably objects to Landlord's calculation within
thirty (30) days after the date of the RSF Notice by delivering written notice
to Landlord providing reasonable evidence in support of Tenant’s determination
of a materially different rentable area of Must-Take Space 2, Landlord's
determination set forth in the RSF Notice will be binding on both Landlord and
Tenant.  If Tenant timely and reasonably objects to Landlord's RSF Notice in
accordance with this Section 1.4.1, then Landlord's space planner/architect and
Tenant's space planner/architect shall promptly meet and attempt to agree upon
the mutually-acceptable rentable square footage of Must-Take Space 2.

1.4.2Construction of the Lusk 3 Building.  In accordance with plans and
specifications approved by Tenant in accordance with the Lusk 3 Work Letter,
Landlord shall commence the Landlord's Lusk 3 Work (i.e. commencement of rough
grading, pouring the pad and utility work) as soon as reasonably practicable
following the Lease Commencement Date, taking into consideration time reasonably
required for Landlord to enter into construction agreements for the Landlord's
Lusk 3 Work and obtain the necessary Permits (as defined in the Lusk 3 Work
Letter) in accordance with the terms and conditions of the Lusk 3 Work
Letter.  Landlord shall thereafter use commercially reasonable efforts to
complete the Landlord's Lusk 3 Work of construction of the Must-Take Space 2 on
or before July 1, 2019, in accordance with the terms and conditions of the Lusk
3 Work Letter.  Landlord shall use its commercially reasonable efforts to
achieve the Fit-Out Period Conditions (as hereinafter defined) within Must-Take
Space 2, in accordance with the terms and conditions of the Lusk 3 Work Letter
and this Section 1.4.2, prior to the Must-Take 2 Delivery Date (as defined in
Section 1.4.3 below); provided, however, that Tenant’s Rent obligations with
respect to Must-Take Space 2 shall not commence until Tenant has been provided
with at least sixty (60) days of non-exclusive access to Must-Take Space 2 to
perform the Tenant’s Fit-Out Work (as defined in the Lusk 3 Work Letter), with
the Fit-Out Period Conditions remaining in effect throughout such period (the
"Must-Take Space 2 Fit-Out Period").  The “Fit-Out Period Conditions” shall mean
those site conditions that permit Tenant to reasonably access the Must-Take
Space 2 during normal business hours on a non-exclusive basis to perform the
Tenant’s Fit-Out Work (as defined in the Lusk 3 Work Letter) in a
commercially-reasonable manner commencing on the date on which (i) the Must-Take
Space 2 is in the condition required for such non-exclusive access by Tenant,
and (ii) Tenant is provided with such non-exclusive access following reasonable
advance notice of such date from Landlord, subject, however, to Tenant’s
compliance with the terms and conditions of the Lusk 3 Work Letter relating to
Tenant’s Fit-Out Work prior to commencing such work to commence; and further
provided that Landlord and Tenant shall each act reasonably and cooperate in
good faith to coordinate the Landlord's Work of the Must-Take Space 2 and
Tenant's Must-Take 2 Fit-Out Work to avoid any interference with, or delay of,
their respective activities in Must-Take Space 2 during the Must-Take Space 2
Fit-Out Period.  Notwithstanding anything set forth in this Lease to the
contrary, Landlord may deny Tenant access to the Must-Take Space 2 during the
Must-Take Space 2 Fit-Out Period if such access by Tenant would interfere with
Landlord's construction of the Tenant Improvements in the Must-Take Space 2, and
such temporary denial of access shall not serve to delay of extend the Must-Take
Space 2 Fit-Out Period (or delay the Must-Take 2 Rent Commencement Date)
provided that Landlord reasonably cooperates with Tenant to provide access as
soon as possible once Tenant's access and work in the Must-Take Space 2 no
longer interferes with Landlord's construction of the Tenant Improvements in the
Must-Take Space 2.  Notwithstanding anything to the contrary contained herein,
to the extent that the Landlord originally named in this Lease (the “Original
Landlord”) assigns or otherwise transfers its interest in the Project prior to
(a) the Substantial Completion of the Must-Take Space 2, or (b) Landlord’s
payment of all Project Costs for which Landlord is responsible under this Lease
and the Lusk 3 Work Letter (collectively, the

 

 

 

 

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“Original Landlord Requirements”), then the Original Landlord shall remain
responsible for, notwithstanding such conveyance, unless the new owner has
expressly agreed to assume the obligation to perform the Original Landlord
Requirements.

1.4.3Delivery of the Must-Take Space 2.  Tenant shall accept delivery of
exclusive possession of the Must-Take Space 2 from Landlord, and Landlord shall
deliver exclusive possession of the Must-Take Space 2 to Tenant, in the
condition required by the applicable terms and conditions of the Lusk 3 Work
Letter upon the Substantial Completion of the Landlord's Lusk 3 Work, which is
anticipated to occur on or about July 1, 2019 (the date upon which Landlord
delivers exclusive possession of the Must-Take Space 2 to Tenant with the
Landlord's Lusk 3 Work in the condition required for Substantial Completion of
the Must-Take Space 2 and with all of the other Delivery Requirements of the
Lusk 3 Work Letter satisfied shall be known as the "Must‑Take 2 Delivery
Date").  Notwithstanding the foregoing, so long as Landlord diligently pursues
the Substantial Completion of the Must-Take Space 2, Landlord shall have no
liability to Tenant for any damages resulting from any delay in delivering
possession of the Must-Take Space 2 to Tenant on or before July 1, 2019, except
as expressly set forth in this Lease or the Tenant Work Letter.

1.4.4Must-Take Space 2 Rent.  The annual Base Rent payable by Tenant for the
Must-Take Space 2 (the "Must-Take Space 2 Base Rent") shall commence to be
payable, in accordance with Article 3 of this Lease, on the Must-Take 2 Rent
Commencement Date, in equal monthly installments of the initial Must-Take Space
2 Base Rent, as hereinafter calculated.  The initial annual rate of Must-Take
Space 2 Base Rent payable by Tenant pursuant to this Lease shall be calculated
in accordance with this Section 1.4.4 on the basis of the Estimated Project Cost
Notice as set forth in Section 1.4.4.6 below, as the product of (a) six and
thee-quarter percent (6.75%), and (b) the Project Costs (as defined in this
Section 1.4.4, below).  The Must-Take Space 2 Base Rent shall be increased
annually on the Lusk 3 Adjustment Date in accordance with Section 4.6 of the
Summary.  As used herein, the term "Project Costs" shall be calculated upon
Substantial Completion of the Landlord's Lusk 3 Work, in accordance with Section
1.4.4.6 below, to the extent incurred by Landlord or otherwise included in the
costs set forth in Sections 1.4.4.1 and 1.4.4.2 below, and which are neither (i)
paid from any portion of the Tenant Improvement Allowance designated by Tenant
for payment of any Tenant FF&E and Tenant Fit-Out Costs of Must-Take Space 2
pursuant to any TIA Allocation Notices delivered to Landlord in accordance with
the Initial Premises Work Letter and/or the Expansion Space Work Letter, nor
(ii) expressly excluded from Development Costs as SMB Costs designated by Tenant
in accordance with Section 1.4.4.3 below, nor (iii) excluded from Project Costs
in accordance with Section 1.4.4.4 below, nor (iv) included in the BTS
Over-Allowance Amount paid by Tenant.  Landlord and Tenant shall work together
in good faith to minimize Project Costs in accordance with the Lusk 3 Work
Letter.

1.4.4.1Must-Take Space 2 Land Value.  A land value ("Must-Take Space 2 Land
Value") equal to the product of (a) the rentable square footage of the Must-Take
Space 2, as determined pursuant to Section 1.4.1, above, and (b) One Hundred
Dollars ($100.00).

1.4.4.2Development Costs.  Subject to the exclusions set forth in Section
1.4.4.3 below, all commercially reasonable costs, fees and expenses incurred by
Landlord to the extent specifically arising out of, and limited to, the design,
development and construction of the Landlord's Lusk 3 Work (including associated
common areas, walkways, parking areas, dirt removal, landscaping, and related
improvements), and of obtaining all permits, approvals, authorizations and
licenses required to construct the Landlord's Lusk 3 Work, and any BTS FF&E
Costs incurred by Landlord or Tenant in accordance with Section 1.4.4.2.8,
below, as Project Costs (collectively, the "Development Costs"); provided,
however, that to the extent that any of the foregoing items of Landlord's Lusk 3
Work of the Base, Shell and Core (as defined in the Lusk 3 Work Letter) are SMB
Cost Items (as defined in Section 1.6.1 below), Tenant may elect, to the extent
that Landlord confirms that the costs of acquisition of materials, labor and
other construction costs of such SMB Cost Items are reasonably severable from
the construction costs of the remainder of the Landlord's Lusk 3 Work of the
Base, Shell and Core (which confirmation shall not be unreasonably withheld), to
designate some or all of the costs of such SMB Cost Items as SMB Costs, in lieu
of Development Costs, and to the extent that Tenant elects to designate such SMB
Cost Items as SMB Costs, (a) the cost of such SMB Cost Items shall be expressly
identified as such in the BB Construction Contract (as defined in the Lusk 3
Work Letter), and paid by Tenant as if they were included the BTS Over-Allowance
Amount, regardless of whether the BTS Project Cost Limit is actually exceeded,
and (b) such Lusk 3 SMB Cost Items designated and paid for by Tenant as SMB
Costs shall be excluded from Development Costs (and from the calculation of any
related Project Costs) for the purposes of determining the Must-Take Space 2
Base Rent pursuant to this Section 1.4.4.  Except for the deemed Capital Carry
Costs and Development Fee set forth in Sections 1.4.4.2.3 and 1.4.4.2.7,
Development Costs shall be limited to

 

 

 

 

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Landlord’s actual out-of-pocket expenses incurred in accordance with the terms
and conditions of the Lusk 3 Work Letter.  A preliminary budget of Development
Costs is attached hereto as Exhibit G.  Subject to the foregoing, Development
Costs shall be defined as the following:

1.4.4.2.1    Design Fees.  All architectural (including landscape architecture),
engineering, and other design consulting fees incurred by Landlord in accordance
with the terms and conditions of the Lusk 3 Work Letter (excluding, however, any
such costs incurred by Landlord prior to the Date of this Lease, except for
those costs and fees of the Base Building Architect (as defined in the Lusk 3
Work Letter) and PMA payable by Landlord for design work expressly included in
the reimbursement obligations of Tenant under that certain Design Work
Reimbursement Agreement between Landlord and Tenant, dated March 14, 2017, as
amended).

1.4.4.2.2    Governmental Fees.  All fees, exactions, mitigations, and permit
fees required for the construction of the Landlord's Lusk 3 Work, including, but
not limited to the costs of the Permits (as defined in the Lusk 3 Work Letter),
to the extent imposed or required by any administrative, governmental or
quasi-governmental agency with jurisdiction over the Must-Take Space 2.

1.4.4.2.3    Capital Carry Costs.  An annual amount equal to four and one-half
percent (4½%) of an amount equal to all Development Costs other than Capital
Carry Costs and the Development Fee.  For purposes of this Section 1.4.4.2.3,
Capital Carry Costs shall be calculated monthly based on actual costs expended
as of the date of calculation.

1.4.4.2.4    Commissions.  Leasing commissions actually paid by Landlord with
respect to Tenant's lease of the Must-Take Space 2; provided that (i) any such
leasing commissions payable to both Landlord's and Tenant’s Brokers shall not
exceed $28 per rentable square foot of the Must-Take Space 2, and (ii) any
management fee payable to Tenant's Project Manager (as defined in the Lusk 3
Work Letter) in accordance with Tenant's separate agreement with Savills Studley
shall be included in Development Costs for the purposes of Landlord’s payment or
reimbursement of such costs pursuant to the Lusk 3 Work Letter.  

1.4.4.2.5     Contractor's Fees.  All costs, fees and charges of the Base
Building Contractor and TI Contractor (as such terms are defined in the Lusk 3
Work Letter), including any profit, general conditions and overhead payable in
accordance with the BB Construction Contract and the TI Construction Contract
(as defined in the Lusk 3 Work Letter) approved by Tenant in accordance with the
Lusk 3 Work Letter, which are incurred by Landlord with respect to the
Landlord's Lusk 3 Work in accordance with the terms and conditions of the Lusk 3
Work Letter.

1.4.4.2.6    Offsite Work.  The cost of all off-site improvement work (i.e.,
improvement work not located on the Must-Take Space 2 land or within any other
portion of the Construction Area) (the "Offsite Work") which Landlord is
required to perform (i) solely as a condition of the issuance or sign-off of any
of the Permits required by the applicable governmental authorities for the
Landlord's Lusk 3 Work, or (ii) in order for the construction of the Must-Take
Space 2 in accordance with the Lusk 3 Work Letter to comply with the Underlying
Documents; provided that no Offsite Work relating to remedying any violations of
law or violations of the Underlying Documents in existence as of the Lease
Commencement Date shall be included in Development Costs.

1.4.4.2.7    Development Fee.  A development fee to which Landlord shall be
entitled in an amount equal to two and one-half percent (2½%) of the total
Development Costs (but not any Development Costs in excess of the BTS Project
Cost Limit), provided in no event shall the Development Fee exceed an amount
equal to Fifteen Dollars ($15.00) per rentable square foot of Must-Take Space 2
(i.e. $420,000.00 based upon an estimated 28,000 rentable square feet).

1.4.4.2.8    Tenant FF&E and Tenant Fit-Out Costs.  The costs of furniture,
fixtures, equipment, and other items of personal property, including, without
limitation, IT/Telco and AV/security systems, installed by or for Tenant in the
Must-Take Space 2 (and to the extent such items are paid for, or reimbursed, by
Landlord as Project Costs, such items, in addition to any other items of Tenant
FF&E, as defined in the Initial Premises Work Letter, are referred to in this
Lease as the "Tenant FF&E"), payable to Vendors (as defined in the Initial
Premises Work Letter), and installed by or for Tenant in Must-Take Space 2, and
Tenant Fit-Out Costs (as defined in the Initial Premises Work Letter) paid or
incurred by Tenant in connection with Tenant FF&E installed in Must-Take Space 2
(collectively with the cost of any Tenant FF&E included in Project Costs, the
"BTS FF&E Costs"); provided that (i) BTS FF&E Costs payable by Landlord as
Project Costs shall not exceed $20.00 per

 

 

 

 

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rentable square foot of Must-Take Space 2 (the "BTS FF&E Cost Limit"), and (ii)
Landlord shall have no obligation to pay, as Project Costs, for any BTS FF&E
Costs submitted by Tenant to Landlord for payment or reimbursement more than
thirty (30) days after the Must-Take 2 Delivery Date; and further provided that
(iii) any Tenant FF&E that may be installed in Must-Take Space 2, which is paid
for with funds allocated by Tenant from the Tenant Improvement Allowance (in
accordance with the Initial Premises Work Letter and/or the Expansion Space Work
Letter, but in no event in excess of the BTS Over-Allowance Amount), shall be
excluded from Project Costs in accordance with Section 1.4.4, and is therefore
excluded from the BTS FF&E Cost Limit; and (iv) any BTS FF&E Costs incurred by
Landlord in excess of the BTS FF&E Cost Limit, or which cause the total Project
Costs to exceed the BTS Project Cost Limit, shall be payable by Tenant from the
BTS Over-Allowance Amount in accordance with Section 1.4.4.4 below.  

1.4.4.2.9    Other Costs.  All premiums for insurance policies maintained by
Landlord covering the construction of the Must-Take Space 2 to the extent that
such policies are obtained and maintained solely to cover the construction
period risks associated with the Landlord's Lusk 3 Work, and are excluded from
Direct Expenses otherwise payable by Tenant pursuant to this Lease; the cost of
any and all surveys performed in association with the construction of the
Must-Take Space 2, and any other costs, fees and expenses (including, without
limitation, professional and consultant fees, costs and expenses) incurred
and/or paid by Landlord in connection with the design, permitting, construction
and development of the Landlord's Lusk 3 Work in accordance with the terms and
conditions of the Lusk 3 Work Letter.

1.4.4.3Exclusions from Project Costs.  Notwithstanding anything to the contrary
in Section 1.4.4.3, Development Costs shall not include (i) Landlord’s costs of
calculating Development Costs, (ii) any legal or accounting fees, (iii) any
costs attributable to the negligence, willful misconduct, contract default, or
violation of law of Landlord or "PMA" (defined below), (iv) any costs associated
with financing the costs of the design, development and/or construction of the
Must-Take Space 2, including any costs incurred in connection with securing such
financing, (v) [Intentionally Omitted], (vi) travel and entertainment expenses,
(vii) any costs relating to matters that are beyond the scope of the design,
development and construction of the Must-Take Space 2 as agreed to by Landlord
and Tenant in this Lease and the exhibits attached hereto, (viii) Tax Expenses,
including any additional real estate taxes resulting from a re-assessment of the
entire Project if such reassessment is triggered by the design, permitting,
construction or development of the Lusk 3 Building or the Tenant Improvements in
the Must-Take Space 2, (ix) costs incurred in order to remedy any violations of
law or of the Underlying Documents, except to the extent that such violations
are caused by Tenant, (x) construction management and supervision fees of
Landlord or its affiliates (Tenant hereby agrees that Project Managers Advisors
("PMA") is not an affiliate of Landlord), (xi) to the extent Tenant elects to
include such costs in SMB Costs in accordance with Section 1.4.4.3, any costs
incurred by Landlord for Lusk 3 SMB Cost Items (xii) any costs for which Tenant
could otherwise be held responsible under other provisions of this Lease,
whether as Direct Expenses or otherwise, (xiii) overhead and profit, except as
specifically provided in Section 1.4.4.3.4, (xiv) costs expressly excluded from
Project Costs or Development Costs in this Section 1.4.4 or elsewhere in this
Lease, or in the Lusk 3 Work Letter, (xv) costs for which Landlord is reimbursed
by parties other than Tenant, (xvi) depreciation, amortization, and interest,
except as expressly set forth in Section 1.4.4.3, (xvii) costs relating to any
ground lease, (xviii) costs relating to lien and completion bonds or other
bonds, (xix) any costs that, while relating to the development of the Must-Take
Space 2, also relate to the improvement of other portions of the Project (e.g.,
SMB Costs incurred for alterations or improvements to the Common Areas of the
Project, other than the Common Areas of the Construction Area, by the Contractor
of the Landlord’s Lusk 3 Work while common general conditions are in effect for
the Landlord’s Lusk 3 Work and the Landlord’s Site Modernization/Beautification
Work), unless such costs are equitably prorated to reflect the extent of their
relationship to the development of the Must-Take Space 2 vis-a-vis their
relationship to other portions of the Project, (xx) any reserves of any kind,
(xxi) any amounts attributable to services provided by Landlord or any affiliate
of Landlord, to the extent that such amounts exceed the amounts that would have
been incurred had the services been provided by a third party service provider
engaged via an arms-length transaction, (xxii) the cost of overtime labor
(unless such overtime labor is requested by Tenant), (xxiii) any costs in excess
of the BTS Project Cost Limit, (xxiv) any costs that are paid for using unused
Tenant Improvement Allowance, (xxv) any costs or expenses required to (a) repair
any construction period casualty to Must-Take Space 2, unless such cost or
repair is not covered by a market standard "Builder's All Risk" insurance
policy, and (b) repair or replace any Building Equipment to be incorporated into
Must-Take Space 2 as part of the Landlord's Lusk 3 Work, which is lost, stolen
or damaged prior to Substantial Completion of the Must-Take Space 2, unless such
repair or replacement cost is not covered by a market standard "Builder's All
Risk" insurance policy; (xxvi) any management or supervision fee (other than the
management fee payable to Tenant's Project Manager in accordance with Tenant's
separate agreement with Savills Studley and PMA's fee, in the amount or
percentage set forth in the Lusk 3 Work

 

 

 

 

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Letter); and (xxvii) any additional costs incurred by Tenant in the exercise of
its rights as a result of a "BB Construction Contract Assignment Condition" or a
“TI Construction Contract Assignment Condition” (as such terms are defined in
the Lusk 3 Work Letter), to the extent such costs are attributable solely to
Tenant exercising such rights and would not have been incurred by either
Landlord or Tenant absent the exercise of such rights.  Landlord shall use
commercially reasonable efforts to enforce the terms of the BB Construction
Contract and the TI Construction Contract, and any other agreements between
Landlord and the architects, engineers and consultants engaged in the
performance of the Landlord's Lusk 3 Work, including the use of proceeds of any
insurance policy and satisfaction of the indemnity obligations of such third
parties with respect to any loss, damage or injury to persons, property or
improvements, or any defect in the design or work of development of Must-Take
Space 2, in accordance with the terms and conditions of the required forms of
agreements set forth in the Lusk 3 Work Letter or the Required Level of Care (as
defined in the Lusk 3 Work Letter), as applicable.  Without limiting the
foregoing, Landlord shall cause PMA to supervise and direct the Landlord's Lusk
3 Work, using a standard of care and quality of service consistent with those
rendered by reputable construction managers performing the same or similar
development management services for the development of First Class Life Sciences
Projects, and shall act in good faith and using its commercially-reasonable
judgment in all aspects of PMA's management of the Development Costs, as if
Landlord were incurring such costs at its sole cost and expense; and in
accordance with the foregoing standards, Landlord shall cause PMA to diligently
act to enforce such third-party obligations or obtain proceeds of insurance
prior to incurring any additional costs of repair or work to remedy such losses,
damages or defects as Development Costs.  In the event of any dispute between
Landlord and Tenant regarding whether any cost of Landlord's Lusk 3 Work has
been appropriately incurred by Landlord as a Development Cost in accordance with
the foregoing standards of supervision and management of the Landlord's Lusk 3
Work, then either Landlord or Tenant may institute arbitration proceedings to
resolve such dispute in accordance with Section 6.8 of the Lusk 3 Work
Letter.  In accordance with the foregoing standard of care, Landlord shall act
in good faith and use its commercially-reasonable efforts to cooperate with
Tenant's requests for achieving discounts or rebates on the Development Costs
and other Project Costs payable to third parties; and for the purposes of
calculating the Must-Take Space 2 Base Rent, Project Costs shall be reduced by
any such discounts actually received by, and any such rebates payable to,
Landlord on such Project Costs (regardless of whether such discounts are
received or such rebates are payable prior to the Must-Take Space 2 Delivery
Date.

1.4.4.4Cap On Project Costs.  Notwithstanding anything to the contrary contained
in this Section 1.4.4.4, if the Project Costs exceed the BTS Project Cost Limit
then Tenant shall pay to Landlord the BTS Over-Allowance Amount.  The BTS
Over-Allowance Amount shall be payable on a pro-rata basis with the Landlord's
payment of the other Development Costs, as the same may be increased by changes
during the course of construction.  To the extent that the amount so paid by
Tenant exceeds the amount by which the Project Costs actually exceed the BTS
Project Cost Limit, Landlord shall immediately refund the amount of the
overpayment to Tenant upon the final determination of Project Costs under
Section 1.4.4.5 below.

1.4.4.5Delivery and Review of Landlord’s Project Costs Calculation.  Landlord
shall provide updated cost information to Tenant throughout Landlord’s design,
permitting, construction and development of the Must-Take Space 2.  No later
than ten (10) business days prior to the Must-Take 2 Delivery Date, Landlord
shall deliver to Tenant a written notice (the “Estimated Project Cost Notice”)
including (i) Landlord’s reasonable, good-faith estimate of the total Project
Costs incurred as amounts included in the calculation of the initial Must-Take
Space 2 Base Rent in accordance with this Section 1.4.4, and (ii) an estimate of
the initial Must-Take Space 2 Base Rent based upon such estimate, and Tenant
shall initially pay Must-Take Space 2 Base Rent in accordance with the Estimated
Project Cost Notice until the actual Project Costs to be included in the
calculation of Must-Take Space 2 Base Rent in accordance with this Section 1.4.4
are determined and agreed upon by Landlord and Tenant in accordance with this
Section 1.4.4.5.  As soon as reasonably practicable following the Must-Take 2
Delivery Date (but not earlier than thirty (30) days thereafter, or Tenant's
earlier confirmation that all BTS FF&E Costs to be paid or reimbursed as Project
Costs have been submitted to Landlord in accordance with Section 1.4.4.2.8),
Landlord shall determine actual Project Costs to be included in the calculation
of Must-Take Space 2 Base Rent in accordance with this Section 1.4.4 and shall
deliver to Tenant written notice of such determination, along with a reasonably
detailed statement setting forth all costs upon which such determination was
based and a revised Base Rent figure for the Must-Take Space 2 (the "Actual
Project Cost Notice").  Tenant shall have the right to review Landlord's books
and records for the Landlord's Lusk 3 Work and the related Project Costs
calculation (and Landlord shall reasonably cooperate in making Landlord's
accountant available for discussion of such calculation) during the 30-day
period following Landlord's delivery of the Actual Project Cost Notice, and to
reasonably object to such determination by written notice to Landlord within
thirty (30) days following the expiration of such 30-day period.  Unless Tenant
timely objects to Landlord's calculation following Landlord's

 

 

 

 

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delivery of the Actual Project Cost Notice, by delivering written notice to
Landlord stating that Landlord's determination is inaccurate, Landlord's
determination set forth in the Actual Project Cost Notice will be binding on
both Landlord and Tenant, and Tenant’s obligation to pay Must-Take Space 2 Base
Rent shall be based upon the figure set forth in the Actual Project Cost
Notice.  If Tenant timely objects to Landlord's determination, Landlord and
Tenant shall promptly meet and attempt to agree upon the actual amount of
Project Costs incurred.  If Landlord and Tenant cannot agree within thirty (30)
days after Tenant's delivery of its written notice objecting thereto, Landlord
and Tenant shall select an independent third party accountant to calculate the
Project Costs.  Such third party independent accountant’s determination shall be
conclusive and binding on Landlord and Tenant, and Landlord and Tenant shall
each pay one-half of the fees and expenses of the independent third-party
accountant (which fees and expenses shall not be added to Project Costs or
included in Operating Expenses; provided that if such accountant determines that
the amount of Project Costs stated in the Actual Project Cost Notice is within
two percent (2%) of the actual Project Costs, then the fees and expenses of such
accountant shall be borne entirely and exclusively by Tenant; or if such
accountant determines that the amount of Project Costs stated in the Actual
Project Cost Notice is more than five percent (5%) higher than actual Project
Costs, then the fees and expenses of such accountant shall be borne entirely and
exclusively by Landlord (which fees and expenses shall not be added to Project
Costs or included in Operating Expenses).  Tenant’s first payment of Base Rent
for the Must-Take Space 2 that is based on actual Project Costs (as agreed to by
the parties) shall be reduced or increased as necessary to account for any
difference between amounts paid by Tenant based on the Estimated Project Cost
Notice and the amounts that would have been payable by Tenant with respect to
such period had Tenant’s Base Rent for the Must-Take Space 2 been based on
actual Project Costs (as agreed to by the parties). Notwithstanding the
foregoing, and for the avoidance of doubt, promptly following the Must-Take
Space 2 Rent Commencement Date, Landlord and Tenant shall enter into an
amendment to this Lease amending and restating Sections 4.6 thru 4.8 of the
Summary as a Base Rent Schedule for the Must-Take Space 2 to be attached to and
incorporated into this Lease, setting forth the exact dates of adjustment to
Must-Take Space 2 Base Rent, and the exact monthly installments of Must-Take
Space 2 Base Rent payable by Tenant for the Must-Take Space 2 during the
remaining Lease Term.  

1.4.4.6Direct Expenses.  For purposes of calculating Tenant's obligations under
Article 4 of this Lease, Tenant's Share of Building Direct Expenses with respect
to Must-Take Space 2 shall be 100%.

1.4.5Term.  The lease term for the Must-Take Space 2 shall commence upon the
Must-Take 2 Commencement Date and shall expire upon the Lease Expiration Date
(subject to the terms and conditions of Section 3.4 of the Summary).

1.4.6Other Terms.  Except as specifically set forth in this Lease and the Lusk 3
Work Letter, as of the Must-Take 2 Commencement Date, all other terms of this
Lease shall apply to the Must-Take Space 2 as though the Must-Take Space 2 was
originally part of the Premises.  No later than thirty (30) days following the
Must-Take 2 Commencement Date, Landlord shall deliver to Tenant a notice in the
form as set forth in Exhibit C-2, attached hereto, setting forth the Must-Take 2
Commencement Date, the Must-Take 2 Rent Commencement Date, the Project Costs
funded by and/or payable to Landlord as Project Costs and the Must-Take Space 2
Base Rent (“Must-Take 2 Rent Commencement Notice”), as a confirmation only of
the actual Project Costs funded by Landlord, the Must-Take 2 Commencement Date
and the Must-Take 2 Rent Commencement Date, and any other information set forth
therein, which Tenant shall execute and return to Landlord within thirty (30)
days of receipt thereof.  If Landlord so elects, the Lease amendment described
in Section 1.4.4.5 above, amending and restating Sections 4.6 thru 4.8 of the
Summary as a Base Rent Schedule for the Must-Take Space 2, may be incorporated
into this Lease by attachment to and reference in the Must-Take 2 Rent
Commencement Notice.  If Landlord fails to timely deliver the Must-Take 2 Rent
Commencement Notice, Landlord shall not be in default and such delay shall not
affect the Must-Take 2 Commencement Date, the Must-Take 2 Rent Commencement
Date, or the Project Costs so long as Landlord diligently pursues in good faith
the delivery of such Must-Take 2 Rent Commencement Notice to Tenant.  

1.5Must‑Take Space 3.  As of the Must-Take 3 Commencement Date, the Premises
shall be expanded to include the rentable square footage of the "Must‑Take Space
3," as that term is defined in Section 1.5.1, below, as set forth in this
Section 1.5 and this Lease.

1.5.1Description of the Must-Take Space 3.  The "Must‑Take Space 3," as used in
this Lease, shall consist of the space set forth in Section 2.3.4 of the
Summary.  For purposes of this Lease, rentable square feet of the Must Take
Space 3 shall be deemed as set forth in Section 2.3.4 of the Summary.

 

 

 

 

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1.5.2Delivery of the Must-Take Space 3.  Tenant shall accept delivery of the
Must-Take Space 3 from Landlord, and Landlord shall deliver the Must-Take Space
3 to Tenant, upon the Substantial Completion of the Tenant Improvements in the
Must-Take Space 3, in the condition required by the applicable terms and
conditions of the Expansion Space Work Letter, but not before April 1, 2019 (the
date upon which Landlord delivers the Must-Take Space 3 to Tenant with the
Tenant Improvements in the Must-Take Space 3 Substantially Complete in
accordance with the Expansion Space Work Letter shall be known as the "Must‑Take
3 Delivery Date").  Landlord shall use its commercially reasonable efforts to
achieve site conditions (i.e., the condition that allows Tenant to access the
Must-Take Space 3 for the "Tenant Must-Take 3 Fit-Out Work" as that term is
defined below), within Must-Take Space 3 at least sixty (60) days prior to the
Must-Take 3 Delivery Date as required for Tenant's reasonable non-exclusive
access to the Must-Take Space 3 for the installation and testing of Tenant FF&E
in the Must-Take Space 3 (the "Tenant Must-Take Space 3 Fit-Out Work"); with
such 60-day period (the "Must-Take Space 3 Fit-Out Period") commencing on the
date on which (i) the Must-Take Space 3 is in the condition required for such
non-exclusive access by Tenant, and (ii) Tenant is provided with such
non-exclusive access following reasonable advance notice of such date from
Landlord; and further provided that Landlord and Tenant shall each act
reasonably and cooperate in good faith to coordinate the Tenant Improvements to
the Must-Take Space 3 and Tenant's Must-Take Space 3 Fit-Out Work to avoid any
interference with, or delay of, their respective activities in Must-Take Space 3
during the Must-Take Space 3 Fit-Out Period.  Notwithstanding anything set forth
in this Lease to the contrary, Landlord may deny Tenant access to the Must-Take
Space 3 during the Must-Take Space 3 Fit-Out Period if such access by Tenant
would interfere with Landlord's construction of the Tenant Improvements in the
Must-Take Space 3, and such temporary denial of access shall not serve to delay
or extend the Must-Take Space 3 Fit-Out Period (or delay the Must-Take 3 Rent
Commencement Date) provided that Landlord reasonably cooperates with Tenant to
provide access as soon as possible once Tenant's access and work in the
Must-Take Space 3 no longer interferes with Landlord's construction of the
Tenant Improvements in the Must-Take Space 3.  Notwithstanding the foregoing, so
long as Landlord diligently pursues the Substantial Completion of the Tenant
Improvements in the Must-Take Space 3, Landlord shall have no liability to
Tenant for any damages resulting from any delay in delivering possession of the
Must-Take Space 3 to Tenant on any particular delivery date designated by
Landlord or designated in this Lease.

1.5.3Rent and Term.  As of the Must-Take 3 Commencement Date, the Must-Take
Space 3 shall become part of the Premises for all purposes hereunder, and,
except as otherwise expressly provided in this Section 1.5.3, shall be subject
to every term and condition of this Lease.  Tenant shall commence payment of the
Must-Take Space 3 Base Rent and the Additional Rent for the Must-Take Space 3
(in addition to the Initial Premises Base Rent, the Must-Take Space 1 Base Rent
and any Must-Take Space 2 Base Rent, and the Additional Rent payable for the
Initial Premises, Must-Take Space 1 and Must-Take Space 2) on the Must-Take 3
Rent Commencement Date; and the amount of the Must-Take Space 3 Base Rent shall
be increased on each Lusk 1 & 2 Rent Adjustment Date in accordance with Section
4.9 of the Summary.  Notwithstanding the foregoing, and for the avoidance of
doubt, promptly following the Must-Take 3 Rent Commencement Date, Landlord and
Tenant shall enter into an amendment to this Lease amending and restating
Sections 4.9 and 4.10 of the Summary, and the Base Rent Schedule prepared by
Landlord in accordance with Section 1.3.3 above, as a new Base Rent Schedule for
the Initial Premises, Must-Take Space 1 and Must-Take Space 3, collectively, to
be attached to and incorporated into this Lease, setting forth the exact dates
of adjustment to Annual Base Rent payable for the Initial Premises, Must-Take
Space 1 and Must-Take Space 3, collectively, the exact monthly installments of
such Annual Base Rent amount payable by Tenant during the remaining Lease
Term.  Furthermore, for purposes of calculating Tenant's obligations under
Article 4 of this Lease, Tenant's Share of Building Direct Expenses for the Lusk
2 Building shall be increased in accordance with Section 6 of the Summary as of
the Must-Take 3 Rent Commencement Date.  The lease term for the Must-Take Space
3 shall commence on the Must-Take 3 Commencement Date; and the lease term for
the Must-Take Space 3 shall expire, unless earlier terminated, upon the Lease
Expiration Date.

1.5.4Improvement of Must-Take Space 3.  The Tenant Improvements of the Must-Take
Space 3 shall be constructed by Landlord, at Landlord's expense (subject to
Tenant's obligation to fund the costs of the Tenant Improvements to the
Must-Take Space 3 in accordance with the applicable terms and conditions of
Expansion Space Work Letter).

1.5.5Other Terms.  Except as specifically set forth in this Lease and in the
Expansion Space Work Letter, as of the Must-Take 3 Commencement Date all other
terms of this Lease shall apply to the Must-Take Space 3 as though the Must-Take
Space 3 was originally part of the Premises.  No later than thirty (30) days
following the Must-Take 3 Commencement Date, Landlord shall deliver to Tenant a
notice in the form as set forth

 

 

 

 

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in Exhibit C‑2, attached hereto, applicable to the Must-Take Space 3, as a
confirmation only of the information set forth therein, which Tenant shall
execute and return to Landlord within thirty (30) days of receipt thereof.

1.6Site Modernization/Beautification Work.  The Site
Modernization/Beautification Work shall be completed by Landlord, at Tenant's
expense (but subject to Landlord’s Common Area Contribution, to the extent
utilized by Tenant), in accordance with this Section 1.6 and the Tenant Work
Letter attached as Exhibit B-4 to this Lease (the "SMB Work Letter").

1.6.1Completion of the Site Modernization/Beautification Work.  The "Site
Modernization/ Beautification Work" shall consist of the improvements and
alterations to the Common Areas, and the exterior renovations and upgrades to
the Existing Buildings (collectively, the “SMB Cost Items”), in accordance with
plans and specifications, and a Tenant-approved project schedule and budget for
the performance and costs of the Site Modernization/Beautification Work, to be
developed by Landlord and Tenant in accordance with the SMB Work Letter
(provided that the construction of certain SMB Cost Items may be included in the
Landlord's Lusk 3 Work, at Tenant's election and subject to Landlord's
confirmation in accordance with Section 1.4.4.2 of this Lease).  Substantial
Completion of the Site Modernization/Beautification Work shall be determined in
accordance with the terms and conditions of the SMB Work Letter.  Landlord shall
use its commercially reasonable efforts to achieve Project conditions consistent
with the requirements for Substantial Completion of the Site
Modernization/Beautification Work in accordance with the SMB Project
Schedule.  Regardless of the condition of the Site Modernization/Beautification
Work on the SMB Rent Commencement Date (as defined in Section 4.12 of the
Summary), SMB Rent shall commence to accrue on such date to the extent that SMB
Costs have been funded from the Landlord's Common Area Contribution, with all
such accrued SMB Rent due and payable, following Tenant's receipt of the SMB
Rent Commencement Notice, in accordance with Section 1.6.3 below.

1.6.2SMB Rent.  In the event, and to the extent, that Tenant elects to use some
or all of the Site Modernization/Beautification Allowance (as defined in the SMB
Work Letter) as the Landlord's Common Area Contribution (as defined in Section
5.3 of the Summary) toward SMB Costs (as defined in Section 1.6.2.1 below), then
annual SMB Rent shall be payable by Tenant in accordance with Section 4.11 of
the Summary.  Such SMB Rent, if any, shall be payable by Tenant in accordance
with Article 3 of this Lease, commencing on the SMB Rent Commencement Date, in
equal monthly installments (subject to the annual increases set forth in Section
4.11 of the Summary), and ending at the end of the initial Lease Term.  The
initial SMB Rent shall be calculated in accordance with Section 4.11 of the
Summary, on the basis of the Landlord’s Common Area Contribution used by Tenant
to fund the SMB Costs, if any (as such Landlord’s Common Area Contribution shall
be documented in the SMB Rent Commencement Notice), as the product of (a) an
annual rate of six and three-quarter percent (6.75%), and (b) the amount of such
Landlord’s Common Area Contribution.  The SMB Rent shall be and shall be payable
in equal monthly installments, and shall be increased annually on the SMB Rent
Adjustment Date (as defined in Section 4.11 of the Summary).  Landlord and
Tenant shall work together in good faith to minimize SMB Costs in accordance
with the SMB Work Letter.

1.6.2.1SMB Costs.  All commercially reasonable costs, fees and expenses incurred
by Landlord or Tenant to the extent specifically arising out of, and limited to,
the design, development and construction of the Site
Modernization/Beautification Work, including, but not limited to, any costs
incurred by Tenant (or Landlord, without duplication of the Project Costs
included in the determination of Must-Take Space 2 Base Rent) for SMB Cost Items
and which are designated by Tenant as SMB Cost Items in accordance with Section
1.4.4.2 of this Lease, and of obtaining all permits, approvals, authorizations
and licenses required to construct the Site Modernization/Beautification Work
(the "SMB Costs"), which SMB Costs shall be limited to those SMB Cost Items
approved by Tenant to be included in the Landlord’s Work of Must-Take Space 2,
but excluded from the Development Costs of Must-Take Space 2 for the purpose of
calculating the Must-Take Space 2 Base Rent in accordance with Section 1.4.4 of
this Lease.  A final budget of SMB Costs shall be submitted in writing and
approved by Tenant in accordance with the terms and conditions of the SMB Work
Letter, in advance of Landlord's commencement of the work of construction of the
Site Modernization/Beautification Work.  SMB Costs shall be defined as the
following:  

1.6.2.1.1Design Fees.  All architectural (including landscape architecture),
engineering, and other design consulting fees incurred by Landlord or Tenant in
accordance with the terms and conditions of the SMB Work Letter (excluding,
however, any such costs incurred by Landlord prior to the Date of this Lease,
except (without duplication of any such fees payable as Development Costs
pursuant to Section 1.4.4.2.1 above) for those fees of the SMB Architect (as
defined in the SMB Work Letter) and PMA payable by Landlord for

 

 

 

 

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design work expressly included in the reimbursement obligations of Tenant under
that certain Design Work Reimbursement Agreement between Landlord and Tenant,
dated March 14, 2017, as amended).

1.6.2.1.2Governmental Fees.  All fees, exactions, mitigations, and permit fees
required for the construction of the Site Modernization/Beautification Work,
including, but not limited to the costs of the Permits (as defined in the SMB
Work Letter) required for the SMB Work, to the extent imposed or required by any
administrative, governmental or quasi-governmental agency with jurisdiction over
the Project.

1.6.2.1.3Capital Carry Costs.  An annual amount equal to four and one-half
percent (4½%) of an amount equal to all SMB Costs funded by Landlord in
accordance with the SMB Work Letter (regardless of whether such SMB Costs are
funded from the Site Modernization/Beautification Allowance).  For purposes of
this Section 1.6.2.1.3, Capital Carry Costs shall be calculated monthly based on
actual costs expended by Landlord as of the date of calculation.

1.6.2.1.4Contractor's Fees.  All costs, fees and charges of the Site Contractor
(as defined in the SMB Work Letter), including any profit, general conditions
and overhead payable in accordance with the SMB Construction Contract approved
by Tenant in accordance with the SMB Work Letter, which are incurred by Landlord
with respect to the Site Modernization/Beautification Work in accordance with
the terms and conditions of the SMB Work Letter.

1.6.2.1.5Other Costs.  The cost of any and all Offsite Work (if any) which
Landlord or Tenant causes to be performed (i) solely as a condition of the
issuance or sign-off of any of the Permits required by the applicable
governmental authorities for the Site Modernization/Beautification Work, or
(ii) in order for the construction of the Site Modernization/Beautification Work
in accordance with the SMB Work Letter to comply with the Underlying Documents;
provided that no Offsite Work relating to remedying any violations of law or
violations of the Underlying Documents in existence as of the Lease Commencement
Date shall be included in SMB Costs, surveys performed in association with the
construction of the Site Modernization/Beautification Work, and any other costs,
fees and expenses (including, without limitation, professional and consultant
fees, costs and expenses) incurred and/or paid by Landlord in connection with
the design, permitting, construction and development of the Site
Modernization/Beautification Work in accordance with the terms and conditions of
the SMB Work Letter.

1.6.2.2Exclusions from SMB Costs.  Notwithstanding anything to the contrary in
Section 1.6.2.1, SMB Costs shall not include any costs, fees or expenses
associated with the Site Modernization/Beautification Work which would be
excluded from Development Costs if such costs, fees or expenses had been
incurred pursuant to the Landlord’s Lusk 3 Work, in accordance with Section
1.4.4.3 of this Lease.

1.6.3Other Terms.  All of the Site Modernization/Beautification Work shall be
incorporated into the Common Areas of the Project and the Existing Buildings and
become the property of the Landlord.  Tenant shall have no obligation to remove
any of the improvements or alterations to the Common Areas or the Existing
Building made pursuant to the Site Modernization/Beautification Work, which
shall be surrendered by Tenant, along with the Premises, upon the expiration or
earlier termination of this Lease, without any compensation from Landlord for
those SMB Costs incurred by Tenant, at Tenant’s expense, in accordance with this
Lease.  Except as specifically set forth in this Lease or in the SMB Work
Letter, all other terms of this Lease relating to the Common Areas and the
exterior of the Existing Buildings shall apply to the Site
Modernization/Beautification Work as incorporated therein.  In the event that
SMB Rent is payable by Tenant pursuant to this Lease, then Landlord shall
deliver to Tenant an SMB Rent Commencement Notice in accordance with Section
4.12 of the Summary, which Tenant shall execute and return to Landlord within
thirty (30) days of receipt thereof.  If Landlord fails to timely deliver the
SMB Rent Commencement Notice, Landlord shall not be in default and such delay
shall not affect the Tenant's SMB Rent obligations, provided, however, that
monthly installments of SMB Rent shall not commence to be due and payable (and
all accrued and unpaid SMB Rent from and after the SMB Rent Commencement Date
shall be due and payable along with the first installment of SMB Rent payable
following Tenant's receipt of the SMB Rent Commencement Notice in accordance
with Section 4.12 of the Summary); and further provided that Landlord shall
diligently pursue in good faith the delivery of such SMB Rent Commencement
Notice to Tenant promptly following Substantial Completion of the Site
Modernization/Beautification Work (or any completed phase of such work), in
accordance with the terms and conditions of the SMB Work Letter.

1.7Right of First Offer to Purchase.  Provided that (a) the Tenant originally
named in this Lease (the "Original Tenant") or a "Permitted Transferee
Assignee," as that term is defined in Section 14.8, below, is the "Tenant" under
this Lease, (b) Tenant (or Tenant’s Permitted Transferee Assignee) continues to
occupy and operate

 

 

 

 

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out of at least fifty percent (50%) of the Project and has not subleased more
than twenty-five percent (25%) of the Premises at the time, and (c) Tenant is
not in default under this Lease at the time of Tenant's exercise of the Purchase
ROFO (defined below) beyond any applicable notice and cure period, Tenant shall
have a right of first offer to purchase (the "Purchase ROFO") the For Sale
Property (as hereinafter defined) if and when Landlord elects to sell, transfer
or otherwise convey the entirety of the Project or a substantial portion of the
real estate comprising the Project (the subject property being referred to
herein as the “For Sale Property”) (i) to any party other than a Landlord
Affiliate (as defined below), whether or not such Landlord Affiliate purchases
or otherwise acquires a direct or indirect, or partial or total, interest in the
Project or any entity directly or indirectly owning all or a part of the
Project, and (ii) on a single asset basis and not as part of a "Group Sale" (as
that term is defined below).  In the event of any sale, transfer or other
conveyance to a Landlord Affiliate or as part of a Group Sale, such purchaser
shall acquire its interest in the Project subject and subordinate to Tenant's
Purchase ROFO in the event of any subsequent sale, transfer or other conveyance
by such purchaser of the Project or the Building, as applicable (except to
another Landlord Affiliate, and except for a Group Sale), and shall be deemed to
have assumed Landlord's obligations under this Section 1.7 and with respect to
any such subsequent sale, transfer or conveyance of the Project.  For purposes
of this Section 1.7, a "Landlord Affiliate" shall mean (a) an entity which, as
of the date of this Lease, is controlled by, controls or is under common control
with Landlord or a parent or constituent partner of Landlord, or (b) HCP,
Inc..  For purposes of this Section 1.7, a "Group Sale" shall mean a sale or
other transfer of the entire Project as part of a single transaction also
involving one or more other commercial office properties or buildings owned by
Landlord and/or any Landlord Affiliate, which is located outside of the Project,
to a single purchaser.

1.7.1Procedure for Offer.  Except as permitted by this Section 1.7, if and when
Landlord intends to sell or otherwise transfer the For Sale Property, Landlord
shall notify Tenant (the "Purchase ROFO Notice") and offer to sell to Tenant the
For Sale Property.  The Purchase ROFO Notice shall set forth the following terms
and conditions (the "Offered Purchase Terms"):  (a) purchase price (the
"Purchase Price"), (b) the closing period, which shall be customary for sales of
First Class Life Sciences Projects, and (c) material conditions to closing and
material closing cost allocations, which shall be customary for sales of First
Class Life Sciences Projects.  In addition, along with the Purchase ROFO Notice,
Landlord shall provide Tenant with (i) copies of all of Landlord's most recent
third-party title reports, surveys, environmental reports, property condition
reports, plans, public sector notices, tax assessments and other material,
non-proprietary third-party reports, studies, tests and documentation relating
to the physical condition of the For Sale Property, to the extent such reports,
studies, test and/or documentation is in Landlord's possession or control,
(ii) a current rent roll and copies of all leases and contracts that Tenant
would be expected to assume upon closing of the sale of the For Sale Property to
Tenant, and (iii) twenty-four (24) months of income and expense operating
history, including a delinquency report for the prior three (3) months.

1.7.2Procedure for Acceptance.  If Tenant wishes to exercise the Purchase ROFO,
Tenant shall notify Landlord in writing ("Tenant's Exercise Notice") on or
before the date that occurs ten (10) business days following Tenant's receipt of
the Purchase ROFO Notice ("Tenant's Notice Period"), of Tenant's irrevocable
exercise of the Purchase ROFO at the purchase price and other terms set forth in
Purchase ROFO Notice.  Following Landlord's receipt of Tenant's Exercise Notice
("Tenant's Negotiation Period"), Landlord and Tenant shall negotiate exclusively
and in good faith, and shall execute and deliver a purchase and sale agreement
(the "Purchase Agreement") for the sale of the For Sale Property to Tenant
containing the terms set forth in the Purchase ROFO Notice.  If (i) Tenant does
not timely deliver Tenant's Exercise Notice, or (ii) Tenant timely delivers
Tenant's Exercise Notice, but, despite negotiating in good faith, Landlord and
Tenant fail to fully execute and deliver the Purchase Agreement on or before the
date that occurs sixty (60) days after the date Landlord receives Tenant's
Exercise Notice, then Landlord shall thereafter be free to sell the For Sale
Property to any party thereafter on any terms elected by Landlord in its sole
discretion; provided, however, prior to offering the For Sale Property to a
third party at a Purchase Price that is less than ninety-two and one-half
percent (92½%) of the Purchase Price set forth in any Purchase ROFO Notice,
Landlord shall deliver to Tenant a modified Purchase ROFO Notice at the reduced
Purchase Price and Tenant shall again have the right to deliver a Tenant's
Exercise Notice pursuant to the terms of this Section 1.7.2, and (z) if Landlord
withdraws the For Sale Property from the market (except during negotiations or
contract periods relating to the sale or potential sale of the For Sale Property
in accordance with this Section 1.7), Landlord must again issue a Purchase ROFO
Notice before again actively marketing the Project.  Time is of the essence with
respect to the giving of Tenant's Exercise Notice, Tenant's Notice Period and
the execution and delivery of the Purchase Agreement.  Tenant may specifically
enforce its Purchase ROFO rights under this Section 1.7.

 

 

 

 

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1.7.3LIQUIDATED DAMAGES.  LANDLORD AND TENANT HAVE DISCUSSED AND NEGOTIATED IN
GOOD FAITH THE QUESTION OF THE DAMAGES THAT WOULD BE SUFFERED BY LANDLORD IF
TENANT ISSUES A TENANT EXERCISE NOTICE BUT FAILS TO PURCHASE THE FOR SALE
PROPERTY IN ACCORDANCE WITH THE TERMS OF THIS SECTION 1.7 AND HAVE ENDEAVORED TO
REASONABLY ESTIMATE SUCH DAMAGES, AND THEY AGREE THAT (I) SUCH DAMAGES ARE AND
WILL BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX, (II) LIQUIDATED DAMAGES IN
THE AMOUNT OF 3.0% OF THE PURCHASE PRICE STATED IN THE PURCHASE ROFO NOTICE (THE
“LD AMOUNT”) WILL BE REASONABLE, (III) IN THE EVENT OF SUCH BREACH, LANDLORD IS
ENTITLED TO THE LD AMOUNT AS SUCH LIQUIDATED DAMAGES, AND (IV) IN CONSIDERATION
OF THE PAYMENT OF SUCH LIQUIDATED DAMAGES, LANDLORD SHALL BE DEEMED TO HAVE
WAIVED ALL OTHER CLAIMS FOR DAMAGES OR RELIEF AT LAW OR IN EQUITY ON ACCOUNT OF
THE FAILURE OF TENANT TO PURCHASE THE FOR SALE PROPERTY, BUT NOT INCLUDING
ANY:  (A) ACTIONS TO EXPUNGE A LIS PENDENS OR OTHER CLOUDS ON TITLE CAUSED BY
TENANT; (B) CLAIMS ON ACCOUNT OF TENANT’S OTHER OBLIGATIONS UNDER THIS LEASE;
AND (C) ATTORNEYS’ FEES AND COSTS INCURRED BY SELLER INCIDENT TO CLAUSES (A) AND
(B) OR TO COLLECT THE LIQUIDATED DAMAGES DESCRIBED ABOVE.

LANDLORD’S INITIALSTENANT’S INITIALS

_________________________________________

1.7.4Term/Termination of Purchase ROFO.  The term of the Purchase ROFO granted
under this Section 1.7 shall commence upon the full, unconditional, execution
and delivery of this Lease by Landlord and Tenant and shall terminate upon any
of the following:

1.7.4.1The termination of this Lease as a result of any default by Tenant beyond
all applicable notice and cure periods;

1.7.4.2Tenant's failure to timely exercise the Purchase ROFO or execute and
deliver the Purchase Agreement on a timely basis as set forth in Section 1.7.2
above; or

1.7.4.3At any time that Tenant or Tenant’s Permitted Transferee Assignee
occupies less than 50% of the Project.

1.7.5Rights Personal to Tenant.  The Purchase ROFO set forth herein shall be
deemed to apply only to the Original Tenant and any Permitted Transferee
Assignee (as defined in Section 14.8) and shall therefore not be exercisable by
any other assignee, or any sublessee or transferee of the Original Tenant's
interest in this Lease.

2.LEASE TERM; OPTION TERM; TERMINATION OF INITIAL LEASE

2.1Lease Term.  The terms and provisions of this Lease shall be effective as of
the date of this Lease.  The term of this Lease (the "Lease Term") shall be as
set forth in Section 3.1 of the Summary, shall commence on the date set forth in
Section 3.2 of the Summary (the "Lease Commencement Date"), and shall terminate
on the date set forth in Section 3.3 of the Summary (the "Lease Expiration
Date"), subject to the terms and conditions of Section 3.4 of the Summary and
unless this Lease is sooner terminated as hereinafter provided.  For purposes of
this Lease, the term "Lease Year" shall mean each consecutive twelve (12) month
period during the Lease Term.

 

 

 

 

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2.2Option Term.

2.2.1Option Right.  Landlord hereby grants to Tenant and any Permitted
Transferee Assignee two (2) options to extend the Lease Term for a period of
five (5) years each (each, an "Option Term").  The options to extend shall be
exercisable only by notice delivered by Tenant (or such Permitted Transferee
Assignee) to Landlord as provided in Section 2.2.3, below, provided that, as of
the date of delivery of such notice, Tenant is not in default under this Lease
beyond applicable notice and cure periods and has not previously been in default
under this Lease beyond applicable notice and cure periods more than twice
during the immediately preceding twelve (12) month period.  Upon the proper
exercise of an option to extend, and provided that, at Landlord’s option, as of
the end of the initial Lease Term or the first (1st) Option Term, as applicable,
Tenant is not in default under this Lease beyond applicable notice and cure
periods, the Lease Term shall be extended for a period of five (5) years.  In
the event that Tenant fails to timely and appropriately exercise its option to
extend in accordance with the terms of this Section 2.2, then the option to
extend granted to Tenant pursuant to the terms of this Section 2.2 shall
automatically terminate and shall be of no further force or effect.

2.2.2Option Rent.  The Rent payable by Tenant during each Option Term (the
"Option Rent") shall be equal to the "Market Rent," as that term is defined in
Exhibit F, attached hereto, as such Market Rent is determined pursuant to
Exhibit F, attached hereto.  The calculation of the "Market Rent" shall be
derived from a review of, and comparison to, the "Net Equivalent Lease Rates" of
the "Comparable Transactions," as provided for in Exhibit F, and, thereafter,
the Market Rent shall be stated as a "Net Equivalent Lease Rate" for the Option
Term.  Tenant shall continue to pay one hundred percent (100%) of all Additional
Rent payable by Tenant during each such Option Term.  Notwithstanding the
foregoing, SMB Rent shall cease to be due and payable upon the expiration of the
initial Lease Term (including during any holdover period), and shall not be
payable as Rent during any Option Term.

2.2.3Exercise of Option.  The option contained in this Section 2.2 shall be
exercised by Tenant or any Permitted Transferee Assignee, if at all, and only in
the following manner:  (i) Tenant or such Permitted Transferee Assignee shall
deliver written notice (the "Option Interest Notice") to Landlord not more than
fifteen (15) months nor less than twelve (12) months prior to the expiration of
the initial Lease Term or first (1st) Option Term, as applicable, stating that
Tenant or such Permitted Transferee Assignee is interested in exercising its
option; (ii) Landlord shall, within thirty (30) days following Landlord's
receipt of the Option Interest Notice, deliver notice (the "Option Rent Notice")
to Tenant or such Permitted Transferee Assignee setting forth the Option Rent;
and (iii) if Tenant wishes to exercise such option, Tenant shall, on or before
the date occurring thirty (30) days after Tenant's receipt of the Option Rent
Notice, deliver written notice thereof to Landlord, and upon, and concurrent
with, such exercise, Tenant may, at its option, accept or reject the Option Rent
set forth in the Option Rent Notice.  If Tenant exercises its option to extend
the Lease but fails to accept or reject the Option Rent set forth in the Option
Rent Notice, then Tenant shall be deemed to have rejected the Option Rent set
forth in the Option Rent Notice.

2.2.4Determination of Option Rent.  In the event Tenant timely and appropriately
exercises its option to extend the Lease but rejects (or is deemed to have
rejected) the Option Rent set forth in the Option Rent Notice pursuant to
Section 2.2.3, above, then Landlord and Tenant shall attempt to agree upon the
Option Rent using their best good-faith efforts.  If Landlord and Tenant fail to
reach agreement upon the Option Rent applicable to the Option Term on or before
the date that is ninety (90) days prior to the expiration of the initial Lease
Term or the first (1st) Option Term, as applicable (the "Outside Agreement
Date"), then the Option Rent shall be determined by arbitration pursuant to the
terms of this Section 2.2.4.  Each party shall make a separate determination of
the Option Rent, within five (5) days following the Outside Agreement Date, and
such determinations shall be submitted to arbitration in accordance with
Sections 2.2.4.1 through 2.2.4.4, below.  

2.2.4.1Landlord and Tenant shall each appoint one arbitrator who shall by
profession be a MAI appraiser, real estate broker or real estate lawyer who
shall have been active over the five (5) year period ending on the date of such
appointment in the appraising and/or leasing of First Class Life Sciences
Projects.  The determination of the arbitrators shall be limited solely to the
issue area 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 2.2.2 of this Lease.  Each such arbitrator
shall be appointed within fifteen (15) days after the Outside Agreement
Date.  Landlord and Tenant may consult with their selected arbitrators prior to
appointment and may select an arbitrator who is favorable to their respective
positions (including an arbitrator who has previously

 

 

 

 

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represented Landlord and/or Tenant, as applicable).  The arbitrators so selected
by Landlord and Tenant shall be deemed "Advocate Arbitrators."

2.2.4.2The two Advocate Arbitrators so appointed shall be specifically required
pursuant to an engagement letter within ten (10) days of the date of the
appointment of the last appointed Advocate Arbitrator to agree upon and appoint
a third arbitrator ("Neutral Arbitrator") who shall be qualified under the same
criteria set forth hereinabove for qualification of the two Advocate Arbitrators
except that (i) neither the Landlord or Tenant or either parties' Advocate
Arbitrator may, directly or indirectly, consult with the Neutral Arbitrator
prior or subsequent to his or her appearance, and (ii) the Neutral Arbitrator
cannot be someone who has represented Landlord and/or Tenant during the five (5)
year period prior to such appointment.  The Neutral Arbitrator shall be retained
via an engagement letter jointly prepared by Landlord’s counsel and Tenant’s
counsel.

2.2.4.3Within thirty (30) days following the appointment of the Arbitrator,
Landlord and Tenant shall enter into an arbitration agreement (the "Arbitration
Agreement") which shall set forth the following:

2.2.4.3.1Each of Landlord's and Tenant's best and final and binding
determination of the Option Rent exchanged by the parties pursuant to
Section 2.2.4, above;

2.2.4.3.2An agreement to be signed by the Neutral Arbitrator, the form of which
agreement shall be attached as an exhibit to the Arbitration Agreement, whereby
the Neutral Arbitrator shall agree to undertake the arbitration and render a
decision in accordance with the terms of this Lease, as modified by the
Arbitration Agreement, and shall require the Neutral Arbitrator to demonstrate
to the reasonable satisfaction of the parties that the Neutral Arbitrator has no
conflicts of interest with either Landlord or Tenant;

2.2.4.3.3Instructions to be followed by the Neutral Arbitrator when conducting
such arbitration;

2.2.4.3.4That Landlord and Tenant shall each have the right to submit to the
Neutral Arbitrator (with a copy to the other party), on or before the date that
occurs fifteen (15) days following the appointment of the Neutral Arbitrator, an
advocate statement (and any other information such party deems relevant)
prepared by or on behalf of Landlord or Tenant, as the case may be, in support
of Landlord's or Tenant's respective determination of Option Rent (the
"Briefs");

2.2.4.3.5That within five (5) business days following the exchange of Briefs,
Landlord and Tenant shall each have the right to provide the Neutral Arbitrator
(with a copy to the other party) with a written rebuttal to the other party's
Brief (the "First Rebuttals"); provided, however, such First Rebuttals shall be
limited to the facts and arguments raised in the other party's Brief and shall
identify clearly which argument or fact of the other party's Brief is intended
to be rebutted;

2.2.4.3.6That within five (5) business days following the parties' receipt of
each other's First Rebuttal, Landlord and Tenant, as applicable, shall each have
the right to provide the Neutral Arbitrator (with a copy to the other party)
with a written rebuttal to the other party's First Rebuttal (the "Second
Rebuttals"); provided, however, such Second Rebuttals shall be limited to the
facts and arguments raised in the other party's First Rebuttal and shall
identify clearly which argument or fact of the other party's First Rebuttal is
intended to be rebutted;

2.2.4.3.7The date, time and location of the arbitration, which shall be mutually
and reasonably agreed upon by Landlord and Tenant, taking into consideration the
schedules of the Neutral Arbitrator, the Advocate Arbitrators, Landlord and
Tenant, and each party's applicable consultants, which date shall in any event
be within forty-five (45) days following the appointment of the Neutral
Arbitrator;

2.2.4.3.8That no discovery shall take place in connection with the arbitration,
other than to verify the factual information that is presented by Landlord or
Tenant;

2.2.4.3.9That the Neutral Arbitrator shall not be allowed to undertake an
independent investigation or consider any factual information other than
presented by Landlord or Tenant, except that the Neutral Arbitrator shall be
permitted to visit the Project and the buildings containing the Comparable
Transactions;

2.2.4.3.10The specific persons that shall be allowed to attend the arbitration;

 

 

 

 

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2.2.4.3.11Tenant shall have the right to present oral arguments to the Neutral
Arbitrator at the arbitration for a period of time not to exceed three (3) hours
("Tenant's Initial Statement");

2.2.4.3.12Following Tenant's Initial Statement, Landlord shall have the right to
present oral arguments to the Neutral Arbitrator at the arbitration for a period
of time not to exceed three (3) hours ("Landlord's Initial Statement");

2.2.4.3.13Following Landlord's Initial Statement, Tenant shall have up to two
(2) additional hours to present additional arguments and/or to rebut the
arguments of Landlord ("Tenant's Rebuttal Statement");

2.2.4.3.14Following Tenant's Rebuttal Statement, Landlord shall have up to two
(2) additional hours to present additional arguments and/or to rebut the
arguments of Tenant ("Landlord's Rebuttal Statement");

2.2.4.3.15That, not later than ten (10) days after the date of the arbitration,
the Neutral Arbitrator shall render a decision (the "Ruling") indicating whether
Landlord's or Tenant's submitted Option Rent is closer to the Option Rent;

2.2.4.3.16That following notification of the Ruling, Landlord's or Tenant's
submitted Option Rent determination, whichever is selected by the Neutral
Arbitrator as being closer to the Option Rent shall become the then applicable
Option Rent; and

2.2.4.3.17That the decision of the Neutral Arbitrator shall be binding on
Landlord and Tenant.

If a date by which an event described in Section 2.2.4.3, above, is to occur
falls on a weekend or a holiday, the date shall be deemed to be the next
business day.

2.2.4.4In the event that the Option Rent shall not have been determined pursuant
to the terms hereof prior to the commencement of the Option Term, Tenant shall
be required to continue paying Base Rent and Additional Rent in accordance with
the terms of this Lease with the Base Rent being the average of Landlord's and
Tenant's submitted Option Rents, and upon the final determination of the Option
Rent, the payments made by Tenant shall be reconciled with the actual amounts
due, and the appropriate party shall make any corresponding payment to the other
party.

2.3Termination of Initial Lease.  Notwithstanding anything set forth in the
Initial Lease to the contrary, Landlord and Tenant hereby agree that the Initial
Lease shall terminate, as of the Lease Commencement Date (the "Initial Lease
Termination Date"), with the same force and effect as if the Initial Lease were
scheduled to expire in accordance with its terms as of such Initial Lease
Termination Date (provided that (a) Tenant shall not be obligated under the
terms of the Initial Lease to (i) remove any existing alterations, improvements,
fixtures, personal property, cabling, signage, or rooftop equipment from the
Project, (ii) restore any portion of the Project, or (iii) surrender the Initial
Premises to Landlord; instead, it is the intent of the parties that Tenant
remain in continuous, uninterrupted possession of the Initial Premises pursuant
to the terms of this Lease; and (b) Landlord shall not be obligated under the
terms of the Initial Lease to (i) refund to Tenant any Rent received by Landlord
for the last partial month of the term of the Initial Lease, which shall be
applied to Base Rent and Estimated Direct Expenses payable by Tenant for the
first partial month of the Lease Term, in accordance with Article 3 and Section
4.4.2 below (provided that no Event of Default has occurred and is continuing
under the Initial Lease as of the Lease Commencement Date); and (ii) Landlord
shall not be required to surrender the Existing Letter of Credit (as defined in
Section 21.1 below) in the event that Tenant timely delivers an amendment to
such Existing Letter of Credit that satisfies the L-C requirements set forth in
Article 21 of this Lease).  From and after the Lease Commencement Date, to the
extent that the terms of this Lease conflict with the terms of the Initial
Lease, the terms of this Lease shall prevail.  Notwithstanding anything to the
contrary in the Initial Lease, Landlord hereby quitclaims, surrenders and
releases all Landlord’s ownership interest in those furnishings, fixtures and
equipment licensed or leased to Tenant pursuant to the Initial Lease as of the
Initial Lease Termination Date, if any (the "Existing FF&E"), which shall become
the trade fixtures and personal property of Tenant without any further actions
by either party.  Landlord makes no representations or warranties regarding the
condition of such Existing FF&E, and Tenant hereby acknowledges and agrees that
it shall accept such Existing FF&E in its then currently existing, "as-is"
condition.

 

 

 

 

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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 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 in equal monthly installments as
set forth in Section 4 of the Summary  in advance on or before the first day of
each and every calendar month during the Lease Term, without any setoff or
deduction whatsoever (except as expressly provided in this
Lease).  Notwithstanding the foregoing, the inclusion of SMB Rent as Base Rent
in Section 4 is limited to the initial Lease Term (and any holdover period), and
shall not be included in the calculation of Base Rent payable during any Option
Term.  If any Rent payment date (including the Lease Commencement Date) falls on
a day of the month other than the first day of such month or if any payment of
Rent is for a period which is shorter than one month, the Rent for any
fractional month shall accrue on a daily basis for the period from the date such
payment is due to the end of such calendar month or to the end of the Lease Term
at a rate per day which is equal to 1/365 of the applicable annual Rent.  All
other payments or adjustments required to be made under the terms of this Lease
that require proration on a time basis shall be prorated on the same
basis.  Notwithstanding the foregoing, as long as no Event of Default exists
under the Initial Lease as of the Lease Commencement Date, Base Rent payable by
Tenant for the first partial month of the Lease Term pursuant to this Article 3
shall be fully satisfied by Landlord's application (pursuant to Section 2.3,
above) of the base rent paid by Tenant for the last calendar month of the
Initial Lease, as hereby terminated.

4.ADDITIONAL RENT

4.1General Terms.

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

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

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

4.2.1Intentionally Deleted.

4.2.2"Direct Expenses" shall mean "Operating Expenses" and "Tax Expenses."

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

4.2.4"Operating Expenses" shall mean all expenses, costs and amounts of every
kind and nature which Landlord pays or accrues during any Expense Year because
of or in connection with the ownership, management, maintenance, security,
repair, replacement, restoration or operation of the Project, or any portion
thereof.  Without limiting the generality of the foregoing, Operating Expenses
shall specifically include any and all of the following:  (i) the cost of
supplying all utilities, the cost of operating, repairing, maintaining, and
renovating

 

 

 

 

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the utility, telephone, mechanical, sanitary, storm drainage, and elevator
systems, and the cost of maintenance and service contracts in connection
therewith; (ii) the cost of licenses, certificates, permits and inspections and
the cost of contesting any governmental enactments which may affect Operating
Expenses (but only to the extent that such contests can reasonably be expected
to reduce Operating Expenses), and the costs incurred in connection with a
governmentally mandated transportation system management program or similar
program; (iii) the cost of all commercially reasonable insurance carried by
Landlord in connection with the Project and Premises as reasonably determined by
Landlord, provided that if such coverage is maintained under a blanket policy,
the Operating Expanses payable for such cover shall be equitably allocated to
the Project by Landlord, on the basis of the business activities covered by such
blanket policy; (iv) the cost of landscaping, relamping, and all supplies,
tools, equipment and materials used in the operation, repair and maintenance of
the Project, or any portion thereof; (v) the cost of parking area operation,
repair, restoration, and maintenance; (vi) fees and other costs, including
management and/or incentive fees (subject to the Management Fee cap set forth in
Section 4.2.4(o) below), consulting fees, legal fees and accounting fees, of all
contractors and consultants in connection with the management, operation,
maintenance and repair of the Project, provided that Landlord’s right to include
any property management fees shall be subject to the terms of Section 7.3 below;
(vii) payments under any equipment rental agreements; (viii) subject to item
(f), below, wages, salaries and other compensation and benefits, including taxes
levied thereon, of all persons engaged in the operation, maintenance and
security of the Project; (ix) costs under any instrument pertaining to the
sharing of costs by the Project; (x) operation, repair, maintenance and
replacement of all systems and equipment and components thereof of the Project;
(xi) the cost of janitorial, alarm, security and other services, replacement of
wall and floor coverings, ceiling tiles and fixtures in common areas,
maintenance and replacement of curbs and walkways, repair to roofs and
re-roofing; (xii) amortization (including interest on the unamortized cost, at
an annual rate equal to 6.75%) over such period of time as Landlord shall
reasonably determine in accordance with sound commercial property management
practices, of the cost of acquiring or the rental expense of personal property
used in the maintenance, operation and repair of the Project, or any portion
thereof; (xiii) the cost of nonstructural capital improvements or other costs
incurred in connection with the Project (A) which are primarily intended to
reduce current or future Operating Expenses (but only to the extent of the
reasonably anticipated reduction in Operating Expenses) or to enhance the safety
or security of the Project or its occupants, (B) that are required to comply
with present or anticipated conservation programs, or (C) that are required
under any governmental law or regulation, except for capital expenditures to
remedy a condition existing prior to the Lease Commencement Date (or if required
as part of the Must-Take Space 1 Delivery Condition or the Must-Take Space 3
Delivery Condition) which an applicable governmental authority, if it had
knowledge of such condition prior to the Lease Commencement Date, would have
then required to be remedied pursuant to then-current governmental laws or
regulations in their form existing as of the Lease Commencement Date and
pursuant to the then current interpretation of such governmental laws or
regulations by the applicable governmental authority as of the Lease
Commencement Date, or (D) which are repairs, replacements or modifications to
the Building Systems (as defined in Section 7.1, below) or the emergency
electrical backup generator of the Project (subject to Tenant's right to make
such repairs, replacements or modifications to the Building Systems pursuant to
Section 7.3, below); provided, however, that any capital expenditure shall be
amortized (including interest on the amortized cost, at an annual rate equal to
6.75%) over the useful life of the underlying capital item in accordance with
good engineering practices; and (xiv) costs, fees, charges or assessments
imposed by, or resulting from any mandate imposed on Landlord by, any federal,
state or local government for fire and police protection, trash removal,
community services, or other services which do not constitute "Tax Expenses" as
that term is defined in Section 4.2.5, below, (xv) cost of tenant relation
programs reasonably established by Landlord, and (xvi) payments under any
easement, license, operating agreement, declaration, restrictive covenant, or
instrument pertaining to the sharing of costs by the Building, including,
without limitation, the covenants, conditions and restrictions of any Underlying
Documents.  Notwithstanding the foregoing, for purposes of this Lease, Operating
Expenses shall not, however, include:

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

 

 

 

 

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

(c)costs for which the Landlord is reimbursed by any tenant or occupant of the
Project or by insurance by its carrier (including costs for which Landlord would
have been reimbursed had Landlord maintained all insurance coverage required by
this Lease) or any tenant's carrier or by anyone else, and electric power costs
for which any tenant directly contracts with the local public service company;
any costs included in the Development Costs of the Landlord's Lusk 3 Work; and
costs to which the Tenant Improvement Allowance may be applied in accordance
with the terms and conditions of the Tenant Work Letters;

(d)any bad debt loss, rent loss, or reserves of any kind;

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

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

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

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

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

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

(k)any costs expressly excluded from Operating Expenses elsewhere in this Lease
or in any of the Tenant Work Letters or any of the other exhibits attached
hereto;

(l)subject to the Management Fee cap set forth in exclusion (o) below, rent for
any office space occupied by Project management personnel to the extent the size
or rental rate of such office space exceeds the size or fair market rental value
of office space occupied by management personnel of the comparable buildings in
the vicinity of the Building, with adjustment where appropriate for the size of
the applicable project;

(m)property damage and personal injury costs arising from the negligence or
willful misconduct of Landlord or the violation by Landlord or any tenant of the
terms and conditions of any lease of space at the Project or any law, code,
regulation, ordinance or other similar legal requirement that would not have
been incurred but for such violation in connection with the ownership,
management, maintenance, security, repair, replacement, restoration or operation
of the Project, or any portion thereof;

 

 

 

 

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(n)costs incurred to comply with laws relating to the removal of hazardous
material (as defined under applicable law) which was in existence in the
Building or on the Project prior to the Lease Commencement Date, and was of such
a nature that a federal, State or municipal governmental authority, if it had
then had knowledge of the presence of such hazardous material, in the state, and
under the conditions that it then existed in the Building or on the Project,
would have then required the removal of such hazardous material or other
remedial or containment action with respect thereto; costs arising from
hazardous materials generated, released or brought upon the Project by Landlord,
its agents, or employees, except for normal and customary uses of hazardous
materials in buildings and projects similar to the Building or Project, such as
hydraulic fluid in an elevator or cleaning and maintenance supplies), or which
are covered by any policy of environmental insurance insuring Landlord against
the cost of contamination arising from the use of the Project by any prior
occupant; and costs incurred to remove, remedy, contain, or treat hazardous
material, which hazardous material is brought into the Building or onto the
Project after the date hereof by any other tenant of the Project and is of such
a nature, at that time, that a federal, State or municipal governmental
authority, if it had then had knowledge of the presence of such hazardous
material, in the state, and under the conditions, that it then exists in the
Building or on the Project, would have then required the removal of such
hazardous material or other remedial or containment action with respect thereto;

(o)fees for management of the Project in excess of two percent (2%) of
Landlord’s Project gross rental revenues (excluding Operating Expenses, Tax
Expenses, SMB Rent, and amounts received by Landlord from any other tenant of
the Project as reimbursement for expenses consistent with Operating Expenses
under this Lease from the Project), adjusted and grossed up to reflect a one
hundred percent (100%) occupancy of the Project with all tenants paying full
rent, as contrasted with free rent, half-rent and the like (the "Management
Fee");

(p)expenses for repairs or replacements that are paid by condemnation awards;

(q)the cost of offsite service personnel, to the extent that such personnel are
not engaged in the management, operation, repair or maintenance of the Project;

(r)any fee to Landlord or its property manager beyond the Management Fee for
general supervision of maintenance or repairs;

(s)all principal, interest, loan fees, and other carrying costs related to any
mortgage or deed of trust, unless such costs are directly attributable to
Tenant's, its agents' or employees' activities in, on or about the Project, or
as a result of a Tenant's breach or default under this Lease;

(t)legal fees, accountant fees and other expenses incurred in disputes regarding
or associated with the enforcement or defense of Landlord's title to or interest
in the Project or any part thereof, or pursuant to any disputes with or claims
made against Landlord by any ground lessors, lenders, brokers, tenants or
prospective tenants;

(u)costs of items considered capital repairs, replacements, improvements or
equipment under sound commercial real estate management and accounting
principles consistently applied, except as expressly included in
Section 4.2.4(xiii) above;

(v)the Tenant Improvement Allowance and any costs, including capital costs,
Project Costs, and other costs incurred in connection with the design,
development, and construction of Must-Take Space 1, Must-Take Space 2, and
Must-Take Space 3;

(w)costs to repair any of the structural components of any of the Project
Structures (but not cosmetic or routine maintenance);

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

(y)costs for acquisition of sculptures, paintings or other extraordinary objects
of art;

(z)to the extent Tenant is paying directly for any service provided to the
Premises, the cost of such service provided to other Project tenants; and

(aa)costs incurred in connection with satisfying Landlord’s obligation (or
rectifying any failure to satisfy such obligation) to deliver the Premises in
the condition required by Section 1.1.1.

 

 

 

 

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4.2.5Taxes.

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

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

4.2.5.3Any costs and expenses (including, without limitation, reasonable
attorneys' and consultants' fees) incurred in attempting to protest, reduce or
minimize Tax Expenses (a "Tax Appeal") shall be included in Tax Expenses in the
Expense Year such expenses are paid.  Tax refunds shall be credited against Tax
Expenses and refunded to Tenant regardless of when received, based on the
Expense Year to which the refund is applicable, provided that in no event shall
the amount to be refunded to Tenant by Landlord for any such Expense Year exceed
the total amount paid by Tenant as Additional Rent under this Article 4 for such
Expense Year.  If Tax Expenses for any period during the Lease Term or any
extension thereof are increased after payment thereof for any reason, including,
without limitation, error or reassessment by applicable governmental or
municipal authorities, Tenant shall pay Landlord upon demand Tenant's Share of
any such increased Tax Expenses.  Notwithstanding anything to the contrary
contained in this Section 4.2.5, there shall be excluded from Tax Expenses (i)
all excess profits taxes, franchise taxes, gift taxes, capital stock taxes,
inheritance and succession taxes, estate taxes, federal and state income taxes,
and other taxes to the extent applicable to Landlord's (or any of its
affiliates’) net income (as opposed to rents, receipts or income attributable to
operations at the Project), (ii) any items included as Operating Expenses, (iii)
any items paid by Tenant under Section 4.5 of this Lease or paid directly by
Tenant, and (iv) any transfer taxes incurred in connection with the sale,
refinancing or refinancing of any portion of the Project.  If any special
assessment included in Tax Expenses is permitted to be paid without penalties or
interest in more than two installments, and Landlord pays the assessment in a
lump sum, Landlord may only include in Tax Expenses for any Expense Year the
portion of the lump-sum payment that would have been paid had Landlord elected
to pay the amount of the assessment using the maximum number of installments
permitted.

4.2.5.4During any portion of the Lease Term following the Must-Take 2 Delivery
Date for so long as Tenant is the only tenant of the Project, Tenant shall have
the sole right and authority, at Tenant's sole cost and expense, to (a) contest
Tax Expenses on the Project, and (b) seek any reduction in the assessed
valuation of the Project Structures and other Premises improvements or any
portion thereof (or any proposed reassessment, whether phased or final) for the
purpose of Tax Expenses payable by Tenant pursuant to this Lease (each of the
foregoing, a "Tax Contest").  Any such Tax Contest shall be brought in Tenant's
name only, subject to the terms and conditions of this Section 4.2.5.4), by
appropriate legal proceedings, provided that Tenant shall first provide Landlord
at least ten (10) business days' prior written notice before commencing any such
Tax Contest.  Tenant may defer payment or performance of the contested
obligation pending outcome of the Tax Contest, provided that Tenant causes the
following conditions (collectively, the "Tax Contest Conditions") to remain
satisfied:  (i) such deferral or noncompliance shall not constitute a criminal
act by Landlord or subject Landlord to a material risk of any fine or penalty,
except civil penalties; (ii) such deferral or noncompliance will not place the
Project in material danger of being forfeited or lost; (iii) if Landlord or
Tenant receive notice of the imminent delivery of a tax deed, Tenant shall be
required to pay such portion of the deferred or unpaid Tax Expenses as necessary
to prevent the delivery of such deed; (iv) all Tenant defaults shall be cured
prior to the commencement of any Tax Contest, and (v) such deferral

 

 

 

 

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shall not cause any liens or other encumbrances to be placed on the Project or
any portion thereof.  If Landlord is named as a party in any Tax Contest, then
Tenant shall cause Landlord to be removed as a party and Tenant shall be
substituted in Landlord's place, if permissible under the circumstances;
provided, however, if Tenant is unable to cause Landlord to be removed as a
party and Tenant to be substituted in Landlord's place, then Tenant shall be
responsible to reimburse Landlord within thirty (30) days following receipt of
written request for all out-of-pocket expenses incurred by Landlord in
connection with Landlord being named as a party in such Tax Contest. Tenant
shall be entitled to any and all refunds of Tax Expenses (and penalties and
interest) paid by Tenant whether such refund is made during or after the Lease
Term.  When Tenant concludes Tenant's Contest of any Tax Expenses, Tenant shall
pay the amount of such Tax Expenses (if any) as has been finally determined in
such Tax Contest to be due, and any costs, interest, penalties, or other
liabilities in connection with such Tax Expenses.  Landlord may contest any
matter for which Tenant is entitled to (but does not) prosecute a Tax Contest,
at Landlord's sole cost and expense (provided that such costs and expenses shall
be reimbursed from any refund amount received by Landlord, and only if: (y)
Landlord notifies Tenant of Landlord's intention to do so at least thirty (30)
days in advance of commencing such Tax Contest; and (z) Tenant fails to commence
such Tax Contest within fifteen (15) days after receipt of such notice from
Landlord).  Any adjustments to Tax Expenses and refunds of amounts paid by
Tenant pursuant to this Lease as Tax Expenses, along with the provisions of this
Section 4.2.5.4, shall survive the expiration or earlier termination of this
Lease.

4.2.6"Tenant's Share" shall mean the percentage, as of the applicable date on
which such determination is made, as set forth in Section 6 of the Summary with
respect to the Initial Premises, Must-Take Space 1 and Must-Take Space 3, and as
set forth in Section 1.4.4.6 for Must-Take Space 2.

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

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

4.4.1Statement of Actual Direct Expenses and Payment by Tenant.  Landlord shall
give to Tenant within one hundred fifty (120) days following the end of each
Expense Year, a statement (the "Statement") which shall state with commercially
reasonable detail the Direct Expenses incurred or accrued for such preceding
Expense Year, and which shall indicate the amount of Tenant's Share of Direct
Expenses.  Within thirty (30) days of receipt of the Statement for each Expense
Year commencing or ending during the Lease Term, Tenant shall pay the full
amount of Tenant's Share of Direct Expenses for such Expense Year, less the
amounts, if any, paid during such Expense Year as Estimated Direct Expenses (as
that term is defined in Section 4.4.2, below), and if Tenant paid more as
Estimated Direct Expenses than the actual Tenant's Share of Direct Expenses,
Tenant shall receive a credit in the amount of Tenant's overpayment against Rent
next due under this Lease.  The failure of Landlord to timely furnish the
Statement for any Expense Year shall not prejudice Landlord or Tenant from
enforcing its rights under this Article 4.  Even though the Lease Term has
expired and Tenant has vacated the Premises, when the final determination is
made of Tenant's Share of Direct Expenses for the Expense Year in which this
Lease terminates, Tenant shall within thirty (30) days following receipt of
Landlord’s request therefor, pay to Landlord such amount, and if Tenant paid
more as Estimated Direct Expenses than the actual Tenant's Share of Direct
Expenses, Landlord shall, within thirty (30) days, deliver a check payable to
Tenant in the amount of the overpayment.  The provisions of this Section 4.4.1
shall survive the expiration or earlier termination of the Lease Term, provided
that, other than increased costs from a governmental entity or a utility company
first billed to Landlord after the applicable Expense Year, Tenant shall not be
responsible for Tenant's Share of any Direct Expenses which are first billed to
Tenant more than two (2) calendar years after the end of the Expense Year to
which such Direct Expenses relate.

4.4.2Statement of Estimated Direct Expenses.  In addition, Landlord shall give
Tenant a yearly expense estimate statement (the "Estimate Statement") which
shall set forth Landlord's reasonable, good

 

 

 

 

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faith estimate (the "Estimate") of what the total amount of Direct Expenses for
the then-current Expense Year shall be and the estimated Tenant's Share of
Direct Expenses (the "Estimated Direct Expenses").  The failure of Landlord to
timely furnish the Estimate Statement for any Expense Year shall not preclude
Landlord from enforcing its rights to collect any Estimated Direct Expenses
under this Article 4, nor shall Landlord be prohibited from revising any
Estimate Statement or Estimated Direct Expenses theretofore delivered to the
extent necessary.  Thereafter, Tenant shall pay, with its next installment of
Base Rent due, a fraction of the Estimated Direct Expenses for the then-current
Expense Year (reduced by any amounts paid pursuant to the last sentence of this
Section 4.4.2).  Such fraction shall have as its numerator the number of months
which have elapsed in such current Expense Year, including the month of such
payment, and twelve (12) as its denominator.  Until a new Estimate Statement is
furnished (which Landlord shall have the right to deliver to Tenant at any
time), Tenant shall pay monthly, with the monthly Base Rent installments, an
amount equal to one-twelfth (1/12) of the total Estimated Direct Expenses set
forth in the previous Estimate Statement delivered by Landlord to
Tenant.  Notwithstanding the foregoing, (a) in the event that an estimate
statement for the Expense Year in which the Lease Term commences was delivered
to Tenant in accordance with the terms and conditions of the Initial Lease, such
estimate statement shall be the Estimate Statement for such initial Expense Year
for the purposes of this Section 4.4.2, and (b) as long as no Event of Default
exists under the Initial Lease as of the Lease Commencement Date, Estimated
Direct Expenses payable by Tenant for the first partial month of the Lease Term
pursuant to this Section 4.4.2 shall be fully satisfied by Landlord's
application of the estimated direct expenses paid by Tenant for the last
calendar month of the Initial Lease, as hereby terminated.

4.5Taxes and Other Charges for Which Tenant Is Directly Responsible.  Tenant
shall be liable for and shall pay 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.

4.6Landlord's Records.  Upon Tenant's written request given not more than six
(6) months after Tenant's receipt of a Statement for a particular Expense Year,
and provided that Tenant is not then in default under this Lease beyond the
applicable notice and cure period provided in this Lease, specifically
including, but not limited to, the timely payment of Additional Rent (whether or
not the same is the subject of the audit contemplated herein), Landlord shall
furnish Tenant with such reasonable supporting documentation in connection with
said Direct Expenses as Tenant may reasonably request.  Landlord shall provide
said documentation to Tenant within thirty (30) days after Tenant's written
request therefor.  Within ninety (90) days after receipt of said documentation
from Landlord (the "Audit Period"), if Tenant disputes the amount of Direct
Expenses set forth in the Statement, an independent certified public accountant
(which accountant (A) is a member of a nationally or regionally recognized
certified public accounting firm which has previous experience in auditing
financial operating records of landlords of office buildings, and (B) is not
working on a contingency fee basis [i.e., Tenant must be billed based on the
actual time and materials that are incurred by the certified public accounting
firm in the performance of the audit]) designated and paid for by Tenant, may,
after reasonable notice to Landlord and at reasonable times, audit Landlord's
records with respect to Direct Expenses for the Expense Year in question at
Landlord's corporate offices in San Diego, California, provided that (i) Tenant
is not then in default under this Lease (beyond the applicable notice and cure
periods provided under this Lease), (ii) Tenant has paid all amounts required to
be paid under the applicable Estimate Statement and Statement, and (iii) a copy
of the audit agreement between Tenant and its particular certified public
accounting firm has been delivered to Landlord prior to the commencement of the
audit.  In connection with such audit, Tenant and Tenant's certified public
accounting firm must agree in advance to follow Landlord's reasonable rules and
procedures regarding an audit of the aforementioned Landlord records, and shall
execute a commercially reasonable confidentiality agreement regarding such
audit.  Any audit report prepared by Tenant's certified public accounting firm
shall be delivered concurrently to Landlord and Tenant as soon as reasonably
practicable following the completion thereof.  Tenant's failure to audit the
amount of Direct Expenses set forth in any Statement within the Audit Period
shall be deemed to be Tenant's approval of such Statement and Tenant,
thereafter, waives the right or ability to audit the amounts set forth in such
Statement.  If after such audit, Tenant still disputes such Direct Expenses, an
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expense, by an independent certified public accountant (the "Accountant")
selected by Landlord and subject to Tenant's reasonable approval; provided that
if such audit by the Accountant proves that Direct Expenses set forth in the
particular Statement were overstated by more than five percent (5%), then the
cost of the Accountant and the cost of Tenant’s audit shall be paid for by
Landlord and such payment by Landlord shall not be subject to reimbursement by
Tenant through Direct Expenses or otherwise.  In the event that such audit
reveals an overstatement of any amount, Landlord shall promptly remit such
amount to Tenant, plus interest; provided that, for purposes of calculating the
amount due to Tenant under this sentence, the amount of the overstatement shall
bear interest at a rate per annum equal to twelve percent (12%), commencing from
the date on which the results of such audit are provided to Landlord in
writing.  Following such determination by the Accountant, Landlord or Tenant, as
appropriate, shall pay to the other the amount shown owing by the
Accountant.  Tenant hereby acknowledges that Tenant's sole right to audit
Landlord's records and to contest the amount of Direct Expenses payable by
Tenant shall be as set forth in this Section 4.6, and Tenant hereby waives any
and all other rights pursuant to applicable law to audit such records and/or to
contest the amount of Direct Expenses payable by Tenant.

5.USE OF PREMISES

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

5.2Prohibited Uses.  Tenant further covenants and agrees that Tenant shall not
use, or suffer or permit any person or persons to use, the Premises or any part
thereof for any use or purpose in violation of the laws of the United States of
America, the State of California, or the ordinances, regulations or requirements
of the local municipal or county governing body or other lawful authorities
having jurisdiction over the Project) including, without limitation, any such
laws, ordinances, regulations or requirements relating to hazardous materials or
substances, as those terms are defined by Applicable Laws now or hereafter in
effect, or any Underlying Documents.  Landlord shall have the right to impose
reasonable and customary rules and regulations based upon the nature of the
Project as either a single-tenant or a multi-tenant First Class Life Sciences
Project (which rules and regulations shall be modified by Landlord in accordance
with Tenant’s reasonable requests, from time to time, taking into account
whether or not Tenant and its Permitted Transferees are the sole occupants of
all occupied space in the Project) regarding the use of the Project, as
reasonably deemed necessary by Landlord with respect to the orderly operation of
the Project as either a single-tenant or multi-tenant First Class Life Sciences
Project, including, but not limited to, reasonable rules and regulations for the
safe and sanitary operation of any fitness/wellness center or cafeteria operated
by Tenant, and for the reasonable mitigation of noise, odors and other effects
of such operations on other occupants of the Project, and provided that such
rules and regulations are consistent with rules and regulations then being
enforced by landlords of Comparable Buildings, with respect to tenants leasing a
similar proportion of First Class Life Sciences Projects as Tenant is then
leasing pursuant to this Lease, Tenant shall comply with such rules and
regulations.  Tenant shall not do or permit anything to be done in or about the
Premises which will in any way damage the reputation of the Project or obstruct
or interfere with the rights of other tenants or occupants of the Buildings, or
injure or annoy them or use or allow the Premises to be used for any improper,
unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit
any nuisance in, on or about the Premises.  Tenant shall comply with, and
Tenant's rights and obligations under the Lease and Tenant's use of the Premises
shall be subject and subordinate to, all recorded easements, covenants,
conditions, and restrictions now or hereafter affecting the Project.

5.3Hazardous Materials.

5.3.1Tenant's Obligations.

5.3.1.1Prohibitions.  As a material inducement to Landlord to enter into this
Lease with Tenant, Tenant has fully and accurately completed Landlord’s
Pre-Leasing Environmental Exposure Questionnaire (the “Environmental
Questionnaire”), which is attached as Exhibit E.  Tenant agrees that except for
those chemicals or materials, and their respective quantities, specifically
listed on the Environmental Questionnaire, neither Tenant nor Tenant’s
employees, contractors and subcontractors of any tier, entities with a
contractual relationship with Tenant (other than Landlord), or any entity acting
as an agent or sub-agent of Tenant (collectively, "Tenant's Agents") will
produce, use, store or generate any "Hazardous Materials," as that term is

 

 

 

 

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defined below, on, under or about the Premises, nor cause or permit any
Hazardous Material to be brought upon, placed, stored, manufactured, generated,
blended, handled, recycled, used or "Released," as that term is defined below,
on, in, under or about the Premises.  If any information provided to Landlord by
Tenant on the Environmental Questionnaire, or otherwise relating to information
concerning Hazardous Materials is false, incomplete, or misleading in any
material respect, the same shall be deemed a default by Tenant under this
Lease.  Tenant shall deliver to Landlord an updated Environmental Questionnaire
in connection with any material change in Tenant’s Hazardous Materials
activities.  Landlord’s prior written consent shall be required to any Hazardous
Materials use for the Premises not described on the initial Environmental
Questionnaire, such consent not to be unreasonably withheld; provided, however,
that in the event Tenant desires to use, store or manage Hazardous Materials
which are not substantially similar to the Hazardous Materials specifically
listed on the Environmental Questionnaire in terms of their hazardous character,
handling profile, usage and quantity ("New Hazardous Materials Usage"), then
Landlord shall have the right to impose additional terms and conditions on such
usage, storage, or management to the extent reasonably necessary in light of the
uniquely hazardous character, handling profile, use, storage and/or management
of such New Hazardous Materials Usage, to the extent such additional terms and
conditions are consistent with the requirements of landlords of other First
Class Life Sciences Projects when leasing space to tenants using Hazardous
Materials materially similar to the New Hazardous Materials Usage in terms of
hazardous character, handling profile, usage and quantity.  Tenant shall not
install or permit any underground storage tank on the Premises.  For purposes of
this Lease, "Hazardous Materials" means all flammable explosives, petroleum and
petroleum products, waste oil, radon, radioactive materials, toxic pollutants,
asbestos, polychlorinated biphenyls (“PCBs”), medical waste, chemicals known to
cause cancer or reproductive toxicity, pollutants, contaminants, hazardous
wastes, toxic substances or related materials, including without limitation any
chemical, element, compound, mixture, solution, substance, object, waste or any
combination thereof, which is or may be hazardous to human health, safety or to
the environment due to its radioactivity, ignitability, corrosiveness,
reactivity, explosiveness, toxicity, carcinogenicity, infectiousness or other
harmful or potentially harmful properties or effects, or defined as, regulated
as or included in, the definition of “hazardous substances,” “hazardous wastes,”
“hazardous materials,” or “toxic substances” under any Environmental Laws.  The
term “Hazardous Materials” for purposes of this Lease shall also include any
mold, fungus or spores, whether or not the same is defined, listed, or otherwise
classified as a “hazardous material” under any Environmental Laws, if such mold,
fungus or spores may pose a risk to human health or the environment or
negatively impact the value of the Premises.  For purposes of this Lease,
"Release" or "Released" or "Releases" shall mean any release, deposit,
discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping,
pouring, emptying, escaping, dumping, disposing, or other movement of Hazardous
Materials into the environment.  Notwithstanding the foregoing, Tenant may,
without prior disclosure to Landlord, use, in compliance with Environmental
Laws, Hazardous Materials in small quantities to the extent that such Hazardous
Materials are either (a) normal and customary supplies for cleaning and
maintenance used in the ordinary course of office businesses with amenities
similar to those included in the Permitted Uses (e.g., cafeteria and
fitness/wellness center operations) or (b) standard office supplies.

5.3.1.2Notices to Landlord.  Tenant shall notify Landlord in writing as soon as
possible but in no event later than five (5) days after (i) Tenant’s actual
knowledge of the occurrence of any actual, alleged or threatened unpermitted
Release of any Hazardous Material in, on, under, from, or about the Premises
(whether past or present), regardless of the source or quantity of any such
Release, or (ii) Tenant becomes aware of any regulatory actions, inquiries,
inspections, investigations, directives, or any cleanup, compliance, enforcement
or abatement proceedings (including any threatened or contemplated
investigations or proceedings) relating to or potentially affecting the
Premises, or (iii) Tenant becomes aware of any claims by any person or entity
relating to any Hazardous Materials in, on, under, from, or about the Premises,
whether relating to damage, contribution, cost recovery, compensation, loss or
injury.  Collectively, the matters set forth in clauses (i), (ii) and (iii)
above are hereinafter referred to as “Hazardous Materials Claims”.  Tenant shall
promptly forward to Landlord copies of all orders, notices, permits,
applications and other communications and reports received or generated by
Tenant in connection with any Hazardous Materials Claims.  Additionally, Tenant
shall promptly advise Landlord in writing of Tenant’s discovery of any
occurrence or condition on, in, under or about the Premises that could subject
Tenant or Landlord to any liability, or restrictions on ownership, occupancy,
transferability or use of the Premises under any "Environmental Laws," as that
term is defined below.  Tenant shall not enter into any legal proceeding or
other action, settlement, consent decree or other compromise with respect to any
Hazardous Materials Claims without first notifying Landlord of Tenant’s
intention to do so and affording Landlord the opportunity to join and
participate, as a party if Landlord so elects, in such proceedings and in no
event shall Tenant enter into any agreements which are

 

 

 

 

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binding on Landlord or the Premises without Landlord’s prior written
consent.  Landlord shall have the right to appear at and participate in, any and
all legal or other administrative proceedings concerning any Hazardous Materials
Claim.  For purposes of this Lease, “Environmental Laws” means all applicable
present and future laws relating to the protection of human health, safety,
wildlife or the environment, including, without limitation, (i) all requirements
pertaining to reporting, licensing, permitting, investigation and/or remediation
of emissions, discharges, Releases, or threatened Releases of Hazardous
Materials, whether solid, liquid, or gaseous in nature, into the air, surface
water, groundwater, or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
Hazardous Materials; and (ii) all requirements pertaining to the health and
safety of employees or the public.  Environmental Laws include, but are not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 USC § 9601, et seq., the Hazardous Materials Transportation
Authorization Act of 1994, 49 USC § 5101, et seq., the Solid Waste Disposal Act,
as amended by the Resource Conservation and Recovery Act of 1976, and Hazardous
and Solid Waste Amendments of 1984, 42 USC § 6901, et seq., the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1977, 33 USC § 1251,
et seq., the Clean Air Act of 1966, 42 USC § 7401, et seq., the Toxic Substances
Control Act of 1976, 15 USC § 2601, et seq., the Safe Drinking Water Act of
1974, 42 USC §§ 300f through 300j, the Occupational Safety and Health Act of
1970, as amended, 29 USC § 651 et seq., the Oil Pollution Act of 1990, 33 USC §
2701 et seq., the Emergency Planning and Community Right-To-Know Act of 1986, 42
USC § 11001 et seq., the National Environmental Policy Act of 1969, 42 USC §
4321 et seq., the Federal Insecticide, Fungicide and Rodenticide Act of 1947, 7
USC § 136 et seq., California Carpenter-Presley-Tanner Hazardous Substance
Account Act, California Health & Safety Code §§ 25300 et seq., Hazardous
Materials Release Response Plans and Inventory Act, California Health & Safety
Code, §§ 25500 et seq., Underground Storage of Hazardous Substances provisions,
California Health & Safety Code, §§ 25280 et seq., California Hazardous Waste
Control Law, California Health & Safety Code, §§ 25100 et seq., and any other
state or local counterparts of Applicable Laws, as amended, as such
Environmental Laws, are in effect as of the Lease Commencement Date, or
thereafter adopted, published, or promulgated.

5.3.1.3Releases of Hazardous Materials.  If any Release of any Hazardous
Material in, on, under, from or about the Premises and caused by Tenant or
Tenant’s Agents shall occur at any time during the Lease and/or if any other
Hazardous Material condition exists at the Premises that requires response
actions of any kind, in addition to notifying Landlord as specified above,
Tenant, at its own sole cost and expense, shall (i) immediately comply with any
and all reporting requirements imposed pursuant to any and all Environmental
Laws, (ii) provide a written certification to Landlord indicating that Tenant
has complied with all applicable reporting requirements, (iii) take any and all
necessary investigation, corrective and remedial action in accordance with any
and all applicable Environmental Laws, utilizing an environmental consultant
approved by Landlord, all in accordance with the provisions and requirements of
this Section 5.3, including, without limitation, Section 5.3.4, and (iv) take
any such additional investigative, remedial and corrective actions as Landlord
shall in its reasonable discretion deem necessary in order to receive a "No
Further Action Letter" from the applicable government agency.

5.3.1.4Indemnification.

5.3.1.4.1Tenant's Indemnity Obligations.  Without limiting in any way Tenant’s
obligations under any other provision of this Lease, Tenant shall be solely
responsible for and shall protect, defend, indemnify and hold the Landlord
Parties (as defined in Section 10.1 below) harmless from and against any and all
claims, judgments, losses, damages, costs, expenses, penalties, enforcement
actions, taxes, fines, remedial actions, liabilities (including, without
limitation, reasonable attorneys’ fees, litigation, arbitration and
administrative proceeding costs, expert and consultant fees and laboratory
costs) including, without limitation, sums paid in settlement of claims, that
arise during or after the Lease Term in whole or in part, foreseeable or
unforeseeable, directly or indirectly arising out of or attributable to the
presence, use, generation, manufacture, treatment, handling, refining,
production, processing, storage, Release or presence of Hazardous Materials in,
on, under or about the Premises by Tenant or Tenant's Agents.

5.3.1.4.2Limitations; Landlord's Indemnity Obligations.  Notwithstanding
anything in Section 5.3.1.4.1, above, to the contrary, Tenant's indemnity of
Landlord as set forth in Section 5.3.1.4, above, shall not be applicable to
claims based upon Hazardous Materials which (a) are shown to exist in, on or
about the Premises as of the date of this Lease and were not attributable to the
acts or omissions of Tenant or Tenant's Agents during the term of the Initial
Lease ("Existing Hazardous Materials"), except to the extent that Tenant's
construction activities and/or Tenant's other acts or omissions (including
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otherwise treat or “Clean-up,” as that term is defined in Section 5.3.4, below,
the subject Existing Hazardous Materials during the tenancy of the Premises)
caused or exacerbated the subject claim, (b) arise out of Landlord’s negligence
or willful misconduct with respect to the handling of Hazardous Materials at the
Project or (c) are caused by a third party not controlled by Tenant or Tenant’s
Agents ("Landlord's Retained Liability").  Landlord shall indemnify and hold
Tenant harmless against all claims, actions, damages and liability (i) caused by
any release of Hazardous Materials requiring remediation caused by Landlord on
or about the Project or any real property in the vicinity of the Project owned
or managed by Landlord or any person or entity affiliated with Landlord, or
(ii) to the extent such third-party liability is actually covered by any
environmental insurance policy carried by Landlord, caused by any release of
Hazardous Materials by any other person or entity or which arise as a result of
existing Hazardous Materials.  The foregoing indemnity shall not apply to any
contamination or release or any claims, actions, damages or liability relating
to any Hazardous Materials arising from acts or occurrences caused, wholly or in
part, permitted or subject to the control of Tenant, its agents, employees,
contractors, sublessees, assignees, licensees or invitees. This Section 5.3.1.4
shall survive the expiration or earlier termination of this Lease.

5.3.1.5Compliance with Environmental Laws.  Without limiting the generality of
Tenant’s obligation to comply with Applicable Laws as otherwise provided in this
Lease, Tenant shall, at its sole cost and expense, comply with all Environmental
Laws.  Tenant shall obtain and maintain any and all necessary permits, licenses,
certifications and approvals appropriate or required for the use, handling,
storage, and disposal of any Hazardous Materials used, stored, generated,
transported, handled, blended, or recycled by Tenant on the Premises.  Landlord
shall have a continuing right, without obligation, to require Tenant to provide
Landlord for its review and inspection any and all such permits, licenses,
certifications and approvals, together with copies of any and all Hazardous
Materials management plans, inventories and programs, any and all Hazardous
Materials risk management and pollution prevention programs, and any and all
Hazardous Materials emergency response and employee training programs respecting
Tenant’s use of Hazardous Materials.  Upon request of Landlord,  Tenant shall
deliver to Landlord a narrative description explaining the nature and scope of
Tenant’s activities involving Hazardous Materials and showing to Landlord’s
reasonable satisfaction compliance with all Environmental Laws and the terms of
this Lease.

5.3.2Landlord’s Obligations.  Notwithstanding anything to the contrary in this
Lease, Landlord, at its sole cost (and not as an Operating Expense, nor as a
cost incurred by Landlord for Tenant Improvements to any portion of the Existing
Buildings, nor as a Project Cost or SMB Cost) shall remediate, abate or
encapsulate any Hazardous Materials discovered in the Project that was not
brought on to the Project by Tenant, a Tenant Party or any invitee of Tenant, to
the extent required by Applicable Law or if Landlord's failure to remediate,
abate or encapsulate such Hazardous Materials would prohibit Tenant from
obtaining or maintaining a certificate of occupancy for all or any portion of
the Premises, or would unreasonably and materially affect the safety of Tenant's
employees or create a significant health hazard for Tenant's employees, or would
otherwise materially and adversely affect Tenant's use of or access to the
Premises.

5.3.3Assurance of Performance.

5.3.3.1Environmental Assessments In General.  Landlord may, but shall not be
required to, engage from time to time such consultants as Landlord determines to
be appropriate to perform environmental assessments of a scope reasonably
determined by Landlord (an "Environmental Assessment") to ensure Tenant’s
compliance with the requirements of this Lease with respect to Hazardous
Materials.

5.3.3.2Costs of Environmental Assessments.  All costs and expenses incurred by
Landlord in connection with any such Environmental Assessment shall be paid by
Landlord and shall not be included in Direct Expenses; provided that if any such
Environmental Assessment shows that Tenant has failed to comply with the
provisions of this Section 5.3, then all of the costs and expenses of such
Environmental Assessment shall be reimbursed by Tenant as Additional Rent within
thirty (30) days after receipt of written demand therefor.

5.3.4Tenant’s Obligations upon Surrender.  At the expiration or earlier
termination of the Lease Term, Tenant, at Tenant’s sole cost and expense, shall
cause:  (i) an Environmental Assessment of the Premises to be conducted in
accordance with Section 15.3; and (ii) all Hazardous Materials that Tenant is
required to remove under this Article 5 to be removed from the Premises and
disposed of in accordance with all Environmental Laws; (iii) all containers
installed by Tenant or Tenant’s Agents during the Lease Term of during Tenant
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occupancy under the Initial Lease to store any Hazardous Materials on the
Premises to be removed, and (iv) any damage to the Premises caused by such
removal to be repaired.

5.3.5Clean-up.

5.3.5.1Environmental Reports; Clean-Up.  If any written report, including any
report containing results of any Environmental Assessment (an “Environmental
Report”) shall indicate (i) the presence of any Hazardous Materials as to which
Tenant has a removal or remediation obligation under this Section 5.3, and (ii)
that as a result of same, that the investigation, characterization, monitoring,
assessment, repair, closure, remediation, removal, or other clean-up (the
“Clean-up”) of any Hazardous Materials is required by Environmental Laws, Tenant
shall prepare and submit to Landlord within thirty (30) days after receipt of
the Environmental Report a comprehensive plan, subject to Landlord’s written
approval, specifying the actions to be taken by Tenant to perform the Clean-up
so that the Premises are restored to the conditions required by this Lease
("Clean-up Plan").  Upon Landlord’s approval of the Clean-up plan, Tenant shall,
at Tenant’s sole cost and expense, without limitation on any rights and remedies
of Landlord under this Lease, immediately implement and proceed with due
diligence to complete the work required by such Clean-up Plan with a consultant
reasonably acceptable to Landlord and proceed to Clean-Up Hazardous Materials in
accordance with all Environmental Laws and as required by the Clean-up Plan and
this Lease.  If, within thirty (30) days after receiving a copy of Landlord’s
approval of the Clean-up plan, Tenant fails either (a) to complete such
Clean-up, or (b) with respect to any Clean-up that cannot be completed within
such thirty-day period, fails to proceed with diligence to prepare the Clean-up
plan and complete the Clean-up as promptly as practicable, then Landlord shall
have the right, but not the obligation, and without waiving any other rights
under this Lease, to carry out the Clean-up Plan and any additional
recommendations contained in the Environmental Report or otherwise required by
any governmental authority having jurisdiction over the Premises, and recover
all of the costs and expenses thereof from Tenant as Additional Rent, payable
within thirty (30) days after receipt of written demand therefor.

5.3.5.2No Rent Abatement.  Tenant shall continue to pay all Rent due or accruing
under this Lease during any Clean-up, and shall not be entitled to any
reduction, offset or deferral of any Base Rent or Additional Rent due or
accruing under this Lease during any such Clean-up.

5.3.5.3Surrender of Premises.  Tenant shall use commercially reasonable efforts
to complete any Clean-up prior to surrender of the Premises upon the expiration
or earlier termination of this Lease; provided that such obligation shall not
operate to shorten the period for Tenant’s performance set forth in
Section 5.3.5.1 above; provided further, that if all Clean-up is not completed
prior to surrender of the Premises upon the expiration or earlier termination of
this Lease, then the terms of Section 5.3.5.4, below, shall be applicable to
such period of time after the expiration or earlier termination of this Lease
and prior to the completion of all such Clean-up.  Tenant shall obtain and
deliver to Landlord a letter or other written determination from the overseeing
governmental authority confirming that the Clean-up has been completed in
accordance with all requirements of such governmental authority and that no
further response action of any kind is required for the unrestricted use of the
Premises (“Closure Letter”).  Upon the expiration or earlier termination of this
Lease, Tenant shall also be obligated to close all permits obtained in
connection with Hazardous Materials in accordance with Applicable Laws.

5.3.5.4Failure to Timely Clean-Up.  Should any Clean-up for which Tenant is
responsible not be completed, or should Tenant not receive the Closure Letter
and any governmental approvals required under Environmental Laws in conjunction
with such Clean-up prior to the expiration or earlier termination of this Lease,
then Tenant shall be liable to Landlord as a holdover tenant (as more
particularly provided in Article 16) until Tenant has fully complied with its
obligations under this Section 5.3.

5.3.6Confidentiality.  Unless compelled to do so by applicable law, Tenant
agrees that Tenant shall not disclose, discuss, disseminate or copy any
information, data, findings, communications, conclusions and reports regarding
the environmental condition of the Premises to any Person (other than Tenant’s
consultants, attorneys, property managers and employees that have a need to know
such information), including any governmental authority, without the prior
written consent of Landlord.  In the event Tenant reasonably believes that
disclosure is compelled by applicable law, it shall provide Landlord ten
(10) days’ advance notice of its intent to disclose of confidential information
so that Landlord may attempt to obtain a protective order.  Tenant may
additionally release such information to bona fide prospective purchasers or
lenders, subject to any such parties’ written agreement to be bound by the terms
of this Section 5.3.

 

 

 

 

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5.3.7Copies of Environmental Reports.  Within thirty (30) days of receipt
thereof, Tenant shall provide Landlord with a copy of any and all Environmental
Reports regarding Tenant’s activities with respect to the Premises, or ground
water beneath the Land, or the environmental condition or Clean-up
thereof.  Tenant shall be obligated to provide Landlord with a copy of such
materials without regard to whether such materials are generated by Tenant or
prepared for Tenant, or how Tenant comes into possession of such materials.

5.3.8Intentionally Omitted.

5.3.9Signs, Response Plans, Etc.  Tenant shall be responsible for posting on the
Premises any signs or warnings required under applicable Environmental
Laws.  Tenant shall also complete and file any business response plans or
inventories required by any Environmental Laws.  Tenant shall concurrently file
a copy of any such business response plan or inventory with Landlord.

5.3.10Survival.  Each covenant, agreement, representation, warranty and
indemnification made by Landlord and Tenant set forth in this Section 5.3 shall
survive the expiration or earlier termination of this Lease and shall remain
effective until all of such party’s obligations under this Section 5.3 have been
completely performed and satisfied.

6.SERVICES AND UTILITIES

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

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

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

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

6.2Interruption of Use.  Tenant agrees that Landlord shall not be liable for
damages, by abatement of Rent (except as specifically set forth in
Section 19.5.2 of this Lease) or otherwise, for failure to furnish or delay in
furnishing any service (including telephone and telecommunication services), or
for any diminution in the quality or quantity thereof, when such failure or
delay or diminution is occasioned, in whole or in part, by breakage, repairs,
replacements, or improvements, by any strike, lockout or other labor trouble, by
inability to secure electricity, gas, water, or other fuel at the Building or
Project after reasonable effort to do so, by any riot or other dangerous
condition, emergency, accident or casualty whatsoever, by act or default of
Tenant or other parties, or by any other cause; and such failures or delays or
diminution shall never be deemed to constitute an eviction or disturbance of
Tenant's use and possession of the Premises or relieve Tenant from paying Rent
(except as specifically set forth in Section 19.5.2 of this Lease) 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.  Landlord shall use commercially reasonable efforts to
(i) notify Tenant in advance of any intentional service interruptions, and (ii)
to the extent reasonably practical, to cause any intentional service
interruptions to occur outside of normal business hours.

 

 

 

 

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7.REPAIRS

7.1Tenant Repair Obligations.  Subject to Tenant’s right to assume additional
obligations under Section 7.3 below, Tenant shall, at Tenant's own expense, keep
the internal, non-structural portions of the Premises, including all
improvements, fixtures, furnishings, and systems and equipment therein
(including, without limitation, (a) plumbing fixtures and equipment such as
dishwashers, garbage disposals, and insta-hot dispensers, and (b) all equipment
located in the Premises that is utilized to supply supplemental HVAC to the
Premises), and the floor coverings of the floors of the Building on which the
Premises are located, and (c) the Back-Up Generator referenced by Section 29.34,
below, in good order, repair and condition at all times during the Lease Term
("Tenant's Repair Obligations").  In addition, to the extent required by
Tenant’s Repair Obligations, Tenant shall, at Tenant's own expense, within any
reasonable period of time, repair all damage to the Premises and replace or
repair all damaged, broken, or worn fixtures and appurtenances, except for
damage caused by ordinary wear and tear or beyond the reasonable control of
Tenant; provided however, that, at Landlord's option, if Tenant fails to make
such repairs within a reasonable period of time following receipt of written
notice of the need therefor, Landlord may, but need not, make such repairs and
replacements, and Tenant shall pay Landlord the cost thereof, including a
percentage of the cost thereof (which shall not exceed two percent (2%)) 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, within thirty (30) days of being billed for same.  Upon Tenant’s
initial occupancy of any portion of the Premises, Landlord shall assign to
Tenant all manufacturer and contractor warranties and guaranties, if any,
relating to items required to be maintained by Tenant hereunder.

7.2Landlord Repair Obligations.  Notwithstanding the foregoing, Landlord shall
at all times during the Lease Term maintain in good condition and operating
order, in a manner consistent with the landlords of the Comparable Buildings,
(i) the structural portions of all Project Structures, including, without
limitation, the foundations, floor slabs, ceilings, roofs (including membranes,
surfaces and seals), columns, beams, shafts, stairs, stairwells, and all
sprinkler, fire and life safety systems  (collectively, the "Non-Assumable
Obligations"), and (ii) the existing mechanical, electrical, lighting, plumbing,
elevator and HVAC systems installed or furnished by Landlord (collectively, the
"Building Systems"), the Common Areas, restrooms, and any components of utility
or plumbing systems not located within Project Structures (collectively, the
"Assumable Obligations"), except to the extent that such repairs are required
due to the negligence or willful misconduct of Tenant; provided, however, that
if such repairs are due to the negligence or willful misconduct of Tenant,
Landlord shall nevertheless make such repairs at Tenant's expense, or, if
covered by Landlord's insurance, Tenant shall only be obligated to pay any
deductible in connection therewith. Subject to the terms and conditions of
Article 27, Landlord may, but shall not be required to, enter the Premises at
all reasonable times to make such repairs to the Premises or to the Project or
to any equipment located in the Project to the extent reasonably necessary for
Landlord to satisfy the Landlord Repair Obligation or as Landlord may be
required to do by governmental or quasi-governmental authority or court order or
decree.

7.3Tenant's Right to Perform Assumable Obligations.  Subject to the remaining
terms of this Section 7.3 and Section 7.4, below, provided Tenant notifies
Landlord on or before the Must-Take 2 Commencement Date, then from and after the
later to occur of (i) the Must-Take 3 Commencement Date, and (ii) the completion
of the "Site Modernization/Beautification Work," as that term is defined in the
SMB Work Letter, Tenant shall have the right to perform any Assumable Obligation
(each Assumable Obligation so assumed being a "Tenant-Assumed Obligation"), at
Tenant's sole cost and expense, in which event no costs associated with the
Tenant-Assumed Obligation shall be payable to Landlord as Additional Rent or as
part of Operating Expenses.  If Tenant elects to perform all Assumable
Obligations, then during any period that Tenant is actually performing all
Assumable Obligations, the Management Fee shall be reduced to $7,500.00 per
month, which amount shall be increased by three percent (3%) on January 1, 2019
and on each January 1st thereafter.  Notwithstanding any election of Tenant to
assume responsibility for the maintenance and repair of the HVAC system, in the
event that, as part of any Tenant-Assumed Obligation, Tenant, after the date
which is ten (10) years after the Lease Commencement Date, is required to
replace a component of the HVAC system (a "Replacement Unit") and (i) such
obligation would be a Landlord Repair Obligation had Tenant not elected to
perform the Tenant-Assumed Obligations, (ii) such Replacement Unit is not
required as a result of Tenant's failure to maintain and repairs the HVAC system
in accordance with the terms of this Lease, and (iii) the cost of such
Replacement Unit would be considered capital cost under sound commercial real
estate management and accounting principles, then Tenant shall provide Landlord
written notice of such Replacement Unit, and, provided that Landlord reasonably
agrees with Tenant that, in accordance with commercially reasonable real estate
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practices of landlords of the Comparable Buildings, such Replacement Unit does
in fact need to be replaced, then Tenant shall have the option to require
Landlord to bear the actual and reasonable out-of-pocket cost of such
Replacement Unit, subject to Landlord’s right to include such cost in Operating
Expenses to the extent permitted by Section 4.2.4).  If Landlord does not agree
with Tenant that, in accordance with commercially reasonable real estate
management and accounting principles consistent with the practices of landlords
of the Comparable Buildings, such Replacement Unit needs to be replaced, then
Tenant may institute arbitration proceedings pursuant to arbitration
administered by the JAMS or any successor thereto under the Expedited Procedures
provisions (Rules 16.1-16.2 in the current edition) of the JAMS Comprehensive
Arbitration Rules and Procedures ("Expedited JAMS Arbitration"), and such
determination rendered by the arbitrator shall be binding upon the parties and
may be entered in any court having jurisdiction thereof.  

7.3.1Service Contracts.  If Tenant elects to perform all Assumable Obligations
pursuant to the terms of this Section 7.3, then all Assumable Obligations shall
be performed by Tenant (i) in a manner consistent with First Class Life Sciences
Projects, (ii) in accordance with any applicable manufacturer specifications
communicated to Tenant relating to any particular Building System, and (iii) in
accordance with Applicable Laws.  Upon Tenant’s assumption of any Assumable
Obligation, Landlord shall assign to Tenant all warranties and guaranties, if
any, relating to such Assumable Obligation.  Tenant shall contract with
qualified, experienced professional third party service companies (a "Service
Contract").  Tenant shall regularly, in accordance with commercially reasonable
standards, generate and maintain preventive maintenance records relating to
Building Systems and the central plant (“Preventative Maintenance Records”).  In
addition, within thirty (30) days of Landlord’s written request, Tenant shall
deliver a copy of all current Service Contracts to Landlord and/or a copy of the
Preventative Maintenance Records.

7.4Landlord's Right to Perform Tenant-Assumed Obligations.  If Landlord
reasonably determines that Tenant is not performing any Tenant-Assumed
Obligation in accordance with the terms of Section 7.3.1, above, then Landlord
shall have the right to either (i) perform such Tenant-Assumed Obligation by
delivering notice of such election to Tenant (in which event Tenant shall no
longer have the right to perform the Tenant-Assumed Obligation pursuant to
Section 7.3, above), or (ii) require Tenant to perform such Tenant-Assumed
Obligation in accordance with the terms of Section 7.3.1, above.  In addition,
if Tenant fails to perform any Tenant-Assumed Obligation within a reasonable
time period, as reasonably determined by Landlord, then Landlord may, but need
not, following delivery of notice to Tenant of such election, satisfy such
Tenant-Assumed Obligation, and Tenant shall pay Landlord the cost thereof,
(including Landlord's reasonable supervision fee equal to two percent (2%) of
the cost thereof) within thirty (30) days after receipt of an invoice
therefor.  If Landlord and Tenant disagree on whether or not Tenant is
performing any Tenant-Assumed Obligation in accordance with the terms of
Section 7.3.1, either party may submit the dispute to Expedited JAMS
Arbitration.

7.5Tenant's Right to Make Repairs.  Notwithstanding any of the terms set forth
in this Lease to the contrary, if Tenant provides notice to Landlord of an event
or circumstance which requires the action of Landlord with respect to any
Landlord Repair Obligation in connection with a Building leased solely by
Tenant, excluding repairs to the Building Structure or Building Systems, which
event or circumstance materially and adversely affects the conduct of Tenant's
business from such Building, and Landlord fails to commence corrective action
within a reasonable period of time, given the circumstances, after the receipt
of such notice, but in any event not later than thirty (30) days after receipt
of such notice (or such lesser period as is reasonable under the circumstances
in the event of an "Emergency," as that term is defined hereinbelow), then
Tenant may (i) compel Landlord to perform its obligations or obtain an order of
the applicable court authorizing Tenant to perform the unfulfilled maintenance
obligation at Landlord’s expense, or (ii) proceed to take the required action
upon delivery of an additional ten (10) business days' notice to Landlord
specifying that Tenant is taking such required action (provided, however, that
the subsequent ten (10)-day notice shall be reduced to a period as is reasonable
under the circumstances in the event of an Emergency) and if such action was
required under the terms of this Lease to be taken by Landlord and was not
commenced by Landlord within such ten (10) business day (or shorter in the
Emergency) period and thereafter diligently pursued to completion, then Tenant
shall be entitled to prompt reimbursement by Landlord of Tenant's reasonable and
out-of-pocket costs and expenses in taking such action.  In the event Tenant
takes such action, Tenant shall use only those contractors used by Landlord in
the Project for similar work unless such contractors are unwilling or unable to
perform, or timely perform, such work, in which event Tenant may utilize the
services of any other qualified contractor which normally and regularly performs
similar work in Comparable Buildings.  Following completion of any work taken by
Tenant pursuant to the terms of this Section 7.5, Tenant shall deliver a
reasonably

 

 

 

 

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detailed invoice of the work completed, the materials used and the costs
relating thereto.  If Landlord does not deliver a detailed written objection to
Tenant within thirty (30) days after receipt of an invoice from Tenant, then
Tenant shall be entitled to deduct from Rent payable by Tenant under this Lease,
the amount set forth in such invoice.  If, however, Landlord delivers to Tenant,
within thirty (30) days after receipt of Tenant's invoice, a written objection
to the payment of such invoice, setting forth with reasonable particularity
Landlord's reasons for its claim that such action did not have to be taken by
Landlord pursuant to the terms of this Lease or that the charges are excessive
(in which case Landlord shall pay the amount it contends would not have been
excessive), then Tenant shall not then be entitled to such deduction from Rent;
provided, however, that such prohibition on deduction of the cost of work which
Landlord contends is excessive shall not affect Landlord’s obligation to
reimburse Tenant for its reasonable out-of-pocket costs and expenses to the
extent that the cost of Tenant’s work invoiced in accordance with this
Section 7.5 is determined to be reasonable pursuant to a determination made by
the arbitrator in an Expedited JAMS Arbitration.  On the other hand, Tenant may
proceed to claim a default by Landlord or, if elected by either Landlord or
Tenant, the matter shall proceed to resolution by litigation.  If Tenant
prevails in the litigation, it may deduct the amount of the initial judgment
(including attorney fees pursuant to Section 29.21 below) from the Rent next due
and owing under this Lease.  For purposes of this Section 7.5, an "Emergency"
shall mean an event threatening immediate and material danger to people located
in the Building or immediate, material damage to the Tenant Improvements, or
Alterations, or creates a realistic possibility of an immediate and material
interference with, or immediate and material interruption of a material aspect
of Tenant's business operations.

8.ADDITIONS AND ALTERATIONS

8.1Landlord's Consent to Alterations.  Except for the Existing Premises Work (as
defined in the Initial Premises Work Letter) in the Initial Premises, which
shall be performed by Tenant in accordance with the terms and conditions of the
Initial Premises Work Letter, and not in accordance with this Article 8, Tenant
may not make any improvements, alterations, additions or changes to the Premises
or any mechanical, plumbing or HVAC facilities or systems pertaining to the
Premises (collectively, the "Alterations") without first procuring the prior
written consent of Landlord to such Alterations, which consent shall be
requested by Tenant not less than thirty (30) days prior to the commencement
thereof, and which consent shall not be unreasonably withheld by Landlord,
provided, during any period Tenant and its Permitted Transferees are the sole
occupants of all occupied space in the Project, it shall be deemed unreasonable
for Landlord to withhold its consent to any Alteration which complies with all
Applicable Laws and does not have a material and adverse effect on the
structural components of Project Structures, the Building Systems, or the Common
Areas and is not visible from the exterior of the Project
Structure.  Notwithstanding the foregoing, Tenant shall be permitted to make
Alterations following ten (10) business days' notice to Landlord, but without
Landlord's prior consent, to the extent that such Alterations (i) do not affect
the structural components of Project Structures or Building Systems, (ii) are
not visible from the exterior of the Building, and (iii) cost less than
$75,000.00 for a particular job of work, and in no event more than an aggregate
cost of $250,000.00 during any 12-month period ("Cosmetic Alterations").  The
construction of the initial improvements to the Premises shall be governed by
the terms of the Tenant Work Letter and not the terms of this Article 8.

8.2Manner of Construction.  Landlord may impose, as a condition of its consent
to any Specialty Alterations (as defined in Section 8.5), the requirement that
upon Landlord's request properly made in accordance with Section 8.5, Tenant
shall, at Tenant's expense, remove such Alterations upon the expiration or any
early termination of the Lease Term.  Tenant shall construct such Alterations
and perform such repairs in a good and workmanlike manner, in conformance with
any and all applicable federal, state, county or municipal laws, rules and
regulations and pursuant to a valid building permit, issued by the city in which
the Building is located (or other applicable governmental authority).  Tenant
shall not use (and upon notice from Landlord shall cease using) contractors,
services, workmen, labor, materials or equipment that, in Landlord's reasonable
judgment, would disturb labor harmony with the workforce or trades engaged in
performing other work, labor or services in or about the Building or the Common
Areas.  Upon completion of any Alterations, Tenant shall deliver to Landlord
final lien waivers from all contractors, subcontractors and materialmen who
performed such work.  In addition to Tenant's obligations under Article 9 of
this Lease, upon completion of any Alterations, Tenant agrees to cause a Notice
of Completion to be recorded in the office of the Recorder of the County of San
Diego in accordance with Section 3093 of the Civil Code of the State of
California or any successor statute, and Tenant shall deliver to the Project
construction manager a reproducible copy of the "as built" drawings of the
Alterations as well as all permits, approvals and other documents issued by any
governmental agency in connection with the Alterations.

 

 

 

 

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8.3Payment for Improvements.  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.

8.4Construction Insurance.  In addition to the requirements of Article 10 of
this Lease, in the event that Tenant makes any Alterations (other than Cosmetic
Alterations), prior to the commencement of such Alterations, Tenant shall
provide Landlord with evidence that Tenant carries "Builder's All Risk"
insurance in an amount approved by Landlord covering the construction of such
Alterations, and such other insurance as Landlord may reasonably require, it
being understood and agreed that all of such Alterations shall be insured by
Tenant pursuant to Article 10 of this Lease immediately upon completion
thereof.  In addition, Tenant's contractors and subcontractors shall be required
to carry (i) Commercial General Liability Insurance in an amount reasonably
approved by Landlord, with Landlord, and, at Landlord's option, Landlord's
property manager and project manager, as additional insureds in an amount
approved by Landlord, and otherwise in accordance with the requirements of
Article 10 of this Lease, and (ii) workers compensation insurance to the extent
required by law with a waiver of subrogation in favor of Landlord.

8.5Landlord's Property.  All existing trade fixtures and equipment located in
the Initial Premises as of the Lease Commencement Date and all trade fixtures,
furnishing and equipment installed by Tenant from time to time in the Premises
(other than Tenant FF&E) is the Tenant's property and may be removed by Tenant
at any time and from time to time during the Lease Term and prior to the Lease
Expiration Date.  Tenant FF&E shall be the property of Landlord during that
portion of the Lease Term following its installation in the Premises, and shall
be surrendered by Tenant, along with the Premises, upon the expiration or
earlier termination of the Lease Term; provided, however, that notwithstanding
the foregoing:  (a) the Tenant FF&E shall be an appurtenance of the Premises
during the Lease Term, and no transfer premium or additional rent shall be
charged by Landlord to Tenant or any Transferee (as defined in Section 14.1,
below), as a condition of any Transfer; (b) Tenant shall have the right to
relocate the Tenant FF&E within the Premises from time to time, in Tenant's sole
discretion, without notice to Landlord; (c) Tenant shall be permitted to dispose
of any Tenant FF&E that has become worn-out or obsolete, or is otherwise not
required for Tenant use or occupancy of the Premises (with not less than three
(3) business days advance notice to Landlord; provided that Tenant's failure to
provide such notice shall not be deemed a default under this Lease and Tenant
shall not be liable to Landlord for such failure except that Tenant shall pay to
Landlord the then fair market value of any Tenant FF&E disposed of by Tenant in
violation of the foregoing notice requirement), in the ordinary course of
Tenant's business, without obligation to replace such items of Tenant FF&E so
disposed of, and without liability to Landlord for doing so; (d) Tenant shall
otherwise have no liability to Landlord for any loss of, or damage to, any of
the items of Tenant FF&E as long as such loss or damage (i) does not occur
during an period when an Event of Default exists under this Lease, or (ii) is
not attributable to the gross negligence or willful misconduct of Tenant or any
of its directors, officers, employees or agents; and (e) Tenant shall maintain
insurance covering loss or damage to the Tenant FF&E pursuant to Section 10.3.2
of this Lease, below, provided that the proceeds of such insurance shall belong
solely to Tenant, provided Tenant shall use such proceeds to replace the Tenant
FF&E to the extent of such proceeds.  Subject to the foregoing, the Tenant FF&E
shall be surrendered by Tenant, along with the Premises, upon the expiration or
earlier termination of the Lease Term in its as-is, where-is condition, without
any obligation of Tenant to provide an inventory or other accounting of the
Tenant FF&E and its location in the Premises. All Alterations which may be made
to the Premises by Tenant pursuant to this Article 8, from time to time, shall
be at the sole cost of Tenant (except for such items that may be included in the
costs of any Tenant Must-Take 1 Fit-Out Work or the Tenant Must-Take 3 Fit-Out
Work that Tenant elects to have paid or reimbursed from the Tenant Improvement
Allowance), and shall be and become the property of Landlord, except that Tenant
may remove any Alterations which have not been paid for with any of the Tenant
Improvement Allowances, provided Tenant repairs any damage to the Premises and
Building caused by such removal and returns the affected portion of the Premises
to a warm shell condition consistent with the condition of the affected portion
of the Premises prior to such removal.  Furthermore, Landlord may, by written
notice to Tenant at the time of Landlord’s consent to any Alterations that are
included in the definition of Specialty Alterations (as hereinafter provided),
reasonably require, as a condition of such consent, that Tenant remove such
Specialty Alterations prior to the end of the Lease Term or any earlier
termination of this Lease and repair any damage to the Premises and Building
caused by such removal, and return the affected portion of the Premises to a
warm shell condition consistent with the condition of such portion of the
Premises prior to such removal, at Tenant’s expense; provided, however, that
with respect to any Cosmetic Alterations that do not require Landlord’s consent,
and which Tenant believes are Specialty Alterations, Tenant may request
Landlord’s determination of whether such Specialty Alterations are required to
be removed at the expiration or earlier termination of this Lease, and if Tenant
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such a request to Landlord in writing, Landlord shall promptly notify Tenant
whether the applicable Cosmetic Alteration constitutes a Specialty Alteration
and whether such Specialty Alteration will be required to be removed pursuant to
the terms of this Section 8.5.  Notwithstanding the foregoing, if Tenant fails
to request Landlord’s determination as to whether a Cosmetic Alteration is a
Specialty Alterations and whether the removal of such Specialty Alteration is
required in accordance with the preceding sentence, and such Cosmetic Alteration
is a Specialty Alteration made without Landlord’s consent in accordance with
Section 8.1 above, then Landlord shall have the right to designate that such
Specialty Alteration be removed prior to the expiration or earlier termination
of this Lease and the affected portion of the Premises repaired and restored in
accordance with this Section 8.5 above. If Tenant fails to complete any required
removal and/or to repair any damage caused by the removal of any Specialty
Alterations in the Premises and return the affected portion of the Premises to a
warm shell condition consistent with the condition of the affected portion of
the Premises prior to such removal, 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 by Tenant or any Tenant Parties, in, on or about the
Premises, which obligations of Tenant shall survive the expiration or earlier
termination of this Lease.  As used herein, “Specialty Alterations” shall mean
any improvement that is constructed or installed as Alterations or Tenant
Improvements in, on or about the Premises by or on behalf of Tenant during the
Term of this Lease, to the extent that such improvement (x) is not a normal and
customary general office improvement (including, without limitation normal and
customary improvements for general office amenities and incidental activities
included in the Permitted Uses, such as cafeteria, lunch room, warehouse and
storage space, and fitness/wellness center areas), and which perforates,
penetrates or requires reinforcement of a floor slab (including, without
limitation, interior stairwells or high-density filing or racking systems),
(y) consists of (i) any raised flooring system, or (ii) the installation of a
vault or other similar device or system intended to secure the Premises or a
portion thereof in a manner that exceeds the level of security normally found in
premises occupied for uses similar to the Permitted Uses in First Class Life
Sciences Projects, or (z) which is visible to the occupants of the Project
outside the Building in which such improvement is located; but in no event shall
Specialty Alterations include renovations or repairs to any "Original
Improvements" (as defined in Section 10.3.2 below) nor any replacement of
Original Improvements with substantially similar improvements.  Tenant shall not
be required to remove any cabling on or prior to the Lease Expiration Date.

9.COVENANT AGAINST LIENS.  Tenant shall keep the Project and Premises free from
any liens or encumbrances arising out of the work performed, materials furnished
or obligations incurred by or on behalf of Tenant, and shall protect, defend,
indemnify and hold Landlord harmless from and against any claims, liabilities,
judgments or costs (including, without limitation, reasonable attorneys' fees
and costs) arising out of same or in connection therewith.  Tenant shall give
Landlord notice at least twenty (20) days prior to the commencement of any
Alterations on the Premises (or such additional time as may be necessary under
Applicable Laws) to afford Landlord the opportunity of posting and recording
appropriate notices of non-responsibility (to the extent applicable pursuant to
Applicable Laws).  Tenant shall remove any such lien or encumbrance by bond or
otherwise within thirty (30) days after notice by Landlord, and if Tenant shall
fail to do so, Landlord may pay the amount necessary to remove such lien or
encumbrance, without being responsible for investigating the validity thereof.

10.INSURANCE.

10.1Indemnification and Waiver.  Subject to the terms of this Section 10.1,
Tenant hereby assumes all risk of damage to property or injury to persons in,
upon or about the Premises from any cause whatsoever and agrees that Landlord,
its partners, subpartners and their respective officers, agents, servants,
employees, lenders, any property manager and independent contractors
(collectively, "Landlord Parties") shall not be liable for, and are hereby
released from any responsibility for, any damage either to person or property or
resulting from the loss of use thereof, which damage is sustained by Tenant or
by other persons claiming through Tenant.  Tenant shall indemnify, defend,
protect, and hold harmless the Landlord Parties from any and all claims, loss,
cost, damage, injury, expense and liability (including without limitation court
costs and reasonable attorneys' fees) incurred in connection with or arising
from any cause in, on or about the Premises, any acts, omissions or negligence
of Tenant or of any person claiming by, through or under Tenant, or of the
contractors, agents, servants, employees, invitees, guests or licensees of
Tenant or any such person, in, on or about the Project, either prior to, during,
or after the expiration of the Lease Term, provided that the terms of the
foregoing indemnity shall not apply to instances of gross negligence or willful
misconduct of Landlord.  Should Landlord be named as a defendant in any suit
brought against Tenant in connection with or arising out of Tenant's occupancy
of the Premises, Tenant shall pay to Landlord its costs and expenses

 

 

 

 

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incurred in such suit, including without limitation, its reasonable professional
fees such as reasonable appraisers', accountants' and attorneys' fees.  Landlord
shall indemnify, defend, protect, and hold harmless Tenant, its affiliates, and
their respective officers, agents, servants, employees, lenders, and independent
contractors (collectively, "Tenant Parties") from any and all claims, loss,
cost, damage, injury, expense and liability (including without limitation
commercially reasonable deductible amounts for claims actually covered or
required to be covered by Tenant’s liability insurance, court costs, and
reasonable attorneys' fees) incurred in connection with or arising from any
cause in, on or about the Project, any acts or omissions of Landlord Parties or
of any person claiming by, through or under Landlord, or of the contractors,
agents, servants, employees, invitees, guests or licensees of Landlord or any
such person, any acts of Landlord Parties in, on or about the Project, either
prior to, during, or after the expiration of the Lease Term, provided that the
terms of the foregoing indemnity shall only apply to instances of gross
negligence or willful misconduct of Landlord Parties.  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.

10.2Tenant's Compliance With Landlord's Property Insurance.  In addition to the
insurance requirements of Landlord set forth in the Expansion Space Work Letter
and the Lusk 3 Work Letter, respectively, during the Lease Term Landlord shall
insure the full replacement cost of (i) the Base, Shell and Core of the Existing
Buildings, (ii) the Base Building of the Lusk 3 Building (as more particularly
described in the Lusk 3 Work Letter), and (iii) any other Project Structures and
improvements of the Common Areas (collectively, the "Base Building
Improvements"), against loss or damage under an "all risk" property insurance
policy with a commercially reasonable deductible.  Within ten (10) business days
of any request by Tenant, Landlord shall deliver proof of such coverage to
Tenant.  Such coverage shall be in such amounts, from such companies, and on
such other terms and conditions, as Landlord may from time to time reasonably
determine.  Additionally, at the option of Landlord, such insurance coverage may
include the risks of earthquakes and/or flood damage and additional hazards, a
rental loss endorsement and one or more loss payee endorsements in favor of the
holders of any mortgages or deeds of trust encumbering the interest of Landlord
in the Buildings or the ground or underlying lessors of the Buildings, or any
portion thereof.  Tenant shall, at Tenant's expense, comply with all insurance
company requirements pertaining to the use of the Premises during the Lease
Term; provided that no such requirements shall materially interfere with any of
the Permitted Uses or materially increase the Tenant’s cost of use or occupancy
or 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.  Tenant shall also provide Landlord and Landlord’s insurer(s) with
such information regarding the use of the Premises and any damage to the
Premises as they may require in connection with the placement of insurance for
the Premises or the adjusting of any losses to the Premises.

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

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

Bodily Injury and
Property Damage Liability

$5,000,000 each occurrence

$5,000,000 annual aggregate

Personal Injury Liability

$3,000,000 each occurrence
$3,000,000 annual aggregate

10.3.2Property Insurance covering: (i) all office furniture, business and trade
fixtures, office equipment, free-standing cabinet work, movable partitions,
merchandise and all other items of Tenant's property on the Premises installed
by, for, or at the expense of Tenant, including the Tenant FF&E (provided the
amount of such insurance coverage on the Tenant FF&E shall not be required to
exceed the Landlord’s FF&E Limit); (ii) the "Tenant Improvements" (as defined in
the applicable Tenant Work Letters) to Must-Take Space 1, Must-Take Space 2 and
Must-Take Space 3, following the Must-Take 1 Commencement Date, the Must-Take 2
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Date and the Must-Take 3 Commencement Date, respectively, (iii) those
improvements that exist in the Initial Premises as of the Lease Commencement
Date (excluding any of the Base Building Improvements, the "Original
Improvements"), and all Tenant Improvements made to the Initial Premises
pursuant to the Initial Premises Work Letter; and (iv) any other Alterations
made to the Premises by Tenant during the Term of this Lease. All of the
Original Improvements, Tenant Improvements and Alterations which Tenant is
required to insure from time to time during the Term of this Lease are sometimes
collectively referred to herein as the "Premises Improvements").  Such insurance
shall be written on an "all risks" of physical loss or damage or special perils
basis, for the full replacement cost value (subject to reasonable deductible
amounts) new without deduction for depreciation of the covered items and in
amounts that meet any co-insurance clauses of the policies of insurance and
shall include coverage for damage or other loss caused by fire or other peril
including, but not limited to, vandalism and malicious mischief, theft, water
damage of any type, including sprinkler leakage, bursting or stoppage of pipes,
and explosion.

10.3.3Intentionally Omitted.

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

10.4Form of Policies.  The minimum limits of policies of insurance required of
Tenant under this Lease shall in no event limit the liability of Tenant under
this Lease.  Such insurance shall (i) name Landlord, its subsidiaries and
affiliates, its property manager (if any) and any other party the Landlord
reasonably specifies, as an additional insured or loss payee, with respect to
insurance required under Section 10.3.2(ii) and (iii), including Landlord's
managing agent, if any; (ii) be issued by an insurance company having a rating
of not less than A:VIII in Best's Insurance Guide or which is otherwise
reasonably  acceptable to Landlord and licensed to do business in the State of
California; (iv) be primary insurance as to all claims thereunder and provide
that any insurance carried by Landlord is excess and is non-contributing with
any insurance required of Tenant; (v) be in form and content reasonably
acceptable to Landlord; and (vi) provide that said insurance shall not be
canceled or coverage changed unless thirty (30) days' prior written notice shall
have been given to Landlord and any mortgagee of Landlord (unless such
cancellation is the result of non-payment of premiums).  To the extent that any
of the Tenant’s existing policies of insurance maintained in accordance with the
Initial Lease need to be modified in order to satisfy the insurance requirements
of this Lease, Tenant shall deliver evidence of such modifications to said
policy or policies, which may be in the form of ACORD certificates to Landlord
within thirty (30) days following the Lease Commencement Date.  At least ten
(10) days before the expiration dates of said policy or policies following the
Lease Commencement Date, Tenant shall deliver copies of replacement policy or
policies, or certificates evidencing the extension of such insurance coverage,
to Landlord.  In the event Tenant shall fail to procure such insurance, or to
deliver such policies or certificates, Landlord may, at its option, procure such
policies for the account of Tenant, and the cost thereof shall be paid to
Landlord within thirty (30) days after delivery to Tenant of bills therefor.

10.5Subrogation.  Landlord and Tenant hereby agree to look solely to, and seek
recovery only from, their respective insurance carriers in the event of a
property or business interruption loss to the extent that such coverage is
either actually provided or 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, provided such
waiver of subrogation shall not affect the right to the insured to recover
thereunder.  The parties agree that their respective insurance policies do now,
or shall, contain the waiver of subrogation.

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

11.DAMAGE AND DESTRUCTION.

11.1Repair 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 any of the Base Building Improvements

 

 

 

 

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(including, without limitation, any Common Areas serving or providing access to
the Premises) shall be damaged by fire or other casualty, Landlord shall
promptly and diligently, subject to reasonable delays for insurance adjustment
or other matters beyond Landlord's reasonable control, and subject to all other
terms of this Article 11, restore such Base Building Improvements to
substantially the same condition as existed immediately prior to the casualty,
except for modifications required by zoning and building codes and other laws,
provided that access to the Premises shall not be materially impaired.  Upon the
occurrence of any damage to the Premises Improvements, unless Landlord elects to
terminate this Lease by timely delivery of a Landlord Termination Notice to
Tenant in accordance with the terms and conditions of Section 11.2, Landlord may
elect to repair the Premises Improvements utilizing the proceeds of Tenant’s
insurance by delivering written notice to Tenant of Landlord’s election to do so
within sixty (60) days after the date of discovery of the damage (a "Landlord
Repair Notice"), and if Landlord so elects, Tenant shall assign to Landlord (or
to any party designated by Landlord) all insurance proceeds payable to Tenant
under Tenant's insurance required under Section 10.3(ii), (iii) and (iv) of this
Lease and Landlord shall repair any injury or damage to the Premises
Improvements and shall return the Premises (including all Base Building
Improvements and Premises Improvements) to the condition existing prior to the
applicable damage or other casualty; provided that if neither Landlord nor
Tenant elects to exercise its right to terminate this Lease under this
Article 11, and Landlord timely delivers a Landlord Repair Notice to Tenant in
accordance with this Section 11.1, above, and the cost of the Landlord repairs
to the Premises Improvements exceeds the amount of insurance proceeds received
by Landlord from Tenant's insurance carrier (including by taking into account
any deductible or self-insured retention), as assigned by Tenant, then, to the
extent that the cost of such repairs by Landlord exceeds such sum, such excess
cost of repairs shall be paid by Tenant to Landlord prior to Landlord's
commencement of such repairs to the Premises Improvements.  In the event that
neither Landlord nor Tenant elects to exercise its right to terminate this Lease
under this Article 11 and Landlord does not deliver the Landlord Repair Notice
within sixty (60) days following the date the casualty becomes known to
Landlord, in accordance with this Section 11.1, above, Tenant shall repair any
injury or damage to the Premises Improvements, subject to Landlord's restoration
of the Base Building Improvements to a condition reasonably permitting such
repairs to occur; provided that the foregoing right of Landlord to elect to
repair the Premises Improvements or to cause Tenant to repair the Premises
Improvements shall not be applicable in the event that Tenant elects to
terminate this Lease following any casualty causing damage to the Premises in
accordance with Section 11.2.  Whether or not Landlord delivers a Landlord
Repair Notice, prior to the commencement of such repairs or restoration of the
Premises Improvements by Landlord or Tenant, Tenant shall submit to Landlord,
for Landlord's review and approval, which approval shall not be unreasonably
withheld, all plans, specifications and working drawings relating thereto
(provided that Tenant shall not be required to include any Specialty Alterations
that were part of the Premises Improvements prior to such fire or any other
casualty in Tenant's plans, specifications and working drawings), and all
contractors selected by Tenant to perform such repairs.  Tenant shall in
addition cooperate with requests for information regarding any repairs from
Landlord’s insurer(s) by providing the requested information within ten (10)
business days after Tenant receives Landlord's written request for such
information.  Landlord shall not be liable for any inconvenience or annoyance to
Tenant or its visitors, or injury to Tenant's business resulting in any way from
such damage or the repair thereof; provided however, that if such fire or other
casualty shall have damaged the Premises or Common Areas necessary to Tenant's
occupancy, and the Premises are not occupied by Tenant as a result thereof, then
during the time and to the extent the Premises are unfit for occupancy, the Rent
shall be abated in proportion to the ratio that the amount of rentable square
feet of the Premises which is unfit for occupancy for the purposes permitted
under this Lease bears to the total rentable square feet of the Premises.

11.2Landlord's Option to Repair.  Notwithstanding the terms of Section 11.1 of
this Lease, Landlord may elect not to rebuild and/or restore the damage to any
affected Building or Buildings, and instead terminate this Lease with respect to
such affected Building or Buildings, by notifying Tenant in writing of such
termination, along with the conditions upon which Landlord’s election is based
pursuant to subheadings (i), (ii) or (iii) as hereinafter set forth (a "Landlord
Termination Notice") within sixty (60) days after the date of discovery of the
damage, with such notice to include a termination date giving Tenant at least
sixty (60) days to vacate the portion of the Premises located in the Building or
Buildings for which this Lease is being terminated, but Landlord may so elect
only if the Building or Buildings shall be damaged by fire or other casualty or
cause, and one or more of the following conditions is present: (i) in Landlord's
reasonable judgment, repairs required to restore the Premises to the condition
required by Section 11.1, above, cannot reasonably be completed within one
hundred eighty (180) days after the date of discovery of the damage (when such
repairs are made without the payment of overtime or other premiums); (ii) the
holder of any mortgage on the Building or Project or ground lessor with respect
to the Building or Project shall require that the insurance proceeds or any
portion thereof be used to retire the mortgage debt, or shall terminate the
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case may be; (iii) Landlord and Tenant have maintained all insurance required by
this Lease, but the damage to the Premises is not fully covered by Landlord's
insurance and the Tenant's insurance proceeds assigned (or assignable) to
Landlord in accordance with Section 11.1; or (iv) such casualty occurs during
the last twelve (12) months of the Lease Term (as the same may be extended by
Tenant under Section 2.2 or as otherwise agreed to by the parties); provided,
however, that if Landlord does not elect to deliver a Landlord Termination
Notice pursuant to Landlord's termination right as provided above, and the
repairs required to return the Premises to the condition existing immediately
prior to such damage cannot, in the reasonable opinion of Landlord, 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),
or if the casualty occurs within the last twelve (12) months of the Lease Term,
then 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; provided further that, if Landlord notifies Tenant of
its election to terminate this Lease by timely delivery of a Landlord
Termination Notice to Tenant based upon the condition set forth under subheading
(iii) above, Tenant shall have the option to prevent such termination by
delivering notice to Landlord within thirty (30) days of Tenant’s receipt of
such Landlord Termination Notice, providing that Tenant has agreed to pay the
cost of repairs of the Premises in excess of Landlord’s and Tenant's combined
insurance proceeds together with reasonable evidence demonstrating Tenant's
ability to pay such cost.  Notwithstanding the provisions of this Section 11.2,
Tenant shall have the right to terminate this Lease with respect to any affected
Building or Buildings under this Section 11.2 only if each of the following
conditions is satisfied:  (a) the damage to the Project by fire or other
casualty was not caused by the gross negligence or intentional act of Tenant or
its partners or subpartners and their respective officers, agents, servants,
employees, and independent contractors; (b) Tenant is not then in default under
this Lease beyond any applicable notice and cure period; (c) as a result of the
damage, Tenant’s use or occupancy of the affected Building or Buildings is
substantially affected or Tenant cannot reasonably conduct business from a
material portion of the Premises located in such affected Building or Buildings;
and (d) as a result of the damage to the Project, Tenant does not occupy or use
a material portion of the Premises located in such affected Building or
Buildings at all and that remaining portion of the Premises located in such
affected Building or Buildings, if any, is not reasonably suitable for the
conduct of Tenant's business.  In addition to the foregoing, in the event that
the damage is limited to less than all of the Buildings in the Project, and in
accordance with this Section 11.2, either (y) Landlord terminates this Lease
with respect to one or more affected Buildings, or (z) Tenant has the right to
terminate this Lease with respect to one or more affected Buildings, then Tenant
may elect to terminate this Lease in its entirety as of the effective date of
the termination of this Lease with respect to the affected Building or
Buildings, if the conditions set forth in clauses (a) and (b) are satisfied; and
such damage either (i) results in the termination of this Lease with respect to
one or both of the Existing Buildings or (ii) as a result of the damage to the
Project, the remaining portion of the Premises located in the Project is not
reasonably suitable for the continued conduct of Tenant's business at the
Project, and Tenant does not conduct business from any material portion of the
Premises; provided, however, in no event shall damage to the Lusk 3 Building in
and of itself be deemed to cause Tenant to not be able to reasonably conduct
business in the Lusk 1 Building and the Lusk 2 Building nor make the Lusk 1
Building and/or the Lusk 2 Building not reasonably suitable for the continued
conduct of Tenant's business at the Project.

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

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

13.CONDEMNATION.  If the whole or any part of the Premises, Building or Project
shall be taken by power of eminent domain or condemned by any competent
authority for any public or quasi-public use or purpose, or if any adjacent
property or street shall be so taken or condemned, or reconfigured or vacated by
such authority in such manner as to require the use, reconstruction or
remodeling of any part of the Premises, Building or Project, or if Landlord
shall grant a deed or other instrument in lieu of such taking by eminent domain
or condemnation, then, provided that such event has a material adverse effect on
Tenant’s use of or access to the Premises (which shall include, without
limitation, the prevention of construction of the Lusk 3 Building), or if the
remaining portion of the Project cannot be operated by Landlord as a First Class
Life Sciences Project in a commercially feasible manner, then either party 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, for loss of
goodwill, business and business interruption, and for moving expenses, so long
as such claims do not diminish the award available to Landlord, its ground
lessor with respect to the Building or Project or its mortgagee, and such claim
is payable separately to Tenant.  All Rent shall be apportioned as of the date
of such termination.  If any part of the Premises shall be taken, and this Lease
shall  not be so terminated, the Rent shall be proportionately abated and
Landlord shall, to the extent of the condemnation proceeds received by Landlord,
promptly restore the remaining Premises to the same condition they were in
immediately prior to such condemnation.  Tenant hereby waives any and all rights
it might otherwise have pursuant to Section 1265.130 of The California Code of
Civil Procedure.  Notwithstanding anything to the contrary contained in this
Article 13, in the event of a temporary taking of all or any portion of the
Premises for a period of one hundred and eighty (180) days or less, then this
Lease shall not terminate but the Base Rent and the Additional Rent shall be
abated for the period of such taking in proportion to the ratio that the amount
of rentable square feet of the Premises taken bears to the total rentable square
feet of the Premises.  Landlord shall be entitled to receive the entire award
made in connection with any such temporary taking.

14.ASSIGNMENT AND SUBLETTING.

14.1Transfers.  Except as otherwise expressly set forth in this Article 14,
Tenant shall not, without the written consent of Landlord, assign, mortgage,
pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise
transfer, this Lease or any interest hereunder, permit any assignment, or other
transfer of this Lease or any interest hereunder by operation of law, sublet the
Premises or any part thereof, or enter into any license or concession agreements
or otherwise permit the occupancy or use of the Premises or any part thereof by
any persons other than Tenant and its employees and contractors (all of the
foregoing are hereinafter sometimes referred to collectively as "Transfers" and
any person to whom any Transfer is made or sought to be made is hereinafter
sometimes referred to as a "Transferee").  If Tenant desires Landlord's consent
to any Transfer, Tenant shall notify Landlord in writing, which notice (the
"Transfer Notice") shall include (i) the proposed effective date of the
Transfer, which shall not be less than twenty (20) 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) the basic material 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, 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 (or deemed

 

 

 

 

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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.  In
addition, at Tenant's option, any Transfer may include Tenant’s appurtenant
interest in the Tenant’s FF&E, and the granting of such appurtenant interest
shall be without any additional rent or payment to Landlord by the Transferee
for its use or possession of the Tenant’s FF&E during the term of the
Transfer.  Whether or not Landlord consents to any proposed Transfer, except
with respect to Permitted Transfers, Tenant shall pay Landlord's reasonable
review and processing fees, as well as any reasonable professional fees
(including, without limitation, attorneys', accountants', architects',
engineers' and consultants' fees) incurred by Landlord (which, in the aggregate,
shall not exceed $2,500.00 in connection with any proposed Transfer in the
ordinary course of business) within thirty (30) days after written request by
Landlord.

14.2Landlord's Consent.  Landlord shall not unreasonably withhold, condition or
delay its consent to any proposed Transfer of the Subject Space to the
Transferee on the terms specified in the Transfer Notice and shall respond to
Tenant's request for consent within twenty (20) days following the date upon
which Landlord receives a "complete" Transfer Notice from Tenant (i.e., a
Transfer Notice that includes all documents and information required pursuant to
Section 14.1 of this Lease, above). If Landlord fails to timely deliver to
Tenant notice of Landlord's consent, or the withholding of consent, to a
proposed Transfer, Tenant may send a second (2nd) notice to Landlord, which
notice must contain the following inscription, in bold faced lettering: "SECOND
NOTICE DELIVERED PURSUANT TO ARTICLE 14 OF LEASE - - FAILURE TO TIMELY RESPOND
WITHIN FIVE (5) BUSINESS DAYS SHALL RESULT IN DEEMED APPROVAL OF ASSIGNMENT OR
SUBLEASE." If Landlord fails to deliver notice of Landlord's consent to, or the
withholding of Landlord's consent, to the proposed assignment or sublease within
such five (5) business day period, Landlord shall be deemed to have approved the
assignment or sublease in question.  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:

14.2.1The Transferee is of a character or reputation or engaged in a business
which is not consistent with First Class Life Sciences Projects;

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

14.2.3The Transferee is not a party of reasonable financial worth and/or
financial stability in light of the responsibilities to be undertaken in
connection with the Transfer on the date consent is requested; or

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

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

14.3Transfer Premium.  If Landlord consents to a Transfer (other than a
Section 14.8 Deemed Consent Transfer to a Permitted Transferee), 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 received by
Tenant in connection with the Transfer in excess of the Rent and Additional Rent
payable by Tenant under this Lease during the term of the Transfer on a per
rentable square foot basis if less than all of the Premises is transferred, and
after deduction of (i) any costs of improvements made to the Subject Space in

 

 

 

 

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connection with such Transfer, including any improvement allowances,
(ii) brokerage commissions paid in connection with such Transfer,
(iii) reasonable legal fees incurred in connection with such Transfer, (iv) free
base rent or other economic concessions reasonably provided to the Transferee,
(v) costs of advertising the subject space, (vi) any lease takeover costs
incurred by Tenant in connection with the Transfer, and (vii) Landlord's review
and processing fees and professional fees paid in accordance with Section 14.1,
which deduction shall be performed after amortizing all such deductible amounts
at 8.0% interest over the term of the Transfer.  "Transfer Premium" shall also
include, but not be limited to, key money, bonus money or other cash
consideration paid by Transferee to Tenant in connection with such Transfer, and
any payment in excess of fair market value for services rendered by Tenant to
Transferee or for assets, fixtures, inventory, equipment, or furniture
transferred by Tenant to Transferee in connection with such Transfer.  The
determination of the amount of Landlord's applicable share of the Transfer
Premium shall be made on a monthly basis as rent or other consideration is
received by Tenant under the Transfer.

14.4Intentionally Omitted.

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

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

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

 

 

 

 

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14.8Deemed 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 the
Transfer), (B) a sale of corporate shares of capital stock in Tenant 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 of any such assignment or sublease and promptly supplies Landlord with
any documents or information reasonably requested by Landlord regarding such
transfer or transferee as set forth above (unless to do so violates state or
Federal securities law, or any confidentiality agreement binding on Tenant, in
which case Tenant shall notify Landlord within ten (10) days after the
Transfer), (ii) Tenant is not in default, beyond any applicable notice and cure
period, and such assignment or sublease is not a subterfuge by Tenant to avoid
its obligations under this Lease, (iii) such Permitted Transferee shall be of a
character and reputation consistent with the quality of the Building, (iv) such
Permitted Transferee and Tenant shall have a combined 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 Tenant on
the day immediately preceding the effective date of such assignment or sublease,
and (v) no assignment relating to this Lease, whether with or without Landlord's
consent, shall relieve Tenant from any liability under this Lease, and, in the
event of an assignment of Tenant's entire interest in this Lease, the liability
of Tenant and such transferee shall be joint and several.  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 at least fifty-one percent (51%) of the voting securities of, or possession
of the right to vote, in the ordinary direction of its affairs, of at least
fifty-one percent (51%) of the voting interest in, any person or entity.

14.9Occupancy by Others. Notwithstanding any contrary provision of this
Article 14, the Original Tenant and any Permitted Transferee Assignee shall have
the right, without the receipt of Landlord's consent and without payment to
Landlord of the Transfer Premium, but on not less than thirty (30) days prior
written notice to Landlord, to permit the occupancy of up to ten percent (10%)
of the Premises, in the aggregate, to any individual(s) with an ongoing business
relationship with Tenant (other than the dual occupancy of the Premises),
including any Permitted Transferee, which occupancy shall include the use of a
corresponding interior support area and other portions of the Premises which
shall be common to Tenant and the permitted occupants, on and subject to the
following conditions: (i) each individual or entity shall be of a character and
reputation consistent with the quality of the Building and the Project; (ii) no
individual or entity shall occupy a separately demised portion of the Premises
or which contains an entrance to such portion of the Premises other than the
primary entrance to the Premises; (iii) the rent, if any, paid by such occupants
shall not be greater than the rent allocable on a pro rata basis to the portion
of the Premises occupied by such occupants, and (iv) such occupancy shall not be
a subterfuge by Tenant to avoid its obligations under this Lease or the
restrictions on Transfers pursuant to this Article 14. Tenant shall promptly
supply Landlord with any documents or information reasonably requested by
Landlord regarding any such individuals or entities. Any occupancy permitted
under this Section 14.9 shall not be deemed a Transfer under this Article 14.
Notwithstanding the foregoing, no such occupancy shall relieve Tenant from any
liability under this Lease.

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

15.1Surrender 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.

 

 

 

 

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15.2Removal of Tenant Property by Tenant.  Upon the expiration of the Lease
Term, or upon any earlier termination of this Lease, Tenant shall, subject to
the provisions of this Article 15, quit and surrender possession of the Premises
to Landlord in as good order and condition as when Tenant took possession,
reasonable wear and tear and repairs which are specifically made the
responsibility of Landlord hereunder excepted; provided that, notwithstanding
the foregoing, (i) Tenant shall not be required to restore any portion of the
Premises (except for any Specialty Alterations and to the extent that Tenant’s
removal of improvements or equipment cause damage to the Premises) or remove any
cabling in connection with such surrender of possession, and (ii) with respect
to the Initial Premises, Tenant’s obligation under this sentence shall be
limited to quitting and surrendering possession to Landlord in as good order and
condition as exists on the Lease Commencement Date.  Upon such expiration or
termination, Tenant shall, without expense to Landlord, remove or cause to be
removed from the Premises all debris and rubbish, and such items of furniture,
equipment, free-standing cabinet work, movable partitions and other articles of
personal property owned by Tenant or installed or placed by Tenant at its
expense in the Premises, and such similar articles of any other persons claiming
under Tenant, as Landlord may, in its sole discretion, require to be removed,
and Tenant shall repair at its own expense all damage to the Premises and
Building resulting from such removal.

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

15.4Condition of the Building and Premises Upon Surrender.  In addition to the
above requirements of this Article 15, upon the expiration of the Lease Term, or
upon any earlier termination of this Lease, Tenant shall, surrender the Premises
and Building such that the same reflect Tenant’s compliance with all Applicable
Laws and with all of Tenant’s obligations under this Lease, including those
relating to improvement, repair, maintenance, compliance with law, testing and
other related obligations of Tenant set forth in Article 7 of this Lease;
provided that such obligation shall not require the repair of any damage caused
by ordinary wear and tear, or damage by casualty or condemnation, or damage
which is Landlord’s responsibility under this Lease.  In the event that the
Building and Premises shall be surrendered in a condition which does not comply
with the terms of this Section 15.4, because Tenant failed to comply with its
obligations set forth in Lease, then following thirty (30) days’ notice to
Tenant, during which thirty (30) day period Tenant shall have the right to cure
such noncompliance, Landlord shall be entitled to expend all reasonable costs in
order to cause the same to comply with the required condition upon surrender and
Tenant shall, within thirty (30) days of receipt of Landlord’s written demand
therefor, reimburse Landlord for all such costs.

16.HOLDING OVER.  If Tenant holds over after the expiration of the Lease Term or
earlier termination thereof, with or without the express or implied consent of
Landlord, such tenancy shall be from month-to-month only, and shall not
constitute a renewal hereof or an extension for any further term.  Rent shall be
payable at a monthly rate equal to one hundred twenty-five percent (125%) of the
Base Rent applicable during the last rental period of the Lease Term under this
Lease (including without limitation any SMB Rent payable by Tenant), plus one
hundred percent (100%) of all Additional Rent;.  Such month-to-month 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 fails to surrender the Premises within ninety (90) days
following the later of (i) the date that Landlord notifies Tenant that Landlord
has leased all or a portion of the Premises to a third party (such notice
specifying with reasonable detail the damages that Landlord

 

 

 

 

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reasonably expects to incur in the event of a holdover), and (b) the termination
or expiration of this Lease, then, in addition to any other liabilities to
Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold
Landlord harmless from all loss, costs (including reasonable attorneys' fees)
and liability resulting from such failure, including, without limiting the
generality of the foregoing, any claims made by any succeeding tenant founded
upon such failure to surrender and any lost profits to Landlord resulting
therefrom.

17.ESTOPPEL CERTIFICATES; FINANCIAL STATEMENTS.  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 substantially in the form of Exhibit D, attached hereto (or
such other commercially reasonable form as may be required by any prospective
mortgagee or purchaser of the Project, or any portion thereof), indicating
therein any exceptions thereto that may exist at that time, and shall also
contain any other information reasonably requested by Landlord or Landlord's
mortgagee or prospective mortgagee.  Any such certificate may be relied upon by
any prospective mortgagee or purchaser of all or any portion of the
Project.  Tenant shall execute and deliver whatever other instruments may be
reasonably required for such purposes.  At any time during the Lease Term,
Landlord may require Tenant to provide Landlord with a current financial
statement and financial statements of the two (2) years prior to the current
financial statement year; provided that Tenant shall not be required to provide
any such statements more than once per calendar year other than in connection
with a financing of all or a portion of the Project or a transfer of all or a
portion of the Project ownership.  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, following Landlord's delivery to
Tenant of a notice pursuant to, and the expiration of the time period set forth
in, Section 19.1.4 of this Lease, below, shall constitute an acknowledgment by
Tenant that statements included in the estoppel certificate are true and
correct, without exception.  Notwithstanding the foregoing, in the event that
(i) stock in the entity which constitutes Tenant under this Lease (as opposed to
an entity that "controls" Tenant or is otherwise an "Affiliate" of Tenant, as
those terms are defined in Section 14.8 of this Lease) is publicly traded on a
national stock exchange, and (ii) Tenant has its own, separate and distinct 10K
and 10Q filing requirements (as opposed joint or cumulative filings with an
entity that controls Tenant or with entities which are otherwise Affiliates of
Tenant), then Tenant's obligation to provide Landlord with a copy of its most
recent current financial statement shall be deemed satisfied.

18.SUBORDINATION.  This Lease shall be subject and subordinate to all present
and future ground or underlying leases of the Building or Project and to the
lien of any mortgage, trust deed or other encumbrances now or hereafter in force
against the Building or Project or any part thereof, if any, and to all
renewals, extensions, modifications, consolidations and replacements thereof,
and to all advances made or hereafter to be made upon the security of such
mortgages or trust deeds, unless the holders of such mortgages, trust deeds or
other encumbrances, or the lessors under such ground lease or underlying leases,
require in writing that this Lease be superior thereto (collectively, the
"Superior Holders"); provided, however, that in consideration of and a condition
precedent to Tenant’s agreement to subordinate this Lease to any mortgage, trust
deed or other encumbrances shall be the receipt by Tenant of a subordination
non-disturbance and attornment agreement in a commercially reasonable form and
with terms and conditions consistent with similar agreements then being provided
to tenants of comparable space to the Premises in First Class Life Science
Projects, which requires such Superior Holder to accept this lease, and not to
disturb tenant’s possession, so long as Tenant is not in default beyond
applicable notice and cure periods (a "SNDAA").  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 (in a written document signed by such
lienholder or purchaser or ground lessor) to accept this Lease and not disturb
Tenant's occupancy, so long as Tenant is not in default beyond applicable notice
and cure periods.  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 leases.  Conversely, at Tenant's request, Landlord shall diligently
seek an SNDAA from its Superior Holders and, by execution of this Lease, Tenant
requests Landlord to do so with respect to any existing Superior Holders as of
the date of this Lease.  Tenant’s failure to timely execute, acknowledge and
deliver a SNDAA or other instrument requested by Landlord under this Article 18
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constitute a default of Tenant under this Lease unless Landlord delivers to
Tenant a second written notice pursuant to Section 19.1.4, below, indicating
that Tenant is in default for its failure to timely deliver the executed SNDAA,
and such default shall become an Event of Default if such Tenant-executed SNDAA
is not received by Landlord within ten (10) business days following Tenant’s
receipt of such second notice.  Tenant waives the provisions of any current or
future statute, rule or law which may give or purport to give Tenant any right
or election to terminate or otherwise adversely affect this Lease and the
obligations of the Tenant hereunder in the event of any foreclosure proceeding
or sale.

19.DEFAULTS; REMEDIES.

19.1Events of Default.  The occurrence of any of the following shall constitute
an "Event of Default" of this Lease by Tenant:

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

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

19.1.3Abandonment (as defined by applicable law) of the Premises by Tenant; or

19.1.4The failure by Tenant to observe or perform according to the provisions of
Sections 5.1 or 5.2 or Articles 14, 17 or 18 of this Lease where such failure
continues for more than ten (10) business days after notice from Landlord of
such failure; provided that if the nature of such default is such that the same
cannot reasonably be cured within ten (10) business days, 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.

19.1.5Intentionally omitted.

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

19.2Remedies 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.

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

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

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

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

 

 

 

 

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

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

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

19.2.2Landlord 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.

19.2.3Landlord 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.

19.3Subleases 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.

19.4Efforts 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.

19.5Landlord Default.

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

19.5.2Abatement of Rent.  In the event that Tenant is prevented from using, and
does not use, the Premises or any portion thereof, as a result of (i) any
repair, maintenance or alteration performed by Landlord, or which Landlord
failed to perform and required by this Lease, which substantially interferes
with Tenant's use of the

 

 

 

 

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Premises or a portion thereof, or (ii) any failure to provide services,
utilities or access to the Premises as required by this Lease, or (iii) any
unreasonable interference with Tenant’s use or occupancy of the Premises caused
by Landlord's activities at the Project, or (iv) the gross negligence or willful
misconduct of Landlord (any such set of circumstances as set forth in items
(i)-(iv), above, to be known as an "Abatement Event"), then Tenant shall give
Landlord notice of such Abatement Event, and if such Abatement Event continues
for three (3) consecutive business days after Landlord's receipt of any such
notice (the "Eligibility Period"), then the Base Rent and Tenant's Share of
Direct Expenses, shall be abated or reduced, as the case may be, upon expiration
of the Eligibility Period for such time that Tenant continues to be so prevented
from using, and does not use for the normal conduct of Tenant's business, the
Premises or a portion thereof, in the proportion that the rentable area of the
portion of the Premises that Tenant is prevented from using, and does not use,
bears to the total rentable area of the Premises; provided, however, in the
event that Tenant is prevented from using, and does not use, a portion of the
Premises for a period of time in excess of the Eligibility Period and the
remaining portion of the Premises is not sufficient to allow Tenant to
effectively conduct its business therein, and if Tenant does not conduct its
business from such remaining portion, then for such time after expiration of the
Eligibility Period during which Tenant is so prevented from effectively
conducting its business therein, the Base Rent and Tenant's Share of Direct
Expenses for the entire Premises shall be abated for such time as Tenant
continues to be so prevented from using, and does not use, the Premises.  If,
however, Tenant reoccupies any portion of the Premises during such period, the
Rent allocable to such reoccupied portion, based on the proportion that the
rentable area of such reoccupied portion of the Premises bears to the total
rentable area of the Premises, shall be payable by Tenant from the date Tenant
reoccupies such portion of the Premises.  To the extent an Abatement Event is
caused by an event covered by Articles 11 or 13 of this Lease, then Tenant's
right to abate rent shall be governed by the terms of such Article 11 or 13, as
applicable, and the Eligibility Period shall not be applicable thereto.  Such
right to abate Base Rent and Tenant's Share of Direct Expenses shall be Tenant's
sole and exclusive remedy for rent abatement at law or in equity for an
Abatement Event.  Except as provided in this Section 19.5.2, nothing contained
herein shall be interpreted to mean that Tenant is excused from paying Rent due
hereunder.

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

21.LETTER OF CREDIT

21.1Delivery of Letter of Credit.  Unless Tenant elects to deliver an amendment
to the Existing Letter of Credit (as hereinafter defined) satisfying the
requirements set forth in this Section 21.1 below, Tenant shall deliver to
Landlord concurrent with Tenant's execution of this Lease, as protection for the
full and faithful performance by Tenant of all of its obligations under this
Lease and for all losses and damages Landlord may suffer (or which Landlord
reasonably estimates that it may suffer) as a result of any breach or default by
Tenant under this Lease, an unconditional, clean, irrevocable negotiable standby
letter of credit (the "L-C") in the amount set forth in Section 8 of the Summary
(the "L-C Amount"), in the form attached hereto as Exhibit I, payable in the
City of San Diego, California, running in favor of Landlord, drawn on a bank
(the "Bank") reasonably approved by Landlord and which Bank must have a rating
from Standard and Poor's Corporation of A- or better (or any equivalent rating
thereto from any successor or substitute rating service selected by Lessor) and
a letter of credit issuer rating from Moody’s Investor Service of A3 or better
(or any equivalent rating thereto from any successor rating agency thereto) (the
"Credit Rating Threshold"), and otherwise conforming in all respects to the
requirements of this Article 21, including, without limitation, all of the
requirements of Section 21.2 below, all as set forth more particularly
hereinbelow.  Tenant shall pay all expenses, points and/or fees incurred by
Tenant in obtaining and maintaining the L/C.  In the event of an assignment by
Tenant of its interest in the Lease (and irrespective of whether Landlord's
consent is required for such assignment), the acceptance of any replacement or
substitute letter of credit by Landlord from the assignee shall be subject to
Landlord's prior written approval, in Landlord's reasonable discretion, and the
reasonable attorney's fees incurred by Landlord in connection with such
determination shall be payable by Tenant to Landlord within thirty (30) days of
billing.  Notwithstanding the foregoing, Landlord agrees that Landlord is
currently the beneficiary of a letter of credit securing the Tenant’s payment
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the Initial Lease in the amount of $3,100,000.00 (the "Existing Letter of
Credit"), and subject to Tenant’s delivery of an amendment to such Existing
Letter of Credit no later than September 15, 2017, in a form reasonably
acceptable to Landlord, which (a) reduces the amount available for payment to
Landlord pursuant to the Existing Letter Credit to the L-C Amount, and
(b) expressly states that funds in the L-C Amount are available for Landlord
draws under the Existing Letter of Credit upon the terms and conditions of
Landlord’s draw rights set forth in this Lease (the "Existing L-C Amendment"),
so long as such Existing Letter of Credit otherwise remains unmodified and in
full force and effect, the Existing Letter of Credit as amended by the Existing
L-C Amendment shall be deemed to be an L-C in satisfaction of the applicable
requirements of this Article 21.  In the event that Tenant elects to deliver an
L-C to Landlord in accordance with this Article 21, in lieu of the Existing L-C
Amendment as permitted under the preceding sentence, then promptly following
Landlord's receipt of such L-C, Landlord shall deliver to Tenant the original
draft of the Existing Letter of Credit, along with any and all proceeds thereof
that have not been applied to costs payable therefrom in accordance with the
Initial Lease.

21.2In General.  The L-C shall permit partial draws and multiple presentations
and drawings, provide that draws will be honored on receipt by Bank of the
original or a certified copy of the L-C accompanied by a written statement
signed by Landlord or its authorized agent certifying that Landlord is entitled
to draw on the L-C pursuant to the terms of this Lease in the amount being
requested, and be otherwise subject to the Uniform Customs and Practices for
Documentary Credits (1993-Rev), International Chamber of Commerce Publication
#500, or the International Standby Practices-ISP 98, International Chamber of
Commerce Publication #590.  Tenant further covenants and warrants as follows:

21.2.1Landlord Right to Transfer.  The L-C shall provide that Landlord, its
successors and assigns, may, at any time and without notice to Tenant and
without first obtaining Tenant's consent thereto, transfer (one or more times)
all or any portion of its interest in and to the L-C to another party, person or
entity, in connection with any assignment by Landlord of its rights and
interests in and to this Lease or to Landlord's lender.  In the event of a
transfer of Landlord's interest in the Building, Landlord shall transfer the
L-C, in whole or in part, to the transferee and thereupon Landlord shall,
without any further agreement between the parties, be released by Tenant from
all liability arising thereunder after the date of the transfer, and it is
agreed that the provisions hereof shall apply to every transfer or assignment of
the whole or any portion of said L-C to a new landlord.  In connection with any
such transfer of the L-C by Landlord, Tenant shall, at Tenant's sole cost and
expense, execute and submit to the Bank such applications, documents and
instruments as may be necessary to effectuate such transfer, and Tenant shall be
responsible for paying the Bank's transfer and processing fees in connection
therewith.

21.2.2No Assignment by Tenant.  Tenant shall neither assign nor encumber the L-C
or any part thereof.  Neither Landlord nor its successors or assigns will be
bound by any assignment, encumbrance, attempted assignment or attempted
encumbrance by Tenant in violation of this Section.

21.2.3Replenishment.  If, as a result of any drawing by Landlord on the L-C
pursuant to its rights set forth in Section 21.3 below, the amount of the L-C
shall be less than the L-C Amount, Tenant shall, within ten (10) business days
thereafter, provide Landlord with (i) an amendment to the L-C restoring such L-C
to the L-C Amount or (ii) additional L-Cs in an amount equal to the deficiency,
which additional L-Cs shall comply with all of the provisions of this
Article 21, and if Tenant fails to comply with the foregoing, notwithstanding
anything to the contrary contained in Section 19.1 above, the same shall
constitute an incurable default by Tenant under this Lease (without the need for
any additional notice and/or cure period).

21.2.4Renewal; Replacement.  If the L-C expires earlier than the date (the "LC
Expiration Date") that is ninety-five (95) days after the expiration of the
Lease Term, Tenant shall deliver a new L-C or certificate of renewal or
extension to Landlord at least thirty (30) days prior to the expiration of the
L-C then held by Landlord, without any action whatsoever on the part of
Landlord, which new L-C shall be irrevocable and automatically renewable through
the LC Expiration Date upon the same terms as the expiring L-C or such other
terms as may be acceptable to Landlord in its reasonable discretion.  In
furtherance of the foregoing, Landlord and Tenant agree that the L-C shall
contain a so-called "evergreen provision," whereby the L-C will automatically be
renewed unless at least thirty (30) days’ prior written notice of non-renewal is
provided by the issuer to Landlord; provided, however, that the final expiration
date identified in the L-C, beyond which the L-C shall not automatically renew,
shall not be earlier than the LC Expiration Date.

21.2.5Bank’s Financial Condition.  If, at any time during the Lease Term, the
Bank’s long term credit rating is reduced below the Credit Rating Threshold
(either, a "Bank Credit Threat"), then Landlord

 

 

 

 

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shall have the right to require that Tenant obtain from a different issuer a
substitute L-C that complies in all respects with the requirements of this
Article 21, and Tenant’s failure to obtain such substitute L-C within ten (10)
business days following Landlord’s written demand therefor (with no other notice
or cure or grace period being applicable thereto, notwithstanding anything in
this Lease to the contrary) shall entitle Landlord, or Landlord’s then managing
agent, to immediately draw upon the then existing L-C in whole or in part,
without notice to Tenant, as more specifically described in Section 21.3
below.  Tenant shall be responsible for the payment of any and all costs
incurred with the review of any replacement L-C (including without limitation
Landlord’s reasonable attorneys’ fees), which replacement is required pursuant
to this Section 21.2.5 or is otherwise requested by Tenant.

21.3Application of Letter of Credit.  Tenant hereby acknowledges and agrees that
Landlord is entering into this Lease in material reliance upon the ability of
Landlord to draw upon the L-C as protection for the full and faithful
performance by Tenant of all of its obligations under this Lease and for all
losses and damages Landlord may suffer (or which Landlord reasonably estimates
that it may suffer) as a result of any breach or default by Tenant under this
Lease.  To the extent of such actual and/or reasonably estimated losses and
damages, Landlord, or its then managing agent, shall have the right to draw down
the L-C during any period in which any one of the following is applicable:  (A)
such amount is past due to Landlord under the terms and conditions of this
Lease, beyond the "L-C Cure Period" (as defined below), or (B) Tenant has filed
a voluntary petition under the U. S. Bankruptcy Code or any state bankruptcy
code (collectively, "Bankruptcy Code"), or (C) an involuntary petition has been
filed against Tenant under the Bankruptcy Code, or (D) the Bank has notified
Landlord that the L-C will not be renewed or extended through the LC Expiration
Date, or (E) a Bank Credit Threat or Receivership (as such term is defined in
Section 21.6.1 below) has occurred and Tenant has failed to comply with the
requirements of either Section 21.2.5 above or 21.6 below, as applicable.  If
Tenant shall breach any provision of this Lease or otherwise be in default
hereunder, or if any of the foregoing events identified in Sections 21.3(B)
through (E) shall have occurred, Landlord may, but without obligation to do so,
and without notice to Tenant, draw upon the L-C, in part or in whole, and the
proceeds may be applied by Landlord (i) to cure any breach or default of Tenant
and/or to compensate Landlord for any and all damages of any kind or nature
sustained or which Landlord reasonably estimates that it will sustain resulting
from Tenant's breach or default, (ii) against any Rent payable by Tenant under
this Lease that is not paid when due and/or (iii) to pay for all losses and
damages that Landlord has suffered or that Landlord reasonably estimates that it
will suffer as a result of any breach or default by Tenant under this
Lease.  The use, application or retention of the L-C, or any portion thereof, by
Landlord shall not prevent Landlord from exercising any other right or remedy
provided by this Lease or by any applicable law, it being intended that Landlord
shall not first be required to proceed against the L-C, and shall not operate as
a limitation on any recovery to which Landlord may otherwise be
entitled.  Tenant agrees not to interfere in any way with payment to Landlord of
the proceeds of the L-C, either prior to or following a "draw" by Landlord of
any portion of the L-C, regardless of whether any dispute exists between Tenant
and Landlord as to Landlord's right to draw upon the L-C.  No condition or term
of this Lease shall be deemed to render the L-C conditional to justify the
issuer of the L-C in failing to honor a drawing upon such L-C in a timely
manner.  Tenant agrees and acknowledges that (i) the L-C constitutes a separate
and independent contract between Landlord and the Bank, (ii) subject to
Sections 21.5 and 21.6, Tenant has no property interest whatsoever in the L-C or
the proceeds thereof, and (iii) in the event Tenant becomes a debtor under any
chapter of the Bankruptcy Code, neither Tenant, any trustee, nor Tenant's
bankruptcy estate shall have any right to restrict or limit Landlord's claim
and/or rights to the L-C and/or the proceeds thereof by application of Section
502(b)(6) of the U. S. Bankruptcy Code or otherwise.  “L-C Cure Period” shall
mean any applicable notice and cure period expressly set forth in this Lease
except that there shall be no L-C Cure Period if Landlord is not permitted for
any legal reason from providing written notice of a default.

21.4Letter of Credit not a Security Deposit.  Subject to Sections 21.5 and 21.6,
Landlord and Tenant acknowledge and agree that in no event or circumstance shall
the L-C or any renewal thereof or any proceeds thereof be (i) deemed to be or
treated as a "security deposit" within the meaning of California Civil Code
Section 1950.7, (ii) subject to the terms of such Section 1950.7, or
(iii) intended to serve as a "security deposit" within the meaning of such
Section 1950.7.  Subject to Sections 21.5 and 21.6, the parties hereto
(A) recite that the L-C is not intended to serve as a security deposit and such
Section 1950.7 and any and all other laws, rules and regulations applicable to
security deposits in the commercial context ("Security Deposit Laws") shall have
no applicability or relevancy thereto and (B) waive any and all rights, duties
and obligations either party may now or, in the future, will have relating to or
arising from the Security Deposit Laws.

21.5Proceeds of Draw.  In the event Landlord draws more funds on the Letter of
Credit than can be properly applied to obligations then due or payable to
Landlord hereunder, the excess of the L-C shall be held by

 

 

 

 

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Landlord as security for Tenant’s obligations to Landlord under this Lease until
the Lease is terminated and all obligations under the Lease are satisfied and
applied by Landlord against any Rent payable by Tenant under this Lease that is
not paid when due and/or to pay for all losses and damages that Landlord has
suffered or that Landlord reasonably estimates that it will suffer as a result
of any breach or default by Tenant under this Lease.  Any unused proceeds need
not be segregated from Landlord's other assets.  Landlord agrees that the amount
of any proceeds of the L-C received by Landlord, and not (a) applied against any
Rent payable by Tenant under this Lease that was not paid when due or (b) used
to pay for any losses and/or damages suffered by Landlord (or reasonably
estimated by Landlord that it will suffer) as a result of any breach or default
by Tenant under this Lease (the "Unused L-C Proceeds"), shall be paid by
Landlord to Tenant (x) upon receipt by Landlord of a replacement L-C in the full
L-C Amount, which replacement L-C shall comply in all respects with the
requirements of this Article 21, or (y) within thirty (30) days after the LC
Expiration Date; provided, however, that if prior to the LC Expiration Date a
voluntary petition is filed by Tenant, or an involuntary petition is filed
against Tenant by any of Tenant's creditors, under the Bankruptcy Code, then
Landlord shall not be obligated to make such payment in the amount of the Unused
L-C Proceeds until either all preference issues relating to payments under this
Lease have been resolved in such bankruptcy or reorganization case or such
bankruptcy or reorganization case has been dismissed.

21.6Bank Placed Into Receivership.

21.6.1Bank Placed Into Receivership.  In the event the Bank is placed into
receivership or conservatorship (any such event, a "Receivership") by the
Federal Deposit Insurance Corporation or any successor or similar entity (the
"FDIC"), then, effective as of the date such Receivership occurs, the L-C shall
be deemed to not meet the requirements of this Article 21, and, within thirty
(30) days following Landlord's notice to Tenant of such Receivership (the "LC
Replacement Notice"), Tenant shall (i) replace the L-C with a substitute L-C
from a different issuer reasonably acceptable to Landlord and that complies in
all respects with the requirements of this Article 21 or (ii), in the event
Tenant demonstrates to Landlord that Tenant is reasonably unable to obtain a
substitute L-C from a different issuer reasonably acceptable to Landlord and
that complies in all respects with the requirements of this Article 21 within
the foregoing thirty (30) day period, deposit with Landlord cash in the L-C
Amount (the "Interim Cash Deposit"); provided, however, that, in the case of the
foregoing sub-clause (ii), Tenant shall have a continuing right (but not any
obligation) to replace any portion of the Interim Cash Deposit with a substitute
L-C from a different issuer reasonably acceptable to Landlord and that complies
in all respects with the requirements of this Article 21, and upon Landlord’s
receipt and acceptance of such replacement L-C, Landlord shall return to Tenant
the applicable portion of the Interim Cash Deposit, with no obligation on the
part of Landlord to pay any interest thereon.  If Tenant fails to comply in any
respect with the requirements of this Section 21.6.1, then, notwithstanding
anything in this Lease to the contrary, Landlord shall have the right to
(a) declare Tenant in default of this Lease for which there shall be no notice
or grace or cure periods being applicable thereto other than the aforesaid
thirty (30) day period, (b) if applicable, retain such Interim Cash Deposit
until such time as such default is cured by Tenant, which retention shall not
constitute a waiver of any right or remedy available to Landlord under the terms
of this Lease or at law, and (c) pursue any and all remedies available to it
under this Lease and at law, including, without limitation, if Tenant has failed
to provide the Interim Cash Deposit, treating any Receivership as a Bank Credit
Threat and exercising Landlord’s remedies under Section 21.2.5 above, to the
extent possible pursuant to the existing FDIC policy.  Tenant shall be
responsible for the payment of any and all costs incurred with the review of any
replacement L-C (including without limitation Landlord’s reasonable attorneys’
fees), which replacement is required pursuant to this Section or is otherwise
requested by Tenant.

21.6.2Interim Cash Deposit.  During any period that Landlord remains in
possession of the Interim Cash Deposit (any such period, a "Deposit Period"), it
is understood by the parties that such Interim Cash Deposit shall be held by
Landlord as security for the full and faithful performance of Tenant’s covenants
and obligations under this Lease.  The Interim Cash Deposit shall not constitute
an advance of any Rent, an advance payment of any other kind, nor a measure of
Landlord’s damages in case of Tenant’s default.  If, during any such Deposit
Period, Tenant defaults beyond applicable notice and cure periods 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, then Landlord may but shall not be required to, from time to
time, without notice to Tenant and without waiving any other remedy available to
Landlord, use the Interim Cash Deposit, or any portion of it, to the extent
necessary to cure or remedy such default or failure or to compensate Landlord
for all damages sustained by Landlord or which Landlord reasonably estimates
that it will sustain resulting from Tenant’s default or failure to comply fully
and timely with its obligations pursuant to this Lease.  Tenant shall within
thirty (30) days of receipt of Landlord’s written demand pay any amount so
applied in order to restore the Interim Cash Deposit to its

 

 

 

 

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original amount, and Tenant’s failure to immediately do so shall constitute a
default under this Lease.  In the event Landlord is in possession of the Interim
Cash Deposit at the expiration or earlier termination of this Lease, and Tenant
is in compliance with the covenants and obligations set forth in this Lease at
the time of such expiration or termination, then Landlord shall return to Tenant
the Interim Cash Deposit, less any amounts deducted by Landlord to reimburse
Landlord for any sums to which Landlord is entitled under the terms of this
Lease, within sixty (60) days following both such expiration or termination and
Tenant’s vacation and surrender of the Premises.  Landlord’s obligations with
respect to the Interim Cash Deposit are those of a debtor and not a
trustee.  Landlord shall not be required to maintain the Interim Cash Deposit
separate and apart from Landlord’s general or other funds, and Landlord may
commingle the Interim Cash Deposit with any of Landlord’s general or other
funds.  Tenant shall not at any time be entitled to interest on the Interim Cash
Deposit.  In the event of a transfer of Landlord's interest in the Building,
Landlord shall transfer the Interim Cash Deposit, in whole or in part, to the
transferee and thereupon Landlord shall, without any further agreement between
the parties, be released by Tenant from all liability therefor accruing after
the date of such transfer with respect to the portion of the Interim Cash
Deposit so transferred, and it is agreed that the provisions hereof shall apply
to every transfer or assignment of the whole or any portion of said Interim Cash
Deposit to a new landlord.  Tenant hereby waives the provisions of Section
1950.7 of the California Civil Code, or any successor statute.

22.ROOFTOP RIGHTS.  With respect to each Building occupied by Tenant, Tenant
may, in accordance with, and subject to (A) reasonable construction rules and
regulations promulgated by Landlord and provided to Tenant, (B) the Building
standards therefor which have been provided to Tenant, and (C) the terms and
conditions set forth in this Lease (including, without limitation, Article 8 and
this Article 22), Tenant may install, repair, maintain and use, at Tenant’s sole
cost and expense, without the payment of Rent (other than costs allowed to be
included in Direct Expenses pursuant to Article 4 of this Lease), one (1) or
more antenna or other telecommunications equipment and HVAC equipment on the
roof of each Building for the receiving and transmitting of signals or
broadcasts servicing the business conducted by Tenant from within the Premises
or providing conditioned air to the Premises (the "Rooftop Equipment").  Tenant
shall be solely responsible for any and all costs incurred or arising in
connection with the Rooftop Equipment, including but not limited to costs of
electricity and insurance related to the Rooftop Equipment, and Tenant shall
ensure that such Rooftop Equipment shall not interfere with the operation of (or
preclude the installation of) other equipment on the roof of a
Building.  Landlord makes no representations or warranties whatsoever with
respect to the fitness or suitability of the roof of the Building for the
installation, maintenance and operation of the Rooftop Equipment, including,
without limitation, with respect to the quality and clarity of any receptions
and transmissions to or from the Rooftop Equipment and the presence of any
interference with such signals whether emanating from the Building or
otherwise.  The physical appearance, size and location of the Rooftop Equipment
shall be subject to Landlord’s approval, which approval shall not be
unreasonably withheld, and Landlord may require Tenant to install screening
around such Rooftop Equipment, at Tenant’s sole cost and expense, if Tenant’s
Rooftop Equipment would otherwise be visible from outside the Project.  Tenant
shall service, maintain and repair such Rooftop Equipment, at Tenant’s sole cost
and expense.  In the event Tenant elects to exercise its right to install the
Rooftop Equipment, then Tenant shall give Landlord no less than thirty (30)
days' prior notice thereof.  Tenant shall reimburse to Landlord the actual costs
reasonably incurred by Landlord in approving such Rooftop Equipment, including
any third-party consultant fees.  Tenant's rights under this Article 22 shall
terminate and shall be of no further force or effect upon the expiration or
earlier termination of the Lease with respect to each Building.  Prior to the
expiration or earlier termination of this Lease, Tenant shall remove and restore
the affected portion of the rooftop, the Building and the Premises to the
condition the rooftop, the Building and the Premises would have been in had no
such Rooftop Equipment been installed (reasonable wear and tear and damage from
casualty that is Landlord's obligation to repair pursuant to Article 11
excepted).  Such Rooftop Equipment shall be installed pursuant to plans and
specifications approved by Landlord (specifically including, without limitation,
all mounting and waterproofing details), which approval shall not be
unreasonably withheld, conditioned or delayed.  Notwithstanding any such review
or approval by Landlord, Tenant shall remain solely liable for any damage
arising in connection with Tenant’s installation, use, maintenance and/or repair
of such Rooftop Equipment, including, without limitation, any damage to any
portion of the roof or roof membrane and any penetrations to the roof.  Landlord
and Tenant hereby acknowledge and agree that Landlord shall have no liability in
connection with Tenant's use, maintenance and/or repair of such Rooftop
Equipment.  The Rooftop Equipment shall, in all instances, comply with all
Applicable Laws.  Subject to Tenant’s rights under Section 29.34, Tenant shall
not be entitled to license its Rooftop Equipment to any third party other than a
Permitted Transferee, nor shall Tenant be permitted to receive any revenues,
fees or any other consideration for the use of the Rooftop Area and/or such
Rooftop Equipment by any third party, in excess of the sublease rents otherwise
payable

 

 

 

 

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in accordance with any subletting of all or a portion of the Premises.  Tenant’s
right to install such Rooftop Equipment shall be non-exclusive with Landlord,
and Tenant hereby expressly acknowledges Landlord’s continued right, at
Landlord's sole cost and expense (and not as an Operating Expense) (i) to itself
utilize any portion of the rooftop of a Building, and (ii) to re-sell, license
or lease any rooftop space to an unaffiliated third party; provided that from
and after the Lease Commencement Date, Landlord shall not permit any lessee,
licensee or other permitted user of rooftop space to interfere with Tenant’s
business operations at the Project, Tenant’s Rooftop Equipment, or any of the
Tenant’s rights under this Lease in connection with any such
activities.  Notwithstanding the foregoing, (a) Landlord, at Landlord’s sole
cost and expense, shall cause all rooftop equipment of other tenants of the
Project to be promptly removed upon the expiration or earlier termination of
such tenants’ leases, and (b) any existing Rooftop Equipment of Tenant affixed
to the Project as of the Lease Commencement Date shall not require Landlord’s
approval hereunder.

23.SIGNS.

23.1Exterior Signage.  Subject to Landlord's prior written approval, which shall
not be unreasonably withheld, conditioned or delayed, and provided all signs are
in keeping with the quality, design and style of First Class Life Sciences
Projects, Tenant, at its sole cost and expense, may install (i) identification
signage on all monument signs located at the Project to the extent of Tenant’s
Share of the Project, and (ii) signage on the exterior of all Project Buildings
occupied by Tenant, including Building-top signage (collectively, "Tenant’s
Signage"); provided, however, in no event shall Tenant's Signage include an
"Objectionable Name," as that term is defined in Section 23.3 of this
Lease.  All such signage shall be subject to Tenant's obtaining all required
governmental approvals and any required approvals under the CC&Rs.  All
permitted signs shall be maintained by Tenant at its expense in a first-class
and safe condition and appearance.  Upon the expiration or earlier termination
of this Lease, Tenant shall remove all of its signs at Tenant's sole cost and
expense.  The graphics, materials, color, design, lettering, lighting, size,
illumination, specifications and exact location of Tenant's Signage
(collectively, the "Sign Specifications") shall be subject to the prior written
approval of Landlord, which approval shall not be unreasonably withheld,
conditioned or delayed, and shall be consistent and compatible with the quality
and nature of First Class Life Sciences Projects.  Tenant hereby acknowledges
that, notwithstanding Landlord's approval of Tenant's Signage, Landlord has made
no representation or warranty to Tenant with respect to the probability of
obtaining all necessary governmental approvals and permits for Tenant's
Signage.  In the event Tenant does not receive the necessary governmental
approvals and permits for Tenant's Signage, Tenant's and Landlord's rights and
obligations under the remaining TCCs of this Lease shall be
unaffected.  Notwithstanding the foregoing, (a) Landlord agrees that any signage
of Tenant already located at the Project as of the Lease Commencement Date shall
not require Landlord’s approval hereunder, and (b) whenever Tenant (including
any Permitted Transferees and any subtenants under Original Tenant or a
Permitted Transferee) is the sole tenant of the Project, the rights of Tenant
and such transferees to install signage at the Project shall be exclusive, and
(c) whenever Tenant (including any Permitted Transferees and any subtenants
under Original Tenant or a Permitted Transferee) is the sole tenant of any
Building, the rights of Tenant and such transferees to install signage on such
Building (including any monument exclusively serving such Building) shall be
exclusive.  Landlord, at Landlord’s sole cost and expense, shall cause all
signage of other tenants of the Lusk 2 Building to be promptly removed at
Landlord's sole cost and expense, and not as SMB Costs or costs of Tenant
Improvements to Must-Take Space 1 or Must-Take Space 3, upon the expiration or
earlier termination of such tenants’ leases.  Notwithstanding the foregoing, all
of Tenant's existing signage at the Project as of the Lease Commencement Date is
hereby deemed to be approved by Landlord, and Tenant shall be permitted to
replace such signage with similar signage from time to time due to casualty or
ordinary wear and tear without Landlord's prior written approval.

23.2Interior Signage.  With respect to any signage to be located within the
Premises, (i) Tenant shall not be required to notify Landlord prior to
installing any such signage, and (ii) no approval of Landlord shall be required
in connection with any such signage; provided that if any such signage is
visible from areas outside of the Premises, Tenant shall be required to obtain
Landlord’s prior written approval, which shall not be unreasonably withheld,
conditioned, or delayed.

23.3Objectionable Name.  Tenant's Signage shall not include a name or logo which
relates to an entity which is of a character or reputation, or is associated
with a political faction or orientation, which is inconsistent with the quality
of First Class Life Sciences Projects, or which would otherwise be offensive to
a landlord of the Comparable Buildings in its commercially-reasonable discretion
(an "Objectionable Name").  The

 

 

 

 

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parties hereby agree that the following name, or any reasonable derivation
thereof, shall be deemed not to constitute an Objectionable Name:  "NuVasive,
Inc."

23.4Prohibited Signage and Other Items.  Any signs, notices, logos, pictures,
names or advertisements which are installed and that have not been separately
approved by Landlord (to the extent that such approval is required under this
Article 23) may be removed without notice by Landlord at the sole expense of
Tenant; provided that any signs of Tenant already affixed to the Project as of
the date of this Lease shall not require Landlord’s approval.  Any signs, window
coverings, or blinds (even if the same are located behind the Landlord-approved
window coverings for the Building) visible from the exterior of the Premises,
shall be subject to the prior approval of Landlord, in its reasonable
discretion.

23.5Multi-Tenant Buildings. If other tenants occupy space on any of the
Buildings in which a portion of the Premises is located, Tenant's identifying
suite entry signage shall be provided by Landlord, at Tenant's cost, and such
signage shall be comparable to that used by Landlord in the Building and shall
comply with Landlord's then-current Building standard signage program.

23.6Termination of Right to Tenant's Signage.  The rights relating to Tenant’s
Signage contained in Section 23.1 shall be personal to Original Tenant and its
Permitted Transferees, and Tenant's exclusive signage rights for each Building
of the Project may be maintained by such parties (and not any other assignee,
sublessee or other transferee of the Original Tenant's interest in this Lease)
to the extent (x) they are not in default under this Lease (beyond any
applicable notice and cure period) and (y) if they lease at least seventy-five
percent (75%) of such Building and occupy at least 50% of the occupied rentable
square footage of such Building; provided, however, that as long as the Original
Tenant or any of its Permitted Transferees occupies at least of sixty-five
percent (65%) of the occupied space in the Project and is maintaining its
headquarters operations at the Project, Original Tenant and such Permitted
Transferees shall retain exclusive signage rights on all of the Buildings of the
Project.

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 judicial decisions and any statute, constitution, ordinance, resolution,
regulation, rule, administrative order, codes, or other requirements of any
municipal, county, state, federal, or other governmental agency or authority
having jurisdiction over the parties to this Lease, the Premises, the Buildings
or the Project, in effect either as of the Lease Commencement Date or at any
time during the Lease Term, including, without limitation, any regulation,
order, or policy of any quasi-official entity or body (e.g., a board of fire
examiners or a public utility or special district); and any Underlying
Documents.  At its sole cost and expense, Tenant shall promptly comply with all
such governmental measures (collectively, "Applicable Laws").  Should any
standard or regulation now or hereafter be imposed on 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.  Except as
otherwise expressly provided in this Lease (including, without limitation,
Landlord’s obligations under the Tenant Work Letter, and Landlord’s obligation
to deliver the Project in the condition required by this Lease), to the extent
triggered by Alterations or uses of Tenant that are inconsistent with the
Permitted Use and inconsistent with First Class Life Sciences Projects, or are
otherwise required due to a specific Alteration constructed (or to be
constructed) by Tenant or by Tenant's specific use of the Premises (whether or
not consistent with First Class Life Sciences Projects), Tenant shall be
responsible, at its sole cost and expense, to make all alterations to the
Building and Premises as are required to comply with the governmental rules,
regulations, requirements or standards described in this Article 24.  The
judgment of any court of competent jurisdiction or the admission of Tenant in
any judicial action, regardless of whether Landlord is a party thereto, that
Tenant has violated any of said governmental measures, shall be conclusive of
that fact as between Landlord and Tenant.  For purposes of Section 1938 of the
California Civil Code, Landlord hereby discloses to Tenant, and Tenant hereby
acknowledges, that the Project, Building and Premises have not undergone
inspection by a Certified Access Specialist (CASp).  As required by Section
1938(e) of the California Civil Code, Landlord hereby states as follows:  "A
Certified Access Specialist (CASp) can inspect the subject premises and
determine whether the subject premises comply with all of the applicable
construction-related accessibility standards under state law.  Although state
law does not require a CASp inspection of the subject premises, the commercial
property owner or lessor may not prohibit the lessee or tenant from obtaining a
CASp inspection of the subject premises for the occupancy or potential occupancy
of the lessee or tenant, if requested by the lessee or tenant.  The parties
shall mutually agree on the arrangements for the time and manner of the CASp
inspection, the payment of the fee for the CASp inspection, and

 

 

 

 

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the cost of making any repairs necessary to correct violations of
construction-related accessibility standards within the premises."  In
furtherance of the foregoing, Landlord and Tenant hereby agree as follows:  (a)
any CASp inspection requested by Tenant shall be conducted, at Tenant's sole
cost and expense, by a CASp approved in advance by Landlord; and (b) pursuant to
Article 24 below, Tenant, at its cost, is responsible for making any repairs
within the Premises to correct violations of construction-related accessibility
standards; and, if anything done by or for Tenant in its use or occupancy of the
Premises shall require repairs to the Building (outside the Premises) to correct
violations of construction-related accessibility standards, then Tenant shall,
at Landlord's option, either perform such repairs at Tenant's sole cost and
expense or reimburse Landlord upon demand, as Additional Rent, for the cost to
Landlord of performing such repairs.  Notwithstanding the foregoing, to the
extent required in order for Tenant to receive a certificate of occupancy or its
legal equivalent, Landlord shall be responsible for correcting all violations of
accessibility standards existing in the Must-Take Space 1, Must-Take Space 2 and
Must-Take Space 3 prior to their incorporation into the Premises in accordance
with the terms and conditions of this Lease.

25.CHARGES.  If any installment of Rent or any other sum due from Tenant shall
not be received by Landlord or Landlord's designee within five (5) business days
after Tenant's receipt of written notice from Landlord that said amount is due,
then Tenant shall pay to Landlord a late charge equal to three percent (3%) of
the overdue amount.  The late charge shall be deemed Additional Rent and the
right to require it shall be in addition to all of Landlord's other rights and
remedies hereunder or at law and shall not be construed as liquidated damages or
as limiting Landlord's remedies in any manner.  In addition to the late charge
described above, any Rent or other amounts owing hereunder which are not paid
within ten (10) days after the date they are due shall bear interest from the
date when due until paid at a rate per annum equal to twelve percent (12%) (the
"Default Rate").  Notwithstanding the foregoing, Tenant shall have no obligation
to pay any late charge or interest in connection with Tenant’s first (1st) late
payment in any twelve (12) month period.

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

26.1Landlord'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.

26.2Tenant's Reimbursement.  Except as may be specifically provided to the
contrary in this Lease, Tenant shall pay to Landlord, upon delivery by Landlord
to Tenant of statements therefor:  (i) sums equal to expenditures reasonably
made and obligations incurred by Landlord in connection with the remedying by
Landlord of Tenant's defaults pursuant to the provisions of Section 26.1; and
(ii) subject to Section 29.21, sums equal to all expenditures reasonably made
and obligations incurred by Landlord in collecting or attempting to collect the
Rent or in enforcing or attempting to enforce any rights of Landlord under this
Lease or pursuant to law, including, without limitation, all reasonable legal
fees and other amounts so expended.  Tenant's obligations under this
Section 26.2 shall survive the expiration or sooner termination of the Lease
Term.

27.ENTRY BY LANDLORD.  Landlord reserves the right, at all reasonable times and
upon reasonable notice to Tenant at least twenty-four (24) hours prior to entry
(except in the case of an emergency) and subject to Tenant’s reasonable safety
and security requirements (except in the case of an emergency), to enter the
Premises to (i) inspect them; (ii) show the Premises to prospective purchasers
(after complying with Landlord’s obligations relating to Tenant’s Purchase ROFO
as set forth in Section 1.6), or to current or prospective mortgagees, ground or
underlying lessors or insurers or, during the last twelve (12) months of the
Lease Term, to prospective tenants; (iii) post notices of nonresponsibility (to
the extent applicable pursuant to then applicable law); or (iv) satisfy
Landlord’s maintenance and repair obligations under this Lease.  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.  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.

 

 

 

 

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28.TENANT PARKING.  Tenant shall have the right to use, at no additional charge
(except to the extent of Tenant's Share of Direct Expenses with respect to the
parking facilities) the amount of parking spaces set forth in Section 9 of the
Summary, in the on-site parking facility (or facilities) which serve the
Project.  Landlord shall require that its contractors and consultants engaged in
the construction of the Landlord's Lusk 3 Work limit the parking of their
vehicles to the Construction Area, and shall act reasonably to prohibit their
use of any other parking facilities of the Project.  Notwithstanding the amounts
set forth in Section 9 of the Summary, at any time when Tenant is the sole
tenant at the Project, Tenant shall be entitled to use all spaces available for
parking use at the Project.  After the Must-Take 2 Delivery Date, Landlord shall
have no right to relocate any of Tenant’s parking spaces or reduce the number of
spaces available for use at the Project, except during periods of maintenance
and repairs.  Tenant shall abide by all reasonable rules and regulations which
are prescribed from time to time for the orderly operation and use of the
parking facility where the parking passes are located (including any sticker or
other identification system established by Landlord and the prohibition of
vehicle repair and maintenance activities in the parking facilities), and shall
cooperate in seeing that Tenant's employees and visitors also comply with such
rules and regulations.  Tenant's use of the Project parking facility shall be at
Tenant's sole risk and Tenant acknowledges and agrees that Landlord shall have
no liability whatsoever for damage to the vehicles of Tenant, its employees
and/or visitors, or for other personal injury or property damage or theft
relating to or connected with the parking rights granted herein or any of
Tenant's, its employees' and/or visitors' use of the parking facilities.  Prior
to the Must-Take 2 Delivery Date, Tenant may designate reserved parking spaces
at locations within the parking area mutually acceptable to Landlord and Tenant
for up to 10% of Tenant's parking spaces (in which case Landlord shall cause the
spaces to be labeled as reserved, at Tenant's sole cost); provided that Landlord
shall not unreasonably withhold, condition or delay its approval of the reserved
parking spaces so designated by Tenant, and such reserved parking spaces may be
relocated by Tenant (at Tenant's cost) within the parking areas of the Project,
subject to Landlord prior approval, which shall not be unreasonably withheld,
conditioned or delayed.  Beginning on the Must-Take 2 Delivery Date and with
respect to any period thereafter during which Tenant is the sole tenant at the
Project, Tenant may designate and label any number of parking spaces as reserved
parking spaces in locations of Tenant’s choosing, in Tenant’s sole and absolute
discretion, and no approval of Landlord shall be required in connection with any
such designation.

29.MISCELLANEOUS PROVISIONS.

29.1Terms; 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.

29.2Binding 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.

29.3No 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.

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

 

 

 

 

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29.5Transfer of Landlord's Interest.  Tenant acknowledges that, subject to
Landlord’s obligations relating to the Purchase ROFO set forth in Section 1.7,
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 accruing after the date of such transfer and Tenant agrees to
look solely to such transferee for the performance of Landlord's obligations
hereunder accruing after the date of transfer and such transferee shall
expressly agree (in a writing signed by such transferee) to fully assume and be
liable for all obligations of this Lease to be performed by Landlord, including
the return of any Unused L-C Proceeds or Interim Cash Deposit, and Tenant shall
attorn to such transferee.

29.6Memorandum of Lease.  Upon the request of either party, the other party
shall execute and acknowledge and deliver to the requesting party a Memorandum
of Lease in form and substance reasonably satisfactory to the other party.  The
requesting party shall have the right to record the Memorandum of Lease in the
Official Records of San Diego County.  If such Memorandum of Lease is recorded,
Tenant agrees to execute and acknowledge a quitclaim deed in favor of Landlord
at the expiration or earlier termination of this Lease.

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

29.8Relationship 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 other than that of landlord and tenant.

29.9Application of Payments.  Landlord shall apply payments received from Tenant
pursuant to this Lease in such order and amounts so as to satisfy Tenant’s
obligations in the same order that such obligations became due.

29.10Time 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.

29.11Partial 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.

29.12No Warranty.  In executing and delivering this Lease, except as expressly
provided in 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.

29.13Landlord 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 interest of
Landlord in the Project, plus any sales or insurance proceeds received by
Landlord or the Landlord Parties in connection with the Project, Building or
Premises, plus any additional insurance proceeds that would have been received
by Landlord if Landlord had maintained the insurance coverage required by this
Lease, plus any proceeds of Landlord’s claims against any other tenant or person
with respect to the Project, plus all rights of action of Landlord with respect
to the Project, the unpaid amount of the Tenant Improvement Allowance, and,
prior to the Substantial Completion of the Landlord’s Work relating to the Lusk
3 Building and the Must-Take Space 2, the Estimated Development Costs (as set
forth in Exhibit G to this Lease).  Neither Landlord, nor any of the Landlord
Parties shall have any personal liability in excess of the foregoing, and Tenant
hereby expressly waives and releases such personal liability on behalf of itself
and all persons claiming by, through or under Tenant.  The limitations of
liability contained in this Section 29.13 shall inure to the benefit of
Landlord's and the Landlord Parties' present and future partners, beneficiaries,
officers,

 

 

 

 

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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, the foregoing limitations
on Landlord's liability shall not be deemed a waiver by Tenant of its right to
specifically enforce any of the Landlord's obligations under this Lease,
including, but not limited to, Landlord's completion of the Landlord's Lusk 3
Work and Tenant's ROFO Purchase Rights.  Notwithstanding any contrary provision
herein, nothing in this Lease shall impose any obligations on Tenant or Landlord
to be responsible or liable for, and each hereby releases the other from all
liability for, consequential damages other than those consequential damages
incurred by Landlord in connection with (i) a holdover of the Premises by Tenant
after the expiration or earlier termination of this Lease as set forth in
Article 16, above, or (ii) Tenant's exercise of its rights under Section 7.5 of
this Lease, above.

29.14Entire 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.

29.15Right to Lease.  Landlord reserves the absolute right to effect such other
tenancies in the Project as Landlord in the exercise of its sole business
judgment shall determine to best promote the interests of the Building or
Project; provided that Landlord shall have no right to effect any other
tenancies in the Project during any period in which Tenant is leasing the
entirety of each of the Lusk 1, Lusk 2, and Lusk 3 Buildings.  Tenant does not
rely on the fact, nor does Landlord represent, that any specific tenant or type
or number of tenants shall, during the Lease Term, occupy any space in the
Building or Project.

29.16Force Majeure.  Any prevention, delay or stoppage due to strikes, lockouts,
labor disputes, acts of God, acts of war, terrorist acts, inability to obtain
services, labor, or materials or reasonable substitutes therefor, governmental
actions, civil commotions, fire or other casualty, and other causes beyond the
reasonable control of the party obligated to perform, except with respect to the
obligations imposed with regard to Rent and other charges to be paid by Tenant
pursuant to this Lease (collectively, a "Force Majeure"), notwithstanding
anything to the contrary contained in this Lease, shall excuse the performance
of such party for a period equal to any such prevention, delay or stoppage and,
therefore, if this Lease specifies a time period for performance of an
obligation of either party, that time period shall be extended by the period of
any delay in such party's performance caused by a Force Majeure.  Each party
shall use its commercially reasonable and diligent efforts to notify the other
party, in writing, of any event claimed by such party as a Force Majeure Delay,
which notice shall state in reasonable detail the nature of such force majeure
event and the reason(s) that such event constitutes a Force Majeure Delay.  

29.17Waiver 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.

 

 

 

 

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29.18Notices.  All notices, demands, statements, designations, approvals  or
other communications (collectively, "Notices") given or required to be given by
either party to the other hereunder or by law shall be in writing, shall be
(A) sent by United States certified or registered mail, postage prepaid, return
receipt requested ("Mail"), (B) transmitted by telecopy, if such telecopy is
promptly followed by a Notice sent by Mail, (C) delivered by a nationally
recognized overnight courier, or (D) delivered personally.  Any Notice shall be
sent, transmitted, or delivered, as the case may be, to Tenant at the
appropriate address set forth in Section 10 of the Summary, or to such other
place as Tenant may from time to time designate in a Notice to Landlord, or to
Landlord at the addresses set forth below, or to such other places as Landlord
may from time to time designate in a Notice to Tenant.  Any Notice will be
deemed given (i) three (3) days after the date it is posted if sent by Mail,
(ii) the date the telecopy is transmitted, (iii) the date the overnight courier
delivery is made, or (iv) the date personal delivery is made.  As of the date of
this Lease, any Notices to Landlord must be sent, transmitted, or delivered, as
the case may be, to the following addresses:

HCPI/SORRENTO, LLC
c/o HCP Life Science Estates, Inc.
an HCP Company (NYSE:  HCP)
420 Stevens Avenue, Suite 170
Solana Beach, CA 92075
Attn:  Mr. Michael Dorris

with a copy to:

HCPI/SORRENTO, LLC
c/o HCP, Inc.
1920 Main Street, Suite 1200
Irvine, CA  92614
Attn:  Legal Department

and

Allen Matkins Leck Gamble Mallory & Natsis LLP
1901 Avenue of the Stars, Suite 1800
Los Angeles, California 90067

Attention:  Anton N. Natsis, Esq.

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

29.20Authority.  If a party to this Lease is a corporation, trust or
partnership, each individual executing this Lease on behalf of such party hereby
represents and warrants that such party is a duly formed and existing entity
qualified to do business in the State of California and that such party has full
right and authority to execute and deliver this Lease and that each person
signing on behalf of such party is authorized to do so.

29.21Attorneys' 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 relating to or
arising out of (a) the suit (whether or not the suit proceeds to judgment), and
(b) any post-judgment or post-award proceeding including, without limitation,
one to enforce or collect any judgment or award resulting from the suit, shall
be paid by the other party and shall be enforceable whether or not the action is
prosecuted to judgment.

29.22Governing Law; WAIVER OF TRIAL BY JURY.  This Lease shall be construed and
enforced in accordance with the laws of the State of California, irrespective of
California's choice-of-law principles. All actions and proceedings arising in
connection with this Lease must be tried and litigated exclusively in the State
and Federal courts located in the County of San Diego, State of California,
which courts have personal jurisdiction and venue over each of the parties to
this Lease for the purpose of adjudicating all matters arising out of or related
to this Lease.  IN ANY ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND
TENANT HEREBY

 

 

 

 

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CONSENT TO (I) THE JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF
CALIFORNIA, (II) SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW,
AND (III) IN THE INTEREST OF SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO
AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR
IN CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S
USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY
EMERGENCY OR STATUTORY REMEDY.

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

29.24Brokers.  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 their respective real estate brokers
or agents specified in Section 12 and Section 13 of the Summary (the "Brokers"),
and that they know of no other real estate broker or agent who is entitled to a
commission in connection with this Lease.  Each party agrees to indemnify and
defend the other party against and hold the other party harmless from any and
all claims, demands, losses, liabilities, lawsuits, judgments, costs and
expenses (including without limitation reasonable attorneys' fees) with respect
to any leasing commission or equivalent compensation alleged to be owing on
account of any dealings with any real estate broker or agent, other than the
Brokers, occurring by, through, or under the indemnifying party.  The terms of
this Section 29.24 shall survive the expiration or earlier termination of the
Lease Term.

29.25Independent 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, except as expressly provided in this Lease to the contrary, 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.

29.26Project or Building Name, Address and Signage.  Subject to Article 23,
Landlord shall have the right 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, which shall not be unreasonably withheld,
conditioned, or delayed.

29.27Counterparts.  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.

29.28Confidentiality.  Landlord and Tenant acknowledge that the content of this
Lease and any related documents are confidential information.  Landlord and
Tenant shall keep such confidential information strictly confidential and shall
not disclose such confidential information to any person or entity other than
Landlord's and Tenant's respective financial, legal, space planning consultants,
real estate brokers, prospective transferees, and investors.  Notwithstanding
the foregoing, Landlord or Tenant may disclose the terms of this Lease and any
of the other matters described in this Section as follows without violating the
confidentiality provision contained in this  Section: (i) such disclosures to
existing or prospective lenders, purchasers, title companies, appraisers, and
other third persons as may reasonably be necessary in order to conduct its
business relating to the Project in a commercially reasonable manner;
(ii) privileged communications including communications with counsel,
accountants, and advisors; (iii) such disclosures as may be necessary or
required by any governmental or regulatory authorities; (iv) such disclosures as
may be required by law or by subpoena or any other similar court order or
discovery request in any civil or criminal trial; (v) such disclosures as may be
reasonably required to enforce the terms of this Lease or any rights and
remedies under this Lease; and (vi) to the extent that disclosure is mandated by
applicable law, the Securities Exchange Commission or the rules of any stock
exchange upon which Landlord's or Tenant's (or Landlord or Tenant's parent's)
shares are from time to time traded.

 

 

 

 

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29.29Development of the Project.

29.29.1Construction of Property and Other Improvements.  Tenant acknowledges
that Landlord is obligated under this Lease to construct the Lusk 3 Building and
Must-Take Space 2 during Tenant's occupancy of the Premises, and that such
construction may result in levels of noise, dust, obstruction of access, etc.
which are in excess of that present in a fully constructed project.  Subject to
Section 19.5.2 and except to the extent that Landlord’s gross negligence or
willful misconduct interferes with Tenant’s use or occupancy of the Premises,
Tenant hereby waives any and all rent offsets or claims of constructive eviction
which may arise in connection with such construction; provided that Landlord
shall use commercially reasonable efforts to minimize such interference in
connection with such construction.

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

29.31Transportation Management.  Landlord covenants that, to Landlord's actual
knowledge as of the date of this Lease, no transportation management program
requirements that are applicable to the Project as of the Lease Commencement
Date shall arise out of Landlord’s construction of the Lusk 3 Building.  Tenant
shall fully comply with all present or future government-mandated programs
intended to manage parking, transportation or traffic in and around the Project
and/or the Building, and in connection therewith, Tenant shall take responsible
action for the transportation planning and management of all employees located
at the Premises by working directly with Landlord, any governmental
transportation management organization or any other transportation-related
committees or entities.  Such programs may include, without limitation:
(i) restrictions on the number of peak-hour vehicle trips generated by Tenant;
(ii) increased vehicle occupancy; (iii) implementation of an in-house
ridesharing program and an employee transportation coordinator; (iv) working
with employees and any Project, Building or area-wide ridesharing program
manager; (v) instituting employer-sponsored incentives (financial or in-kind) to
encourage employees to rideshare; and (vi) utilizing flexible work shifts for
employees.

29.32Communications And Computer Line.  Tenant may install, maintain, replace,
remove or use any communications or computer wires and cables serving the
Premises (collectively, the "Lines"), provided that Tenant shall obtain
Landlord's prior written consent (which shall not be unreasonably withheld,
conditioned, or delayed), use an experienced and qualified contractor reasonably
approved in writing by Landlord, and comply with all of the other provisions of
Articles 7 and 8 of this Lease.  Tenant shall pay all costs in connection
therewith.  Tenant shall not be required to remove any Lines located in or
serving the Premises prior to the expiration or earlier termination of this
Lease.

29.33Fixture Financing.  Tenant may encumber or lease its trade fixtures,
furniture and equipment (including its Rooftop Equipment) to secure financing of
such items (including with lines of credit and other financing mechanisms).  In
such event, upon request, Landlord agrees to execute an agreement with the
applicable lessor(s) and/or lender(s) in a form reasonably satisfactory to
Landlord and such lessor(s) and/or lender(s) which permits such secured parties
to remove the trade fixtures, equipment and furniture prior to the expiration of
the term of this Lease; provided, however, that in any event, such lessor or
lender shall repair any damage occasioned by such removal and such agreement
must be in a form and substance typically accepted by landlords of the
Comparable Buildings.

29.34Back-Up Generator.  Tenant shall have the non-exclusive right to the usage
of the existing emergency electrical backup generator of the Project throughout
the Lease Term (provided such right shall be exclusive during at any time that
Tenant is leasing the entire Project).  Such backup generator shall, subject to
compliance with all laws, be used by Tenant only during (i) testing, and
(ii) any period of electrical power outage in the Project.  Tenant shall be
entitled to operate the generator without notice to Landlord without the
approval of Landlord.  Tenant shall use commercially reasonable efforts to
ensure that its use of the backup generator does not result in any Hazardous
Materials being introduced to the Project (other than lubricants and fuel to the
extent required for the operation of such generator); provided that such
obligation shall not reduce Landlord’s ongoing obligation to maintain, repair,
and replace the generator as part of the Project’s life safety system under
Section 7.2.  

 

 

 

 

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In the event that Tenant reasonably determines that the existing generator
capacity is insufficient, Landlord shall cooperate with Tenant's reasonable
efforts to establish a back-up power solution reasonably acceptable to Tenant.

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

LANDLORD:

 

HCPI/SORRENTO, LLC,
a Delaware limited liability company

By: /s/ Jonathan Bergschneider

Jonathan Bergschneider_____

Print Name

Its:  Senior Managing Director__

 

TENANT:

 

NUVASIVE, INC.,
a Delaware corporation

By:  /s/ Gregory T. Lucier__

Gregory T. Lucier________

Print Name

Its:  Chief Executive Officer

By:  Gregory T. Lucier____

________________

Print Name

 

 

 

 

 

 

 

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EXHIBIT A

SORRENTO SUMMIT

OUTLINE OF PREMISES

[g2017082904212015219282.jpg]

 

 

 

EXHIBIT A

 

 

 

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EXHIBIT A-1

SORRENTO SUMMIT

PROJECT SITE PLAN

[g2017082904212017519283.jpg]

 

 

 

EXHIBIT A-1

 

 

 

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EXHIBIT A-2

MUST-TAKE SPACE 1

[g2017082904212019719284.jpg]

 

 

 

EXHIBIT A-2

 

 

 

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EXHIBIT A-3

MUST-TAKE SPACE 2

[g2017082904212022119285.jpg]

 

 

 

EXHIBIT A-3

 

 

 

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EXHIBIT A-4

MUST-TAKE SPACE 3

[g2017082904212024319286.jpg]

 

 

 

EXHIBIT A-4

 

 

 

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EXHIBIT B-1

SORRENTO SUMMIT

EXISTING PREMISES TENANT WORK LETTER

This Exhibit B-1 is applicable to the construction of those Tenant Improvements
(as hereinafter defined) to be constructed by Tenant in the Initial Premises.  
In the event of any inconsistency between the terms of this Exhibit B-1 (the
"Tenant Work Letter") and the terms of the Lease or any of the other exhibits
attached thereto and incorporated therein, the terms of this Tenant Work Letter
shall control.  This Tenant Work Letter is essentially organized chronologically
and addresses the issues of the construction of the Tenant Improvements, in
sequence, as such issues will arise during the actual construction of the Tenant
Improvements.  All references in this Tenant Work Letter to Articles or
Sections of "this Lease" shall mean the relevant portions of Articles 1 through
29 of the Office Lease to which this Tenant Work Letter is attached as
Exhibit B-1, and all references in this Tenant Work Letter to Sections of "this
Tenant Work Letter" shall mean the relevant portions of Sections 1 through 7 of
this Exhibit B-1.  All defined terms used herein shall have the meanings set
forth in the Lease, unless otherwise defined in this Tenant Work Letter,
including, but not limited to, references in this Exhibit B-1 to "Premises" to
mean the Initial Premises (as defined in the Lease); and all references in this
Exhibit B-1 to "Project Site" to mean that portion of the Initial Premises that
are affected by the Existing Premises Work (as hereinafter defined).  

ARTICLE 1

REPRESENTATIVES

Landlord designates Project Management Advisors ("PMA") as "Landlord's
Representative," and Tenant designates James Page as "Tenant's Representative,"
for the Tenant Improvements of this Tenant Work Letter; provided that Landlord
and Tenant may change or replace their respective designated representative at
any time by delivering written notice reasonably in advance of such change to
the other party.  Landlord's Representative and Tenant’s Representative shall
each perform certain services for and on behalf of Landlord and Tenant,
respectively, during the design and construction phases of the Tenant
Improvements and shall receive copies of all notices to which reference is made
in this Tenant Work Letter.  Landlord’s Representative shall have full authority
to act on behalf of, make decisions on behalf of and otherwise bind the Landlord
in connection with the Tenant Improvements.  Tenant’s Representative shall have
full authority to act on behalf of, make decisions on behalf of and otherwise
bind the Tenant in connection with the Tenant Improvements.

ARTICLE 2

TENANT'S WORK

Tenant hereby acknowledges that Tenant is currently in possession of the Initial
Premises and, without limiting any of the Landlord's obligations relating to the
maintenance and repair of the Premises under this Lease, Tenant accepts the
Initial Premises in their current "as-is" condition as of the date of this
Lease.  Notwithstanding the foregoing, Tenant shall have the right, at Tenant's
sole cost and expense (subject to Landlord's contribution  of such portion of
the Tenant Improvement Allowance that may be designated by Tenant for inclusion
in the Existing Premises Allowance, from time to time, in accordance with
Section 3.1 of this Tenant Work Letter), to construct certain alterations and
improvements to the Premises as more particularly described from time to time in
the Approved Working Drawings (the “Tenant Improvements”), as such Approved
Working Drawings are to be developed by Tenant in accordance with this Section 4
of this Tenant Work Letter (with all of the work of construction of the Tenant
Improvements, and all related demolition, mitigation of noise, fumes and dust in
occupied portions of the Premises and other incidental work to be performed by
or for Tenant pursuant to this Tenant Work Letter, sometimes collectively
referred to herein as the "Existing Premises Work"); provided, however, that the
Existing Premises Work excludes any and all alterations and improvements to the
exterior of the Buildings included in the Basis of Design of the Site
Modernization/Beautification Work (as such terms are defined in Exhibit B-4 to
this Lease), all of which are to be performed by Landlord in accordance with the
Site Modernization/Beautification Work Letter attached as Exhibit B-4 to this
Lease.  

 

EXHIBIT B-1

 

.

 

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ARTICLE 3

COST OF TENANT IMPROVEMENTS

3.1Tenant Improvement Allowance.  Tenant may designate such portion of the funds
to be provided by Landlord as the Tenant Improvement Allowance for the Initial
Premises, Must-Take Space 1 and Must-Take Space 3 in accordance with terms and
conditions set forth in Section 5 of the Summary to reimburse Tenant for the
Tenant Improvement Allowance Items (as defined in Section 3.2.1 below) from time
to time in accordance with the terms and conditions of this Tenant Work Letter,
but only to the extent that the Tenant Improvement Allowance is not utilized by
Tenant for the cost of Must Take 1 Work, Must Take 3 Work or any of the Site
Modernization/Beautification Work, and is payment is requested in accordance
with the terms and conditions of this Tenant Work Letter prior to the TIA
Expiration Date.  In the event that the Tenant Improvement Allowance is not
fully utilized by Tenant on or before December 31, 2020 (the "TIA Expiration
Date"), then such unused amounts shall revert to Landlord, and Tenant shall have
no further rights with respect thereto.  At any time prior to the TIA Expiration
Date, Tenant shall have the option, by delivery of written notice to Landlord
(each a "TIA Allocation Notice"), to allocate any or all of the Tenant
Improvement Allowance (or to modify any prior allocation thereof) that has not
been allocated by Tenant to the cost of the Must Take 1 Work, Must Take 3 Work
or any of the Site Modernization/Beautification Work in accordance with Exhibits
B-2 and B-4 to this Lease (or that may have been so allocated and was not
utilized by Tenant for the cost of such work), to pay for the Tenant's cost of
the Tenant Improvement Allowance Items pursuant to this Tenant Work Letter.  In
no event, however, shall such allocation of the Tenant Improvement Allowance to
Tenant Improvement Allowance Items pursuant to this Tenant Work Letter result in
the aggregate amount payable by Landlord pursuant to this Lease to exceed the
total amount of the Tenant Improvement Allowance payable by Landlord pursuant to
Section 5 of the Summary.  All Tenant Improvements Allowance Items actually paid
for (or reimbursed) by Landlord with proceeds of the Tenant Improvement
Allowance, Including without limitation the cost of Tenant’s furniture, trade
fixtures, equipment, and other items of personal property included in the "FF&E
Costs" (as defined in Section 3.2 below), shall be deemed Landlord's property
under the terms of this Lease; provided that Tenant's removal and restoration
obligations with respect to the Tenant Improvements shall be governed by the
terms and conditions of Section 8.5 of the Lease.  Tenant’s furniture, trade
fixtures, equipment, and other items personal property paid for (or reimbursed)
by Landlord as FF&E Costs (the "Tenant's FF&E") shall be deemed Landlord's
property during the Lease Term.

3.2Disbursement of the Tenant Improvement Allowance.

3.2.1Tenant Improvement Allowance Items.  Except as otherwise set forth in this
Tenant Work Letter, the Tenant Improvement Allowance shall be disbursed by
Landlord only for the following items and costs (collectively the "Tenant
Improvement Allowance Items"):

3.2.1.1Payment of the fees of the "Architect" and the "Engineers," as those
terms are defined in Section 4.1 of this Tenant Work Letter, and Tenant's
third-party project manager, and payment of the commercially reasonable fees
incurred by Landlord's third party consultants in connection with the Landlord's
review of the "Construction Drawings," as such term is defined in Section 4.1 of
this Tenant Work Letter (collectively, the "Design Fees"); provided that such
Design Fees payable to the Architect and the Engineers shall not to exceed $5.00
per rentable square foot of the Premises;

3.2.1.2The payment of plan check, permit and license fees relating to the
Existing Premises Work;

3.2.1.3The cost of construction of the Tenant Improvements, including, without
limitation, the cost of such work included in any Tenant Change Orders, testing
and inspection costs, hoisting and trash removal costs, and contractors' fees
and general conditions;

3.2.1.4The cost of any changes to the Construction Drawings or any Existing
Premises Work required by applicable building codes (the "Code") following
Landlord's approval of the Approved Working Drawings;

3.2.1.5FF&E Costs (as hereinafter defined) incurred in accordance with Section
3.2.2 and allocated by Tenant to the Tenant's FF&E payable from the Tenant
Improvement Allowance pursuant to this Tenant Work Letter (regardless of where
such Tenant's FF&E is physically located within the Premises), in accordance
with the "TIA Allocation Notice," as that term is defined in Section 3.1;

 

EXHIBIT B-1

 

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3.2.1.6The cost of the "PMA's Fee," as that term is defined in Section 5.4 of
this Tenant Work Letter; and

3.2.1.6Sales and use taxes and Title 24 fees.

3.2.2FF&E Costs.  Up to $20.00 per rentable square foot of aggregate rentable
square footage of the Initial Premises, Must-Take Space 1 and Must-Take Space 3
(i.e. 223,941 RSF) may be allocated by Tenant from the Tenant Improvement
Allowance to pay for the costs of the Tenant's FF&E to third-party
manufacturers, vendors and suppliers (collectively "Vendors"), including without
limitation IT/Telco and AV/security systems, installed by or for Tenant in any
portion of the Premises, and for Tenant Fit-Out Costs (as hereinafter defined)
paid or incurred by Tenant in connection therewith (collectively, the "FF&E
Costs").  Such FF&E Costs may be allocated by Tenant among the various portions
of the Premises, in Tenant's sole discretion, as long as (a) FF&E Costs
allocated by Tenant to Tenant's FF&E in Exhibit B-2 to this Lease shall reduce
the amount that may be allocated to FF&E Costs as Tenant Improvement Allowance
Items pursuant to this Tenant Work Letter, (b) the total amount payable by
Landlord from the Tenant Improvement Allowance for aggregate FF&E Costs incurred
under this Tenant Work Letter and under the work letter attached as Exhibit B-2
to this Lease shall not exceed $4,478,820.00 in the aggregate, and (c) all FF&E
Costs shall be incurred and submitted by Tenant for reimbursement on or before
the TIA Expiration Date.  For the purposes of this Lease, the term "Tenant
Fit-Out Costs" shall mean costs paid by Tenant to vendors or contractors for the
design, engineering, delivery, installation and/or testing of the Tenant's FF&E,
to the extent that such costs are incurred or paid by Tenant separate from the
work of the Contractor under the Construction Agreement (as hereinafter
defined), or the work performed under any Construction Contract (as defined in
Exhibit B-2 to this Lease), or under the BB Construction Contract or the TI
Construction Contract (as defined in Exhibit B-3 to this Lease).

3.2.3Disbursement of Tenant Improvement Allowance.  From time to time between
the date of this Lease and the TIA Expiration Date, but not more frequently than
monthly, Landlord shall reimburse Tenant for Tenant Improvement Allowance Items
incurred by Tenant in accordance with the allocation of the Tenant Improvement
Allowance toward such costs and expenses in accordance with TIA Allocation
Notices previously received by Landlord, in accordance with Applications for
Payment submitted to Landlord in accordance with this Section 3.2.3 as follows:

3.2.3.1Applications for Payment.  On or before the fifth (5th) day of each
calendar month in which Tenant may request reimbursement of Tenant Improvement
Allowance Items payable by Landlord from the Tenant Improvement Allowance,
Tenant shall deliver to Landlord the following items, to the extent applicable
to the amounts requested for reimbursement (each, an "Application for
Payment"):  (i) to the extent that such Application for Payment includes any
Design Fees and/or FF&E Costs payable to the Architect, Engineers or Vendors, a
copy of such Architect's, Engineer's (to the extent not included in the
Architect's Design Fee) or Vendors' written receipts for Design Fees and FF&E
Costs that are included in the amounts to be reimbursed by Landlord pursuant to
such Application for Payment; (ii) to the extent that such Application for
Payment includes the cost of any Existing Premises Work of demolition,
construction, installation or any other amount payable to a Contractor in
accordance with the Approved Tenant Budget (as defined in Section 5.2.1 of this
Tenant Work Letter) of a Construction Agreement, (a) a written request for
payment in a form similar to the AIA G702 payment application request (a "Draw
Request"), showing the schedule, by trade, of percentage of completion of the
applicable Tenant Improvements included in the Existing Premises Work of such
Construction Agreement, with reasonably-detailed invoices from all of the
Tenant's Agents (as such term is defined in Section 5.1.2 of this Tenant Work
Letter) of such Contractor for which payment is requested by Tenant in such Draw
Request (the "Invoiced Items"), detailing the work included therein, and
(b) copies of executed conditional mechanic's lien releases from all of Tenant's
Agents submitting invoices for Invoiced Items pursuant to such Draw Request,
which shall comply with the appropriate provisions of the California Civil Code
(and for all Invoiced Items previously reimbursed by Landlord, Tenant shall
provide Landlord with copies of unconditional lien releases from the Contractor
and Tenant's Agents who have received payment for such Invoiced Items prior to
any further payment by Landlord on any subsequent Draw Requests for the
applicable Project is due and payable from Landlord pursuant to any subsequent
Application for Payment).  No later than the date that occurs thirty (30) days
after such Application for Payment is timely received by Landlord, Landlord
shall deliver a check to Tenant in payment of the lesser of:  (y) the amounts so
requested by Tenant, as set forth in this Section 3.2.3.1, above, less a
retention in the amount of ten percent (10%) of the total Invoiced Items
included in such Application for Payment (with the aggregate amount of such
retentions to be known as the "Final Retention"; and provided that such
retention shall not apply to any Design Fees or FF&E Costs), and

 

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(z) the balance of any remaining available portion of the Tenant Improvement
Allowance allocated to the Tenant Improvement Allowance Items of such Project in
accordance with this Tenant Work Letter (not including the Final Retention
amount, as determined in accordance with the applicable Approved Tenant Budget);
provided that Landlord may reasonably delay payment of some or all of the
Invoiced Items included in any Application for Payment until Tenant has provided
such other information reasonably requested by Landlord within five (5) business
days of Landlord's receipt of such Application for Payment in confirmation of
the amounts requested therein for payment as Invoiced Items and the Contractor's
compliance with the Contractor's payment obligations under the Construction
Agreement, including, but not limited to reasonable evidence that such work is
substantially consistent with the applicable Approved Working Drawings in
accordance with Section 4.4 of this Tenant Work Letter.  Landlord's payment of
such amounts requested for reimbursement by Tenant shall not be deemed
Landlord's approval or acceptance of the applicable work or materials of the
applicable Application for Payment.    

3.2.3.2Landlord Deduction Amounts. In addition to the amounts payable by
Landlord for reimbursement of amounts requested by Tenant in each Application
for Payment, Landlord may deduct from the Tenant Improvement Allowance those
Design Fees payable to Landlord's design professionals as Tenant Improvement
Allowance Items, provided that such Design Fees shall be in commercially
reasonable amounts, and Landlord shall deliver written notice of the amount
deducted within thirty (30) days following the date on which the Construction
Drawings to which such Design Fees relate are approved, or deemed approved, by
Landlord in accordance with this Tenant Work Letter.  

3.2.3.3Final Retention.  Subject to the provisions of this Tenant Work Letter, a
check for the Final Retention for each Project shall be delivered by Landlord to
Tenant no later than thirty (30) days following the later of (a) substantial
completion of the Existing Premises Work (as substantial completion is
determined in accordance with the Construction Agreement) of such Project and
(b) Landlord's receipt of (i) properly executed mechanics lien releases in
compliance with both California Civil Code Section 8134 and either Section 8136
or Section 8138 from Tenant's contractor, subcontractors and material suppliers
and any other party which has lien rights in connection with the construction of
the Tenant Improvements, and (ii) a certificate of completion of the Existing
Premises Work of such Project from the applicable Architect, certifying that the
Existing Premises Work of such Project has been substantially completed in
accordance with the applicable Approved Working Drawings.   In addition to the
foregoing, Landlord may condition such payment upon the correction of any patent
defects disclosed during Landlord's walk-through inspection of the applicable
Existing Premises Work, provided that such walk-through inspection shall be
performed, if at all, within ten (10) business days following Landlord's receipt
of the final Application for Payment for such Project of the Existing Premises
Work.

3.3Failure to Disburse Tenant Improvement Allowance.  If Landlord fails to
timely fulfill its obligation to fund any portion of the Tenant Improvement
Allowance, Tenant shall be entitled to deliver notice (the "Payment Notice")
thereof to Landlord and to any Superior Holders of the Project whose identity
and address have been previously provided to Tenant.  If Landlord still fails to
fulfill any such obligation within twenty (20) business days after Landlord's
receipt of the Payment Notice from Tenant and if Landlord fails to deliver
notice to Tenant within such twenty (20) business day period explaining
Landlord's reasons that Landlord believes that the amounts described in Tenant's
Payment Notice are not due and payable by Landlord ("Refusal Notice"), Tenant
shall be entitled, after Landlord's failure to pay such amounts within five (5)
business days after Tenant's delivery of a second notice from Tenant delivered
after the expiration of such (20) business day period, which second notice must
contain the following inscription, in bold faced lettering: “SECOND NOTICE
DELIVERED PURSUANT TO SECTION 3.3 OF EXHIBIT B-1 TO THE LEASE - - FAILURE TO
TIMELY PAY THE REQUESTED ALLOWANCE MAY RESULT IN TENANT'S PAYMENT OF THE SAME
AND A DEDUCTION FROM RENT UNDER THE LEASE,” to pay the same and offset the
amount so owed to Tenant by Landlord but not paid by Landlord (or if Landlord
delivers a Refusal Notice but only with respect to a portion of the amount set
forth in the Payment Notice and Landlord fails to pay such undisputed amount as
required by the next succeeding sentence, the undisputed amount so owed to
Tenant) from the last day of such twenty (20) business day period until the date
of offset, against Tenant's next obligations to pay Rent.  Notwithstanding the
foregoing, Landlord hereby agrees that if Landlord delivers a Refusal Notice
disputing a portion of the amount set forth in Tenant's Payment Notice, Landlord
shall pay to Tenant, concurrently with the delivery of the Refusal Notice, the
undisputed portion of the amount set forth in the Payment Notice.  However, if
Tenant is in Default under Section 19.1.1 of the Lease at the time that such
offset would otherwise be applicable, Tenant shall not be entitled to such
offset until such Default is cured.  If Landlord delivers a Refusal Notice, and
if Landlord and Tenant are not able to agree on the disputed amounts to be so
paid by Landlord, if any, within ten (10) days after Tenant's receipt of a
Refusal Notice, Tenant may submit such

 

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dispute to a referee under the provisions of the California Code of Civil
Procedure, Sections 638 — 645.1, inclusive, in accordance with Section 29.22 of
the Lease.  If Tenant prevails in any such arbitration, Tenant shall be entitled
to apply such award as a credit against Tenant's obligations to pay Rent.

ARTICLE 4

DESIGN AND PERMITTING

4.1Selection of Architect/Construction Drawings.  For each work of Tenant
Improvements to the Premises to be performed by Tenant as Existing Premises Work
pursuant to this Tenant Work Letter (each, a "Project"), Tenant shall retain an
architect/space planner selected by Tenant and reasonably approved by Landlord
(the "Architect" of the applicable Project) to prepare the Construction Drawings
for such Project in accordance with this Section 4.1.  In addition to the
Architect, Tenant shall retain those engineering consultants selected by Tenant
and reasonably approved by Landlord (the "Engineers" of the applicable Project)
for any and all plans and engineering working drawings relating to any
structural alterations or improvements or alterations to the Building Systems of
the Existing Buildings as part of the Existing Premises Work of any
Project.  The plans and drawings to be prepared by the Architect and any
Engineers for a Project hereunder shall be known collectively as the
"Construction Drawings."  All Construction Drawings shall comply with the
drawing format and specifications reasonably determined by Landlord, and shall
be subject to Landlord's approval, to the extent of Landlord’s approval rights
under this Article 4, provided that Landlord's review and approval of any
Construction Drawings pursuant to this Section 4 shall be solely for Landlord's
own benefit and shall not obligate Landlord to review the same, nor make the
Landlord liable to Tenant or any of the Tenant's Agents for the quality, design,
Code compliance or other like matters included in any Construction Drawings
approved by Landlord.  

4.2Final Space Plan.  Tenant shall supply Landlord with copies of its final
space plan for each Project (the "Final Space Plan" of such Project), which
shall include a layout and designation of all offices, rooms and other
partitioning included in the applicable Project Site and their intended use.  To
the extent reasonable, Landlord may request clarification or more specific
drawings for special use items not included in the Final Space Plan.  Within ten
(10) business days of Landlord’s receipt of a Final Space Plan, Landlord shall
notify Tenant in writing whether (i) Landlord approves of such Final Space Plan
or whether (ii) Landlord disapproves such Final Space Plan, which disapproval
shall specify the reasonable basis for such disapproval and shall be accompanied
by a written reasonably detailed description of changes required in order to
satisfy Landlord’s concerns.  Notwithstanding the generality of the foregoing,
Landlord may not disapprove of any Final Space Plan proposed by Tenant unless
the proposed improvements would (a) have an adverse effect on Building Systems
or Building Structure (as reasonably determined by Landlord), (b) materially
increase the cost of occupancy, use, maintenance or repair of the Building or
the Project, or (c) cause noncompliance with Code.  If Landlord’s written
approval, or disapproval satisfying the requirements of the preceding sentence,
is not received by Tenant within ten (10) business days following Landlord's
receipt of the proposed Final Space Plan from Tenant, then the terms of Section
4.6, below, shall be applicable.  If Landlord timely and reasonably disapproves
of the Final Space Plan, Tenant shall cause the Final Space Plan to be revised
as reasonably required to address Landlord’s concerns, and shall submit the
revised Final Space Plan to Landlord for review, with the foregoing review
process to be repeated until Landlord has approved (or is deemed to have
approved per the below) the Final Space Plan for such Project.  

4.3Final Working Drawings.  After the Final Space Plan for a Project has been
approved by Landlord, Tenant shall cause the Architect to complete the
architectural and engineering drawings for the Project in a form which is
complete to allow the approved general contractors (as set forth in Section 5.1
of this Tenant Work Letter) and qualified subcontractors of the Major Trade
Components (as defined in Section 5.1.2 of this Tenant Work Letter) to bid on
the work of such Project and to obtain all applicable permits (collectively, the
"Final Working Drawings").  Upon the Architect's completion of the Final Working
Drawings for a Project, Tenant shall submit the same to Landlord for Landlord's
approval, which shall not be unreasonably withheld, conditioned or
delayed.  Within ten (10) business days following Landlord’s receipt of such
Final Working Drawings, Landlord shall notify Tenant in writing whether
(a) Landlord approves of such Final Working Drawings or whether (b) Landlord
disapproves such Final Working Drawings, which disapproval shall specify the
reasonable basis for such disapproval and shall be accompanied by a written
detailed description of changes required in order to satisfy Landlord’s
concerns.  If Landlord timely and reasonably disapproves the Final Working
Drawings in accordance with this Section 4.3, Tenant shall cause the Final
Working Drawings to be revised by the Architect as reasonably

 

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required to address the Landlord’s objections, and shall submit the revised
Final Working Drawings to Landlord for review, with the foregoing review process
to be repeated until Landlord has approved (or is deemed to have approved as
provided below) the Final Working Drawings.  If Landlord fails to timely approve
or reasonably disapprove the Final Working Drawings within ten (10) business day
following their submission by Tenant for Landlord's approval, the terms of
Section 4.6, below, shall be applicable.

4.4Approved Working Drawings.  The Final Working Drawings for each Project, as
approved or deemed approved by Landlord in accordance with Section 4.3 above,
shall be known as the "Approved Working Drawings” of such Project of Existing
Premises Work.  Such Approved Working Drawings shall be submitted by Tenant to
the appropriate municipal authorities for the applicable building permits (the
"Permits") for the Tenant Improvements of such Project, and Landlord shall
cooperate with Tenant in executing permit applications and performing other
ministerial acts reasonably necessary to enable Tenant to obtain such Permits or
any certificate of occupancy (or its legal equivalent) required for Tenant's
occupancy of the Project Site following substantial completion of any
Project.  Following Landlord’s approval, or deemed approval, of the Approved
Working Drawings, the Approved Working Drawings shall not be modified for any
reason other than a Minor Variation (as hereinafter defined) without Landlord’s
prior written consent, which shall not be unreasonably withheld, conditioned, or
delayed.  No material changes, modifications or alterations in the Approved
Working Drawings of any Project may be made without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, conditioned or
delayed.  "Minor Variation" shall mean any modification to make reasonable
adjustments for field deviations or conditions encountered during construction.

4.5Changes to Approved Working Drawings.  Without limiting Tenant’s right to
make Minor Variations to the Approved Working Drawings without Landlord’s
approval, Tenant shall also have the right to modify the Approved Working
Drawings with Landlord’s prior written approval, which approval shall be granted
unless the requested modification would (a) have an adverse effect on Building
Systems or Building Structure, (b) (b) materially increase the cost of
occupancy, use, maintenance or repair of the Building or the Project,  or (b)
cause noncompliance with applicable Code.  Tenant shall request such
modifications to the Approved Working Drawings for a Project by notifying
Landlord in writing, in substantially the same form as the AIA standard change
order form (a “Tenant Change Order Request”), which Tenant Change Order Request
shall detail the nature and extent of any such modification and shall be signed
by Tenant's Representative and the Contractor of the applicable
Project.  Landlord shall use commercially reasonable efforts to approve or
reasonably disapprove such Tenant Change Order Request no later than five (5)
business days after Landlord's receipt thereof, with any such disapproval of a
Tenant Change Order Request to specify the reasonable basis for such disapproval
accompanied by a written detailed description of changes by Landlord.  If
Landlord approves a Tenant Change Order Request, Tenant may cause the Approved
Working Drawings to be modified accordingly.  If Landlord fails to respond with
Landlord's approval or reasonable disapproval (in accordance with the terms and
conditions of this Section 4.5) within such five (5) business day period, then
the terms of Section 4.6, below, shall be applicable.  

4.6Deemed Approval.  If Landlord fails to notify Tenant of Landlord's approval
or disapproval of any Construction Drawings or Tenant Change Order Request
within the applicable time period set forth herein, Tenant shall have the right
to provide Landlord with a second (2nd) written request for approval (a "Second
Request") that specifically identifies the applicable Construction Drawings or
Tenant Change Order Request and contains the following statement in bold and
capital letters:  "THIS IS A SECOND REQUEST FOR APPROVAL PURSUANT TO THE
PROVISIONS OF SECTION 4.6 OF EXHIBIT B-1 TO THE LEASE.  IF LANDLORD FAILS TO
RESPOND WITHIN TEN (10) BUSINESS DAYS AFTER RECEIPT OF THIS NOTICE, THEN
LANDLORD SHALL BE DEEMED TO HAVE APPROVED THE CONSTRUCTION DRAWINGS (OR TENANT
CHANGE ORDER REQUEST, AS APPLICABLE) DESCRIBED HEREIN."  If Landlord fails to
respond to such Second Request within ten (10) business days after Landlord's
receipt thereof, the proposed Construction Drawings or Tenant Change Order
Request shall be deemed approved by Landlord.

 

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ARTICLE 5

CONSTRUCTION OF THE TENANT IMPROVEMENTS

5.1Tenant's Selection of Contractors.

5.1.1The Contractor.  A general contractor (the "Contractor") shall be selected
by Tenant to construct the Tenant Improvements of each Project following
Landlord's approval or deemed approval of the Final Working Drawings for such
Project in accordance with Section 4.3 of this Tenant Work Letter, subject to
Landlord’s approval, which shall not be unreasonably withheld, conditioned or
delayed; and following Landlord's approval of the Contractor, Tenant shall enter
into a Construction Agreement with such Contractor (in accordance with
Section 5.2.1 of this Tenant Work Letter) to construct such Tenant
Improvements.  Landlord hereby pre-approves of Tenant’s selection of any of the
following general contractors as a Contractor for any Project of Tenant
Improvements included in the Existing Premises Work:  (a) Swinerton; (b) Pacific
Building Group; or (c) Whiting Turner; provided that such pre-approval shall not
limit Landlord’s right to approve of the Construction Agreement in accordance
with Section 5.2.1 of this Tenant Work Letter.  

5.1.2Tenant's Agents.  All subcontractors, laborers, materialmen, and suppliers
used by Tenant (such subcontractors, laborers, materialmen, and suppliers, and
the Contractor to be known collectively as "Tenant's Agents") shall be subject
to Landlord’s approval, which shall not be unreasonably withheld, conditioned or
delayed (as so approved by Landlord, the “Approved Subcontractors”), and shall
be subject to Landlord's reasonable rules and regulations for the construction
of improvements in the Building, so long as Landlord has provided a copy of such
rules and regulations to Tenant’s Representative; provided that Landlord shall
not require that the Contractor engage any particular subcontractor for a Major
Trade Component (as hereinafter defined) as an Approved Subcontractor unless
such subcontractor submits a bid for the work of such Major Trade Component that
is reasonably competitive with the bids submitted by other qualified
subcontractors bidding for such Major Trade Component.  "Major Trade Components"
shall mean any mechanical, electrical and plumbing work of a Project of Tenant
Improvements.   If Tenant reasonably determines that the proposed cost of work
to be performed by any subcontractor required by Landlord to be engaged as an
Approved Subcontractor for any Major Trade Component of any Project is
substantially in excess of competitive proposals for such work provided by
qualified subcontractors other than the subcontractor required by Landlord, then
Landlord and Tenant shall promptly and reasonably cooperate with one another to
agree upon a list of mutually-satisfactory subcontractors willing to submit a
reasonably competitive bid for the work of such Major Trade Component, from whom
Tenant will select the Approved Subcontractor for the applicable Major Trade
Component of such Project.  

5.2Construction of Tenant Improvements by Tenant's Agents.

5.2.1Construction Contract; Cost Budget.  Prior to Tenant's execution of the
construction agreement and related general conditions for any Project of Tenant
Improvements in the Initial Premises with the applicable Contractor (the
"Construction Agreement" for such Project), Tenant shall submit the proposed
Construction Agreement to Landlord for its approval, which approval shall not be
unreasonably withheld, conditioned or delayed.  Landlord’s failure to approve or
reasonably disapprove (with reasons specified) of such proposed Construction
Agreement within five (5) business days following receipt thereof from Tenant
shall be deemed Landlord’s approval thereof, provided that such Construction
Agreement shall include a reasonably-detailed breakdown, by trade, of the final
costs to be incurred for the Tenant Improvement Allowance Items of the
applicable Tenant Improvements (the "List of Final Costs").  The work of
construction of the Tenant Improvements of each Project will be performed on an
open book basis, with Landlord having access to all information relating to
bidding and pricing for the cost of the Tenant Improvement Allowance Items
included in such Tenant Improvements.  Notwithstanding anything to the contrary
set forth elsewhere in this Tenant Work Letter or this Lease, Tenant will not
commence construction of any Project of Tenant Improvements pursuant to this
Tenant Work Letter until (a) Landlord has approved (or is deemed to have
approved) the applicable Construction Agreement, (b) Landlord shall have
approved in writing the construction budget for the applicable Project (the
"Approved Tenant Budget" of such Project), which approval shall not be
unreasonably withheld, conditioned or delayed, (c) Tenant has procured and
delivered to Landlord a copy of all Permits required for the applicable Existing
Premises Work, and (d) Tenant has provided Landlord with certificates of
insurance from the applicable Contractor and the other Tenant's Agents
performing the Existing Premises Work of such Project at the Project Site
satisfying the requirements of Section 5.2.2.3 below.  The Approved Tenant
Budget for each Project shall include actual pricing received by Tenant directly
from the Contractor and all other Tenant’s Agents responsible for the Existing
Premises

 

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Work of such Project.  Landlord shall not be obligated to reimburse Tenant for
the cost of any Tenant Improvement Allowance Items which are not included in the
Approved Tenant Budget; provided that the Approved Tenant Budget shall be
adjusted to reflect any change to the Approved Working Drawings pursuant to any
Landlord-approved (or deemed approved) Tenant Requested Change Order.  If the
Approved Tenant Budget for any Project is in excess of the remaining Tenant
Improvement Allowance allocated by Tenant to all Tenant Improvement Allowance
Items included in all Projects of the Existing Premises Work, as such allocation
may be modified by Tenant from time to time as long as the total allocation of
the Tenant Improvement Allowance to the Tenant Improvement Allowance Items of
this Tenant Work Letter and under Exhibit B-2 to this Lease do not exceed, in
the aggregate, the total Tenant Improvement Allowance set forth in Section 5 of
the Lease Summary (such excess, the "Over-Allowance Amount" for such Project),
then Tenant shall pay Tenant's TIA Share (as hereinafter defined) of the amount
requested from Landlord pursuant to each Application for Payment for such
Project (as reduced by the applicable retention amount), and such payment by
Tenant of the Tenant's TIA Share of each Application for Payment shall be a
condition of Landlord's payment of the remainder of the amount requested by
Tenant in such Application for Payment.  The "Tenant's TIA Share" for a Project
shall mean that percentage amount equal to such Over-Allowance Amount divided by
the Approved Tenant Budget (after deducting from the Approved Tenant Budget any
amounts expended in connection with the preparation of the Construction
Drawings, and the cost of all other Tenant Improvement Allowance Items incurred
prior to the commencement of construction of the Tenant Improvements) for such
Project.  

5.2.2Tenant's Agents.

5.2.2.1General Conditions for Tenant's Agents and Tenant Improvement
Work.  Tenant's and Tenant's Agent's construction of the Tenant Improvements of
each Project subject to this Tenant Work Letter shall comply with the
following:  (i) such Tenant Improvements shall be constructed in accordance with
the applicable Approved Working Drawings (as the same may be modified in
accordance with Article 4 of this Tenant Work Letter); and (ii) Landlord's
reasonable rules and regulations for the construction of improvements in the
Building as set forth in this Lease (if any).  

5.2.2.2Indemnity.  The indemnity provisions of the Lease shall also apply with
respect to the Tenant Improvements of each Project included in the Existing
Premises Work.  

5.2.2.3Insurance Requirements.

5.2.2.3.1General Coverages.  All of Tenant's Agents shall carry worker's
compensation insurance to the extent required by Applicable Laws, and shall also
carry public liability insurance, including property damage, all with limits, in
form and with companies as are required to be carried by Tenant as set forth in
this Lease.

5.2.2.3.2Special Coverages.  Tenant shall carry "Builder's All Risk" insurance
for each Project in an amount reasonably approved by Landlord, covering the cost
of repairs to the Existing Premises Work and the Initial Premises associated
with such Project and arising out of those risks associated with the coverage of
such insurance coverage.  Tenant's Agents shall carry excess liability insurance
with limits, in form and with companies as are required to be carried by Tenant
as set forth in this Lease.

5.2.2.3.3General Terms.  Certificates for all insurance carried pursuant to this
Section 5.2.2.3 shall be delivered to Landlord before the commencement of
construction of the Tenant Improvements of the applicable Project and before the
applicable Contractor's equipment is moved onto the Project Site.  To the extent
reasonably obtainable, all such policies of insurance must contain a provision
that the company writing said policy will give Landlord thirty (30) days prior
written notice of any cancellation or lapse of the effective date or any
reduction in the amounts of such insurance.  In the event that the applicable
Tenant Improvements are damaged by any cause other than Landlord’s gross
negligence or willful misconduct during the course of the construction thereof,
Tenant shall immediately repair the same at Tenant's sole cost and expense
(subject to Tenant right to increase the allocation of any remaining Tenant
Improvement Allowance to the applicable Project to cover some or all of the cost
of such repairs pursuant to a TIA Allocation Notice delivered to Landlord in
accordance with this Tenant Work Letter).  Tenant's Agents shall maintain all of
the foregoing insurance coverage in force until the Tenant Improvements of the
applicable Project are fully completed.  All policies carried under this
Section 5.2.2.3 shall insure Landlord and Tenant, as their interests may appear,
as well as PMA, Contractor and Tenant's Agents.  All insurance, except Workers'
Compensation, maintained by Contractor and Tenant's Agents shall preclude
subrogation claims by the insurer against anyone insured thereunder.  Such
insurance shall provide that it is

 

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primary insurance as respects the owner and that any other insurance maintained
by owner is excess and noncontributing with the insurance required
hereunder.    

5.2.3Governmental Compliance.  The Tenant Improvements shall comply with Code
and other Applicable Laws.  

5.2.4Inspection by Landlord.  Tenant shall provide Landlord with reasonable
prior notice of any inspection to be performed by a governmental entity in
connection with the construction of the Tenant Improvements in order to allow
Landlord to be present during such inspection.  Landlord shall have the right to
inspect the Tenant Improvements with Tenant at all reasonable times following
reasonable advanced notice, provided however, that Landlord's failure to inspect
the Tenant Improvements shall in no event constitute a waiver of any of
Landlord's rights hereunder nor shall Landlord's inspection of the Tenant
Improvements constitute Landlord's approval of the same.  Should Landlord and
Tenant identify any defect in any portion of the Tenant Improvements in
connection with any such inspection, Landlord and Tenant shall document such
defect, and such defect shall be promptly rectified by Tenant at no expense to
Landlord (except to the extent of any remaining Tenant Improvement Allowance).

5.2.5Meetings.  Commencing upon Landlord's approval (or deemed approval) of the
Approved Working Drawings for each Project of this Tenant Work Letter, Tenant
shall hold weekly meetings (and/or other meetings as necessary) at a reasonable
time, with the Architect and the Contractor of the applicable Project, regarding
the progress of the applicable Tenant Improvements until such Tenant
Improvements are substantially completed, which meetings shall be held at a
location at the Project Site designated by Tenant in its sole discretion, and
Landlord and/or its agents shall receive prior notice of, and shall have the
right to attend, all such meetings, and, upon Landlord's request, certain of
Tenant's Agents shall attend such meetings.  In addition, minutes shall be taken
at all such meetings, a copy of which minutes shall be distributed to all
attendees, including Landlord.  One such meeting each month shall include the
review of the most recent Application for Payment for the applicable Project.

5.3Notice of Completion; Copy of Record Set of Plans.  Within ten (10) days
after substantial completion of the Tenant Improvements of each project, Tenant
shall cause a Notice of Completion to be recorded in the office of the Recorder
of the County of San Diego in accordance with Section 3093 of the California
Civil Code or any successor statute, and shall furnish a copy thereof to
Landlord upon such recordation.  If Tenant fails to do so, Landlord may execute
and file the same on behalf of Tenant as Tenant's agent for such purpose, and at
Tenant's sole cost and expense.  In addition to the foregoing, promptly
following substantial completion of the Tenant Improvements of each Project,
Tenant shall cause the applicable Architect and Contractor (i) to update the
Approved Working Drawings for such Tenant Improvements as necessary to reflect
any and all changes made to the Approved Working Drawings during the course of
construction, (ii) to certify that such "as-built" drawings are true and correct
in accordance with applicable standards, and (iii) to deliver to Landlord two
(2) sets of copies of such as-built record set of drawings.

5.4PMA's Fee.  For each Project of the Existing Premises Work, Landlord shall
pay PMA a project management fee ("PMA's Fee") equal to 2.65% of the Tenant
Improvement Allowance Items payable by Landlord from the Tenant Improvement
Allowance or by Tenant from the Over-Allowance Amount, exclusive of (i) any FF&E
Costs and (ii) PMA’s Fee for such Project.  PMA's Fee for each Project will be
established as a fixed fee once the Approved Tenant Budget for the applicable
Project is determined (but subject to revision as a result of any Tenant Change
Order Requests), along with a schedule of payment of the PMA's Fee, which shall
be payable in monthly installments over the scheduled term of construction.

SECTION 6

MISCELLANEOUS

6.1Time 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.  Time is of the essence with respect to all instances where Landlord or
Tenant is required to approve or deliver an item under this Tenant Work Letter.

 

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6.2Tenant's Lease Default.  Notwithstanding any provision to the contrary
contained in this Lease, if an event of default by Tenant (as described in the
Lease), or a default by Tenant under this Tenant Work Letter, beyond all
applicable notice requirements and cure periods, has occurred and is continuing
at any time when Landlord becomes required to disburse a portion of the Tenant
Improvement Allowance pursuant to this Tenant Work Letter, then (i) in addition
to all other rights and remedies granted to Landlord pursuant to this Lease,
Landlord shall have the right to suspend payment of such portion until such time
as such default is cured pursuant to the terms of this Lease.

6.3No Miscellaneous Charges.  As part of the Landlord's obligations under the
Lease, and subject to Tenant's payment of Direct Expenses in accordance
therewith, parking, utilities (including HVAC service), freight elevator
service, loading docks and other Building and Project Site services shall be
provided to the Initial Premises as required for the performance of the Existing
Premises Work, without additional charge or deduction of the cost of such
services from the Tenant Improvement Allowance.  Landlord shall not restrict
Tenant’s access to any loading dock or freight elevator for their use in support
of the Existing Premises Work.

6.4Exclusion from Alterations.  The terms and conditions of Section 8 of this
Lease not apply to the design or construction of any of the Tenant Improvements
performed in the Premises at any time or from time to time as a Project of
Existing Premises Work pursuant to this Tenant Work Letter.

 

 

 

EXHIBIT B-1

 

.

 

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EXHIBIT B-2

SORRENTO SUMMIT

TENANT WORK LETTER – MUST-TAKE SPACE 1 AND MUST-TAKE SPACE 3

This Exhibit B-2 is applicable to the construction of Tenant Improvement in the
Must-Take Space 1 and Must-Take Space 3, as applicable.  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.  All references in this Tenant Work Letter to Articles or
Sections of "this Lease" shall mean the relevant portion of Articles 1 through
29 of the Office Lease to which this Tenant Work Letter is attached as
Exhibit B-2 and of which this Tenant Work Letter forms a part, and all
references in this Tenant Work Letter to Sections of "this Tenant Work Letter"
shall mean the relevant portion of Sections 1 through 6 of this Exhibit
B-2.  All references in this Exhibit B-2 to "Premises" shall mean the Must-Take
Space 1 or Must-Take Space 3, as applicable.  Landlord and Tenant acknowledge
that the Tenant Improvements shall be constructed in different phases, with the
Tenant Improvements being constructed in Must-Take Space 1 prior to the
construction of the Tenant Improvements in Must-Take Space 3, and, therefore,
the terms and conditions of this Tenant Work Letter shall apply to each phase of
construction independently.  

SECTION 1

LANDLORD'S INITIAL CONSTRUCTION IN THE PREMISES

As of the date of this Lease set forth in the Summary, Landlord has constructed,
at its sole cost and expense, the Base, Shell, and Core (as hereinafter defined)
of the following:  (i)  the Premises, (ii)  the floor of the Existing Building
on which the Premises is located, and (C) the Common Areas. The term "Base,
Shell, and Core" shall mean the following elements of the Existing Building in
which the Premises are located: (A) the Building Systems (as defined in Section
7.1 of the Lease) serving the Premises wherever located in the Existing Building
; and (B) all structural components of the Existing Building. Notwithstanding
anything set forth in this Tenant Work Letter to the contrary, but subject to
the remaining terms of this Section 1, below, Tenant shall accept the Base,
Shell and Core of the Premises from Landlord in their presently existing,
"as-is" condition; provided, however, that (i) the foregoing shall not modify
any of the Landlord's repair and maintenance obligations relating to the Base,
Shell and Core set forth in Section 7.2 of the Lease, and (ii) prior to the
Must-Take 1 Commencement Date and Must-Take 3 Commencement Date, as applicable,
Landlord shall, at Landlord's sole cost and expense (and not as a deduction from
the Tenant Improvement Allowance), complete the following with respect to the
applicable Premises (collectively, "Landlord's Work"):

(a)Notwithstanding anything set forth in this Lease to the contrary, upon the
Must-Take 1 Commencement Date or Must-Take 3 Commencement Date, as applicable,
the "Building Systems," as that term is defined in the Lease, serving such
Premises shall be in good working condition and repair.  Notwithstanding
anything in this Lease to the contrary, Landlord shall, at Landlord's sole cost
and expense (which shall not be deemed an Operating Expense), repair or replace
any failed or inoperable portion of the Building Systems if it is determined,
within thirty (30) days following the Must-Take 1 Commencement Date or Must-Take
3 Commencement Date, as applicable, that the Building Systems were not in good
working condition and repair as of the Must-Take 1 Commencement Date or
Must-Take 3 Commencement Date, as applicable, ("Landlord’s Warranty"), provided
that the need to repair or replace was not caused by the misuse, misconduct,
damage, destruction and/or negligence (collectively, "Tenant Damage") of Tenant,
its subtenants and/or assignees, if any. To the extent repairs which Landlord is
required to make pursuant to this Section 1 are necessitated in part by Tenant
Damage, then Tenant shall reimburse Landlord for the reasonable cost of such
repair. If it is determined that any portion of the Building Systems were not in
good working condition and repair within thirty (30) days following the
Must-Take 1 Commencement Date or Must-Take 3 Commencement Date, as applicable,
then Landlord shall not be liable to Tenant for any damages, but as Tenant's
sole remedy, Landlord, at no cost to Tenant, shall promptly commence such work
or take such other action as may be necessary to place the same in good working
condition and repair, and shall thereafter diligently pursue the same to
completion.

 

EXHIBIT B-2

 

 

 

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(b)To the extent required in order to obtain a certificate of occupancy or
temporary certificate of occupancy, or legal equivalent, for such Premises for
general office use assuming a normal and customary office occupancy density,
cause the Base, Shell, and Core (including, without limitation, those applicable
portions of the Common Areas included in the Base, Shell and Core, which are
commonly known as the "path of travel" to the applicable Premises) to comply
with applicable building codes and other governmental laws, ordinances and
regulations, including but not limited to those related to handicap access,
which were enacted and enforced as of the Must-Take 1 Commencement Date or
Must-Take 3 Commencement Date, as applicable.

All of Landlord's Agents shall carry worker's compensation insurance covering
all of their respective employees, and shall also carry public liability
insurance, including property damage, all with limits, in form and with
companies reasonably approved by Tenant.  In addition, Landlord shall cause the
Contractor, to carry "Builder's All Risk" insurance in an amount reasonably
approved by Tenant covering the Landlord's Work or the construction of the
Tenant Improvements, as applicable.  In the event any of Landlord's Work or the
Tenant Improvements are damaged by any cause covered by such insurance during
the course of the construction thereof, Landlord shall enforce the terms of the
Construction Contract, including without limitation any indemnity provisions, in
order to cause the damage to be repaired using the proceeds of such
insurance.  If any of the Tenant Improvements are damaged by any cause not
covered by insurance but would have been covered by insurance if Landlord had
carried (or required the Contractor to carry) the insurance required by the
terms of this Tenant Work Letter, then Landlord shall cause such damage to be
repaired at Landlord’s sole cost and expense, and not as a Final Cost
.  Landlord shall cause “Builder’s All-Risk” insurance coverage on the
Landlord’s Work and the construction of the Tenant Improvements to preclude or
waive subrogation claims by the insurer against Tenant, its agents, employees
and representatives, and if reasonably available any certificate evidencing such
insurance coverage shall contain a provision that the company writing such
policy, or its agent, will endeavor to give Tenant thirty (30) calendar days
prior written notice of any cancellation or lapse of the policy or any reduction
in the amounts of such insurance prior to the Substantial Completion of the
Premises (as defined in Section 5.1 below).

SECTION 2

TENANT IMPROVEMENTS; PROJECT SCHEDULE

2.1Tenant Improvement Allowance.  Tenant shall be entitled to a tenant
improvement allowance (the "Tenant Improvement Allowance") in the amount set
forth in Section 5 of the Summary for Must-Take Space 1 or Must-Take Space 3, as
applicable, for the costs relating to the initial design and construction of
Tenant's improvements, which are permanently affixed to the Premises (the
"Tenant Improvements").  In the event that the Tenant Improvement Allowance is
not fully utilized by Tenant on or before the completion of the Tenant
Improvements for the Premises, then such unused amounts may be used by Tenant in
connection with the construction of the Tenant Improvements for the Initial
Premises, Must-Take Space 1 (or Must-Take Space 3, as applicable), and/or
Must-Take Space 2 (but only to the extent of any BTS Over-Allowance Amount), or
for costs incurred in connection with the Site Modernization/Beautification
Work.  In the event that the Tenant Improvement Allowance is not fully utilized
by Tenant on or before December 31, 2020 (as applicable, the "TIA Expiration
Date"), then such unused amounts shall revert to Landlord, and Tenant shall have
no further rights with respect thereto.  At any time prior to the TIA Expiration
Date, Tenant shall have the option, by delivery of one or more written notices
to Landlord (each, a "TIA Allocation Notice"), to allocate the Tenant
Improvement Allowance (or to modify any prior allocation thereof) to the cost of
the Tenant Improvements and Tenant's FF&E (not to exceed, in total, Landlord's
FF&E Limit) in Must-Take Space 1 or Must-Take Space 3 (to the extent not
previously allocated by Tenant to the cost of Tenant Improvements in the Initial
Premises and/or to the BTS Over-Allowance Amount for Must-Take Space 2 and/or to
costs incurred in connection with the Site Modernization/Beautification Work;
except to the extent that such previously-allocated amounts are not utilized by
Tenant for the cost of such work), to pay for the Tenant's cost of the Tenant
Improvement Allowance Items pursuant to this Tenant Work Letter.  In no event,
however, shall such allocation of the Tenant Improvement Allowance to Tenant
Improvement Allowance Items pursuant to this Tenant Work Letter result in the
aggregate Tenant Improvement Allowance payable by Landlord pursuant to the
Initial Premises Work Letter and this Tenant Work Letter, collectively,
exceeding the amount of the Tenant Improvement Allowance set forth in Section
5.1 of the Summary.  All Tenant Improvements and all furniture, trade fixtures,
equipment, and other items of personal property included in the Tenant
Improvement Allowance Items paid for by Landlord from the Tenant Improvement
Allowance in accordance with Section 2.2 below ("Tenant's FF&E"), shall

 

EXHIBIT B-2

 

 

 

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be deemed Landlord's property under the terms of the Lease; provided, however,
Tenant's removal and restoration obligations with respect to such Tenant
Improvements and Tenant's FF&E shall be governed by the terms and conditions of
Section 8.5 of the Lease.  

2.2Disbursement of the Tenant Improvement 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) only for the following items and costs
(collectively, the "Tenant Improvement Allowance Items"):  

2.2.1Payment of the fees of the "Architect" and the "Engineers," as those terms
are defined in Section 3.1 of this Tenant Work Letter, (and Tenant's Project
Manager (as defined in Section 2.3, below), whose fees shall, notwithstanding
anything to the contrary contained in this Tenant Work Letter, not exceed an
aggregate amount equal to $5.00 per rentable square foot of the Premises), and
payment of the fees incurred by, and the cost of documents and materials
supplied by, Landlord and Landlord's consultants 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;

2.2.2The payment of plan check, permit and license fees relating to construction
of the Tenant Improvements;

2.2.3The cost of construction of the Tenant Improvements, including, without
limitation, testing and inspection costs, hoisting and trash removal costs, and
contractors' fees and general conditions;

2.2.4The cost of any changes in the Base, Shell and Core when such changes are
required by the Construction Drawings (including if such changes are due to the
fact that such work is prepared on an unoccupied basis), such cost to include
all direct architectural and/or engineering fees and expenses incurred in
connection therewith;

2.2.5Subject to Landlord's obligations under Section 1, above, the cost of any
changes to the Construction Drawings or Tenant Improvements required by all
applicable building codes (the "Code");

2.2.6The cost of connection of the Premises to the Building's energy management
systems, as required;

2.2.7 FF&E Costs (as defined in Exhibit B-1 to this Lease) which are incurred by
Landlord or Tenant in accordance with the terms and conditions (and not to
exceed the aggregate limit on the allocation of the Tenant Improvement Allowance
to be applied to FF&E Costs by Tenant, as set forth in Section 3.2.2 of Exhibit
B-1 to this Lease, to the extent that such FF&E Costs are allocated by Tenant to
the Tenant Improvement Allowance Items of Must-Take Space 1 or Must-Take Space 3
in accordance with any TIA Allocation Notices for the Premises (regardless of
where such Tenant's FF&E is physically located within the Premises or elsewhere
in the Project, or whether the work associated with Tenant's Fit-Out Costs is
performed within the Premises or elsewhere in the Project);

2.2.8The cost of the "PMA's Fee," as that term is defined in Section 2.3.2 of
this Tenant Work Letter;

2.2.9Sales and use taxes and Title 24 fees; and

2.2.10All other actual and reasonable out-of-pocket costs incurred by Landlord
in connection with the construction of the Tenant Improvements and reasonably
approved by Tenant.

2.3Tenant's Project Manager.  Tenant shall retain a project manager (the
"Project Manager"), subject to Landlord's reasonable approval, to oversee the
day-to-day construction of the Tenant Improvements.  Landlord shall use
commercially reasonable efforts to cause the Landlord's Agents to reasonably
cooperate with Tenant and the Project Manager in connection with the
construction of the Tenant Improvements in accordance with the Project Schedule
(as defined in Section 2.6, below).  Tenant shall use commercially reasonable
efforts to cause

 

EXHIBIT B-2

 

 

 

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the Project Manager to reasonably cooperate in good faith with Landlord's
project manager, Project Management Advisors ("PMA"), in connection with the
construction of the Tenant Improvements.  

2.3.1Project Manager's Access to Premises and Materials.  Tenant's Project
Manager, as well as Tenant's Representative set forth in Section 6.3, below,
shall have the right to perform a walk-through inspection of the Landlord's Work
prior to Tenant’s approval of each Draw Request (as defined in Section 2.4
below) for purposes of determining the condition of the Landlord's Work and
confirmation of the information contained in such Draw Request (each, a
“Progress Payment Walk-Through Inspection”), provided such walk-through
inspection shall not cause a Tenant Delay or a Landlord Delay (as defined in
Section 5, below). Additionally, Tenant’s Representative and Project Manager
will have access to the Premises and the Landlord’s and the Contractors' books
and records to provide construction management services in representing Tenant
with respect to the construction of the Tenant Improvements, and will be
provided with copies of all shop drawings and samples for review for compliance
with the Approved Working Drawings (as defined in Section 3.4 to this Tenant
Work Letter), will be permitted to assist in the drafting of Contractor bid
documents and to perform regular site visits, participate in weekly project
meetings, as reasonably required for construction management services of the
Landlord's Work on behalf of Tenant, and to participate in the walk-through
inspection of the Premises to determine whether the Delivery Condition has been
satisfied (in accordance with Section 5.4 below), and in the related preparation
of "punch-list" items and follow-up confirmation of completion or repairs of
such punch-list items (in accordance with Section 5.4 below).  Subject to the
Project Manager having reasonable rights of access to the Premises, notice of,
and the right to attend and participate at, construction meetings, and review
the annotated “as built” site copies of the Approved Working Drawings from time
to time, to the extent that the Project Manager delays the completion of the
Tenant Improvements in accordance with the Project Schedule, such delay will be
a Tenant Delay, subject to the terms and condition of Section 2.6
below.  Subject to the terms of Section 2.2.1, above, the fee of Tenant’s
Project Manager shall be paid or reimbursed by Landlord as a Tenant Improvement
Allowance Item, if Tenant so requests.

2.3.2PMA's Fee.  Landlord shall pay PMA a project management fee ("PMA's Fee")
equal to 2.65% of the Tenant Improvement Allowance Items payable by Landlord
from the Tenant Improvement Allowance and by Tenant from the Over-Allowance
Amount, if any), exclusive of (i) any FF&E Costs and (ii) PMA’s Fee.  PMA's Fee
will be established as a fixed fee once the Approved Tenant Budget (as defined
in Section 4.3.2 of this Tenant Work Letter) is determined (but subject to
revision as a result of any Tenant Change Order Requests, and any Landlord
Change Directives, in accordance with the terms and conditions of Section 4.2,
below), along with a schedule of payment of the PMA's Fee, which shall be
payable in monthly installments over the scheduled term of construction of the
Tenant Improvements as set forth in the Project Schedule.  

2.4Applications for Payment to Landlord's Agents and Payment Conditions.  From
time to time between the date of this Lease and the determination of the Final
Costs for the Premises, Landlord shall pay the Contractor and its subcontractors
for Tenant Improvement Allowance Items incurred by Landlord in accordance with
the Construction Contract, subject to the terms and conditions of Progress
Payments set forth in this Section 2.4 as follows:

2.4.1Draw Requests.  Prior to making any payment to the Contractor or to any
other third party manufacturer, vendor, supplier, or governmental authority or
utility retained by Landlord, for any other amount to be incurred by Landlord in
connection with the construction of the Tenant Improvements (each, a "Progress
Payment"), (a)  Tenant's Representative shall have received complete copies of
all of the fully-executed subcontracts and material supplier contracts that are
not included in the Construction Contract, as previously approved by Tenant in
accordance with Section 4.3.2 of this Tenant Work Letter, for all of the
Landlord's Agents (as hereinafter defined) included as payees in the applicable
Draw Request (as hereinafter defined), each of which shall be in the form
approved by Tenant in advance in accordance with this Tenant Work Letter, and
copies of all fully-executed Tenant Change Orders (as hereinafter defined)
associated therewith, if any (which shall cover all work for which Landlord
seeks to make payment pursuant to the applicable Draw Request, provided that
each contract and Change Order need be submitted only once for each such payee),
and (b) Tenant’s Representative shall have received and approved the Landlord's
written request for approval of the proposed Progress Payment amount (each, a
“Draw Request”), which Draw Request shall include the following items:  (i) a
request for payment of the Contractor in a form similar to the AIA G702 payment
application request, showing the schedule, by trade, of percentage of completion
of the Tenant Improvements, and detailing the portion of Tenant Improvements
completed and the portion not completed as of the date of such Draw Request;
(ii) invoices from all other "Landlord's Agents"

 

EXHIBIT B-2

 

 

 

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as defined below, for labor rendered and materials delivered to the Premises;
(iii) executed mechanic's lien releases from all of Landlord's Agents which
shall comply with the appropriate provisions, as reasonably determined by
Landlord, of California Civil Code Sections 8132, 8134, 8136 and 8138 (with
unconditional lien waivers from all of the Landlord's Agents for whom payments
were requested pursuant to the previous Draw Request in the amounts reasonably
approved by Tenant for payment to such Landlord's Agents pursuant thereto, as
such amount may be reduced by a retention not to exceed ten percent (10%) of the
amount reasonably approved by Tenant for payment); and (iv) a certificate from
the Architect certifying the requisite percentage of completion of such work has
been completed.  Notwithstanding the foregoing, if Landlord has paid any portion
of the Tenant Improvement Allowance to any of the Landlord's Agents, but
pursuant to any unresolved dispute between Landlord and such Landlord's Agent,
such Landlord's Agent shall fail to deliver an unconditional lien waiver, then
as long as Landlord provides reasonably satisfactory evidence to Tenant's
Representative that the amount included in such unconditional lien waiver has
been paid to such Landlord's Agent, then Tenant's Representative shall not
withhold approval of any ensuing Draw Request on the basis of such missing
unconditional lien waiver otherwise satisfying the foregoing requirements;
provided, however, that the foregoing shall not make Tenant liable for any
disputed amount in excess of the amount approved by Tenant for payment in
accordance with the Draw Request submitted by landlord in connection with such
disputed amount.  The Contractor and all subcontractors and, laborers used by
Landlord in connection with Tenant Improvements shall be known collectively as
"Landlord's Agents."  All contracts entered into by Landlord with Landlord's
Agents ("Landlord Agent Contracts") shall be subject to Tenant's reasonable
approval, provided, however, unless an approval process is otherwise expressly
set forth in the Tenant Work Letter, Tenant shall respond to any request for
Tenant approval to any Landlord Agent Contract in a timely manner so as not to
delay the Project Schedule.  

2.5Applications for Payment to Tenant's Agents and Payment Conditions.  From
time to time between the date of this Lease and the TIA Expiration Date, but not
more frequently than monthly, Landlord shall reimburse Tenant for Tenant
Improvement Allowance Items incurred by Tenant and payable to Architect,
Engineers and/or third-party manufacturers, vendors and suppliers (collectively
"Vendors"), in accordance with Applications for Payment submitted to Landlord in
accordance with this Section 2.5 as follows:

2.5.1Applications for Payment.  On or before the fifth (5th) day of each
calendar month in which Tenant may request reimbursement of Tenant Improvement
Allowance Items payable by Landlord from the Tenant Improvement Allowance,
Tenant shall deliver to Landlord the following items, to the extent applicable
to the amounts requested for reimbursement (each, an "Application for
Payment"):  a copy of such Architect's, Engineer's, Vendor's or other Tenant's
Agent's written receipts for fees and costs that are included in the amounts to
be reimbursed by Landlord pursuant to such Application for Payment.  No later
than the date that occurs thirty (30) days after such Application for Payment is
timely received by Landlord, Landlord shall deliver a check to Tenant in payment
of the lesser of:  (y) the amounts so requested by Tenant, as set forth in this
Section 2.5.1, above, and (z) the balance of any remaining available portion of
the Tenant Improvement Allowance; provided that Landlord may reasonably delay
payment of some or all of such amount to Tenant until Tenant has provided such
other information reasonably requested by Landlord within five (5) business days
of Landlord's receipt of such Application for Payment in confirmation of
Tenant's payment of the amounts requested therein.  

2.5.2Failure to Disburse Tenant Improvement Allowance.  If Landlord fails to
timely fulfill its obligation to fund any portion of the Tenant Improvement
Allowance for amounts to be reimbursed to Tenant in accordance with this Section
2.5, Tenant shall be entitled to deliver notice (the "Payment Notice") thereof
to Landlord and to any Superior Holders of the Project whose identity and
address have been previously provided to Tenant.  If Landlord still fails to
fulfill any such obligation within twenty (20) business days after Landlord's
receipt of the Payment Notice from Tenant and if Landlord fails to deliver
notice to Tenant within such twenty (20) business day period explaining
Landlord's reasons that Landlord believes that the amounts described in Tenant's
Payment Notice are not due and payable by Landlord ("Refusal Notice"), Tenant
shall be entitled, after Landlord's failure to pay such amounts within five (5)
business days after Tenant's delivery of a second notice from Tenant delivered
after the expiration of such (20) business day period, which second notice must
contain the following inscription, in bold faced lettering: “SECOND NOTICE
DELIVERED PURSUANT TO SECTION 2.5.2 OF EXHIBIT B-2 TO THE LEASE - - FAILURE TO
TIMELY PAY THE REQUESTED ALLOWANCE MAY RESULT IN TENANT'S PAYMENT OF THE SAME
AND A DEDUCTION FROM RENT UNDER THE LEASE,” to pay the same and offset the
amount so owed to Tenant by Landlord but not paid by Landlord (or if Landlord
delivers a Refusal Notice but only with respect to a portion of the amount set
forth in the Payment Notice

 

EXHIBIT B-2

 

 

 

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and Landlord fails to pay such undisputed amount as required by the next
succeeding sentence, the undisputed amount so owed to Tenant) against Tenant's
next obligations to pay Rent.  Notwithstanding the foregoing, Landlord hereby
agrees that if Landlord delivers a Refusal Notice disputing a portion of the
amount set forth in Tenant's Payment Notice, Landlord shall pay to Tenant,
concurrently with the delivery of the Refusal Notice, the undisputed portion of
the amount set forth in the Payment Notice.  However, if Tenant is in Default
under Section 19.1.1 of the Lease at the time that such offset would otherwise
be applicable, Tenant shall not be entitled to such offset until such Default is
cured.  If Landlord delivers a Refusal Notice, and if Landlord and Tenant are
not able to agree on the disputed amounts to be so paid by Landlord, if any,
within ten (10) days after Tenant's receipt of a Refusal Notice, Tenant may
submit such dispute to a referee under the provisions of the California Code of
Civil Procedure, Sections 638 — 645.1, inclusive, in accordance with Section
29.22 of the Lease.  If Tenant prevails in any such arbitration, Tenant shall be
entitled to apply such award as a credit against Tenant's obligations to pay
Rent.

2.6Project Schedule.  Subject to any Tenant Delays (as hereinafter defined), the
Premises shall be constructed by Landlord in accordance with this Tenant Work
Letter diligently following the effective date of this Lease; and subject to any
Tenant Delays, and Tenant's rights under this Lease, Landlord shall use
commercially reasonable efforts to construct the Tenant Improvements in the
Premises in accordance with the Project Schedule (as hereinafter defined) for
the Premises.  The term "Project Schedule" shall mean the following, as
applicable:  (a) for the construction of Tenant Improvements in Must-Take Space
1, the project schedule attached hereto and incorporated herein as Schedule 1 to
this Work Letter; and (b) for Must-Take Space 3, the construction schedule
incorporated into the Construction Contract for the Tenant Improvements thereto,
as approved by Tenant in accordance with Section 4.3.2 of this Tenant Work
Letter.  Tenant shall have the right to accelerate the milestone dates contained
in the Project Schedule for the construction of the Tenant Improvements (or,
with respect to the design of the Tenant Improvements, the applicable dates set
forth in Schedule 1 to this Tenant Work Letter) by written notice indicating the
revised milestone date that Tenant intends to advance (an “Acceleration
Notice”); and if Tenant so elects, Landlord and Tenant shall use mutual good
faith and commercially reasonable efforts to determine and agree upon the
additional cost, if any, of achieving the accelerated milestone date (which
shall similarly accelerate all subsequent milestone dates unless otherwise noted
in the applicable Acceleration Notice), in consideration of the effect of such
Acceleration Notice on all of the other terms and conditions of this Tenant Work
Letter; and in the event that Landlord and Tenant agree upon such additional
cost and the effect of such acceleration on the Project Schedule, the Project
Schedule for the construction of the Tenant Improvements shall be modified in
accordance with the Acceleration Notice.  If at any time during the design,
permitting and construction process Tenant reasonably believes that Landlord
will fail to meet any of such delivery or permitting deadlines, Tenant shall
have the right to notify Landlord of such belief and the reasons therefor, and
Landlord shall promptly provide a status update to Tenant, and revisions to
Schedule 1 to this Tenant Work Letter or a revised Project Schedule, as
applicable, to reflect any prior, on-going and anticipated delays.  If at any
time during the design, permitting or construction of the Premises, Landlord
reasonably believes that Landlord will fail to meet any of the required delivery
or permitting milestones of Schedule 1 to this Tenant Work Letter or the Project
Schedule, Landlord shall promptly notify Tenant of the anticipated delay,
including any known causation and the Landlord’s estimate of the duration of
such delay (if Landlord is reasonably capable of estimating such duration).  

SECTION 3

CONSTRUCTION DRAWINGS

3.1Selection of Architect/Construction Drawings.  Tenant shall retain Ferguson
Pape Baldwin Architects or another architect/space planner selected by Tenant
and reasonably approved by Landlord (the "Architect") to prepare the
"Construction Drawings," as that term is defined in this Section 3.1.  Tenant
shall retain the engineering consultants selected by Tenant and reasonably
approved by Landlord (the "Engineers") to prepare all plans and engineering
working drawings relating to the structural, mechanical, electrical, plumbing,
HVAC, life safety, and sprinkler 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 determined by Landlord, and
shall be subject to Landlord's approval, which shall not be unreasonably
withheld, conditioned or delayed.  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, and Landlord's approval

 

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(or deemed approval, in accordance with Section 3.7 below) of the Construction
Drawings pursuant to such review, 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 or approved (or
deemed approved) by Landlord or its space planner, architect, engineers and
consultants, and notwithstanding any advice or assistance which may be rendered
to Tenant by Landlord or Landlord's space planner, architect, engineers, and
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, and Tenant's waiver and indemnity set forth in this Lease
shall specifically apply to the Construction Drawings.

3.2Final Space Plan.  On or before the date set forth in Schedule 1, attached
hereto, Tenant and the Architect shall prepare the final space plan for Tenant
Improvements in the Premises (collectively, the "Final Space Plan"), which Final
Space Plan shall include a layout and designation of all offices, rooms and
other partitioning, their intended use, and equipment to be contained therein,
and shall deliver two (2) copies signed by Tenant of the Final Space Plan to
Landlord for Landlord's approval.  Landlord shall approve or disapprove the
Final Space Plan by notice to Tenant within five (5) business days after
Landlord's receipt of the same.  If Landlord disapproves the Final Space Plan,
Landlord's notice of disapproval shall specify any revisions Landlord desires in
the Final Space Plan.  If Landlord timely and reasonably disapproves of the
Final Space Plan, Tenant shall cause the Architect to revise the Final Space
Plan, taking into account the reasons for Landlord's disapproval, and resubmit
the Final Space Plan to Landlord for its approval.  Such revision and
resubmission shall occur within five (5) business days after Tenant's receipt of
Landlord's timely delivery of such notice of disapproval if such revision is not
material, and within such longer period of time as may be reasonably necessary
(but not more than ten (10) business days after such receipt by Tenant) if such
revision is material.  Notwithstanding the generality of the foregoing, Landlord
may not disapprove of any Final Space Plan proposed by Tenant unless the
proposed Tenant Improvements would cause a Design Problem (as hereinafter
defined).  A "Design Problem" shall mean any of the following:  (a) an adverse
effect on Base, Shell and Core of the Premises (as reasonably determined by
Landlord), (b) a material increase in the cost of occupancy, use, maintenance or
repair of the Building or the Project, or (c) noncompliance with Code.  If
Landlord’s written approval, or disapproval satisfying the requirements of the
preceding sentence, is not received by Tenant within ten (10) business days
following Landlord's receipt of the proposed Final Space Plan from Tenant, then
the terms of Section 3.7, below, shall be applicable.  Such procedure shall be
repeated as necessary until Tenant has approved the Final Space Plan.  

3.3Final Working Drawings.  After approving the Final Space Plan, Tenant shall
cause the Architect and the Engineers to prepare and deliver to Landlord 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 that conform to the approved
Final Space Plan.  Such preparation and delivery shall occur within fifteen (15)
business days after Landlord's approval of the Final Space Plan.  Landlord shall
approve or disapprove the Final Working Drawings by notice to Tenant within ten
(10) business days after Landlord's receipt of the same.  If Landlord
disapproves the Final Working Drawings, Landlord's notice of disapproval shall
specify any revisions Landlord desires in the Final Working Drawings.  If
Landlord timely and reasonably disapproves the Final Work Drawings in accordance
with this Section 3.3, Tenant shall cause the Architect and/or the Engineers to
revise the Final Working Drawings, taking into account the reasons for
Landlord’s disapproval (provided, however, that Tenant shall not be required to
cause the Architect or the Engineers to make any revision to the Final Working
Drawings that is inconsistent with the Approved Working Drawings or that Tenant
otherwise reasonably disapproves), and resubmit the Final Working Drawings to
Landlord for its approval.  Such revision and resubmission shall occur within
ten (10) business days after Tenant's receipt of Landlord’s timely notice of
disapproval if such revision is not material, and within such longer period of
time as may be reasonably necessary (but not more than fifteen (15) business
days after such receipt by Tenant) if such revision is
material.  Notwithstanding the generality of the foregoing, Landlord may not
disapprove of any Final Working Drawings proposed by Tenant unless the proposed
Tenant Improvements would cause a Design Problem.  Such procedure shall be
repeated as necessary until Landlord has approved the Final Working
Drawings.  Tenant shall have the right to value-engineer the design of the
Tenant Improvements in Tenant’s reasonable discretion as part of the process of
negotiating the cost of construction of the Tenant Improvements with the Bidding
Contractors. Landlord acknowledges that Tenant's value engineering efforts may
result in additional revisions to the Final Working Drawings, and as long as
such revisions do not cause a Design Problem, the Final Working Drawings shall
be modified by the Architect to incorporate such requested changes, in

 

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accordance with the process set forth in this Section 3.3 until the Final
Working Drawings are in a form which is complete for incorporation into the
Construction Contract as the basis of the contract sum payable to the Contractor
in accordance with Section 4.3.2 below; provided that Landlord's approval of the
Final Working Drawings incorporating any Tenant-requested value-engineering
changes shall not be withheld except in the case of a Design Problem.  The Final
Working Drawings approved by Landlord and Tenant (as modified in accordance with
Section 3.4, below, in order for the appropriate municipal authorities to issue
the Permits) are referred to in this Work Letter as the “Approved Working
Drawings”.    Without limiting the foregoing, if Landlord fails to timely
approve or reasonably disapprove the Final Working Drawings within ten (10)
business day following their submission by Tenant for Landlord's approval, the
terms of Section 3.7, below, shall be applicable.

3.4Permits.  The Final Working Drawings shall be approved by Landlord in
accordance with Section 3.3, above, or shall be deemed approved by Landlord in
accordance with Section 3.7, below (in either case, the "Approved Working
Drawings"), prior to the commencement of the construction of the Tenant
Improvements.  Tenant shall immediately 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 (the
"Permits"), and Landlord shall cooperate with Tenant in executing permit
applications and performing other ministerial acts reasonably necessary to
enable Tenant to obtain such Permits, and, in connection therewith, Tenant shall
coordinate with Landlord in order to allow Landlord, at its option, to take part
in all phases of the permitting process and shall supply Landlord, as soon as
possible, with all plan check numbers and dates of submittal and obtain the
Permits on or before the date set forth in Schedule 1 to this Tenant Work
Letter; provided, however, that promptly following approval of the Approved
Working Drawings (as the same may be modified in order to obtain the Permits in
accordance with this Section 3.4) and the issuance of the Permits by the
appropriate municipal authority, Landlord shall cause the Contractor to
physically pick up the Permits and inform Tenant that such permits have been
picked up.  Following Landlord’s approval, or deemed approval, of the Approved
Working Drawings, the Approved Working Drawings shall not be modified for any
reason other than a Minor Variation (as hereinafter defined) without Landlord’s
prior written consent, which shall not be unreasonably withheld, conditioned, or
delayed.  No material changes, modifications or alterations in the Approved
Working Drawings of any Project may be made without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, conditioned or
delayed.  "Minor Variation" shall mean any modification to make reasonable
adjustments for field deviations or conditions encountered during
construction.  Notwithstanding anything to the contrary set forth in this
Section 3.4, but subject to Landlord's obligation pursuant to Section 1, above,
Tenant hereby agrees that neither Landlord nor Landlord's consultants shall be
responsible for obtaining any building permit for the Premises and that the
obtaining of the same shall be Tenant's responsibility; provided however that
Landlord shall, in any event, cooperate with Tenant in executing permit
applications and performing other ministerial acts reasonably necessary to
enable Tenant to obtain the Permits.  

3.5Time Deadlines.  Landlord and Tenant shall use their mutual good faith
efforts and all due diligence to (a) cooperate with one another, and the
Architect and the Engineers, to complete all phases of the Construction Drawings
and the permitting process in order to receive the Permits in accordance with
the applicable Schedule 1 to this Tenant Work Letter, and (b) cooperate with one
another, and with the Contractor, to obtain a reasonable "Cost Proposal," as
that term is defined in Section 4.2 of this Tenant Work Letter, for the Tenant
Improvements to Must-Take Space 1, as soon as possible after the execution of
the Lease (and with respect to the Tenant Improvements to Must-Take Space 3, in
accordance with Schedule 1 to this Tenant Work Letter), and, in that regard,
Landlord and Tenant shall meet with one another to discuss Tenant's progress in
connection with the Construction Drawings and Permits, and in connection with
Landlord's progress in connection with the Cost Proposal and the Construction
Contract.  The applicable dates for approval of items, plans and drawings as
described in this Section 3, Section 4, below, and in this Tenant Work Letter
are set forth and further elaborated upon in Schedule 1 (the "Time Deadlines"),
attached hereto.  Tenant agrees to comply with those Time Deadlines applicable
to the Construction Drawings and Permits, and Landlord agrees to comply with
those Time Deadlines applicable to the Cost Proposal and the Construction
Contract.

3.6Changes to Approved Working Drawings.  Without limiting Tenant’s right to
make Minor Variations to the Approved Working Drawings without Landlord’s
approval, Tenant shall also have the right to modify the Approved Working
Drawings with Landlord’s prior written approval, which approval shall be granted
unless the requested modification would cause a Design Problem.  Tenant shall
request such modifications to the

 

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Approved Working Drawings by notifying Landlord in writing, in substantially the
same form as the AIA standard change order form (a “Tenant Change Order
Request”), which Tenant Change Order Request shall detail the nature and extent
of any such modification and shall be signed by Tenant's Representative and the
Contractor of the applicable Project.  Landlord shall use commercially
reasonable efforts to approve or reasonably disapprove such Tenant Change Order
Request no later than five (5) business days after Landlord's receipt thereof,
with any such disapproval of a Tenant Change Order Request to specify the
reasonable basis for such disapproval accompanied by a written detailed
description of changes by Landlord.  If Landlord approves a Tenant Change Order
Request, Tenant may cause the Approved Working Drawings to be modified
accordingly.  If Landlord fails to respond with Landlord's approval or
reasonable disapproval (in accordance with the terms and conditions of this
Section 3.6) within such five (5) business day period, then the terms of Section
3.7, below, shall be applicable.

3.7Deemed Approval.  If Landlord fails to notify Tenant of Landlord's approval
or disapproval of any proposed Final Space Plan or Final Working Drawings, or
any Tenant Change Order Request, within the applicable time period set forth
herein, Tenant shall have the right to provide Landlord with a second (2nd)
written request for approval (a "Second Request") that specifically identifies
the applicable Construction Drawings or Tenant Change Order Request and contains
the following statement in bold and capital letters:  "THIS IS A SECOND REQUEST
FOR APPROVAL PURSUANT TO THE PROVISIONS OF SECTION 3.7 OF EXHIBIT B-2 TO THE
LEASE.  IF LANDLORD FAILS TO RESPOND WITHIN FIVE (5) BUSINESS DAYS AFTER RECEIPT
OF THIS NOTICE, THEN LANDLORD SHALL BE DEEMED TO HAVE APPROVED THE FINAL SPACE
PLAN (OR FINAL WORKING DRAWINGS, OR TENANT CHANGE ORDER REQUEST, AS APPLICABLE)
DESCRIBED HEREIN."  If Landlord fails to respond to such Second Request within
five (5) business days after Landlord's receipt thereof, the proposed Final
Space Plan, Final Working Drawings or Tenant Change Order Request shall be
deemed approved by Landlord.

SECTION 4

CONSTRUCTION OF THE TENANT IMPROVEMENTS

4.1Selection of Contractor.  Tenant shall select, pursuant to the terms of this
Section 4.1, below, a Contractor (“Contractor”) from the following general
contractors as Bidding Contractors for Tenant Improvements:  (a) Swinerton; (b)
Pacific Building Group; or (c) Whiting Turner (the "Approved Bidding
Contractors"), to construct the Tenant Improvements pursuant to the terms of
this Tenant Work Letter.  Landlord hereby approves each of the Approved Bidding
Contractors.

4.1.1Selection of Bidding Contractors.  On or before the date scheduled for
Landlord and Tenant's approval of the Approved Working Drawings in the Schedule
1 to this Tenant Work Letter, Landlord and Tenant shall mutually agree upon
those Approved Bidding Contractors to receive bid requests for the construction
of the Tenant Improvements and to prepare competitive bids in accordance with
Section 4.1.2, below (each of the Approved Bidding Contractors and any other
general contractors selected to receive such a bid package, a "Bidding
Contractor," and, collectively, the "Bidding Contractors").  Promptly following
Landlord's approval or deemed approval of the Approved Drawings, Landlord shall
submit the Tenant Improvements construction bidding package, which shall be
jointly prepared by Landlord's Representative and Tenant's Representative in
consultation with PMA and the Project Manager, to the Bidding Contractors.  Each
of the Bidding Contractors shall be notified in the Tenant Improvements
construction bid package (i) of the Project Schedule for completion of the
Tenant Improvements, and (ii) the requirement that the Contractor shall be
required to bid each of the major subcontractors (as reasonably and mutually
determined by Landlord and Tenant) with at least two (2) qualified
subcontractors designated by Tenant (the "Designated Subcontractors"), subject
to Landlord's reasonable approval, and Tenant shall only select Designated
Subcontractors that are qualified contractors, licensed and bondable in the
State of California, with substantial experience in industrial projects of
similar size as the Premises.  All Bidding Contractors shall be instructed to
submit their bids directly to Landlord with copies to the Tenant's
Representative.  

4.1.2Competitive Bid Process.  Unless Tenant timely delivers the Negotiated Bid
Notice in accordance with Section 4.1.3, below, Landlord shall prepare a bid
analysis of the bids timely submitted by the Bidding Contractors and distribute
such bid analysis to Tenant promptly following receipt of bids.  Within five (5)
business days after providing Tenant with the bid analysis report for the
Bidding Contractors, Landlord and Tenant shall endeavor to jointly select
a  Contractor from among the Bidding Contractors based upon the competitive bids

 

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received by Landlord and Tenant pursuant to this Section 4.1 of this Tenant Work
Letter; provided that (i) any failure by Tenant to reasonably participate in
such process shall be a Tenant Delay; and (ii) any failure by Landlord to
reasonably participate in such process shall be a Landlord
Delay.  Notwithstanding the foregoing, if Landlord and Tenant fail to agree on a
Contractor from among the Bidding Contractors within such five (5) business day
period following Tenant’s receipt of Landlord's bid analysis, Tenant shall be
permitted to select the Contractor from among the Bidding Contractors in
Tenant’s sole discretion provided such Bidding Contractor agrees to comply with
the Project Schedule.  The competitive bid of the Bidding Contractors selected
pursuant to this Section 4.1.2, or the negotiated bid selected by Tenant
pursuant to Section 4.1.3 below, as applicable, shall be documented as a written
proposal from the Bidding Contractor for the cost of completing the construction
of the Tenant Improvements on a guaranteed maximum price basis, based upon the
Approved Working Drawings and shall include a detailed line item breakdown of
all costs included in the completion of the construction of the Tenant
Improvements, including the Contractor’s fee, overhead, general conditions and
insurance.  

4.1.3Negotiated Bid Option.  By written notice to Landlord delivered within five
(5) business days following Tenant’s receipt of the last bid to be timely
submitted by the Bidding Contractors in accordance with Section 4.1.2 above,
Tenant may notify Landlord that Tenant intends to solicit negotiated bids from
one (1) or more of the Bidding Contractors from whom bids have been timely
received (a “Negotiated Bid Notice”), and if Tenant timely delivers a Negotiated
Bid Notice to Landlord, then for a period not to exceed fifteen (15) business
days following delivery of such notice (the “Negotiated Bid Period”), Tenant may
pursue negotiated bids from such Bidding Contractor(s).  Landlord shall have the
right to participate in Tenant's negotiated bid process with any of the of the
Bidding Contractors designated in the Negotiated Bid Notice following Tenant's
timely delivery of the Negotiated Bid Notice (provided that, subject to the
terms and conditions set forth in Section 5.3, below, any failure by Landlord to
reasonably participate in such process shall be a Landlord Delay), and Tenant
shall share copies of all negotiated bid responses received by Tenant pursuant
to such process on an “open book” basis.  If Tenant fails to timely deliver the
Negotiated Bid Notice to Landlord, Landlord and Tenant shall select the
Contractor in accordance with the competitive bid process set forth in Section
4.1.2 of this Work Letter.  Notwithstanding the foregoing, Tenant may continue
to negotiate with the Bidding Contractors beyond the expiration of the
Negotiated Bid Period without affecting Tenant's right to select the Contractor
pursuant to such negotiations; provided that any delays resulting from such
Tenant negotiations with the Bidding Contractors beyond the Negotiated Bid
Period shall be Tenant Delays.  

4.2Requests for Information and Base Building Change Directives.  Landlord shall
require the Contractor to copy Tenant's Representative and Project Manager on
any requests for information submitted to Landlord relating to the Tenant
Improvements ("RFI’s").  In addition, Landlord shall consult with Tenant's
Representative and Project Manager in advance of, and provide Tenant's
Representative and Project Manager with copies of:  (i) Landlord's response to
any RFI, and (b) any plan clarifications relating the Approved Working Drawings
sent to any of the Landlord's Agents (collectively, "Landlord Change
Directives"), provided that Tenant shall either approve or reasonably disapprove
any proposed Landlord Change Directive within three (3) business days after
Tenant's Representative's receipt of a copy of such proposed Landlord Change
Directive from Landlord, with Tenant's disapproval of a proposed Landlord Change
Directive to be limited to the following reasons:  either (i)  Tenant's
Representative reasonably determines that such Landlord Change Directive will
adversely impact the design or construction of the completed Landlord's Work, or
(ii) Tenant's Representative determines that such Landlord Change Directive will
materially increase the cost of construction of the completed Landlord's Work or
materially increase the Tenant's cost of occupancy, use, maintenance, repair or
restoration of the Premises following completion of the Landlord's Work, and in
either case a reasonable alternative solution is available.  Should Tenant's
Representative fail to timely deliver such reasons for objections to any
Landlord Change Directive in writing, then such Landlord Change Directive (and
any additional or increased Development Costs associated therewith) shall be
deemed to have been approved by Tenant in accordance with this Section 4.2 (but
without limiting Tenant's rights under this Tenant Work Letter relating to the
Tenant's Representative's right to review the Landlord's books and records
relating to the Tenant Improvements).

4.3Construction of Tenant Improvements by Contractor under the Supervision of
Landlord.

4.3.1Over-Allowance Amount.  On the Cost Proposal Delivery Date, Tenant shall
identify the amount (the "Over-Allowance Amount") equal to the difference
between (i) the amount of the Cost Proposal and (ii) the amount of the Tenant
Improvement Allowance.  In the event that the Cost Proposal is greater than the

 

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amount of the Tenant Improvement Allowance, then Tenant shall pay a percentage
of each amount requested by the Contractor or otherwise to be disbursed under
this Tenant Work Letter, which percentage shall be equal to the Over-Allowance
Amount divided by the amount of the Cost Proposal (after deducting from the Cost
Proposal any amounts expended in connection with the preparation of the
Construction Drawings, and the cost of all other Tenant Improvement Allowance
Items incurred prior to the commencement of construction of the Tenant
Improvements), and such payments by Tenant (the "Over-Allowance Payments") shall
be a condition to Landlord's obligation to pay any amounts from the Tenant
Improvement Allowance.  In the event that, after the Cost Proposal Delivery
Date, any revisions, changes, or substitutions shall be made to the Construction
Drawings or the Tenant Improvements, any additional costs which arise in
connection with such revisions, changes or substitutions or any other additional
costs shall be added to the Over-Allowance Amount and the Final Costs, and the
Over-Allowance Payments shall be recalculated in accordance with the terms of
the immediately preceding sentence.

4.3.2Landlord's Retention of Contractor.  Landlord shall submit to Tenant's
Representative and Project Manager a copy of the Landlord's proposed
construction contracts with the Contractor selected in accordance with Section
3.1 above (the "Construction Contract") for Tenant's review and prior written
approval thereof, which shall not be unreasonably withheld, provided that the
terms and conditions of such Construction Contract are in compliance with the
terms and conditions of this Section 4.3.2, below, and if Tenant’s written
approval or disapproval (accompanied by a written detailed description of
changes required by Tenant to satisfy its concerns relating to the proposed
Construction Contract) is not received within ten (10) business days after such
contract is submitted to Tenant for Tenant’s approval, then such delay by Tenant
in the delivery of such written approval or disapproval shall be a Tenant
Delay.  If Tenant timely disapproves the proposed Construction Contract in
accordance with this Section 4.3.2, Landlord shall cause the proposed
Construction Contract to be revised as reasonably required to address Tenant’s
specified concerns, and shall submit the revised Construction Contract to Tenant
for its review and approval as provided in this Section 4.3.2, and such
procedure shall continue until Tenant has approved of the proposed Construction
Contract for execution by Landlord and the Contractor (provided that Landlord
shall not be liable to Tenant for the Contractor’s refusal to agree to any of
Tenant's changes and any delay in negotiating the Construction Contract as a
result thereof shall be deemed a Tenant Delay), provided that such consent, or
any objections or comments, provided by Tenant (or lack thereof) shall in no way
imply that such Construction Contract is sufficient or meet the requirements for
the related work under this Tenant Work Letter.  The Construction Contract shall
be in the AIA form of a guaranteed maximum price basis (A102-2007) or a Cost
plus Fee with GMP construction agreement (A103-2007).  Landlord shall use
commercially reasonable efforts to cause the Construction Contract to provide
that:  (a) Tenant and Tenant's Representative will be named as additional
insureds on each CGL policy to be carried by Contractor; (b) Tenant shall be an
express third-party beneficiary of all of the Landlord contractual rights and
all of the Contractor's obligations, including, but not limited to, (i) naming
Tenant as an indemnified party for the Landlord's Agent's indemnification
obligations, (ii) Tenant shall be a permitted assignee of Landlord's interest
the Construction Contract with the right to enforce the covenants and
obligations of the Contractor, and (iii) both Landlord and Tenant shall be named
as the beneficiaries of all industry standard warranties, and (c) upon notice
from Tenant that a "Construction Contract Assignment Condition" (as that term is
defined below) has occurred, the "Owner" position in the Construction Contract
shall be assigned by Landlord to Tenant and Contractor shall accept such
assignment and recognize Tenant as the Owner under the Construction
Contract.  If following a Construction Contract Assignment Condition, Tenant
reasonably elects to accelerate the then-effective Project Schedule in order to
achieve Substantial Completion of the Tenant Improvements as soon as reasonably
practical following Tenant's delivery of written notice that a Construction
Contract Assignment Condition has occurred, then any costs reasonably incurred
by Tenant in connection with such acceleration (and which would not have been
incurred by Tenant or Landlord but for such acceleration) shall be paid by
Landlord and excluded from Tenant Improvement Allowance Items payable from the
Tenant Improvement Allowance or the Over-Allowance.  As used herein, a
"Construction Contract Assignment Condition" shall mean (y) with respect to the
Tenant Improvements to Must-Take Space 1, a failure by Landlord to achieve
Substantial Completion of the Tenant Improvements by July 30, 2018; and (z) with
respect to the Tenant Improvements to Must-Take Space 3, a failure by Landlord
to achieve Substantial Completion of the Tenant Improvements by August 30, 2019,
in either case as the result of a Landlord Delay.  In addition to the foregoing,
the proposed Construction Contract shall include the following (provided that
Landlord shall not be liable to Tenant for the Contractor’s refusal to include
the following in the Construction Contract and any delay in negotiating the
Construction Contract as a result thereof shall be deemed a Tenant Delay):

 

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(a) all subcontractors’ subcontracts shall, to the extent possible, have unit
pricing which shall be applicable to the pricing of any Tenant Change Order
Requests.  Additionally, prior to Substantial Completion of the Tenant
Improvements, Tenant shall have the right to require that any subcontractor
invoices and/or schedules of value that do not provide sufficient detail
satisfactory to Tenant, provide additional pricing breakout for portions of
their work.  Such pricing breakout materials will take the form of simple
spreadsheets or letters describing in detail the nature of work and references
to the Approved Working Drawings indicating the location of the work performed
by such subcontractor; and

(b)Tenant shall have access to the Contractor ’s books and records relating to
the construction of the Tenant Improvements on an “open book” basis throughout
the construction thereof, and shall have the right to audit the Contractor’s
costs and expenses, including all invoices submitted to Landlord in support of
the Draw Requests at any time within the 6-month period immediately following
Substantial Completion of the Tenant Improvements, which audit may be performed
for Tenant, at Tenant’s sole cost and expense.

4.3.3Contractor's Warranties, Guaranties and Insurance.  Landlord shall obtain
customary warranties and guaranties from the Contractor. Landlord hereby assigns
to Tenant all warranties and guaranties by Contractor relating to the Tenant
Improvements, and, subject to the terms of Section 1, above, Tenant hereby
waives all claims against Landlord relating to, or arising out of the
construction of, the Tenant Improvements.  All of Landlord's Agents shall carry
worker's compensation insurance covering all of their respective employees, and
shall also carry public liability insurance, including property damage, all with
limits, in form and with companies reasonably approved by Tenant.  In addition,
Landlord shall cause the Contractor to carry "Builder's All Risk" insurance in
an amount reasonably approved by Tenant covering the Tenant Improvements.  In
the event that the Base, Shell and Core or any of the Tenant Improvements are
damaged by any cause covered by such insurance during the course of the
construction thereof, Landlord shall enforce the terms of the Construction
Contract, including without limitation any indemnity provisions, in order to
cause the damage to be repaired using the proceeds of such insurance.  If the
Base, Shell and Core or any of the Tenant Improvements are damaged by any cause
not covered by insurance but would have been covered by insurance if Landlord
had carried (or required the Contractor to carry) the insurance required by the
terms of this Tenant Work Letter, then Landlord shall cause such damage to be
repaired at Landlord’s sole cost and expense, and not as a cost of Tenant
Improvements payable from the Tenant Improvement Allowance or any
Over-Allowance.  Prior to the completion of the Tenant Improvements, such
“Builder’s All Risk” insurance is an expense included in the Tenant Improvements
Allowance Items.  Landlord shall cause all “Builder’s All-Risk” insurance
coverage obtained and maintained by Landlord or the Contractor pursuant to this
Tenant Work Letter to preclude or waive subrogation claims by the insurer
against Tenant, its agents, employees and representatives, and if reasonably
available any certificate evidencing such insurance coverage shall contain a
provision that the company writing such policy, or its agent, will endeavor to
give Tenant thirty (30) calendar days prior written notice of any cancellation
or lapse of the policy or any reduction in the amounts of such insurance prior
to the Substantial Completion of the Tenant Improvements.  

4.3.4Tenant's Covenants.   Tenant hereby indemnifies Landlord for any loss,
claims, damages or delays arising from the actions of Architect on the Premises
or in the Building.  Within thirty (30) days following the Substantial
Completion of the Premises, Tenant shall have prepared and delivered to the
Building two (2) copies signed by Tenant of the "as built" plans and
specifications (including all working drawings) for the Tenant Improvements.

4.4Tenant's Access to Contractor's Books and Records.  Tenant shall have the
right to review all documentation relating to the costs incurred by Landlord in
connection with the construction of the Tenant Improvements, and any FF&E Costs
incurred by Landlord for the Premises (collectively, the "Final Costs"), on an
“open book” basis.  In that regard, Landlord shall make reasonably available for
Tenant’s review and copying all material invoices, applications for payment, and
other material books, records and other documentation evidencing the Final Costs
incurred by Landlord.  Any dispute regarding Final Costs shall be subject to the
dispute resolution process set forth Section 1.4.4.5 of the Lease (as if the
Final Costs were the Project Costs).  Landlord and Tenant shall reasonably
cooperate with one another in good faith to coordinate the construction of the
Landlord's Work with the Tenant's business operations at the Project in a manner
reasonably acceptable to both Landlord and Tenant, which cooperation shall
include, but not be limited to, (i) coordinating contractor and its
subcontractors' parking at the Project with the parking of the vehicles of
Tenant's employees during construction of the Landlord's Work, (ii)

 

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minimizing interference with Tenant’s ongoing business operations, and
mitigating adverse effects, such as noise, vibrations and dust, on the quiet use
and enjoyment of the Lusk 1 and Lusk 2 Buildings and Common Areas of the Project
by Tenant's employees and visitors during normal working hours, and (iii)
coordinating timing of construction deliveries to avoid delayed access to and
from the parking areas of the Project and the Existing Buildings by Tenant's
employees during normal working hours.  Landlord and Tenant shall use their
commercially reasonable and good faith efforts and diligence to cooperate with
the Architect, the Engineers, and the Contractor so as to enable the prompt and
timely completion of the Tenant Improvements in accordance with the Project
Schedule.

4.5Landlord's Deliverables; Contractor's Warranties and Guaranties.  Landlord
shall obtain customary warranties and guaranties from the Contractor (the
“Contractors' Warranties”), and shall cooperate with Tenant in obtaining any
extended warranties reasonably requested by Tenant on any of the Tenant
Improvements (collectively with the Contractors' Warranties, the "Project
Warranties").  Within sixty (60) days following the Substantial Completion of
the Premises, Landlord shall have prepared and delivered to Tenant copies of all
such third-party Project Warranties, (the "Landlord's  Deliverables").  In
addition to the Project Warranties, Landlord hereby assigns to Tenant all
warranties and guaranties by the Contractor, and all manufacturers, vendors and
subcontractors relating to the construction of the Tenant Improvements to the
extent related to Tenant's Repair Obligations and, if applicable, and Tenant
Assumed Obligation, afforded Landlord by operation of law (collectively with the
Project Warranties, the "Assigned Warranties"); and, subject to the terms of
Section 1 above, and without limiting the Landlord's Repair Obligations or
modifying any of the other terms and conditions of this Lease (including, but
not limited to, the express exclusions of certain repairs, maintenance and
capital costs under the terms and conditions of this Lease), Tenant hereby
waives all claims against Landlord relating to, or arising out of the
construction of, the Tenant Improvements; provided that the foregoing waiver
shall not extend to any Tenant claims arising out of the Landlord's breach of
any of its obligations under this Tenant Work Letter.

SECTION 5

COMPLETION OF THE TENANT IMPROVEMENTS;
COMMENCEMENT DATE

5.1Ready for Occupancy.  The Premises shall be deemed "Ready for Occupancy" upon
the Substantial Completion of the Premises.  For purposes of this Lease,
"Substantial Completion" of the Premises shall occur upon the date the Premises
is in the "Delivery Condition," as that term is defined in Section 5.5, below.

5.2Delay of the Substantial Completion of the Premises.  Except as provided in
this Section 5.2, the Must-Take 1 Commencement Date or Must-Take 3 Commencement
Date, as applicable, shall occur as set forth in the Lease and Section 5.1,
above.  If there shall be a delay or there are delays in the Substantial
Completion of the Premises or in the occurrence of any of the other conditions
precedent to the Must-Take 1 Commencement Date or Must-Take 3 Commencement Date,
as applicable, as set forth in the Lease, as a direct, indirect, partial, or
total result of:

5.2.1Tenant's failure to comply with the Time Deadlines;

5.2.2Tenant's failure to timely approve any matter requiring Tenant's approval
in accordance with the time requirements of this Tenant Work Letter;

5.2.3A breach by Tenant of the terms of this Tenant Work Letter or the Lease;

5.2.4Any Tenant Change Order;

5.2.5Tenant's requirement for materials, components, finishes or improvements
which are not available in a commercially reasonable time given the anticipated
date of Substantial Completion of the Premises, as set forth in the Lease, or
which are different from, or not included in, the Standard Improvement Package,
which are ordered to Tenant's specifications with Tenant’s knowledge (based on
written notice from the Landlord’s Representative, the Architect or the
Contractor) that such items are unlikely to be received at the Premises in
accordance with the Project Schedule, thereby causing a Tenant Delay;

 

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5.2.6Changes to the Base, Shell and Core required by the Approved Working
Drawings;

5.2.7Any delay in obtaining the Permits or a "CofO," as that term is defined in
Section 5.3, below, resulting from the Approved Working Drawings or any other
information provided by Tenant to Landlord or the Contractor; or

5.2.8Any other acts or omissions of Tenant, or its agents, or employees,
including, without limitation, any act or omission which causes the Contractor
to fail to meet the Project Schedule;

(each, a "Tenant Delay") then, notwithstanding anything to the contrary set
forth in the Lease or this Tenant Work Letter and regardless of the actual date
of the Substantial Completion of the Premises, the date of the Substantial
Completion of the Premises shall be deemed to be the date the Substantial
Completion of the Premises would have occurred if no Tenant Delay, as set forth
above, had occurred.  Except for delays where there is an express notice or
response period under this Tenant Work Letter or this Lease, no Tenant Delay
shall be deemed to have occurred unless Landlord has given Tenant written
notice, promptly following Landlord’s actual knowledge thereof, that an act or
omission on the part of Tenant or its agents, employees or contractors has
occurred which will cause such a delay and Tenant fails to cure such delay
within two (2) business days after receipt of such notice.  

5.3A "Landlord Delay" shall mean only an actual delay resulting from (i)  the
failure of the Contractor to act within the time limits set forth in the Project
Schedule or this Tenant Work Letter to the extent Landlord fails to reasonably
cooperate with Tenant's efforts enforce such obligations under the Construction
Contract; (ii) the failure of Landlord to provide any required authorizations or
approvals within the time periods set forth in this Tenant Work Letter;
(iii) the failure of Landlord to timely approve or disapprove any proposed Final
Space Plan or proposed Final Working Drawings, (iii) delays due to the acts or
failures to act of Landlord or Landlord Parties with respect to payment of the
Tenant Improvement Allowance (or any Over-Allowance amount deposited with
Landlord) and any cessation of work as a result thereof, (iv) a violation by
Landlord of any of its obligations under the Lease or this Tenant Work Letter;
(v) the issuance of a stop work order by any governmental authority (but only to
the extent caused for reasons within Landlord’s reasonable control and not
caused by an act or omission of Tenant, or any of the Tenant's Agents); (vi) any
act or omission by Landlord or any of the Landlord's Agents that causes Landlord
to be in default under the Construction Contract (and which was not caused by a
Tenant Delay); or (vii) Landlord's denial of Tenant access to the Premises
during the Premises Fit-Out Period (as defined in Section 6.1, below) for more
than ten (10) consecutive full days.  Except for delays where there is an
express notice or response period under this Tenant Work Letter or this Lease,
no Landlord Delay shall be deemed to have occurred unless Tenant has given
Landlord written notice, promptly following Tenant's actual knowledge thereof,
that an act or omission on the part of Landlord or its agents, employees or
contractors has occurred which will cause such a delay and Landlord fails to
cure such delay within two (2) business days after receipt of such notice.  

5.4Delivery Condition.  The "Delivery Condition" shall occur at such time as
Landlord delivers the Premises to Tenant with (i) the completion of construction
of the Tenant Improvements in the Premises pursuant to the Approved Working
Drawings, with the exception of any industry standard punch list items and any
tenant fixtures, work-stations, built-in furniture, or equipment to be installed
by Tenant or under the supervision of Contractor, (ii) Landlord has received a
certificate of occupancy or temporary certificate of occupancy, or legal
equivalent, for the Premises for general office assuming a normal and customary
office occupancy density (a "CofO"), (iii) all Building Systems serving the
Premises are good working condition in accordance with Section 1, above, (iv)
Architect has signed an AIA Document G704 – 2000 (Certificate of Substantial
Completion), (v) Landlord has balanced the climate control equipment in the
Must-Take 1 Commencement Date or Must-Take 3 Commencement Date, as applicable;
provided, however, Tenant acknowledges that it is possible that additional
air-balancing may be required following such initial air-balancing for the
Premises, and that only the initial 30 days of rebalancing of the of climate
control equipment for the Premises shall be covered by the Landlord's Warranty,
with any subsequent air-balancing of the climate control systems to be performed
by Landlord as part of the Direct Expenses associated with Landlord's
maintenance and repair of the Building Systems, and (vi) representatives of
Landlord and Tenant have completed a mutual walk-through inspection of the
Premises and have mutually and reasonably agreed upon a set of industry standard
"punch list" items to be completed by Landlord following the "Must-Take Space 1
Delivery Date" or the "Must-Take Space 3 Delivery Date," as applicable.  The
date that Landlord causes the Delivery Condition to occur shall be referred to
herein as the "Must-Take Space 1 Delivery Date" or the "Must-Take Space 3
Delivery Date," as applicable.  If Tenant disagrees with Landlord’s assertion
that

 

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Delivery Condition has been achieved, then Tenant shall notify Landlord in
writing, within five (5) business days following the final walk-through
inspection, indicating the reasons for withholding such
confirmation.  Thereafter, the parties shall mutually select an independent
licensed general contractor with at least ten (10) years of experience in
construction of tenant improvements in First Class Life Sciences Projects, who
is not affiliated with Landlord or Tenant or any of their respective agents, or
retained by either of them or any of their agents in any capacity within the
three (3) year period preceding retention pursuant to this Tenant Work Letter
(the applicable person being referred to herein as the “Third Party Inspector”),
who shall be notified of the dispute, and shall be instructed to immediately
visit the Must-Take Space 1 or Must-Take Space 3, as applicable, to determine
whether Delivery Condition has been achieved.  The determination of the date of
Delivery Condition by the Third Party Inspector shall be binding on the parties,
and the costs of such Third Party Inspector shall be split equally by the
parties.  From the date of Delivery Condition and until Landlord has caused all
industry standard punch list items to be completed, Landlord shall comply with
all reasonable requests of Tenant relating to the scheduling and performance of
any remaining work in and about the Premises.

SECTION 6

MISCELLANEOUS

6.1Tenant's Entry Into the Premises Prior to Substantial Completion.  Provided
that Tenant and its agents do not interfere with Contractor's work in the
Building and the Premises, Contractor shall allow Tenant access to the Premises
at least sixty (60) days prior to the Substantial Completion of the Premises for
the purpose of Tenant installing Tenant's furnishings, equipment and
overstandard fixtures (including Tenant's data and telephone equipment) in the
Premises (the "Premises Fit-Out Period").  Prior to Tenant's entry into the
Premises as permitted by the terms of this Section 6.1, Tenant shall submit a
schedule to Landlord and Contractor, for their approval (which shall not be
unreasonably withheld, conditioned or delayed), 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
Building or Premises and against injury to any persons caused by Tenant's
actions pursuant to this Section 6.1.

6.2No Miscellaneous Charges. In addition to Landlord's obligations under the
Lease, Landlord shall provide to Tenant and Tenant's Agents, notwithstanding
anything to the contrary contained in this Lease, without charge (to the extent
utilized in connection with the construction of the Tenant Improvements or
Tenant move into the Premises), but subject to availability, parking, utilities,
freight elevator service and loading docks during the period that such Tenant's
Agents are actually present in the Building and working on the design and/or
construction of the Tenant Improvements during the Building Hours.

6.3Tenant's Representative.  Tenant has designated James Page ("Tenant's
Representative") 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.

6.4Landlord's Representative.  Landlord has designated Project Management
Advisors ("PMA") ("Landlord's Representative") as its sole representative with
respect to the matters set forth in this Tenant Work Letter, who, until further
notice to Tenant, shall have full authority and responsibility to act on behalf
of the Landlord as required in this Tenant Work Letter.

6.5Tenant's Agents.  The term "Tenant's Agents" shall mean the Architect and
Engineer, Tenant's Representative, and any contractors, subcontractors,
laborers, materialmen, and suppliers retained directly by Tenant.  Tenant's
Agents shall be shall be subject to Landlord's reasonable approval.

6.6Time 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.  In all instances where Tenant is required to approve or deliver an item,
if no written notice of approval is given or the item is not delivered within
the stated time period, at Landlord's sole option, at the end of such period the
item shall automatically be deemed approved or delivered by Tenant and the next
succeeding time period shall commence.

 

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6.7Tenant's Lease Default.  Notwithstanding any provision to the contrary
contained in this Lease, if an event of default as described in the Lease, or a
default by Tenant under this Tenant Work Letter, and Tenant fails to cure such
default within any applicable notice and cure period set forth in the Lease (or
within ten (10) business days if Tenant is in default under this Tenant Work
Letter), at any time on or before the Substantial Completion of the Premises,
then (i) in addition to all other rights and remedies granted to Landlord
pursuant to the Lease, Landlord shall have the right to withhold payment of all
or any portion of the Tenant Improvement Allowance and/or Landlord may cause
Contractor to cease the construction of the Premises (in which case, Tenant
shall be responsible for any delay in the Substantial Completion of the Premises
caused by such work stoppage as set forth in Section 5 of this Tenant Work
Letter), and (ii) all other obligations of Landlord under the terms of this
Tenant Work Letter shall be forgiven until such time as such default is cured
pursuant to the terms of the Lease.

6.8Disputes.  Except in connection with provisions in this Tenant Work Letter
than have an express dispute resolution process, in the event of any dispute
between Landlord and Tenant in connection arising under this Tenant Work Letter,
either party may institute arbitration proceedings pursuant to arbitration
administered by the JAMS or any successor thereto under the Expedited Procedures
provisions (Rules 16.1-16.2 in the current edition) of the JAMS Comprehensive
Arbitration Rules and Procedures (as such rules may be modified from time to
time by JAMS, the “Arbitration Rules”), and such determination rendered by the
arbitrator mutually selected by Landlord and Tenant in accordance with the
Arbitration Rules (the “Arbitrator”) shall be binding upon the parties and may
be entered in any court having jurisdiction thereof.  

 

 

EXHIBIT B-2

 

 

 

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SCHEDULE 1 TO EXHIBIT B-2

TIME DEADLINES

MUST-TAKE SPACE 1

 

Dates

Actions to be Performed

A.

September 28, 2017

Final Space Plan to be completed by Tenant and delivered to Landlord.

B.

October 20, 2017

Tenant to deliver Final Working Drawings to Landlord.

C.

December 31, 2017

Tenant to cause all Permits to be approved by the appropriate municipal
authorities and ready to be picked up by Contractor.

D.

Five (5) business days after the receipt of the Cost Proposal by Tenant.  

Tenant to approve Cost Proposal and deliver Cost Proposal to Landlord.

 

MUST-TAKE SPACE 3

 

Dates

Actions to be Performed

A.

July 11, 2018

 

Final Space Plan to be completed by Tenant and delivered to Landlord.

B.

August 1, 2018

Tenant to deliver Final Working Drawings to Landlord.

C.

September 30, 2018

Tenant to cause all Permits to be approved by the appropriate municipal
authorities and ready to be picked up by Contractor.

D.

Five (5) business days after the receipt of the Cost Proposal by Tenant.  

Tenant to approve Cost Proposal and deliver Cost Proposal to Landlord.

 

 

 

SCHEDULE 1 TO EXHIBIT B-2

 

 

 

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EXHIBIT B-3

SORRENTO SUMMIT

TENANT WORK LETTER – MUST-TAKE SPACE 2

This Exhibit B-3 is applicable to the construction of Tenant Improvement in the
Must-Take Space 2.  This Tenant Work Letter shall set forth the terms and
conditions relating to the construction of the Lusk 3 Building and the tenant
improvements within the Lusk 3 Building as required to satisfy the conditions of
delivery of the Must-Take Space 2 more particularly set forth in this
Lease.  This Tenant Work Letter is essentially organized chronologically and
addresses the issues of the Landlord's construction of the Lusk 3 Building
structural and core improvements, and the interior improvements of the Must-Take
2 Space, in sequence, as such issues will arise during the actual construction
of the Premises.  All references in this Tenant Work Letter to Articles or
Sections of "this Lease" shall mean the relevant portion of Articles 1 through
29 of the Lease to which this Tenant Work Letter is attached as Exhibit B-3 and
of which this Tenant Work Letter forms a part, and all references in this Tenant
Work Letter to Sections of "this Tenant Work Letter" shall mean the relevant
portion of Sections 1 through 5 of this Tenant Work Letter.  All references in
this Exhibit B-3 to "Premises" shall mean the Must-Take Space 2, and all
references in this Exhibit B-2 to the "Building" shall mean the Lusk 3
Building.  

SECTION 1

DESIGN AND PERMITTING OF THE LANDLORD'S WORK

1.1General Provisions and Definitions.  Landlord shall, in consultation with
Tenant and in accordance with the terms and conditions of this Tenant Work
Letter, administer, coordinate, and (subject to the terms of Section 1.4.4 of
this Lease) pay for all of the costs and expenses of the planning, design and
construction of the Building and the Premises (the "Landlord's Work"), which
shall consist of two separate design and construction projects:  (a) the project
of designing, permitting and constructing (i) the Building Structure of the Lusk
3 Building, (ii) those mechanical, electrical, plumbing, and life safety and
sprinkler systems of the Building Systems identified in the Preliminary Drawings
(as defined in Section 1.2 below) and (iii) those exterior site improvements
included in the design of the Lusk 3 Building set forth in the Preliminary
Drawings (as hereinafter defined), including, without limitation, any such
exterior improvements designated by Tenant as SMB Cost Items in accordance with
Section 1.4.4.2 of this Lease (collectively, the "Base, Shell and Core"), which
shall proceed in accordance with the design development and permitting process
set forth in Section 1.2 of this Tenant Work Letter, the engagement of the Base
Building Contractor in accordance with Section 3.1 of this Tenant Work Letter,
and the work of constructing the Base Shell and Core (collectively, the
"Landlord's Base Building Work"), and (b) the project of designing, permitting
and constructing all of the other improvements to the Building and Premises (the
"Tenant Improvements"), which shall proceed in accordance with the design
development and permitting process set forth in Section 1.3 of this Tenant Work
Letter, the engagement of the TI Contractor (as defined in Section 3.2 of this
Tenant Work Letter, and the work of constructing the Tenant Improvements in
accordance with this Tenant Work Letter (collectively, the "Landlord's TI
Work"). The construction of the Landlord's Base Building Work and the Landlord's
TI Work shall occur in multiple phases with both projects to be substantially
completed as a single integrated Building and Premises in accordance with the
requirements of Section 5.1 of this Tenant Work Letter, with each phase of
design and construction of the Landlord's Work to proceed in accordance with the
project schedule attached hereto and incorporated herein as Schedule 1 to this
Work Letter (the "Project Schedule"), subject to, and which may be updated and
modified from time to time by Landlord and Tenant in accordance with, Section
2.1 of this Tenant Work Letter.

In recognition that Tenant's Must-Take Space 2 Base Rent payment obligations are
directly tied to the Development Costs incurred by Landlord in the performance
of the Landlord's Work, Tenant shall have the right to participate in the
negotiation of all Development Costs (as defined in Section 1.4.4.3 of this
Lease) which are to be included in Project Costs, including, without limitation,
all Design Fees (as defined in Section 1.4.4.3.1 of this Lease); and to the
extent that Tenant has not approved, or is not deemed to have approved in
advance (in accordance with the terms and conditions of this Tenant Work Letter)
any of the costs or expenses of Landlord's Work that Landlord proposes for
inclusion in Development Costs, pursuant to any Draw Request (as defined in
Section 3.4 below) or the Actual  Project Cost Notice (in accordance with
Section 1.4.4.6 of this Lease), and Tenant provides

 

EXHIBIT B-3

 

 

 

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written notice to Landlord setting forth Tenant's reasons for objecting to the
inclusion of such costs or expenses as Development Costs (individually and
collectively, "Unapproved Development Costs"), then Landlord and Tenant shall
promptly thereafter meet and attempt to agree in good faith as to whether or not
such Unapproved Development Costs (x) were incurred by Landlord reasonably and
in good faith in order to comply with the Landlord's Work requirements under
this Tenant Work Letter, (y) are not otherwise excluded from Development Costs
pursuant to the terms and conditions of this Lease, and (z) are commercially
reasonable under market conditions existing at the time that such costs were
incurred by Landlord. To the extent that Landlord and Tenant are not able to
agree upon the inclusion or exclusion of any of the Unapproved Development Costs
as Development Costs within then (10) business days following the commencement
of such informal resolution discussions, then such dispute shall be resolved in
accordance with Section 6.8 of this Tenant Work Letter.  Unless, and except to
the extent that, Unapproved Development Costs are approved by Tenant (or by the
Arbitrator, as defined in Section 6.8 of this Tenant Work Letter) for inclusion
in Development Costs in accordance with the terms and conditions of this Section
1.1, such costs and expenses shall be excluded from Development Costs as if
expressly set forth in Section 1.4.4.4 of this Lease.  Without limiting the
foregoing, the Development Costs shall exclude all costs and expenses of the
test-fitting of the Tenant Improvements and the conceptual design drawings,
presentations and models for the proposed Lusk 3 Building that were incurred by
Landlord prior to the date of this Lease, unless and only to the extent of those
certain costs and fees of the Base Building Architect (as defined in Section
1.2, below) and PMA payable by Landlord for design work expressly included in
the reimbursement obligations of Tenant under that certain Design Work
Reimbursement Agreement between Landlord and Tenant, dated March 14, 2017, as
amended.

1.2Base, Shell and Core Design and Permitting.  Landlord shall construct the
Base, Shell and Core pursuant to the Base Building Working Drawings (as
hereinafter defined) to be prepared by Ferguson Pape Baldwin Architects ("Base
Building Architect") and those certain engineering consultants identified in the
Approved BB Design Contracts (the "Base Building Engineers") as a logical
extension of those schematic drawings and preliminary specifications for the
Base, Shell and Core prepared by the Base Building Architect, dated as of July
6, 2017, as more particularly described in the sheet list of drawings and the
Lusk 3 Building floor plans and renderings attached hereto and incorporated
herein as Schedule 2 (the "Preliminary Drawings"), in accordance with the terms
and conditions of this Section 1.2 below.  Following the Tenant's approval of
the Approved Base Building Drawings in accordance with the terms and conditions
of Section 1.2.2 below, and Tenant's selection of the Base Building Contractor,
and approval of the BB Construction Contract in accordance with the terms and
conditions of Section 3.1.4 below, Landlord shall engage the Base Building
Contractor in accordance with the terms and conditions of Section 3.1.4 below,
who shall procure the Base Building Permits (as defined in Section 1.2.3 below)
from the appropriate municipal authorities and commence the construction of the
Base, Shell and Core.  The plans and drawings to be prepared by Base Building
Architect and the Base Building Engineers pursuant to the process of this
Section 1.2 are sometimes referred to in this Tenant Work Letter, generically as
the "Base Building Drawings".  

1.2.1Engagement of Base Building Architect and Engineers.  Promptly following
the mutual execution and delivery of this Lease, Landlord will enter into one or
more professional services agreements between Landlord and the Base Building
Architect and some or all of the Base Building Engineers to design the Base,
Shell and Core, subject to Tenant's prior approval of the terms and conditions
of such agreements, including, without limitation, the Design Fees payable by
Landlord pursuant to such Approved BB Design Contracts as Project Costs (the
"Approved BB Design Fees"), in advance of Landlord entering into any of the
foregoing agreements (as such agreement(s) may be modified and/or supplemented
from time to time with Tenant's prior approval thereof, the "Approved BB Design
Contracts"); provided, however, Tenant shall not unreasonably withhold its
approval of such agreements and design fees.  In recognition that Tenant's
Must-Take Space 2 Base Rent payment obligations are directly tied to the
Approved BB Design Fees of the Landlord's Base Building Work, Landlord hereby
agrees not to unilaterally (a) make or agree to any material change to any
Approved BB Design Contract, nor (b) increase the Approved BB Design Fees as
Project Costs, without Tenant's prior approval, except as otherwise expressly
provided in this Tenant Work Letter (e.g., any extension of contract time due to
Tenant Delays in accordance with Section 5.3 below, or any increased design
costs due to any Tenant Change Order Requests (as defined in Section 1.4 below)
modifying the Approved Base Building Drawings); provided, however, that Tenant
shall not unreasonably delay or withhold its approval of any Landlord-requested
changes to any Approved BB Design Contract.  

1.2.2Approved Working Drawings.  Promptly following the full execution and
delivery of the Lease, Landlord and Tenant shall cooperate in good faith and in
accordance with the Project Schedule to supply the Base Building Architect such
information requested by the Base Building Architect which is reasonably
necessary to

 

EXHIBIT B-3

 

 

 

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allow the Base Building Architect to complete the Base Building Drawings, as a
logical extension of the Preliminary Drawings, in a form that is sufficient to
enable the Base Building Contractor and subcontractors to bid on the work of
construction of the Base, Shell and Core, and to obtain all applicable permits
for the construction of the Base Shell and Core, including structural, and core
mechanical, electrical and plumbing requirements, as well as exterior
landscaping and other site improvements required for the Base Building Permits
(as defined in Section 1.2.3 below).  Landlord shall use commercially reasonable
efforts to cause the Base Building Architect and Base Building Engineers to work
in good faith with Tenant to prepare and deliver the proposed Base Building
Drawings to Landlord and Tenant for review and approval in accordance with the
Project Schedule.  If Tenant disapproves the proposed Base Building Drawings,
Tenant's notice of disapproval shall specify the reasons for such disapproval
and those revisions required to obtain Tenant's approval of the Final Base
Building Drawings (as hereinafter defined) for their submission to the Bidding
BB Contractors in accordance with Section 3.1 below.  After receiving such
notice of disapproval, Landlord shall cause the Base Building Architect to
revise the Base Building Drawings in accordance with the Tenant's requested
changes; provided, however, that Landlord shall not be required to cause the
Base Building Architect to make any revision to the Base Building Drawings that
creates a Base Building Design Problem (as defined in Section 1.2.3
below).  Once the proposed Base Building Drawings have been so revised, the
revised Base Building Drawings will be resubmitted to Tenant for approval.  Such
revision and resubmission process shall occur within ten (10) business days
after Landlord's receipt of Tenant's written notice of disapproval (if such
revision is not material; otherwise the revised Base Building Drawings will be
resubmitted to Tenant within such longer period of time as may be reasonably
necessary, but not more than fifteen (15) business days after Landlord's receipt
of such disapproval notice).  Such procedure shall be repeated as necessary
until Tenant and Landlord have both approved the Base Building Drawings for
submission to the Bidding BB Contractors (the "Final Base Building Drawings"),
provided that Landlord's approval of any revised Base Building Drawings
incorporating any Tenant-requested revisions shall not be withheld except in the
case of a Base Building Design Problem.  Landlord shall immediately submit the
Final Base Building Drawings to the Bidding BB Contractors in accordance with
Section 3.1 below, in order for Tenant to select the Base Building Contractor to
be retained by Landlord.  Following Tenant's selection of the Base Building
Contractor (or as part of such selection process), Tenant shall have the right
to value-engineer the design of the Base, Shell and Core in Tenant's reasonable
discretion as part of the process of negotiating the cost of construction of the
Landlord's Base Building Work in accordance with the Project Schedule, and
Landlord shall use commercially reasonable efforts to cause the Base Building
Architect and Base Building Engineers to reasonably participate in such value
engineering process (with the applicable Design Fees payable in accordance with
the Approved BB Design Fees) in compliance with the Project Schedule. Landlord
acknowledges that Tenant's value engineering efforts may result in additional
revisions to the Final Base Building Drawings, which may be requested by Tenant
in accordance with the Project Schedule, and as long as such revisions do not
cause a Base Building Design Problem, the Final Base Building Drawings shall be
modified by the Base Building Architect to incorporate such requested changes,
in accordance with process set forth in this Section 1.2.2 above, until the
Final Base Building Drawings are in a form which is complete for incorporation
into the BB Construction Contract as the basis of the contract sum payable to
the Base Building Contractor in accordance with Section 3.1.4 below, and to
allow the Base Building Contractor and its subcontractors to obtain all
applicable Base Building Permits in accordance with Section 1.2.4 below.  The
Final Base Building Drawings approved by Landlord and Tenant for incorporation
by reference into the BB Construction Contract in accordance with this Section
1.2.2 (as the same may be modified in accordance with Section 1.2.4, below, in
order for the appropriate municipal authorities to issue the Base Building
Permits) shall be known as the "Approved Base Building Drawings." Except as
provided in Section 1.2.4 and Section 1.4 below, respectively, neither Landlord
nor Tenant shall make any changes or modifications to the Approved Base Building
Drawings, without the prior written consent of the other party to this Lease,
which consent shall not be unreasonably withheld, conditioned or delayed.  

1.2.3Base Building Design Problems.  For the purposes of this Tenant Work
Letter, a "Base Building Design Problem" means, and will be deemed to exist to
the extent, that any component or components of the proposed Base Building
Drawings (or any Tenant-proposed revisions thereto) either: (a) represents a
material deviation from the design of the Base, Shell and Core improvements of
the Preliminary Drawings (unless such deviation is required to accommodate the
design of the Tenant Improvements, as such design shall be subject to the
Landlord's approval rights under Section 1.3.1 below with respect to any TI
Design Problems), or (b) fails to, or is reasonably likely to cause any
component of the Base, Shell and Core improvements to fail to, comply with
Applicable Laws (taking into account that the separate design of the Tenant
Improvements by the TI Architect is intended to complete the design of the
Premises and the Landlord's Work in accordance with Applicable Laws).  Tenant
shall be responsible for ensuring that all elements of the design of the Base
Building Drawings (as such

 

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drawings may be modified by any Tenant Change Orders in accordance with Section
1.4 below) are suitable for Tenant's use of the Premises, and neither the
preparation of the Base Building Drawings by the Base Building Architect, nor
Landlord's approval of (or failure to disapprove) the Base Building Drawings
pursuant to this Section 1.2., shall relieve Tenant from such
responsibility.  Landlord shall cause the Base Building Architect and the Base
Building Engineers to use the "Required Level of Care" (defined below) to cause
the Base Building Drawings to comply with Applicable Laws.  As used herein,
"Required Level of Care" means the level of care that reputable architects and
engineers customarily use in the San Diego market to cause drawings and
specifications for a project of improvements similar to the Base, Shell and Core
to comply with Applicable Laws (taking into account the separate and sequential
phases of design of the Base, Shell and Core and the Tenant Improvements, and
the TI Architect's and TI Engineers' responsibility for design of the Tenant
Improvements in accordance with a similar Required Level of Care for the Tenant
Improvements).

1.2.4Permits for Base, Shell and Core.  Landlord shall, at Landlord's cost (but
which shall be Project Cost), promptly submit the Approved Base Building
Drawings to the appropriate municipal authorities in order to procure all
applicable permits necessary to commence and fully complete the construction of
the Base, Shell and Core (the "Base Building Permits"); provided, however, that
the Approved Base Building Drawings may be submitted for such Base Building
Permits in phases (e.g., the submission of those Approved Base Building Drawings
for the grading permits to commence grading of the Building site may occur
before the submission of those Approved Base Building Drawings for the remaining
Base Building Permits). Landlord agrees to use reasonable diligent efforts to
obtain such Base Building Permits, and in connection therewith, Landlord shall
coordinate with Tenant in order to allow Tenant, at its option, to take part in
the permitting process; and Landlord shall supply Tenant, as soon as possible,
with all plan check numbers and dates of submittal of the Approved Base Building
Drawings.  If the Approved Base Building Drawings are not approved by the
applicable municipal authorities and such approval will require a change to the
Approved Working Drawings, or will impose any condition on construction of the
Base, Shell and Core, which:  (i) is materially inconsistent with the Approved
Base Building Drawings, (ii) materially increase the cost of the Landlord's Base
Building Work by increasing the Approved BB Design Fees or the negotiated
contract sum of the BB Construction Contract, (iii) is determined by Tenant's
Representative to materially and adversely affect Tenant's planned Permitted Use
of the Premises and the Project, (iv) is materially inconsistent with the design
of the Tenant Improvements as set forth in the most recent iteration of the TI
Construction Drawings (as defined in Section 1.3.1 below) as of the date such
disapproval, or (v) is reasonably likely to substantially delay the Substantial
Completion of Landlord's Work beyond December 31, 2019 (each of the foregoing, a
"Material BB Design Change"), then Landlord and Tenant shall mutually and
reasonably work together in good faith to modify the Approved Base Building
Drawings to the extent required in order for the same to be approved by the
applicable municipal authorities, and if the parties are unable to agree upon
such modifications within ten (10) business days following Tenant's receipt of
notice of any disapproval of the Approved Base Building Drawings by the
applicable municipal authorities, such dispute shall be resolved in accordance
with Section 6.8 of this Tenant Work Letter.  Notwithstanding the foregoing, if
the Approved Base Building Drawings are not approved by the applicable municipal
authorities and Landlord and Tenant's Representative mutually determine that
such approval will not require a Material BB Design Change, Landlord shall have
the right to reasonably and in good faith modify the Approved Base Building
Drawings to the extent required for the applicable municipal authorities to
issue the Base Building Permits without Tenant's approval of such modifications,
provided that (a) Landlord does so in consultation with the Tenant's
Representative and Tenant's Project Manager, '''and (b) such modifications are
otherwise consistent with the first class nature of the Project and do not use
systems or equipment materially lower in quality (or materially more expensive)
than those specified in the Approved Base Building Drawings; provided, however,
that any additional or increased costs or expenses of the Landlord's Work of the
Base, Shell and Core shall be subject to Tenant's prior approval in accordance
with the terms and conditions of Section 1.1 of this Tenant Work Letter, which
approval shall not be unreasonably withheld.  The Approved Base Building
Drawings, as the same may be modified in this Section 1.2.4 to procure the Base
Building Permits, and in accordance with any Tenant Change Orders in accordance
with Section 1.4 below, are sometimes referred to herein as the "Base Building
Working Drawing."

1.3Design and Permitting of Tenant Improvements.  Landlord shall cause the
Tenant Improvements to be constructed in accordance with the TI Working Drawings
(as hereinafter defined) to be prepared in accordance with this Section 1.3 of
this Tenant Work Letter.  Landlord shall retain an architect selected by Tenant
and reasonably approved by Landlord in accordance with Section 1.3.1 below (the
"TI Architect"; who, in Tenant's discretion may also be the Base Building
Architect) and the TI Engineers (as defined in Section 1.3.1

 

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below) to design the Tenant Improvements.  The TI Architect shall develop the
Approved TI Drawings (as defined in Section 1.3 below) to be submitted to the
appropriate municipal authorities for the TI Permits (as defined in Section
1.3.7 below), on the basis of the preliminary design of the Building set forth
in the Preliminary Drawings, and in accordance with the terms and conditions of
this Section 1.3 below.  

1.3.1Engagement of Tenant Improvements Architect and Engineers.  As of the date
of this Lease, Tenant has not selected, and Landlord has not retained the TI
Architect nor any of engineering consultants selected by Tenant and reasonably
approved by Landlord (the "TI Engineers") to prepare all plans and engineering
working drawings relating to the structural, mechanical, electrical, plumbing,
HVAC, life safety, and sprinkler work of the Tenant Improvements, so that none
of the costs associated with the design and design-related services payable to
any TI Architect or any of the TI Engineers have been approved by Tenant as
Design Fees included in Project Costs pursuant to Section 1.4.4.4 of this Lease,
except if and to the extent included in the Approved BB Design Fees.  Tenant
shall select, and Landlord shall retain, the TI Architect and those TI Engineers
approved by Landlord (which approval shall not be unreasonably withheld) in
accordance with the Project Schedule, to prepare the "TI Construction Drawings,"
as that term is defined in this Section 1.3.1 below, in accordance with terms
and conditions of one or more professional services agreements between Landlord
and the TI Architect and some or all of the TI Engineers completely, subject to
Tenant's prior approval of such terms and conditions in advance of Landlord
entering into any of the foregoing agreements (the "Approved TI Design
Contracts"), including, without limitation, the Design Fees payable by Landlord
pursuant to the Approved TI Design Contracts as Project Costs (the "Approved TI
Design Fees").  In recognition that Tenant's Must-Take Space 2 Base Rent payment
obligations are directly tied to the Design Fees of the Landlord's TI Work,
Landlord hereby agrees not to unilaterally (a) make or agree to any material
change to any Approved TI Design Contract, nor (b) increase the Approved TI
Design Fees, without Tenant's prior approval, except as otherwise expressly
provided in this Tenant Work Letter (e.g., any extension of contract time due to
Tenant Delays in accordance with Section 5.2, or any increased design costs due
to any Tenant Change Order Requests, as defined in Section 4.3.3, modifying the
Approved TI  Drawings), and subject to the terms and conditions of Section 1.1
regarding any Unapproved Development Costs arising out of Landlord's failure to
obtain Tenant's prior approval for any increase in the Approved TI Design Fees,
to the extent required under this Section 1.3.1; provided, however, that Tenant
shall not unreasonably delay or withhold its approval of any reasonable
Landlord-requested changes to any Approved TI Design Contract.    The plans and
drawings to be prepared by TI Architect and the TI Engineers pursuant to the
process of this Section 1.3 are sometimes referred to in this Tenant Work
Letter, generically as the "TI Construction Drawings."  Landlord and Tenant
shall cooperate in good faith to supply the TI Architect and TI Engineers with
such information as is necessary to allow the TI Architect to complete the TI
Construction Drawings in accordance with this Section 1.3 and the Project
Schedule.  Landlord shall use commercially reasonable efforts to cause the TI
Architect to work in good faith with Tenant to prepare and deliver the TI
Construction Drawings to Landlord and Tenant for review and approval in
accordance with the Project Schedule, provided that Landlord's approval shall
not be withheld except in the case of a "TI Design Problem" (as defined in
Section 1.3.2 below).  

1.3.2TI Design Problems.  A "TI Design Problem" is defined as, and will be
deemed to exist if such Tenant Improvement (i) causes a material change to the
design of the Building as set forth in the Preliminary Drawings, if such change
is reasonably likely to (a) have a material adverse effect on the value of the
Building or the Project following the expiration or earlier termination of this
Lease, or (b) materially increase the cost of (1) occupancy or use of the
Building (for occupancy or use consistent with the Tenant's intended occupancy
and use of the Building), or (2) maintenance or repair of the Building or the
Project in excess of maintenance and repair costs reasonably associated with the
design of the Building as set forth in the Preliminary Drawings, or (ii) fails
to, or is reasonably likely to cause any component of the Base, Shell and Core
improvements to fail to, comply with Applicable Laws.  Notwithstanding the
foregoing sentence, Tenant shall be responsible for ensuring that all elements
of the design of the TI Construction Drawings are suitable for Tenant's use of
the Premises, and neither the preparation of the TI Construction Drawings by the
TI Architect or the TI Engineers nor Landlord's approval of the Approved TI
Drawings (as defined in Section 1.3.5 below) shall relieve Tenant from such
responsibility.  Landlord shall cause the TI Architect and the TI Engineers to
use the Required Level of Care to cause the TI Construction Drawings to comply
with Applicable Laws; provided, however, that Tenant, not Landlord, shall be
responsible for any violation of Applicable Laws by the TI Construction Drawings
resulting from any information provided by Tenant pursuant to the development of
the TI Construction Drawings, or resulting from any Tenant Change Order, or from
Tenant's use of the Premises for any use other than a Permitted Use.  

 

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1.3.3Final Space Plan.  Promptly following Tenant's selection and Landlord's
retention of the TI Architect pursuant to an Approved TI Design Contract,
Landlord shall cause the TI Architect to prepare and deliver to Tenant a
schematic space plan for the Tenant Improvements that conforms to the
Preliminary Drawings (the "Final Space Plan").  Such preparation and delivery
shall occur in accordance with the Project Schedule and the Approved TI Design
Contracts.  Tenant shall approve or disapprove the Final Space Plan by notice to
Landlord in accordance with the Project Schedule.  If Tenant disapproves the
Final Space Plan, Tenant's notice of disapproval shall specify any revisions
Tenant desires in the Final Space Plan.  After receiving such notice of
disapproval, Landlord shall cause the Architect to revise the Final Space Plan,
taking into account the reasons for Tenant's disapproval (provided, however,
that Landlord shall not be required to cause the Architect to make any revision
to the Final Space Plan that creates a TI Design Problem), and resubmit the
Final Space Plan to Tenant for its approval.  Such revision and resubmission
shall occur within five (5) business days after Landlord's receipt of Tenant's
notice of disapproval (if such revision is not material; otherwise the revised
Final Space Plan will be resubmitted to Tenant within such longer period of time
as may be reasonably necessary, but not more than ten (10) business days after
such receipt by Landlord).  Such procedure shall be repeated as necessary until
Tenant has approved the Space Plan.  The Final Space Plan approved by Tenant
shall be known as the "Approved Space Plan."  

1.3.4Additional Programming Information.  After approving the Final Space Plan,
Tenant shall furnish to Landlord all information reasonably requested by
Landlord in accordance with the Project Schedule that, together with the
Approved Space Plan, is necessary in the judgment of Landlord, the TI Architect
and the TI Engineers to complete the TI Construction Drawings in a form that is
sufficient to enable the TI Contractor and subcontractors to bid on the work of
construction of the Tenant Improvements, and to obtain all applicable permits
for the Tenant Improvements (the "Final TI Drawings"), including electrical
requirements, telephone requirements, special HVAC requirements, plumbing
requirements, and all interior and special finishes (collectively, the
"Additional Programming Information").  Tenant's delivery of such Additional
Programming Information to Landlord shall occur in accordance with the Project
Schedule. The Additional Programming Information shall be consistent with the
Approved Space Plan and shall otherwise be subject to Landlord's reasonable
approval, provided that Landlord's approval shall not be withheld except in the
case of a TI Design Problem.  Landlord shall provide Tenant with notice
approving or reasonably disapproving the Additional Programming Information in
accordance with the Project Schedule.  If Landlord disapproves the Additional
Programming Information, Landlord's notice of disapproval shall describe with
reasonable specificity the basis for such disapproval and the changes that would
be necessary to resolve Landlord's objections.  If Landlord disapproves the
Additional Programming Information, then Landlord and Tenant shall mutually and
reasonably work together with the TI Architect and TI Engineers, in good faith,
to modify the Additional Programming Information in order for the same to be
approved by Landlord.    

1.3.5Final TI Drawings.  After approving the Additional Programming Information,
Landlord shall cause the TI Architect and the TI Engineers to prepare and
deliver to Tenant the Final TI Drawings that conform to the Approved Space Plan
and the approved Additional Programming Information.  Such preparation and
delivery shall occur in accordance with the Project Schedule.  Tenant shall
approve or disapprove the Final TI Drawings, incorporating the Additional
Programming Information as hereinafter provided, by notice to Landlord in
accordance with the Project Schedule.  If Tenant disapproves the Final TI
Drawings, Tenant's notice of disapproval shall specify the reasons for such
disapproval and those revisions required to obtain Tenant's approval of the
Final TI Drawings for submission to the Bidding TI Contractors in accordance
with Section 3.2.1 below.  After receiving such notice of disapproval, Landlord
shall cause the TI Architect and/or the TI Engineers to revise the Final TI
Drawings, taking into account the reasons for Tenant's disapproval (provided,
however, that Landlord shall not be required to cause the TI Architect or the TI
Engineers to make any revision to the Final TI Drawings that causes a TI Design
Problem).  Once the Final TI Drawings have been so revised, Landlord shall
resubmit the revised Final TI Drawings to Tenant for its approval.  Such
revision and resubmission shall occur within ten (10) business days after
Landlord's receipt of Tenant's notice of disapproval (if such revision is not
material; otherwise the revised Final TI Drawings will be resubmitted to Tenant
within such longer period of time as may be reasonably necessary, but not more
than fifteen (15) business days after such receipt by Landlord).  Such procedure
shall be repeated as necessary until Tenant has approved the Final TI Drawings
for submission to the Bidding TI Contractors.  The Final TI Drawings approved by
Landlord and Tenant for incorporation into the TI Construction Contract are
referred to in this Work Letter as the "Approved TI Drawings".  Landlord shall
immediately submit the Approved TI Drawings to the Bidding TI Contractors, in
order for Tenant to select the TI Contractor to be retained by Landlord in
accordance with Section 3.2 below.  Tenant shall have the right to
value-engineer the design of the Tenant Improvements in Tenant's reasonable
discretion, either as part of the process of negotiating the cost of
construction of the Landlord's

 

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TI Work with the Bidding TI Contractors or following Tenant's selection of the
TI Contractor (and in either case in accordance with the Project Schedule), and
Landlord shall use commercially reasonable efforts to cause the TI Architect and
TI Engineers to reasonably participate in such value engineering process (with
the applicable Design Fees payable in accordance with the Approved TI Design
Fees) in compliance with the Project Schedule. Landlord acknowledges that
Tenant's value engineering efforts may result in additional revisions to the
Approved TI Drawings, which may be requested by Tenant in accordance with the
Project Schedule, and as long as such revisions do not cause a TI Design
Problem, the Approved TI Drawings shall be modified by the TI Architect to
incorporate such requested changes, in accordance with the process set forth in
this Section 1.3.5 above, until the Approved TI Drawings are in a form which is
complete for incorporation into the TI Construction Contract as the basis of the
contract sum payable to the TI Contractor in accordance with Section 3.2.4
below, and to allow the TI Contractor and its subcontractors to obtain all
applicable TI Permits in accordance with Section 1.3.6 below; provided that
Landlord's approval of the Approved TI Drawings incorporating any
Tenant-requested value-engineering changes shall not be withheld except in the
case of a TI Design Problem.  

1.3.6TI Permits.  Promptly following Tenant's approval of the TI Construction
Contract for execution by Landlord and the TI Contractor, Landlord shall submit
the Approved TI Drawings to the appropriate municipal authorities for all
applicable building permits necessary to allow the TI Contractor to commence and
fully complete the construction of the Tenant Improvements (the "TI Permits" and
together with the Base Building Permits, the "Permits"), and, in connection
therewith, Landlord shall coordinate with Tenant in order to allow Tenant, at
its option,  to take part in all phases of the permitting process and shall
supply Tenant, as soon as possible, with all plan check numbers and dates of
submittal. If the Approved TI Drawings are not approved by the applicable
municipal authorities, and such approval will require a change to the Approved
TI Drawings, 'or will impose any condition on construction of the Landlord's
Base Building Work or the Tenant Improvements which:  (i) is materially
inconsistent with the Approved TI Drawings, (ii) requires any change to the
Approved Base Building Drawings, (iii) materially increases the cost of
Landlord's Base Building Work by increasing the negotiated contract sum of the
BB Construction Contract, (iv) materially increases the cost of constructing the
Tenant Improvements over the contract sum of the TI Construction Contract,
(v) is determined by Tenant's Representative to materially and adversely affect
Tenant's planned Permitted Use of the Premises and the Project, or
(vi) reasonably likely to substantially delay the Substantial Completion of the
Premises beyond December 31, 2019 (each of the foregoing, a "Material TI Design
Change"), Landlord and Tenant shall reasonably, diligently, and in good faith
seek means by which to mitigate or eliminate any such Material TI Design Change,
and if the parties are unable to agree upon such mitigation within ten (10)
business days, such dispute shall be resolved in accordance with Section 6.8 of
this Tenant Work Letter.  If the Approved TI Construction Drawings are not
approved by the applicable municipal authorities for any reason that does not
require a Material TI Design Change, then Landlord and Tenant shall mutually and
reasonably work together in good faith to modify the Approved TI Construction
Drawings to the extent required in order for the same to be approved by the
applicable municipal authorities; provided, however, that if, notwithstanding
such mutual and reasonable efforts, Landlord and Tenant are unable to agree upon
any change or changes to the Approved TI Drawings required for the applicable
municipal authorities to issue the TI Permits within ten (10) business days
following commencement of such mutual effort, then Landlord shall have the right
to modify the Approved TI Drawings without Tenant's approval of such
modifications, provided that (a) Landlord does so in consultation with the
Tenant's Representative and Tenant's Project Manager, (b) such modifications by
Landlord do not result in a Material TI Design Change, 'and (c) such
modifications are otherwise consistent with the first class nature of the
Project and do not use systems or equipment materially lower in quality (or
materially more expensive) than those specified in the Approved TI Drawings;
provided, however, that any additional or increased costs or expenses of the
Landlord's Work of the Tenant Improvements shall be subject to Tenant's prior
approval in accordance with the terms and conditions of Section 1.1 of this
Tenant Work Letter.  Landlord shall cause the Tenant Improvements to be
constructed in accordance with the TI Working Drawings (as defined in Section
1.3 above). The Approved TI Drawings, as the same may be modified in accordance
with this Section 1.3.6 in order to obtain the TI Permits, and in accordance
with any Tenant Change Orders in accordance with Section 1.4 below, are
sometimes referred to herein as the "TI Working Drawings".

1.4Tenant-Requested Changes to Base Building Working and TI Working
Drawings.  Tenant shall have the right to request changes to the Base Building
Drawings and the TI Construction Drawings (generically, for the purposes of this
Section 1.4, the "Working Drawings") subject to Landlord's prior written
approval, which shall not be unreasonably withheld.  Tenant shall request any
such modification to the Working Drawings by notifying Landlord in writing (a
"Tenant Change Order Request"), in substantially the same form as

 

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the AIA standard change order form (AIA Form G701-2001), which Tenant Change
Order Request shall detail the nature and extent of any such modification and
shall be signed by Tenant's Representative.  Landlord shall, before proceeding
with any such modification, use commercially reasonable efforts to respond to
Tenant as soon as is reasonably possible with an estimate of:  (i) the effect
that the design and construction of the modification will have on the
then-current Project Schedule, (ii) any additional Design Fees that will be
incurred, to analyze such modification, and (iii) the effect of the modification
on the cost of the construction of the Tenant Improvements, including, without
limitation, any impact of the proposed modification on the Development
Costs.  Landlord shall submit to Tenant in writing, within five (5) business
days after receipt of the Tenant Change Order Request (or such longer period of
time as is reasonably required and as promptly communicated to Tenant's
Representative, depending on the extent of the requested modification), an
analysis of the additional cost or savings involved, including, without
limitation, any additional Design Fees, any adjustment to Development Costs, and
the period of Tenant Delay, if any, associated with such modification, which
shall be incorporated into the Tenant Change Order Request as a proposed change
order to the Landlord's Work (the "Landlord Change Order Response").  If Tenant
accepts the terms and conditions of the Landlord Change Order Response, Tenant
shall execute the Landlord Change Order Response as a written change order for
the modification of the Tenant Improvements (a "Tenant Change Order") no later
than five (5) business days after Tenant's receipt of the Landlord Change Order
Response, and the Project Costs associated with the additional Design Fees and
any increase or decrease in the Development Costs shall be adjusted
accordingly.  Pending agreement as to the terms and conditions of the Tenant
Change Order prior to Tenant's timely execution and delivery of the Landlord
Change Order Response, Landlord shall not delay the normal progress of the
Tenant Improvements.  If Tenant fails to execute the Landlord Change Order
Response within such five (5) business day period, then Tenant shall be deemed
to have rescinded the Tenant Change Order Request.  

1.5 Requests for Information and Base Building Change Directives.  Landlord
shall require the Base Building Contractor and the TI Contractor, respectively,
to copy Tenant's Representative, PMA and the Project Manager (as such terms are
defined in Section 2.2 below) on any requests for information submitted to
Landlord relating to the Landlord's Work ("RFI's").  In addition, Landlord shall
consult with PMA, Tenant's Representative and Project Manager in advance of, and
provide Tenant's Representative and Project Manager with copies of:  (i)
Landlord's response to any RFI, and (b) any plan clarifications relating the
Base Building Working Drawings or the TI Working Drawings sent to a Contractor
or any of its subcontractors by either Base Building Architect or the TI
Architect (collectively, "Landlord Change Directives"), provided that Tenant
shall either approve or reasonably disapprove any proposed Landlord Change
Directive within three (3) business days after Tenant's Representative's receipt
of a copy of such proposed Landlord Change Directive from Landlord, with
Tenant's disapproval of a proposed Landlord Change Directive to be limited to
the following reasons:  either (i)  Tenant's Representative reasonably
determines that such Landlord Change Directive will adversely impact the design
or construction of the completed Landlord's Work, or (ii) Tenant's
Representative determines that such Landlord Change Directive will materially
increase the cost of construction of the completed Landlord's Work or materially
increase the Tenant's cost of occupancy, use, maintenance, repair or restoration
of the Premises following completion of the Landlord's Work, and in either case
a reasonable alternative solution is available.  Should Tenant's Representative
fail to timely deliver such reasons for objections to any Landlord Change
Directive in writing, then such Landlord Change Directive (and any additional or
increased Development Costs associated therewith) shall be deemed to have been
approved by Tenant in accordance with this Section 1.5 (but without limiting
Tenant's rights under this Tenant Work Letter relating to the Tenant's
Representative's right to review the Landlord's books and records relating to
the completed Landlord's Work).  

SECTION 2

PROJECT SCHEDULE; TENANT'S PROJECT MANAGER

2.1Project Schedule.  Subject to any Tenant Delays and Force Majeure Delays (as
hereinafter defined), the Must-Take Space 2 shall be constructed by Landlord in
accordance with this Tenant Work Letter diligently following the effective date
of this Lease; and subject to any Tenant Delays and Force Majeure Delays, and
Tenant's rights under this Lease, Landlord shall use commercially reasonable
efforts to construct the Must-Take Space 2 in accordance with the Project
Schedule. In the event that the Landlord's Work is delayed by any Tenant Delays
or Force Majeure Delays, Landlord shall reasonably cooperate with Tenant's
efforts to mitigate such delays;

 

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provided that the cost and expense of any such mitigation or acceleration
actions requested by Tenant shall be performed at Tenant's sole cost and expense
(which may be included in Project Costs or funded separately by Tenant, as
Tenant may elect in Tenant's sole discretion, subject to the terms and
conditions of this Work Letter). Additionally, Tenant shall have the right to
accelerate the milestone dates contained in the Project Schedule for either
portion of the Landlord's Work by written notice indicating the revised
milestone date that Tenant intends to advance (an "Acceleration Notice"); and if
Tenant so elects, Landlord and Tenant shall use mutual good faith and
commercially reasonable efforts to determine and agree upon the additional cost
of achieving the accelerated milestone date (which shall similarly accelerate
all subsequent milestone dates unless otherwise noted in the applicable
Acceleration Notice), in consideration of the effect of such Acceleration Notice
on all of the other terms and conditions of this Tenant Work Letter; and in the
event that Landlord and Tenant agree upon such additional cost and the effect of
such acceleration on the Project Schedule, such change in the Landlord's Work
and the additional cost associated therewith, as approved by Landlord and Tenant
in accordance with this Section 2.1, shall be implemented by means of a Tenant
Change Order in accordance with Section 1.4 above, and the Project Schedule for
the applicable portion of the Landlord's Work shall be modified in accordance
with the Acceleration Notice.  If at any time during the design, permitting and
construction process Tenant reasonably believes that Landlord will fail to meet
any of such delivery or permitting deadlines, Tenant shall have the right to
notify Landlord of such belief and the reasons therefor, and Landlord shall
promptly provide a Project Schedule status update to Tenant, and a revised
Project Schedule as modified by any prior, on-going and anticipated delays.  If
at any time during the design, permitting or construction of Must-Take Space 2,
Landlord reasonably believes that Landlord will fail to meet any of the required
delivery or permitting milestones of the Landlord's Work, Landlord shall
promptly notify Tenant of the anticipated delay, including any known causation
and the Landlord's estimate of the duration of such delay (if Landlord is
reasonably capable of estimating such duration) and Landlord shall promptly
provide a Project Schedule status update to Tenant, and a revised Project
Schedule as modified by any prior, on-going and anticipated
delays.  Notwithstanding the foregoing, nor anything set forth in Section 5 of
this Tenant Work Letter relating to Tenant Delays, Landlord Delays and Force
Majeure:  (a) except for delays where there is an express notice or response
period under this Tenant Work Letter, no Landlord Delay or Tenant Delay shall be
deemed to have occurred unless the party claiming the occurrence of such a delay
has given the other party written notice, promptly following such party's actual
knowledge thereof, that an act or omission on the part of the other party or its
agents, employees or contractors has occurred which will cause such a delay and
the other party fails to cure such delay within two (2) business days after
receipt of such notice, in which case the number of days of delay after such
notice shall be a Tenant Delay or a Landlord Delay, as applicable, in accordance
with Section 5.3 and Section 5.4 below, respectively; and (B) there shall be no
Tenant Delays or Landlord Delays if the aggregate effect of such delays does not
delay Landlord's satisfaction of the Substantial Completion conditions set forth
in Section 5.1 below beyond December 31, 2019.

2.2Tenant's Project Manager.  Tenant shall retain a project manager (the
"Project Manager"), subject to Landlord's reasonable approval, to oversee the
day-to-day construction of the Tenant Improvements and to direct each of the
Base Building Contractor and the TI Contractor (generically, a "Contractor" for
the purposes of this Tenant Work Letter) in connection with the construction of
the Base, Shell and Core and the Tenant Improvements.  Landlord shall use
commercially reasonable efforts to cause the Base Building Architect, the TI
Architect and the Contractors to reasonably cooperate with Tenant and the
Project Manager in connection with the construction of the Landlord's Work in
accordance with the Project Schedule.  Tenant shall use commercially reasonable
efforts to cause the Project Manager to reasonably cooperate in good faith with
Landlord's project manager, Project Management Advisors ("PMA"), in connection
with the construction of the Landlord's Work.  Tenant's Project Manager, as well
as Tenant's Representative set forth in Section 6.3, below, shall have the right
to perform a walk-through inspection of the Landlord's Work prior to Tenant's
approval of each Draw Request (as defined in Section 3.4 below) for purposes of
determining the condition of the Landlord's Work and confirmation of the
information contained in such Draw Request (each, a "Progress Payment
Walk-Through Inspection"), provided such walk-through inspection shall not cause
a Tenant Delay or a Landlord Delay. Additionally, Tenant's Representative and
Project Manager will have access to the Premises and the Landlord's and the
Contractors' books and records to provide construction management services in
representing Tenant with respect to the construction of the Landlord's Work, and
will be provided with copies of all shop drawings and samples for review for
compliance with the Tenant-approved design documents for Landlord's Work, will
be permitted to assist in the drafting of Contractor bid documents and to
perform regular site visits, participate in weekly project meetings, as
reasonably required for construction management services of the Landlord's Work
on behalf of Tenant, and to participate in the walk-through inspection of the
Premises to determine whether the Delivery Condition has been satisfied (in

 

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accordance with Section 5.6 below), and in the related Punch List preparation
and follow-up confirmation of completion or repairs of the Punch List items (as
such terms are defined in Section 5.1 below).  Subject to the Project Manager
having reasonable rights of access to the Must-Take 2 Space construction site,
notice of, and the right to attend and participate at, construction meetings,
and review the annotated "as built" site copies of the Base Building Working
Drawings and the TI Working Drawings from time to time, to the extent that the
Project Manager delays the completion of the Landlord's Work, such delay will be
a Tenant Delay, subject to the terms and condition of Section 2.1 above.  The
fee of Tenant's Project Manager shall be paid or reimbursed by Landlord as a
Project Cost, if Tenant so requests.

2.3Time Deadlines.  Tenant and Landlord shall use their respective best, good
faith, efforts and all due diligence to cooperate with the Base Building
Architect, TI Architect, the Base Building Engineers and the TI Engineers, and
one another in order to complete all phases of the Landlord's Work in accordance
with the Project Schedule, and, in that regard, Landlord shall arrange for
Tenant's Representative and Project Manager to receive notice of, and right to
attend, all design and construction progress meetings for the Landlord's Work,
on a scheduled basis and reasonably in advance of such, and shall arrange for
Tenant's Representative and Project Manager to be copied on all electronic and
written communications with the Base Building Architect, the TI Architect, the
BB Contractor and/or the TI Contractor with respect to the progress and
performance of the Landlord's Work.  The applicable dates for submissions,
responses, revisions and approvals of items, plans and drawings as described in
this Tenant Work Letter are further elaborated upon in the Project Schedule (the
"Time Deadlines").  Landlord and Tenant agree to comply with their respective
Time Deadlines pursuant their respective obligations under this Tenant Work
Letter.

SECTION 3

CONSTRUCTION OF THE LANDLORD'S WORK

3.1Construction of Landlord's Base Building Work.

3.1.1Landlord's Retention of Base Building Contractor. Tenant shall select a
Contractor ("Base Building Contractor") to construct the Base, Shell and Core
pursuant to the terms of this Section 3.1, below.  Landlord and Tenant hereby
approve the following general contractors as Bidding Contractors for the
Landlord's Lusk 3 Work:  (a) Swinerton; (b) Pacific Building Group; or (c)
Whiting Turner (the "Approved Bidding Contractors"); provided that Landlord and
Tenant hereby agree that each of them may propose additional general contractors
as Bidding Contractors for the Landlord's Base Building Work, subject to the
other party's prior written approval, which shall not be unreasonably withheld,
conditioned or delayed.   On or before the date scheduled for Landlord and
Tenant's approval of the Approved Base Building Drawings in accordance with the
Project Schedule, Landlord and Tenant shall mutually agree upon any additional
qualified, licensed and reputable general contractors, if any, in addition to
the Approved Bidding Contractors, to receive bid requests for the Landlord's
Work and to prepare competitive bids in accordance with Section 3.1.2, below
(each of the Approved Bidding Contractors and any other general contractors
selected to receive such a bid package, a "Bidding BB Contractor," and,
collectively, the "Bidding BB Contractors").  Promptly following Tenant's
approval of the Approved Base Building Drawings, Landlord shall submit the
Landlord's Base Building Work construction bidding package, which shall be
jointly prepared by Landlord's Representative and Tenant's Representative, in
consultation with PMA and the Project Manager, to the Bidding BB
Contractors.  Each of the Bidding BB Contractors shall be notified in the bid
package (i) of the Project Schedule for completion of the Landlord's Base
Building Work, (ii) the requirement that, if Landlord so requires, the selected
Bidding BB Contractor shall use the fire, life safety subcontractor designated
by Landlord, subject to Tenant's reasonable approval, and (iii) the requirement
that the Base Building Contractor shall be required to bid each of the major
subcontractors (as reasonably and mutually determined by Landlord and Tenant)
with at least two (2) qualified subcontractors designated by Tenant (the
"Designated BB Subcontractors"), subject to Landlord's reasonable approval, and
Tenant shall only select Designated BB Subcontractors that are qualified
contractors, licensed and bondable in the State of California, with substantial
experience in industrial projects of similar size as the Premises.  All Bidding
BB Contractors shall be instructed to submit their bids directly to Landlord
with copies to the Tenant's Representative.  

3.1.2Competitive Bid Process.  Unless Tenant timely delivers the Negotiated Bid
Notice in accordance with Section 3.1.3, below, Landlord shall prepare a bid
analysis of the bids timely submitted by the

 

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Bidding BB Contractors and distribute such bid analysis to Tenant promptly
following receipt of bids.  Within five (5) business days after providing Tenant
with the bid analysis report for the Bidding BB Contractors, Landlord and Tenant
shall endeavor to jointly select a  Base Building Contractor from among the
Bidding BB Contractors based upon the competitive bids received by Landlord and
Tenant pursuant to this Tenant Work Letter; provided that (i) any failure by
Tenant to reasonably participate in such process shall be a Tenant Delay; and
(ii) any failure by Landlord to reasonably participate in such process shall be
a Landlord Delay.  Notwithstanding the foregoing, if Landlord and Tenant fail to
agree on a Base Building Contractor from among the Bidding BB Contractors within
such five (5) business day period following Tenant's receipt of Landlord's bid
analysis, Tenant shall be permitted to select the Base Building Contractor from
among the Bidding BB Contractors in Tenant's sole discretion provided such
Bidding BB Contractor agrees to comply with the Project Schedule.  The
competitive bid of the Bidding BB Contractors selected pursuant to this Section
3.1.2, or the negotiated bid selected by Tenant pursuant to Section 3.1.3 below,
as applicable, shall be documented as a written proposal from the Bidding BB
Contractor for the cost of completing the Landlord's Base Building Work on a
guaranteed maximum price basis, based upon the Approved Base Building Drawings
and shall include a detailed line item breakdown of all costs included in the
completion of the Landlord's Base Building Work, including the Contractor's fee,
overhead, general conditions and insurance.  

3.1.3Negotiated Bid Option.  By written notice to Landlord delivered within five
(5) business days following Tenant's receipt of the last bid to be timely
submitted by the Bidding BB Contractors in accordance with Section 3.1.2 above,
Tenant may notify Landlord that Tenant intends to solicit negotiated bids from
one (1) or more of the Bidding BB Contractors from whom bids have been timely
received (a "Negotiated BB Bid Notice"), and if Tenant timely delivers a
Negotiated BB Bid Notice to Landlord, then for a period not to exceed fifteen
(15) business days following delivery of such notice (the "Negotiated BB Bid
Period"), Tenant may pursue negotiated bids from such Bidding BB
Contractor(s).  Landlord shall have the right to participate in Tenant's
negotiated bid process with any of the of the Bidding BB Contractors designated
in the Negotiated BB Bid Notice following Tenant's timely delivery of the
Negotiated BB Bid Notice, and Tenant shall share copies of all negotiated bid
responses received by Tenant pursuant to such process on an "open book"
basis.  If Tenant fails to timely deliver the Negotiated BB Bid Notice to
Landlord, Landlord and Tenant shall select the Base Building Contractor in
accordance with the competitive bid process set forth in Section 3.1.2 of this
Tenant Work Letter.   Notwithstanding the foregoing, Tenant may continue to
negotiate with the Bidding BB Contractors beyond the expiration of the
Negotiated BB Bid Period without affecting Tenant's right to select the Base
Building Contractor pursuant to such negotiations; provided that any delays
resulting from such Tenant negotiations with the Bidding BB Contractors beyond
the Negotiated BB Bid Period shall be Tenant Delays.

3.1.4Base Building Construction Contract.  Landlord shall submit to Tenant's
Representative (as hereinafter defined) a copy of the Landlord's proposed
construction contract with the Base Building Contractor selected in accordance
with Section 3.12 or Section 3.1.3 above (the "BB Construction Contract") for
Tenant's review and prior written approval thereof, which shall not be
unreasonably withheld, and if Tenant's written approval or disapproval,
accompanied by a written detailed description of changes required by Tenant to
satisfy its concerns relating to the proposed BB Construction Contract is not
received within ten (10) business days after such contract is submitted to
Tenant for Tenant's approval, then such delay by Tenant in the delivery of such
written approval or disapproval shall be a Tenant Delay.  If Tenant timely
disapproves the proposed BB Construction Contract in accordance with this
Section 3.1.4, Landlord shall cause the proposed BB Construction Contract to be
revised as reasonably required to address Tenant's specified concerns, and shall
submit the revised BB Construction Contract to Tenant for its review and
approval as provided in this Section 3.1.4, and such procedure shall continue
until Tenant has approved of the proposed BB Construction Contract for execution
by Landlord and the Base Building Contractor (provided that Landlord shall not
be liable to Tenant for the Base Building Contractor's refusal to agree to any
of Tenant's changes and any delay in negotiating the BB Construction Contract as
a result thereof shall be deemed a Tenant Delay), provided that such consent, or
any objections or comments, provided by Tenant (or lack thereof) shall in no way
imply that such BB Construction Contract is sufficient or meet the requirements
for the related work under this Tenant Work Letter.  The BB Construction
Contract shall, at Tenant's option, be in the AIA form of a guaranteed maximum
price basis (A102-2007) or a Cost plus Fee with GMP construction agreement
(A103-2007).  Landlord shall use commercially reasonable efforts in coordination
with Tenant to cause the BB Construction Contract to provide that:  (a) Tenant
and Tenant's Representative will be named as additional insureds on each CGL
policy to be carried by Base Building Contractor; (b) Tenant shall be an express
third-party beneficiary of all of the Landlord contractual rights and all of the
Base Building Contractor's obligations, including, but not limited to,
(i) naming Tenant as an indemnified party for the Landlord's Agent's
indemnification obligations,

 

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(ii) Tenant shall be a permitted assignee of Landlord's interest the BB
Construction Contract with the right to enforce the covenants and obligations of
the Base Building Contractor, and (iii) both Landlord and Tenant shall be named
as the beneficiaries of all industry standard warranties, and (c) upon notice
from Tenant that a "BB Construction Contract Assignment Condition" (as that term
is defined below) has occurred, the "Owner" position in the BB Construction
Contract shall be assigned by Landlord to Tenant and Base Building Contractor
shall accept such assignment and recognize Tenant as the Owner under the BB
Construction Contract.  If following a BB Construction Contract Assignment
Condition, Tenant reasonably elects to accelerate the then-effective  Project
Schedule in order to achieve Substantial Completion of the Landlord's Work as
soon as reasonably practical following December 31, 2019, then any costs
reasonably incurred by Tenant in connection with such acceleration (and which
would not have been incurred by Tenant or Landlord but for such acceleration)
shall be paid by Landlord and excluded from Development Costs.  As used herein,
a "BB Construction Contract Assignment Condition" shall mean a failure for the
"Substantial Completion" of the Premises to occur on or before December 31, 2019
as the result of a Landlord Delay.  In addition to the foregoing, the proposed
BB Construction Contract shall include the following (provided that Landlord
shall not be liable to Tenant for the Base Building Contractor's refusal to
include the following in the BB Construction Contract and any delay in
negotiating the BB Construction Contract as a result thereof shall be deemed a
Tenant Delay):

(a) all subcontractors' subcontracts shall, to the extent possible, have unit
pricing which shall be applicable to the pricing of any Tenant Change Order
Requests.  Additionally, prior to Substantial Completion of the Landlord's Work,
Tenant shall have the right to require that any subcontractor invoices and/or
schedules of value that do not provide sufficient detail satisfactory to Tenant,
provide additional pricing breakout for portions of their work.  Such pricing
breakout materials will take the form of simple spreadsheets or letters
describing in detail the nature of work and references to the Base Building
Working Drawings indicating the location of the work performed by such
subcontractor; and

(b)Tenant shall have access to the Base Building Contractor 's books and records
relating to the construction of the Base, Shell and Core on an "open book" basis
throughout the construction thereof, and shall have the right to audit the Base
Building Contractor's costs and expenses, including all invoices submitted to
Landlord for the Development Costs of the Landlord's Base Building Work at any
time within the 6-month period immediately following the Must-Take 2
Commencement Date, which audit may be performed for Tenant, at Tenant's sole
cost and expense.

3.2Landlord's Retention of TI Contractor.  Tenant shall select a Contractor ("TI
Contractor") from among the Approved Bidding Contractors to construct the Tenant
Improvements pursuant to the terms of this Section 3.2, below.  As used in this
Tenant Work Letter, the TI Contractor and the Base Building Contractor may, if
Tenant so elects, be the same Contractor, but in such event the TI Contractor
may be retained by Landlord as an addendum to the BB Construction Contract or
under a separate construction contract, in either case as determined by Tenant
in its sole discretion.

3.2.1Selection of Bidding TI Contractors.  On or before the date scheduled for
Landlord and Tenant's approval of the Approved TI Drawings in the Project
Schedule, Landlord and Tenant shall mutually agree upon those Approved Bidding
Contractors to receive bid requests for the Landlord's TI Work and to prepare
competitive bids in accordance with Section 3.2.2, below (each of the Approved
Bidding Contractors and any other general contractors selected to receive such a
bid package, a "Bidding TI Contractor," and, collectively, the "Bidding TI
Contractors").  Promptly following Tenant's approval or deemed approval of the
Approved TI Drawings, Landlord shall submit the Landlord's TI Work construction
bidding package, which shall be jointly prepared by Landlord's Representative
and Tenant's Representative in consultation with PMA and the Project Manager, to
the Bidding TI Contractors.  Each of the Bidding TI Contractors shall be
notified in the Landlord's TI Work construction bid package (i) of the Project
Schedule for completion of the Landlord's TI Work, and (ii) the requirement that
the Base Building Contractor shall be required to bid each of the major
subcontractors (as reasonably and mutually determined by Landlord and Tenant)
with at least two (2) qualified subcontractors designated by Tenant (the
"Designated TI Subcontractors"), subject to Landlord's reasonable approval, and
Tenant shall only select Designated BB Subcontractors that are qualified
contractors, licensed and bondable in the State of California, with substantial
experience in industrial projects of similar size as the Premises.  All Bidding
TI Contractors shall be instructed to submit their bids directly to Landlord
with copies to the Tenant's Representative.  

 

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3.2.2Competitive Bid Process.  Unless Tenant timely delivers the Negotiated Bid
Notice in accordance with Section 3.2.3, below, Landlord shall prepare a bid
analysis of the bids timely submitted by the Bidding TI Contractors and
distribute such bid analysis to Tenant promptly following receipt of
bids.  Within five (5) business days after providing Tenant with the bid
analysis report for the Bidding TI Contractors, Landlord and Tenant shall
endeavor to jointly select a  TI Contractor from among the Bidding TI
Contractors based upon the competitive bids received by Landlord and Tenant
pursuant to this Section 3.2 of this Tenant Work Letter; provided that (i) any
failure by Tenant to reasonably participate in such process shall be a Tenant
Delay; and (ii) any failure by Landlord to reasonably participate in such
process shall be a Landlord Delay.  Notwithstanding the foregoing, if Landlord
and Tenant fail to agree on a TI Contractor from among the Bidding TI
Contractors within such five (5) business day period following Tenant's receipt
of Landlord's bid analysis, Tenant shall be permitted to select the Contractor
from among the Bidding TI Contractors in Tenant's sole discretion provided such
Bidding TI Contractor agrees to comply with the Project Schedule.  The
competitive bid of the Bidding TI Contractors selected pursuant to this Section
3.2.2, or the negotiated bid selected by Tenant pursuant to Section 3.2.3 below,
as applicable, shall be documented as a written proposal from the Bidding TI
Contractor for the cost of completing the Landlord's TI Work on a guaranteed
maximum price basis, based upon the Approved TI Drawings and shall include a
detailed line item breakdown of all costs included in the completion of the
Landlord's TI Work, including the Contractor's fee, overhead, general conditions
and insurance.  

3.2.3Negotiated Bid Option.  By written notice to Landlord delivered within five
(5) business days following Tenant's receipt of the last bid to be timely
submitted by the Bidding Contractors in accordance with Section 3.2.2 above,
Tenant may notify Landlord that Tenant intends to solicit negotiated bids from
one (1) or more of the Bidding TI Contractors from whom bids have been timely
received (a "Negotiated TI Bid Notice"), and if Tenant timely delivers a
Negotiated TI Bid Notice to Landlord, then for a period not to exceed fifteen
(15) business days following delivery of such notice (the "Negotiated TI Bid
Period"), Tenant may pursue negotiated bids from such Bidding TI
Contractor(s).  Landlord shall have the right to participate in Tenant's
negotiated bid process with any of the of the Bidding TI Contractors designated
in the Negotiated TI Bid Notice following Tenant's timely delivery of the
Negotiated TI Bid Notice, and Tenant shall share copies of all negotiated bid
responses received by Tenant pursuant to such process on an "open book"
basis.  If Tenant fails to timely deliver the Negotiated TI Bid Notice to
Landlord, Landlord and Tenant shall select the TI Contractor in accordance with
the competitive bid process set forth in Section 3.2.2 of this Work
Letter.  Notwithstanding the foregoing, Tenant may continue to negotiate with
the Bidding TI Contractors beyond the expiration of the Negotiated TI Bid Period
without affecting Tenant's right to select the TI Contractor pursuant to such
negotiations; provided that any delays resulting from such Tenant negotiations
with the Bidding TI Contractors beyond the Negotiated TI Bid Period shall be
Tenant Delays.

3.2.4Tenant Improvements Construction Contract.  Landlord shall submit to
Tenant's Representative and Project Manager a copy of the Landlord's proposed
construction contracts with the TI Contractor selected in accordance with
Section 3.2.2 or Section 3.2.3 above (the "TI Construction Contract") for
Tenant's review and prior written approval thereof, and if Tenant's written
approval or disapproval, accompanied by a written detailed description of
changes required by Tenant to satisfy its concerns relating to the proposed TI
Construction Contract is not received within ten (10) business days after such
contract is submitted to Tenant for Tenant's approval, then such delay by Tenant
in the delivery of such written approval or disapproval shall be a Tenant
Delay.  If Tenant timely disapproves the proposed TI Construction Contract in
accordance with this Section 3.2.4, Landlord shall cause the proposed TI
Construction Contract to be revised as reasonably required to address Tenant's
specified concerns, and shall submit the revised TI Construction Contract to
Tenant for its review and approval as provided in this Section 3.2.4, and such
procedure shall continue until Tenant has approved of the proposed TI
Construction Contract for execution by Landlord and the TI Contractor (provided
that Landlord shall not be liable to Tenant for the TI Contractor's refusal to
agree to any of Tenant's changes and any delay in negotiating the TI
Construction Contract as a result thereof shall be deemed a Tenant Delay),
provided that such consent, or any objections or comments, provided by Tenant
(or lack thereof) shall in no way imply that such TI Construction Contract is
sufficient or meet the requirements for the related work under this Tenant Work
Letter.  The TI Construction Contract shall be in the AIA form of a guaranteed
maximum price basis (A102-2007) or a Cost plus Fee with GMP construction
agreement (A103-2007).  Landlord shall use commercially reasonable efforts to
cause the TI Construction Contract to provide that:  (a) Tenant and Tenant's
Representative will be named as additional insureds on each CGL policy to be
carried by TI Contractor; (b) Tenant shall be an express third-party beneficiary
of all of the Landlord contractual rights and all of the TI Contractor's
obligations, including, but not limited to, (i) naming Tenant as an indemnified
party for the Landlord's Agent's indemnification obligations, (ii) Tenant shall
be a

 

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permitted assignee of Landlord's interest the TI Construction Contract with the
right to enforce the covenants and obligations of the TI Contractor, and
(iii) both Landlord and Tenant shall be named as the beneficiaries of all
industry standard warranties, and (c) upon notice from Tenant that a "TI
Construction Contract Assignment Condition" (as that term is defined below) has
occurred, the "Owner" position in the Construction Contract shall be assigned by
Landlord to Tenant and Contractor shall accept such assignment and recognize
Tenant as the Owner under the TI Construction Contract.  If following a TI
Construction Contract Assignment Condition, Tenant reasonably elects to
accelerate the then-effective Project Schedule in order to achieve Substantial
Completion of the Landlord's Work as soon as reasonably practical following
December 31, 2019, then any costs reasonably incurred by Tenant in connection
with such acceleration (and which would not have been incurred by Tenant or
Landlord but for such acceleration) shall be paid by Landlord and excluded from
Development Costs.  As used herein, a "TI Construction Contract Assignment
Condition" shall mean a failure for the "Substantial Completion" of the Premises
to occur on or before December 31, 2019 as the result of a Landlord Delay.  In
addition to the foregoing, the proposed TI Construction Contract shall include
the following (provided that Landlord shall not be liable to Tenant for the TI
Contractor's refusal to include the following in the TI Construction Contract
and any delay in negotiating the TI Construction Contract as a result thereof
shall be deemed a Tenant Delay):

(a)all subcontractors' subcontracts shall, to the extent possible, have unit
pricing which shall be applicable to the pricing of any Tenant Change Order
Requests.  Additionally, prior to Substantial Completion of the Landlord's Work,
Tenant shall have the right to require that any subcontractor invoices and/or
schedules of value that do not provide sufficient detail satisfactory to Tenant,
provide additional pricing breakout for portions of their work.  Such pricing
breakout materials will take the form of simple spreadsheets or letters
describing in detail the nature of work and references to the TI Working
Drawings indicating the location of the work performed by such subcontractor;
and

(b)Tenant shall have access to the TI Contractor 's books and records relating
to the construction of the Tenant Improvements on an "open book" basis
throughout the construction thereof, and shall have the right to audit the TI
Contractor's costs and expenses, including all invoices submitted to Landlord
for the Development Costs of the Landlord's TI Work at any time within the
6-month period immediately following the Must-Take 2 Commencement Date, which
audit may be performed for Tenant, at Tenant's sole cost and expense.

3.3Insurance.  All of Landlord's Agents shall carry worker's compensation
insurance covering all of their respective employees, and shall also carry
public liability insurance, including property damage, all with limits, in form
and with companies reasonably approved by Tenant.  In addition, Landlord shall
cause the Base Building Contractor, and the TI Contractor, to carry "Builder's
All Risk" insurance in an amount reasonably approved by Tenant covering the
Landlord's Work.  In the event that the Base, Shell and Core or any of the
Tenant Improvements are damaged by any cause covered by such insurance during
the course of the construction thereof, Landlord shall enforce the terms of the
BB Construction Contract and/or the TI Construction Contract, including without
limitation any indemnity provisions, in order to cause the damage to be repaired
using the proceeds of such insurance.  If the Base, Shell and Core or any of the
Tenant Improvements are damaged by any cause not covered by insurance but would
have been covered by insurance if Landlord had carried (or required the Base
Building Contractor and the TI Contractor to carry) the insurance required by
the terms of this Tenant Work Letter, then Landlord shall cause such damage to
be repaired at Landlord's sole cost and expense, and not as a Development
Cost.  Prior to the Must-Take 2 Commencement Date, Landlord's "Builder's All
Risk" insurance is an expense included in the Development Costs.  Landlord shall
cause such "Builder's All-Risk" insurance coverage on the Landlord's Work to
preclude or waive subrogation claims by the insurer against Tenant, its agents,
employees and representatives, and if reasonably available any certificate
evidencing such insurance coverage shall contain a provision that the company
writing such policy, or its agent, will endeavor to give Tenant thirty (30)
calendar days prior written notice of any cancellation or lapse of the policy or
any reduction in the amounts of such insurance prior to the Substantial
Completion of Landlord's Work (as defined in Section 5.2 below).  

3.4Applications for Payment and Payment Conditions.  The terms of this Section
3.4 shall be applicable to the construction of the Base, Shell and Core and to
the construction of the Tenant Improvements.  Prior to making any payment to any
of the Base Building Architect, Base Building Contractor, TI Architect or TI
Contractor, or any of the Base Building Engineers or TI Engineers, or to any
other third party manufacturer, vendor, supplier, or governmental authority or
utility, for any of the Development Costs of Must-Take Space 2 (each, a

 

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"Progress Payment"), (a)  Tenant's Representative and Project Manager shall have
received complete copies of all of the fully-executed design, consultant,
construction, and material supplier contracts for all payees included in the
applicable Draw Request (as hereinafter defined), each of which shall be in the
form approved by Tenant in advance in accordance with this Tenant Work Letter,
and copies of all fully-executed Tenant Change Orders (as hereinafter defined)
associated therewith, if any (which shall cover all work for which Landlord
seeks to make payment of Development Costs pursuant to the applicable Draw
Request, provided that each contract and Change Order need be submitted only
once for each such payee), and (b) Tenant's Representative shall have received
and approved the Landlord's written request for approval of the proposed
Development Costs included in such Progress Payment amount (each, a "Draw
Request"), which Draw Request shall include the following items:  (i) a request
for payment of the Base Building Contractor or the TI Contractor, as applicable,
in a form reasonably approved by Tenant showing the schedule, by trade,
detailing the portion of Landlord's Work completed and the portion not
completed; (ii) invoices from all other "Landlord's Agents" as defined below,
for labor rendered and materials delivered to the Premises; (iii) executed
mechanic's lien releases from all of Landlord's Agents which shall comply with
the appropriate provisions, as reasonably determined by Landlord, of California
Civil Code Sections 8132, 8134, 8136 and 8138; and (iv) a certificate from the
Base Building Architect or the Architect, as applicable, of the applicable
portion of Landlord's Work, certifying the requisite percentage of completion of
such work has been completed.  Notwithstanding the foregoing, if Landlord has
paid any portion of the Development Costs to any Contractor, Architect, Engineer
or any manufacturer, vendor or supplier, but pursuant to any unresolved dispute,
such persons shall fail to deliver an unconditional lien waiver, then as long as
Landlord provides reasonably satisfactory evidence to Tenant's Representative of
such payment, Tenant's Representative shall not withhold approval of any ensuing
Draw Request otherwise satisfying the foregoing requirements.  The Base Building
Construction Contractor, Contractor and all subcontractors and, laborers used by
Landlord in connection with Landlord's Work shall be known collectively as
"Landlord's Agents."  All contracts entered into by Landlord with Landlord's
Agents ("Landlord Agent Contracts") shall be subject to Tenant's reasonable
approval, provided, however, unless an approval process is otherwise expressly
set forth in the Tenant Work Letter, Tenant shall respond to any request for
Tenant approval to any Landlord Agent Contract in a timely manner so as not to
delay the Project Schedule.  

3.5Landlord's Deliverables; Contractor's Warranties and Guaranties.  Landlord
shall obtain customary warranties and guaranties from the Base Building
Contractor and the TI Contractor (collectively, the "Contractors' Warranties")
and the manufacturers of any Building Systems installed as part of the
Landlord's Work, and shall cooperate with Tenant in obtaining any extended
warranties reasonably requested by Tenant on such Building Systems or any of the
Tenant Improvements (collectively with the Contractors' Warranties, the "Project
Warranties").  Within sixty (60) days following the Substantial Completion of
the Premises, Landlord shall have prepared and delivered to Tenant (a) copies of
all such third-party Project Warranties, (b) all instructions and operating
manuals for such Building Systems, and (c) two (2) copies of the "as built" Base
Building Working Drawings and TI Working Drawings (collectively, the
"Landlord's  Deliverables").  In addition to the Project Warranties, Landlord
hereby assigns to Tenant all warranties and guaranties by each of the Base
Building Contractor and the TI Contractor, and all manufacturers, vendors and
subcontractors relating to Landlord's Work to the extent related to Tenant's
Repair Obligations and, if applicable, and Tenant Assumed Obligation, afforded
Landlord by operation of law (collectively with the Project Warranties, the
"Assigned Warranties"); and, subject to the terms of Section 3.6 below, and
without limiting the Landlord's Repair Obligations or modifying any of the other
terms and conditions of this Lease (including, but not limited to, the express
exclusions of certain repairs, maintenance and capital costs under the terms and
conditions of this Lease), Tenant hereby waives all claims against Landlord
relating to, or arising out of the construction of, the Landlord's Work;
provided that the foregoing waiver shall not extend to any Tenant claims arising
out of the Landlord's breach of any of its obligations under this Tenant Work
Letter.

3.6Landlord's MTS2 Warranty.  Notwithstanding anything set forth in the Lease or
this Tenant Work Letter to the contrary, upon the Must-Take 2 Commencement Date,
the Building Structure of the Lusk 3 Building shall be in good condition free
from material water leaks and the Building Systems serving the Premises shall be
in good working condition and repair.  Notwithstanding anything in the Lease to
the contrary, Landlord shall, at Landlord's sole cost and expense (which shall
not be deemed an Operating Expense), repair or replace any failed or inoperable
portion of the Building Structure or Building Systems if it is determined,
within thirty (30) days following the Must-Take 2 Commencement Date (the
"Landlord's MTS2 Warranty Period"), that such portion of the Building Structure
was not in good condition free from material water leaks or such portion of the
Building Systems was not in good working condition and repair ("Landlord's MTS2
Warranty"), provided that the need to

 

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repair or replace was not caused by Tenant Damage.  To the extent repairs which
Landlord is required to make pursuant to this Section 3.6 are necessitated in
part by Tenant Damage, then Tenant shall reimburse Landlord for the reasonable
cost of such repair. If it is determined that any portion of the Building
Structure was not in good condition free from material water leaks  or any
portion of the Building Systems was not in good working condition and repair
within thirty (30) days following the Must-Take 2 Commencement Date, then
Landlord shall not be liable to Tenant for any damages, but as Tenant's sole
remedy, Landlord, at no cost to Tenant, shall promptly commence such work or
take such other action as may be necessary to place the same in good working
condition and repair, and shall thereafter diligently pursue the same to
completion.  To the extent that Tenant fails to deliver written notice of any
violation of the Landlord's MTS2 Warranty within thirty (30) days following the
expiration of the Landlord's MTS2 Warranty Period, all of the Landlord's
warranty obligations under this Section 3.6 shall be null and void, except that
Landlord shall act reasonably and shall cooperate in good faith with Tenant's
efforts to reasonably enforce the Assigned Contractor Warranties.

3.7PMA's Fee.  Landlord shall pay PMA a project management fee ("PMA's Fee")
equal to 2.65% of the total of the following Development Costs included in the
Project Costs of Must-Take Space 2:  design fees (as set forth in Section
1.4.4.2.1 of this Lease, exclusive of the fees payable to PMA), governmental
fees(as set forth in Section 1.4.4.2.2 of this Lease), Contractor's fees (as set
forth in Section 1.4.4.2.5), and the cost of any Offsite Work (incurred in
accordance with Section 1.4.4.2.6 of this Lease).  PMA's Fee to be established
as a fixed fee once budgets for each project are determined (but subject to
revision as a result of any Tenant Change Order Requests and any Landlord Change
Directives, in accordance with the terms and conditions of Section 1.5,
above).  PMA's Fee is an expense included in the Development Costs in accordance
with Section 1.4.4.2 of this Lease.  

SECTION 4

COSTS OF LANDLORD'S WORK;
CONTRACTORS' BOOKS AND RECORDS, AND DEVELOPMENT CREDITS

4.1.Documentation of Development Costs.  Landlord shall construct the Base,
Shell and Core and the Tenant Improvements on an "open book" basis, with its
books and records reflecting all of the Development Costs of the Landlord's
Work, as may be reasonably requested by Tenant, which shall include each
Contractor 's applications for payment and subcontractors' and vendors' invoices
for costs included in such applications, to be made available, upon reasonable
notice, either at the project site or at PMA's offices in San Diego County, for
Tenant's Representative's and/or the Project Manager's review and verification
(at Tenant's expense).

4.2Development Credits.  In calculating the Development Costs pursuant to
Section 1.4.4 of this Lease, Landlord shall reasonably cooperate with Tenant in
applying for and obtaining (as part of the Development Costs) any development
impact fee credits available for the development of Must-Take Space 2 and any
other improvements to the Project included in any of the other Tenant Work
Letters to this Lease, as may be requested by Tenant from time to time,
including, without limitation, tax incentives and credits relating to any sales
or use taxes attributable equipment, materials or utilities incorporated or
utilized in the Landlord's development of Must-Take Space 2 or any other portion
of the Project, or relating to Tenant's intended use of the Premises or the
Project, or Tenant's related employment or sales activities, utility tariff
reductions and any benefits relating to any energy conservation-related design
or specification of the Landlord's Work, or any additional or supplemental solar
electrical system improvements installed as part of the Premises improvements,
or any of the Building Systems, or relating to any Alteration made by Tenant to
any portion of the Premises during the Term of this Lease, or otherwise relating
to the Tenant's activities at the Premises (collectively, the "Project
Incentives and Credits"); provided, however, in no event shall Project
Incentives and Credits include any rights or assets of Landlord as of the date
of this Lease, including without limitation any Equivalent Dwelling Units (EDUs)
that Landlord may have as of the date of this Lease.  Tenant shall have the
exclusive right to apply for and receive the full benefits of all Project
Incentives and Credits; and to the extent that any of the Project Incentives and
Credits are paid or credited to Landlord (including any credit against the cost
of utilities incurred by Landlord in the construction of Must-Take Space 2),
such Project Incentives and Credits shall be credited against the Development
Costs for the purposes of determining the Must-Take Space 2 Rent payable by
Tenant during the Term of this Lease; provided, however, that Tenant shall have
the right to designate that the funds for reimbursement of any costs and
expenses reasonably

 

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incurred by Landlord, at Tenant's request, in connection with such Project
Incentives and Credits to be either (a) included in the Development Costs for
Must-Take Space 2, (b) paid from the Tenant Improvement Allowance for the
Initial Premises or Must-Take Space 1 or Must-Take Space 3, or paid from the
Site Modernization/Beautification Allowance, or (c) paid directly by Tenant to
Landlord within thirty (30) days of receipt of Landlord's reasonably-detailed
invoice for such costs and expenses, regardless of the portion of the Project to
which such Project Incentives and Credits may be related.

4.3Failure to Pay Project Costs.  To the extent that Landlord fails to pay any
Design Fees or Development Costs of Landlord's Work in accordance with the terms
of the Lease and this Tenant Work Letter, and such amounts remain unpaid for
thirty (30) days after notice from Tenant, then Tenant may, after Landlord's
failure to pay such amounts within five (5) business days after Tenant's
delivery of a second notice from Tenant delivered after the expiration of such
30-day period, which second notice must contain (i) the following inscription,
in bold faced lettering: "SECOND NOTICE DELIVERED PURSUANT TO SECTION 4.3 OF THE
MUST-TAKE SPACE 2 TENANT WORK LETTER - - FAILURE TO TIMELY PAY THE FOLLOWING
PROJECT COST MAY RESULT IN TENANT'S PAYMENT OF THE SAME AND A DEDUCTION FROM
RENT UNDER THE LEASE," and (ii) a detailed description of the Project Cost that
Landlord has failed to pay, pay the same and deduct the amount thereof from the
Rent next due and owning under the Lease, including interest at the Default Rate
from the due date until the date of the Rent offset. Notwithstanding the
foregoing, if during either the 30-day or 5-day period set forth above, Landlord
(i) delivers notice to Tenant that it disputes any portion of the amounts
claimed to be due (the "Allowance Dispute Notice"), and (ii) pays any amounts
not in dispute, Tenant shall have no immediate right to offset any amounts
against rent, but may institute arbitration proceedings pursuant to Section 6.8,
below. Notwithstanding of the foregoing, in the event Tenant institutes
arbitration proceedings as provided herein and the determination of the
arbitrator is in favor of Tenant, Tenant shall be entitled, automatically, to
offset the amount of such award against the Rent next coming due under the
Lease, including interest at the Default Rate from the due date until the date
such amount has been fully offset. Further, in the event the arbitration award
is in favor of Tenant, any delay in the Substantial Completion of the Premises
actually caused as a result of Landlord's failure to pay the disputed amount
shall be deemed to be a "Landlord Delay" under Section 5.4 of this Tenant Work
Letter.

4.4Landlord's and Tenant's Agreement to Cooperate.  Landlord and Tenant shall
reasonably cooperate with one another in good faith to coordinate the
construction of the Landlord's Work with the Tenant's business operations at the
Project in a manner reasonably acceptable to both Landlord and Tenant, which
cooperation shall include, but not be limited to, (i) coordinating contractor
and its subcontractors' parking at the Project with the parking of the vehicles
of Tenant's employees during construction of the Landlord's Work, (ii)
minimizing interference with Tenant's ongoing business operations, and
mitigating adverse effects, such as noise, vibrations and dust, on the quiet use
and enjoyment of the Lusk 1 and Lusk 2 Buildings and Common Areas of the Project
by Tenant's employees and visitors during normal working hours, and (iii)
coordinating timing of construction deliveries to avoid delayed access to and
from the parking areas of the Project and the Lusk 1 and Lusk 2 Buildings by
Tenant's employees during normal working hours.  Landlord and Tenant shall use
their commercially reasonable and good faith efforts and diligence to cooperate
with the Base Building Architect and any other Architect, the Engineers, and the
Contractors so as to enable the prompt and timely completion of the Landlord's
Work in accordance with the Project Schedule.

SECTION 5

COMPLETION OF THE TENANT IMPROVEMENTS;
DELAYS

5.1Completion of Landlord's Work.   Landlord shall cause the Base Building
Contractor and the TI Contractor to complete the Landlord's Work (a) in
accordance with the Base Building Working Drawings and the TI Working Drawings,
respectively; (b) in compliance with all Applicable Laws, including but not
limited to the California Uniform Building Code, to the extent necessary for
Landlord to obtain a certificate of occupancy or temporary certificate of
occupancy, or legal equivalent, for the Premises for general office assuming a
normal and customary office occupancy density; and (c) with no Hazardous
Materials which is in violation of Applicable Laws introduced or generated in,
on, or about the Premises as a result of Landlord's Work.  

 

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5.2Ready for Occupancy.  The Premises shall be deemed "Ready for Occupancy" upon
the Substantial Completion of the Premises.  For purposes of this Lease,
"Substantial Completion" of the Premises shall occur upon the date the Premises
is in the "Delivery Condition," as that term is defined in Section 5.6, below.

5.3Tenant Delay.  Any actual delay or delays in the Substantial Completion of
the Premises or in the occurrence of any of the other conditions precedent to
the Must-Take 2 Commencement Date as set forth in the Lease, as a direct,
indirect, partial, or total result of:

5.3.1Tenant's failure to comply with the Time Deadlines which causes the Base
Building Contractor or the TI Contractor to fail to meet the Project Schedule;

5.3.2Tenant's failure to timely approve any matter requiring Tenant's approval
in accordance with the time requirements of this Tenant Work Letter, to the
extent such failure causes the Base Building Contractor or the TI Contractor to
fail to meet the Project Schedule;

5.3.3A breach by Tenant of the terms of this Tenant Work Letter or the Lease;

5.3.4Any Tenant Change Order;

5.3.5Tenant's requirement for materials, components, finishes or improvements
which are not available in a commercially reasonable time given the anticipated
date of Substantial Completion of the Premises, as set forth in the Lease, or
which are different from, or not included in, the Standard Improvement Package,
which are ordered to Tenant's specifications with Tenant's knowledge (based on
written notice from the Landlord's Representative, the TI Architect or the TI
Contractor) that such items are unlikely to be received at the Premises in
accordance with the Project Schedule, thereby causing a Tenant Delay;

5.3.6Changes to the Base, Shell and Core required by the Approved TI Drawings;

5.3.7Any delay in obtaining the Base Building Permits, TI Permits or a "CofO,"
as that term is defined in Section 5.5, below, resulting from (a) Tenant's
failure to timely deliver any Additional Programming Information requested by
the Base Building Architect or TI Architect, or the Base Building Contractor or
TI Contractor, in accordance with the Project Schedule and the terms and
conditions of this Tenant Work Letter, (b) Tenant's failure to approve the Base
Building Drawings, Final Space Plan or Final TI Drawings in accordance with the
Project Schedule and the terms and conditions of this Tenant Work Letter, or
(c) Tenant's value-engineering activities relating to the design of the Base,
Shell and Core or the Tenant Improvements pursuant to the terms of Section 1.2.2
or 1.3.5, as applicable, of this Tenant Work Letter, to the extent that such
activities cause the delayed commencement of the Landlord's Base Building Work
or the Landlord's TI Work, respectively, in accordance with the Project
Schedule; or

5.3.8Any other acts or omissions of Tenant, or its agents, or employees,
including, without limitation, any act or omission which causes the Base
Building Contractor or the TI Contractor to fail to meet the Project Schedule;

shall be deemed a "Tenant Delay."  Except for delays where there is an express
notice or response period under this Tenant Work Letter or this Lease, no Tenant
Delay shall be deemed to have occurred unless Landlord has given Tenant written
notice, promptly following Landlord's actual knowledge thereof, that an act or
omission on the part of Tenant or its agents, employees or contractors has
occurred which will cause such a delay and Tenant fails to cure such delay
within two (2) business days after receipt of such notice.  

5.4A "Landlord Delay" shall mean only an actual failure of the Base Building
Contractor or the TI Contractor to meet the Project Schedule resulting from (i) 
the failure of the Base Building Architect or either Contractor to act within
the time limits set forth in the Project Schedule or this Tenant Work Letter to
the extent Landlord fails to reasonably cooperate with Tenant's efforts to
enforce such obligations under the BB Construction Contract or the TI
Construction Contract, as applicable; (ii) the failure of Landlord to provide
any Landlord Change Order Response, or any other Landlord response,
authorization or approval required under this Tenant Work Letter

 

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within the time periods set forth in this Tenant Work Letter; (iii) the failure
of Landlord to timely approve or disapprove any Base Building Drawings or TI
Construction Drawings, (iii) delays due to the acts or failures to act of
Landlord or Landlord Parties with respect to payment of the Design Fees or the
Development Costs and cessation of work as a result thereof, (iv) a violation by
Landlord of any of its obligations under this Lease or this Tenant Work Letter;
(v) the issuance of a stop work order by any governmental authority (but only to
the extent caused for reasons within Landlord's reasonable control and not
caused by an act or omission of Tenant, or any of its employees or the Project
Manager); (vi) any act or omission by Landlord or a Landlord Agent that causes
Landlord to be in default under the BB Construction Contract or the TI
Construction Contract (and which was not caused by a Tenant Delay); or (vii)
Landlord's denial of Tenant access to the Must-Take Space 2 during the Must-Take
Space 2 Fit-Out Period for more than ten (10) consecutive full days.  Except for
delays where there is an express notice or response period under this Tenant
Work Letter or this Lease, no Landlord Delay shall be deemed to have occurred
unless Tenant has given Landlord written notice, promptly following Tenant's
actual knowledge thereof, that an act or omission on the part of Landlord or its
agents, employees or contractors has occurred which will cause such a delay and
Landlord fails to cure such delay within two (2) business days after receipt of
such notice.  Notwithstanding anything to the contrary in Section 5.5 below, the
following delay attributable to any violation of the Applicable Laws caused by
Landlord's  negligence or willful misconduct, the violation of the applicable
zoning ordinance and any overlay restrictions of the Project, will be excluded
from Force Majeure Delays and included in Landlord Delays for the purposes of
Landlord's satisfaction of its completion and delivery obligations under this
Tenant Work Letter.

5.5A "Force Majeure Delay" shall mean any failure for the Lease Expiration
Trigger Date to occur on or before December 31, 2019 to the extent such failure
is not the result of a Tenant Delay or a Landlord Delay, including, but not
limited to, delays due to earthquake, fire or other casualty, strikes or labor
disputes, embargo, unusually adverse weather, unavailability of power or
supplies, war or violence, acts of terrorism, any moratorium pursuant to any
legal requirement of any governmental agency (except as hereinafter
provided).  Each party shall use its commercially reasonable and diligent
efforts to notify the other party, in writing, of any event claimed by such
party as a Force Majeure Delay, which notice shall state in reasonable detail
the nature of such force majeure event and the reason(s) that such event
constitutes a Force Majeure Delay.  Any dispute between Landlord and Tenant
relating to whether a delay is a Tenant delay, a Landlord Delay or a Force
Majeure Delay to be resolved in accordance with Section 6.8 below.  

5.6Delivery Condition. The "Delivery Condition" shall occur at such time as
Landlord delivers the Premises to Tenant with (i) the completion of construction
of the Tenant Improvements in the Premises pursuant to the TI Working Drawings,
with the exception of any industry standard punch list items and any tenant
fixtures, work-stations, built-in furniture, or equipment to be installed by
Tenant or under the supervision of Contractor, (ii) Landlord has received a
certificate of occupancy or temporary certificate of occupancy, or legal
equivalent, for the Premises for the Permitted Uses of the Must-Take Space 2, as
reasonably inferred from the TI Working Drawings (a "CofO"), (iii) all Building
Systems serving the Premises are good working condition, with climate control
equipment in the Premises air-balanced (with the understanding that it is
possible that additional air-balancing may be required following such initial
air-balancing for the Premises, and that only the initial 30 days of rebalancing
of the of climate control equipment for the Premises shall be covered by the
Landlord's MTS2 Warranty, with any subsequent air-balancing of the climate
control systems to be performed by Landlord as part of the Direct Expenses
associated with Landlord's maintenance and repair of the Building Systems),
(iv) the Base Building Architect and the TI Architect have both signed an AIA
Document G704 – 2000 (Certificate of Substantial Completion), and
(v) representatives of Landlord and Tenant have completed a mutual walk-through
inspection of the Premises and have mutually and reasonably agreed upon a set of
industry standard "punch list" items to be completed by Landlord following the
Must-Take 2 Delivery Date (as defined in Section 1.4.3 of this Lease).  If
Tenant disagrees with Landlord's assertion that Delivery Condition has been
achieved, then Tenant shall notify Landlord in writing, within five (5) business
days following the final walk-through inspection, indicating the reasons for
withholding such confirmation.  Thereafter, the parties shall mutually select an
independent licensed general contractor with at least ten (10) years of
experience in construction of tenant improvements in First Class Life Sciences
Projects, who is not affiliated with Landlord or Tenant or any of their
respective agents, or retained by either of them or any of their agents in any
capacity within the three (3) year period preceding retention pursuant to this
Tenant Work Letter (the applicable person being referred to herein as the "Third
Party Inspector"), who shall be notified of the dispute, and shall be instructed
to immediately visit the Must-Take Space 2 to determine whether Delivery
Condition has been achieved.  The determination of the date of Delivery
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Inspector shall be binding on the parties, and the costs of such Third Party
Inspector shall be split equally by the parties.  From the date of Delivery
Condition and until Landlord has caused all industry standard punch list items
to be completed, Landlord shall comply with all reasonable requests of Tenant
relating to the scheduling and performance of any remaining work in and about
the Premises.

SECTION 6

MISCELLANEOUS

6.1Tenant's Entry Into the Premises Prior to Substantial Completion.  Provided
that Tenant and its agents do not interfere with Contractor's work in the
Building and the Premises, Contractor shall allow Tenant access to the Premises
at least sixty (60) days prior to the Substantial Completion of the Premises for
the purpose of Tenant installing Tenant's furnishings, equipment and
overstandard fixtures (including Tenant's data and telephone equipment) in the
Premises (the "Tenant's Fit-Out Work").  Prior to Tenant's entry into the
Premises as permitted by the terms of this Section 6.1, Tenant shall submit a
schedule to Landlord and the TI Contractor, for their approval (which shall not
be unreasonably withheld, conditioned or delayed), 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 Building or Premises and against injury to any persons caused by Tenant's
actions pursuant to this Section 6.1.  The foregoing requirements of the
Tenant's Fit-Out Work shall not modify the terms and conditions of Section 1.4.2
of this Lease, nor any of the Fit-Out Period Conditions set forth therein.

6.2No Miscellaneous Charges. In addition to Landlord's obligations under the
Lease, Landlord shall provide to Landlord's Agents, Tenant and Tenant's Agents,
notwithstanding anything to the contrary contained in this Lease, without charge
(to the extent utilized in connection with the construction of the Tenant
Improvements or Tenant move into the Premises), but subject to availability,
parking, utilities, freight elevator service and loading docks during the period
that such Landlord's Agents and Tenant's Agents are actually present in the
Building and working on the design and/or construction of the Tenant
Improvements during the Building Hours.

6.3Tenant's Representative.  Tenant has designated James Page ("Tenant's
Representative") 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.

6.4Landlord's Representative.  Landlord has designated PMA ("Landlord's
Representative") as its sole representative with respect to the matters set
forth in this Tenant Work Letter, who, until further notice to Tenant, shall
have full authority and responsibility to act on behalf of the Landlord as
required in this Tenant Work Letter.

6.5Tenant's Agents.  The Project Manager and any other contractor, subcontractor
or consultant retained directly by Tenant shall be subject to Landlord's
reasonable approval.

6.6Time 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.  In all instances where Tenant is required to approve or deliver an item,
if no written notice of approval is given or the item is not delivered within
the stated time period, at Landlord's sole option, at the end of such period the
item shall automatically be deemed approved or delivered by Tenant and the next
succeeding time period shall commence.

6.7Tenant's Lease Default.  Notwithstanding any provision to the contrary
contained in this Lease, if an event of default as described in the Lease, or a
default by Tenant under this Tenant Work Letter, and Tenant fails to use such
default within any applicable notice and cure period set forth in the Lease (or
within ten (10) business days if Tenant is in default under this Tenant Work
Letter), at any time on or before the Substantial Completion of the Premises,
then (i) in addition to all other rights and remedies granted to Landlord
pursuant to the Lease, Landlord may cause Contractor to cease the construction
of the Premises (in which case, Tenant shall be responsible for any delay in the
Substantial Completion of the Premises caused by such work stoppage as set forth
in Section 5 of this Tenant Work Letter), and (ii) all other obligations of
Landlord under the terms of this Tenant Work Letter shall be forgiven until such
time as such default is cured pursuant to the terms of the Lease.

 

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6.8Disputes.  Except in connection with provisions in this Tenant Work Letter
than have an express dispute resolution process, in the event of any dispute
between Landlord and Tenant in connection arising under this Tenant Work Letter,
either party may institute arbitration proceedings pursuant to arbitration
administered by the JAMS or any successor thereto under the Expedited Procedures
provisions (Rules 16.1-16.2 in the current edition) of the JAMS Comprehensive
Arbitration Rules and Procedures (as such rules may be modified from time to
time by JAMS, the "Arbitration Rules"), and such determination rendered by the
arbitrator mutually selected by Landlord and Tenant in accordance with the
Arbitration Rules (the "Arbitrator") shall be binding upon the parties and may
be entered in any court having jurisdiction thereof.  

 

 

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EXHIBIT B-4

SORRENTO SUMMIT

PROJECT RENOVATION AND UPGRADES WORK LETTER
(SITE MODERNIZATION/BEAUTIFICATION IMPROVEMENTS)

This Exhibit B-4 sets forth the terms and conditions relating to the
construction of the Site Modernization/Beautification Improvements (as such term
is defined in Section 1.2 of this Tenant Work Letter).  This Tenant Work Letter
is essentially organized chronologically and addresses the issues of the
Landlord's construction of the Site Modernization/Beautification Improvements in
sequence, as such issues will arise during the actual construction of the Site
Modernization/Beautification Improvements.  All references in this Tenant Work
Letter to Articles or Sections of "this Lease" shall mean the relevant portion
of Articles 1 through 29 of the Lease to which this Tenant Work Letter is
attached as Exhibit B-4 and of which this Tenant Work Letter forms a part, and
all references in this Tenant Work Letter to Sections of "this Tenant Work
Letter" shall mean the relevant portion of Sections 1 through 6 of this Tenant
Work Letter.  All references in this Exhibit B-4 to the "Project Site" shall
mean the Common Areas of the Project, as well as exterior components of the
Project Structures (to the extent not included in the Common Areas) and any
other portion of the Project depicted or described in the Basis of Design (as
such capitalized terms are defined Section 1.2 of this Tenant Work Letter).

SECTION 1

DESIGN AND PERMITTING OF THE SITE MODERNIZATION/BEAUTIFICATION IMPROVEMENTS

1.1General Provisions and Definitions.  Landlord shall, in consultation with
Tenant and in accordance with the terms and conditions of this Tenant Work
Letter, administer, coordinate, and (subject to the terms and conditions of
Section 1.6 of this Lease and Section 4 of this Tenant Work Letter) pay for the
costs and expenses of the planning, design and construction of the alterations
and improvements to the Project Site that are included in SMB Cost Items (as
defined in Section 1.6.1 of this Lease) as a logical extension of the Basis of
Design (the "Site Modernization/Beautification "Improvements"), and all related
work of demolition and other incidental work to be performed by or for Tenant
pursuant to this Tenant Work Letter, and mitigation of related noise fumes and
dust in occupied portions of the Project Structures and the parking areas of the
Project whenever likely to be caused by any of the foregoing activities
(collectively with the work of constructing the Site
Modernization/Beautification Improvements, the "Landlord's SMB Work" of this
Tenant Work Letter).  Except to the extent that any SMB Cost Items are included
in the Landlord's Base Building Work, the Landlord's SMB Work shall proceed in
accordance with the design development and permitting process set forth in
Section 1.3 of this Tenant Work Letter, and the engagement of the Contractor in
accordance with Section 3 of this Tenant Work Letter.  The construction of the
Landlord's SMB Work may occur in multiple phases, with each phase of the
Landlord's SMB Work (an "SMB Project"), as Tenant may elect in accordance with
the Request for Bid Proposals process set forth in Section 3.1.1 of this Tenant
Work Letter.

1.2Minimum Site Modernization/Beautification Costs.  In recognition that the
cost of the Landlord's SMB Work is payable by Tenant, (a) in accordance with
Section 3.3.2 of this Tenant Work Letter, using Tenant's funds and/or portions
of the Tenant Improvement Allowance allocated to SMB Cost Items in accordance
with one or more TIA Allocation Notices delivered in accordance with the terms
and conditions of Section 3.1 of Exhibit B-1 to this Lease and/or Section 2.1 of
Exhibit B-2 to this Lease (the "Tenant-Funded Amount"), and/or (b) by utilizing
some or all of the Site Modernization/Beautification Allowance as the Landlord's
Common Area Contribution (as such terms are defined in Section 5.3 of the
Summary to this Lease), which is subject to reimbursement by Tenant as SMB Rent,
prior to incurring any architectural (including landscape architecture),
engineering, and other design consulting fees, or cost or expense of any work
performed by any SMB Contractor, or any of the other Landlord's Agents, included
in the Landlord's SMB Work as SMB Costs pursuant to the terms and conditions of
this Tenant Work Letter, Tenant shall have the right to participate in the
negotiation of such SMB Costs and shall have the right to approve such SMB Costs
prior to their incorporation into the Approved SMB Budget (as defined in Section
3.1.4 below) for the applicable SMB Project; and to the extent that Tenant has
not approved, or is not deemed to have approved in advance (in accordance with
the terms and conditions of this Tenant Work Letter), any of the costs or
expenses  incurred by Landlord in the performance of the Landlord's SMB Work,

 

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which Landlord proposes for inclusion in SMB Costs pursuant to any SMB Draw
Request (as defined in Section 3.4 below), and Tenant provides written notice to
Landlord setting forth Tenant's reasons for objecting to the inclusion of such
costs or expenses as SMB Costs (provided that Tenant shall not object to the
inclusion of such cost or expense as SMB Costs if Tenant has previously approved
such cost or expense) promptly following the receipt of such SMB Draw Request by
the Tenant's Representative (individually and collectively, "Unapproved SMB
Costs"), then Landlord and Tenant shall promptly thereafter meet and attempt to
agree in good faith as to whether or not such Unapproved SMB Costs (x) were
incurred by Landlord reasonably and in good faith in order to comply with the
Site Modernization/Beautification Improvements requirements pursuant to the SMB
Working Drawings (as defined in Section 1.3.4 of this Tenant Work Letter), (y)
are not otherwise excluded from SMB Costs pursuant to the terms and conditions
of this Lease, and (z) are commercially reasonable under market conditions
existing at the time that such costs were incurred by Landlord.  To the extent
that Landlord and Tenant are not able to agree upon the inclusion or exclusion
of any of the Unapproved SMB Costs as SMB Costs within ten (10) business days
following the commencement of such informal resolution discussions, then such
dispute shall be resolved in accordance with Section 6.8 of this Tenant Work
Letter.  Unless, and except to the extent that, Unapproved SMB Costs are
approved by Tenant (or by the Arbitrator, as defined in Section 6.8 of this
Tenant Work Letter) for inclusion in SMB Costs in accordance with the terms and
conditions of this Section 1.1, such costs and expenses shall be excluded from
SMB Costs as if expressly set forth in Section 1.6.2.2 of this
Lease.  Notwithstanding anything in this Tenant Work Letter or this Lease to the
contrary:  (i) in no event shall the SMB Costs incurred by Landlord as a sum of
the Tenant-Funded Amount and any Landlord's Common Area Contribution designated
by Tenant for funding of SMB Costs in accordance with Section 5.3 of the Summary
(regardless of whether such SMB Costs are incurred pursuant to this Tenant Work
Letter or as a component of the Landlord's Base Building Work under Exhibit B-3
to this Lease) be less than Five Million Dollars ($5,000,000) in the aggregate
(the "Minimum SMB Costs"); and (ii) except to the extent included in the SMB
Working Drawings (as defined in Section 1.3.4 of this Tenant Work Letter), or
(to the extent that any SMB Cost Items are included in the Landlord's Base
Building Work of Exhibit B-3 to this Lease) expressly designated as SMB Cost
Items in the BB Construction Contract (as defined or Exhibit B-3 to this Lease),
costs incurred by Landlord or Tenant to make any other alterations and
improvements to the Project Site are excluded from the Minimum SMB Costs.

1.3Site Modernization/Beautification Improvements Design and
Permitting.  Promptly following the mutual execution and delivery of this Lease,
Landlord will enter into one or more professional services agreements with
Ferguson Pape Baldwin Architects ("SMB Architect") and certain engineering
consultants (the "SMB Engineers") to design the Site
Modernization/Beautification Improvements in accordance with the terms and
conditions of this Tenant Work Letter, subject to Tenant's prior approval of the
terms and conditions of such agreements (as such agreements may be modified
and/or supplemented from time to time with Tenant's prior approval thereof, the
"Approved SMB Design Contracts"), including, without limitation, (a) the design
fees payable by Landlord to the SMB Architect and SMB Engineers pursuant thereto
as SMB Costs pursuant thereto (the "Approved SMB Design Fees"), and (b) the
engineering consultants to act as the SMB Engineers, as identified in the
Approved Design Contracts; provided, however, Tenant shall not unreasonably
withhold its approval of such agreements, the proposed design fees or the
proposed engineering consultants to act as the SMB Engineers.  In recognition
that Tenant's SMB Rent payment obligations are directly tied to the Approved SMB
Design Fees, Landlord hereby agrees not to unilaterally (a) make or agree to any
material change to any Approved SMB Design Contract, nor (b) increase the
Approved SMB Design Fees as SMB Costs, without Tenant's prior approval, except
as otherwise expressly provided in this Tenant Work Letter (e.g., any extension
of contract time due to Tenant Delays in accordance with Section 5.3 below, or
any increased design costs due to any Tenant Change Order Requests (as defined
in Section 1.4, below) modifying the Approved SMB Plans); provided, however,
that Tenant shall not unreasonably delay or withhold its approval of any
Landlord-requested changes to any Approved SMB Design Contract.  The plans and
drawings to be prepared by SMB Architect and the SMB Engineers pursuant to the
process of this Section 1.3 are sometimes referred to in this Tenant Work
Letter, generically as the "SMB Plans."

1.3.1Basis of Design/Project Renderings.  Promptly following Landlord's
engagement of the SMB Architect and SMB Engineers in accordance with this
Section 1.3, Landlord shall coordinate with the SMB Architect, Tenant's
Representative and the Project Manager to develop architectural renderings for
those upgraded landscaping, hardscaping and other outdoors improvements
(including, but not limited to, Building exterior, patio areas and related
amenities, such as trellises, pergolas and arbors, outdoor fixtures and
furniture conducive for outdoor eating and employee meetings, sidewalks and
pathways, sculptures, fountains and other water features), and those renovations
to the existing landscaping, hardscaping, parking areas, driveways and exterior
storage areas, and

 

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other existing outdoors improvements at the Project Site to be included in the
Landlord's SMB Work (the "Final Project Site Renderings"), as a logical
extension of those concept design elements listed and/or graphically depicted on
Schedule 1 attached hereto (the "Basis of Design") and in accordance with such
additional information as SMB Architect and the SMB Engineers require from
Tenant and Landlord to complete the Final Project Site Renderings (collectively,
the "Additional Programming Information").  Tenant shall furnish to Landlord all
Additional Programming Information reasonably requested by SMB Architect that is
necessary in the judgment of the SMB Architect and the SMB Engineers to complete
prepare the Final Project Site Renderings as a logical extension of the Basis of
Design for Tenant's approval.  Landlord shall use commercially reasonable
efforts to cause the SMB Architect and SMB Engineers to work in good faith with
Tenant to prepare and deliver the Project Site Renderings to Landlord and Tenant
for review and approval in accordance with the schedule for design services
included in the Approved SMB Design Contract between Landlord and SMB Architect
(the "SMB Design Schedule").  Following Tenant's approval of the Final Project
Site Renderings, Landlord shall cause the SMB Architect and SMB Engineers to
prepare schematic drawings and preliminary specifications for the Site
Modernization/Beautification Improvements that conform to the Final Project Site
Renderings (the "Preliminary SMB Plans") for Tenant's approval in accordance
with Section 1.3.2 below.

1.3.2Approved SMB Plans.  During the course of development of the Preliminary
SMB Plans, Tenant shall furnish to Landlord any Additional Programming
Information reasonably requested by SMB Architect that is necessary, in the
reasonable judgment of Landlord, the SMB Architect and the SMB Engineers, to
complete the SMB Plans in a form that is sufficient to enable the SMB Contractor
and subcontractors to bid on the work of construction of the Landlord's SMB Work
and to obtain all applicable SMB Permits.  Tenant shall cooperate in good faith
to supply the SMB Architect such Additional Programming Information as is
reasonably necessary to allow the SMB Architect to complete the SMB Plans as a
logical extension of the Final Project Site Renderings approved by
Tenant.  Landlord shall use commercially reasonable efforts to cause the SMB
Architect and SMB Engineers to work in good faith with Tenant to prepare and
deliver the Preliminary SMB Plans to Landlord and Tenant for review and approval
in accordance with the SMB Design Schedule.  If Tenant disapproves the
Preliminary SMB Plans, Tenant's notice of disapproval shall specify the reasons
for such disapproval and those revisions required to obtain Tenant's approval of
the Preliminary SMB Plans.  After receiving such notice of disapproval, Landlord
shall cause the SMB Architect to revise the Preliminary SMB Plans, taking into
account the reasons for Tenant's disapproval (provided, however, that Landlord
shall not be required to cause the SMB Architect to make any revision to the
Preliminary SMB Plans that creates a Design Problem, as defined in Section 1.3.3
below), and to resubmit the revised Preliminary SMB Plans to Tenant for its
approval.  Such revision and resubmission shall occur within five (5) business
days after Landlord's receipt of Tenant's notice of disapproval (if such
revision is not material; otherwise the revised Preliminary SMB Plans will be
resubmitted to Tenant within such longer period of time as may be reasonably
necessary, but not more than ten (10) business days after such receipt by
Landlord).  Such procedure shall be repeated as necessary until Tenant has
approved the Preliminary SMB Plans.  Promptly following Tenant's approval of the
Preliminary SMB Plans in accordance with this Section 1.3.2, and in accordance
with the SMB Design Schedule, Landlord shall use commercially reasonable efforts
to cause the SMB Architect and SMB Engineers to work in good faith with Tenant's
Representative and Project Manager to complete the SMB Plans in a form that is
sufficient to enable the SMB Contractor and subcontractors to bid on the work of
construction of the Landlord's SMB Work and to obtain all applicable SMB Permits
(as approved by Tenant in accordance with this Section 1.3.2 below, the "Final
SMB Plans").  Landlord shall cause the SMB Architect to prepare and deliver to
Tenant the SMB Plans for Tenant's approval as the Final SMB Plans in accordance
with the SMB Design Schedule.  Tenant shall approve or disapprove the Final SMB
Plans by notice to Landlord within ten (10) business days after Tenant's
Representative receives the proposed Final SMB Plans.  If Tenant timely
disapproves the Final SMB Plans, Tenant's notice of disapproval shall specify
the reasons for such disapproval and those revisions required to obtain Tenant's
approval of the Final SMB Plans for submission to the Bidding Contractors as
part of the Request for Bid Proposals prepared in accordance with Section 3.3.1
below.  After receiving such notice of disapproval, Landlord shall cause the SMB
Architect to revise the Final SMB Plans, taking into account the reasons for
Tenant's disapproval (provided, however, that Landlord shall not be required to
cause the SMB Architect to make any revision to the Final SMB Plans that causes
a Design Problem).  Once the Final SMB Plans have been so revised, Landlord
shall resubmit the revised Final SMB Plans to Tenant for its approval.  Such
revision and resubmission shall occur within ten (10) business days after
Landlord's receipt of Tenant's notice of disapproval (if such revision is not
material; otherwise the revised Final SMB Plans will be resubmitted to Tenant
within such longer period of time as may be reasonably necessary, but not more
than fifteen (15) business days after such receipt by Landlord).  Such procedure
shall be repeated as necessary until Tenant has approved the Final SMB Plans for
submission to the

 

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Bidding Contractors.  Notwithstanding the foregoing, Tenant shall have the right
to value-engineer the design of the Site Modernization/Beautification
Improvements as set forth in the Final SMB Plans approved by Tenant for
submission to the Bidding Contractors, in Tenant's reasonable discretion, as
part of the process of negotiating the cost of construction of the Landlord's
SMB Work with the Bidding Contractors, and Landlord shall cause the SMB
Architect and SMB Engineers to reasonably participate in such value engineering
process (with the applicable design fees payable in accordance with the Approved
SMB Design Contracts).  Landlord acknowledges that Tenant's value engineering
efforts may result in additional revisions to the Final SMB Plans approved by
Tenant, and that such value-engineering revisions may be requested by Tenant in
accordance with the SMB Design Schedule, and as long as such revisions do not
cause a Design Problem, the Final SMB Plans shall be modified by the SMB
Architect to incorporate such requested changes, in accordance with the process
for Tenant's approval of the Final SMB Plans set forth in this Section 1.3.2
above, until the Final SMB Plans are in a form approved by Tenant for
incorporation into the SMB Construction Contract as the basis of the contract
sum payable to the Contractor in accordance with Section 3.1.4 below, and in the
form to be submitted to governmental authorities for the SMB Permits.  The Final
SMB Plans approved by Landlord and Tenant for incorporation into the SMB
Construction Contract are referred to in this Tenant Work Letter as the
"Approved SMB Plans."  Except as provided in Section 1.4 below, neither Landlord
nor Tenant shall make any change or modification to the Approved SMB Plans,
without the prior written consent of the other party to this Lease, which
consent shall not be unreasonably withheld, conditioned or delayed.  

1.3.3Design Problems.  For the purposes of this Tenant Work Letter, a "Design
Problem" means, and will be deemed to exist to the extent, that any component or
components of the proposed SMB Plans (or any Tenant-proposed revisions thereto)
either:  (a) represents a material deviation from the Basis of Design or the
Project Site Renderings mutually-approved by Landlord and Tenant in accordance
with this Tenant Work Letter, or (b) fails to, or is reasonably likely to cause
any component of the Site Modernization/Beautification Improvements to fail to,
comply with Applicable Laws.  Tenant shall be responsible for ensuring that all
elements of the design of the Approved SMB Plans (as such drawings may be
modified by any Tenant Change Orders in accordance with Section 1.4 below) are
suitable for Tenant's use of the Project, and neither the preparation of the
Approved SMB Plans by the SMB Architect, nor Landlord's approval of (or failure
to disapprove) the Approved SMB Plans pursuant to Section 1.3.1 above, shall
relieve Tenant from such responsibility.  Landlord shall cause the SMB Architect
and the SMB Engineers to use the "Required Level of Care" (defined below) to
cause the SMB Working Drawings to comply with Applicable Laws.  As used herein,
"Required Level of Care" means the level of care that reputable architects and
engineers customarily use in the San Diego market to cause drawings and
specifications for a project of improvements similar to the Site
Modernization/Beautification Improvements to comply with Applicable Laws.

1.3.4Site Modernization/Beautification Improvements Permits.  Promptly following
Tenant's selection of the SMB Contractor and approval of the SMB Construction
Contract in accordance with the terms and conditions of Section 3.1 below,
Landlord shall cause the SMB Contractor to promptly submit the Approved SMB
Plans to the appropriate municipal authorities in order to procure all
applicable permits necessary to commence and fully complete the construction of
the Site Modernization/Beautification Improvements (the "SMB Permits"), at
Landlord's cost (as part of the SMB Costs); provided, however, that the Approved
SMB Plans may be submitted for such SMB Permits in phases in accordance with the
terms and conditions of the SMB Construction Contract (e.g., the submission of
those Approved SMB Plans required for grading permits to commence grading of
portions of the Common Areas may occur before the submission of Approved SMB
Plans for the remaining SMB Permits).  Landlord agrees to use reasonable
diligent efforts to cause the SMB Contractor to obtain such SMB Permits in
accordance with the project schedule for the construction of the Landlord's SMB
Work set forth in the SMB Construction Contract approved by Tenant in accordance
with Section 3.1 (as the same may be modified or updated from time to time in
accordance with the terms and conditions of this Tenant Work Letter or the SMB
Construction Contract, the "SMB Project Schedule"), and in connection therewith
Landlord shall coordinate with Tenant's Representative in order to allow Tenant,
at Tenant's option, to take part in the permitting process in accordance with
the SMB Project Schedule; and Landlord shall supply Tenant, as soon as possible,
with all plan check numbers and dates of submittal of the Approved SMB
Plans.  If the Approved SMB Plans are not approved by the applicable municipal
authorities and such approval will require a change to the Approved SMB Plans,
or if such authorities impose any condition on construction of the Site
Modernization/Beautification Improvements, which:  (i) is materially
inconsistent with the Approved SMB Plans, (ii) will materially increase the cost
of the Landlord's SMB Work by increasing the Approved Design Fees or the
Tenant-approved contract sum of the SMB Construction Contract, or (iii) is
reasonably likely to substantially delay the Substantial Completion of the
Landlord's SMB Work

 

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beyond December 31, 2019 (each of the foregoing, a "Material Design Change"),
then Landlord and Tenant shall mutually and reasonably work together in good
faith to modify the Approved SMB Plans to the extent required in order for the
same to be approved by the applicable municipal authorities, and if the parties
are unable to agree upon such modifications within ten (10) business days
following Tenant's receipt of notice of any disapproval of the Approved SMB
Plans by the applicable municipal authorities, such dispute shall be resolved in
accordance with Section 6.8 of this Tenant Work Letter; provided, however, that
Tenant shall have the exclusive right, in its sole discretion, to approve any
Material Design Change that is materially consistent with the Approved SMB Plans
(i.e. a Material Design Change that materially increases the cost of the
Landlord's SMB Work or is reasonably likely to delay Substantial Completion of
Landlord's SMB Work, as long as (i) such material increased costs of Landlord's
SMB Work are SMB Costs, and (ii) such delay of Substantial Completion of
Landlord's SMB Work (A) does not delay the SMB Rent Commencement Date beyond
January 1, 2020, and (B) is not likely to be delayed beyond December 31,
2020.  Notwithstanding the foregoing, Landlord shall have the right to
reasonably and in good faith modify the Approved SMB Plans, in consultation with
the Tenant's Representative and Project Manager, but without Tenant's approval,
to the extent that such modifications (a) are determined by Landlord, Tenant's
Representative and Project Manager not to be a Material Design Change, (b) will
not increase the Approved SMB Design Fees or the Tenant-approved contract sum of
the SMB Construction Contract payable by Tenant as SMB Costs, (c) will not
materially and adversely affect Tenant's planned Permitted Use of the Common
Areas (as can be reasonably deduced from the Approved SMB Plans) and any Project
Structures improved or modified as part of the Landlord's SMB Work, and (d) are
otherwise consistent with the first class nature of the Project and do not use
systems or equipment materially lower in quality (or materially more expensive)
than those specified in the Approved SMB Plans.  The Approved SMB Plans as
incorporated into the Tenant-approved SMB Construction Contract, and as modified
to procure the SMB Permits in accordance with this Section 1.3.4, and in
accordance with any Tenant Change Orders in accordance with Section 1.4 below,
any Landlord Change Directives (as defined in Section 1.5 below) and "as built"
conditions of completed Landlord's SMB Work are sometimes referred to herein as
the "SMB Working Drawings."

1.4Tenant-Requested Changes to SMB Working Drawings.  Tenant shall have the
right to request changes to the Approved SMB Plans and the SMB Working Drawings
from time to time, subject to Landlord's prior written approval, which shall not
be unreasonably withheld.  Tenant shall request any such modification to the
Approved SMB Plans or the SMB Working Drawings by notifying Landlord in writing
(a "Tenant Change Order Request"), in substantially the same form as the AIA
standard change order form (AIA Form G701-2001), which Tenant Change Order
Request shall detail the nature and extent of any such modification and shall be
signed by Tenant's Representative.  Landlord shall, before proceeding with any
such modification, use commercially reasonable efforts to respond to Tenant as
soon as is reasonably possible with an estimate of:  (i) the effect that the
design and construction of the modification will have on the then-current SMB
Project Schedule, (ii) any additional Approved Design Fees that will be incurred
to analyze and/or make such modification, and (iii) the effect of the
modification on the SMB Costs.  Landlord shall submit to Tenant in writing,
within five (5) business days after receipt of the Tenant Change Order Request
(or such longer period of time as is reasonably required and as promptly
communicated to Tenant's Representative and Project Manager, depending on the
extent of the requested modification), an analysis of the additional or
increased SMB Costs and/or savings involved in such Tenant Change Order Request,
including, without limitation, any adjustment to the SMB Costs and the effect of
such Tenant Change Order Request on the Project Schedule then in effect (the
"Landlord Change Order Response").  If Tenant accepts the terms and conditions
of the Landlord Change Order Response, the Tenant Change Order Request shall be
modified in accordance with the terms and conditions of the Landlord Change
Order Response and Tenant shall execute the Tenant Change Order Request as so
modified as a written change order for the modification of the Landlord's SMB
Work (a "Tenant Change Order") promptly following Tenant's receipt of the
Landlord Change Order Response, and the SMB Costs (and the Tenant-Funded Amount)
shall be adjusted accordingly.  Pending agreement as to the terms and conditions
of the Tenant Change Order prior to Tenant's timely execution and delivery of
the Landlord Change Order Response, Landlord shall not delay the normal progress
of the Landlord's SMB Work.  Any delay in Substantial Completion of Landlord's
SMB Work caused by Tenant's failure to promptly execute a Tenant Change Order in
accordance with the Landlord Change Order Response approved by Tenant shall be a
Tenant Delay under this Tenant Work Letter.  

1.5Requests for Information and Change Directives.  Landlord shall require the
SMB Contractor to copy Tenant's Representative and Project Manager (as defined
in Section 2.2 below) on any requests for information submitted to Landlord
relating to the Landlord's SMB Work ("RFI's").  In addition, Landlord shall

 

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consult with Tenant's Representative and Project Manager in advance of, and
provide Tenant's Representative and Project Manager with copies
of:  (i) Landlord's response to any RFI, and (b) any plan clarifications
relating the SMB Working Drawings sent to SMB Contractor or any of its
subcontractors by SMB Architect ("Landlord Change Directives"), provided that
Tenant shall either approve or reasonably disapprove any proposed Landlord
Change Directive within three (3) business days after Tenant's Representative's
receipt of a copy of such proposed Landlord Change Directive from Landlord, with
Tenant's disapproval of a proposed Landlord Change Directive to be limited to
the following reasons:  either (i) Tenant's Representative reasonably determines
that such Landlord Change Directive will adversely impact the design or
construction of the completed Site Modernization/Beautification Improvements, or
(ii) Tenant's Representative determines that such Landlord Change Directive will
increase the SMB Costs or materially increase the Tenant's cost of occupancy,
use, maintenance or repair or restoration of any portion of the Premises or the
Project (or the Direct Expenses payable to Landlord) following completion of the
Landlord's SMB Work.  Should Tenant's Representative fail to timely deliver such
reasons for objections to any Landlord Change Directive in writing, then such
Landlord Change Directive (and any additional or increased SMB Costs associated
therewith) shall be deemed to have been approved by Tenant in accordance with
this Section 1.5 (but without limiting Tenant's rights under this Tenant Work
Letter relating to the Tenant's Representative's and Project Manager's right to
review the Landlord's books and records relating to the completed Landlord's SMB
Work).

SECTION 2

PROJECT SCHEDULE; TENANT'S PROJECT MANAGER

2.1Project Schedule.  Subject to any Tenant Delays (as hereinafter defined), the
Landlord's SMB Work shall be completed in accordance with this Tenant Work
Letter diligently following the effective date of this Lease; and subject to any
Tenant Delays, Landlord shall use commercially reasonable efforts to cause the
SMB Architect to design the Site Modernization/Beautification Improvements in
accordance with the SMB Design Schedule and to cause the SMB Contractor to
construct the Site Modernization/Beautification Improvements in accordance with
the SMB Project Schedule.  Tenant shall have the right to accelerate the
milestone dates contained in the SMB Project Schedule for the construction of
the Site Modernization/Beautification Improvements by written notice indicating
the revised milestone date that Tenant intends to advance (an "Acceleration
Notice"); and if Tenant so elects, Landlord and Tenant shall use mutual good
faith and commercially reasonable efforts to determine and agree upon the
additional cost of achieving the accelerated milestone date (which shall
similarly accelerate all subsequent milestone dates unless otherwise noted in
the applicable Acceleration Notice), in consideration of the effect of such
Acceleration Notice on all of the other terms and conditions of this Tenant Work
Letter; and in the event that Landlord and Tenant agree upon any additional SMB
Costs and the effect of such acceleration on the SMB Project Schedule, the SMB
Project Schedule for the construction of the Site Modernization/Beautification
Improvements shall be modified in accordance with the Acceleration Notice.  If
at any time during the design, permitting and construction process Tenant
reasonably believes that Landlord will fail to meet any of the delivery or
permitting deadlines of the SMB Project Schedule, Tenant shall have the right to
notify Landlord of such belief and the reasons therefor, and Landlord shall
promptly provide an SMB Project Schedule status update to Tenant, and a revised
SMB Project Schedule as modified by any prior, on-going and anticipated
delays.  If at any time during the design, permitting or construction of the
Premises, Landlord reasonably believes that Landlord will fail to meet any of
the required delivery or permitting milestones of the SMB Design Schedule or the
SMB Project Schedule, Landlord shall promptly notify Tenant of the anticipated
delay, including any known causation and the Landlord's estimate of the duration
of such delay (if Landlord is reasonably capable of estimating such duration)
and Landlord shall promptly provide Tenant with a status update to the SMB
Design Schedule or the SMB Project Schedule, as applicable, and a revised SMB
Design Schedule or SMB Project Schedule, respectively, as modified by any prior,
on-going and anticipated delays.  Notwithstanding the foregoing, nor anything
set forth in Section 5 of this Tenant Work Letter relating to Tenant Delays,
except for delays where there is an express notice or response period under this
Tenant Work Letter, no Tenant Delay shall be deemed to have occurred unless
Landlord has given Tenant written notice, promptly following Landlord's actual
knowledge thereof, that an act or omission on the part of Tenant or its agents,
employees or contractors has occurred which will cause such a delay and Tenant
fails to cure such delay within two (2) business days after receipt of such
notice, in which case the number of days of delay after such notice shall be a
Tenant Delay in accordance with Section 5.3 below.

 

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2.2Tenant's Project Manager.  Tenant shall retain a project manager (the
"Project Manager"), subject to Landlord's reasonable approval, to oversee the
day-to-day work of construction included in the Landlord's SMB Work and to
direct the general contractor engaged by Landlord pursuant to the SMB
Construction Contract ("SMB Contractor" for the purposes of this Tenant Work
Letter) in connection with the construction of the Site
Modernization/Beautification Improvements.  Landlord shall use commercially
reasonable efforts to cause the SMB Architect and the SMB Contractor to
reasonably cooperate with Tenant and the Project Manager in connection with the
Landlord's SMB Work of construction of the Site Modernization/Beautification
Improvements in accordance with the Project Schedule.  Tenant shall use
commercially reasonable efforts to cause the Project Manager to reasonably
cooperate in good faith with Landlord's project manager, Project Management
Advisors ("PMA"), in connection with Landlord's SMB Work of construction of the
Site Modernization/Beautification Improvements.  Tenant's Project Manager, as
well as Tenant's Representative set forth in Section 6.3, below, shall have the
right to perform a walk-through inspection of the Site
Modernization/Beautification Improvements prior to Tenant's approval of each SMB
Draw Request (as defined in Section 3.4 below) for purposes of determining the
condition of the Site Modernization/Beautification Improvements and confirmation
of the information contained in such SMB Draw Request (each, a "SMB Progress
Payment Walk-Through Inspection").  Additionally, Tenant's Representative and
Project Manager will have access to the Project Site and the Landlord's and the
SMB Contractors' books and records with respect to the SMB Landlord's Work of
construction of the Site Modernization/Beautification Improvements, and will be
provided with copies of all shop drawings and samples for review for compliance
with the Tenant-approved design documents for Site Modernization/Beautification
Improvements, participate in weekly project meetings, as reasonably required for
construction management services of the Landlord's SMB Work on behalf of Tenant,
and to participate in the walk-through inspection of the Site
Modernization/Beautification Improvements upon Substantial Completion of each
SMB Project (and the final walk-through inspection upon Substantial Completion
of the last phase of Landlord's SMB Work) to determine whether the Delivery
Condition has been satisfied (in accordance with Section 5.6 below), and in the
related punch list preparation and follow-up confirmation of completion or
repairs of the punch list items (as defined in Section 5.6 below).  Subject to
the Project Manager having reasonable rights of access to the Project Site as
reasonably required for the Project Manager to observe the construction of the
Site Modernization/Beautification Improvements throughout the period of
construction of the Landlord's SMB Work, and reasonable notice of, and the right
to attend and participate at, construction meetings, and review the annotated
"as built" site copies of the SMB Working Drawings from time to time, and at all
reasonable times during the period of construction of the Landlord's SMB Work,
to the extent that the Project Manager delays the Substantial Completion of the
Site Modernization/Beautification Improvements beyond December 31, 2019, such
delay will be a Tenant Delay, subject to the terms and condition of Section 2.1
above regarding Tenant's Acceleration Notice rights.  The fee of Tenant's
Project Manager shall be included in the SMB Costs.

2.3Time Deadlines.  Tenant and Landlord shall use their respective best, good
faith, efforts and all due diligence to cooperate with the SMB Contractor, SMB
Architect, the SMB Engineers and one another in order to complete all phases of
the Landlord's SMB Work in accordance with the SMB Design Schedule and the SMB
Project Schedule, and, in that regard, Landlord shall arrange for Tenant's
Representative and Project Manager to receive notice of, and right to attend,
all design and construction progress meetings for the Landlord's SMB Work, on a
scheduled basis and reasonably in advance of such, and shall arrange for
Tenant's Representative and Project Manager to be copied on all electronic and
written communications with the SMB Architect and the SMB Contractor with
respect to the progress and performance of the Landlord's SMB Work.  The
applicable dates for submissions, responses, revisions and approvals of items,
plans and drawings as described in this Tenant Work Letter will be further
elaborated upon in the SMB Design Schedule and the SMB Project Schedule (the
"Time Deadlines").  Landlord and Tenant agree to comply with their respective
Time Deadlines pursuant their respective obligations under this Tenant Work
Letter.

SECTION 3

CONSTRUCTION OF THE SITE MODERNIZATION/BEAUTIFICATION IMPROVEMENTS

3.1Selection of Contractor.  Tenant shall select, pursuant to the terms of this
Section 3.1, below, the SMB Contractor from the following general contractors as
Bidding Contractors for Landlord's SMB Work:  (a) Swinerton; (b) Pacific
Building Group; or (c) Whiting Turner (the "Approved Bidding Contractors"), to
construct the Site Modernization/Beautification Improvements of the Landlord's
SMB Work pursuant to the terms of this

 

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Tenant Work Letter; provided that Landlord and Tenant hereby agree that each of
Landlord and Tenant may propose additional general contractors as Bidding
Contractors for the Landlord's SMB Work, subject to the other party's prior
written approval, which shall not be unreasonably withheld, conditioned or
delayed.  Landlord hereby approves each of the Approved Bidding Contractors.

3.1.1Selection of Bidding Contractors.  On or before the date scheduled for
Landlord and Tenant's approval of the Approved SMB Plans in accordance with the
SMB Design Schedule in the Approved SMB Design Contract with the SMB Architect,
Landlord shall cause the SMB Architect to cooperate with Landlord and Tenant in
the preparation of a bid request package for competitive bid proposals to
perform the work of construction of the Site Modernization/Beautification
Improvements in accord with the Final SMB Plans (the "Request for Bid
Proposals") to be delivered by Landlord to the Approved Bidding Contractors and
any other qualified, licensed and reputable general contractors approved by
Landlord and Tenant to receive such Request for Bid Proposals (each a "Bidding
Contractor," and, collectively, the "Bidding Contractors").  If Tenant elects,
the Request for Bid Proposals may provide for bid alternatives for the
performance of the Landlord's SMB Work in multiple phases as separate SMB
Projects (in which event, and if Tenant so elects, the Landlord and the SMB
Contractor shall enter into one or more SMB Construction Contracts pursuant to
this Section 3.1.  Promptly following Tenant's approval of the Approved SMB
Plans and the Request for Bid Proposals, Landlord shall submit the Request for
Bid Proposals approved by Tenant to the Bidding Contractors.  Each of the
Bidding Contractors shall be notified in the Request for Bid Proposals of the
requirement that the Bidding Contractor selected as the SMB Contractor shall be
required to bid each of the major subcontractors (as reasonably and mutually
determined by Landlord and Tenant) with at least two (2) qualified
subcontractors designated by Tenant (the "Designated Subcontractors"), subject
to Landlord's reasonable approval, and Tenant shall only select Designated
Subcontractors that are qualified contractors, licensed and bondable in the
State of California, with substantial experience in First Class Life Sciences
projects of similar size as the Site Modernization/Beautification
Improvements.  All Bidding Contractors shall be instructed to submit their bids
directly to Landlord with copies to the Tenant's Representative.

3.1.2Competitive Bid Process.  Unless Tenant timely delivers the Negotiated Bid
Notice in accordance with Section 3.1.3, below, Landlord shall prepare a bid
analysis of the bids timely submitted by the Bidding Contractors and distribute
such bid analysis to Tenant promptly following receipt of bids.  Within five (5)
business days after providing Tenant with the bid analysis report for the
Bidding Contractors, Landlord and Tenant shall endeavor to jointly select the
SMB Contractor from among the Bidding Contractors based upon the competitive
bids received by Landlord and Tenant pursuant to this Tenant Work Letter;
provided that (i) any failure by Tenant to reasonably participate in such
process shall be a Tenant Delay; and (ii) any failure by Landlord to reasonably
participate in such process shall be deemed Landlord's consent to the SMB
Contractor selected by Tenant from among the competitive bids submitted by the
Bidding Contractors.  Notwithstanding the foregoing, if Landlord and Tenant fail
to agree on a Contractor from among the Bidding Contractors within such five (5)
business day period following Tenant's receipt of Landlord's bid analysis,
Tenant shall be permitted to select the SMB Contractor from among the Bidding
Contractors in Tenant's sole discretion provided that such Bidding Contractor
agrees to a Project Schedule that provides for Substantial Completion of the
Site Modernization/Beautification Improvements no later than December 31, 2020
(provided that in no event shall the SMB Rent Commencement Date be beyond
January 1, 2020).  The competitive bid of the Bidding Contractors selected
pursuant to this Section 3.1.2, or the negotiated bid selected by Tenant
pursuant to Section 3.1.3 below, as applicable, shall be documented as a written
proposal from the Bidding Contractor for the cost of completing the Site
Modernization/Beautification Improvements on a guaranteed maximum price basis,
based upon the Approved SMB Plans and shall include a detailed line item
breakdown of all costs included in the completion of the Site
Modernization/Beautification Improvements, including the SMB Contractor's fee,
overhead, general conditions and insurance.  

3.1.3Negotiated Bid Option.  By written notice to Landlord delivered within five
(5) business days following Tenant's receipt of the last bid to be timely
submitted by the Bidding Contractors in accordance with Section 3.1.2 above,
Tenant may notify Landlord that Tenant intends to solicit negotiated bids from
one (1) or more of the Bidding Contractors from whom bids have been timely
received (a "Negotiated Bid Notice"), and if Tenant timely delivers a Negotiated
Bid Notice to Landlord, then Tenant may pursue negotiated bids from such Bidding
Contractor(s).  Landlord shall have the right to participate in Tenant's
negotiated bid process with any of the of the Bidding Contractors designated in
the Negotiated Bid Notice following Tenant's timely delivery of the Negotiated
Bid Notice, and Tenant shall share copies of all negotiated bid responses
received by Tenant pursuant to such process on an "open book" basis.  If Tenant
fails to timely deliver the Negotiated Bid Notice to Landlord, Landlord

 

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and Tenant shall select the Contractor in accordance with the competitive bid
process set forth in Section 3.1.2 of this Tenant Work Letter.

3.1.4SMB Construction Contract.  Landlord shall submit to Tenant's
Representative (as hereinafter defined) a copy of the Landlord's proposed
construction contract with the SMB Contractor selected by Tenant in accordance
with Section 3.1.2 or Section 3.1.3 above for each SMB Project (an "SMB
Construction Contract") for Tenant's review and prior written approval thereof,
which shall not be unreasonably withheld, and if Tenant’s written approval or
disapproval, accompanied by a written detailed description of changes required
by Tenant to satisfy its concerns relating to the proposed Construction Contract
is not received within ten (10) business days after such contract is submitted
to Tenant for Tenant’s approval, then such delay by Tenant in the delivery of
such written approval or disapproval shall be a Tenant Delay.  If Tenant
disapproves the proposed SMB Construction Contract in accordance with this
Section 3.1.4, Landlord shall cause the proposed SMB Construction Contract to be
revised as reasonably required to address Tenant's specified concerns, and shall
submit the revised SMB Construction Contract to Tenant for its review and
approval as provided in this Section 3.1.4, and such procedure shall continue
until Tenant has approved of the proposed SMB Construction Contract for
execution by Landlord and the SMB Contractor (provided that Landlord shall not
be liable to Tenant for the Contractor's reasonable refusal to agree to any of
Tenant's changes nor for any delay in negotiating the SMB Construction
Contract), provided that such consent, or any objections or comments, provided
by Tenant (or lack thereof) shall in no way imply that such SMB Construction
Contract is sufficient or meet the requirements for the related work under this
Tenant Work Letter.  The SMB Construction Contract shall, at Tenant's option, be
in the AIA form of a guaranteed maximum price basis (A102-2007) or a Cost plus
Fee with GMP construction agreement (A103-2007).  The contract sum of each SMB
Construction Contract, as well as all other applicable SMB Costs, is sometimes
referred to herein as the "Approved SMB Budget" of the applicable SMB
Project.  Landlord shall use commercially reasonable efforts in coordination
with Tenant to cause the SMB Construction Contract to provide that:  (a) Tenant
and Tenant's Representative will be named as additional insureds on each CGL
policy to be carried by the SMB Contractor; and (b) Tenant shall be an express
third-party beneficiary of all of the Landlord contractual rights and all of the
SMB Contractor's obligations, including, but not limited to, (i) naming Tenant
as an indemnified party for the Landlord's Agent's indemnification obligations,
(ii) Tenant shall be a permitted assignee of Landlord's interest the SMB
Construction Contract with the right to enforce the covenants and obligations of
the SMB Contractor, and (iii) both Landlord and Tenant shall be named as the
beneficiaries of all industry standard warranties.  In addition to the
foregoing, the proposed SMB Construction Contract shall include the following
(provided that Landlord shall not be liable to Tenant for the Contractor's
refusal to include the following in the SMB Construction Contract nor for any
delay in negotiating the SMB Construction Contract as a result thereof shall be
deemed a Tenant Delay):

(a)all subcontractors' subcontracts shall, to the extent possible, have unit
pricing which shall be applicable to the pricing of any Tenant Change Order
Requests.  Additionally, prior to Substantial Completion of the Site
Modernization/Beautification Improvements, Tenant shall have the right to
require that any subcontractor invoices and/or schedules of value that do not
provide sufficient detail satisfactory to Tenant, provide additional pricing
breakout for portions of their work.  Such pricing breakout materials will take
the form of simple spreadsheets or letters describing in detail the nature of
work and references to the SMB Working Drawings indicating the location of the
work performed by such subcontractor; and

(b)Tenant shall have access to the Contractor 's books and records relating to
the construction of the Site Modernization/Beautification Improvements on an
"open book" basis throughout the construction thereof, and shall have the right
to audit the Contractor's costs and expenses, including all invoices submitted
to Landlord for the SMB Costs of the Site Modernization/Beautification
Improvements at any time within the 6-month period immediately following the
Substantial Completion of the Landlord's SMB Work (or Substantial Completion of
such applicable phase of Landlord's SMB Work), which audit may be performed for
Tenant, at Tenant's sole cost and expense.

3.2Insurance.  All of Landlord's Agents shall carry worker's compensation
insurance covering all of their respective employees, and shall also carry
public liability insurance, including property damage, all with limits, in form
and with companies reasonably approved by Tenant.  In addition, Landlord shall
cause the Contractor to carry "Builder's All Risk" insurance in an amount
reasonably approved by Tenant covering the Site Modernization/Beautification
Improvements.  In the event that the Site Modernization/Beautification
Improvements are damaged by any cause covered by such insurance during the
course of the construction thereof, Landlord shall

 

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enforce the terms of the SMB Construction Contract, including without limitation
any indemnity provisions, in order to cause the damage to be repaired using the
proceeds of such insurance.  If the Site Modernization/Beautification
Improvements are damaged by any cause not covered by insurance but would have
been covered by insurance if Landlord had carried (or required the SMB
Contractor to carry) the insurance required by the terms of this Tenant Work
Letter, then Landlord shall cause such damage to be repaired at Landlord's sole
cost and expense, and not as a SMB Cost.  Prior to the SMB Rent Commencement
Date, Landlord's "Builder's All Risk" insurance is an expense included in the
SMB Costs.  Landlord shall cause such "Builder's All-Risk" insurance coverage on
the Site Modernization/Beautification Improvements to preclude or waive
subrogation claims by the insurer against Tenant, its agents, employees and
representatives, and if reasonably available any certificate evidencing such
insurance coverage shall contain a provision that the company writing such
policy, or its agent, will endeavor to give Tenant thirty (30) calendar days
prior written notice of any cancellation or lapse of the policy or any reduction
in the amounts of such insurance prior to the Substantial Completion of Site
Modernization/Beautification Improvements (as defined in Section 5.2 below).

3.3Payment of SMB Costs.  The terms of this Section 3.3 shall be applicable to
the payment of the SMB Costs of Landlord's SMB Work.

3.3.1Applications for Payment and Payment Conditions.  Prior to making any
payment to any of the SMB Architect, SMB Contractor, or any of the SMB Engineers
or to any other third party manufacturer, vendor, supplier, or governmental
authority or utility, for any of the SMB Costs in connection with the Landlord's
SMB Work (each, an "SMB Progress Payment"), (a) Tenant's Representative and
Project Manager shall have received complete copies of all of the fully-executed
design, consultant, construction, and material supplier contracts for all payees
included in the applicable SMB Draw Request (as hereinafter defined), each of
which shall be in the form approved by Tenant in advance in accordance with this
Tenant Work Letter, and copies of all fully-executed Tenant Change Orders (as
hereinafter defined) associated therewith, if any (which shall cover all work
for which Landlord seeks to make payment of SMB Costs pursuant to the applicable
SMB Draw Request, provided that each contract and Change Order need be submitted
only once for each such payee), and (b) Tenant's Representative shall have
received and approved the Landlord's written request for approval of the
proposed SMB Costs included in such SMB Progress Payment amount (each, a "SMB
Draw Request"), which SMB Draw Request shall include the following items:  (i)
for any SMB Costs payable to the SMB Architect or the SMB Engineers, an invoice
from the SMB Architect or SMB Engineers for services rendered and the remaining
services to be completed under the applicable Approved SMB Design Contract
materials delivered to the Project; or (ii) for any SMB Costs payable to the SMB
Contractor, (A) a request for payment of the SMB Contractor, in a form
reasonably approved by Tenant showing the schedule, by trade, detailing the
portion of the work of construction of the SMB Project completed and the portion
not completed; (B) invoices from all other "Landlord's Agents" as defined below,
for labor rendered and materials delivered to the Project Site pursuant to the
applicable SMB Project; (C) executed mechanic's lien releases from all of
Landlord's Agents engaged in the construction of the Landlord's SMB Work of the
applicable SMB Project, which shall comply with the appropriate provisions, as
reasonably determined by Landlord, of California Civil Code Sections 8132, 8134,
8136 and 8138; and (D) a certificate from the SMB Architect of the applicable
portion of work of construction of the Site Modernization/Beautification
Improvements of the applicable SMB Project, certifying the requisite percentage
of completion of such work has been completed.  Notwithstanding the foregoing,
if Landlord has paid any portion of the SMB Costs to any SMB Contractor, SMB
Architect, SMB Engineer or any manufacturer, vendor or supplier, but pursuant to
any unresolved dispute, such persons shall fail to deliver an unconditional lien
waiver, then as long as Landlord provides reasonably satisfactory evidence to
Tenant's Representative of such payment, Tenant's Representative shall not
withhold approval of any ensuing SMB Draw Request otherwise satisfying the
foregoing requirements.  The SMB Contractor and all subcontractors and, laborers
used by Landlord in connection with Landlord's SMB Work shall be known
collectively as "Landlord's Agents."  All contracts entered into by Landlord
with Landlord's Agents ("Landlord Agent Contracts") shall be subject to Tenant's
reasonable approval, excluding, however, Landlord's contract with PMA.

3.3.2Tenant-Funded SMB Costs.  Notwithstanding anything set forth in the Lease
or this Tenant Work Letter to the contrary, but subject to the remaining terms
of this Section 4.3, Tenant shall pay to Landlord, at Tenant's sole cost and
expense, concurrently with Tenant's approval of each SMB Draw Request, the
Tenant SMB Payment (as hereinafter defined) toward the SMB Costs included in
such SMB Draw Request.  To the extent that Tenant timely designates that all or
a portion of the Site Modernization/Beautification Allowance be funded by
Landlord as the Landlord's Common Area Contribution in accordance with Section
5.3 of the Summary to this

 

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Lease, then following Tenant's approval of the Approved SMB "Design Fees, and
the Approved SMB Budget for any SMB Project, Tenant shall have the option, by
delivery of written notice to Landlord (each, a "Landlord's Contribution
Allocation Notice"), to allocate all or a portion of the Landlord's Common Area
Contribution to the SMB Costs of such the Approved SMB Design Fees or such
Approved SMB Budget, respectively.  In the event that Approved SMB Design Fees,
or the Approved SMB Budget for any SMB Project, exceed the amount of the
Landlord's Common Area Contribution allocated thereto in accordance with the
applicable Landlord's Contribution Allocation Notice, if any, then Tenant shall
pay a percentage of each SMB Draw Request received from Landlord for such
Approved SMB Design Fees or of such Approved SMB Budget from the Tenant-Funded
Amount, in a percentage amount equal to a fraction, the numerator of which is
the difference between Approved SMB Design Fees or the Approved SMB Budget (as
applicable) and the Landlord's Common Area Contribution allocated thereto in
accordance with a Landlord's Contribution Allocation Notice, and the denominator
of which is the applicable Approved SMB Design Fees or Approved SMB Budget (with
such percentage amount of the SMB Draw Request referred to herein as the "Tenant
SMB Payment").  The foregoing shall not prevent Tenant from applying any portion
of the Tenant Improvement Allowance allocated to SMB Costs in accordance with
the terms and conditions of Exhibit B-1 or Exhibit B-2 to this Lease, to the
Tenant SMB Payment, provided that Tenant's payment of the difference between the
Tenant SMB Payment and that portion of the SMB Draw Request payable from the
Tenant Improvement Allowance shall be a condition to Landlord's obligation to
pay such portion of the Tenant SMB Payment from the Tenant Improvement
Allowance.  In the event that, after the Approved SMB Design Fees or the
Approved SMB Budget is approved by Tenant, any revisions, changes, or
substitutions shall be made to the applicable Approved SMB Design Contract or
the applicable SMB Construction Contract, respectively, any adjustment to the
Approved SMB Design Fees or the Approved SMB Budget shall be reflected in all
future calculations of the Tenant SMB Payment in accordance with the terms of
this Section 3.3.2.  

3.4Landlord's Deliverables; Contractor's Warranties and Guaranties.  Landlord
shall obtain customary warranties and guaranties from the Contractor (the
"Contractors' Warranties") and shall cooperate with Tenant in obtaining any
extended warranties reasonably requested by Tenant (the "Project
Warranties").  Within sixty (60) days following the Substantial Completion of
the last SMB Project of Site Modernization/Beautification Improvements, Landlord
shall have prepared and delivered to Tenant (a) copies of all such third-party
Project Warranties, and (b) two (2) copies of the "as built" SMB Working
Drawings (the "Landlord's Deliverables").  In addition to the Project
Warranties, Landlord hereby assigns to Tenant all warranties and guaranties by
the Contractor, and all manufacturers, vendors and subcontractors relating to
any Tenant Assumed Obligation, afforded Landlord by operation of law
(collectively with the Project Warranties, the "Assigned Warranties"); and,
without limiting the Landlord's Repair Obligations or modifying any of the other
terms and conditions of this Lease (including, but not limited to, the express
exclusions of certain repairs, maintenance and capital costs under the terms and
conditions of this Lease), Tenant hereby waives all claims against Landlord
relating to, or arising out of the construction of, the Site
Modernization/Beautification Improvements; provided that the foregoing waiver
shall not extend to any Tenant claims arising out of the Landlord's breach of
any of its obligations under this Tenant Work Letter.

3.5PMA's Fee.  Landlord shall pay PMA a project management fee ("PMA's Fee")
equal to 2.65% of the sum of (a) the SMB Costs payable by Landlord from the
Landlord's Common Area Contribution, if any, and (b) the SMB Costs payable by
Tenant from the Tenant-Funded Amount (including, any portion of the Tenant
Improvement Allowance allocated to SMB Costs pursuant to any other Tenant Work
Letter, exclusive of (i) Landlord's Capital Carry Costs and (ii) PMA's
Fee.  PMA's Fee for each SMB Project will be established as a fixed fee once the
Approved SMB Budget is determined (subject to revision as a result of any Tenant
Change Order Requests and any Landlord Change Directive).

SECTION 4

COSTS OF SITE MODERNIZATION/BEAUTIFICATION IMPROVEMENTS;
CONTRACTORS' BOOKS AND RECORDS, AND DEVELOPMENT CREDITS

4.1.Documentation of SMB Costs.  Landlord shall construct the Site
Modernization/Beautification Improvements on an "open book" basis, with its
books and records reflecting all of the SMB Costs of the Site

 

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Modernization/Beautification Improvements, as may be reasonably requested by
Tenant, which shall include Contractor 's applications for payment and
subcontractors' and vendors' invoices for costs included in such applications,
to be made available, upon reasonable notice, either at the project site or at
PMA's offices in San Diego County, for Tenant's Representative's and/or the
Project Manager's review and verification (at Tenant's expense).

4.2Development Credits.  In calculating SMB Costs, and any SMB Rent payable by
Tenant pursuant to any Landlord's Common Area Contribution to SMB Costs in
accordance with Section 1.6 of the Lease, Landlord shall reasonably cooperate
with Tenant in applying for and obtaining (as part of SMB Costs) Project
Incentives and Credits (as defined in Section 4.2 of the Lusk 3 Work Letter)
available for the development of the Site Modernization/Beautification
Improvements as may be requested by Tenant from time to time, from any Local
Authority or Utility Provider, in accordance with Section 4.2 of Exhibit B-3 to
this Lease; provided, however, in no event shall Project Incentives and Credits
include any rights or assets of Landlord as of the date of this Lease, including
without limitation any Equivalent Dwelling Units (EDUs) that Landlord may have
as of the date of this Lease.  Tenant shall have the exclusive right to apply
for and receive the benefit of the Project Incentives and Credits attributable
to the Site Modernization/Beautification Improvements, which shall be applied
first as a credit against, or Tenant reimbursement of, SMB Costs paid or payable
by Tenant pursuant to this Work Letter.  To the extent that such Project
Incentives and Credits exceed the SMB Costs they shall accrue solely to the
benefit of the Tenant, and to the extent that such Project Incentives and
Credits are credited against the Site Modernization/Beautification Allowance,
the amount of such credit shall be promptly paid to Tenant following the
Substantial Completion of the Site Modernization/Beautification Improvements.

4.3Landlord's and Tenant's Agreement to Cooperate.  Landlord and Tenant shall
reasonably cooperate with one another in good faith to coordinate the
construction of the Site Modernization/Beautification Improvements with the
Tenant's business operations at the Project in a manner reasonably acceptable to
both Landlord and Tenant, which cooperation shall include, but not be limited
to, (i) coordinating Contractor and its subcontractors' parking at the Project
with the parking of the vehicles of Tenant's employees during construction of
the Site Modernization/Beautification Improvements, (ii) minimizing interference
with Tenant's ongoing business operations, and mitigating adverse effects, such
as noise, vibrations and dust, on the quiet use and enjoyment of the Lusk 1,
Lusk 2 and Lusk 3 Buildings and other Common Areas of the Project by Tenant's
employees and visitors during normal working hours, and (iii) coordinating
timing of construction deliveries to avoid delayed access to and from the
parking areas of the Project and the Lusk 1, Lusk 2 and Lusk 3 Buildings by
Tenant's employees during normal working hours.  Landlord and Tenant shall use
their commercially reasonable and good faith efforts and diligence to cooperate
with the Architect, the Engineers, and the Contractor so as to enable the prompt
and timely completion of the Site Modernization/Beautification Improvements in
accordance with the Project Schedule.

SECTION 5

COMPLETION OF THE SITE MODERNIZATION/BEAUTIFICATION IMPROVEMENTS;
DELAYS

5.1Completion of Site Modernization/Beautification Improvements.  Landlord shall
cause the Contractor to complete the Site Modernization/Beautification
Improvements (a) in accordance with the SMB Working Drawings and the terms and
conditions of the SMB Construction Contract; (b) in compliance with all
Applicable Laws, including but not limited to the California Uniform Building
Code, to the extent necessary for Landlord to obtain a certificate of occupancy
or temporary certificate of occupancy, or legal equivalent, for the Buildings
for Tenant's planned Permitted Use; and (c) with no Hazardous Material which is
in violation of Applicable Laws introduced or generated in, on, or about the
Common Areas as a result of Site Modernization/Beautification Improvements.  

5.2Substantial Completion.  For purposes of this Lease, "Substantial Completion"
of the Site Modernization/Beautification Improvements shall occur upon the date
the Site Modernization/Beautification Improvements are in the "Delivery
Condition," as that term is defined in Section 5.6, below.

5.3Tenant Delay.  Any actual delay or delays that cause the Substantial
Completion of the Site Modernization/Beautification Improvements to occur after
December 31, 2020, or which delay the occurrence of

 

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any of the conditions precedent to the SMB Rent Commencement Date beyond January
1, 2020, as a direct, indirect, partial, or total result of:

5.3.1Tenant's failure to comply with the Time Deadlines;

5.3.2Tenant's failure to timely approve any matter requiring Tenant's approval
in accordance with the time requirements of this Tenant Work Letter;

5.3.3A breach by Tenant of the terms of this Tenant Work Letter or the Lease;

5.3.4Any Tenant Change Order;

5.3.5Tenant's requirement for materials, components, finishes or improvements
which are not available in a commercially reasonable time given the anticipated
date of Substantial Completion of the Site Modernization/Beautification
Improvements, as set forth in the Lease, or which are ordered to Tenant's
specifications with Tenant's knowledge (based on written notice from the
Landlord's Representative, the Architect or the Contractor) that such items are
unlikely to be received at the Project in accordance with the Project Schedule,
thereby causing a Tenant Delay;

5.3.6Any delay in obtaining the Permits resulting from the information provided
by Tenant to Landlord, Architect or the Contractor pursuant to the terms and
conditions of this Tenant Work Letter, or Tenant's failure to approve the
Drawings, in accordance with the Project Schedule or as a result of Tenant
value-engineering the design of the Site Modernization/Beautification
Improvements pursuant to the terms of Section 1.3.2 of this Tenant Work Letter;
or

5.3.7Any other acts or omissions of Tenant, or its agents, or employees,
including, without limitation, any act or omission which causes the Contractor
to fail to meet the Project Schedule; shall be deemed a "Tenant Delay."  Except
for delays where there is an express notice or response period under this Tenant
Work Letter or this Lease, no Tenant Delay shall be deemed to have occurred
unless Landlord has given Tenant written notice, promptly following Landlord's
actual knowledge thereof, that an act or omission on the part of Tenant or its
agents, employees or contractors has occurred which will cause such a delay and
Tenant fails to cure such delay within two (2) business days after receipt of
such notice.

5.4Delivery Condition.  The "Delivery Condition" shall occur at such time as
Landlord delivers the Site Modernization/Beautification Improvements to Tenant
with (i) the completion of construction of the Site Modernization/Beautification
Improvements pursuant to the SMB Working Drawings, with the exception of any
industry standard punch list items, and (ii) representatives of Landlord and
Tenant have completed a mutual walk-through inspection of the Project Site and
have mutually and reasonably agreed upon a set of industry standard "punch list"
items to be completed by Landlord following the "SMB Delivery Date."  The date
that Landlord causes the Delivery Condition to occur shall be referred to herein
as the "SMB Delivery Date".  If Tenant disagrees with Landlord's assertion that
Delivery Condition has been achieved, then Tenant shall notify Landlord in
writing, within five (5) business days following the final walk-through
inspection, indicating the reasons for withholding such
confirmation.  Thereafter, the parties shall mutually select an independent
licensed general contractor with at least ten (10) years of experience in
construction of common areas in First Class Life Sciences Projects, who is not
affiliated with Landlord or Tenant or any of their respective agents, or
retained by either of them or any of their agents in any capacity within the
three (3) year period preceding retention pursuant to this Tenant Work Letter
(the applicable person being referred to herein as the "Third Party Inspector"),
who shall be notified of the dispute, and shall be instructed to immediately
visit the Project to determine whether Delivery Condition has been
achieved.  The determination of the date of Delivery Condition by the Third
Party Inspector shall be binding on the parties, and the costs of such Third
Party Inspector shall be split equally by the parties.  From the date of
Delivery Condition and until Landlord has caused all industry standard punch
list items to be completed, Landlord shall comply with all reasonable requests
of Tenant relating to the scheduling and performance of any remaining work in
and about the Common Areas, provided that Landlord shall not be obligated to
incur any additional costs or expenses which are not included the applicable
Approved SMB Budget, in connection with such scheduling and performance of
remaining work unless and until such costs and expenses are either approved by
Tenant in advance, or are deemed approved by Tenant in advance, as SMB Costs in
accordance with the terms and conditions of this Tenant Work

 

EXHIBIT B-4

 

 

 

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Letter; and further provided that the foregoing shall not modify Landlord's
rights with respect to any such additional costs and expenses incurred as
Unapproved SMB Costs pursuant to the terms and conditions of Section 1.2 of this
Tenant Work Letter.

SECTION 6

MISCELLANEOUS

6.1Intentionally Omitted.  

6.2No Miscellaneous Charges.  In addition to Landlord's obligations under the
Lease, Landlord shall provide to Landlord's Agents, Tenant and Tenant's Agents,
notwithstanding anything to the contrary contained in this Lease, without charge
(to the extent utilized in connection with the construction of the Site
Modernization/Beautification Improvements), but subject to availability,
parking, utilities, and loading docks during the period that such Landlord's
Agents and Tenant's Agents are actually present in the Project and working on
the design and/or construction of the Site Modernization/Beautification
Improvements.

6.3Tenant's Representative.  Tenant has designated James Page ("Tenant's
Representative") 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.

6.4Landlord's Representative.  Landlord has designated PMA ("Landlord's
Representative") as its sole representative with respect to the matters set
forth in this Tenant Work Letter, who, until further notice to Tenant, shall
have full authority and responsibility to act on behalf of the Landlord as
required in this Tenant Work Letter.

6.5Tenant's Agents.  The Project Manager and any other contractor, subcontractor
or consultant retained directly by Tenant shall be subject to Landlord's
reasonable approval.

6.6Time 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.  In all instances where Tenant is required to approve or deliver an item,
if no written notice of approval is given or the item is not delivered within
the stated time period, at Landlord's sole option, at the end of such period the
item shall automatically be deemed approved or delivered by Tenant and the next
succeeding time period shall commence.

6.7Tenant's Lease Default.  Notwithstanding any provision to the contrary
contained in this Lease, if an event of default as described in the Lease, or a
default by Tenant under this Tenant Work Letter, and Tenant fails to use such
default within any applicable notice and cure period set forth in the Lease (or
within ten (10) business days if Tenant is in default under this Tenant Work
Letter), at any time on or before the Substantial Completion of the Site
Modernization/Beautification Improvements, then (i) in addition to all other
rights and remedies granted to Landlord pursuant to the Lease, Landlord may
cause Contractor to cease the construction of the Site
Modernization/Beautification Improvements (in which case, Tenant shall be
responsible for any delay in the Substantial Completion of the Site
Modernization/Beautification Improvements caused by such work stoppage as set
forth in Section 5 of this Tenant Work Letter), and (ii) all other obligations
of Landlord under the terms of this Tenant Work Letter shall be forgiven until
such time as such default is cured pursuant to the terms of the Lease.

6.8Disputes.  Except in connection with provisions in this Tenant Work Letter
than have an express dispute resolution process, in the event of any dispute
between Landlord and Tenant in connection arising under this Tenant Work Letter,
either party may institute arbitration proceedings pursuant to arbitration
administered by the JAMS or any successor thereto under the Expedited Procedures
provisions (Rules 16.1-16.2 in the current edition) of the JAMS Comprehensive
Arbitration Rules and Procedures (as such rules may be modified from time to
time by JAMS, the "Arbitration Rules"), and such determination rendered by the
arbitrator mutually selected by Landlord and Tenant in accordance with the
Arbitration Rules (the "Arbitrator") shall be binding upon the parties and may
be entered in any court having jurisdiction thereof.  

 

 

EXHIBIT B-4

 

 

 

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SCHEDULE 1 TO EXHIBIT B-4

BASIS OF DESIGN

[g2017082904212115119293.jpg]

 

SCHEDULE 1 TO EXHIBIT B-4

 

 

 

 

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[g2017082904212117519294.jpg]

 

SCHEDULE 1 TO EXHIBIT B-4

 

 

 

 

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[g2017082904212119819295.jpg]

 

SCHEDULE 1 TO EXHIBIT B-4

 

 

 

 

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[g2017082904212122319296.jpg]

 

 

 

SCHEDULE 1 TO EXHIBIT B-4

 

 

 

 

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EXHIBIT C-1

SORRENTO SUMMIT

INITIAL NOTICE OF LEASE TERM DATES

To:

_______________________
_______________________
_______________________
_______________________

Date: ______________________, 2017

 

Re:

Lease dated August 28, 2017, between HCPI/SORRENTO, LLC, a Delaware limited
liability company ("Landlord"), and NUVASIVE, INC., a Delaware corporation
("Tenant"), concerning approximately 145,225 rentable square feet comprised of
(i) the entirety of that certain building located at 7475 Lusk Boulevard and
7475B Lusk Boulevard, San Diego, California, and commonly known as Lusk 1
Building, which Lusk 1 Building contains approximately 74,050 rentable square
feet of space, and (ii) approximately 71,175 rentable square feet of space
located in a portion of the basement, a portion of the first (1st) floor, a
portion of the second (2nd) floor, and the entirety of the third (3rd) floor of
that certain building located at 7473 Lusk Boulevard, San Diego, California, and
commonly known as Lusk 2 Building, which Lusk 2 Building contains approximately
149,891 rentable square feet of space (collectively, the “Initial Premises”).

Gentlemen:

In accordance with the Lease (the "Lease"), we wish to advise you and/or confirm
as follows:

 

1.

The Lease Term commenced on August 28, 2017 (the “Lease Commencement Date”),
with the duration of such Lease Term to be determined in accordance with Section
3 of the Summary of Basic Lease Information following the completion and
delivery of the Must-Take Space 2 (as defined in the Lease). As of the Lease
Commencement Date, Tenant occupied the entire Initial Premises.

 

2.

That certain Office Lease Agreement entered into by Landlord and Tenant as of
November 6, 2007 (the "Initial Lease") terminated on August 27, 2017 (“Initial
Lease Termination Date”).  

 

3.

For the purposes of Tenant’s continued occupancy of the Initial Premises
following the Initial Lease Termination Date, the Lease amends, restates and
supersedes the Initial Lease.  

 

4.

Initial Premises Base Rent and Tenant’s Share of Estimated Direct Expenses
commenced to accrue on August 28, 2017, with the amount due and payable for the
initial partial month of the Lease Term having been satisfied, in accordance
with Article 3 of the Lease, by Landlord’s application of the excess amount of
monthly rent paid by Tenant for the last partial month of the term of the
Initial Lease (i.e. for the period August 28, 2017 – August 31, 2017) to such
amounts due and payable under the Lease, in accordance with Section 2.3 of the
Lease.

 

5.

Initial Premises Base Rent commenced (or will commence) to accrue under the
Lease on September 1, 2017, in the annual amount of $5,525,402.66, and payable
in monthly installments of $460,450.22/month. Tenant’s Share of Estimated Direct
Expenses for the Initial Premises commenced (or will commence) to accrue under
the Lease on September 1, 2017, payable in monthly installments of
$_________/month.  Attached to this Letter is the Landlord’s Estimate Statement
for 2017.  

 

EXHIBIT C-1

 

 

 

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

 

 

6.

Your rent checks should be made payable to __________ at ______________ until
further notice.

 

 

"Landlord":

HCPI/SORRENTO, LLC,
a Delaware limited liability company

By: ___________________________

       Its:  ___________________________

Agreed to and Accepted as
of                                       , 2017.

"Tenant":

NUVASIVE, INC., a Delaware corporation

By: ___________________________

     Its: ___________________________

 

 

 

 

 

 

EXHIBIT C-1

 

 

 

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

 

EXHIBIT C-2

NOTICE OF LEASE TERM DATES

[NOTE – THIS NOTICE OF LEASE TERM DATES TO BE MODIFIED FOR THE MUST-TAKE SPACE
1, MUST-TAKE SPACE 2 AND MUST-TAKE SPACE 3, AS APPLICABLE]

To:

_______________________
_______________________
_______________________

 

Re:

Lease dated August 28, 2017, between HCPI/SORRENTO, LLC, a Delaware limited
liability company ("Landlord"), and NUVASIVE, INC., a Delaware corporation
("Tenant"), [concerning approximately ____________ rentable square feet of space
located on the ___ floor of that certain building [FOR MUST-TAKE SPACE 1 OR
MUST-TAKE SPACE 3:  located at 7473 Lusk Boulevard, San Diego, California, and
commonly known as Lusk 2 Building, which Lusk 2 Building contains approximately
149,891 rentable square feet of space; OR FOR MUST-TAKE SPACE 2: the entirety of
that certain building located at ________ Lusk Boulevard, San Diego, California,
and commonly known as Lusk 3 Building, which Lusk 3 Building contains
approximately ________ rentable square feet of space].

Gentlemen:

In accordance with the Lease (the "Lease"), we wish to advise you and/or confirm
as follows:

 

1.

The __________ Commencement Date shall occur, or has occurred, on _____________,
[PRIOR TO MUST-TAKE 2 COMMENCEMENT DATE: with the duration of such Lease Term to
be determined in accordance with Section 3 of the Summary of Basic Lease
Information following the completion and delivery of the Must-Take Space 2 (as
defined in the Lease); OR FOR MUST-TAKE 2 COMMENCEMENT DATE OR LATER NOTICE:
with the initial Lease Term scheduled to expire on _____________]. As of the
___________ Commencement Date, the Premises consist of the Initial Premises [and
____________________________.]

 

2.

_________________ Base Rent commenced to accrue on ____________, in the amount
of ____________.  .

 

3.

If the ________________ Rent Commencement Date is other than the first day of
the month, in addition to the first monthly installment due and payable on
_________________, Tenant will pay Landlord the sum of ____________________,
which includes _______________, as the amount of the accrued pro rata Base Rent
for the first partial month in which the _________________ Rent Commencement
Date occurred, plus ____________________ as the accrued and unpaid
________________Base Rent for _____________________________.  Each billing
thereafter, with the exception of the final billing, shall be for the full
amount of the monthly installment as provided for in the Lease. The Lease is
hereby amended to incorporate the Base Rent Schedule attached hereto as Schedule
1.  Each monthly installment of __________________Base Rent shall be payable in
accordance with the Base Rent Schedule attached hereto as Schedule 1 for the
duration of the Lease Term

 

4.

Your rent checks should be made payable to __________ at ______________, until
further notice.

 

5.

The exact number of rentable square feet within the _____________ Space
_________ rentable square feet.

 

EXHIBIT C-2

 

 

 

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

 

 

"Landlord":

HCPI/SORRENTO, LLC,
a Delaware limited liability company

By: ___________________________

       Its:  ___________________________

Agreed to and Accepted as
of                                       , 2017.

"Tenant":

NUVASIVE, INC., a Delaware corporation

By: ___________________________

     Its: ___________________________

 

 

 

 

 

 

EXHIBIT C-2

 

 

 

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EXHIBIT C-3

NOTICE OF SMB RENT LEASE TERM DATES

To:

_______________________
_______________________
_______________________

 

Re:

Lease dated August 28, 2017, between HCPI/SORRENTO, LLC, a Delaware limited
liability company ("Landlord"), and NUVASIVE, INC., a Delaware corporation
("Tenant").

Gentlemen:

In accordance with the Lease (the "Lease"), we wish to advise you and/or confirm
as follows:

 

1.

The SMB Rent Commencement Date shall occur, or has occurred, on _____________,
with SMB Rent commencing to accrue monthly in the amount of ____________.

 

2.

If the SMB Rent Commencement Date is other than the first day of the month, in
addition to the first monthly installment due and payable on _________________,
Tenant will pay Landlord the sum of ____________________, which includes
_______________, as the amount of the accrued pro rata SMB Rent for the first
partial month in which the SMB Rent Commencement Date occurred, [plus
____________________ as the accrued and unpaid SMB Base Rent for the period
_____________________________], plus the monthly installment of SMB Rent for
______________.   Each billing thereafter, with the exception of the final
billing, shall be for the full amount of the monthly installment as provided for
in the SMB Rent Schedule attached hereto as Schedule 1.  

 

3.

Your rent checks should be made payable to __________ at ______________, until
further notice.

 

 

"Landlord":

HCPI/SORRENTO, LLC,
a Delaware limited liability company

By: ___________________________

       Its:  ___________________________

Agreed to and Accepted as
of                                       , 2017.

"Tenant":

NUVASIVE, INC., a Delaware corporation

By: ___________________________

     Its: ___________________________

 

 

 

 

 

EXHIBIT C-3

 

 

 

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

 

EXHIBIT D

SORRENTO SUMMIT

FORM OF TENANT'S ESTOPPEL CERTIFICATE

The undersigned as Tenant under that certain Lease (the "Lease") made and
entered into as of ___________, 20___ by and between _______________ as
Landlord, and the undersigned as Tenant, for Premises located at
______________________________, California, certifies as follows:

1.Attached hereto as Exhibit A is a true and correct copy of the Lease and all
amendments and modifications thereto.  The documents contained in Exhibit A
represent the entire agreement between the parties as to the Premises.

2.The undersigned currently occupies that portion of the Premises described in
the Lease as follows:
_____________________________________________________________________________________________,
_____________________________________________________________________________________________.The
Lease Term commenced on __________, and the Lease Term will expire on
___________, and the undersigned has no option to terminate or cancel the Lease
or to purchase all or any part of the Premises, the Building and/or the Project,
except as expressly set forth in the Lease.

3.Initial Premises Base Rent became payable on ____________.  [ADD THE FOLLOWING
AS APPROPRIATE: ____________ Base Rent became payable on
____________.  ____________ Base Rent became payable on ____________.]

4.The Lease is in full force and effect and has not been modified, supplemented
or amended in any way except as provided in Exhibit A.

5.Tenant has not transferred, assigned, or sublet any portion of the Premises
nor entered into any license or concession agreements with respect thereto
except as follows:

6. All monthly installments of Base Rent, all Additional Rent and all monthly
installments of estimated Additional Rent have been paid when due through
___________.  The current monthly installment of Lusk 1 & 2 Base Rent is
$_____________________ [and the current monthly installment of Lusk 3 Base Rent
is $_____________________; and the current monthly installment of SMB Rent is
$_____________________.]

7.To Tenant’s actual knowledge, all conditions of the Lease to be performed by
Landlord necessary to the enforceability of the Lease have been satisfied and
Landlord is not in default thereunder.  In addition, the undersigned has not
delivered any notice to Landlord regarding a default by Landlord
thereunder.  The Lease does not require Landlord to provide any rental
concessions or to pay any leasing brokerage commissions.

8.No rental has been paid more than thirty (30) days in advance and no security
has been deposited with Landlord except as provided in the Lease.  Neither
Landlord, nor its successors or assigns, shall in any event be liable or
responsible for, or with respect to, the retention, application and/or return to
Tenant of any security deposit paid to any prior landlord of the Premises,
unless and until the party from whom the security deposit is being sought,
whether it be a lender, or any of its successors or assigns, has actually
received for its own account, as landlord, the amount of such security deposit
being sought.

9.As of the date hereof, there are no existing defenses or offsets, or, to
Tenant’s actual knowledge, claims or any basis for a claim, that the undersigned
has against Landlord.

10.If Tenant is a corporation or partnership, 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 Estoppel Certificate and that each person signing on behalf of
Tenant is authorized to do so.

 

 

EXHIBIT D

 

 

 

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

 

11.To Tenant’s knowledge, there are no actions pending against Tenant under the
bankruptcy or similar laws of the United States or any state.

12.To Tenant’s actual knowledge, Tenant has not been notified in writing by any
government agency of any existing noncompliance with federal, state and local
laws, ordinances, rules and regulations affecting its use of the Premises,
including, but not limited to, those laws, ordinances, rules or regulations
relating to hazardous or toxic materials.  

13.To the Tenant's knowledge, all tenant improvement work to be performed by
Landlord under the Lease has been completed in accordance with the Lease and has
been accepted by the undersigned and all reimbursements and allowances due to
the undersigned under the Lease in connection with any tenant improvement
work have been paid in full, except as follows:
                                              
                                                                                                             
                                                                                                        
                                                                                                        
                                                                                                        
            . [If no exceptions, insert “None”].  To Tenant’s knowledge, all
work (if any) in the common areas required by the
Lease to be completed by Landlord has been completed except as follows:
                                                                                                             
                                                                                                        
                                                                                                        
                                                                                                        
              .[If no exceptions, insert “None”]. All parking spaces required by
the Lease have been furnished and/or all parking ratios required by the Lease
have been met.

Tenant hereby acknowledges that this Estoppel Certificate may be delivered to
Landlord or to a prospective mortgagee or prospective purchaser, and
acknowledges that said prospective mortgagee or prospective purchaser will be
relying upon the statements contained herein in making the loan or acquiring the
property of which the Premises are a part and that receipt by it of this
certificate is a condition of making such loan or acquiring such property.

Executed at ______________ on the ____ day of ___________, 20__.

 

"Tenant":

___________________________,
a ___________________________

By: ___________________________
      Its:  ___________________________

By:  ___________________________
      Its:  ___________________________

 

 

 

 

 

EXHIBIT D

 

 

 

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EXHIBIT E

SORRENTO SUMMIT

ENVIRONMENTAL QUESTIONNAIRE

ENVIRONMENTAL QUESTIONNAIRE
FOR COMMERCIAL AND INDUSTRIAL PROPERTIES

Tenant
Name:                                                                                                                                                           

Lease Address:  
                                                                                                                                                       

Lease Type (check correct box – right click to properties):  

☐ Primary Lease/Lessee    

☐ Sublease from:    _______________________

 

Instructions: The following questionnaire is to be completed by the Lessee
representative with knowledge of the planned operations for the specified
building/location. Please print clearly and attach additional sheets as
necessary.

 

1.0

PROCESS INFORMATION

 

Describe planned site use, including a brief description of manufacturing
processes and/or pilot plants planned for this site, if any.

  _______________________________________________________________________________________

  _______________________________________________________________________________________

  _______________________________________________________________________________________

 

2.0

HAZARDOUS MATERIALS – OTHER THAN WASTE

 

Will (or are) non-waste hazardous materials be/being used or stored at this
site? If so, continue with the next question. If not, go to Section 3.0.

 

2.1

Are any of the following materials handled on the Property?       ☐ Yes   ☐ No

[A material is handled if it is used, generated, processed, produced, packaged,
treated, stored, emitted, discharged, or disposed.] If YES, check (right click
to properties) the applicable correct Fire Code hazard categories below.

☐

Combustible dusts/fibers

☐

Explosives

☐

Flammable liquids

☐

Combustible liquids (e.g., oils)

☐

Compressed gas - inert

☐

Flammable solids/pyrophorics

☐

Cryogenic liquids - inert

☐

Compressed gas - flammable/pyrophoric

☐

Organic peroxides

☐

Cryogenic liquids - flammable

☐

Compressed gas - oxidizing

☐

Oxidizers - solid or liquid

☐

Cryogenic liquids - oxidizing

☐

Compressed gas - toxic

☐

Reactives - unstable or water reactive

☐

Corrosives - solid or liquid

☐

Compressed gas - corrosive

☐

Toxics - solid or liquid

 

 

EXHIBIT E

 

 

 

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2-2.

For all materials checked in Section 2.1 above, please list the specific
material(s), use(s), and quantities of each used or stored on the site in the
table below; or attach a separate inventory. NOTE: If proprietary, the
constituents need not be named but the hazard information and volumes are
required.

Material/

Chemical

Physical State (Solid, Liquid, or Gas)

Container Size

Number of Containers Used & Stored

Total Quantity

Units (pounds for solids, gallons or liters for liquids, & cubic feet for gases)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2-3.

Describe the planned storage area location(s) for the materials in Section 2-2
above. Include site maps and drawings as appropriate.

                                                                                                                                                                      

  _________________________________________________________________________________

  _________________________________________________________________________________

 

EXHIBIT E

 

 

 

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2-4.

Other hazardous materials. Check below (right click to properties) if
applicable. NOTE: If either of the latter two are checked (BSL-3 and/or
radioisotope/radiation), be advised that not all lease locations/cities or lease
agreements allow these hazards; and if either of these hazards are planned,
additional information will be required with copies of oversight agency
authorizations/licenses as they become available.

☐

Risk Group 2/Biosafety Level-2 Biohazards

☐

Risk Group 3/Biosafety Level-3 Biohazards

☐

Radioisotopes/Radiation

3.0

HAZARDOUS WASTE (i.e., REGULATED CHEMICAL WASTE)

Are (or will) hazardous wastes (be) generated?       ☐ Yes   ☐ No

If YES, continue with the next question. If not, skip this section and go to
section 4.0.

 

 

3.1

Are or will any of the following hazardous (CHEMICAL) wastes generated, handled,
or disposed of (where applicable and allowed) on the property?

 

☐

Liquids

☐

Process sludges

☐

PCBs

☐

Solids

☐

Metals

☐

wastewater

 

 

3-2.

List and estimate the quantities of hazardous waste identified in Question 3-1
above.

HAZRDOUS (CHEMICAL) WASTE GENERATED

SOURCE

WASTE TYPE

APPROX. MONTHLY QUANTITY with units

 

DISPOSITION [e.g., off-site landfill, incineration, fuel blending scrap metal;
wastewater neutralization (onsite or off-site)]

RCRA listed (federal)

Non-RCRA (Calif-ornia ONLY or recycle)

 

 

☐

☐

 

 

 

 

☐

☐

 

 

 

 

☐

☐

 

 

 

 

☐

☐

 

 

 

 

☐

☐

 

 

 

3-3.

Waste characterization by:        Process knowledge ☐       EPA lab analysis
☐      Both ☐

 

3-4.  

Please include name, location, and permit number (e.g. EPA ID No.) for
transporter and disposal facility if applicable. Attach separate pages as
necessary. If not yet known, write “TBD.”

Hazardous Waste Transporter/Disposal Facility Name

Facility Location

Transporter (T) or Disposal (D) Facility

Permit Number

 

 

 

 

 

 

 

 

 

 

 

 

 

3-5.

Are pollution controls or monitoring employed in the process to prevent or
minimize the release of wastes into the environment? NOTE: This does NOT mean
fume hoods; examples include air scrubbers, cyclones, carbon or HEPA filters at
building exhaust fans, sedimentation tanks, pH neutralization systems for
wastewater, etc.

 

EXHIBIT E

 

 

 

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☐ Yes   ☐ No

If YES, please list/describe:
                                                                                                                        

  _________________________________________________________________________________

 

  _________________________________________________________________________________

4.0

OTHER REGULATED WASTE (i.e., REGULATED BIOLOGICAL WASTE, referred to as “Medical
Waste” in California)

 

4-1.

Will (or do) you generate medical waste?   ☐ Yes   ☐ No   If NO, skip to Section
5.0.

 

4-2.

Check the types of waste that will be generated, all of which fall under the
California Medical Waste Act:

☐

Contaminated sharps (i.e., if contaminated with  ≥ Risk Group 2 materials)

☐

Animal carcasses

☐

Pathology waste known or suspected to be contaminated with ≥ Risk Group 2
pathogens)

☐

Red bag  biohazardous waste (i.e., with  ≥ Risk Group 2 materials) for
autoclaving

☐

Human or non-human primate blood, tissues, etc.

(e.g., clinical specimens)

☐

Trace Chemotherapeutic Waste and/or Pharmaceutical waste NOT otherwise regulated
as RCRA chemical waste

 

4-3.

What vendor will be used for off-site autoclaving and/or incineration?

  _________________________________________________________________________________

 

4-5.

Do you have a Medical Waste Permit for this site?    ☐ Yes   ☐ No, not
required.  

☐ No, but an application will be submitted.

5.0

UNDERGROUND STORAGE TANKS (USTS) & ABOVEGROUND STORAGE TANKS (ASTS)

 

5-1.

Are underground storage tanks (USTs), aboveground storage tanks (ASTs), or
associated pipelines used for the storage of petroleum products, chemicals, or
liquid wastes present on site (lease renewals) or required for planned
operations (new tenants)?     ☐ Yes   ☐ No  

NOTE: If you will have your own diesel emergency power generator, then you will
have at least one AST! [NOTE: If a backup generator services multiple tenants,
then the landlord usually handles the permits.]

If  NO, skip to section 6.0. If YES, please describe capacity, contents, age,
type of the USTs or ASTs, as well any associated leak detection/spill prevention
measures. Please attach additional pages if necessary.

 

UST or AST

Capacity (gallons)

 

Contents

Year Installed

Type (Steel, Fiberglass, etc.)

Associated Leak Detection / Spill Prevention Measures*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*NOTE: The following are examples of leak detection / spill prevention measures:
integrity testing, inventory reconciliation, leak detection system, overfill
spill protection, secondary containment, cathodic protection.

 

5-2.

Please provide copies of written tank integrity test results and/or monitoring
documentation, if available.

 

5-3.

Is the UST/AST registered and permitted with the appropriate regulatory
agencies?     ☐ Yes   ☐ No, not yet  

 

EXHIBIT E

 

 

 

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

 

If YES, please attach a copy of the required permit(s). See Section 7-1 for the
oversight agencies that issue permits, with the exception of those for diesel
emergency power generators which are permitted by the local Air Quality District
(Bay Area Air Quality Management District = BAAQMD; or San Diego Air Pollution
Control District = San Diego APCD).

 

5-4.

If this Questionnaire is being completed for a lease renewal, and if any of the
USTs/ASTs have leaked, please state the substance released, the media(s)
impacted (e.g., soil, water, asphalt, etc.), the actions taken, and all remedial
responses to the incident.

  _________________________________________________________________________________

  _________________________________________________________________________________

  _________________________________________________________________________________

 

5-5.

If this Questionnaire is being completed for a lease renewal, have USTs/ASTs
been removed from the Property?

☐ Yes   ☐ No

If YES, please provide any official closure letters or reports and supporting
documentation (e.g., analytical test results, remediation report results, etc.).

 

5-6.

For Lease renewals, are there any above or below ground pipelines on site used
to transfer chemicals or wastes?

☐ Yes   ☐ No

For new tenants, are installations of this type required for the planned
operations?   ☐ Yes   ☐ No

If YES to either question in this section 5-6, please describe.

 

  _________________________________________________________________________________

  _________________________________________________________________________________

  _________________________________________________________________________________

 

6.0

ASBESTOS CONTAINING BUILDING MATERIALS

Please be advised that an asbestos survey may have been performed at the
Property. If provided, please review the information that identifies the
locations of known asbestos containing material or presumed asbestos containing
material. All personnel and appropriate subcontractors should be notified of the
presence of these materials, and informed not to disturb these materials. Any
activity that involves the disturbance or removal of these materials must be
done by an appropriately trained individual/contractor.

 

7.0

OTHER REGULATORY PERMITS/REQUIREMENTS

 

 

7-1.

Does the operation have or require an industrial wastewater permit to discharge
into the local National Pollutant Discharge Elimination System (NPDES)?
[Example: This applies when wastewater from equipment cleaning is routed through
a pH neutralization system prior to discharge into the sanitary or lab sewer for
certain pharmaceutical manufacturing wastewater; etc.] Permits are obtained from
the regional sanitation district that is treating wastewater.

☐ Yes   ☐ No   ☐ No, but one will be prepared and submitted to the Landlord
property management company.

If so, please attach a copy of this permit or provide it later when it has been
prepared.

 

7-2.

Has a Hazardous Materials Business Plan (HMBP) been developed for the site and
submitted via the State of California Electronic Reporting System (CERS)? [NOTE:
The trigger limits for having to do this are ≥ 200 cubic feet if any one type of
compressed gas(except for carbon dioxide and inert simple asphyxiant gases,
which have a higher trigger limit of  ≥ 1,000 cubic feet); ≥ 55 gallons if any
one type of hazardous chemical liquid; and ≥500 pounds of any one type of
hazardous chemical solid. So a full-sixe gas cylinder and a 260-liter of liquid
nitrogen are triggers! Don’t forget the diesel fuel in a backup emergency
generator if  the diesel tank size is ≥ 55 gallons and it is permitted under the
tenant (rather than  under the landlord).] NOTE: Each local Certified Unified
Program Agency (CUPA) in California governs the HMBP process so start there.
Examples: the CUPA for cities in San Mateo County is the County Environmental
Health Department; the CUPA for the City of Hayward, CA is the

 

EXHIBIT E

 

 

 

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

 

 

Hayward Fire Department; the CUPA for Mountain View is the Mountain View Fire
Department; and, the CUPA for San Diego is the County of San Diego Hazardous
Materials Division (HMD),

☐ Yes   ☐ No, not required.  ☐ No, but one will be prepared and submitted, and a
copy will be provided to the landlord property management company.

If one has been completed, please attach a copy.  Continue to provide updated
versions as they are completed. This is a legal requirement in that State law
requires that the owner/operator of a business located on leased or rented real
property shall notify, in writing, the owner of the property that the business
is subject to and is in compliance with the Hazardous Materials Business Plan
requirements (Health and Safety Code Chapter 6.95 Section 25505.1).

 

7-3.

NOTE: Please be advised that if you are involved in any tenant improvements that
require a construction permit, you will be asked to provide the local city with
a Hazardous Materials Inventory Statement (HMIS) to ensure that your hazardous
chemicals fall within the applicable Fire Code fire control area limits for the
applicable construction occupancy of the particular building.  The HMIS will
include much of the information listed in Section 2-2.  Neither the landlord nor
the landlord’s property management company expressly warrants that the inventory
provided in Section 2-2 will necessarily meet the applicable California Fire
Code fire control area limits for building occupancy, especially in shared
tenant occupancy situations. It is the responsibility of the tenant to ensure
that a facility and site can legally handle the intended operations and
hazardous materials desired/ needed for its operations, but the landlord is
happy to assist in this determination when possible.

CERTIFICATION

 

I am familiar with the real property described in this questionnaire. By signing
below, I represent and warrant that the answers to the above questions are
complete and accurate to the best of my knowledge. I also understand that Lessor
will rely on the completeness and accuracy of my answers in assessing any
environmental liability risks associated with the property.

 

 

Signature:  ___________________________________________________________

 

Name:     _____________________________________________________________

 

Title:    _______________________________________________________________

 

Date:     _________________________

 

Telephone:     ___________________________

 

 

 

EXHIBIT E

 

 

 

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

 

EXHIBIT F

MARKET RENT ANALYSIS

When determining Market Rent, the following rules and instructions shall be
followed.

1.RELEVANT FACTORS.  The "Market Rent," as used in this Lease, shall be derived
from an analysis (as such derivation and analysis are set forth in this
Exhibit F) of the "Net Equivalent Lease Rates," of the "Comparable
Transactions".  The "Market Rent," as used in this Lease, shall be equal to the
annual rent per rentable square foot as would be applicable on the commencement
of the Option Term at which renewal tenants, are, pursuant to transactions
consummated within the twelve (12) month period immediately preceding the first
day of the Option Term (provided that timing adjustments shall be made to
reflect any perceived changes which will occur in the Market Rent following the
date of any particular Comparable Transaction up to the date of the commencement
of the Option Term) are extending the term of its lease of non-sublease,
non-encumbered, non-equity space comparable in location and quality to the
Premises and consisting of transactions similar size to the Premises, for a
comparable term, in an arm's-length transaction, which comparable space is
located in the "Comparable Buildings," as that term is defined in Section 4,
below (transactions satisfying the foregoing criteria shall be known as the
"Comparable Transactions").  The terms of the Comparable Transactions shall be
calculated as a Net Equivalent Lease Rate pursuant to the terms of this
Exhibit F and shall take into consideration all terms and concessions relating
to the Comparable Transactions, including, but not limited to:  (i) the rental
rate and escalations for the Comparable Transactions, (ii) the amount of parking
rent per parking permit paid in the Comparable Transactions, (iii) operating
expense and tax escalation protection granted in such Comparable Transactions
such as a base year or expense stop (although for each such Comparable
Transaction the base rent shall be adjusted to a triple net base rent using
reasonable estimates of operating expenses and taxes as determined by Landlord
for each such Comparable Transaction); (iv) tenant improvements or allowances
provided or to be provided for such comparable space, taking into account, the
value of the existing improvements, if any, in the Premises and/or improvement
allowances granted to Tenant, such value of existing improvements to be based
upon the age, quality and layout of the improvements and the extent to which the
same could be utilized by general office users (as contrasted to the Tenant),
(v) rental abatement concessions, if any, being granted such tenants in
connection with such comparable space, and (vi) the fact that Landlord is or is
not required to pay a real estate brokerage commission in connection with the
applicable term or the fact that the Comparable Transactions do or do not
involve the payment of real estate brokerage commissions; provided, however,
that no consideration shall be given to any period of rental abatement, if any,
granted to tenants in Comparable Transactions in connection with the design,
permitting and construction of tenant improvements in such comparable
spaces.  The Market Rent shall include adjustment of the stated size of the
Premises, based upon the standards of measurement utilized in the Comparable
Transactions.

2.TENANT SECURITY.  The Market Rent shall additionally include a determination
as to whether, and if so to what extent, Tenant must provide Landlord with
financial security, such as a letter of credit or guaranty, for Tenant's Rent
obligations during the Option Term.  Such determination shall be made by
reviewing the extent of financial security then generally being imposed in
Comparable Transactions from tenants of comparable financial condition and
credit history to the then existing financial condition and credit history of
Tenant (with appropriate adjustments to account for differences in the
then-existing financial condition of Tenant and such other tenants).

3.TENANT IMPROVEMENT ALLOWANCE.  If, in determining the Market Rent for an
Option Term, Tenant is entitled to a tenant improvement or comparable allowance
for the improvement of the Premises (the "Option Term TI Allowance"), Landlord
may, at Landlord’s sole option, elect to grant all or a portion of the Option
Term TI Allowance in accordance with the following:  (A) to grant some or all of
the Option Term TI Allowance to Tenant in the form as described above (i.e., as
an improvement allowance), and/or (B) to offset against the rental rate
component of the Market Rent all or a portion of the Option Term TI Allowance
(in which case such portion of the Option Term TI Allowance provided in the form
of a rental offset shall not be granted to Tenant).  To the extent Landlord
elects not to grant the entire Option Term TI Allowance as a tenant improvement
allowance, the offset under item (B), above, shall equal the amount of the
tenant improvement allowance not granted to Tenant as a tenant improvement
allowance pursuant to the preceding sentence.

 

EXHIBIT F

 

 

 

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

 

4.COMPARABLE BUILDINGS.  For purposes of this Lease, the term "Comparable
Buildings" shall mean those certain other first-class laboratory and R&D
buildings located in the –Northern San Diego Area of San Diego, California West
of Interstate 15, that are comparable in age (based on the date of original
construction or the latest major renovation) location, quality of construction,
services and amenities, etc.

5.METHODOLOGY FOR REVIEWING AND COMPARING THE COMPARABLE TRANSACTIONS.  In order
to analyze the Comparable Transactions based on the factors to be considered in
calculating Market Rent and in connection with calculations under Section 2.2 of
this Lease, and given that the Comparable Transactions may vary in terms of
length or term, rental rate, concessions, etc., the following steps shall be
taken into consideration to "adjust" the objective data from each of the
Comparable Transactions.  By taking this approach, a "Net Equivalent Lease Rate"
for each of the Comparable Transactions shall be determined using the following
steps to adjust the Comparable Transactions, which will allow for an "apples to
apples" comparison of the Comparable Transactions and Economic Terms.

5.1The contractual rent payments for each of the Comparable Transactions should
be arrayed monthly or annually over the lease term.  All Comparable Transactions
and Economic Terms should be adjusted to simulate a net rent structure, wherein
the tenant is responsible for the payment of all property operating expenses and
taxes in a manner consistent with this Lease.  This results in the estimate of
Net Equivalent Rent received by each landlord for each Comparable Transaction
being expressed as a periodic net rent payment.

5.2Any free rent or similar inducements received over time should be deducted in
the time period in which they occur, resulting in the net cash flow arrayed over
the lease term.

5.3The resultant net cash flow from the lease should be then discounted (using
an annual discount rate equal to 8.0%) to the lease commencement date, resulting
in a net present value estimate.

5.4From the net present value, up front inducements (improvements allowances and
other concessions) should be deducted.  These items should be deducted directly,
on a "dollar for dollar" basis, without discounting since they are typically
incurred at lease commencement, while rent (which is discounted) is a future
receipt.

5.5The net present value should then amortized back over the lease term as a
level monthly or annual net rent payment using the same annual discount rate of
8.0% used in the present value analysis.  This calculation will result in a
hypothetical level or even payment over the option period, termed the "Net
Equivalent Lease Rate" (or constant equivalent in general financial terms).

6.USE OF NET EQUIVALENT LEASE RATES FOR COMPARABLE TRANSACTIONS.  The Net
Equivalent Lease Rates for the Comparable Transactions shall then be used to
reconcile, in a manner usual and customary for a real estate appraisal process,
to a conclusion of Market Rent which shall be stated as a Net Equivalent Lease
Rate applicable the Option Term.

 

 

 

EXHIBIT F

 

 

 

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

 

EXHIBIT G

PRELIMINARY DEVELOPMENT COSTS BUDGET

[g2017082904212458419297.jpg]

 

 

 

EXHIBIT G

 

 

 

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

 

EXHIBIT H

[INTENTIONALLY OMITTED]

 

 

 

EXHIBIT H

 

 

 

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

 

EXHIBIT I

APPROVED FORM OF LETTER OF CREDIT

 

BENEFICIARY:
HCPI/SORRENTO, LLC

C/O HCP, INC.

1920 MAIN STREET, SUITE 1200

IRVINE, CALIFORNIA, 92614

ATTENTION: LEGAL DEPARTMENT

 

 

LADIES AND GENTLEMEN:

 

AT THE REQUEST OF:

 

APPLICANT:

NUVASIVE, INC.

 

 

WE HEREBY ISSUE IN YOUR FAVOR OUR IRREVOCABLE CREDIT NO. ___________________ FOR
THE ACCOUNT OF NUVASIVE, INC. FOR AN AMOUNT OF $1,350,000.00 (ONE MILLION THREE
HUNDRED FIFTY THOUSAND DOLLARS) AVAILABLE BY YOUR DRAFTS AT SIGHT ON
_______________ BANK, N.A. EFFECTIVE IMMEDIATELY AND EXPIRING AT OUR OFFICE ON
AUGUST 31, 2018.

 

WE ARE INFORMED THIS LETTER OF CREDIT IS ISSUED RELATIVE TO THE LEASE AGREEMENT
FOR SORRENTO SUMMIT DATED AUGUST 28, 2017, INCLUDING ANY AMENDMENTS AND
RESTATEMENTS THERETO, BETWEEN NUVASIVE, INC., AS TENANT, AND HCPI/SORRENTO, LLC
AS LANDLORD (THE “LEASE”) FOR PREMISES LOCATED AT 7473 AND 7475 LUSK BOULEVARD,
SAN DIEGO, CALIFORNIA 92121, AND AT THAT CERTAIN TO BE CONSTRUCTED BUILDING TO
BE KNOWN AS THE LUSK 3 BUILDING.

 

FUNDS UNDER THIS CREDIT ARE AVAILABLE AGAINST YOUR DRAFT(S) MARKED “DRAWN UNDER
___________ BANK, N.A. LETTER OF CREDIT NO. ____________________” ACCOMPANIED BY
THE FOLLOWING:

 

BENEFICIARY’S SIGNED AND DATED STATEMENT READING AS FOLLOWS:

 

“IN ACCORDANCE WITH THE LEASE AGREEMENT FOR SORRENTO SUMMIT DATED AUGUST 28,
2017, INCLUDING ANY AMENDMENTS AND RESTATEMENTS THERETO, BETWEEN NUVASIVE, INC.,
AS TENANT, AND HCPI/SORRENTO, LLC AS LANDLORD (THE “LEASE”), THE UNDERSIGNED AS
THE CURRENT LANDLORD UNDER THE LEASE IS ENTITLED TO AND HEREBY DEMANDS PAYMENT
UNDER ____________________ BANK, N.A. LETTER OF CREDIT NO ____________________
IN THE AMOUNT OF U.S. $___________________ .” OR

 

“THE UNDERSIGNED, [SUCCESSOR TO] HCPI/SORRENTO, LLC (“CREDITOR”) IS IN RECEIPT
OF NOTICE FROM _________________ BANK, N.A. THAT LETTER OF CREDIT NO.
_____________________ WILL NOT BE EXTENDED BEYOND ITS CURRENT EXPIRATION DATE
AND THE UNDERSIGNED HAS NOT RECEIVED ACCEPTABLE REPLACEMENT SECURITY.  THE
UNDERSIGNED IS ENTITLED TO AND HEREBY DEMANDS PAYMENT UNDER _______________
BANK, N.A. LETTER OF CREDIT NO. _____________________ IN THE AMOUNT OF U.S.
$____________________.”

 

PARTIAL DRAWING AND MULTIPLE PRESENTATIONS ARE PERMITTED.  PRESENTATION OF A
DRAWING UNDER THIS LETTER OF CREDIT MAY BE MADE BY HAND DELIVERY, COURIER
SERVICE, OVERNIGHT MAIL, OR FACSIMILE.  PRESENTATION BY FACSIMILE TRANSMISSION
SHALL BE BY TRANSMISSION OF THE ABOVE REQUIRED SIGHT DRAFT DRAWN ON US TOGETHER

 

EXHIBIT I

 

 

 

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

 

WITH THIS LETTER OF CREDIT TO OUR FACSIMILE NUMBER, [INSERT FAX NUMBER –
(___) ___-____], ATTENTION:  [INSERT APPROPRIATE RECIPIENT], WITH TELEPHONIC
CONFIRMATION OF OUR RECEIPT OF SUCH FACSIMILE TRANSMISSION AT OUR TELEPHONE
NUMBER [INSERT TELEPHONE NUMBER – (___) ___-____] OR TO SUCH OTHER FACSIMILE OR
TELEPHONE NUMBERS, AS TO WHICH BENEFICIARY HAS RECEIVED WRITTEN NOTICE FROM US
AS BEING THE APPLICABLE SUCH NUMBER.  WE AGREE TO NOTIFY BENEFICIARY IN WRITING,
BY NATIONALLY RECOGNIZED OVERNIGHT COURIER SERVICE, OF ANY CHANGE IN SUCH
DIRECTION.  ANY FACSIMILE PRESENTATION PURSUANT TO THIS PARAGRAPH SHALL ALSO
STATE THEREON THAT THE ORIGINAL OF SUCH SIGHT DRAFT AND LETTER OF CREDIT ARE
BEING REMITTED, FOR DELIVERY ON THE NEXT BUSINESS DAY, TO [INSERT BANK NAME] AT
THE APPLICABLE ADDRESS FOR PRESENTMENT PURSUANT TO THE PARAGRAPH FOLLOWING THIS
ONE.

 

IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT SHALL BE DEEMED AUTOMATICALLY
EXTENDED FOR ONE YEAR FROM THE PRESENT OR ANY FUTURE EXPIRATION DATE, UNLESS AT
LEAST SIXTY (60) DAYS PRIOR TO THIS OR ANY FUTURE EXPIRATION DATE WE SEND NOTICE
TO YOU BY REGISTERED MAIL, RETURN RECEIPT REQUESTED, OR BY HAND DELIVERED
COURIER THAT WE ELECT NOT TO CONSIDER THIS LETTER OF CREDIT EXTENDED FOR ANY
SUCH ADDITIONAL PERIOD.

 

THIS LETTER OF CREDIT IS TRANSFERRABLE ONE OR MORE TIMES AND ONLY IN ITS
ENTIRETY, PROVIDED THAT SUCH TRANSFER WOULD NOT VIOLATE ANY GOVERNMENTAL RULE,
ORDER, OR

REGULATION, SUBJECT TO OUR RECEIPT OF BENEFICIARY'S INSTRUCTIONS IN THE FORM
ATTACHED HERETO AS EXHIBIT A, ACCOMPANIED BY THE ORIGINAL LETTER OF CREDIT AND
AMENDMENT(S) IF ANY. COSTS OR EXPENSES OF SUCH TRANSFER SHALL BE FOR THE ACCOUNT
OF THE APPLICANT.

 

WE HEREBY ENGAGE WITH YOU THAT DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE
TERMS AND CONDITIONS OF THIS CREDIT WILL BE DULY HONORED UPON PRESENTATION AT
OUR COUNTERS AT ____________________________________ ON OR BEFORE THE EXPIRATION
DATE HEREOF.  THE ORIGINAL LETTER OF CREDIT OR A CERTIFIED COPY MUST ACCOMPANY
THE DOCUMENTS PRESENTED UNDER THIS LETTER OF CREDIT.

 

THIS LETTER OF CREDIT SETS FORTH IN FULL THE TERMS OF OUR UNDERTAKING, AND SUCH
UNDERTAKING SHALL NOT IN ANY WAY BE MODIFIED, AMENDED OR AMPLIFIED BY REFERENCE
TO ANY DOCUMENT, INSTRUMENT OR AGREEMENT REFERRED TO HEREIN OR IN WHICH THIS
LETTER OF CREDIT REFERRED TO OR TO WHICH THIS LETTER OF CREDIT RELATES, AND ANY
REFERENCES SHALL NOT BE DEEMED TO INCORPORATE HEREIN BY REFERENCE ANY DOCUMENT,
INSTRUMENT OR AGREEMENT.  THE OBLIGATION OF __________ BANK, N.A. UNDER THIS
LETTER OF CREDIT IS THE INDIVIDUAL OBLIGATION OF _________ BANK, N.A. AND IS IN
NO WAY CONTINGENT UPON REIMBURSEMENT WITH RESPECT THERETO.

 

 

EXCEPT AS EXPRESSLY STATED HEREIN, THIS LETTER OF CREDIT IS SUBJECT TO THE
INTERNATIONAL STANDBY PRACTICE 1998, INTERNATIONAL CHAMBER OF COMMERCE
PUBLICATION NO 590 (“ISP98”).

 

PLEASE ADDRESS ALL CORRESPONDENCE REGARDING THIS LETTER OF CREDIT TO THE
ATTENTION OF THE STANDBY LETTER OF CREDIT UNIT
________________________________________________, INCLUDING THE LETTER OF CREDIT
NUMBER MENTIONED ABOVE.  FOR TELEPHONE ASSISTANCE, PLEASE CONTACT THE STANDBY
CLIENT SERVICE UNIT AT __________________________________.

 

VERY TRULY YOURS,

 

 

 

EXHIBIT I

 

 

 

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

 

LEASE

 

SORRENTO SUMMIT

 

 

 

 

HCPI/SORRENTO, LLC,
a Delaware limited liability company,

as Landlord,

and

NUVASIVE, INC.,
a Delaware corporation,

as Tenant

 

 

 

 

 

 

August 28, 2017

 

 

 

 

 

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

TABLE OF CONTENTS

Page

 

1.

PREMISES, BUILDING, PROJECT, AND COMMON AREAS

15

2.

LEASE TERM; OPTION TERM; TERMINATION OF INITIAL LEASE

28

3.

BASE RENT

32

4.

ADDITIONAL RENT

32

5.

USE OF PREMISES

39

6.

SERVICES AND UTILITIES

44

7.

REPAIRS

45

8.

ADDITIONS AND ALTERATIONS

47

9.

COVENANT AGAINST LIENS

49

10.

INSURANCE

49

11.

DAMAGE AND DESTRUCTION

51

12.

NONWAIVER

53

13.

CONDEMNATION

54

14.

ASSIGNMENT AND SUBLETTING

54

15.

SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES

57

16.

HOLDING OVER

58

17.

ESTOPPEL CERTIFICATES; FINANCIAL STATEMENTS

59

18.

SUBORDINATION

59

19.

DEFAULTS; REMEDIES

60

20.

COVENANT OF QUIET ENJOYMENT

62

21.

LETTER OF CREDIT

62

22.

ROOFTOP RIGHTS

66

23.

SIGNS

67

24.

COMPLIANCE WITH LAW

68

25.

CHARGES

69

26.

LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

69

27.

ENTRY BY LANDLORD

69

28.

TENANT PARKING

70

29.

MISCELLANEOUS PROVISIONS

70

 

 

 

EXHIBITS

 

 

 

 

A

OUTLINE OF PREMISES

 

B

TENANT WORK LETTER

 

C

FORM OF NOTICE OF LEASE TERM DATES

 

D

FORM OF TENANT'S ESTOPPEL CERTIFICATE

 

E

ENVIRONMENTAL QUESTIONNAIRE

 

F

MARKET RENT ANALYSIS

 

G

PRELIMINARY DEVELOPMENT COSTS BUDGET

 

H

[INTENTIONALLY OMITTED]

 

I

APPROVED FORM OF LETTER OF CREDIT

 

 

 

 

 

 

 

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

INDEX

Page

2020 Rent Adjustment Date

7

Abatement Event

62

Accountant

39

Actual Project Cost Notice

22

Additional Rent

32

Advocate Arbitrators.

30

Alterations

47

Applicable Laws

68

Arbitration Agreement

30

Audit Period

38

Bank

62

Bank Credit Threat

63

Bankruptcy Code

64

Base Building Improvements

50

Base Rent

32

BOMA 2010

16

Briefs

30

BTS Over-Allowance Amount

11

BTS Project Cost Limit

11

Building Systems

45

Building,

2

Buildings.

2

Clean-up

43

Clean-up Plan

43

Closure Letter

43

Common Areas

15

Construction Area

1

Cosmetic Alterations

47

Credit Rating Threshold

62

Deposit Period

65

Direct Expenses

32

Eligibility Period

62

Emergency

47

Environmental Assessment

42

Environmental Laws

41

Environmental Questionnaire

39

Environmental Report

43

Estimate

38

Estimate Statement

37

Estimated Direct Expenses

38

Estimated Project Cost Notice

22

Existing Buildings

2

Existing Hazardous Materials

41

Existing Letter of Credit

63

Expansion Space Work Letter

10

Expense Year

32

Extension Space

5

FDIC

65

First Class Life Sciences Projects

13

First Rebuttals

30

Fit-Out Period Conditions

18

For Sale Property

27

Force Majeure

72

 

 

 

 

 

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

INDEX

Page

Group Sale

27

Hazardous Materials

39

Hazardous Materials Claims

40

Initial Lease

1

Initial Lease Termination Date

31

Interim Cash Deposit

65

Landlord

1

Landlord Affiliate

27

Landlord Parties

49

Landlord Repair Notice

52

Landlord Termination Notice

52

Landlord's Common Area Contribution

12

Landlord's FF&E Limit

10

Landlord's Initial Statement

31

Landlord's Lusk 3 Work

18

Landlord's Rebuttal Statement

31

Landlord's Retained Liability

42

L-C

62

L-C Amount

62

LC Expiration Date

63

LC Replacement Notice

65

LD AMOUNT

28

Lease

1

Lease Commencement Date

28

Lease Expiration Date

28

Lease Term

28

Lease Year

28

Lines

75

Lusk 1 & 2 Base Rent Schedule

7

Lusk 1 Building

2

Lusk 2 Building

2

Lusk 3 Building

2

Mail

73

Management Fee

35

Market Rent

29

Market Rent,

29

Must‑Take 1 Delivery Date

16

Must‑Take 2 Delivery Date

19

Must‑Take 3 Delivery Date

24

Must-Take Space 1 Fit-Out Period

17

Must-Take Space 2 Base Rent

19

Must-Take Space 2 Buyout Amount

5

Must-Take Space 2 Buyout Amount,

5

Must-Take Space 2 Commencement Date

23

Must-Take Space 2 Fit-Out Period

18

Must-Take Space 2 Land Value

19

Must-Take Space 2 Rent Commencement Notice

23

Must‑Take Space 3

23

Must-Take Space 3 Fit-Out Period

24

Net Worth

57

Neutral Arbitrator

30

New Hazardous Materials Usage

40

Non-Assumable Obligations

45

 

 

 

 

 

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Page

Notices

73

Objectionable Name

67

Offered Purchase Terms

27

Offsite Work

20

Operating Expenses

32

Option Interest Notice

29

Option Rent

29

Option Rent Notice

29

Option Term

29

Original Improvements

51

Original Landlord

18

Original Landlord Requirements

19

Original Tenant

26

Outside Agreement Date

29

Partial Expiration Date

5

PCBs

40

Permitted Transferee

57

Permitted Transferee Assignee.

57

PMA

21

Premises

15

Premises Improvements

51

Preventative Maintenance Records

46

Project

1

Project Structures.

2

Purchase Agreement

27

Purchase Price

27

Purchase ROFO

27

Purchase ROFO Notice

27

Receivership

65

Rent.

32

Replacement Unit

45

Rooftop Equipment

66

RSF Notice

18

Ruling

31

Scheduled Expiration Date

5

Second Rebuttals

30

Security Deposit Laws

64

Service Contract

46

Sign Specifications

67

Site Modernization/ Beautification Allowance

11

Site Plan

1

SMB Costs

25

SMB Rent Commencement Date

9

SMB Rent Commencement Notice

9

SMB Rent Schedule

9

SMB Work Letter

9, 26

SNDAA

59

Sorrento Summit.

15

Specialty Alterations

49

Statement

37

Subject Space

54

Summary

1

Superior Holders

59

Tax Appeal

36

Tax Contest

36

 

 

 

 

 

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Page

Tax Contest Conditions

36

Tax Expenses

36

Taxes

36

Tenant

1

Tenant Must-Take 1 Fit-Out Work

17

Tenant Must-Take Space 3 Fit-Out Work

24

Tenant Parties

50

Tenant Work Letter

15

Tenant Work Letters

15

Tenant’s Signage

67

Tenant-Assumed Obligation

45

Tenant's Agents

39

Tenant's Exercise Notice

27

Tenant's Initial Statement

31

Tenant's Negotiation Period

27

Tenant's Notice Period

27

Tenant's Rebuttal Statement

31

Tenant's Repair Obligations

45

Tenant's Share

37

Transfer Notice

54

Transfer Premium

54

Transferee

54

Transfers

54

Underlying Documents

16

Unused L-C Proceeds

65

Waiver/Acceleration Notice

5