Exhibit 10.1
OFFICE LEASE
by and between
TREA PACIFIC PLAZA, LLC,
a Delaware limited liability company
(“Landlord”)
and
SOMAXON PHARMACEUTICALS, INC.,
a Delaware corporation
(“Tenant”)
Dated as of
May 24, 2011

 

 

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

 

OFFICE LEASE
THIS OFFICE LEASE (this “Lease”) is made between TREA PACIFIC PLAZA, LLC, a
Delaware limited liability company (“Landlord”), and the Tenant described in
Item 1 of the Basic Lease Provisions.
LEASE OF PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, subject
to all of the terms and conditions set forth herein, those certain premises (the
“Premises”) described in Item 3 of the Basic Lease Provisions and as shown in
the drawing attached hereto as Exhibit A. The Premises are located in the
Building described in Item 2 of the Basic Lease Provisions. The Building is
located on that certain land (the “Land”), which is also improved with
landscaping, parking facilities and other improvements, fixtures and common
areas and appurtenances now or hereafter placed, constructed or erected on the
Land (sometimes referred to herein as the “Project”).
BASIC LEASE PROVISIONS

         
1.
  Tenant:   SOMAXON PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”)
 
       
2.
  Building:   10935 Vista Sorrento Parkway
San Diego, California 92130
 
       
3.
  Description of Premises:   Suite: 250
 
       
 
  Area:   12,109 rentable square feet (10,776 usable square feet)
 
       
 
  Building Size:   73,359 square feet (subject to Paragraph 18)
 
       
4.
  Tenant’s Proportionate Share:   16.51% (12,109 rsf / 73,359 rsf) (See
Paragraph 3)
 
       
5.
  Base Rent:   (See Paragraph 2)

          Months   Base Rent*  
1 - 12
  $ 29,667.50 **
13 - 24
  $ 30,705.40 **
25 - 36
  $ 31,780.08  
37 - 48
  $ 32,892.39  
49 - 60
  $ 34,043.62  
61 - 64
  $ 35,235.14  

 

      *  
Tenant shall pay for electricity separately pursuant to Paragraph 7(a) of the
Standard Lease Provisions.

 

-1-

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

 

      **  
Notwithstanding the foregoing, provided Tenant is not in default under this
Lease beyond any applicable notice and cure period, Landlord hereby agrees to
abate Tenant’s obligation to pay one-half (1/2) of the monthly Base Rent due
during the second (2nd) through thirteenth (13th) months of the Term (the
“Abatement Period”), such that Tenant shall be required to pay half rent amount
per month towards monthly Base Rent during such months (the aggregate amount of
partially abated monthly Base Rent during the Abatement Period being hereinafter
collectively referred to as the “Abated Amount”). During such Abatement Period,
Tenant will still be responsible for the payment of all other monetary
obligations due under this Lease during such Abatement Period including, without
limitation, Tenant’s Proportionate Share of Operating Expense increases, parking
charges, and the remaining one-half (1/2) of the monthly Base Rent due during
each month of the Abatement Period (i.e., $14,833.75 per month during months 2
through 12, and $15,352.70 during month 13). Tenant acknowledges that any
uncured default by Tenant under this Lease will cause Landlord to incur costs
not contemplated hereunder, the exact amount of such costs being extremely
difficult and impracticable to ascertain. Therefore, should Tenant at any time
during the Term be in default beyond any applicable notice and cure period,
then, in addition to all of Landlord’s other rights and remedies, the total
unamortized sum of such Abated Amount (amortized on a straight line basis over
the Initial Term) so conditionally excused shall be payable monthly over the
remainder of the Initial Term by Tenant to Landlord; provided, however, Tenant
acknowledges and agrees that nothing in this subparagraph is intended to limit
any other remedies available to Landlord at law or in equity under applicable
law (including, without limitation, the remedies under Civil Code Section 1951.2
and/or 1951.4 and any successor statutes or similar laws), in the event Tenant
defaults under this Lease beyond any applicable notice and cure period.

         
6.
  Installment Payable Upon Execution:   $29,667.50
 
       
7.
  Security Deposit or other Collateral Due Upon Execution:  
Letter of Credit in the initial principal amount of $200,000.00, as provided in
Paragraph 2(c)
 
       
8.
  Base Year for Operating Expenses:   2011 (See Paragraph 3)
 
       
9.
  Initial Term:  
Sixty-four (64) months, commencing on the Commencement Date and ending on the
day immediately preceding the sixty-fourth (64th) month anniversary of the
Commencement Date (See Paragraph 1)
 
       
10.
  Estimated Commencement Date:   July 1, 2011 (subject to Paragraph 1 below)
 
       
11.
  Estimated Termination Date:   October 31, 2016 (subject to Paragraph 1 below)
 
       
12.
  Broker(s) (See Paragraph 19(k)):    
 
       
 
  Landlord’s Broker:   Cushman & Wakefield of San Diego, Inc.
 
      4435 Eastgate Mall, 2nd Floor
 
      San Diego, California 92121
 
       
 
  Tenant’s Broker:   Studley, Inc.
 
      3579 Valley Centre Drive, Suite 100
 
      San Diego, California 92130

 

-2-

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

 

         
13.
  Number of Parking Spaces:  
Tenant shall have the right to lease up to forty-eight (48) unreserved parking
stalls in the Project’s garage free of charge during the Initial Term, and
thereafter at Landlord’s then prevailing rate as the same may change from time
to time. Tenant may convert up to three (3) of said unreserved parking spaces
into reserved parking spaces with monthly parking charge for such reserved
parking spaces payable at the rate of $75.00 per stall per month during the
initial Term, but Tenant is under no obligation to rent the reserved spaces
during the Term. Tenant may contract directly with the parking garage vendor for
additional stalls, all pursuant to the provisions of Paragraph 18(a) below.
 
       
14.
  Addresses for Notices:    
 
       
 
  To: TENANT:   To: LANDLORD:
 
       
 
  Prior to occupancy of the Premises:    
 
   
  TREA Pacific Plaza, LLC
 
  Somaxon Pharmaceuticals, Inc.   4675 MacArthur Court, Suite 1100
 
  3570 Carmel Mountain Road, Suite 100   Newport Beach, California 92660
 
  San Diego, CA 92130   Attn: Robert Niendorf, Director — Asset Management
 
       
 
  After occupancy of the Premises:   With a copy to:
 
       
 
  To the Premises   Cushman & Wakefield of San Diego, Inc.
 
      4435 Eastgate Mall, Suite 200
 
      San Diego, California 92121
 
      Attn: Karen Christian
 
       
15.
  Address for Payment of Rent:  
All payments payable under this Lease shall be sent to Landlord at:
 
       
 
      TREA Pacific Plaza, LLC
 
      P.O. Box 51114
 
      Los Angeles, California 90074
 
       
 
      or to such other address as Landlord may designate in writing.
 
       
16.
  Guarantor:   None
 
       
17.
  Effective Date:   May 24, 2011
 
       
18.
  Tenant Improvement Allowance:  
None. Tenant Improvements shall be provided by Landlord on a “turnkey” basis.
(See Exhibit B)
 
       
19.
  The “State” is the state of California.    

This Lease consists of the foregoing introductory paragraphs and Basic Lease
Provisions, the provisions of the Standard Lease Provisions (the “Standard Lease
Provisions”) (consisting of Paragraph 1 through Paragraph 19 which follow) and
Exhibit A through Exhibit F, and the following Riders: Rider No.1 through Rider
No. 5, all of which are incorporated herein by this reference. In the event of
any conflict between the provisions of the Basic Lease Provisions and the
provisions of the Standard Lease Provisions, the Standard Lease Provisions shall
control.

 

-3-

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

 

STANDARD LEASE PROVISIONS
1. TERM
(a) The Initial Term of this Lease and the Rent (defined below) shall commence
on the earliest of (i) the date that the Tenant Improvements are Substantially
Completed, or (ii) the date the Tenant Improvements would have been
Substantially Completed except for Tenant Delays, or (iii) the date that Tenant,
or any person occupying any of the Premises with Tenant’s permission, commences
business operations from the Premises (the “Commencement Date”). Unless earlier
terminated in accordance with the provisions hereof, the Initial Term of this
Lease shall be the period shown in Item 9 of the Basic Lease Provisions. As used
herein, “Lease Term” shall mean the Initial Term referred to in Item 9 of the
Basic Lease Provisions, subject to any extension of the Initial Term hereof
exercised in accordance with the terms and conditions expressly set forth herein
(the “Expiration Date”). Unless Landlord is terminating this Lease prior to the
Expiration Date in accordance with the provisions hereof, Landlord shall not be
required to provide notice to Tenant of the Expiration Date. This Lease shall be
a binding contractual obligation effective upon execution hereof by Landlord and
Tenant, notwithstanding the later commencement of the Initial Term of this
Lease. The terms “Tenant Improvements” and “Substantial Completion” or
“Substantially Completed” are defined in the attached Exhibit B Work Letter.
“Tenant Delays” consist of those delays defined in Exhibit B.
(b) The Premises will be delivered to Tenant when the Tenant Improvements have
been Substantially Completed. If the Commencement Date is delayed or otherwise
does not occur on the Estimated Commencement Date, set forth in Item 10 of the
Basic Lease Provisions, this Lease shall not be void or voidable, nor shall
Landlord be liable to Tenant for any loss or damage resulting therefrom, but
provided the Commencement Date is not delayed as a result of Tenant Delays, the
Commencement Date shall be extended until it occurs as provided in
Paragraph 1(a) above. Notwithstanding the foregoing, if the Commencement Date
has not occurred by September 1, 2011, for reasons other than Tenant Delays or
Force Majeure Delays (defined in Paragraph 19(w)), then Landlord shall provide
Tenant with one day of free rent, and the abated rent to be provided in
Paragraph 5 of the Basic Lease Provisions shall be extended for an additional
day for each day that the Commencement Date is delayed for such reasons other
than Tenant Delays or Force Majeure Delays. Notwithstanding the foregoing, if,
for reasons other than Tenant Delays, Landlord has not commenced construction of
the Tenant Improvements by September 1, 2011, Tenant, as its sole and exclusive
remedy, shall have the right to terminate the Lease upon written notice to
Landlord, whereupon this Lease shall be deemed terminated and neither party
shall thereafter have any further liability or obligation to the other.
(c) Upon Substantial Completion of the Tenant Improvements, Landlord shall
prepare and deliver to Tenant, Tenant’s Commencement Letter in the form of
Exhibit E attached hereto (the “Commencement Letter”) which Tenant shall
acknowledge by executing a copy and returning it to Landlord. If Tenant fails to
sign and return the Commencement Letter to Landlord within ten (10) days of its
receipt from Landlord, the Commencement Letter as sent by Landlord shall be
deemed to have correctly set forth the Commencement Date and the other matters
addressed in the Commencement Letter. Failure of Landlord to send the
Commencement Letter shall have no effect on the Commencement Date.
(d) Upon mutual execution and delivery of this Lease, and so long as Landlord
has received from Tenant the first month’s installment of Base Rent due pursuant
to Item 6 of the Basic Lease Provisions, certificates satisfactory to Landlord
evidencing the insurance required to be carried by Tenant under this Lease (and
to the extent required by Landlord, evidence of insurance as to Tenant’s
contractors and agents), and the Letter of Credit, and so long as the Tenant and
its contractors do not cause a Tenant Delay, Landlord shall use reasonable
efforts to give Tenant and Tenant’s designated contractors access to the
Premises approximately fifteen (15) days prior to the Estimated Commencement
Date (the “Early Access Period”) for purposes of installing Tenant’s furniture,
fixtures, and equipment (“Tenant’s Work”). Tenant’s Work shall be performed by
Tenant at Tenant’s sole cost and expense. Tenant’s access to the Premises during
the Early Access Period shall be subject to all terms and conditions of this
Lease, except that Tenant shall not be obligated to pay Rent during the Early
Access Period until the Commencement Date. Tenant agrees to provide Landlord
with prior notice of any such intended early access and to cooperate with
Landlord during the period of any such early access so as not to interfere with
Landlord in the completion of any Landlord’s work in the Premises pursuant to
the Work Letter (the “Landlord’s Work”). Should Landlord determine such early
access interferes with Landlord’s Work, Landlord may deny Tenant access to the
Premises until Landlord’s Work is substantially completed, whereupon Tenant
shall comply, including promptly surrendering any keys of other means of access
to the Premises.

 

-4-

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

 

2. BASE RENT AND LETTER OF CREDIT
(a) Tenant agrees to pay during each month of the Lease Term as Base Rent (“Base
Rent”) for the Premises the sums shown for such periods in Item 5 of the Basic
Lease Provisions.
(b) Except as expressly provided to the contrary herein, Base Rent shall be
payable in consecutive monthly installments, in advance, without demand,
deduction or offset, commencing on the Commencement Date and continuing on the
first day of each calendar month thereafter until the expiration of the Lease
Term. The first full monthly installment of Base Rent shall be payable upon
Tenant’s execution of this Lease. The obligation of Tenant to pay Rent and other
sums to Landlord and the obligations of Landlord under this Lease are
independent obligations. If the Commencement Date is a day other than the first
day of a calendar month, or the Lease Term expires on a day other than the last
day of a calendar month, then the Rent for such partial month shall be
calculated on a per diem basis. In the event Landlord delivers possession of the
Premises to Tenant prior to the Commencement Date, Tenant agrees it shall be
bound by and subject to all terms, covenants, conditions and obligations of this
Lease during the period between the date possession is delivered and the
Commencement Date, other than the payment of Base Rent, in the same manner as if
delivery had occurred on the Commencement Date.
(c) Letter of Credit.
(i) General Provisions. On or prior to the date Landlord commences construction
of the Tenant Improvements, Tenant shall deliver to Landlord, as additional
collateral for the full performance by Tenant of all of its obligations under
this Lease and for all losses and damages Landlord may suffer as a result of any
default by Tenant under this Lease, including, but not limited to, any post
lease termination damages under section 1951.2 of the California Civil Code, a
standby, unconditional, irrevocable, transferable letter of credit (the “Letter
of Credit”) in the form of Exhibit F attached hereto and containing the terms
required herein, in the face amount of $200,000.00 (the “Letter of Credit
Amount”), naming Landlord as beneficiary, issued by a financial institution
acceptable to Landlord in Landlord’s sole discretion, permitting multiple and
partial draws thereon, and otherwise in form acceptable to Landlord in its sole
discretion. Tenant shall cause the Letter of Credit to be continuously
maintained in effect (whether through replacement, renewal or extension) in the
Letter of Credit Amount (as the same may be reduced as described in Subparagraph
(F) below) through the expiration date of the Lease Term (the “Final LC
Expiration Date”). If the Letter of Credit held by Landlord expires earlier than
the Final LC Expiration Date (whether by reason of a stated expiration date or a
notice of termination or non-renewal given by the issuing bank), Tenant shall
deliver a new Letter of Credit or certificate of renewal or extension to
Landlord not later than thirty (30) days prior to the expiration date of the
Letter of Credit then held by Landlord. Any renewal or replacement Letter of
Credit shall comply with all of the provisions of this Paragraph 2(c)(ii)(A),
shall be irrevocable, transferable and shall remain in effect (or be
automatically renewable) through the Final LC Expiration Date upon the same
terms as the expiring Letter of Credit or such other terms as may be acceptable
to Landlord in its sole discretion.
(ii) Drawings under Letter of Credit. Landlord shall have the immediate right to
draw upon the Letter of Credit, in whole or in part, at any time and from time
to time: (i) If an event of default occurs and is not cured within the
applicable cure period provided for such default in this Lease; or (ii) If the
Letter of Credit held by Landlord expires (or is set to expire) earlier than the
Final LC Expiration Date (whether by reason of a stated expiration date or a
notice of termination or non-renewal given by the issuing bank), and Tenant
fails to deliver to Landlord, at least thirty (30) days prior to the expiration
date of the Letter of Credit then held by Landlord, a renewal or substitute
Letter of Credit that is in effect and that complies with the provisions of this
Paragraph 2(c)(ii). No condition or term of this Lease shall be deemed to render
the Letter of Credit conditional to justify the issuer of the Letter of Credit
in failing to honor a drawing upon such Letter of Credit in a timely manner.
Tenant hereby acknowledges and agrees that Landlord is entering into this Lease
in material reliance upon the ability of Landlord to draw upon the Letter of
Credit upon the occurrence of any event of default by Tenant under this Lease or
upon the occurrence of any of the other events described above in this
Paragraph 2(c)(ii)(B).

 

-5-

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

 

(iii) Use of Proceeds by Landlord. The proceeds of the Letter of Credit shall
constitute Landlord’s sole and separate property (and not Tenant’s property or
the property of Tenant’s bankruptcy estate) and Landlord may immediately upon
any draw (and without notice to Tenant) apply or offset the proceeds of the
Letter of Credit: (i) against any rent payable by Tenant under this Lease that
is not paid when due; (ii) against all losses and damages that Landlord has
suffered or that Landlord reasonably estimates that it may suffer as a result of
any default by Tenant under this Lease, including any damages arising under
section 1951.2 of the California Civil Code following termination of the Lease;
(iii) against any costs incurred by Landlord in connection with this Lease
(including attorneys’ fees); and (iv) against any other amount that Landlord may
spend or become obligated to spend by reason of Tenant’s default. Provided
Tenant has performed all of its obligations under this Lease, Landlord agrees to
pay to Tenant within thirty (30) days after the Final LC Expiration Date the
amount of any proceeds of the Letter of Credit received by Landlord and not
applied as allowed above; provided, that if prior to the Final 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 Federal Bankruptcy
Code, then Landlord shall not be obligated to make such payment in the amount of
the unused Letter of Credit 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, in each case pursuant to a final court order not subject to appeal or
any stay pending appeal.
(iv) Additional Covenants of Tenant. If, as result of any application or use by
Landlord of all or any part of the Letter of Credit, the amount of the Letter of
Credit shall be less than the Letter of Credit Amount, Tenant shall, within ten
days thereafter, provide Landlord with additional letter(s) of credit in an
amount equal to the deficiency (or a replacement letter of credit in the total
Letter of Credit Amount), and any such additional (or replacement) letter of
credit shall comply with all of the provisions of this Paragraph 2(c)(ii), and
if Tenant fails to comply with the foregoing, notwithstanding anything to the
contrary contained in this Lease, the same shall, at Landlord’s election,
constitute an event of default by Tenant. Tenant further covenants and warrants
that it will neither assign nor encumber the Letter of Credit or any part
thereof and that neither Landlord nor its successors or assigns will be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
(v) Transfer of Letter of Credit. Landlord may, at any time and without notice
to Tenant and without first obtaining Tenant’s consent thereto, transfer all or
any portion of its interest in and to the Letter of Credit to another party,
person or entity, including Landlord’s mortgagee and/or to have the Letter of
Credit reissued in the name of Landlord’s mortgagee. If Landlord transfers its
interest in the Building and transfers the Letter of Credit (or any proceeds
thereof then held by Landlord) in whole or in part to the transferee, Landlord
shall, upon notice to Tenant, without any further agreement between the parties
hereto, thereupon be released by Tenant from all liability therefor. The
provisions hereof shall apply to every transfer or assignment of all or any part
of the Letter of Credit to a new landlord. In connection with any such transfer
of the Letter of Credit by Landlord, Tenant shall, at Landlord’s sole cost and
expense, execute and submit to the issuer of the Letter of Credit such
applications, documents and instruments as may be necessary to effectuate such
transfer. Landlord shall be responsible for paying the issuer’s transfer and
processing fees in connection with any transfer of the Letter of Credit and, if
Tenant advances any such fees (without having any obligation to do so), Landlord
shall reimburse Tenant for any such transfer or processing fees within ten days
after Tenant’s written request therefor.
(vi) Reduction in Letter of Credit Amount. Subject to the provisions of this
Paragraph 2(c)(ii)(F), Tenant shall be entitled to cancel or reduce the Letter
of Credit as provided below. If Tenant is not then in actual default of any
provision of this Lease beyond the applicable notice and cure period, and
provided Tenant has not been in monetary default or material non-monetary
default beyond any applicable notice and cure periods at any time prior to the
applicable Reduction Date (as defined below), Tenant shall then be entitled to
reduce the Letter of Credit commencing as of the twenty-fifth (25th) month of
the Initial Term, and thereafter on the thirty-seventh (37th) and forty-ninth
(49th) months of the Initial Term (each, a “Reduction Date”), by one-fourth
(1/4th) of the initial Letter of Credit Amount, such that there shall remain

 

-6-

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

 

at all times during the Lease Term, at least one-fourth (1/4th) of the initial
Letter of Credit Amount. For example only, if the initial Letter of Credit
Amount is $200,000.00, and Tenant has satisfied the requirements for the
reduction of the Letter of Credit (i.e., Tenant is not then in default of any
provision of this Lease beyond any applicable notice and cure period), and
provided Tenant has not been in monetary default or material non-monetary
default beyond any applicable notice and cure periods at any time prior to the
applicable Reduction Date (as defined below)then as of the 25th, 37th, and 49th
months of the Initial Term, the Letter of Credit Amount shall be reduced by
$50,000.00 during each such Reduction Date, such that, as of the 50th month of
the Initial Term and thereafter, the Letter of Credit shall have a remaining
balance of at least $50,000.00. If Tenant is entitled to reduce the Letter of
Credit on a Reduction Date, Landlord shall execute any documents reasonably
requested by Tenant and the issuing bank to effectuate the applicable reduction
of the Letter of Credit, within fifteen (15) days after Tenant submits such
documents to Landlord for execution provided Tenant is not then in uncured
default under this Lease.
(vii) Nature of Letter of Credit. Landlord and Tenant (i) acknowledge and agree
that in no event or circumstance shall the Letter of Credit or any renewal
thereof or substitute therefor or any proceeds thereof be deemed to be or
treated as a “security deposit” under any Law applicable to security deposits in
the commercial context including Section 1950.7 of the California Civil Code, as
such section now exists or as may be hereafter amended or succeeded (“Security
Deposit Laws”), (ii) acknowledge and agree that the Letter of Credit (including
any renewal thereof or substitute therefor or any proceeds thereof) is not
intended to serve as a security deposit, and the Security Deposit Laws shall
have no applicability or relevancy thereto, and (iii) 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. Tenant hereby waives the
provisions of Section 1950.7 of the California Civil Code and all other
provisions of Law, now or hereafter in effect, which (A) establish the time
frame by which Landlord must refund a security deposit under a lease, and/or
(B) provide that Landlord may claim from the Security Deposit only those sums
reasonably necessary to remedy defaults in the payment of rent, to repair damage
caused by Tenant or to clean the Premises, it being agreed that Landlord may, in
addition, claim those sums specified in this Paragraph 2(c)(ii) and/or those
sums reasonably necessary to compensate Landlord for any loss or damage caused
by Tenant’s breach of this Lease or the acts or omissions of Tenant, including
any damages Landlord suffers following termination of this Lease.
(d) The parties agree that for all purposes hereunder the Premises shall be
stipulated to contain the number of square feet of Rentable Area described in
Item 3 of the Basic Lease Provisions. Landlord calculated the Rentable Area
described in Item 3 of the Basic Lease Provisions substantially in accordance
with the “Standard Method for Measuring Floor Area in Office Buildings,”
approved as of June 7, 1996 by the American National Standards Institute, Inc.
(ANSI/BOMA Z65.1-1996; the “BOMA Standard”).
(e) Base Rent shall be paid to Landlord absolutely net of all costs and
expenses. The provisions for payment of Operating Expenses by means of periodic
payment of Tenant’s Proportionate Share of estimated Operating Expenses and the
year end adjustment of such payments are intended to pass on to Tenant and
reimburse Landlord for Tenant’s Proportionate Share of all costs and expenses of
the nature described in Paragraph 3 of this Lease.
3. ADDITIONAL RENT
(a) If Operating Expenses (defined below) for the Project for any calendar year
during the Lease Term exceed Base Operating Expenses (defined below), Tenant
shall pay to Landlord as additional rent (“Additional Rent”) an amount equal to
Tenant’s Proportionate Share (defined below) of such excess. Notwithstanding the
foregoing, in no event shall Tenant be obligated to pay Tenant’s Proportionate
Share of any increases in Operating Expenses during the first twelve
(12) calendar months of the Initial Term; accordingly, Tenant’s obligation to
pay Tenant’s Proportionate Share of any increases in Operating Expenses shall
commence on the first day of the thirteenth (13th) full calendar month of the
Initial Term.
(b) “Tenant’s Proportionate Share” is, subject to the provisions of Paragraph
18, the percentage number described in Item 4 of the Basic Lease Provisions.
Tenant’s Proportionate Share represents, subject to the provisions of
Paragraph 18, a fraction, the numerator of which is the number of square feet of
Rentable Area in the Premises and the denominator of which is the number of
square feet of Rentable Area for lease to third parties in the Project, as
determined by Landlord pursuant to Paragraph 18.

 

-7-

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

 

(c) “Base Operating Expenses” means all Operating Expenses incurred or payable
by Landlord during the calendar year specified as Tenant’s Base Year in Item 8
of the Basic Lease Provisions.
(d) “Operating Expenses” means all costs, expenses and obligations incurred or
payable by Landlord in connection with the operation, ownership, management,
repair or maintenance of the Building and the Project during or allocable to the
Lease Term, including without limitation, the following:
(i) Any form of assessment, license fee, license tax, business license fee,
commercial rental tax, levy, charge, improvement bond, tax, water and sewer
rents and charges, utilities and communications taxes and charges or similar or
dissimilar imposition imposed by any authority having the direct power to tax,
including any city, county, state or federal government, or any school,
agricultural, lighting, drainage or other improvement or special assessment
district thereof, or any other governmental charge, general and special,
ordinary and extraordinary, foreseen and unforeseen, which may be assessed
against any legal or equitable interest of Landlord in the Premises, Building,
Common Areas or Project (collectively, (“Taxes”). Taxes shall also include,
without limitation:
(A) any Tax on Landlord’s “right” to rent or “right” to other income from the
Premises or as against Landlord’s business of leasing the Premises;
(B) any assessment, tax, fee, levy or charge in substitution, partially or
totally, of any assessment, tax, fee, levy or charge previously included within
the definition of real property tax, it being acknowledged by Tenant and
Landlord that Proposition 13 was adopted by the voters of the State of
California in the June, 1978 election and that assessments, taxes, fees, levies
and charges may be imposed by governmental agencies for such services as fire
protection, street, sidewalk and road maintenance, refuse removal and for other
governmental services formerly provided without charge to property owners or
occupants. It is the intention of Tenant and Landlord that all such new and
increased assessments, taxes, fees, levies and charges be included within the
definition of “Taxes” for the purposes of this Lease;
(C) any assessment, tax, fee, levy or charge allocable to or measured by the
area of the Premises or other premises in the Building or the rent payable by
Tenant hereunder or other tenants of the Project, including, without limitation,
any gross receipts tax or excise tax levied by state, city or federal
government, or any political subdivision thereof, with respect to the receipt of
such rent, or upon or with respect to the possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises, or any portion thereof but not on Landlord’s other operations;
(D) any Tax upon this transaction or any document to which Tenant is a party,
creating or transferring an interest or an estate in the Premises;
(E) any assessment, tax, fee, levy or charge by any governmental agency related
to any transportation plan, fund or system (including assessment districts)
instituted within the geographic area of which the Project is a part; and/or
(F) any costs and expenses (including, without limitation, reasonable attorneys’
fees) incurred in attempting to protest, reduce or minimize Taxes.
(ii) The cost of services and utilities (including taxes and other charges
incurred in connection therewith) provided to the Premises, the Building or the
Project (excluding the cost of electricity consumed in the Premises and the
premises of other tenants of the Building and the Other Buildings because Tenant
is separately paying for the cost of electricity consumed in the Premises
pursuant to Paragraph 7(a) below), including, without limitation, water, power,
gas, sewer, waste disposal, telephone and cable television facilities, fuel,
supplies, equipment, tools, materials, service contracts, janitorial services,
waste and refuse disposal, window cleaning, maintenance and repair of sidewalks
and Building

 

-8-

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

 

exterior and services areas, gardening and landscaping; insurance, including,
but not limited to, public liability, fire, property damage, wind, hurricane,
earthquake, terrorism, flood, rental loss, rent continuation, boiler machinery,
business interruption, contractual indemnification and All Risk or Causes of
Loss — Special Form coverage insurance for up to the full replacement cost of
the Project and such other insurance as is customarily carried by operators of
other similar class office buildings in the city in which the Project is
located, to the extent carried by Landlord in its discretion, and the deductible
portion of any insured loss otherwise covered by such insurance; the pro rata
cost of compensation, including employment, welfare and social security taxes,
paid vacation days, disability, pension, medical and other fringe benefits of
all persons (including independent contractors) who perform services connected
with the operation, maintenance, repair or replacement of the Project in
proportion to the services attributable to the Project; any association
assessments, costs, dues and/or expenses relating to the Project, personal
property taxes on and maintenance and repair of equipment and other personal
property used in connection with the operation, maintenance or repair of the
Project; such reasonable auditors’ fees and legal fees as are incurred in
connection with the operation, the cost of maintenance or repair of the Project;
a commercially reasonable property management fee (which fee may be imputed if
Landlord has internalized management or otherwise acts as its own property
manager), such annual fee shall not exceed five percent (5%) of the annual base
rent due to Landlord from tenants of the Project; the maintenance of any
easements or ground leases benefiting the Project, whether by Landlord or by an
independent contractor; a reasonable allowance for depreciation of personal
property used in the operation, maintenance or repair of the Project; license,
permit and reasonable inspection fees; all costs and expenses required by any
governmental or quasi-governmental authority or by applicable law, for any
reason, including capital improvements, and the cost of any capital improvements
made to the Project by Landlord that improve life-safety systems or reduce
operating expenses and the costs to replace items which Landlord would be
obligated to maintain under the Lease (the cost of any capital improvements to
be amortized over the useful life thereof, as Landlord shall reasonably
determine under generally accepted real estate accounting principles, together
with interest thereon as being the interest rate then being charged for
long-term mortgages by institutional lenders on like properties within the
locality in which the Project is located); the cost of air conditioning,
heating, ventilating, plumbing, elevator maintenance and repair (to include the
replacement of components) and other mechanical and electrical systems repair
and maintenance; sign maintenance and repair; and Common Area (defined below)
repair, resurfacing, operation and maintenance; and the cost of providing
security services, if any, deemed appropriate by Landlord.
The following items shall be excluded from Operating Expenses:
(A) leasing commissions, attorneys’ fees, costs and disbursements and other
expenses incurred in connection with leasing, renovating or improving vacant
space in the Project for tenants or prospective tenants of the Project;
(B) costs (including permit, license and inspection fees) incurred in renovating
or otherwise improving or decorating, painting or redecorating space for tenants
or vacant space;
(C) Landlord’s costs of any services sold to tenants for which Landlord is
entitled to be reimbursed by such tenants as an additional charge or rental over
and above the Base Rent and Operating Expenses payable under the lease with such
tenant or other occupant;
(D) any depreciation or amortization of the Project except as expressly
permitted herein;
(E) costs incurred due to gross negligence, willful misconduct, a breach of any
of the terms or representation and warranty in this Lease, a violation of Law
(defined below) by Landlord relating to the Project;
(F) interest on debt or amortization payments on any mortgages or deeds of trust
or any other debt for borrowed money;

 

-9-

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

 

(G) all items and services for which Tenant or other tenants reimburse Landlord
outside of Operating Expenses;
(H) repairs or other work occasioned by fire, windstorm or other work paid for
through insurance or condemnation proceeds (excluding any deductible);
(I) legal expenses incurred for (i) negotiating lease terms for prospective
tenants, (ii) negotiating termination or extension of leases with existing
tenants, (iii) proceedings against any other specific tenant relating solely to
the collection of rent or other sums due to Landlord from such tenant, or
(iv) the development and/or construction of the Project; and
(J) repairs resulting from any defect in the original design or construction of
the Project.
(K) Costs incurred in advertising and promotional activities for the Project.
(L) The management fee, overhead and(or) profit increments paid to subsidiaries
or affiliates of Landlord for service on or to the Project, to the extent that
the costs of such services exceed reasonable costs for such services rendered by
persons or entities of similar skill, competence and experience.
(M) Any expenses for repairs or maintenance which are reimbursed through
warranties or service contracts.
(N) Any expenses paid by any tenant directly to third parties, or as to which
Landlord is otherwise reimbursed by any third party, other tenants or insurance
proceeds.
(O) Any taxes on the income of the Landlord.
(e) Operating Expenses for any calendar year during which actual occupancy of
the Project is less than one hundred percent (100%) of the Rentable Area of the
Project shall be appropriately adjusted to reflect one hundred percent (100%)
occupancy of the existing Rentable Area of the Project during such period. In
determining Operating Expenses, if any services or utilities are separately
charged to tenants of the Project or others, Operating Expenses shall be
adjusted by Landlord to reflect the amount of expense which would have been
incurred for such services or utilities on a full time basis for normal Project
operating hours. Operating Expenses for the Tenant’s Base Year for Operating
Expenses (as defined in Item 8 of the Basic Lease Provisions) shall not include
Operating Expenses attributable to temporary market-wide labor-rate increases
and/or utility rate increases due to extraordinary circumstances, including, but
not limited to Force Majeure, conservation surcharges, boycotts, embargoes, or
other shortages. In the event (i) the Commencement Date shall be a date other
than January 1, (ii) the date fixed for the expiration of the Lease Term shall
be a date other than December 31, (iii) of any early termination of this Lease,
or (iv) of any increase or decrease in the size of the Premises, then in each
such event, an appropriate adjustment in the application of this Paragraph 3
shall, subject to the provisions of this Lease, be made to reflect such event on
a basis determined by Landlord to be consistent with the principles underlying
the provisions of this Paragraph 3. In addition, Landlord shall have the right,
from time to time, to equitably and reasonably allocate and prorate some or all
of the Operating Expenses among different tenants and/or different buildings of
the Project and/or on a building-by-building basis (the “Cost Pools”), adjusting
Tenant’s Proportionate Share as to each of the separately allocated costs based
on the ratio of the Rentable Area of the Premises to the Rentable Area of all of
the premises to which such costs are allocated. Such Cost Pools may include,
without limitation, the office space tenants and retail space tenants of the
buildings in the Project.
(f) Prior to the commencement of each calendar year of the Lease Term following
the Commencement Date, Landlord shall have the right to give to Tenant a written
estimate of Tenant’s Proportionate Share of excess Operating Expenses, if any,
for the Project for the ensuing year. Tenant shall pay such estimated amount to
Landlord in equal monthly installments, in advance on the first day of each
month. Within one hundred twenty (120) days after the end of each calendar year,
Landlord shall furnish Tenant a statement indicating in

 

-10-

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

 

reasonable detail the excess of Operating Expenses over Base Operating Expenses
for such period and the parties shall, within thirty (30) days thereafter, make
any payment or allowance necessary to adjust Tenant’s estimated payments to
Tenant’s actual share of such excess as indicated by such annual statement. Any
payment due Landlord shall be payable by Tenant on demand from Landlord. Any
amount due Tenant shall be credited against installments next becoming due under
this Paragraph 3(f) or refunded to Tenant, if requested by Tenant.
(g) Tenant shall pay ten (10) days before delinquency, all taxes and assessments
(i) levied against any personal property, Alterations, tenant improvements or
trade fixtures of Tenant in or about the Premises, (ii) based upon this Lease or
any document to which Tenant is a party creating or transferring an interest in
this Lease or an estate in all or any portion of the Premises, and (iii) levied
for any business, professional, or occupational license fees. If any such taxes
or assessments are levied against Landlord or Landlord’s property or if the
assessed value of the Project is increased by the inclusion therein of a value
placed upon such personal property or trade fixtures, Tenant shall upon demand
reimburse Landlord for the taxes and assessments so levied against Landlord, or
such taxes, levies and assessments resulting from such increase in assessed
value. To the extent that any such taxes are not separately assessed or billed
to Tenant, Tenant shall pay the amount thereof as invoiced to Tenant by
Landlord. In the event that the Project is owned by an entity the property of
which is exempt from taxation pursuant to the California Revenue and Taxation
Code, Tenant’s possessory interest may be subject to property taxation pursuant
to Section 107.6 of the California Revenue and Taxation Code and to the payment
of property taxes levied on that interest. The full cash value, as defined in
Sections 110 and 110.1 of the California Revenue and Taxation Code, of the
possessory interest, upon which property taxes will be based, shall equal the
greater of (A) the full cash value of the possessory interest or (B) if Tenant
has leased less than all of the Project, Tenant’s allocable share of the full
cash value of the Project that would have been enrolled if the Project had been
subject to property tax upon acquisition by Landlord. The full cash value as
provided for pursuant to either (A) or (B) of the preceding sentence shall
reflect the anticipated term of possession if, on the lien date described in
Section 2192 of the California Revenue and Taxation Code, that term is expected
to terminate prior to the end of the next succeeding fiscal year. Tenant’s
allocable share shall, subject to the preceding sentence, be the Rentable Area
of the Premises divided by the Rentable Area of the Project.
(h) Any delay or failure of Landlord in (i) delivering any estimate or statement
described in this Paragraph 3, or (ii) computing or billing Tenant’s
Proportionate Share of excess Operating Expenses shall not constitute a waiver
of its right to require an increase in Rent, or in any way impair the continuing
obligations of Tenant under this Paragraph 3. In the event of any dispute as to
any Additional Rent due under this Paragraph 3, Tenant, an officer of Tenant or
Tenant’s certified public accountant (or in the event Tenant hires or employs an
independent party to perform such audit (who shall in no event be compensated or
paid for such audit on a contingency basis), Tenant shall provide Landlord with
a copy of the engagement letter) shall have the right after reasonable notice
and at reasonable times to inspect but not more than once per calendar year,
Landlord’s accounting records at Landlord’s accounting office. If, after such
inspection, Tenant still disputes such Additional Rent, upon Tenant’s written
request therefor, a certification as to the proper amount of Operating Expenses
and the amount due to or payable by Tenant shall be made by an independent
certified public accountant mutually agreed to by Landlord and Tenant. If
Landlord and Tenant cannot mutually agree to an independent certified public
accountant, then the parties agree that Landlord shall choose an independent
certified public accountant to conduct the certification as to the proper amount
of Tenant’s Proportionate Share of Operating Expenses due by Tenant for the
period in question; provided, however, such certified public accountant shall
not be the accountant who conducted Landlord’s initial calculation of Operating
Expenses to which Tenant is now objecting. Such certification shall be final and
conclusive as to all parties. If the certification reflects that Tenant has
overpaid Tenant’s Proportionate Share of Operating Expenses for the period in
question, then Landlord shall credit such excess to Tenant’s next payment of
Operating Expenses or, at the request of Tenant, promptly refund such excess to
Tenant and conversely, if Tenant has underpaid Tenant’s Proportionate Share of
Operating Expenses, Tenant shall promptly pay such additional Operating Expenses
to Landlord. Tenant agrees to pay the cost of such certification and the
investigation with respect thereto unless it is determined that Landlord’s
original statement was in error in Landlord’s favor by more than five percent
(5%). Tenant waives the right to dispute any matter relating to the calculation
of Operating Expenses or Additional Rent under this Paragraph 3 if any claim or
dispute is not asserted in writing to Landlord within one hundred eighty
(180) days after delivery to Tenant of the original billing statement with
respect thereto. Notwithstanding the foregoing, Tenant shall maintain strict
confidentiality of all of Landlord’s accounting records and shall not disclose
the same to any other person or entity except for Tenant’s professional advisory
representatives (such as Tenant’s employees, accountants, advisors, attorneys
and consultants) with a need to know such accounting information, who agree to
similarly maintain the confidentiality of such financial information.

 

-11-

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

 

(i) Even though the Lease Term has expired and Tenant has vacated the Premises,
when the final determination is made of Tenant’s Proportionate Share of excess
Operating Expenses for the year in which this Lease terminates, Tenant shall
immediately pay any increase due over the estimated Operating Expenses paid, and
conversely, any overpayment made by Tenant shall be promptly refunded to Tenant
by Landlord.
(j) The Base Rent, Additional Rent, late fees, and other amounts required to be
paid by Tenant to Landlord hereunder (including the excess Operating Expenses)
are sometimes collectively referred to as, and shall constitute, “Rent”.
(k) The parties acknowledge that the Building is a part of a multi-building
project, and that certain costs and expenses incurred in connection with the
Project (i.e., the Operating Expenses) should be shared among the Building
and/or the other buildings located at 10945 and 10955 Vista Sorrento Parkway
(the “Other Buildings”), while certain other costs and expenses which are solely
attributable to the Building and the Other Buildings, as applicable, shall be
allocated directly to the Building and the Other Buildings, respectively.
Accordingly, as set forth in Paragraph 3(a) and 3(b) above, Operating Expenses
are determined annually for the Project as a whole, and include an equitable
allocation to the Project of certain costs and expenses (including tax expenses,
assessments, charges and impositions) incurred in connection with the Other
Buildings, and a portion of the Operating Expenses, which portion shall be
determined by Landlord on an equitable basis, shall be allocated to the tenants
of the Building (as opposed to the Other Buildings), and such portion so
allocated shall be the amount of Operating Expenses payable with respect to the
Building upon which Tenant’s Proportionate Share shall be calculated. Such
portion of the Operating Expenses allocated to the Building shall include all
Operating Expenses which are attributable solely to the Building, and an
equitable portion of the Operating Expenses attributable to the Project and an
equitable portion of the Operating Expenses to be shared with the Other
Buildings. With respect to Taxes, only, the improvements component of Taxes for
the Building and the Other Buildings shall be calculated for and allocated
separately to each such building, while the land component of Taxes for the
Project shall be aggregated and then allocated by Landlord to the Building and
Other Buildings pro-rata based upon the ratio of the rentable square feet of
such particular building to the total rentable square feet of the Building and
the Other Buildings (or allocated upon such other equitable basis as Landlord
may subsequently adopt from time to time to equitably reflect the particular
building’s share of such Taxes for the land components of the Project).
4. IMPROVEMENTS AND ALTERATIONS
(a) Landlord shall deliver the Premises to Tenant, and Tenant agrees to accept
the Premises from Landlord in its existing “AS-IS”, “WHERE-IS” and “WITH ALL
FAULTS” condition, and Landlord shall have no obligation to refurbish or
otherwise improve the Premises throughout the Lease Term; provided, however, and
notwithstanding the foregoing to the contrary, Landlord’s sole construction
obligation under this Lease is set forth in the Work Letter attached hereto as
Exhibit B.
(b) Any alterations, additions, or improvements made by or on behalf of Tenant
to the Premises (“Alterations”) in excess of $10,000 in cost shall be subject to
Landlord’s prior written consent. The foregoing notwithstanding, the Landlord
hereby consents to: (i) any cosmetic alterations (such as painting, carpeting or
installation of wall paper) made from time to time by Tenant in and to the
Premises; and (ii) any security systems installed by Tenant in the Premises.
Landlord’s consent shall not be unreasonably withheld, conditioned or delayed
with respect to proposed Alterations that (i) comply with all applicable laws,
ordinances, rules and regulations; (ii) are compatible with the Building and its
mechanical, electrical, HVAC and life safety systems; (iii) will not interfere
with the use and occupancy of any other portion of the Building by any other
tenant or their invitees; (iv) do not affect the structural portions of the
Building or require capital alterations to any other portions of the Building
and/or the Project; and, (v) do not and will not, whether alone or taken
together with other improvements, require the construction of any other
improvements or alterations within the Building. Tenant shall cause, at its sole
cost and expense, all Alterations to comply with insurance requirements and with
Laws and shall construct, at its sole cost and expense, any alteration or
modification required by Laws as a result of any Alterations. All Alterations
shall be constructed at Tenant’s sole cost and expense, in a first class and
good and workmanlike manner by contractors reasonably acceptable to Landlord and
only good grades of materials shall be used. All plans and specifications for

 

-12-

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

 

any Alterations in excess of $10,000 in cost shall be submitted to Landlord for
its approval. Landlord may monitor construction of the Alterations in excess of
$10,000 in cost and Tenant shall reimburse Landlord for the reasonable costs
incurred by Landlord in monitoring such construction, provided that Landlord
provides Tenant with a reasonable estimation of the costs to be incurred in
advance. Landlord’s right to review plans and specifications and to monitor
construction shall be solely for its own benefit, and Landlord shall have no
duty to see that such plans and specifications or construction comply with
applicable laws, codes, rules and regulations. Landlord may also require that
all life safety related work and all mechanical, electrical, plumbing and roof
related work be performed by contractors designated by Landlord. Landlord shall
have the right, in its sole discretion, to instruct Tenant to remove those
improvements or Alterations from the Premises which (i) were not approved in
advance by Landlord, (ii) were not built in conformance with the plans and
specifications approved by Landlord, or (iii) Landlord specified during its
review of plans and specifications for Alterations would need to be removed by
Tenant upon the expiration of this Lease (all of (i) through (iii) being
“Removable Alterations”). Except for Removable Alterations, Tenant shall not be
obligated to remove Alterations at the expiration of this Lease. If upon the
termination of this Lease Landlord requires Tenant to remove any Removable
Alterations from the Premises, then Tenant, at Tenant’s sole cost and expense,
shall promptly remove such Removable Alterations and Tenant shall repair and
restore the Premises to its original condition as of the Commencement Date,
except for reasonable wear and tear and any Alterations that are permitted to
remain on the Premises. Any Alterations remaining in the Premises following the
expiration of the Lease Term or following the surrender of the Premises from
Tenant to Landlord, shall become the property of Landlord unless Landlord
notifies Tenant otherwise. In connection with the Alterations, Tenant shall
provide Landlord with the identities and mailing addresses of all persons
performing work or supplying materials, prior to beginning such construction,
and Landlord may post on and about the Premises notices of non-responsibility
pursuant to applicable law. In connection with the Alterations, Tenant shall
assure payment for the completion of all work free and clear of liens and shall
provide certificates of insurance for worker’s compensation and other coverage
in amounts and from an insurance company reasonably satisfactory to Landlord
protecting Landlord against liability for bodily injury or property damage
during construction. Upon completion of any Alterations and upon Landlord’s
reasonable request, Tenant shall deliver to Landlord sworn statements setting
forth the names of all contractors and subcontractors who did work on the
Alterations and final lien waivers from all such contractors and subcontractors.
Additionally, upon completion of any Alteration, Tenant shall provide Landlord,
at Tenant’s expense, with a complete set of plans in reproducible form and
specifications reflecting the actual conditions of the Alterations, together
with a copy of such plans on diskette in the AutoCAD format or such other format
as may then be in common use for computer assisted design purposes. Tenant shall
pay to Landlord, within ten (10) business days after completion of any
Alterations, the actual, reasonable costs incurred by Landlord for services
rendered by Landlord’s management personnel and engineers to coordinate and/or
supervise any of the Alterations to the extent such services are provided in
excess of or after the normal on-site hours of such engineers and management
personnel, provided that Landlord has provided Tenant with a reasonable
estimation of such costs in advance.
(c) Tenant shall keep the Premises, the Building and the Project free from any
and all liens arising out of any Alterations, work performed, materials
furnished, or obligations incurred by or for Tenant. If Tenant has not, within
ten (10) days following the imposition of any such lien, cause the same to be
released of record by payment or posting of a bond in a form and issued by a
surety acceptable to Landlord, Landlord shall have the right, but not the
obligation, to cause such lien to be released by such means as it shall deem
proper (including payment of or defense against the claim giving rise to such
lien); in such case, Tenant shall reimburse Landlord for all amounts so paid by
Landlord in connection therewith, together with all of Landlord’s costs and
expenses, with interest thereon at the Default Rate (defined below) and Tenant
shall indemnify and defend each and all of the Landlord Indemnitees (defined
below) against any damages, losses or costs arising out of any such claim.
Tenant’s indemnification of Landlord contained in this Paragraph shall survive
the expiration or earlier termination of this Lease. Such rights of Landlord
shall be in addition to all other remedies provided herein or by law.
(d) NOTICE IS HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY LABOR,
SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT, OR TO ANYONE
HOLDING THE PREMISES THROUGH OR UNDER TENANT, AND THAT NO MECHANICS’ OR OTHER
LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE
INTEREST OF LANDLORD IN THE PREMISES, EXCEPT FOR TENANT IMPROVEMENTS CONDUCTED
BY THE LANDLORD PURSUANT TO THE WORK LETTER ATTACHED AS EXHIBIT B HERETO.

 

-13-

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

 

5. REPAIRS
(a) Landlord’s obligation with respect to repair as part of Basic Services shall
be limited to (i) the structural portions of the Building, (ii) the exterior
walls of the Building, including, without limitation, glass and glazing,
(iii) the roof, (iv) heating, ventilation, air conditioning, mechanical,
electrical, plumbing and life safety systems, and (v) Common Areas. Landlord
shall not be deemed to have breached any obligation with respect to the
condition of any part of the Project unless Tenant has given to Landlord written
notice of any required repair and Landlord has not made such repair within a
reasonable time following the receipt by Landlord of such notice. The foregoing
notwithstanding: (i) Landlord shall not be required to repair damage to any of
the foregoing to the extent caused by the acts or omissions of Tenant or it
agents, employees or contractors, except to the extent covered by insurance
carried by Landlord; and (ii) the obligations of Landlord pertaining to damage
or destruction by casualty not caused by the acts or omissions of Tenant or its
agents or employees shall be governed by the provisions of Paragraph 9. Landlord
shall have the right but not the obligation to undertake work of repair that
Tenant is required to perform under this Lease and that Tenant fails or refuses
to perform in a timely and efficient manner. All reasonable costs incurred by
Landlord in performing any such repair for the account of Tenant shall be repaid
by Tenant to Landlord upon demand, together with an administration fee equal to
five percent (5%) of such costs. Except as expressly provided in Paragraph 9 of
this Lease, there shall be no abatement of Rent and no liability of Landlord by
reason of any injury to or interference with Tenant’s business arising from the
making of any repairs, alterations or improvements in or to any portion of the
Premises, the Building or the Project. Tenant waives the right to make repairs
at Landlord’s expense under any law, statute or ordinance now or hereafter in
effect (including the provisions of California Civil Code Section 1942 and any
successive sections or statutes of a similar nature).
(b) Tenant, at its expense, (i) shall keep the Premises and all fixtures and
personal property contained therein in a safe, clean and neat condition, and
(ii) shall bear the cost of maintenance and repair, by contractors selected by
Landlord, of all facilities which are not expressly required to be maintained or
repaired by Landlord and which are located in the Premises, including, without
limitation, lavatory, shower, toilet, wash basin and kitchen facilities, and
supplemental heating and air conditioning systems (including all plumbing
connected to said facilities or systems installed by or on behalf of Tenant or
existing in the Premises at the time of Landlord’s delivery of the Premises to
Tenant). Tenant shall make all repairs to the Premises not required to be made
by Landlord under subparagraph 5(a) above with replacements of any materials to
be made by use of materials of equal or better quality. Tenant shall do all
decorating, remodeling, alteration and painting required by Tenant during the
Lease Term. Tenant shall pay for the cost of any repairs to the Premises, the
Building or the Project made necessary by any negligence or willful misconduct
of Tenant or any of its assignees, subtenants, employees or their respective
agents, representatives, contractors, or other persons permitted in or invited
to the Premises or the Project by Tenant. If Tenant fails to make such repairs
or replacements within fifteen (15) business days after written notice from
Landlord, Landlord may at its option make such repairs or replacements, and
Tenant shall upon demand pay Landlord for the cost thereof, together with an
administration fee equal to five percent (5%) of such costs.
(c) Upon the expiration or earlier termination of this Lease, Tenant shall
surrender the Premises in a safe, clean and neat condition, normal wear and tear
excepted. Except as otherwise set forth in Paragraph 4(b) of this Lease, Tenant
shall remove from the Premises all trade fixtures, furnishings and other
personal property of Tenant and all computer and phone cabling and wiring
installed by or on behalf of Tenant, shall repair all damage caused by such
removal, and shall restore the Premises to its original condition, reasonable
wear and tear excepted. In addition to all other rights Landlord may have, in
the event Tenant does not so remove any such fixtures, furnishings or personal
property, Tenant shall be deemed to have abandoned the same, in which case
Landlord may store or dispose of the same at Tenant’s expense, appropriate the
same for itself, and/or sell the same in its discretion.
6. USE OF PREMISES
(a) Tenant shall use the Premises only for general office uses and shall not use
the Premises or permit the Premises to be used for any other purpose. Landlord
shall have the right to deny its consent to any change in the permitted use of
the Premises in its sole and absolute discretion.

 

-14-

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

 

(b) Tenant shall not at any time use or occupy the Premises, or permit any act
or omission in or about the Premises in violation of any law, statute, ordinance
or any governmental rule, regulation or order including without limitation the
Americans with Disabilities Act of 1990 as amended, or of any certificates of
occupancy issued for or restrictive covenants, conditions or restrictions
pertaining to the Building or the Premises (collectively, “Law” or “Laws”) and
Tenant shall, upon written notice from Landlord, discontinue any use of the
Premises which is declared by any governmental authority to be a violation of
Law. If any Law shall, by reason of the nature of Tenant’s use or occupancy of
the Premises, impose any duty upon Tenant or Landlord with respect to
(i) modification or other maintenance of the Premises, the Building or the
Project, or (ii) the use, Alteration or occupancy thereof, Tenant shall comply
with such Law at Tenant’s sole cost and expense. This Lease shall be subject to
and Tenant shall comply with all financing documents encumbering the Building or
the Project and all covenants, conditions and restrictions affecting the
Premises, the Building or the Project, including, but not limited to, Tenant’s
execution of any subordination agreements requested by a mortgagee (which for
purposes of this Lease includes any lender or grantee under a deed of trust) of
the Premises, the Building or the Project and of which Landlord has notified
Tenant.
(c) Tenant shall not at any time use or occupy the Premises in violation of the
certificates of occupancy issued for or restrictive covenants pertaining to the
Building or the Premises, and in the event that any architectural control
committee or department of the state or the city or county in which the Project
is located shall at any time contend or declare that the Premises are used or
occupied in violation of such certificate or certificates of occupancy or
restrictive covenants, Tenant shall, upon five (5) business days’ notice from
Landlord or any such governmental agency, immediately discontinue such use of
the Premises (and otherwise remedy such violation). The failure by Tenant to
discontinue such use shall be considered a default under this Lease and Landlord
shall have the right to exercise any and all rights and remedies provided herein
or by Law. Any statement in this Lease of the nature of the business to be
conducted by Tenant in the Premises shall not be deemed or construed to
constitute a representation or guaranty by Landlord that such business is or
will continue to be lawful or permissible under any certificate of occupancy
issued for the Building or the Premises, or otherwise permitted by Law.
(d) Tenant shall not do or permit to be done anything which may invalidate or
increase the cost of any fire, All Risk, Causes of Loss — Special Form or other
insurance policy covering the Building, the Project and/or property located
therein and shall comply with all rules, orders, regulations and requirements of
the appropriate fire codes and ordinances or any other organization performing a
similar function. In addition to all other remedies of Landlord, Landlord may
require Tenant, promptly upon demand, to reimburse Landlord for the full amount
of any additional premiums charged for such policy or policies by reason of
Tenant’s failure to comply with the provisions of this Paragraph 6.
(e) Tenant shall not in any way interfere with the rights or quiet enjoyment of
other tenants or occupants of the Premises, the Building or the Project. Tenant
shall not use or allow the Premises to be used for any improper, immoral,
unlawful or objectionable purpose, nor shall Tenant cause, maintain, or permit
any nuisance in, on or about the Premises, the Building or the Project. Tenant
shall not place weight upon any portion of the Premises exceeding the structural
floor load (per square foot of area) which such area was designated (and is
permitted by Law) to carry or otherwise use any Building system in excess of its
capacity or in any other manner which may damage such system or the Building.
Tenant shall not create within the Premises a working environment with a density
of greater than the lesser of (i) five (5) persons per 1,000 square feet of
Rentable Area, or (ii) the maximum density permitted by Law. Business machines
and mechanical equipment shall be placed and maintained by Tenant, at Tenant’s
expense, in locations and in settings sufficient in Landlord’s reasonable
judgment to absorb and prevent vibration, noise and annoyance. Tenant shall not
commit or suffer to be committed any waste in, on, upon or about the Premises,
the Building or the Project.
(f) Tenant shall take all reasonable steps necessary to adequately secure the
Premises from unlawful intrusion, theft, fire and other hazards, and shall keep
and maintain any and all security devices in or on the Premises in good working
order, including, but not limited to, exterior door locks for the Premises and
smoke detectors and burglar alarms located within the Premises and shall
cooperate with Landlord and other tenants in the Project with respect to access
control and other safety matters. IN ALL EVENTS, EXCEPT TO THE EXTENT OF THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD, LANDLORD SHALL NOT BE LIABLE
TO TENANT, AND TENANT HEREBY WAIVES ANY CLAIM AGAINST LANDLORD, FOR (I) ANY
UNAUTHORIZED OR CRIMINAL ENTRY OF THIRD PARTIES INTO THE PREMISES, THE BUILDING
OR THE PROJECT, (II) ANY INJURY OR DEATH TO PERSONS RESULTING FROM ANY
UNAUTHORIZED OR CRIMINAL ACTS OF THIRD PARTIES, OR (III) ANY LOSS OF PROPERTY IN
AND

 

-15-

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

 

ABOUT THE PREMISES, THE BUILDING OR THE PROJECT, BY OR FROM ANY UNAUTHORIZED OR
CRIMINAL ACTS OF THIRD PARTIES. LANDLORD SHALL NOT BE RESPONSIBLE OR LIABLE IN
ANY MANNER FOR FAILURE OF ANY ACCESS PERSONNEL, SERVICES, PROCEDURES OR
EQUIPMENT TO PREVENT, CONTROL, OR APPREHEND ANYONE SUSPECTED OF CAUSING PERSONAL
INJURY OR DAMAGE IN, ON OR AROUND THE PROJECT. Tenant acknowledges that it has
neither received nor relied upon any representation or warranty made by or on
behalf of Landlord with respect to the safety or security of the Premises or the
Project or any part thereof or the extent or effectiveness of any security
measures or procedures now or hereafter provided by Landlord, and further
acknowledges that Tenant has made its own independent determinations with
respect to all such matters.
(g) As used herein, the term “Hazardous Material” means any (a) oil or any other
petroleum-based substance, flammable substances, explosives, radioactive
materials, hazardous wastes or substances, toxic wastes or substances or any
other wastes, materials or pollutants which (i) pose a hazard to the Project or
to persons on or about the Project or (ii) cause the Project to be in violation
of any Laws; (b) asbestos in any form, urea formaldehyde foam insulation,
transformers or other equipment that contain dielectric fluid containing levels
of polychlorinated biphenyls, or radon gas; (c) chemical, material or substance
defined as or included in the definition of “hazardous substances”, “hazardous
wastes”, “hazardous materials”, “extremely hazardous waste”, “restricted
hazardous waste”, or “toxic substances” or words of similar import under any
applicable local, state or federal law or under the regulations adopted or
publications promulgated pursuant thereto, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. §9601, et seq.; the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. §1801, et seq.; the Federal Water Pollution Control Act,
as amended, 33 U.S.C. §1251, et seq.; the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. §6901, et seq.; the Safe Drinking Water Act, as
amended, 42 U.S.C. §300, et seq.; the Toxic Substances Control Act, as amended,
15 U.S.C. §2601, et seq.; the Federal Hazardous Substances Control Act, as
amended, 15 U.S.C. §1261, et seq.; and the Occupational Safety and Health Act,
as amended, 29 U.S.C. §651, et seq.; Sections 25115, 25117, 25122.7, 25140,
25249.8, 25281, 25316, 25501, and 25316 of the California Health and Safety
Code; (d) other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority or may or could
pose a hazard to the health and safety of the occupants of the Project or the
owners and/or occupants of property adjacent to or surrounding the Project, or
any other Person coming upon the Project or adjacent property; and (e) other
chemicals, materials or substances which may or could pose a hazard to the
environment. The term “Permitted Hazardous Materials” shall mean Hazardous
Materials which are contained in ordinary office supplies of a type and in
quantities typically used in the ordinary course of business within executive
offices of similar size in the comparable office buildings, but only if and to
the extent that such supplies are transported, stored and used in full
compliance with all applicable laws, ordinances, orders, rules and regulations
and otherwise in a safe and prudent manner. Hazardous Materials which are
contained in ordinary office supplies but which are transported, stored and used
in a manner which is not in full compliance with all applicable laws,
ordinances, orders, rules and regulations or which is not in any respect safe
and prudent shall not be deemed to be “Permitted Hazardous Materials” for the
purposes of this Lease.
(i) Tenant, its assignees, subtenants, and their respective agents, servants,
employees, representatives and contractors (collectively referred to herein as
“Tenant Affiliates”) shall not cause or permit any Hazardous Material to be
brought upon, kept or used in or about the Premises by Tenant or by Tenant
Affiliates without the prior written consent of Landlord (which may be granted,
conditioned or withheld in the sole discretion of Landlord), save and except
only for Permitted Hazardous Materials, which Tenant or Tenant Affiliates may
bring, store and use in reasonable quantities for their intended use in the
Premises, but only in full compliance with all applicable laws, ordinances,
orders, rules and regulations. On or before the expiration or earlier
termination of this Lease, Tenant shall remove from the Premises all Hazardous
Materials (including, without limitation, Permitted Hazardous Materials),
regardless of whether such Hazardous Materials are present in concentrations
which require removal under applicable laws, except to the extent that such
Hazardous Materials were present in the Premises as of the Commencement Date and
were not brought onto the Premises by Tenant or Tenant Affiliates.
(ii) Tenant agrees to indemnify, defend and hold Landlord and its Affiliates
(defined below) harmless for, from and against any and all claims, actions,
administrative proceedings (including informal proceedings), judgments, damages,
punitive damages, penalties, fines, costs, liabilities, interest or losses,
including reasonable attorneys’ fees and expenses, court costs, consultant fees,
and expert fees, together with all other costs and expenses of any kind or
nature that arise during or after the Lease Term directly or indirectly from or
in connection with the presence, suspected presence, or release of any Hazardous
Material in or into the air, soil, surface water or groundwater at, on, about,
under or within the Premises, or any portion thereof caused by Tenant or Tenant
Affiliates.

 

-16-

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

 

(iii) In the event any investigation or monitoring of site conditions or any
clean-up, containment, restoration, removal or other remedial work
(collectively, the “Remedial Work”) is required under any applicable federal,
state or local Law, by any judicial order, or by any governmental entity as the
result of operations or activities upon, or any use or occupancy of any portion
of the Premises by Tenant or Tenant Affiliates, Landlord shall perform or cause
to be performed the Remedial Work in compliance with such Law or order at
Tenant’s sole cost and expense. All Remedial Work shall be performed by one or
more contractors, selected and approved by Landlord, and under the supervision
of a consulting engineer, selected by Tenant and approved in advance in writing
by Landlord. All costs and expenses of such Remedial Work shall be paid by
Tenant, including, without limitation, the charges of such contractor(s), the
consulting engineer, and Landlord’s reasonable attorneys’ fees and costs
incurred in connection with monitoring or review of such Remedial Work.
(iv) Subject to Paragraphs 8 and 17 of this Lease, Landlord shall defend,
indemnify and hold Tenant harmless from and against any and all claims, damages,
judgments, suits, causes of action, losses, liabilities, penalties or fines
arising from Hazardous Materials which are present at the Building or elsewhere
within the Project unless caused and/or contributed to by Tenant, Tenant
Affiliates or any of its/their employees, agents, contractors, visitors and/or
invitees, or its/their use or occupancy of the Project or the Premises.
(v) Each of the covenants and agreements of Tenant set forth in this Paragraph
6(g) shall survive the expiration or earlier termination of this Lease.
7. UTILITIES AND SERVICES
(a) Landlord shall furnish, or cause to be furnished to the Premises, the
utilities and services described in this Paragraph 7(a) (collectively the “Basic
Services”):
(i) Tepid water at those points of supply provided for general use of other
tenants in the Project;
(ii) Central heat and air-conditioning in season, at such times as Landlord
normally furnishes these services to other tenants in the Project (i.e.,
currently Monday through Friday, from 7:00 a.m. to 6:00 p.m. and Saturdays from
9:00 a.m. to 12 p.m., except for Holidays), and if provided in the region,
central heat and air conditioning in season, at such temperatures and in such
amounts as are considered by Landlord to be standard or as may be permitted or
controlled by Laws, and 24 hour, 7 days a week, air-conditioning in the server
room;
(iii) Routine maintenance, repairs, structural and exterior maintenance
(including, without limitation, exterior glass and glazing), painting and
electric lighting service for all Common Areas of the Project in the manner and
to the extent deemed by Landlord to be standard, subject to the limitation
contained in Paragraph 5(a) above;
(iv) Janitorial service on a five (5) day week basis, Saturday through Thursday
nights, excluding Holidays;
(v) An electrical system to convey power delivered by public utility providers
selected by Landlord in amounts sufficient for normal office operations as
provided in similar office buildings, as reasonably determined by Landlord; and

 

-17-

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

 

(vi) Public elevator service and a freight elevator serving the floors on which
the Premises are situated, during hours designated by Landlord.

   
Tenant shall pay directly to the utility company pursuant to the utility
company’s separate meters, the cost of all electricity provided to and/or
consumed in the Premises (including normal and excess consumption).

(b) Landlord shall provide to Tenant at Tenant’s sole cost and expense (and
subject to the limitations hereinafter set forth) the following extra services
(collectively the “Extra Services”):
(i) Such extra cleaning and above-standard janitorial services requested by
Tenant, and agreed to by Landlord;
(ii) Subject to Paragraph 7(d) below, additional air conditioning and
ventilating capacity required by reason of any electrical, data processing or
other equipment or facilities or services required to support the same, in
excess of that typically provided by the Building, with Tenant also being
responsible for any electricity used to provide such service as set forth in the
lease grammatical paragraph of Paragraph 7(a) above;
(iii) Maintaining and replacing lamps, bulbs, and ballasts;
(iv) Heating, ventilation or air conditioning service provided by Landlord to
Tenant (i) during hours other than normal business hours which are Monday
through Friday 7:00 a.m. to 6:00 p.m. and Saturday 9:00 a.m. to 12:00 p.m.,
(ii) on Saturdays (after normal business hours), Sundays, or Holidays, said
heating, ventilation and air conditioning or extra service to be furnished
solely upon the prior written request of Tenant given with such advance notice
as Landlord may reasonably require and Tenant shall pay to Landlord Landlord’s
standard charge for overtime HVAC on an hourly basis (currently at the rate of
$45.00 per hour in one hour increments, as the same may change from time to
time), with Tenant also being responsible for any electricity used to provide
such service as set forth in the lease grammatical paragraph of Paragraph 7(a)
above; and
(v) Any Basic Service in amounts determined by Landlord to exceed the amounts
reasonably required to be provided above, but only if Landlord elects to provide
such additional or excess service. Tenant shall pay Landlord the cost of
providing such additional services (or an amount equal to Landlord’s reasonable
estimate of such cost, if the actual cost is not readily ascertainable), within
ten (10) days following presentation of an invoice therefore by Landlord to
Tenant. The cost chargeable to Tenant for all extra services shall constitute
Additional Rent.
(c) Tenant agrees to cooperate fully at all times with Landlord and to comply
with all regulations and requirements which Landlord may from time to time
prescribe for the use of the utilities and Basic Services described herein.
Landlord shall not be liable to Tenant for the failure of any other tenant, or
its assignees, subtenants, employees, or their respective invitees, licensees,
agents or other representatives to comply with such regulations and
requirements. The term “Holidays” shall be deemed to mean and include New Year’s
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day and, at Landlord’s discretion, other nationally, State or locally recognized
holidays.
(d) If Tenant requires utilities or services in quantities greater than or at
times other than that generally furnished by Landlord as set forth above, Tenant
shall pay to Landlord, upon receipt of a written statement therefor, Landlord’s
charge for such use. In the event that Tenant shall require additional electric
current, water or gas for use in the Premises and if, in Landlord’s judgment,
such excess requirements cannot be furnished unless additional risers, conduits,
feeders, switchboards and/or appurtenances are installed in the Building,
subject to the conditions stated below, Landlord shall proceed to install the
same at the sole cost of Tenant, payable upon demand in advance. The
installation of such facilities shall be conditioned upon Landlord’s consent,
and a determination that the installation and use thereof (i) shall be permitted
by applicable Law and insurance regulations, (ii) shall not cause permanent
damage or injury to the Building or adversely affect the value of the Building
or the Project, and (iii)

 

-18-

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

 

shall not cause or create a dangerous or hazardous condition or interfere with
or disturb other tenants in the Building. Subject to the foregoing, Landlord
shall, upon reasonable prior notice by Tenant, furnish to the Premises
additional elevator, heating, air conditioning and/or cleaning services upon
such reasonable terms and conditions as shall be determined by Landlord,
including payment of Landlord’s charge therefor. In the case of any additional
utilities or services to be provided hereunder, Landlord may require a switch
and metering system to be installed so as to measure the amount of such
additional utilities or services. The cost of installation, maintenance and
repair thereof shall be paid by Tenant upon demand. Notwithstanding the
foregoing, Landlord shall have the right to contract with any utility provider
it deems appropriate to provide utilities to the Project.
(e) Landlord shall not be liable for, and Tenant shall not be entitled to, any
damages, abatement or reduction of Rent, or other liability by reason of any
failure to furnish any services or utilities described herein for any reason
beyond Landlord’s reasonable control, including, without limitation, when caused
by accident, breakage, water leakage, flooding, repairs, Alterations or other
improvements to the Project, strikes, lockouts or other labor disturbances or
labor disputes of any character, governmental regulation, moratorium or other
governmental action, inability to obtain electricity, water or fuel. Landlord
shall be entitled to cooperate with the energy conservation efforts of
governmental agencies or utility suppliers. No such failure, stoppage or
interruption of any such utility or service shall be construed as an eviction of
Tenant, nor shall the same relieve Tenant from any obligation to perform any
covenant or agreement under this Lease. In the event of any failure, stoppage or
interruption thereof, Landlord shall use reasonable efforts to attempt to
restore all services promptly. No representation is made by Landlord with
respect to the adequacy or fitness of the Building’s ventilating, air
conditioning or other systems to maintain temperatures as may be required for
the operation of any computer, data processing or other special equipment of
Tenant. Tenant hereby waives the provisions of California Civil Code
Section 1932(1) or any other applicable existing or future law, ordinance or
governmental regulation permitting the termination of this Lease due to an
interruption, failure or inability to provide any services.
(f) Landlord reserves the right from time to time to make reasonable and
nondiscriminatory modifications to the above standards for Basic Services and
Extra Services as long as such modifications are made to all tenants in the
Project.
8. NON-LIABILITY AND INDEMNIFICATION OF LANDLORD AND TENANT; INSURANCE
(a) To the greatest extent permitted by Law, and except to the extent caused by
Landlord’s gross negligence or willful misconduct or a breach of the provisions
of this Lease or a breach of the representations and warranties of Landlord in
this Lease, Landlord shall not be liable for any injury, loss or damage suffered
by Tenant or to any person or property occurring or incurred in or about the
Premises, the Building or the Project from any cause. Without limiting the
foregoing, neither Landlord nor any of its partners, officers, trustees,
affiliates, directors, employees, contractors, agents or representatives
(collectively, “Affiliates”) shall be liable for and there shall be no abatement
of Rent (except in the event of a casualty loss or a condemnation as set forth
in Paragraph 9 and Paragraph 10 of this Lease) for (i) any damage to Tenant’s
property stored with or entrusted to Affiliates of Landlord, (ii) loss of or
damage to any property by theft or any other wrongful or illegal act, or
(iii) any injury or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water or rain which may
leak from any part of the Building or the Project or from the pipes, appliances,
appurtenances or plumbing works therein or from the roof, street or sub-surface
or from any other place or resulting from dampness or any other cause whatsoever
or from the acts or omissions of other tenants, occupants or other visitors to
the Building or the Project or from any other cause whatsoever, (iv) any
diminution or shutting off of light, air or view by any structure which may be
erected on lands adjacent to the Building, whether within or outside of the
Project, or (v) any latent or other defect in the Premises, the Building or the
Project. Tenant shall give prompt notice to Landlord in the event of (i) the
occurrence of a fire or accident in the Premises or in the Building, or (ii) the
discovery of a defect therein or in the fixtures or equipment thereof. This
Paragraph 8(a) shall survive the expiration or earlier termination of this
Lease.
(b) To the greatest extent permitted by Law, Tenant hereby agrees to indemnify,
protect, defend and hold harmless Landlord and its designated property
management company, and their respective partners, members, affiliates and
subsidiaries, and all of their respective officers, trustees, directors,
shareholders, employees, servants, partners, representatives, insurers and
agents (collectively, “Landlord Indemnitees”) for, from and against all
liabilities, claims, fines, penalties, costs, damages or injuries to persons,
damages to property, losses, liens, causes of

 

-19-

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

 

action, suits, judgments and expenses (including court costs, attorneys’ fees,
expert witness fees and costs of investigation), of any nature, kind or
description of any person or entity, directly or indirectly arising out of,
caused by, or resulting from (in whole or part) (1) Tenant’s construction of, or
use, occupancy or enjoyment of, the Premises, (2) any activity, work or other
things done, permitted or suffered by Tenant and its agents and employees in or
about the Premises, (3) any breach or default in the performance of any of
Tenant’s obligations under this Lease, (4) any gross negligence or willful
misconduct of Tenant or any of its agents, contractors, employees, business
invitees or licensees, or (5) any damage to Tenant’s property, or the property
of Tenant’s agents, employees, contractors, business invitees or licensees,
located in or about the Premises (collectively, “Liabilities”). This
Paragraph 8(b) shall survive the expiration or earlier termination of this
Lease.
(c) To the greatest extent permitted by Law, Landlord hereby agrees to
indemnify, protect, defend and hold harmless Tenant, and its partners, members,
affiliates and subsidiaries, and all of its officers, trustees, directors,
shareholders, employees, servants, partners, representatives, insurers and
agents (collectively, “Tenant Indemnitees”) for, from and against all
liabilities, claims, fines, penalties, costs, damages or injuries to persons,
damages to property, losses, liens, causes of action, suits, judgments and
expenses (including court costs, attorneys’ fees, expert witness fees and costs
of investigation), of any nature, kind or description of any person or entity,
directly or indirectly arising out of, caused by, or resulting from (in whole or
part) (1) any breach or default in the performance of any of Landlord’s
obligations under this Lease, or (2) any gross negligence or willful misconduct
of Landlord or any of its agents, contractors, or employees, or (3) any
occurrence in the Common Areas covered by Landlord’s liability insurance for the
Property or indemnification from any other tenant. This Paragraph 8(c) shall
survive the expiration or earlier termination of this Lease.
(d) Each party shall promptly advise the other party in writing of any action,
administrative or legal proceeding or investigation as to which this
indemnification may apply, and the indemnifying party, at the indemnifying
party’s expense, shall assume on behalf of each and every the indemnified party
and conduct with due diligence and in good faith the defense thereof with
counsel reasonably satisfactory to the indemnified party; provided, however,
that any indemnified party shall have the right, at its option, to be
represented therein by advisory counsel of its own selection and at its own
expense. In the event of failure by indemnifying party to fully perform in
accordance with this Paragraph, the indemnified party, at its option, and
without relieving the indemnifying party of its obligations hereunder, may so
perform, but all costs and expenses so incurred by the indemnified party in that
event shall be reimbursed by the indemnifying party to the indemnified party,
together with interest on the same from the date any such expense was paid by
the indemnified party until reimbursed by the indemnifying party, at the rate of
interest provided to be paid on judgments, by the law of the jurisdiction to
which the interpretation of this Lease is subject. The indemnification provided
in Paragraphs 8(b) and 8(c) shall not be limited to damages, compensation or
benefits payable under insurance policies, workers’ compensation acts,
disability benefit acts or other employees’ benefit acts.
(e) Insurance.
(i) Tenant at all times during the Lease Term shall, at its own expense, keep in
full force and effect (A) commercial general liability insurance providing
coverage against bodily injury, including death resulting therefrom and property
damage to a combined single limit of Two Million Dollars ($2,000,000) to one or
more than one person as the result of any one accident or occurrence, which
shall include provision for contractual liability coverage insuring Tenant for
the performance of its indemnity obligations set forth in this Paragraph 8 and
in Paragraph 6(g)(ii) of this Lease, with an Excess Limits (Umbrella) Policy in
the amount of Five Million Dollars ($5,000,000), (B) worker’s compensation
insurance to the statutory limit, if any, and employer’s liability insurance to
the limit of Five Hundred Thousand Dollars ($500,000) per occurrence, and
(C) All Risk or Causes of Loss — Special Form property insurance, including fire
and extended coverage, sprinkler leakage (including earthquake, sprinkler
leakage), vandalism, malicious mischief, wind and/or hurricane coverage,
covering full replacement value of all of Tenant’s personal property, trade
fixtures and improvements in the Premises. Landlord, Teachers Insurance and
Annuity Association of America, its designated property management firm and such
other parties as Landlord may designate, shall be named an additional insured on
each of said policies (excluding the worker’s compensation policy and property
damage policy) and said policies shall be issued by an insurance company or
companies authorized to do business in the State of California and which have
policyholder ratings not lower than “A-” and financial ratings not lower than
“VII” in Best’s Insurance Guide (latest

 

-20-

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

 

edition in effect as of the Effective Date and subsequently in effect as of the
date of renewal of the required policies). THE GENERAL LIABILITY POLICY SHALL
ALSO INCLUDE A WAIVER OF SUBROGATION PROVISION OR ENDORSEMENT IN FAVOR OF
LANDLORD. Tenant shall provide Landlord with thirty (30) days prior written
notice of any cancellation of, non-renewal of, reduction of coverage or material
change in coverage with respect to said policies. The policies or duly executed
certificates showing the material terms for the same, together with satisfactory
evidence of the payment of the premiums therefor, shall be deposited with
Landlord on the date Tenant first occupies the Premises and upon renewals of
such policies not less than fifteen (15) days prior to the expiration of the
term of such coverage. If certificates are supplied rather than the policies
themselves, Tenant shall allow Landlord, at all reasonable times, to inspect the
policies of insurance required herein.
(ii) It is expressly understood and agreed that the coverages required represent
Landlord’s minimum requirements and such are not to be construed to void or
limit Tenant’s obligations contained in this Lease, including without limitation
Tenant’s indemnity obligations hereunder. Neither shall (A) the insolvency,
bankruptcy or failure of any insurance company carrying Tenant, (B) the failure
of any insurance company to pay claims occurring nor (C) any exclusion from or
insufficiency of coverage be held to affect, negate or waive any of Tenant’s
indemnity obligations under this Paragraph 8 and Paragraph 6(g)(ii) or any other
provision of this Lease. With respect to insurance coverages, except worker’s
compensation, maintained hereunder by Tenant and insurance coverages separately
obtained by Landlord, all insurance coverages afforded by policies of insurance
maintained by Tenant shall be primary insurance as such coverages apply to
Landlord, and such insurance coverages separately maintained by Landlord shall
be excess, and Tenant shall have its insurance policies so endorsed. The amount
of liability insurance under insurance policies maintained by Tenant shall not
be reduced by the existence of insurance coverage under policies separately
maintained by Landlord. Tenant shall be solely responsible for any premiums,
assessments, penalties, deductible assumptions, retentions, audits,
retrospective adjustments or any other kind of payment due under its policies.
Tenant shall increase the amounts of insurance or the insurance coverages as
Landlord may reasonably request from time to time, but not in excess of the
requirements of prudent landlords or lenders for similar tenants occupying
similar premises in comparable buildings within the San Diego, California area.
(iii) Tenant’s occupancy of the Premises without delivering the certificates of
insurance shall not constitute a waiver of Tenant’s obligations to provide the
required coverages. If Tenant provides to Landlord a certificate that does not
evidence the coverages required herein, or that is faulty in any respect, such
shall not constitute a waiver of Tenant’s obligations to provide the proper
insurance
(iv) Throughout the Lease Term, Landlord agrees to maintain (i) fire and
extended coverage insurance, and, at Landlord’s option, earthquake damage
coverage, terrorism coverage, wind and hurricane coverage, and such additional
property insurance coverage as Landlord deems appropriate, on the insurable
portions of Building and the remainder of the Project in an amount not less than
the fair replacement value thereof, subject to reasonable deductibles
(ii) boiler and machinery insurance amounts and with deductibles that would be
considered standard for similar class office building in the San Diego,
California area in which the Premises is located, and (iii) commercial general
liability insurance with a combined single limit coverage of at least One
Million Dollars ($1,000,000.00) per occurrence. All such insurance shall be
obtained from insurers Landlord reasonably believes to be financially
responsible in light of the risks being insured. The premiums for any such
insurance shall be a part of Operating Expenses.
(f) Mutual Waivers of Recovery. Landlord, Tenant, and all parties claiming under
them, each mutually release and discharge each other from responsibility for
that portion of any loss or damage paid or reimbursed by an insurer of Landlord
or Tenant under any fire, extended coverage or other property insurance policy
maintained by Tenant with respect to its Premises or by Landlord with respect to
the Building or the Project (or which would have been paid had the insurance
required to be maintained hereunder been in full force and effect), no matter
how caused, including negligence, and each waives any right of recovery from the
other including, but not limited to, claims for contribution or indemnity, which
might otherwise exist on account thereof. Any fire, extended coverage or
property insurance policy maintained by Tenant with respect to the Premises, or
Landlord with respect to the Building or the Project, shall contain, in the case
of Tenant’s policies, a waiver of subrogation provision or endorsement in favor
of Landlord, and in the case of Landlord’s policies, a waiver of subrogation
provision or

 

-21-

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

 

endorsement in favor of Tenant, or, if such insurers cannot or shall not include
or attach such waiver of subrogation provision or endorsement, Tenant and
Landlord shall obtain the approval and consent of their respective insurers, in
writing, to the terms of this Lease. Tenant agrees to indemnify, protect, defend
and hold harmless each and all of the Landlord Indemnitees from and against any
claim, suit or cause of action asserted or brought by Tenant’s insurers for, on
behalf of, or in the name of Tenant, including, but not limited to, claims for
contribution, indemnity or subrogation, brought in contravention of this
paragraph. The mutual releases, discharges and waivers contained in this
provision shall apply EVEN IF THE LOSS OR DAMAGE TO WHICH THIS PROVISION APPLIES
IS CAUSED SOLELY OR IN PART BY THE NEGLIGENCE OF LANDLORD OR TENANT.
(g) Adjustment of Claims. Tenant shall cooperate with Landlord and Landlord’s
insurers in the adjustment of any insurance claim pertaining to the Building or
the Project or Landlord’s use thereof.
(h) Increase in Landlord’s Insurance Costs. Tenant agrees to pay to Landlord any
increase in premiums for Landlord’s insurance policies resulting from Tenant’s
use or occupancy of the Premises.
(i) Failure to Maintain Insurance. Any failure of Tenant to obtain and maintain
the insurance policies and coverages required hereunder or failure by Tenant to
meet any of the insurance requirements of this Lease shall, subject to the
notice and cure periods of Paragraph 12(a)(ii), constitute an event of default
hereunder, and such failure shall entitle Landlord to pursue, exercise or obtain
any of the remedies provided for in Paragraph 12(b), and Tenant shall be solely
responsible for any loss suffered by Landlord as a result of such failure. In
the event of failure by Tenant to maintain the insurance policies and coverages
required by this Lease or to meet any of the insurance requirements of this
Lease, Landlord, at its option, and without relieving Tenant of its obligations
hereunder, may obtain said insurance policies and coverages or perform any other
insurance obligation of Tenant, but all costs and expenses incurred by Landlord
in obtaining such insurance or performing Tenant’s insurance obligations shall
be reimbursed by Tenant to Landlord, together with interest on same from the
date any such cost or expense was paid by Landlord until reimbursed by Tenant,
at the rate of interest provided to be paid on judgments, by the law of the
jurisdiction to which the interpretation of this Lease is subject.
9. FIRE OR CASUALTY
(a) Subject to the provisions of this Paragraph 9, in the event the Premises, or
access thereto, is wholly or partially destroyed by fire or other casualty,
Landlord shall (to the extent permitted by Law and covenants, conditions and
restrictions then applicable to the Project) rebuild, repair or restore the
Premises and access thereto to substantially the same condition as existing
immediately prior to such destruction (excluding Tenant’s Alterations, trade
fixtures, equipment and personal property, which Tenant shall be required to
restore) and this Lease shall continue in full force and effect. Notwithstanding
the foregoing, (i) Landlord’s obligation to rebuild, repair or restore the
Premises shall not apply to any personal property, Alterations or other items
installed or contained in the Premises, and (ii) Landlord shall have no
obligation whatsoever to rebuild, repair or restore the Premises with respect to
any damage or destruction occurring during the last twelve (12) months of the
term of this Lease or any extension of the term.
(b) Landlord may elect to terminate this Lease in any of the following cases of
damage or destruction to the Premises, the Building or the Project provided that
Tenant does not have reasonable access to the Premises to conduct business:
(i) where the cost of rebuilding, repairing and restoring (collectively,
“Restoration”) of the Building or the Project, would, regardless of the lack of
damage to the Premises or access thereto, in the reasonable opinion of Landlord,
exceed twenty percent (20%) of the then replacement cost of the Building;
(ii) where, in the case of any damage or destruction to any portion of the
Building or the Project by uninsured casualty, the cost of Restoration of the
Building or the Project, in the reasonable opinion of Landlord, exceeds Five
Hundred Thousand Dollars ($500,000); or (iii) where, in the case of any damage
or destruction to the Premises or access thereto by uninsured casualty, the cost
of Restoration of the Premises or access thereto, in the reasonable opinion of
Landlord, exceeds fifty percent (50%) of the replacement cost of the Premises;
or (iv) if Landlord is not able to obtain using commercially reasonable efforts
appropriate zoning approvals for reconstruction of the Project, Building or
Premises. Any such termination shall be made by thirty (30) days’ prior written
notice to Tenant given within one hundred twenty (120) days of the date of such
damage or destruction. If this Lease is not terminated by Landlord and as the
result of any damage or destruction, the Premises, or a portion thereof, are
rendered untenantable, the Base Rent shall abate reasonably during the period of
Restoration (based upon the extent to which such damage and

 

-22-

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

 

Restoration materially interfere with Tenant’s business in the Premises). This
Lease shall be considered an express agreement governing any case of damage to
or destruction of the Premises, the Building or the Project. This Lease sets
forth the terms and conditions upon which this Lease may terminate in the event
of any damage or destruction. Accordingly, the parties hereby waive the
provisions of California Civil Code Section 1932, Subsection 2, and
Section 1933, Subsection 4 (and any successor statutes thereof permitting the
parties to terminate this Lease as a result of any damage or destruction).
Notwithstanding the foregoing, if in Tenant’s reasonable opinion Landlord is
unable to complete the Restoration of the Premises within one hundred eighty
(180) days of the casualty, Tenant shall have the right to terminate the Lease
by providing Landlord with thirty (30) days prior written notice.
10. EMINENT DOMAIN
In the event the whole of the Premises, the Building or the Project shall be
taken under the power of eminent domain, or sold to prevent the exercise thereof
(collectively, a “Taking”), this Lease shall automatically terminate as of the
date of such Taking. In the event a Taking of a portion of the Project, the
Building or the Premises shall, in the reasonable opinion of Landlord,
substantially interfere with Landlord’s operation thereof, Landlord may
terminate this Lease upon thirty (30) days’ written notice to Tenant given at
any time within sixty (60) days following the date of such Taking. For purposes
of this Lease, the date of Taking shall be the earlier of the date of transfer
of title resulting from such Taking or the date of transfer of possession
resulting from such Taking. In the event that a portion of the Premises is so
taken and this Lease is not terminated, Landlord shall, to the extent of
proceeds paid to Landlord as a result of the Taking, with reasonable diligence,
use commercially reasonable efforts to proceed to restore (to the extent
permitted by Law and covenants, conditions and restrictions then applicable to
the Project) the Premises (other than Tenant’s personal property and fixtures,
and above-standard tenant improvements) to a complete, functioning unit. In such
case, the Rent shall be reduced proportionately based on the portion of the
Premises so taken. If all or any portion of the Premises is the subject of a
temporary Taking for a period of ninety (90) days or less, this Lease shall
remain in full force and effect and Tenant shall continue to perform each of its
obligations under this Lease; in such case, Tenant shall be entitled to receive
the entire award allocable to the temporary Taking of the Premises. Except as
provided herein, Tenant shall not assert any claim against Landlord or the
condemning authority for, and hereby assigns to Landlord, any compensation in
connection with any such Taking, and Landlord shall be entitled to receive the
entire amount of any award therefor, without deduction for any estate or
interest of Tenant. Nothing contained in this Paragraph 10 shall be deemed to
give Landlord any interest in, or prevent Tenant from seeking any award against
the condemning authority for the Taking of personal property, fixtures, above
standard tenant improvements of Tenant or for relocation or moving expenses
recoverable by Tenant from the condemning authority. This Paragraph 10 shall be
Tenant’s sole and exclusive remedy in the event of a Taking. This Lease sets
forth the terms and conditions upon which this Lease may terminate in the event
of a Taking. Accordingly, the parties waive the provisions of the California
Code of Civil Procedure Section 1265.130 and any successor or similar statutes
permitting the parties to terminate this Lease as a result of a Taking.
11. ASSIGNMENT AND SUBLETTING
(a) Tenant shall not directly or indirectly, voluntarily or involuntarily, by
operation of law or otherwise, assign, sublet, mortgage or otherwise encumber
all or any portion of its interest in this Lease or in the Premises or grant any
license for any person other than Tenant or its employees to use or occupy the
Premises or any part thereof (except to a person or entity affiliated with or
controlled by Tenant) without obtaining the prior written consent of Landlord,
which consent shall not be unreasonably withheld, conditioned, or delayed. Any
such attempted assignment, subletting, license, mortgage, other encumbrance or
other use or occupancy without the consent of Landlord shall, at Landlord’s
option, be null and void and of no effect. Any mortgage, or encumbrance of all
or any portion of Tenant’s interest in this Lease or in the Premises and any
grant of a license for any person other than Tenant or its employees to use or
occupy the Premises or any part thereof shall be deemed to be an “assignment” of
this Lease. In addition, as used in this Paragraph 11, the term “Tenant” shall
also mean any entity that has guaranteed Tenant’s obligations under this Lease,
and the restrictions applicable to Tenant contained herein shall also be
applicable to such guarantor.

 

-23-

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

 

(b) No assignment or subletting shall relieve Tenant of its obligation to pay
the Rent and to perform all of the other obligations to be performed by Tenant
hereunder. The acceptance of Rent by Landlord from any other person shall not be
deemed to be a waiver by Landlord of any provision of this Lease or to be a
consent to any subletting or assignment. Consent by Landlord to one subletting
or assignment shall not be deemed to constitute a consent to any other or
subsequent attempted subletting or assignment. If Tenant desires at any time to
assign this Lease or to sublet the Premises or any portion thereof, it shall
first notify Landlord of its desire to do so and shall submit in writing to
Landlord all pertinent information relating to the proposed assignee or
sublessee, all pertinent information relating to the proposed assignment or
sublease, and all such financial information as Landlord may reasonably request
concerning the Tenant and proposed assignee or subtenant. Any assignment or
sublease shall be expressly subject to the terms and conditions of this Lease.
(c) Tenant acknowledges that it shall be reasonable for Landlord to withhold its
consent to a proposed assignment or sublease in any of the following instances:
(i) The assignee or sublessee is not, in Landlord’s reasonable opinion,
sufficiently creditworthy to perform the obligations such assignee or sublessee
will have under this Lease;
(ii) The intended use of the Premises by the assignee or sublessee is not for
general office use;
(iii) The intended use of the Premises by the assignee or sublessee would
materially increase the pedestrian or vehicular traffic to the Premises or the
Building;
(iv) Occupancy of the Premises by the assignee or sublessee would, in the good
faith judgment of Landlord, violate any agreement binding upon Landlord, the
Building or the Project with regard to the identity of tenants, usage in the
Building, or similar matters;
(v) The identity or business reputation of the assignee or sublessee will, in
the good faith judgment of Landlord, tend to damage the goodwill or reputation
of the Building or Project;
(vi) the proposed sublease would result in more than two subleases of portions
of the Premises being in effect at any one time during the Lease Term;
(vii) or, in the case of a sublease, the subtenant has not acknowledged that the
Lease controls over any inconsistent provision in the sublease.
The foregoing criteria shall not exclude any other reasonable basis for Landlord
to refuse its consent to such assignment or sublease. Notwithstanding any
contrary provision of this Lease, if Tenant or any proposed assignee or
sublessee claims that Landlord has unreasonably withheld its consent to a
proposed assignment or sublease or otherwise has breached its obligations under
this Paragraph 11, their sole remedy shall be to seek a declaratory judgment
and/or injunctive relief without any monetary damages, and, with respect
thereto, Tenant, on behalf of itself and, to the extent permitted by law, such
proposed assignee/sublessee, hereby waives all other remedies against Landlord,
including, without limitation, the right to seek monetary damages or to
terminate this Lease.
(d) If any Tenant is a corporation, partnership or other entity that is not
publicly traded on a recognized national stock exchange, any transaction or
series of related or unrelated transactions (including, without limitation, any
dissolution, merger, consolidation or other reorganization, any withdrawal or
admission of a partner or change in a partner’s interest, or any issuance, sale,
gift, transfer or redemption of any capital stock of or ownership interest in
such entity, whether voluntary, involuntary or by operation of law, or any
combination of any of the foregoing transactions) resulting in the transfer of
control of such Tenant, shall be deemed to be an assignment of this Lease
subject to the provisions of this Paragraph 11. The term “control” as used in
this Paragraph 11(e) means the power to directly or indirectly direct or cause
the direction of the management or policies of Tenant. Any transfer of control
of a subtenant which is a corporation or other entity shall be deemed an
assignment of any sublease. Notwithstanding anything to the contrary in this
Paragraph 11(e), if the original Tenant under this Lease is a corporation,
partnership or other entity, a change or series of changes in ownership of stock
or other ownership interests which would result in direct or indirect change in
ownership of less than fifty percent (50%) of the outstanding stock of or other
ownership interests in such Tenant as of the date of the execution and delivery
of this Lease shall not be considered a change of control.

 

-24-

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

 

(e) Notwithstanding any assignment or subletting, Tenant and any guarantor or
surety of Tenant’s obligations under this Lease shall at all times during the
Initial Term and any subsequent renewals or extensions remain fully responsible
and liable for the payment of the rent and for compliance with all of Tenant’s
other obligations under this Lease. If the Rent due and payable by a sublessee
or assignee (or a combination of the rental payable under such sublease or
assignment, plus any bonus or other consideration therefor or incident thereto)
exceeds the Rent payable under this Lease, after deducting leasing commissions,
marketing fees, tenant improvement costs, legal fees, management fees,
administration fees and other actual, reasonable and documented costs related to
the sublease or assignment as determined by Tenant in its reasonable discretion,
then Tenant shall be bound and obligated to pay Landlord, as additional rent
hereunder, one-half (1/2) of all such excess Rent and other excess consideration
within ten (10) days following receipt thereof by Tenant.
(f) If this Lease is assigned or if the Premises is subleased (whether in whole
or in part), or in the event of the mortgage or pledge of Tenant’s leasehold
interest, or grant of any concession or license within the Premises, or if the
Premises are occupied in whole or in part by anyone other than Tenant, then upon
a default by Tenant hereunder Landlord may collect Rent from the assignee,
sublessee, mortgagee, pledgee, concessionee or licensee or other occupant and,
except to the extent set forth in the preceding paragraph, apply the amount
collected to the next Rent payable hereunder; and all such Rent collected by
Tenant shall be held in deposit for Landlord and immediately forwarded to
Landlord. No such transaction or collection of Rent or application thereof by
Landlord, however, shall be deemed a waiver of these provisions or a release of
Tenant from the further performance by Tenant of its covenants, duties, or
obligations hereunder.
(g) If Tenant effects an assignment or sublease or requests the consent of
Landlord to any proposed assignment or sublease, then Tenant shall, upon demand,
pay Landlord a non-refundable administrative fee of One Thousand Dollars
($1,500.00), to cover any reasonable attorneys’ and paralegal fees and costs
incurred by Landlord in connection with such assignment or sublease or request
for consent. Acceptance of the One Thousand Dollar ($1,500.00) fees shall in no
event obligate Landlord to consent to any proposed assignment or sublease.
(h) Notwithstanding any provision of this Lease to the contrary, in the event
this Lease is assigned to any person or entity pursuant to the provisions of the
Bankruptcy Code, any and all monies or other consideration payable or otherwise
to be delivered in connection with such assignment shall be paid or delivered to
Landlord, shall be and remain the exclusive property of Landlord and shall not
constitute the property of Tenant or Tenant’s estate within the meaning of the
Bankruptcy Code. All such money and other consideration not paid or delivered to
Landlord shall be held in trust for the benefit of Landlord and shall be
promptly paid or delivered to Landlord.
(i) The joint and several liability of the Tenant named herein and any immediate
and remote successor-in-interest of Tenant (by assignment or otherwise), and the
due performance of the obligations of this Lease on Tenant’s part to be
performed or observed, shall not in any way be discharged, released or impaired
by any (a) agreement that modifies any of the rights or obligations of the
parties under this Lease, (b) stipulation that extends the time within which an
obligation under this Lease is to be performed, (c) waiver of the performance of
an obligation required under this Lease, or (d) failure to enforce any of the
obligations set forth in this Lease.
(j) If Tenant is any form of partnership, a withdrawal or change, voluntary,
involuntary or by operation of law of any partner, or the dissolution of the
partnership, shall be deemed a voluntary assignment. If Tenant consists of more
than one (1) person, a purported assignment, voluntary or involuntary or by
operation of law from one (1) person to the other shall be deemed a voluntary
assignment. If Tenant is a corporation or limited liability entity that is not
publicly traded on a recognized stock exchange, any dissolution, merger,
consolidation or other reorganization of Tenant, or sale or other transfer of a
controlling percentage of the ownership interest of Tenant, or the sale of at
least fifty-one percent (51%) of the value of the assets of Tenant shall be
deemed a voluntary assignment.

 

-25-

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

 

(k) Notwithstanding the terms of this Paragraph 11, Tenant may effect an
assignment (a “Permitted Transfer”), without Landlord’s consent, without payment
of any Transfer Premium to Landlord, and without extending any recapture right
to Landlord, to any parent, subsidiary or affiliate entity which controls, is
controlled by, or is under common control with, Tenant, or to any entity
resulting from a merger or consolidation of Tenant, or to any person or entity
which acquires all or substantially all of the assets of Tenant’s business as a
going concern (a “Permitted Transferee”), provided that (a) Tenant delivers to
Landlord, substantially concurrently with such assignment, written notice of
same, (b) the assignee shall use the Premises only for general office uses,
(c) the assignee assumes in full the obligations of Tenant under this Lease
arising after the transfer, and (d) Tenant remains fully liable under this
Lease.
12. DEFAULT
(a) Events of Default. The occurrence of any one or more of the following events
shall constitute an “event of default” or “default” (herein so called) under
this Lease by Tenant: (i) Tenant shall fail to pay Rent or any other payment
required to be made by Tenant hereunder where such failure continues for seven
(7) business days after written notice thereof from Landlord that such payment
was not received; (ii) the failure by Tenant to observe or perform any of the
express or implied covenants or provisions of this Lease to be observed or
performed by Tenant, other than monetary failures as specified in
Paragraph 12(a)(i) above, where such failure shall continue for a period of ten
(10) business days after written notice thereof from Landlord to Tenant;
provided, however, that if the nature of Tenant’s default is such that more than
ten (10) business days are reasonably required for its cure, then Tenant shall
not be deemed to be in default if Tenant shall commence such cure within said
ten (10) business day period and thereafter diligently prosecute such cure to
completion, which completion shall occur not later than sixty (60) days from the
date of such notice from Landlord; (iii) the making by Tenant or any guarantor
hereof of any general assignment for the benefit of creditors, (iv) the filing
by or against Tenant or any guarantor hereof of a petition to have Tenant or any
guarantor hereof adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant or any guarantor hereof, the same is dismissed
within sixty (60) days), (v) the appointment of a trustee or receiver to take
possession of substantially all of Tenant’s assets located at the Premises or of
Tenant’s interest in this Lease or of substantially all of guarantor’s assets,
where possession is not restored to Tenant or guarantor within sixty (60) days,
(vi) the attachment, execution or other judicial seizure of substantially all of
Tenant’s assets located at the Premises or of substantially all of guarantor’s
assets or of Tenant’s interest in this Lease where such seizure is not
discharged within sixty (60) days; (vii) any material representation or warranty
made by Tenant or guarantor in this Lease or any other document delivered in
connection with the execution and delivery of this Lease or pursuant to this
Lease proves to be incorrect in any material respect; (viii) Tenant or guarantor
shall be liquidated or dissolved or shall begin proceedings towards its
liquidation or dissolution; or (ix) the vacation or abandonment of the Premises
by Tenant in excess of fifteen (15) business days, except in connection with any
subleases or assignments of the Lease consented to in writing by the Landlord.
Any notice sent by Landlord to Tenant pursuant to this Paragraph 12(a) shall be
in lieu of, and not in addition to, any notice required under California Code of
Civil Procedure Section 1161.
(b) Landlord’s Remedies; Termination. In the event of any event of default by
Tenant, in addition to any other remedies available to Landlord under this
Lease, at law or in equity, Landlord shall have the immediate option to
terminate this Lease and all rights of Tenant hereunder and Landlord shall have
all the rights and remedies of a Landlord provided by Section 1951.2 of the
California Civil Code. If Landlord shall elect to so terminate this Lease, then
Landlord may recover from Tenant:
(i) the worth at the time of award of any unpaid rent which had been earned at
the time of such termination; plus
(ii) the worth at the time of the 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 the award of the amount by which the unpaid rent
for the balance of the term after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided; plus

 

-26-

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

 

(iv) any other amount reasonably 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 including, but not limited to: unamortized Tenant Improvement
costs (such amount to be payable monthly for the remainder of the term);
unamortized Abated Amount (such amount to be payable monthly for the remainder
of the term); reasonable attorneys’ fees; brokers’ commissions; the repair of
the Premises (reasonable wear and tear excepted); and removal (including the
repair of any damage caused by such removal) and storage (or disposal) of
Tenant’s personal property, equipment, fixtures, Tenant Alterations, Tenant
Improvements and any other items which Tenant is required under this Lease to
remove but does not remove.
As used in subparagraph (i) and subparagraph (ii) of Paragraph 12(b) above, the
“worth at the time of award” is computed by allowing interest at the Default
Rate (as defined below). As used in subparagraph (iii) of Paragraph 12(b) above,
the “worth at the time of award” is 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%).
(c) Landlord’s Remedies; Re-Entry Rights. In the event of any event of default
by Tenant, in addition to any other remedies available to Landlord under this
Lease, at law or in equity, Landlord shall also have the right, with or without
terminating this Lease, to re-enter the Premises and remove all persons and
property from the Premises; such property may be removed, stored and/or disposed
of pursuant to Paragraph 5(c) of this Lease or any other procedures permitted by
applicable law. No re-entry or taking possession of the Premises by Landlord
pursuant to this Paragraph 12(c), and no acceptance of surrender of the Premises
or other action on Landlord’s part, shall be construed as an election to
terminate this Lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court of competent
jurisdiction.
(d) Continuation of Lease. Landlord shall have the remedy described in
California Civil Code Section 1951.4 (lessor may continue lease in effect after
lessee’s breach and abandonment and recover rent as it becomes due, if lessee
has the right to sublet or assign, subject only to reasonable limitations).
Accordingly, if Landlord does not elect to terminate this Lease on account of
any event of 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.
(e) Landlord’s Right to Perform. Except as specifically provided otherwise in
this Lease, all covenants and agreements by Tenant under this Lease shall be
performed by Tenant at Tenant’s sole cost and expense and without any abatement
or offset of Rent. If Tenant shall fail to pay any sum of money (other than Base
Rent) or perform any other act on its part to be paid or performed hereunder and
such failure shall continue for seven (7) business days with respect to monetary
obligations (or ten (10) business days with respect to non-monetary obligations,
except in case of emergencies, in which such case, such shorter period of time
as is reasonable under the circumstances) after Tenant’s receipt of written
notice thereof from Landlord, Landlord may, without waiving or releasing Tenant
from any of Tenant’s obligations, make such payment or perform such other act on
behalf of Tenant. All sums so paid by Landlord and all necessary incidental
costs incurred by Landlord in performing such other acts shall be payable by
Tenant to Landlord within five (5) business days after demand therefor as
Additional Rent.
(f) Interest. If any monthly installment of Rent or Operating Expenses, or any
other amount payable by Tenant hereunder is not received by Landlord by the date
when due, it shall bear interest at the Default Rate from the date due until
paid. All interest, and any late charges imposed pursuant to Paragraph 12(g)
below, shall be considered Additional Rent due from Tenant to Landlord under the
terms of this Lease. The term “Default Rate” as used in this Lease shall mean
the lesser of (A) the rate announced from time to time by Wells Fargo Bank or,
if Wells Fargo bank ceases to exist or ceases to publish such rate, then the
rate announced from time to time by the largest (as measured by deposits)
chartered bank operating in the State of California, as its “prime rate” or
“reference rate”, plus two percent (2%), or (B) the maximum rate of interest
permitted by Law.

 

-27-

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

 

(g) Late Charges. Tenant acknowledges that, in addition to interest costs, the
late payments by Tenant to Landlord of any monthly installment of Base Rent,
Additional Rent or other sums due under this Lease will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of such costs being
extremely difficult and impractical to fix. Such other costs include, without
limitation, processing, administrative and accounting charges and late charges
that may be imposed on Landlord by the terms of any mortgage, deed to secure
debt, deed of trust or related loan documents encumbering the Premises, the
Building or the Project. Accordingly, if any monthly installment of Base Rent,
Additional Rent or any other amount payable by Tenant hereunder is not received
by Landlord by the due date thereof, Tenant shall pay to Landlord an additional
sum of five percent (5%) of the overdue amount as a late charge, but in no event
more than the maximum late charge allowed by law. The parties agree that such
late charge represents a fair and reasonable estimate of the costs that Landlord
will incur by reason of any late payment as hereinabove referred to by Tenant,
and the payment of late charges and interest are distinct and separate in that
the payment of interest is to compensate Landlord for the use of Landlord’s
money by Tenant, while the payment of late charges is to compensate Landlord for
Landlord’s processing, administrative and other costs incurred by Landlord as a
result of Tenant’s delinquent payments. Acceptance of a late charge or interest
shall not constitute a waiver of Tenant’s default with respect to the overdue
amount or prevent Landlord from exercising any of the other rights and remedies
available to Landlord under this Lease or at law or in equity now or hereafter
in effect.
(h) Rights and Remedies Cumulative. All rights, options and remedies of Landlord
contained in this Paragraph 12 and elsewhere in this Lease shall be construed
and held to be cumulative, and no one of them shall be exclusive of the other,
and Landlord shall have the right to pursue any one or all of such remedies or
any other remedy or relief which may be provided by law or in equity, whether or
not stated in this Lease. Nothing in this Paragraph 12 shall be deemed to limit
or otherwise affect Tenant’s indemnification of Landlord pursuant to any
provision of this Lease.
(i) Tenant’s Waiver of Redemption. Tenant hereby waives and surrenders for
itself and all those claiming under it, including creditors of all kinds,
(i) any right and privilege which it or any of them may have under any present
or future law to redeem any of the Premises or to have a continuance of this
Lease after termination of this Lease or of Tenant’s right of occupancy or
possession pursuant to any court order or any provision hereof, and (ii) the
benefits of any present or future law which exempts property from liability for
debt or for distress for Rent.
(j) Costs Upon Default and Litigation. Tenant shall pay to Landlord and its
mortgagees as Additional Rent all the reasonable expenses incurred by Landlord
or its mortgagees in connection with any uncured default by Tenant hereunder or
the exercise of any remedy by reason of any uncured default by Tenant hereunder,
including reasonable attorneys’ fees and expenses. If Landlord or its mortgagees
shall be made a party to any litigation commenced against Tenant or any
litigation pertaining to this Lease or the Premises, at the option of Landlord
and/or its mortgagees, Tenant, at its expense, shall provide Landlord and/or its
mortgagees with counsel approved by Landlord and/or its mortgagees and shall pay
all reasonable costs incurred or paid by Landlord and/or its mortgagees in
connection with such litigation.
13. ACCESS; CONSTRUCTION
Landlord reserves from the leasehold estate hereunder, in addition to all other
rights reserved by Landlord under this Lease, the right to use the roof and
exterior walls of the Premises and the area beneath, adjacent to and above the
Premises. Landlord also reserves the right to install, use, maintain, repair,
replace and relocate equipment, machinery, meters, pipes, ducts, plumbing,
conduits and wiring through the Premises, which serve other portions of the
Building or the Project in a manner and in locations which do not unreasonably
interfere with Tenant’s use of the Premises. In addition, Landlord shall have
free access to any and all mechanical installations of Landlord or Tenant,
including, without limitation, machine rooms, telephone rooms and electrical
closets. Tenant agrees that there shall be no construction of partitions or
other obstructions which materially interfere with or which threaten to
materially interfere with Landlord’s free access thereto, or materially
interfere with the moving of Landlord’s equipment to or from the enclosures
containing said installations. Landlord shall at all reasonable times, during
normal business hours and after reasonable written or oral notice (except in the
event of an emergency which no notice shall be necessary), Landlord reserves and
shall at all times have the right to enter the Premises to inspect the same, to
supply janitorial service and any other service to be provided by Landlord to
Tenant hereunder, to exhibit the Premises to prospective purchasers, lenders or
tenants, to post notices of non-responsibility, to alter, improve, restore,
rebuild or repair the Premises or any other portion of the Building, or to do
any other act permitted or contemplated to be done by Landlord hereunder, all
without being deemed guilty of an eviction of Tenant and without liability for
abatement of Rent or otherwise, provided that Tenant shall continue to have
reasonable access to the Premises. For such purposes, Landlord may also erect
scaffolding and other necessary structures where

 

-28-

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

 

reasonably required by the character of the work to be performed. Landlord shall
conduct all such inspections and/or improvements, alterations and repairs so as
to minimize, to the extent reasonably practical and without material additional
expense to Landlord, any interruption of or interference with the business of
Tenant. Tenant hereby waives any claim for damages for any injury or
inconvenience to or interference with Tenant’s business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss occasioned thereby,
provided that Tenant shall continue to have reasonable access to the Premises.
For each of such purposes, Landlord shall at all times have and retain a key
with which to unlock all of the doors in, upon and about the Premises (excluding
Tenant’s vaults and safes, access to which shall be provided by Tenant upon
Landlord’s reasonable request). Landlord shall have the right to use any and all
means which Landlord may deem proper in an emergency in order to obtain entry to
the Premises or any portion thereof, and Landlord shall have the right, at any
time during the Lease Term, to provide whatever access control measures it deems
reasonably necessary to the Project, without any interruption or abatement in
the payment of Rent by Tenant. Any entry into the Premises obtained by Landlord
by any of such means shall not under any circumstances be construed to be a
forcible or unlawful entry into, or a detainer of, the Premises, or any eviction
of Tenant from the Premises or any portion thereof. No provision of this Lease
shall be construed as obligating Landlord to perform any repairs, Alterations or
decorations to the Premises or the Project except as otherwise expressly agreed
to be performed by Landlord pursuant to the provisions of this Lease.
14. BANKRUPTCY
(a) If at any time on or before the Commencement Date there shall be filed by or
against Tenant in any court, tribunal, administrative agency or any other forum
having jurisdiction, pursuant to any applicable law, either of the United States
or of any state, a petition in bankruptcy or insolvency or for reorganization or
for the appointment of a receiver, trustee or conservator of all or a portion of
Tenant’s property, or if Tenant makes an assignment for the benefit of
creditors, this Lease shall ipso facto be canceled and terminated and in such
event neither Tenant nor any person claiming through or under Tenant or by
virtue of any applicable law or by an order of any court, tribunal,
administrative agency or any other forum having jurisdiction, shall be entitled
to possession of the Premises and Landlord, in addition to the other rights and
remedies given by Paragraph 12 hereof or by virtue of any other provision
contained in this Lease or by virtue of any applicable law, may retain as
damages any Rent, Security Deposit or moneys received by it from Tenant or
others on behalf of Tenant.
(b) If, after the Commencement Date, or if at any time during the term of this
Lease, there shall be filed against Tenant in any court, tribunal,
administrative agency or any other forum having jurisdiction, pursuant to any
applicable law, either of the United States or of any state, a petition in
bankruptcy or insolvency or for reorganization or for the appointment of a
receiver, trustee or conservator of all or a portion of Tenant’s property, and
the same is not dismissed after sixty (60) calendar days, or if Tenant makes an
assignment for the benefit of creditors, this Lease, at the option of Landlord
exercised within a reasonable time after notice of the happening of any one or
more of such events, may be canceled and terminated and in such event neither
Tenant nor any person claiming through or under Tenant or by virtue of any
statute or of an order of any court shall be entitled to possession or to remain
in possession of the Premises, but shall forthwith quit and surrender the
Premises, and Landlord, in addition to the other rights and remedies granted by
Paragraph 12 hereof or by virtue of any other provision contained in this Lease
or by virtue of any applicable law, may retain as damages any Rent, Security
Deposit or moneys received by it from Tenant or others on behalf of Tenant.
15. SUBSTITUTION OF PREMISES
INTENTIONALLY OMITTED
16. SUBORDINATION; ATTORNMENT; ESTOPPEL CERTIFICATES
(a) Tenant agrees that this Lease and the rights of Tenant hereunder shall be
subject and subordinate to any and all deeds to secure debt, deeds of trust,
security interests, mortgages, master leases, ground leases or other security
documents and any and all modifications, renewals, extensions, consolidations
and replacements thereof (collectively, “Security Documents”) which now or
hereafter constitute a lien upon or affect the Project, the Building or the
Premises. Such subordination shall be effective without the necessity of the
execution by Tenant of any additional document for the purpose of evidencing or
effecting such subordination. In addition, Landlord shall have the right to
subordinate or cause to be subordinated any such Security Documents to this
Lease and in such

 

-29-

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

 

case, in the event of the termination or transfer of Landlord’s estate or
interest in the Project by reason of any termination or foreclosure of any such
Security Documents, Tenant shall, notwithstanding such subordination, attorn to
and become the Tenant of the successor-in-interest to Landlord at the option of
such successor-in-interest. Furthermore, Tenant shall within fifteen (15) days
of demand therefor execute any instruments or other documents which may be
required by Landlord or the holder of any Security Document and specifically
shall execute, acknowledge and deliver within fifteen (15) days of demand
therefor a subordination of lease or subordination of deed of trust or mortgage,
in the form required by the holder of the Security Document requesting the
document; the failure to do so by Tenant within such time period shall be a
material default hereunder; provided, however, the new landlord or the holder of
any Security Document shall agree that Tenant’s quiet enjoyment of the Premises
shall not be disturbed as long as Tenant is not in uncured default under this
Lease.
(b) If any proceeding is brought for default under any ground or master lease to
which this Lease is subject or in the event of foreclosure or the exercise of
the power of sale under any mortgage, deed of trust or other Security Document
made by Landlord covering the Premises, at the election of such ground lessor,
master lessor or purchaser at foreclosure, Tenant shall attorn to and recognize
the same as Landlord under this Lease, provided such successor expressly agrees
in writing to be bound to all future obligations by the terms of this Lease, and
if so requested, Tenant shall enter into a new lease with that successor on the
same terms and conditions as are contained in this Lease (for the unexpired term
of this Lease then remaining). Tenant hereby waives its rights under any current
or future law which gives or purports to give Tenant any right to terminate or
otherwise adversely affect this Lease and the obligations of Tenant hereunder in
the event of any such foreclosure proceeding or sale.
(c) In addition to any statutory lien for Rent in Landlord’s favor, Landlord
(the secured party for purposes hereof) shall have and Tenant (the debtor for
purposes hereof) hereby grants to Landlord, an express contract lien and a
continuing security interest to secure the payment of all Rent due hereunder
from Tenant, upon all goods, wares, equipment, fixtures, furniture, inventory
and other personal property of Tenant (and any transferees or other occupants of
the Premises) presently or hereafter situated on the Premises and upon all
proceeds of any insurance which may accrue to Tenant by reason of damage or
destruction of any such property. In the event of an uncured default under this
Lease, Landlord shall have, in addition to any other remedies provided herein or
by law, all rights and remedies under the Uniform Commercial Code of the state
in which the Premises is located, including without limitation the right to sell
the property described in this paragraph at public or private sale upon ten
(10) business days’ notice to Tenant, which notice Tenant hereby agrees is
adequate and reasonable. Tenant hereby agrees to execute such other instruments
necessary or desirable in Landlord’s discretion to perfect the security interest
hereby created. Any statutory lien for Rent is not hereby waived, the express
contractual lien herein granted being in addition and supplementary thereto.
Landlord and Tenant agree that this Lease and the security interest granted
herein serve as a financing statement, and a copy or photographic or other
reproduction of this paragraph of this Lease may be filed of record by Landlord
and have the same force and effect as the original. Tenant warrants and
represents that the collateral subject to the security interest granted herein
is not purchased or used by Tenant for personal, family or household purposes.
Tenant further warrants and represents to Landlord that the lien granted herein
constitutes a first and superior lien and that Tenant will not allow the placing
of any other lien upon any of the property described in this paragraph without
the prior written consent of Landlord. Notwithstanding the provisions of this
Paragraph 16(c) to the contrary, if Tenant desires to obtain a loan secured by
Tenant’s personal property in the Premises and requests that Landlord execute a
lien waiver in connection therewith, Landlord may, in its sole discretion, based
upon Landlord’s review of Tenant’s financial condition, agree to subordinate its
lien rights to the rights of Tenant’s lender pursuant to a lien subordination on
Landlord’s standard form, provided that Tenant delivers such request in writing
to Landlord together with a nonrefundable processing fee in the amount of Three
Hundred Dollars ($300.00). Notwithstanding the foregoing, however, if Landlord
incurs processing costs (including attorneys’ fees) in connection with any such
request which exceed Three Hundred Dollars ($300.00), then Tenant shall
reimburse Landlord for such excess within three (3) business days following
Tenant’s receipt of invoice(s) therefor from Landlord. Nothing in this
Paragraph 16(c) shall permit Tenant to encumber its leasehold interest in the
Premises. Notwithstanding the foregoing, Landlord acknowledges that Tenant has
granted a prior security interest to Comerica Bank and Landlord’s interest is
subordinate to such security interest of Comerica Bank.

 

-30-

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

 

(d) Tenant shall, upon not less than ten (10) days’ prior notice by Landlord,
execute, acknowledge and deliver to Landlord a statement in writing certifying
to those facts for which certification has been requested by Landlord or any
current or prospective purchaser, holder of any Security Document, ground lessor
or master lessor, including, but without limitation, that (i) this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating the
modifications), (ii) the dates to which the Base Rent, Additional Rent and other
charges hereunder have been paid, if any, and (iii) whether or not to the best
knowledge of Tenant, Landlord is in default in the performance of any covenant,
agreement or condition contained in this Lease and, if so, specifying each such
default of which Tenant may have knowledge. The form of the statement attached
hereto as Exhibit D is hereby approved by Tenant for use pursuant to this
subparagraph (d); however, at Landlord’s option, Landlord shall have the right
to use other forms for such purpose. Tenant’s failure to execute and deliver
such statement within such time shall, at the option of Landlord, constitute a
material default under this Lease and, in any event, shall be conclusive upon
Tenant that this Lease is in full force and effect without modification except
as may be represented by Landlord in any such certificate prepared by Landlord
and delivered to Tenant for execution. Any statement delivered pursuant to this
Paragraph 16 may be relied upon by any prospective purchaser of the fee of the
Building or the Project or any mortgagee, ground lessor or other like
encumbrances thereof or any assignee of any such encumbrance upon the Building
or the Project.
17. SALE BY LANDLORD; TENANT’S REMEDIES; NONRECOURSE LIABILITY
(a) In the event of a sale or conveyance by Landlord of the Building or the
Project, Landlord shall be released from any and all liability under this Lease.
If the Security Deposit has been deposited by Tenant to Landlord prior to such
sale or conveyance, Landlord shall transfer the Security Deposit to the
purchaser, and upon delivery to Tenant of notice thereof, Landlord shall be
discharged from any further liability in reference thereto.
(b) Landlord shall not be in default of any obligation of Landlord hereunder
unless Landlord fails to perform any of its obligations under this Lease within
thirty (30) days after receipt of written notice of such failure from Tenant;
provided, however, that if the nature of Landlord’s obligation is such that more
than thirty (30) days are required for its performance, Landlord shall not be in
default if Landlord commences to cure such default within the thirty (30) day
period and thereafter diligently prosecutes the same to completion. All
obligations of Landlord under this Lease will be binding upon Landlord only
during the period of its ownership of the Project and not thereafter. All
obligations of Landlord hereunder shall be construed as covenants, not
conditions; and, except as may be otherwise expressly provided in this Lease,
Tenant may not terminate this Lease for breach of Landlord’s obligations
hereunder.
(c) Notwithstanding anything contained in this Lease to the contrary, the
obligations of Landlord under this Lease (including any actual or alleged breach
or default by Landlord) do not constitute personal obligations of the individual
partners, directors, officers, trustees, members or shareholders of Landlord or
Landlord’s members or partners, and Tenant shall not seek recourse against the
individual partners, directors, officers, trustees, members or shareholders of
Landlord or against Landlord’s members or partners or against any other persons
or entities having any interest in Landlord, or against any of their personal
assets for satisfaction of any liability with respect to this Lease. Any
liability of Landlord for a default by Landlord under this Lease, or a breach by
Landlord of any of its obligations under the Lease, shall be limited solely to
its interest in the Project, and in no event shall any personal liability be
asserted against Landlord in connection with this Lease nor shall any recourse
be had to any other property or assets of Landlord, its partners, directors,
officers, trustees, members, shareholders or any other persons or entities
having any interest in Landlord. Tenant’s sole and exclusive remedy for a
default or breach of this Lease by Landlord shall be either (i) an action for
damages, or (ii) an action for injunctive relief; Tenant hereby waiving and
agreeing that Tenant shall have no offset rights on account of any breach or
default by Landlord under this Lease. Under no circumstances whatsoever shall
Landlord ever be liable for punitive, consequential or special damages under
this Lease and Tenant waives any rights it may have to such damages under this
Lease in the event of a breach or default by Landlord under this Lease.
(d) As a condition to the effectiveness of any notice of default given by Tenant
to Landlord, Tenant shall also concurrently give such notice under the
provisions of Paragraph 17(b) to each beneficiary under a Security Document
encumbering the Project of whom Tenant has received written notice (such notice
to specify the address of the beneficiary). If Landlord shall fail to cure any
breach or default within the time period specified in subparagraph (b), then
prior to the pursuit of any remedy therefor by Tenant, each such beneficiary
shall have an additional thirty (30) days within which to cure such default, or
if such default cannot reasonably be cured within such period, then each such
beneficiary shall have such additional time as shall be necessary to cure such
default, provided that within such thirty (30) day period, such beneficiary has
commenced and is diligently pursuing the remedies available to it which are
necessary to cure such default (including, without limitation, as appropriate,
commencement of foreclosure proceedings).

 

-31-

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

 

18. PARKING; COMMON AREAS
(a) Tenant shall have the right to the nonexclusive use of the number of parking
spaces located in the parking areas of the Project specified in Item 13 of the
Basic Lease Provisions for the parking of operational motor vehicles used by
Tenant, its officers and employees only. Landlord reserves the right, at any
time upon written notice to Tenant, to designate the location of Tenant’s
parking spaces as determined by Landlord in its reasonable discretion. The use
of such spaces shall be subject to the rules and regulations adopted by Landlord
from time to time for the use of the parking areas. Landlord further reserves
the right to make such changes to the parking system as Landlord may deem
necessary or reasonable from time to time; i.e., Landlord may provide for one or
a combination of parking systems, including, without limitation, self-parking,
single or double stall parking spaces, and valet assisted parking. Except as
otherwise expressly agreed to in this Lease, Tenant agrees that Tenant, its
officers and employees shall not be entitled to park in any reserved or
specially assigned areas designated by Landlord from time to time in the
Project’s parking areas. Landlord may require execution of an agreement with
respect to the use of such parking areas by Tenant and/or its officers and
employees in form reasonably satisfactory to Landlord as a condition of any such
use by Tenant, its officers and employees. A default by Tenant, its officers or
employees in the payment of such charges, the compliance with such rules and
regulations, or the performance of such agreement(s) shall constitute a material
default by Tenant hereunder. Tenant shall not permit or allow any vehicles that
belong to or are controlled by Tenant or Tenant’s officers, employees,
suppliers, shippers, customers or invitees to be loaded, unloaded or parked in
areas other than those designated by Landlord for such activities. If Tenant
permits or allows any of the prohibited activities described in this Paragraph,
then Landlord shall have the right, without notice, in addition to such other
rights and remedies that it may have, to remove or tow away the vehicle involved
and charge the cost to Tenant, which cost shall be immediately payable upon
demand by Landlord.
(b) Subject to subparagraph (c) below and the remaining provisions of this
Lease, Tenant shall have the nonexclusive right, in common with others, to the
use of such entrances, lobbies, fire vestibules, restrooms (excluding restrooms
on any full floors leased by a tenant), mechanical areas, ground floor
corridors, elevators and elevator foyers, electrical and janitorial closets,
telephone and equipment rooms, loading and unloading areas, the Project’s plaza
areas, if any, ramps, drives, stairs, and similar access ways and service ways
and other common areas and facilities in and adjacent to the Building and the
Project as are designated from time to time by Landlord for the general
nonexclusive use of Landlord, Tenant and the other tenants of the Project and
their respective employees, agents, representatives, licensees and invitees
(“Common Areas”). The use of such Common Areas shall be subject to the rules and
regulations contained herein and the provisions of any covenants, conditions and
restrictions affecting the Building or the Project. Tenant shall keep all of the
Common Areas free and clear of any obstructions created or permitted by Tenant
or resulting from Tenant’s operations, and shall use the Common Areas only for
normal activities, parking and ingress and egress by Tenant and its employees,
agents, representatives, licensees and invitees to and from the Premises, the
Building or the Project. If, in the reasonable opinion of Landlord, unauthorized
persons are using the Common Areas by reason of the presence of Tenant in the
Premises, Tenant, upon demand of Landlord, shall correct such situation by
appropriate action or proceedings against all such unauthorized persons. Nothing
herein shall affect the rights of Landlord at any time to remove any such
unauthorized persons from said areas or to prevent the use of any of said areas
by unauthorized persons. Landlord reserves the right to make such changes,
alterations, additions, deletions, improvements, repairs or replacements in or
to the Building, the Project (including the Premises) and the Common Areas as
Landlord may reasonably deem necessary or desirable, including, without
limitation, constructing new buildings and making changes in the location, size,
shape and number of driveways, entrances, parking spaces, parking areas, loading
areas, landscaped areas and walkways; provided, however, that (i) there shall be
no unreasonable permanent obstruction of access to or use of the Premises
resulting therefrom, and (ii) Landlord shall use commercially reasonable efforts
to minimize any interruption with Tenant’s use of the Premises. In the event
that the Project is not completed on the date of execution of this Lease,
Landlord shall have the sole judgment and discretion to determine the
architecture, design, appearance, construction, workmanship, materials and
equipment with respect to construction of the Project. Notwithstanding any
provision of this Lease to the contrary, the Common Areas shall not in any event
be deemed to be a portion of or included within the Premises leased to Tenant
and the Premises shall not be deemed to be a portion of the Common Areas. This
Lease is granted subject to the terms hereof, the rights and interests of third
parties under existing liens, ground leases, easements and encumbrances
affecting such property, all zoning regulations, rules, ordinances, building
restrictions and other laws and regulations now in effect or hereafter adopted
by any governmental authority having jurisdiction over the Project or any part
thereof.

 

-32-

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

 

(c) Notwithstanding any provision of this Lease to the contrary, Landlord
specifically reserves the right to redefine the terms “Building” and “Project”
for purposes of allocating and calculating Operating Expenses so as to include
or exclude areas as Landlord shall from time to time determine or specify (and
any such determination or specification shall be without prejudice to Landlord’s
right to revise thereafter such determination or specification). In addition,
Landlord shall have the right to contract or otherwise arrange for amenities,
services or utilities (the cost of which is included within Operating Expenses)
to be on a common or shared basis to both the Project (i.e., the area with
respect to which Operating Expenses are determined) and adjacent areas not
included within the Project, so long as the basis on which the cost of such
amenities, services or utilities is allocated to the Project is determined on an
arms-length basis or some other basis reasonably determined by Landlord. In the
case where the definition of the Project is revised for purposes of the
allocation or determination of Operating Expenses, Tenant’s Proportionate Share
shall be appropriately revised to equal the percentage share of all Rentable
Area contained within the Project (as then defined) represented by the Premises.
The Rentable Area of the Project is subject to adjustment by Landlord from time
to time to reflect any remeasurement thereof by Landlord’s architect, at
Landlord’s request, and/or as a result of any additions or deletions to any of
the buildings in the Project as designated by Landlord. Landlord shall have the
sole right to determine which portions of the Project and other areas, if any,
shall be served by common management, operation, maintenance and repair.
Landlord shall have the exclusive rights to the airspace above and around, and
the subsurface below, the Premises and other portions of the Building and
Project.
(d) So long as there is no default by Tenant under this Lease (beyond the
expiration of all applicable notice and cure periods), Landlord acknowledges and
agrees that Tenant’s employees employed at the Premises shall have the right to
utilize the Project’s fitness center, including shower and locker facilities
(“Fitness Center”) for so long as Landlord determines that such Fitness Center
will be in operation at the Project. Tenant, for Tenant and its employees,
hereby agrees that the Landlord Indemnitees shall not be liable for, and are
hereby released from, any responsibility for any loss, cost, damage, expense or
liability to person or property arising from the use of the Fitness Center by
Tenant or Tenant’s employees. In connection with the operation of the Fitness
Center, Landlord reserves the right to promulgate commercially reasonable rules
and regulations applicable to all users of the Fitness Center, which rules and
regulations may include, as a condition to any person’s use of the Fitness
Center, of such person’s execution and delivery to Landlord of a release
agreement in a form specified by Landlord, releasing Landlord from any liability
arising out of or in connection with such person’s use of the Fitness Center
(and upon such person’s compliance with such rules and regulations which
Landlord may specify for the use of the Fitness Center). Landlord shall have the
right, from time to time, to relocate or eliminate the Fitness Center and use
such space as leasable space.
19. MISCELLANEOUS
(a) Attorneys’ Fees. In the event of any legal action or proceeding brought by
either party against the other arising out of this Lease, the prevailing party
shall be entitled to recover reasonable attorneys’ fees and costs (including,
without limitation, court costs and expert witness fees) incurred in such
action. Such amounts shall be included in any judgment rendered in any such
action or proceeding.
(b) Waiver. No waiver by Landlord of any provision of this Lease or of any
breach by Tenant hereunder shall be deemed to be a waiver of any other provision
hereof, or of any subsequent breach by Tenant. Landlord’s consent to or approval
of any act by Tenant requiring Landlord’s consent or approval under this Lease
shall not be deemed to render unnecessary the obtaining of Landlord’s consent to
or approval of any subsequent act of Tenant. No act or thing done by Landlord or
Landlord’s agents during the term of this Lease shall be deemed an acceptance of
a surrender of the Premises, unless in writing signed by Landlord. The delivery
of the keys to any employee or agent of Landlord shall not operate as a
termination of the Lease or a surrender of the Premises. The acceptance of any
Rent by Landlord following a breach of this Lease by Tenant shall not constitute
a waiver by Landlord of such breach or any other breach unless such waiver is
expressly stated in a writing signed by Landlord.

 

-33-

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

 

(c) Notices. Any notice, demand, request, consent, approval, disapproval or
certificate (“Notice”) required or desired to be given under this Lease shall be
in writing and given by certified mail, return receipt requested, by personal
delivery or by a nationally recognized overnight delivery service (such as
Federal Express or UPS) providing a receipt for delivery. Notices may not be
given by facsimile. The date of giving any Notice shall be deemed to be the date
upon which delivery is actually made by one of the methods described in this
Paragraph 19(c) (or attempted if said delivery is refused or rejected). If a
Notice is received on a Saturday, Sunday or legal holiday, it shall be deemed
received on the next business day. All notices, demands, requests, consents,
approvals, disapprovals, or certificates shall be addressed at the address
specified in Item 14 of the Basic Lease Provisions or to such other addresses as
may be specified by written notice from Landlord to Tenant and if to Tenant, at
the Premises. Either party may change its address by giving reasonable advance
written Notice of its new address in accordance with the methods described in
this Paragraph; provided, however, no notice of either party’s change of address
shall be effective until fifteen (15) days after the addressee’s actual receipt
thereof. For the purpose of this Lease, Landlord’s counsel may provide Notices
to Tenant on behalf of Landlord and such notices shall be binding on Tenant as
if such notices have been provided directly by Landlord.
(d) Access Control. Landlord shall be the sole determinant of the type and
amount of any access control or courtesy guard services to be provided to the
Project, if any. IN ALL EVENTS, LANDLORD SHALL NOT BE LIABLE TO TENANT, AND
TENANT HEREBY WAIVES ANY CLAIM AGAINST LANDLORD, FOR (I) ANY UNAUTHORIZED OR
CRIMINAL ENTRY OF THIRD PARTIES INTO THE PREMISES, THE BUILDING OR THE PROJECT,
(II) ANY DAMAGE TO PERSONS, OR (III) ANY LOSS OF PROPERTY IN AND ABOUT THE
PREMISES, THE BUILDING OR THE PROJECT, BY OR FROM ANY UNAUTHORIZED OR CRIMINAL
ACTS OF THIRD PARTIES, REGARDLESS OF ANY ACTION, INACTION, FAILURE, BREAKDOWN,
MALFUNCTION AND/OR INSUFFICIENCY OF THE ACCESS CONTROL OR COURTESY GUARD
SERVICES PROVIDED BY LANDLORD, IF ANY. Tenant shall provide such supplemental
security services and shall install within the Premises such supplemental
security equipment, systems and procedures as may reasonably be required for the
protection of its employees and invitees, provided that Tenant shall coordinate
such services and equipment with any security provided by Landlord. The
determination of the extent to which such supplemental security equipment,
systems and procedures are reasonably required shall be made in the sole
judgment, and shall be the sole responsibility, of Tenant. Tenant acknowledges
that it has neither received nor relied upon any representation or warranty made
by or on behalf of Landlord with respect to the safety or security of the
Premises or the Project or any part thereof or the extent or effectiveness of
any security measures or procedures now or hereafter provided by Landlord, and
further acknowledges that Tenant has made its own independent determinations
with respect to all such matters. Except as otherwise provided in this Lease and
subject to Force Majeure and any Access Control then implemented for the
Building, Tenant shall have access to the Building and the Premises 24 hours a
day, 365 days a year.
(e) Storage. Any storage space at any time leased to Tenant hereunder shall be
used exclusively for storage. Notwithstanding any other provision of this Lease
to the contrary, (i) Landlord shall have no obligation to provide heating,
cleaning, water or air conditioning therefor, and (ii) Landlord shall be
obligated to provide to such storage space only such electricity as will, in
Landlord’s judgment, be adequate to light said space as storage space.
(f) Holding Over. If Tenant retains possession of the Premises after the
termination or expiration of the Lease Term, then Tenant shall, at Landlord’s
election become a tenant at sufferance (and not a tenant at will), such
possession shall be subject to immediate termination by Landlord at any time,
and all of the other terms and provisions of this Lease (excluding any expansion
or renewal option or other similar right or option) shall be applicable during
such holdover period, except that Tenant shall pay Landlord from time to time,
upon demand, as Base Rent for the holdover period, an amount equal to: (i) One
Hundred Fifty Percent (150%) of the Base Rent in effect on the termination date
if Tenant has provided Landlord with written notice, at least six (6) months
notice prior to the termination date, of Tenant’s intent to holdover, or
(ii) without such advance notice, at the rate of One Hundred Sixty Percent
(160%) of the Base Rent in effect on the termination date, computed on a monthly
basis for each month or part thereof during such holding over. All other
payments (including payment of Additional Rent) shall continue under the terms
of this Lease. In addition, Tenant shall be liable for all damages incurred by
Landlord as a result of such holding over. Notwithstanding anything contained
herein, no holding over by Tenant, whether upon prior notice to Landlord or with
or without consent of Landlord, shall operate to extend this Lease except as
otherwise expressly provided and expressly agreed by Landlord in writing, and
this Paragraph shall not be construed as consent for Tenant to retain possession
of the Premises beyond the scheduled expiration date absent such express written
consent of Landlord.

 

-34-

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

 

(g) Condition of Premises. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS LEASE,
LANDLORD HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY THAT
THE PREMISES ARE SUITABLE FOR TENANT’S INTENDED PURPOSE OR USE, WHICH DISCLAIMER
IS HEREBY ACKNOWLEDGED BY TENANT. THE TAKING OF POSSESSION BY TENANT SHALL BE
CONCLUSIVE EVIDENCE THAT TENANT:
(i) ACCEPTS THE PREMISES, THE BUILDING AND LEASEHOLD IMPROVEMENTS AS SUITABLE
FOR THE PURPOSES FOR WHICH THE PREMISES WERE LEASED;
(ii) ACCEPTS THE PREMISES AND PROJECT AS BEING IN GOOD AND SATISFACTORY
CONDITION;
(iii) WAIVES ANY DEFECTS IN THE PREMISES AND ITS APPURTENANCES EXISTING NOW OR
IN THE FUTURE, EXCEPT THAT TENANT’S TAKING OF POSSESSION SHALL NOT BE DEEMED TO
WAIVE LANDLORD’S COMPLETION OF MINOR FINISH WORK ITEMS THAT DO NOT INTERFERE
WITH TENANT’S OCCUPANCY OF THE PREMISES; AND
(iv) WAIVES ALL CLAIMS BASED ON ANY IMPLIED WARRANTY OF SUITABILITY OR
HABITABILITY.
(h) Quiet Possession. Upon Tenant’s paying the Rent reserved hereunder and
observing and performing all of the covenants, conditions and provisions on
Tenant’s part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premises for the term hereof without hindrance or ejection by
any person lawfully claiming under Landlord, subject to the provisions of this
Lease and to the provisions of any (i) covenants, conditions and restrictions,
(ii) master lease, or (iii) Security Documents to which this Lease is
subordinate or may be subordinated.
(i) Matters of Record. Except as otherwise provided herein, this Lease and
Tenant’s rights hereunder are subject and subordinate to all matters affecting
Landlord’s title to the Project recorded in the Real Property Records of the
County in which the Project is located, prior to and subsequent to the date
hereof, including, without limitation, all covenants, conditions and
restrictions. Tenant agrees for itself and all persons in possession or holding
under it that it will comply with and not violate any such covenants, conditions
and restrictions or other matters of record. Landlord reserves the right, from
time to time, to grant such easements, rights and dedications as Landlord deems
necessary or desirable, and to cause the recordation of parcel maps and
covenants, conditions and restrictions affecting the Premises, the Building or
the Project, as long as such easements, rights, dedications, maps, and
covenants, conditions and restrictions do not materially interfere with the use
of the Premises by Tenant. At Landlord’s request, Tenant shall join in the
execution of any of the aforementioned documents.
(j) Successors and Assigns. Except as otherwise provided in this Lease, all of
the covenants, conditions and provisions of this Lease shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns. Tenant shall attorn to each
purchaser, successor or assignee of Landlord.
(k) Brokers. Tenant warrants that it has had no dealings with any real estate
broker or agent in connection with the negotiation of this Lease, excepting only
the brokers named in Item 12 of the Basic Lease Provisions and that it knows of
no other real estate broker or agent who is or might be entitled to a commission
in connection with this Lease. Tenant hereby agrees to indemnify, defend and
hold Landlord harmless for, from and against all claims for any brokerage
commissions, finders’ fees or similar payments by any persons other than those
listed in Item 12 of the Basic Lease Provisions and all costs, expenses and
liabilities incurred in connection with such claims, including reasonable
attorneys’ fees and costs.

 

-35-

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

 

(l) Project or Building Name and Signage.
(i) Landlord shall have the right at any time 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. Additionally, Landlord shall have the
exclusive right at all times during the Lease Term to change, modify, add to or
otherwise alter the name, number, or designation of the Building and/or the
Project, and Landlord shall not be liable for claims or damages of any kind
which may be attributed thereto or result therefrom.
(ii) Landlord shall provide to Tenant, at Landlord’s sole cost and expense
Building standard suite entry and directory board identity signs; provided,
however, any subsequent change to said sign shall be at Tenant’s sole cost and
expense. In addition to the foregoing, subject to Landlord’s prior reasonable
approval, the sign criteria for the Building, all covenants, conditions, and
restrictions affecting the Project and all applicable laws, rules, regulations,
and local ordinances, and subject to Landlord obtaining all necessary permits
and approvals from the City of San Diego, Tenant shall also have the
non-exclusive right, at Tenant’s sole cost and expense, to have the name
“SOMAXON PHARMACEUTICALS” including, at Tenant’s sole discretion, Tenant’s
corporate logo placed on one (1) panel on the existing monument sign in the
Common Areas (“Monument Sign”); provided, however, if Tenant does not install
the Monument Sign within twelve (12) months of the Commencement Date, such right
to install the Monument Sign shall terminate. The location of Tenant’s panel on
the Monument Sign will be determined by Landlord. Tenant shall be solely
responsible for payment of all costs and expenses arising from Tenant’s panel on
the Monument Sign, including, without limitation, all design, fabrication and
permitting costs, license fees, installation, maintenance, repair and removal
costs. Landlord shall maintain and repair all of Tenant’s signs at Tenant’s
expense. Upon the expiration or earlier termination of this Lease, Landlord
shall, at Landlord’s sole cost and expense (except as otherwise set forth
hereinabove), (i) cause all of Tenant’s signs to be removed from the exterior
and interior of the Building and the Common Areas, (ii) repair any damage caused
by the removal of Tenant’s signs, and (iii) restore the underlying surfaces to
the condition existing prior to the installation of Tenant’s signs. The sign
rights granted herein are personal to the original Tenant executing this Lease
and may not be assigned, voluntarily or involuntarily, to any person or entity
except if Tenant is merged with or acquired by another entity, that entity may
be assigned the sign rights. The rights granted to the original Tenant hereunder
are not assignable separate and apart from the Lease, nor may any right granted
herein be separated from the Lease in any manner, either by reservation or
otherwise.
(m) Examination of Lease. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for lease,
and it is not effective as a lease or otherwise until execution by and delivery
to both Landlord and Tenant.
(n) Time. Time is of the essence of this Lease and each and all of its
provisions.
(o) Defined Terms and Marginal Headings. The words “Landlord” and “Tenant” as
used herein shall include the plural as well as the singular and for purposes of
Paragraphs 5, 7, 13 and 18, the term Landlord shall include Landlord, its
employees, contractors and agents. If more than one person or entity is named
das Tenant, then the obligations of such persons and/or entities are joint and
several. The marginal headings and titles to the articles of this Lease are not
a part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.
(p) Conflict of Laws; Prior Agreements; Separability. This Lease shall be
governed by and construed pursuant to the laws of the State of California.
Except for the indemnity letter dated April 29, 2011, this Lease contains all of
the agreements of the parties hereto with respect to any matter covered or
mentioned in this Lease. No prior agreement, understanding or representation
pertaining to any such matter shall be effective for any purpose. No provision
of this Lease may be amended or added to except by an agreement in writing
signed by the parties hereto or their respective successors in interest. The
illegality, invalidity or unenforceability of any provision of this Lease shall
in no way impair or invalidate any other provision of this Lease, and such
remaining provisions shall remain in full force and effect.

 

-36-

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

 

(q) Authority. If Tenant is a corporation or limited liability company, each
individual executing this Lease on behalf of Tenant hereby covenants and
warrants that Tenant is a duly authorized and existing corporation or limited
liability company, that Tenant has and is qualified to do business in the State
of California, that the corporation or limited liability company has full right
and authority to enter into this Lease, and that each person signing on behalf
of the corporation is authorized to do so. If Tenant is a partnership or trust,
each individual executing this Lease on behalf of Tenant hereby covenants and
warrants that he is duly authorized to execute and deliver this Lease on behalf
of Tenant in accordance with the terms of such entity’s partnership or trust
agreement. Tenant shall provide Landlord on demand with such evidence of such
authority as Landlord shall reasonably request, including, without limitation,
resolutions, certificates and opinions of counsel. This Lease shall not be
construed to create a partnership, joint venture or similar relationship or
arrangement between Landlord and Tenant hereunder.
(r) Joint and Several Liability. If two or more individuals, corporations,
partnerships or other business associations (or any combination of two or more
thereof) shall sign this Lease as Tenant, the liability of each such individual,
corporation, partnership or other business association to pay Rent and perform
all other obligations hereunder shall be deemed to be joint and several, and all
notices, payments and agreements given or made by, with or to any one of such
individuals, corporations, partnerships or other business associations shall be
deemed to have been given or made by, with or to all of them. In like manner, if
Tenant shall be a partnership or other business association, the members of
which are, by virtue of statute or federal law, subject to personal liability,
then the liability of each such member shall be joint and several.
(s) Rental Allocation. For purposes of Section 467 of the Internal Revenue Code
of 1986, as amended from time to time, Landlord and Tenant hereby agree to
allocate all Rent to the period in which payment is due, or if later, the period
in which Rent is paid.
(t) Rules and Regulations. Tenant agrees to comply with all rules and
regulations of the Building and the Project imposed by Landlord as set forth on
Exhibit C attached hereto, as the same may be changed from time to time upon
reasonable notice to Tenant, provided that the rules are changed for all tenants
in the Building and Project on an equal basis. Landlord shall not be liable to
Tenant for the failure of any other tenant or any of its assignees, subtenants,
or their respective agents, employees, representatives, invitees or licensees to
conform to such rules and regulations.
(u) Joint Product. This Agreement is the result of arms-length negotiations
between Landlord and Tenant and their respective attorneys. Accordingly, neither
party shall be deemed to be the author of this Lease and this Lease shall not be
construed against either party.
(v) Financial Statements. Upon Landlord’s written request, Tenant shall promptly
furnish Landlord, from time to time, with the most current audited financial
statements prepared in accordance with generally accepted accounting principles,
certified by Tenant and an independent auditor to be true and correct,
reflecting Tenant’s then current financial condition.
(w) Force Majeure. Any prevention, delay or stoppage due to strikes, lockouts,
labor disputes, acts of God, acts of war, terrorism, terrorist activities,
inability to obtain services, labor, or materials or reasonable substitutes
therefore, governmental actions, civil commotions, fire, flood, earthquake 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 and except
as to Tenant’s obligations under Paragraphs 6, 8 and 19(f) of 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.
(x) Counterparts. This Lease may be executed in several counterparts, each of
which shall be deemed an original, and all of which shall constitute but one and
the same instrument.

 

-37-

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

 

(y) Waiver of Right to Jury Trial. LANDLORD AND TENANT WAIVE THEIR RESPECTIVE
RIGHTS TO TRIAL BY JURY OF ANY CONTRACT OR TORT CLAIM, COUNTERCLAIM,
CROSS-COMPLAINT, OR CAUSE OF ACTION IN ANY ACTION, PROCEEDING, OR HEARING
BROUGHT BY EITHER PARTY AGAINST THE OTHER ON ANY MATTER ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, OR
TENANT’S USE OR OCCUPANCY OF THE LEASED PREMISES, INCLUDING WITHOUT LIMITATION
ANY CLAIM OF INJURY OR DAMAGE OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY CURRENT
OR FUTURE LAW, STATUTE, REGULATION, CODE, OR ORDINANCE. Landlord and Tenant
agree that this paragraph constitutes a written consent to waiver of trial by
jury within the meaning of California Code of Civil Procedure Section 631(a)(2),
and Tenant does hereby authorize and empower Landlord to file this paragraph
and/or this Lease, as required, with the clerk or judge of any court of
competent jurisdiction as a written consent to waiver of jury trial.
(z) ARBITRATION OF DISPUTES. IN THE EVENT THAT THE JURY WAIVER PROVISIONS OF
SECTION 19(y) ABOVE ARE NOT ENFORCEABLE UNDER CALIFORNIA LAW, THEN THE FOLLOWING
PROVISIONS OF THIS SECTION 19(z) SHALL APPLY. IT IS THE DESIRE AND INTENTION OF
THE PARTIES TO AGREE UPON A MECHANISM AND PROCEDURE UNDER WHICH CONTROVERSIES
AND DISPUTES ARISING OUT OF THIS LEASE OR RELATED TO THE PREMISES WILL BE
RESOLVED IN A PROMPT AND EXPEDITIOUS MANNER. ACCORDINGLY, EXCEPT WITH RESPECT TO
ACTIONS FOR UNLAWFUL OR FORCIBLE DETAINER OR WITH RESPECT TO THE PREJUDGMENT
REMEDY OF ATTACHMENT, ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER
PARTY HERETO AGAINST THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS OR SUBSIDIARY OR AFFILIATED ENTITIES) ON ANY MATTERS
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, TENANT’S USE
OR OCCUPANCY OF THE PREMISES AND/OR ANY CLAIM OF INJURY OR DAMAGE, SHALL BE
HEARD AND RESOLVED BY A REFEREE UNDER THE PROVISIONS OF THE CALIFORNIA CODE OF
CIVIL PROCEDURE, SECTIONS 638 — 645.1, INCLUSIVE (AS SAME MAY BE AMENDED, OR ANY
SUCCESSOR STATUTE(S) THERETO) (THE “REFEREE SECTIONS”). ANY FEE TO INITIATE THE
JUDICIAL REFERENCE PROCEEDINGS SHALL BE PAID BY THE PARTY INITIATING SUCH
PROCEDURE; PROVIDED HOWEVER, THAT THE COSTS AND FEES, INCLUDING ANY INITIATION
FEE, OF SUCH PROCEEDING SHALL ULTIMATELY BE BORNE IN ACCORDANCE WITH SECTION
19(a) ABOVE. THE VENUE OF THE PROCEEDINGS SHALL BE IN THE COUNTY IN WHICH THE
PREMISES ARE LOCATED. WITHIN TEN (10) DAYS OF RECEIPT BY ANY PARTY OF A WRITTEN
REQUEST TO RESOLVE ANY DISPUTE OR CONTROVERSY PURSUANT TO THIS SECTION 19(z),
THE PARTIES SHALL AGREE UPON A SINGLE REFEREE WHO SHALL TRY ALL ISSUES, WHETHER
OF FACT OR LAW, AND REPORT A FINDING AND JUDGMENT ON SUCH ISSUES AS REQUIRED BY
THE REFEREE SECTIONS. IF THE PARTIES ARE UNABLE TO AGREE UPON A REFEREE WITHIN
SUCH TEN (10) DAY PERIOD, THEN ANY PARTY MAY THEREAFTER FILE A LAWSUIT IN THE
COUNTY IN WHICH THE PREMISES ARE LOCATED FOR THE PURPOSE OF APPOINTMENT OF A
REFEREE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 638 AND 640, AS SAME
MAY BE AMENDED OF ANY SUCCESSOR STATUTE(S) THERETO. IF THE REFEREE IS APPOINTED
BY THE COURT, THE REFEREE SHALL BE A NEUTRAL AND IMPARTIAL RETIRED JUDGE WITH
SUBSTANTIAL EXPERIENCE IN THE RELEVANT MATTERS TO BE DETERMINED, FROM
JAMS/ENDISPUTE, INC., THE AMERICAN ARBITRATION ASSOCIATION OR SIMILAR
MEDIATION/ARBITRATION ENTITY. THE PROPOSED REFEREE MAY BE CHALLENGED BY ANY
PARTY FOR ANY OF THE GROUNDS LISTED IN SECTION 641 OF THE CALIFORNIA CODE OF
CIVIL PROCEDURE, AS SAME MAY BE AMENDED OR ANY SUCCESSOR STATUTE(S) THERETO. THE
REFEREE SHALL HAVE THE POWER TO DECIDE ALL ISSUES OF FACT AND LAW AND REPORT HIS
OR HER DECISION ON SUCH ISSUES, AND TO ISSUE ALL RECOGNIZED REMEDIES AVAILABLE
AT LAW OR IN EQUITY FOR ANY CAUSE OF ACTION THAT IS BEFORE THE REFEREE,
INCLUDING AN AWARD OF ATTORNEYS’ FEES AND COSTS IN ACCORDANCE WITH CALIFORNIA
LAW. THE REFEREE SHALL NOT, HOWEVER, HAVE THE POWER TO AWARD PUNITIVE DAMAGES,
NOR ANY OTHER DAMAGES WHICH ARE NOT PERMITTED BY THE EXPRESS PROVISIONS OF THIS
LEASE, AND THE PARTIES HEREBY WAIVE ANY RIGHT TO RECOVER ANY SUCH DAMAGES. THE
PARTIES SHALL BE ENTITLED TO CONDUCT ALL DISCOVERY AS PROVIDED IN THE CALIFORNIA
CODE OF CIVIL PROCEDURE, AND THE REFEREE SHALL OVERSEE DISCOVERY AND MAY ENFORCE
ALL DISCOVERY ORDERS IN THE SAME MANNER AS ANY TRIAL COURT JUDGE, WITH RIGHTS TO
REGULATE DISCOVERY AND

 

-38-

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

 

TO ISSUE AND ENFORCE SUBPOENAS, PROTECTIVE ORDERS AND OTHER LIMITATIONS ON
DISCOVERY AVAILABLE UNDER CALIFORNIA LAW. THE REFERENCE PROCEEDING SHALL BE
CONDUCTED IN ACCORDANCE WITH CALIFORNIA LAW (INCLUDING THE RULES OF EVIDENCE),
AND IN ALL REGARDS, THE REFEREE SHALL FOLLOW CALIFORNIA LAW APPLICABLE AT THE
TIME OF THE REFERENCE PROCEEDING. IN ACCORDANCE WITH SECTION 644 OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE, THE DECISION OF THE REFEREE UPON THE WHOLE
ISSUE MUST STAND AS THE DECISION OF THE COURT, AND UPON THE FILING OF THE
STATEMENT OF DECISION WITH THE CLERK OF THE COURT, OR WITH THE JUDGE IF THERE IS
NO CLERK, JUDGMENT MAY BE ENTERED THEREON IN THE SAME MANNER AS IF THE ACTION
HAD BEEN TRIED BY THE COURT. THE PARTIES SHALL PROMPTLY AND DILIGENTLY COOPERATE
WITH ONE ANOTHER AND THE REFEREE, AND SHALL PERFORM SUCH ACTS AS MAY BE
NECESSARY TO OBTAIN A PROMPT AND EXPEDITIOUS RESOLUTION OF THE DISPUTE OR
CONTROVERSY IN ACCORDANCE WITH THE TERMS OF THIS SECTION 19(z). TO THE EXTENT
THAT NO PENDING LAWSUIT HAS BEEN FILED TO OBTAIN THE APPOINTMENT OF A REFEREE,
ANY PARTY, AFTER THE ISSUANCE OF THE DECISION OF THE REFEREE, MAY APPLY TO THE
COURT OF THE COUNTY IN WHICH THE PREMISES ARE LOCATED FOR CONFIRMATION BY THE
COURT OF THE DECISION OF THE REFEREE IN THE SAME MANNER AS A PETITION FOR
CONFIRMATION OF AN ARBITRATION AWARD PURSUANT TO CODE OF CIVIL PROCEDURE SECTION
1285 ET SEQ. (AS SAME MAY BE AMENDED OR ANY SUCCESSOR STATUTE(S) THERETO).
(aa) Office and Communications Services. Landlord has advised Tenant that
certain office and communications services may be offered to tenants of the
Building by a concessionaire under contract to Landlord (“Provider”). Tenant
shall be permitted to contract with Provider for the provision of any or all of
such services on such terms and conditions as Tenant and Provider may agree.
Tenant acknowledges and agrees that: (i) Landlord has made no warranty or
representation to Tenant with respect to the availability of any such services,
or the quality, reliability or suitability thereof; (ii) the Provider is not
acting as the agent or representative of Landlord in the provision of such
services, and Landlord shall have no liability or responsibility for any failure
or inadequacy of such services, or any equipment or facilities used in the
furnishing thereof, or any act or omission of Provider, or its agents,
employees, representatives, officers or contractors; (iii) Landlord shall have
no responsibility or liability for the installation, alteration, repair,
maintenance, furnishing, operation, adjustment or removal of any such services,
equipment or facilities; and (iv) any contract or other agreement between Tenant
and Provider shall be independent of this Lease, the obligations of Tenant
hereunder, and the rights of Landlord hereunder, and, without limiting the
foregoing, no default or failure of Provider with respect to any such services,
equipment or facilities, or under any contract or agreement relating thereto,
shall have any effect on this Lease or give to Tenant any offset or defense to
the full and timely performance of its obligations hereunder, or entitle Tenant
to any abatement of rent or additional rent or any other payment required to be
made by Tenant hereunder, or constitute any accrual or constructive eviction of
Tenant, or otherwise give rise to any other claim of any nature against
Landlord.
(bb) OFAC Compliance.
(i) Certification. Tenant certifies, represents, warrants and covenants that:
(A) It is not acting and will not act, directly or indirectly, for or on behalf
of any person, group, entity, or nation named by any Executive Order or the
United States Treasury Department as a terrorist, “Specially Designated National
and Blocked Person”, or other banned or blocked person, entity, nation or
transaction pursuant to any law, order, rule, or regulation that is enforced or
administered by the Office of Foreign Assets Control; and
(B) It is not engaged in this transaction, directly or indirectly on behalf of,
or instigating or facilitating this transaction, directly or indirectly on
behalf of, any such person, group, entity or nation.
(ii) Indemnity. Tenant hereby agrees to defend (with counsel reasonably
acceptable to Landlord), indemnify and hold harmless Landlord and the Landlord
Indemnitees from and against any and all Claims arising from or related to any
such breach of the foregoing certifications, representations, warranties and
covenants.

 

-39-

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

 

(cc) No Easement For Light, Air And View. This Lease conveys to Tenant no rights
for any light, air or view. No diminution of light, air or view, or any
impairment of the visibility of the Premises from inside or outside the
Building, by any structure or other object that may hereafter be erected
(whether or not by Landlord) shall entitle Tenant to any reduction of Rent under
this Lease, constitute an actual or constructive eviction of Tenant, result in
any liability of Landlord to Tenant, or in any other way affect this Lease or
Tenant’s obligations hereunder.
(dd) Nondisclosure of Lease Terms. Tenant agrees that the terms of this Lease
are confidential and constitute proprietary information of Landlord, and that
disclosure of the terms hereof could adversely affect the ability of Landlord to
negotiate with other tenants. Tenant hereby agrees that Tenant and its partners,
officers, directors, employees, agents, real estate brokers and sales persons
and attorneys shall not disclose the terms of this Lease to any other person
without Landlord’s prior written consent, except to any accountants of Tenant in
connection with the preparation of Tenant’s financial statements or tax returns,
to an assignee of this Lease or subtenant of the Premises, or to an entity or
person to whom disclosure is require by applicable law or in connection with any
action brought to enforce this Lease.
(ee) Anti-Terrorism Representation. To the best of Tenant’s knowledge, neither
Tenant nor any of its affiliates have engaged in any dealings or transactions,
directly or indirectly, (i) in contravention of any U.S., international or other
money laundering regulations or conventions, including, without limitation, the
United States Bank Secrecy Act, the United States Money Laundering Control Act
of 1986, the United States International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001, Trading with the Enemy Act (50 U.S.C. §1
et seq., as amended), or any foreign asset control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any
enabling legislation or executive order relating thereto, or (ii) in
contravention of Executive Order No. 13,244,66 Fed. Reg. 49,079 (2001) issued by
the President of the United States (Executive Order Blocking Property and
Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support
Terrorism), as may be amended or supplemented from time to time (“Anti-Terrorism
Order”) or on behalf of terrorists or terrorist organizations, including those
persons or entities that are included on any relevant lists maintained by the
United Nations, North Atlantic Treaty Organization, Organization of Economic
Cooperation and Development, Financial Action Task Force, U.S. Office of Foreign
Assets Control, U.S. Securities & Exchange Commission, U.S. Federal Bureau of
Investigation, U.S. Central Intelligence Agency, U.S. Internal Revenue Service,
or any country or organization, all as may be amended from time to time. Neither
Tenant nor any of its affiliates are a person described in section 1 of the
Anti-Terrorism Order and neither Tenant nor any of its affiliates have engaged
in any dealings or transactions, or otherwise been associated with any such
person. If at any time this representation becomes false then it shall be
considered a default under this Lease and Landlord shall have the right to
exercise all of the remedies set forth in this Lease in the event of a default.
[SIGNATURE PAGE TO FOLLOW]

 

-40-

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

 

SIGNATURE PAGE TO OFFICE LEASE
BY AND BETWEEN TREA PACIFIC PLAZA, LLC, AS LANDLORD,
AND SOMAXON PHARMACEUTICALS, INC., AS TENANT
IN WITNESS WHEREOF, the parties have executed this Lease to be effective as of
the Date of this Lease.

                      “LANDLORD”:       “TENANT”:
 
                    TREA PACIFIC PLAZA, LLC,
a Delaware limited liability company       SOMAXON PHARMACEUTICALS, INC.,
a Delaware corporation
 
                    By:   ,           
 
                      a     ,      By:   /s/ Richard W. Pascoe
 
                      as agent           Name: Richard W. Pascoe
 
                  Title: President & CEO
 
                   
 
  By:   /s/ Robert E. Niendorf            
 
                   
 
      Name: Robert E. Niendorf       By:   /s/ Tran Nguyen
 
                   
 
      Title: Director           Name: Tran Nguyen
 
                  Title: CFO

 

      *  
NOTE:

If Tenant is a California corporation, then one of the following alternative
requirements must be satisfied:

  (i)  
This Lease must be signed by two (2) officers of such corporation: one being the
chairman of the board, the president or a vice president, and the other being
the secretary, an assistant secretary, the chief financial officer or an
assistant treasurer. If one (1) individual is signing in two (2) of the
foregoing capacities, that individual must sign twice; once as one officer and
again as the other officer.
    (ii)  
If there is only one (1) individual signing in two (2) capacities, or if the two
(2) signatories do not satisfy the requirements of (A) above, then Tenant shall
deliver to Landlord a certified copy of a corporate resolution in a form
reasonably acceptable to Landlord authorizing the signatory(ies) to execute this
Lease.

If Tenant is a corporation incorporated in a state other than California, then
Tenant shall deliver to Landlord a certified copy of a corporate resolution in a
form reasonably acceptable to Landlord authorizing the signatory(ies) to execute
this Lease.

 

-41-

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

 

EXHIBIT A
FLOOR PLAN OF THE PREMISES

EXHIBIT A 

-1-

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

 

EXHIBIT B
WORK LETTER
THIS WORK LETTER is attached as Exhibit B to the Office Lease between TREA
PACIFIC PLAZA, LLC, a Delaware limited liability company, as Landlord, and
SOMAXON PHARMACEUTICALS, INC., a Delaware corporation, as Tenant, and
constitutes the further agreement between Landlord and Tenant as follows:
1. TENANT IMPROVEMENTS. Landlord shall construct and, except as provided below
to the contrary, pay for the entire cost of constructing the tenant improvements
(“Tenant Improvements”) as described by the plans and specifications (including
price specifications) identified in Schedule “1” attached hereto (the “Plans”).
Tenant may request changes to the Plans prior to the Commencement Date provided
that (a) the changes shall not be of a lesser quality than Landlord’s standard
specifications for tenant improvements for the Building, as the same may be
changed from time to time by Landlord (the “Standards”); (b) the changes conform
to applicable governmental regulations and necessary governmental permits and
approvals can be secured; (c) the changes do not require building service beyond
the levels normally provided to other tenants in the Building; (d) the changes
do not have any adverse affect on the structural integrity or systems of the
Building; (e) the changes will not, in Landlord’s reasonable opinion,
unreasonably delay construction of the Tenant Improvements; and (f) Landlord has
determined in its sole discretion that the changes are of a nature and quality
consistent with the overall objectives of Landlord for the Building. If Landlord
approves a change requested by Tenant, then, as a condition to the effectiveness
of Landlord’s approval, Tenant shall pay to Landlord upon demand by Landlord the
increased cost attributable to such change, as reasonably determined by Landlord
and which Landlord has previously provided a reasonable estimate of the cost of
such change. To the extent any such change results in a delay of completion of
construction of the Tenant Improvements, then such delay shall constitute a
delay caused by Tenant as described below. Landlord’s contractors for the
Project shall bid and construct the Tenant Improvements.
2. CONSTRUCTION OF TENANT IMPROVEMENTS. Upon Tenant’s payment to Landlord of the
total amount of the cost of any changes to the Plans, if any, Landlord’s
contractor shall commence and diligently proceed with the construction of the
Tenant Improvements, subject to Tenant Delays (as described in Section 4 below)
and Force Majeure Delays (as described in Section 5 below). Promptly upon the
commencement of the Tenant Improvements, Landlord shall furnish Tenant with a
construction schedule letter setting forth the projected completion dates
therefor and showing the deadlines for any actions required to be taken by
Tenant during such construction, and Landlord may from time to time during
construction of the Tenant Improvements modify such schedule.
3. COMMENCEMENT DATE AND SUBSTANTIAL COMPLETION.
(a) Commencement Date. The Lease Term shall commence on the date (the
“Commencement Date”) which is the earlier of:
(i) the date Tenant moves into the Premises to commence operation of its
business in all or any portion of the Premises; or
(ii) the date the Tenant Improvements have been “substantially completed” (as
defined below); provided, however, that if substantial completion of the Tenant
Improvements is delayed as a result of any Tenant Delays described in Section 4
below, then the Commencement Date as would otherwise have been established
pursuant to this Section 3(a)(ii) shall be accelerated by the number of days of
such Tenant Delays.
(b) Substantial Completion; Punch-List. For purposes of Section 3(a)(ii) above,
the Tenant Improvements shall be deemed to be “substantially completed” when
Landlord: (a) is able to provide Tenant reasonable access to the Premises to
conduct business; (b) has substantially completed the Tenant Improvements in
accordance with the Plans, other than decoration and minor “punch-list” type
items and adjustments which do not materially interfere with Tenant’s access to
or use of the Premises to conduct business; and (c) has obtained a temporary
certificate of occupancy or other required equivalent approval from the local
governmental authority permitting occupancy of the

EXHIBIT B 

-1-

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

 

Premises. Within ten (10) days after such substantial completion, Tenant shall
conduct a walk-through inspection of the Premises with Landlord and provide to
Landlord a written punch-list specifying those decoration and other punch-list
items which require completion, which items Landlord shall thereafter diligently
complete; provided, however, that Tenant shall be responsible, at Tenant’s sole
cost and expense, for the remediation of any items on the punch-list caused by
Tenant’s acts or omissions.
4. Delivery of Possession. Landlord agrees to deliver possession of the Premises
to Tenant when the Tenant Improvements have been substantially completed in
accordance with Section (b) above. The parties estimate that Landlord will
deliver possession of the Premises to Tenant and the Initial Term of this Lease
will commence on or before the Estimated Commencement Date set forth in Item 10
of the Basic Lease Provisions. Landlord shall use its commercially reasonable
efforts to cause the Premises to be substantially completed on or before the
Estimated Commencement Date.
5. TENANT DELAYS. For purposes of this Work Letter, “Tenant Delays” shall mean
any delay in the completion of the Tenant Improvements resulting from any or all
of the following: (a) Tenant’s failure to timely perform any of its obligations
pursuant to this Work Letter, including any failure to complete, on or before
the due date therefor, any action item which is Tenant’s responsibility pursuant
to the Work Schedule or any schedule delivered by Landlord to Tenant pursuant to
this Work Letter, provided, however, that Landlord has given Tenant reasonable
advance notice of such items; (b) Tenant’s changes to the Plans that cause a
material delay in construction or work schedule; (c) Tenant’s request for
materials, finishes, or installations which are not readily available or which
are incompatible with the Standards, and which Landlord has promptly notified
Tenant of such fact; (d) any delay of Tenant in making payment to Landlord for
Tenant’s share of any costs in excess of the cost of the Tenant Improvements as
described in the Plans; or (e) any other act or failure to act by Tenant,
Tenant’s employees, agents, architects, independent contractors, consultants
and/or any other person performing or required to perform services on behalf of
Tenant that materially delay construction or the work schedule.
6. FORCE MAJEURE DELAYS. For purposes of this Work Letter, “Force Majeure
Delays” shall mean any actual delay beyond the reasonable control of Landlord in
the construction of the Tenant Improvements, which is not a Tenant Delay and
which is caused by any of the causes described in Paragraph 19(w) of the Lease.
[SIGNATURES CONTINUED ON FOLLOWING PAGE]

EXHIBIT B

-2-

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

 

                      “LANDLORD”:       “TENANT”:
 
                    TREA PACIFIC PLAZA, LLC,
a Delaware limited liability company       SOMAXON PHARMACEUTICALS, INC.,
a Delaware corporation
 
                    By:   ,           
 
                      a   ,      By:   /s/ Richard W. Pascoe
 
                      as agent           Name: Richard W. Pascoe
 
                  Title: President & CEO
 
                   
 
  By:   /s/ Robert E. Niendorf            
 
                   
 
      Name: Robert E. Niendorf       By:   /s/ Tran Nguyen
 
                   
 
      Title: Director           Name: Tran Nguyen
 
                  Title: CFO

EXHIBIT B

-3-

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

 

SCHEDULE “1”
PLANS AND SPECIFICATIONS

SCHEDULE “1”

-1-

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

 

EXHIBIT C
BUILDING RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules, stairways
and corridors of halls shall not be obstructed or used for any purpose other
than ingress and egress. The halls, passages, entrances, elevators, stairways,
balconies and roof are not for the use of the general public, and the Landlord
shall in all cases retain the right to control and prevent access thereto of all
persons whose presence, in the judgment of the Landlord, shall be prejudicial to
the safety, character, reputation and interests of the Building and its tenants,
provided that nothing herein contained shall be construed to prevent such access
to persons with whom the Tenant normally deals only for the purpose of
conducting its business in the Premises (such as clients, customers, office
suppliers and equipment vendors, and the like) unless such persons are engaged
in illegal activities. No tenant and no employees of any tenant shall go upon
the roof of the Building without the written consent of Landlord.
2. No awnings or other projections shall be attached to the outside walls of the
Building. No curtains, blinds, shades or screens shall be attached to or hung
in, or used in connection with, any window or door of the Premises other than
Landlord standard window coverings. All electrical ceiling fixtures hung in
offices or spaces along the perimeter of the Building must be fluorescent, of a
quality, type, design and bulb color approved by Landlord. Neither the interior
nor the exterior of any windows shall be coated or otherwise sunscreened without
the written consent of Landlord.
3. No sign, advertisement, notice or handbill shall be exhibited, distributed,
painted or affixed by any tenant on, about or from any part of the Premises, the
Building or the Project without the prior written consent of the Landlord. If
the Landlord shall have given such consent at the time, whether before or after
the execution of this Lease, such consent shall in no way operate as a waiver or
release of any of the provisions hereof or of this Lease, and shall be deemed to
relate only to the particular sign, advertisement or notice so consented to by
the Landlord and shall not be construed as dispensing with the necessity of
obtaining the specific written consent of the Landlord with respect to each and
every such sign, advertisement or notice other than the particular sign,
advertisement or notice, as the case may be, so consented to by the Landlord. In
the event of the violation of the foregoing by any tenant, Landlord may remove
or stop same without any liability, and may charge the expense incurred in such
removal or stopping to such tenant. Interior signs on doors and the directory
tablet shall be inscribed, painted or affixed for each tenant by the Landlord at
the expense of such tenant, and shall be of a size, color and style acceptable
to the Landlord. The directory tablet will be provided exclusively for the
display of the name and location of tenants only and Landlord reserves the right
to exclude any other names therefrom. Nothing may be placed on the exterior of
corridor walls or corridor doors other than Landlord’s standard lettering.
4. The sashes, sash doors, skylights, windows, and doors that reflect or admit
light and air into halls, passageways or other public places in the Building
shall not be covered or obstructed by any tenant, nor shall any bottles, parcels
or other articles be placed on the window sills. Tenant shall see that the
windows, transoms and doors of the Premises are closed and securely locked
before leaving the Building and must observe strict care not to leave windows
open when it rains. Tenant shall exercise extraordinary care and caution that
all water faucets or water apparatus are entirely shut off before Tenant or
Tenant’s employees leave the Building, and that all electricity, gas or air
shall likewise be carefully shut off, so as to prevent waste or damage. Tenant
shall cooperate with Landlord in obtaining maximum effectiveness of the cooling
system by closing window coverings when the sun’s rays fall directly on the
windows of the Premises. Tenant shall not tamper with or change the setting of
any thermostats or temperature control valves.
5. The toilet rooms, water and wash closets and other plumbing fixtures shall
not be used for any purpose other than those for which they were considered, and
no sweepings, rubbish, rags or other substances shall be thrown therein. All
damages resulting from any misuse of the fixtures shall be borne by the tenant
who, or whose subtenants, assignees or any of their servants, employees, agents,
visitors or licensees shall have caused the same.

EXHIBIT C

-1-

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

 

6. No tenant shall mark, paint, drill into, or in any way deface any part of the
Premises, the Building or the Project, except for normal installation of
artwork, AV equipment and other typical office place fixtures. No boring,
cutting or stringing of wires or laying of linoleum or other similar floor
coverings shall be permitted, except with the prior written consent of the
Landlord and as the Landlord may direct.
7. No bicycles, vehicles, birds or animals of any kind shall be brought into or
kept in or about the Premises, and no cooking shall be done or permitted by any
tenant on the Premises, except that the preparation of coffee, tea, hot
chocolate and similar items (including those suitable for microwave heating) for
tenants and their employees shall be permitted, provided that the power required
therefor shall not exceed that amount which can be provided by a 30 amp circuit.
No tenant shall cause or permit any unusual or objectionable odors to be
produced or permeate the Premises. Smoking or carrying lighted cigars,
cigarettes or pipes in the Building is prohibited.
8. The Premises shall not be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the permitted use of the
Premises. No tenant shall occupy or permit any portion of the Premises to be
occupied as an office for a public stenographer or typist, or for the
manufacture or sale of liquor, narcotics, or tobacco (except by a cigarette
vending machine for use by Tenant’s employees) in any form, or as a medical
office, or as a barber or manicure shop, or as an employment bureau, without the
express written consent of Landlord. No tenant shall engage or pay any employees
on the Premises except those actually working for such tenant on the Premises
nor advertise for laborers giving an address at the Premises. The Premises shall
not be used for lodging or sleeping or for any immoral or illegal purposes.
9. No tenant shall make, or permit to be made any unseemly or disturbing noises
or disturb or interfere with occupants of this or neighboring buildings or
premises or those having business with them, whether by the use of any musical
instrument, radio, phonograph, unusual noise, or in any other way. No tenant
shall throw anything out of doors, windows or skylights or down the passageways.
10. No tenant, subtenant or assignee nor any of their servants, employees,
agents, visitors or licensees shall at any time bring or keep upon the Premises
any inflammable, combustible or explosive fluid, chemical or substance.
11. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows by any tenant, nor shall any changes be made in existing locks
or the mechanisms thereof. Each tenant must, upon the termination of his
tenancy, restore to Landlord all keys of stores, offices, and toilet rooms,
either furnished to, or otherwise procured by, such tenant and in the event of
the loss of keys so furnished, such tenant shall pay to Landlord the cost of
replacing the same or of changing the lock or locks opened by such lost key if
Landlord shall deem it necessary to make such changes.
12. All removals, or the carrying in or out of any safes, freight, furniture, or
bulky matter of any description must take place during the hours which Landlord
shall determine from time to time, without the express written consent of
Landlord. The moving of safes or other fixtures or bulky matter of any kind must
be done upon previous notice to the Project Management Office and under its
supervision, and the persons employed by any tenant for such work must be
acceptable to the Landlord. Landlord reserves the right to inspect all safes,
freight or other bulky articles to be brought into the Building and to exclude
from the Building all safes, freight or other bulky articles which violate any
of these Rules and Regulations or the Lease of which these Rules and Regulations
are a part. Landlord reserves the right to prescribe the weight and position of
all safes, which must be placed upon supports approved by Landlord to distribute
the weight.
13. No tenant shall purchase spring water, ice, towel, janitorial maintenance or
other similar services from any person or persons not approved by Landlord.
14. Landlord shall have the right to prohibit any advertising by any tenant
which, in Landlord’s opinion, tends to impair the reputation of the Building or
the Project or its desirability as an office location, and upon written notice
from Landlord, any tenant shall refrain from or discontinue such advertising.

EXHIBIT C

-2-

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

 

15. Landlord reserves the right to exclude from the Building between the hours
of 6:00 P.M. and 7:00 A.M. and at all hours on Saturday, Sunday and legal
holidays all persons who do not present a pass or card key to the Building
approved by the Landlord. Each tenant shall be responsible for all persons who
enter the Building with or at the invitation of such tenant and shall be liable
to Landlord for all acts of such persons. Landlord shall in no case be liable
for damages for any error with regard to the admission to or exclusion from the
Building of any person. In case of an invasion, mob riot, public excitement or
other circumstances rendering such action advisable in Landlord’s opinion,
Landlord reserves the right, without abatement of Rent, to require all persons
to vacate the Building and to prevent access to the Building during the
continuance of the same for the safety of the tenants, the protection of the
Building, and the property in the Building.
16. Any persons employed by any tenant to do janitorial work shall, while in the
Building and outside of the Premises, be subject to and under the control and
direction of the Project Management Office (but not as an agent or servant of
said Office or of the Landlord), and such tenant shall be responsible for all
acts of such persons.
17. All doors opening onto public corridors shall be kept closed, except when in
use for ingress and egress.
18. The requirements of Tenant will be attended to only upon application to the
Project Management Office.
19. Canvassing, soliciting and peddling in the Building are prohibited and each
tenant shall report and otherwise cooperate to prevent the same.
20. All office equipment of any electrical or mechanical nature shall be placed
by Tenant in the Premises in settings approved by Landlord, to absorb or prevent
any vibration, noise or annoyance.
21. No air conditioning unit or other similar apparatus shall be installed or
used by any tenant without the written consent of Landlord.
22. There shall not be used in any space, or in the public halls of the
Building, either by any tenant or others, any hand trucks, except those equipped
with rubber tires and rubber side guards.
23. No vending machine or machines of any description shall be installed,
maintained or operated upon the Premises without the written consent of
Landlord.
24. The scheduling of tenant move-ins shall be subject to the reasonable
discretion of Landlord.
25. If the Tenant desires telephone or telegraph connections, the Landlord will
direct electricians as to where and how the wires are to be introduced. No
boring or cutting for wires or otherwise shall be made without direction from
the Landlord.
26. The term “personal goods or services vendors” as used herein means persons
who periodically enter the Building of which the Premises are a part for the
purpose of selling goods or services to a tenant, other than goods or services
which are used by the Tenant only for the purpose of conducting its business in
the Premises. “Personal goods or services” include, but are not limited to,
drinking water and other beverages, food, barbering services and shoeshining
services. Landlord reserves the right to prohibit personal goods and services
vendors from access to the Building except upon Landlord’s prior written consent
and upon such reasonable terms and conditions, including, but not limited to,
the payment of a reasonable fee and provision for insurance coverage, as are
related to the safety, care and cleanliness of the Building, the preservation of
good order thereon, and the relief of any financial or other burden on Landlord
or other tenants occasioned by the presence of such vendors or the sale by them
of personal goods or services to the Tenant or its employees. If necessary for
the accomplishment of these purposes, Landlord may exclude a particular vendor
entirely or limit the number of vendors who may be present at any one time in
the Building.
27. The Building is a non-smoking building. Smoking is prohibited at all times
within the entire Building, including all leased premises, as well as all
public/common areas and parking areas for the Building, including any attached
parking garage structure. This prohibition applies during business and
non-business hours to restrooms, elevators, elevator lobbies, first floor lobby,
stairwells, common hallways, the lunch room and any other public/common area, as
well as to all areas within the Leased Premises by Tenants. Smoking is only
permitted in the designated smoking area outside the Building and away from the
entrances to the Building.

EXHIBIT C

-3-

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

 

28. The Building and Project is a weapons free environment. No tenant, owner of
a tenant, officer or employee of a tenant, visitor of tenant, contractor or
subcontractor of tenant, or any other party shall carry weapons (concealed or
not) of any kind in the building, or parking areas. This prohibition applies to
all public areas, including without limitation, restrooms, elevators, elevator
lobbies, first floor lobby, stairwells, common hallways, all areas within the
leased premises of tenants, all surface parking areas and the surrounding land
related to the building.

EXHIBIT C

-4-

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

 

EXHIBIT D
FORM TENANT ESTOPPEL CERTIFICATE

TO:   
                     (“Landlord”)
                    
                    
  and:   

     
                     (“Third Party”)
                    
                    
  Re:   
Property Address:
Lease Date:                                          
Between                                                             , Landlord
and
                                                            , Tenant
Square Footage Leased:                                         
Suite No.                     
Floor:                     

The undersigned tenant (“Tenant”) hereby certifies to Third Party and Landlord
as follows:
1. The above-described Lease has not been canceled, modified, assigned, extended
or amended except                                                             .
2. Base Rent has been paid to the first day of the current month and all
additional rent has been paid and collected in a current manner. There is no
prepaid rent except $                    , and the amount of the security
deposit is $                    .
3. Base Rent is currently payable in the amount of $                     
monthly exclusive of Tenant’s Proportionate Share of Operating Expenses.
4. The Lease terminates on                     , 20__ subject to any renewal
option(s) set forth in the Lease.
5. All work to be performed for Tenant under the Lease has been performed as
required and has been accepted by Tenant, except
                                                                            
                        .
6. The Lease is: (a) in full force and effect; (b) to Tenant’s actual knowledge,
free from default; and (c) to Tenant’s actual knowledge, Tenant has no claims
against the Landlord or offsets against rent.
7. The Base Year for Operating Expenses, as defined in the said Lease, is
                                        .
8. The undersigned has no right or option pursuant to the said Lease or
otherwise to purchase all or any part of the Premises or the Building of which
the Premises are a part.
9. There are no other agreements written or oral between the undersigned and the
Landlord with respect to the Lease and/or the Premises and Building.
10. The statements contained herein may be relied upon by the Landlord and by
any prospective purchaser of the property of which the Premises is a part and
its mortgage lender.
EXHIBIT D

-1-

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

 

If a blank in this document is not filled in, the blank will be deemed to read
“none”.
If Tenant is a corporation, the undersigned signatory is a duly appointed
Officer of the corporation.

            Dated this _____day of _____, 20_.

Tenant:
      By:           Name: 
                                                                                 
      Title: 
                                                                                 
   

EXHIBIT D

-2-

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

 

EXHIBIT E
TENANT’S COMMENCEMENT LETTER

          To:   
                                                             (“Landlord”)
  Date:   
                                                            

Tenant’s Commencement Letter
                                                            
The undersigned, as the Tenant under that certain Office Lease (the “Lease”)
dated                     , made and entered into between                     ,
a                      as Landlord, and the undersigned, as Tenant, hereby
certifies that:

  1.  
The undersigned has accepted possession and entered into occupancy of the
Premises described in the Lease.
    2.  
The Commencement Date of the Lease was                     .
    3.  
The expiration date of the Lease is                     .
    4.  
The Lease is in full force and effect and has not been modified or amended.
    5.  
Landlord has performed all of its obligations to improve the Premises for
occupancy by the undersigned.

            Very truly yours,

                                                                                ,

a                                                                               
      By:           Name: 
                                                                                
    Title: 
                                                                                
 

EXHIBIT E

-1-

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

 

EXHIBIT F
FORM OF LETTER OF CREDIT
[BANK LETTERHEAD]
                    , 200_____
IRREVOCABLE, UNCONDITIONAL LETTER OF CREDIT NO. _____
                                        
                                        
                                        
Gentlemen:
                                        , a
                                         (“Bank”) [PLEASE PROVIDE NAME OF BANK],
of _____,                      hereby issues its Irrevocable, Unconditional
Letter of Credit in favor of                                         , and/or
its successors and assigns (“Landlord”), for the account of
                                        , a                      (“Tenant”) up
to the aggregate amount of _____and No/100ths Dollars ($                    )
(US Dollars), available at sight by the drafts of Landlord on the Bank. Drafts
drawn on this Letter of Credit will be honored when presented, accompanied only
by a letter or certificate purportedly signed by a representative of Landlord
stating that Landlord is entitled to draw on this Letter of Credit under the
terms of the Standard Lease dated as of                     , 200_____, between
Landlord and Tenant. Multiple and partial draws shall be permitted hereunder.
This Letter of Credit is transferable in whole or in part. The Bank shall look
solely to Tenant for payment of any fee for such transfer. Such payment is not a
condition to transfer.
The Bank shall be entitled (and required) to rely upon the statements contained
in the above-described letter or certificate and will have no obligation to
verify the truth of any statements set forth therein.
The Bank hereby agrees with drawers, endorsers, and bona fide holders of this
Letter of Credit that all drafts drawn by reason of this Letter of Credit and in
accordance with the above conditions, will meet with due honor when presented at
the office of the Bank in                      County, California.
The obligations of the Bank shall not be subject to any claim or defense by
reason of the invalidity, illegality, or inability to enforce any of the
agreements set forth in the Lease.
This Letter of Credit is subject to the International Standby Practices—ISP98,
International Chamber of Commerce Publication 590 when not in conflict with the
express terms of this Letter of Credit.
This Letter of Credit shall terminate at 3:00 p.m. Pacific Standard [or Daylight
Savings] Time on                                          [Insert date of
expiration of the Term which shall be the final expiration date of this Letter
of Credit, unless, at least 60 days prior to the then current expiration date,
we notify you in writing by certified mail, return receipt requested, at the
following address (or at such other address as you may specify by written notice
to us), that this Letter of Credit will not be extended beyond the current
expiration date; provided, that our obligation to make any payment hereunder in
respect of a drawing request made prior to the expiry hereof shall continue
until payment is made:
                                        
                                        
                                        
Amounts drawn upon this Letter of Credit are to be endorsed on the reverse side
of this Letter of Credit by the negotiating bank.

                  By:           Name:  
                                                                                 
      Title:  
                                                                                 
   

EXHIBIT_______

-2-

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

 

EXTENSION OPTION RIDER
RIDER NO. 1 TO LEASE
This Rider No. 1 is made and entered into by and between TREA PACIFIC PLAZA,
LLC, a Delaware limited liability company (“Landlord”), and SOMAXON
PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”), as of the day and year
of the Lease between Landlord and Tenant to which this Rider is attached.
Landlord and Tenant hereby agree that, notwithstanding anything contained in the
Lease to the contrary, the provisions set forth below shall be deemed to be part
of the Lease and shall supersede any inconsistent provisions of the Lease. All
references in the Lease and in this Rider to the “Lease” shall be construed to
mean the Lease (and all exhibits and Riders attached thereto), as amended and
supplemented by this Rider. All capitalized terms not defined in this Rider
shall have the same meaning as set forth in the Lease.
1. Subject to Rider No. 4 entitled, “Options In General”, Landlord hereby grants
to Tenant one (1) option (the “Extension Option”) to extend the Lease Term for
an additional period of five (5) years (the “Option Term”), on the same terms,
covenants and conditions as provided for in the Lease during the Initial Term,
except for the Base Rent, which shall initially be equal to the “fair market
rental rate” for the Premises for the Option Term as defined and determined in
accordance with the provisions of the Fair Market Rental Rate Rider attached to
the Lease as Rider No. 2, subject to fair market annual rent adjustments during
the Option Term.
2. An Extension Option must be exercised, if at all, by written notice
(“Extension Notice”) delivered by Tenant to Landlord no sooner than that date
which is twelve (12) months and no later than that date which is eight
(8) months prior to the expiration of the then current Term of the Lease.
Provided Tenant has properly and timely exercised the Extension Option, the then
current Term of the Lease shall be extended by the Option Term, and all terms,
covenants and conditions of the Lease shall remain unmodified and in full force
and effect, except that the Base Rent shall be as set forth above and in Rider.
No. 2, Tenant’s Base Year for Operating Expenses will be updated to the then
current year, and except that there shall be no remaining Extension Options.

 

-3-

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

 

FAIR MARKET RENTAL RATE RIDER
RIDER NO. 2 TO LEASE
This Rider No. 2 is made and entered into by and between TREA PACIFIC PLAZA,
LLC, a Delaware limited liability company (“Landlord”), and SOMAXON
PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”), as of the day and year
of the Lease between Landlord and Tenant to which this Rider is attached.
Landlord and Tenant hereby agree that, notwithstanding anything contained in the
Lease to the contrary, the provisions set forth below shall be deemed to be part
of the Lease and shall supersede any inconsistent provisions of the Lease. All
references in the Lease and in this Rider to the “Lease” shall be construed to
mean the Lease (and all exhibits and Riders attached thereto), as amended and
supplemented by this Rider. All capitalized terms not defined in this Rider
shall have the same meaning as set forth in the Lease.
1. The term “fair market rental rate” as used in the Lease and any Rider
attached to the Lease shall mean the annual amount per square foot, projected
during the Option Term (including annual adjustments), that a willing,
non-equity renewal tenant (excluding sublease and assignment transactions) would
pay, and a willing, institutional landlord of a comparable quality office
building located in the Del Mar/Torrey Hills area of San Diego would accept, in
an arm’s length transaction for space of comparable size, quality and floor
height as the Premises, taking into account the age, quality and layout of the
existing improvements in the Premises, and taking into account items that
professional real estate brokers or professional real estate appraisers
customarily consider, including, but not limited to, rental rates, space
availability, tenant size, tenant improvement allowances, parking charges and
any other lease considerations, if any, then being charged or granted by
Landlord or the lessors of such similar office buildings. All economic terms
other than Base Rent, such as tenant improvement allowance amounts, if any,
operating expense allowances, parking charges, etc., will be established by
Landlord and will be factored into the determination of the fair market rental
rate for the Option Term. Accordingly, the fair market rental rate will be an
effective rate, not specifically including, but accounting for, the appropriate
economic considerations described above.
2. In the event where a determination of fair market rental rate is required
under the Lease, Landlord shall provide written notice of Landlord’s
determination of the fair market rental rate not later than ninety (90) days
after the last day upon which Tenant may timely exercise the right giving rise
to the necessity for such fair market rental rate determination. Tenant shall
have fourteen (14) days (“Tenant’s Review Period”) after receipt of Landlord’s
notice of the fair market rental rate within which to accept such fair market
rental rate or to reasonably object thereto in writing. Failure of Tenant to so
object to the fair market rental rate submitted by Landlord in writing within
Tenant’s Review Period shall conclusively be deemed Tenant’s approval and
acceptance thereof. If within Tenant’s Review Period Tenant reasonably objects
to or is deemed to have disapproved the fair market rental rate submitted by
Landlord, Landlord and Tenant will meet together with their respective legal
counsel to present and discuss their individual determinations of the fair
market rental rate for the Premises under the parameters set forth in
Paragraph 1 above and shall diligently and in good faith attempt to negotiate a
rental rate on the basis of such individual determinations. Such meeting shall
occur no later than ten (10) days after the expiration of Tenant’s Review
Period. The parties shall each provide the other with such supporting
information and documentation as they deem appropriate. At such meeting if
Landlord and Tenant are unable to agree upon the fair market rental rate, they
shall each submit to the other their respective best and final offer as to the
fair market rental rate. If Landlord and Tenant fail to reach agreement on such
fair market rental rate within five (5) business days following such a meeting
(the “Outside Agreement Date”), Tenant’s Extension Option will be deemed null
and void unless Tenant demands appraisal, in which event each party’s
determination shall be submitted to appraisal in accordance with the provisions
of Section 3 below.
3. (a) Landlord and Tenant shall each appoint one (1) independent appraiser who
shall by profession be an M.A.I. certified real estate appraiser who shall have
been active over the five (5) year period ending on the date of such appointment
in the leasing of commercial (including office) properties in the Del Mar/Torrey
Hills area of San Diego. The determination of the appraisers shall be limited
solely to the issue of whether Landlord’s or Tenant’s last proposed (as of the
Outside Agreement Date) best and final fair market rental rate for the Premises
is the closest to the actual fair market rental rate for the Premises as
determined by the appraisers, taking into account the requirements specified in
Section 1 above. Each such appraiser shall be appointed within fifteen (15) days
after the request for appraisal.

 

-4-

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

 

(b) The two (2) appraisers so appointed shall within fifteen (15) days of the
date of the appointment of the last appointed appraiser agree upon and appoint a
third appraiser who shall be qualified under the same criteria set forth
hereinabove for qualification of the initial two (2) appraisers.
(c) The three (3) appraisers shall within thirty (30) days of the appointment of
the third appraiser reach a decision as to whether the parties shall use
Landlord’s or Tenant’s submitted best and final fair market rental rate, and
shall notify Landlord and Tenant thereof. During such thirty (30) day period,
Landlord and Tenant may submit to the appraisers such information and
documentation to support their respective positions as they shall deem
reasonably relevant and Landlord and Tenant may each appear before the
appraisers jointly to question and respond to questions from the appraisers.
(d) The decision of the majority of the three (3) appraisers shall be binding
upon Landlord and Tenant and neither party shall have the right to reject the
decision or to undo the exercise of the applicable Option. If either Landlord or
Tenant fails to appoint an appraiser within the time period specified in Section
3(a) hereinabove, the appraiser appointed by one of them shall within thirty
(30) days following the date on which the party failing to appoint an appraiser
could have last appointed such appraiser reach a decision based upon the same
procedures as set forth above (i.e., by selecting either Landlord’s or Tenant’s
submitted best and final fair market rental rate), and shall notify Landlord and
Tenant thereof, and such appraiser’s decision shall be binding upon Landlord and
Tenant and neither party shall have the right to reject the decision or to undo
the exercise of the applicable Option.
(e) If the two (2) appraisers fail to agree upon and appoint a third appraiser,
either party, upon ten (10) days written notice to the other party, can apply to
the Presiding Judge of the Superior Court of San Diego County to appoint a third
appraiser meeting the qualifications set forth herein. The third appraiser,
however, selected shall be a person who has not previously acted in any capacity
for ether party.
(f) The cost of each party’s appraiser shall be the responsibility of the party
selecting such appraiser, and the cost of the third appraiser (or arbitration,
if necessary) shall be shared equally by Landlord and Tenant.
(g) If the process described hereinabove has not resulted in a selection of
either Landlord’s or Tenant’s submitted best and final fair market rental rate
by the commencement of the applicable lease term, then the fair market rental
rate estimated by Landlord will be used until the appraiser(s) reach a decision,
with an appropriate rental credit and other adjustments for any overpayments of
Base Rent or other amounts if the appraisers select Tenant’s submitted best and
final estimate of the fair market rental rate. The parties shall enter into an
amendment to this Lease confirming the terms of the decision.
RIDER NO. 2

-5-

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

 

RIGHT OF FIRST OFFER RIDER
RIDER NO. 3 TO LEASE
This Rider No. 3 is made and entered into by and between TREA PACIFIC PLAZA,
LLC, a Delaware limited liability company (“Landlord”), and SOMAXON
PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”), as of the day and year
of the Lease between Landlord and Tenant to which this Rider is attached.
Landlord and Tenant hereby agree that, notwithstanding anything contained in the
Lease to the contrary, the provisions set forth below shall be deemed to be part
of the Lease and shall supersede any inconsistent provisions of the Lease. All
references in the Lease and in this Rider to the “Lease” shall be construed to
mean the Lease (and all exhibits and Riders attached thereto), as amended and
supplemented by this Rider. All capitalized terms not defined in this Rider
shall have the same meaning as set forth in the Lease.
1. Grant of Option; Conditions. Tenant shall have the one time right of first
offer (the “Right of First Offer”) with respect to the balance of the presently
available space on the second (2nd) floor of the Building, consisting of
approximately 12,898 rentable square feet (the “First Offer Space”). Landlord
shall notify Tenant (the “First Offer Notice”) from time to time if Landlord
makes or receives a written offer to lease any of the First Offer Space from a
third party or a written request for a proposal for the lease of any of the
First Offer Space from a third party. The First Offer Notice shall describe the
space so offered to Tenant and shall set forth Landlord’s proposed material
economic terms and conditions applicable to Tenant’s lease of such space
(collectively, the “Economic Terms”), including the proposed term of lease and
the proposed rent payable for the First Offer Space. In the event the
commencement of Tenant’s lease of First Offer Space occurs on or before
December 31, 2011, (i) the term of the lease shall be concurrent with the
original Premises, (ii) the Base Rent for the First Offer Space shall be at the
Base Rent per rentable square foot that is then payable for the Premises as set
forth in Item 5 of the Basic Lease Provisions of this Lease, subject to
abatement of Base Rent for any portion of the term of the First Offer Space
occurring during the Abatement Period, (iii) Tenant shall be entitled to a
one-time tenant refurbishment allowance in an amount adequate to refurbish the
First Offer Space in a manner equivalent in lay-out and finish to the Premises.
In the event the commencement of Tenant’s lease of such First Offer Space occurs
on or after January 1, 2012, the Economic Terms shall be equal to those then
being offered (not quoted) by Landlord for the leasing of comparable space in
the Building pro rated for the then remaining term of this Lease, but in no
event shall the Base Rent for such First Offer Space be less than the then
current monthly Base Rent plus Additional Operating Expenses for the Premises
under this Lease calculated on a square foot basis and the term of the lease for
the First Offer Space shall expire concurrently with the Term for the original
Premises. However, such Base Rent may be subject to abatement as the parties may
agree. Notwithstanding the foregoing, Landlord’s obligation to deliver the First
Offer Notice shall not apply during the last seven (7) months of the Initial
Term unless Tenant has timely delivered the Extension Notice to Landlord
pursuant to the Lease.
2. Procedure for Acceptance. If Tenant wishes to exercise Tenant’s right of
first offer with respect to the space described in the First Offer Notice, then
within ten (10) business days after delivery of the First Offer Notice to
Tenant, Tenant shall deliver an unconditional irrevocable notice to Landlord of
Tenant’s exercise of its right of first offer with respect to the entire space
described in the First Offer Notice (“ROFO Exercise Notice”), and the Economic
Terms shall be as set forth in Paragraph 1 above. If Tenant does not
unconditionally exercise its right of first offer within such ten (10) business
day period, then Landlord shall be free to lease the space described in the
First Offer Notice to anyone to whom Landlord desires on any terms Landlord
desires and Tenant’s right of first offer shall terminate as to the First Offer
Space described in the First Offer Notice. Notwithstanding anything to the
contrary contained herein, Tenant must elect to exercise its right of first
offer, if at all, with respect to all of the space offered by Landlord to Tenant
as being proposed to be leased by a third party at any particular time, and
Tenant may not elect to lease only a portion thereof, provided however, that
Tenant will not be required to lease the entire First Offer Space unless the
third party is offering to lease the entire First Offer Space.
3. Lease of First Offer Space. If Tenant timely and properly exercises Tenant’s
right to lease the First Offer Space as set forth herein, Landlord and Tenant
shall execute an amendment adding such First Offer Space to the Lease upon the
same non-economic terms and conditions as applicable to the initial Premises,
and the Economic Terms as provided in this Rider No. 3. Unless otherwise
specified in Landlord’s Economic Terms, Tenant shall commence payment of rent
for the First Offer Space and the Term of the First Offer Space shall commence
upon the date of delivery of such space to Tenant.

 

-6-

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

 

4. Personal; No Defaults. The rights contained in this Rider No. 3 shall be
personal to the original Tenant executing this Lease, and may only be exercised
by such original Tenant or a Permitted Transferee (and not any other assignee,
sublessee or other transferee of the original Tenant’s interest in the Lease) if
the original Tenant or a Permitted Transferee occupies the entire Premises as of
the date of the First Offer Notice. Tenant shall not have the right to lease
First Offer Space as provided in this Section 4 if, as of the date of the First
Offer Notice, or, at Landlord’s option, as of the scheduled date of delivery of
such First Offer Space to Tenant, Tenant is then in default under the Lease
beyond any applicable notice and cure periods.
RIDER NO. 3

-7-

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

 

TERMINATION OPTION RIDER
RIDER NO. 4 TO LEASE
This Rider No. 4 is made and entered into by and between TREA PACIFIC PLAZA,
LLC, a Delaware limited liability company (“Landlord”), and SOMAXON
PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”), as of the day and year
of the Lease between Landlord and Tenant to which this Rider is attached.
Landlord and Tenant hereby agree that, notwithstanding anything contained in the
Lease to the contrary, the provisions set forth below shall be deemed to be part
of the Lease and shall supersede any inconsistent provisions of the Lease. All
references in the Lease and in this Rider to the “Lease” shall be construed to
mean the Lease (and all exhibits and Riders attached thereto), as amended and
supplemented by this Rider. All capitalized terms not defined in this Rider
shall have the same meaning as set forth in the Lease.
1. Subject to the terms of this Rider No. 4 and Rider No. 5, entitled “Options
In General”, and notwithstanding anything to the contrary contained in the
Lease, and provided Tenant has not exercised its Right of First Offer as
provided in Rider No. 3, Tenant will have the one-time option to terminate and
cancel the Lease (“Termination Option”), effective as of 11:59 p.m. on the last
day of the thirty-sixth (36th) full calendar month of the Initial Term
(“Termination Date”), by delivering to Landlord, on or before the date which is
eight (8) months prior to the Termination Date, written notice of Tenant’s
exercise of its Termination Option. As a condition to the effectiveness of
Tenant’s exercise of its Termination Option and in addition to Tenant’s
obligation to satisfy all other monetary and non-monetary obligations arising
under this Lease through to the Termination Date, Tenant shall pay to Landlord
the following “Termination Consideration”: (i) the then unamortized value of the
cost of the initial Tenant Improvements and the cost of any subsequent leasehold
improvements made by Landlord at Landlord’s expense for the benefit of Tenant,
brokerage commissions, and Abated Amount, amortized with interest at the rate of
eight percent (8%) per annum; and (ii) three (3) months worth of Base Rent at
the rate then payable as of the month after the Termination Date (i.e.,
$32,221.12 per month, for a total of $96,663.35). The Termination Consideration
shall be due and payable by Tenant to Landlord concurrently with Tenant’s
delivery of notice to Landlord of the exercise of the Termination Option. If
Tenant properly and timely exercises its Termination Option and properly and
timely delivers the Termination Consideration to Landlord as set forth above and
satisfies all other monetary and non-monetary obligations under this Lease
including, without limitation, the provisions regarding surrender of the
Premises, all of which must be accomplished on or before the Termination Date,
then the Lease will terminate as of midnight on the Termination Date.
2. Upon determination of the final unamortized value of the cost of the initial
Tenant Improvements and brokerage commissions, Landlord and Tenant shall enter
into an amendment acknowledging the total Termination Consideration.

 

-8-

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

 

OPTIONS IN GENERAL
RIDER NO. 5 TO LEASE
This Rider No. 5 is made and entered into by and between TREA PACIFIC PLAZA,
LLC, a Delaware limited liability company (“Landlord”), and SOMAXON
PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”), as of the day and year
of the Lease between Landlord and Tenant to which this Rider is attached.
Landlord and Tenant hereby agree that, notwithstanding anything contained in the
Lease to the contrary, the provisions set forth below shall be deemed to be part
of the Lease and shall supersede any inconsistent provisions of the Lease. All
references in the Lease and in this Rider to the “Lease” shall be construed to
mean the Lease (and all exhibits and Riders attached thereto), as amended and
supplemented by this Rider. All capitalized terms not defined in this Rider
shall have the same meaning as set forth in the Lease.
1. Definition. As used in this Lease and any Rider or Exhibit attached hereto,
the word “Option” has the following meaning:
(i) The Extension Option pursuant to Rider No. 1 herein;
(ii) The Right of First Offer pursuant to Rider No. 3 herein; and
(iii) The Termination Option pursuant to Rider No. 4 herein.
2. Options Personal. Each Option granted to Tenant is personal to the original
Tenant executing this Lease and may be exercised only by the original Tenant (or
any entity merged with Tenant or which has acquired Tenant) executing this Lease
while occupying and leasing the entire Premises and without having assigned this
Lease or sublet any portion of the Premises, and/or without the intent of
thereafter assigning this Lease or subletting the Premises, and may not be
exercised or be assigned, voluntarily or involuntarily, by any person or entity
other than the original Tenant executing this Lease. The Options, if any,
granted to Tenant under this Lease are not assignable separate and apart from
this Lease, nor may any Option be separated from this Lease in any manner,
either by reservation or otherwise.
3. Effect of Default on Options. Tenant will have no right to exercise any
Option, notwithstanding any provision of the grant of option to the contrary,
and Tenant’s exercise of any Option may be nullified by Landlord and deemed of
no further force or effect, if (i) Tenant is in default of any monetary
obligation or material non-monetary obligation under the terms of this Lease (or
if Tenant would be in such default under this Lease but for the passage of time
or the giving of notice, or both) as of Tenant’s exercise of the Option in
question or at any time after the exercise of any such Option and prior to the
commencement of the Option event, or (ii) Landlord has given Tenant two (2) or
more notices of default, whether or not such defaults are subsequently cured,
during any twelve (12) consecutive month period of this Lease.
4. Options as Economic Terms. Each Option is hereby deemed an economic term
which Landlord, in its sole and absolute discretion, may or may not offer in
conjunction with any future extensions of the Initial Term.

 

-9-

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

 

TABLE OF CONTENTS

                      Page      
 
        LEASE OF PREMISES     1      
 
        BASIC LEASE PROVISIONS     1      
 
        STANDARD LEASE PROVISIONS     4      
 
        1.  
TERM
    4      
 
        2.  
BASE RENT AND SECURITY DEPOSIT
    5      
 
        3.  
ADDITIONAL RENT
    7      
 
        4.  
IMPROVEMENTS AND ALTERATIONS
    12      
 
        5.  
REPAIRS
    14      
 
        6.  
USE OF PREMISES
    14      
 
        7.  
UTILITIES AND SERVICES
    17      
 
        8.  
NON-LIABILITY AND INDEMNIFICATION OF LANDLORD; INSURANCE
    19      
 
        9.  
FIRE OR CASUALTY
    22      
 
        10.  
EMINENT DOMAIN
    23      
 
        11.  
ASSIGNMENT AND SUBLETTING
    23      
 
        12.  
DEFAULT
    26      
 
        13.  
ACCESS; CONSTRUCTION
    28      
 
        14.  
BANKRUPTCY
    29      
 
        15.  
SUBSTITUTION OF PREMISES
    29      
 
        16.  
SUBORDINATION; ATTORNMENT; ESTOPPEL CERTIFICATES
    29      
 
        17.  
SALE BY LANDLORD; TENANT’S REMEDIES; NONRECOURSE LIABILITY
    31      
 
        18.  
PARKING; COMMON AREAS
    32      
 
        19.  
MISCELLANEOUS
    33  

LIST OF EXHIBITS

     
Exhibit A
  Floor Plan
Exhibit B
  Work Letter
Exhibit C
  Building Rules and Regulations
Exhibit D
  Form Tenant Estoppel Certificate
Exhibit E
  Tenant’s Commencement Letter
Exhibit F
  Form of Letter of Credit

 

(i)

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

 

                  Page LIST OF RIDERS    
 
       
Rider No. 1
  Extension Option Rider    
Rider No. 2
  Fair Market Rental Rate Rider    
Rider No. 3
  Right of First Offer Rider    
Rider No. 4
  Termination Option Rider    
Rider No. 5
  Options in General    

 

(ii)