Exhibit 10.6


EXECUTION VERSION


 


 


LEASE


 


by and between


 


BMR-6114-6154 Nancy
Ridge Drive LLC,
 a Delaware limited liability company,


as Landlord


 


and


 


Arena Pharmaceuticals, Inc.,

a Delaware corporation,


as Tenant


 


Building G: 
6118 Nancy Ridge Drive, San Diego, CA


















TABLE OF CONTENTS


	
  

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Lease of Premises

  	
   

  	
  1

  
	
  2.

  	
  Basic Lease Provisions

  	
   

  	
  1

  
	
  3.

  	
  Term

  	
   

  	
  2

  
	
  4.

  	
  Term Commencement Date and Possession

  	
   

  	
  2

  
	
  5.

  	
  Rent

  	
   

  	
  2

  
	
  6.

  	
  Rent Adjustments

  	
   

  	
  3

  
	
  7.

  	
  Taxes

  	
   

  	
  3

  
	
  8.

  	
  Security Deposit

  	
   

  	
  5

  
	
  9.

  	
  Use

  	
   

  	
  7

  
	
  10.

  	
  Brokers

  	
   

  	
  8

  
	
  11.

  	
  Holding Over

  	
   

  	
  8

  
	
  12.

  	
  Property Management Fee

  	
   

  	
  9

  
	
  13.

  	
  Condition of Premises

  	
   

  	
  9

  
	
  14.

  	
  Regulations and Parking Facilities

  	
   

  	
  10

  
	
  15.

  	
  Utilities and Services

  	
   

  	
  10

  
	
  16.

  	
  Tenant Improvements

  	
   

  	
  11

  
	
  17.

  	
  Alterations

  	
   

  	
  13

  
	
  18.

  	
  Repairs and Maintenance

  	
   

  	
  14

  
	
  19.

  	
  Liens

  	
   

  	
  16

  
	
  20.

  	
  Indemnification and Exculpation

  	
   

  	
  16

  
	
  21.

  	
  Insurance; Waiver of Subrogation

  	
   

  	
  17

  
	
  22.

  	
  Damage or Destruction

  	
   

  	
  19

  
	
  23.

  	
  Eminent Domain

  	
   

  	
  21

  
	
  24.

  	
  Defaults and Remedies

  	
   

  	
  22

  
	
  25.

  	
  Assignment or Subletting

  	
   

  	
  25

  
	
  26.

  	
  Attorneys’ Fees

  	
   

  	
  28

  
	
  27.

  	
  Bankruptcy

  	
   

  	
  28

  
	
  28.

  	
  Definition of Landlord

  	
   

  	
  29

  
	
  29.

  	
  Estoppel Certificate

  	
   

  	
  29

  
	
  30.

  	
  Purchase Option

  	
   

  	
  29

  
	
  31.

  	
  Limitation of Landlord’s Liability

  	
   

  	
  33

  
	
  32.

  	
  Premises Control by Landlord

  	
   

  	
  33

  
	
  33.

  	
  Quiet Enjoyment

  	
   

  	
  34

  
	
  34.

  	
  Subordination and Attornment

  	
   

  	
  34

  
	
  35.

  	
  Surrender

  	
   

  	
  35

  
	
  36.

  	
  Waiver and Modification

  	
   

  	
  35

  
	
  37.

  	
  Waiver of Jury Trial and Counterclaims

  	
   

  	
  35

  
	
  38.

  	
  Hazardous Materials

  	
   

  	
  36

  
	
  39.

  	
  Miscellaneous

  	
   

  	
  37

  
	
  40.

  	
  Option to Extend Term

  	
   

  	
  39

  
	
  41.

  	
  Tenant’s Authority

  	
   

  	
  40

  
	
  41.

  	
  Landlord’s Authority

  	
   

  	
  40

  
	
  42.

  	
  Confidentiality

  	
   

  	
  40

  
	
  43.

  	
  Odors and Exhaust

  	
   

  	
  40

  
	
  44.

  	
  Excavation

  	
   

  	
  40

  



 


















LEASE


THIS LEASE (this “Lease”)
is entered into as of this 2nd day of May, 2007 (the “Execution Date”),
by and between BMR-6114-6154 Nancy
Ridge Drive LLC, a Delaware limited liability company (“Landlord”),
and Arena Pharmaceuticals, Inc., a Delaware corporation (“Tenant”).


RECITALS


A.                                   Landlord owns certain real property (the “Property”)
and the improvements thereon located at 6118 Nancy Ridge Drive, San Diego,
California, including the approximately 22,000 rentable square foot building
located thereon (the “Building”) in which the Premises (as defined
below) are located;


B.                                     Tenant may elect to construct an expansion to
the Building totaling between approximately 9,000 and 10,000 rentable square
feet (collectively, the “Optional Improvements”); and


C.                                     Landlord wishes to lease to Tenant, and
Tenant desires to lease from Landlord, the Premises (as defined below) pursuant
to the terms and conditions of this Lease, as detailed below.


AGREEMENT


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


1.                                       Lease of Premises. 
Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the Premises, as more particularly described on Exhibit A
attached hereto.  The Property and all
landscaping, parking facilities and other improvements and appurtenances
related thereto, including, without limitation, the Building and the Optional
Improvements, if any, are hereinafter collectively referred to as the “Premises.”


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


2.1.                              This Lease shall take effect upon the date of
execution and delivery hereof by all parties hereto and, except as specifically
otherwise provided within this Lease, each of the provisions hereof shall be
binding upon and inure to the benefit of Landlord and Tenant from the date of
execution and delivery hereof by all parties hereto.  Notwithstanding anything to the contrary
contained in this Lease, the delivery of this Lease by each party hereto to the
other shall occur concurrently with, and as part of, the consummation of the
transactions contemplated by that certain Agreement of Purchase and Sale dated
as of March 21, 2007 (the “Purchase Agreement”).


2.2.                              Rentable Area of the Premises:  As of the Term Commencement Date, the
Rentable Area of the Premises is approximately 22,000 rentable square feet for
the Building.


2.3.                              Initial monthly installment of Basic Annual
Rent for the Premises (“Basic Annual Rent”) as of the Term Commencement
Date shall be $74,411.05, subject to the rental adjustments provided in Article 6
hereof.


2.4.                              Term Commencement Date: May 2, 2007.


2.5.                              Term Expiration Date:  May 31, 2027.


2.6.                              Security Deposit: An amount equal to
$74,411.05, which amount shall be increased in accordance with Section 8.1.


2.7.                              Permitted Use:  General office and/or laboratory use,
together with all manufacturing, research and development in connection with
such laboratory use, in conformity with Applicable Laws (as defined below) and
consistent with applicable zoning for the Premises.



 1
 









 


	
  2.8.

  	
  Address for Rent
  Payment:

  	
  BMR-6114-6154 Nancy
  Ridge Drive LLC

  
	
   

  	
   

  	
  17140 Bernardo
  Center Drive, Suite 222

  
	
   

  	
   

  	
  San Diego,
  California 92128

  
	
   

  	
   

  	
  Attn: Karen
  Sztraicher

  
	
   

  	
   

  	
   

  
	
  2.9.

  	
  Address for Notices to
  Landlord:

  	
  BMR-6114-6154 Nancy
  Ridge Drive LLC

  
	
   

  	
   

  	
  17140 Bernardo
  Center Drive, Suite 222

  
	
   

  	
   

  	
  San Diego,
  California 92128

  
	
   

  	
   

  	
  Attn: General
  Counsel/Real Estate

  
	
   

  	
   

  	
   

  
	
  2.10.

  	
  Address for Notices to
  Tenant:

  	
  Arena Pharmaceuticals,
  Inc.

  
	
   

  	
   

  	
  6166 Nancy Ridge
  Drive

  
	
   

  	
   

  	
  San Diego,
  California 92121

  
	
   

  	
   

  	
  Attn: Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
  Arena Pharmaceuticals,
  Inc.

  
	
   

  	
   

  	
  6166 Nancy Ridge
  Drive

  
	
   

  	
   

  	
  San Diego,
  California 92121

  
	
   

  	
   

  	
  Attn: General
  Counsel

  
	
   

  	
   

  	
   

  
	
  2.11.

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

  
	
   

  	
   

  
	
   

  	
  Exhibit A

  	
  Premises

  
	
   

  	
  Exhibit B

  	
  Acknowledgement of Term
  Commencement Date and Term Expiration Date

  
	
   

  	
  Exhibit C

  	
  Rules and Regulations

  
	
   

  	
  Exhibit D

  	
  Form of Estoppel
  Certificate

  
	
   

  	
  Exhibit E

  	
  Form of Letter of
  Credit

  
	
   

  	
  Exhibit F

  	
  Form of Notice of
  Exercise of Purchase Option

  
				



 


3.                                       Term.


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


3.2.                              The actual term of this Lease (the “Term”)
shall be that period from the Term Commencement Date through the Term
Expiration Date, subject to earlier termination of this Lease as provided
herein.


4.                                       Term Commencement Date and Possession.


4.1.                              Tenant currently occupies and shall continue
to occupy the Premises on the Term Commencement Date.  Tenant and Landlord shall execute and deliver
to each other a written acknowledgement of the actual Term Commencement Date
and the Term Expiration Date within ten (10) days after the Term Commencement
Date, in the form attached as Exhibit B hereto.  Failure to execute and deliver such
acknowledgement, however, shall not affect the Term Commencement Date or
Landlord’s or Tenant’s liability hereunder.


5.                                       Rent.


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


5.2.                              In addition to Basic Annual Rent, Tenant
shall pay to Landlord as additional rent (“Additional Rent”) at times
hereinafter specified in this Lease (a) amounts related to Insurance Costs and
Taxes (each as defined below) and (b) any other amounts that Tenant assumes or
agrees to pay under the provisions of this Lease that are owed to Landlord,
including, without



 2
 









limitation, any and all other sums that may
become due by reason of any default of Tenant or failure on Tenant’s part to
comply with the agreements, terms, covenants and conditions of this Lease to be
performed by Tenant, after notice and the lapse of any applicable cure periods.


5.3.                              Basic Annual Rent and Additional Rent shall
together be denominated “Rent.” 
Rent shall be paid to Landlord, without abatement, deduction or offset,
in lawful money of the United States of America at the office of Landlord as
set forth in Section 2.9 or to such other person or at such other
place as Landlord may from time to time designate in writing.  In the event the Term commences or ends on a
day other than the first day of a calendar month, then the Rent for such
fraction of a month shall be prorated for such period on the basis of a thirty
(30) day month and shall be paid at the then-current rate for such fractional
month.


6.                                       Rent Adjustments.  The
Basic Annual Rent shall be subject to the following adjustments:


6.1.                              Annual Adjustment.  The
Basic Annual Rent shall be subject to an annual upward adjustment of two and
one-half percent (2.5%) of the then-current Basic Annual Rent.  The first such adjustment shall become
effective commencing with that monthly rental installment that is due on or
after the first (1st) anniversary of the Term Commencement Date,
and subsequent adjustments shall become effective on every successive
anniversary for so long as this Lease continues in effect.


6.2.                              Optional Improvements: Basic Annual Rent
Increase.  In the event Tenant receives the Building G
Additional Purchase Price (as defined in Section 1.3.2(b) of the
Purchase Agreement), the monthly rental installment of Basic Annual Rent shall
be increased (effective as of the date Tenant receives the Building G
Additional Purchase Price) by the applicable amount set forth in Schedule 1
attached hereto (the “Basic Annual Rent Increase”), and the Basic Annual
Rent as so adjusted shall be subject to further rental adjustments as provided
in Section 6.1 hereof.


6.3.                              Building F Option: Basic Annual Rent
Reduction.  Pursuant to the Purchase Agreement, Tenant
assigned to Landlord Tenant’s existing option (the “Building F Option”)
to acquire that certain real property located at 6122, 6124 and 6126 Nancy
Ridge Drive, San Diego, California, including the approximately 68,000 rentable
square foot building located thereon (the “Building F Property”).  In the event: (a) Landlord elects not to
exercise the Building F Option as a result of any casualty loss or proceeding
in eminent domain in accordance with Section 1.2 of the Purchase
Agreement; and (b) Tenant pays Landlord the Building F Option Termination
Payment in accordance with Section 1.2 of the Purchase Agreement, the
monthly rental installment of Basic Annual Rent shall be reduced by the
applicable amount set forth in Schedule 2 attached hereto (the “Basic
Annual Rent Reduction”), and the Basic Annual Rent as so adjusted shall be
subject to further rental adjustments as provided in Section 6.1 hereof.


7.                                       Taxes.


7.1.                              Commencing with the Term Commencement Date
and continuing for each calendar year or, at Landlord’s option, tax year (each
such “tax year” being a period of twelve (12) consecutive calendar months for
which the applicable taxing authority levies or assesses Taxes), for the
balance of the Term, Tenant shall pay to Landlord the amount of all Taxes
levied and assessed for any such year upon the Premises.  “Taxes” shall mean all government
impositions including, without limitation, property tax costs consisting of
real and personal property taxes and assessments (including amounts due under
any improvement bond upon the Premises or any portion thereof, including the
parcel or parcels of real property upon which the Building is located or
assessments levied in lieu thereof) imposed by any federal, state, regional,
local or municipal governmental authority, agency or subdivision (each, a “Governmental
Authority”) on the Premises or improvements thereon, any tax on or measured
by gross rentals received from the rental of space in the Building (other than
gross receipt taxes assessed against Landlord based solely on Landlord’s
business entity structure), or tax based on the square footage of the Premises
or the Building as well as any parking charges, utilities surcharges, or any
other costs levied, assessed or imposed by, or at the direction of, or
resulting from statutes or regulations, or interpretations thereof, promulgated
by any Governmental Authority in connection with the use or occupancy of the
Premises or the parking facilities serving the Premises; any tax on this
transaction or this Lease; provided, however, that “Taxes” shall
in no event include any franchise or income tax or any tax based on net rentals
received from the rental of space in the Building. Any amount paid by Tenant
for any partial year of the Term shall be



 3
 









prorated on the basis of the
number of days of such partial year. 
Payment shall be made in the following manner:  Tenant shall pay to Landlord the amounts owed
under this Article 7 within thirty (30) days after Landlord gives notice
to Tenant of the amount of such Taxes payable by Tenant (or not less than ten
(10) days prior to delinquency, whichever is later).  Landlord also shall provide Tenant with a
copy of the applicable tax bill or tax statement from the relevant taxing
authority.  Notwithstanding the
foregoing, if Applicable Laws allow any such Taxes to be paid in installments,
then Tenant may make such payments to Landlord in installments, provided
that each such installment shall be payable to Landlord not less than ten (10)
days prior to the date upon which payment of the applicable installment to the
taxing authority becomes delinquent.  In
addition to any other amounts due from Tenant to Landlord, if Tenant fails to
pay Taxes to Landlord as herein required, Tenant shall pay to Landlord the
amount of any interest, penalties or late charges imposed for late
payment.  “Applicable Laws” means
all federal, state, municipal and local laws, codes, ordinances, rules and
regulations of Governmental Authorities, committees, associations, or other
regulatory committees, agencies or governing bodies having jurisdiction over
the Premises, Landlord or Tenant, including both statutory and common law and
hazard waste rules and regulations.


(a)                          If the Premises are separately assessed,
Tenant shall have the right, by appropriate proceedings, to protest or contest
in good faith any assessment or reassessment of Taxes, any special assessment,
or the validity of any Taxes or of any change in assessment or tax rate; provided,
however, that prior to any such challenge Tenant must either (i) pay to the
appropriate Governmental Authority the Taxes alleged to be due in their
entirety and seek a refund from the appropriate authority (which payment may be
under protest if payment under protest will not materially adversely affect
Landlord) or (ii) post a bond (or provide to Landlord other security acceptable
to Landlord) in an amount sufficient to ensure full payment of the Taxes,
including any potential interest, late charges and penalties.  Upon a final determination with respect to
any such contest or protest, Tenant shall promptly pay to the appropriate
Governmental Authority all sums found to be due with respect thereto.  In any such protest or contest, Tenant may
act in its own name, and at the request of Tenant, Landlord shall cooperate
with Tenant in any way Tenant may reasonably require in connection with such
contest or protest, including signing such documents as Tenant reasonably shall
request, provided that such cooperation shall be at no expense to
Landlord and shall not require Landlord to attend any appeal or other hearing
unless (x) such attendance is mandatory or reasonably determined by Tenant to be
reasonably required in order to materially increase the prospects of a
successful contest or protest, and (y) Tenant pays all costs and expenses of
Landlord’s appearance and fairly compensates Landlord for all time spent at
such appeal or hearing.  Any such contest
or protest shall be at Tenant’s sole expense (subject to reimbursement of such
expenses whenever Tenant prevails in such contest or protest but only to the
extent of available proceeds therefor from any portion of the refund that would
not have accrued to the benefit of Landlord absent Tenant’s protest or
contest), and if any penalties, interest or late charges become payable with
respect to the Taxes as a result of such contest or protest, Tenant shall pay
the same.


(b)                         If Tenant obtains a refund as the result of
Tenant’s protest or contest, and subject to Tenant’s obligation to pay Landlord’s
costs (if any) associated therewith, Tenant shall be entitled to such refund to
the extent it relates to the Premises during the Term.


7.2.                              Tenant shall be solely responsible for the
payment of any and all taxes levied upon personal property and trade fixtures
located upon the Premises, and shall pay the same at least ten (10) days prior
to delinquency.  Tenant shall have the
right by appropriate proceedings to protest or contest in good faith the
assessment or validity of any such taxes. 
Any such contest or protest shall be at Tenant’s sole expense.


7.3.                              If, at any time during the Term under the
laws of any Governmental Authority, a tax or excise on rent or any other tax
howsoever described is levied or assessed by any such political body against
Landlord on account of rentals payable to Landlord hereunder, such tax or
excise shall be considered “Taxes” for the purposes of this Article 7.  Notwithstanding the foregoing, “Taxes” shall
not include any amount assessed against Landlord as any local, state or federal
income tax, including any gross receipt taxes assessed against Landlord based
solely on Landlord’s business entity structure.


7.4.                              Within ten (10) business days after the end
of each calendar month, Tenant shall submit to Landlord an invoice, or, in the
event an invoice is not available, an itemized list, of all



 4
 









costs and expenses paid by Tenant that (a)
Tenant has incurred (either internally or by employing third parties) during
the prior month and (b) for which Tenant reasonably believes it is entitled to
reimbursements from Landlord pursuant to the terms of this Lease; provided,
however, in no event should this Section 7.4 apply to the
Building G Additional Purchase Price. 
Landlord shall pay to Tenant each invoiced amount within twenty (20)
days after Landlord’s receipt of the applicable invoice unless Landlord, in
good faith, disputes any obligation to pay the invoice; provided, however,
Landlord shall pay to Tenant any undisputed portion of such invoice and shall
notify Tenant in writing of those portions of such invoice which Landlord
disputes (the “Disputed Amounts”). 
Upon resolution of any Disputed Amount, in a manner in which Landlord is
either determined to owe, or has agreed to pay, any of the Disputed Amounts,
then Landlord shall promptly pay to Tenant the amount it is determined to owe
or has agreed to pay, as applicable.


8.                                       Security Deposit.


8.1.                              Prior to the Term Commencement Date, Tenant
shall deposit with Landlord the sum set forth in Section 2.6 (the “Security
Deposit”), which sum shall be held by Landlord as security for the faithful
performance by Tenant of all of the terms, covenants and conditions of this
Lease to be kept and performed by Tenant during the Term of this Lease.  In addition, Tenant shall, within five (5)
days after any upward adjustment in the Basic Annual Rent pursuant to Section
6.2, deposit with Landlord, and the Security Deposit shall be increased by,
an amount equal to the increase in the monthly rental installment of the Basic
Annual Rent pursuant to Section 6.2. 
If Tenant defaults with respect to any provision of this Lease,
including, but not limited to, any provision relating to the payment of Rent,
then Landlord may (but shall not be required to) use, apply or retain all or
any part of the Security Deposit for the payment of any Rent or any other sum
in default, or to compensate Landlord for any other loss or damage that
Landlord may suffer by reason of Tenant’s default.  If any portion of the Security Deposit is so
used or applied, then Tenant shall, within ten (10) days following demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to its original amount, and Tenant’s failure to do so shall be
a material breach of this Lease. 
Landlord shall not be required to keep this Security Deposit separate
from its general fund, and Tenant shall not be entitled to interest on the
Security Deposit.  The provisions of this
Article 8 shall survive the expiration or earlier termination of this
Lease.  TENANT HEREBY WAIVES THE
REQUIREMENTS OF SECTION 1950.7 OF THE CALIFORNIA CIVIL CODE, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, WHICH, AMONG OTHER THINGS, (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.


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


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


8.4.                              The Security Deposit, or any balance thereof
after Landlord applies the Security Deposit to the payment of Rent or the
amount reasonably necessary to repair damage to the Premises caused by Tenant
or to compensate Landlord for any breach by Tenant, shall be returned to Tenant
(or, at Landlord’s option, to the last assignee of Tenant’s interest hereunder)
within thirty (30) days after the later of: (a) the expiration or earlier
termination of this Lease so long as Tenant is not then in Default under this
Lease nor is any event then occurring which with the giving of notice or the
passage of time, or both, would constitute a Default hereunder; or (b) the date
that Tenant has cured all such Defaults or prospective Defaults under this
Lease.


8.5.                              The Security Deposit may be in the form of
cash, a letter of credit or any other security instrument acceptable to
Landlord in its sole discretion.  Tenant
may at any time, except during Default, deliver a letter of credit (the “L/C
Security”) as the entire Security Deposit, as follows.



 5
 









(a)                          If Tenant elects to deliver L/C Security,
then Tenant shall provide Landlord, and maintain in full force and effect
throughout the Term, a letter of credit in substantially the form of Exhibit E
issued by any national bank that has (x) a branch office within San Diego
County where Landlord may present drafts under the L/C Security and (y) an
issuer reasonably satisfactory to Landlord, in the amount of the Security
Deposit, with an initial term of at least one year.  If, at the Term Expiration Date, any Rent
remains uncalculated or unpaid, then: 
(i) Landlord shall with reasonable diligence complete any necessary
calculations; (ii) Tenant shall extend the expiry date of such L/C Security
from time to time as Landlord reasonably requires; and (iii) in such
extended period, Landlord shall not unreasonably refuse to consent to an
appropriate reduction of the L/C Security. 
Tenant shall reimburse Landlord’s out-of-pocket legal costs not to
exceed the sum of Two Thousand Dollars ($2,000) in handling Landlord’s
acceptance of L/C Security or its replacement or extension, except with respect
to any replacement in accordance with subparagraph (d) of this Section 8.5.


(b)                         If Tenant delivers to Landlord satisfactory
L/C Security in place of the entire Security Deposit, Landlord shall promptly
remit to Tenant any cash Security Deposit Landlord previously held.


(c)                          Landlord may draw upon the L/C Security, and
hold and apply the proceeds in the same manner and for the same purposes as the
Security Deposit, if:  (i) an
uncured Default exists; (ii) as of the date 45 days before any L/C
Security expires (even if such scheduled expiry date is after the Term
Expiration Date) Tenant has not delivered to Landlord an amendment or
replacement for such L/C Security, reasonably satisfactory to Landlord,
extending the expiry date to the earlier of (1) the date two (2) months
after the then-current Term Expiration Date or (2) the date one year after
the then-current expiry date of the L/C Security; (iii) the L/C Security
provides for automatic renewals, Landlord asks the issuer to confirm the
current L/C Security expiry date, and the issuer fails to do so within ten (10)
business days; (iv) Tenant fails to pay (when and as Landlord reasonably
requires) any bank charges for Landlord’s transfer of the L/C Security;
(v) the issuer of the L/C Security ceases, or announces that it will
cease, to maintain an office within San Diego County where Landlord may present
drafts under the L/C Security; or (vi) upon the expiration or earlier
termination of this Lease, the conditions set forth in Section 8.4 have
not been satisfied, and the L/C Security expires in less than thirty (30)
days.  This paragraph does not limit any
other provisions of this Lease allowing Landlord to draw the L/C Security under
specified circumstances.


(d)                         Tenant shall not seek to enjoin, prevent, or
otherwise interfere with Landlord’s draw under L/C Security, even if it
violates this Lease.  Tenant acknowledges
that the only effect of a wrongful draw would be to substitute a cash Security
Deposit for L/C Security, causing Tenant no legally recognizable damage.  Landlord shall hold the proceeds of any draw
in the same manner and for the same purposes as a cash Security Deposit.  In the event of a wrongful draw, the parties
shall cooperate to allow Tenant to post replacement L/C Security simultaneously
with the return to Tenant of the wrongfully drawn sums, and Landlord shall upon
request confirm in writing to the issuer of the L/C Security that Landlord’s
draw was erroneous.


(e)                          If Landlord transfers its interest in the
Premises, then Tenant shall at Tenant’s expense, within fifteen (15) Business
Days after receiving a written request from Landlord, deliver (and, if the
issuer requires, Landlord shall consent to) an amendment to the L/C Security
naming Landlord’s grantee as substitute beneficiary.  If the required Security changes while L/C
Security is in force, then Tenant shall deliver (and, if the issuer requires,
Landlord shall consent to) a corresponding amendment to the L/C Security.


(f)                            Notwithstanding an election by Tenant during
the Term to substitute a cash Security Deposit for L/C Security, Tenant shall
nevertheless have the right to replace the L/C Security with a cash Security
Deposit, at Tenant’s sole cost and expense. 
If Tenant delivers the cash Security Deposit to Landlord in place of the
L/C Security, Landlord shall promptly cancel or surrender the L/C
Security.  Tenant may effect such
substitutions on multiple occasions during the Term, provided Tenant shall not
effect such substitutions more than twice in any calendar year.



 6
 









9.                                       Use.


9.1.                              Tenant shall use the Premises for the
purposes set forth in Section 2.7 (or any one, or any combination of,
such purposes), and shall not use the Premises, or permit or suffer the
Premises to be used, for any other purpose without Landlord’s prior written
consent, which consent Landlord may withhold in its sole and absolute
discretion.


9.2.                              Tenant shall not use or occupy the Premises
in violation of Applicable Laws; zoning ordinances; or the certificate of
occupancy issued for the Building, and shall, upon five (5) days’ written
notice from Landlord, discontinue any use of the Premises if such use is in
violation of Applicable Law or declared or claimed by any Governmental
Authority having jurisdiction to be a violation of any of the above.  Tenant shall, at its sole cost and expense,
promptly and properly observe and comply with (including in the making by Tenant
of the any Alterations to the Premises): (a) all present and future orders,
regulations, directions, rules, laws, ordinances, and requirements of all
Governmental Authorities arising from the use or occupancy of, or applicable
to, the Premises or any portion thereof (except for any orders, regulations,
directions, rules, laws, ordinances or requirement that it is contesting in
accordance with this Section 9.2); and (b) any direction of any
Governmental Authority having jurisdiction that shall, by reason of the nature
of Tenant’s use or occupancy of the Premises, impose any duty upon Tenant or
Landlord with respect to the Premises or with respect to the use or occupation
thereof.  Tenant shall comply with all
safety, fire protection and evacuation procedures and regulations established
by any Governmental Authority. 
Notwithstanding the foregoing, Tenant shall not be obligated to comply
with any declaration, direction or other governmental rule or governmental
action (a) whose application or validity is being contested by Tenant
diligently and in good faith by appropriate proceedings if Tenant’s failure to
comply therewith neither creates any material risk of any financial liability
or criminal sanction against Landlord or the Premises, nor creates any material
risk of damage to the Premises, nor creates any risk to Landlord’s title to or
rights in the Premises, or (b) compliance with which shall have been excused or
exempted by a nonconforming use permit, waiver, extension or forbearance
exempting it from such declaration, direction or other governmental rule or
governmental action.


9.3.                              Tenant shall not do or permit to be done
anything that will invalidate the cost of any fire, environmental, extended
coverage or any other insurance policy covering the Premises, and shall comply
with all rules, orders, regulations and requirements of the insurers of the
Premises, and Tenant shall promptly, upon demand, reimburse Landlord for any
additional premium charged for such policy by reason of Tenant’s failure to
comply with the provisions of this Article.


9.4.                              Tenant shall, upon termination of this Lease,
return to Landlord all keys to offices and restrooms either furnished to or
otherwise procured by Tenant.  In the
event any key so furnished to Tenant is lost, Tenant shall pay to Landlord the
cost of replacing the same or of changing the lock or locks opened by such lost
key if Landlord shall deem it necessary to make such change.


9.5.                              No awnings or other projections shall be
attached to any outside wall of the Building in violation of any Applicable
Laws.


9.6.                              Tenant shall, at Tenant’s sole cost and
expense, have the right to install legally permitted signage on the Premises
(including any building thereon) (“Signage”), which Signage shall be
subject to Landlord’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed. 
Tenant shall keep the Signage in good condition and repair.  The size, design, and other physical aspects
of any sign shall be subject to Landlord’s written approval prior to
installation, which approval will not unreasonably be withheld, and shall
conform to all covenants, conditions, and restrictions encumbering the Premises
and all Applicable Laws. The cost of the sign(s), including but not limited to
the permitting, installation, maintenance and removal thereof shall be at
Tenant’s sole cost and expense. If Tenant fails to maintain its sign(s), or if
Tenant fails to remove such sign(s) upon termination of this Lease, or fails to
repair any damage caused by such removal (including without limitation,
painting the damaged portions of the Building and any other portions of the
Building that Landlord reasonably determines in good faith shall be painted so
that repainting the damaged portion of the Building does not adversely affect
the visual appearance of the Building, if required by Landlord), Landlord may
do so at Tenant’s expense. Tenant shall reimburse Landlord within twenty (20)
days after written demand for all reasonable costs incurred by Landlord to
effect



 7
 









such maintenance, removal or repair, which
amounts shall be deemed Additional Rent and shall include without limitation,
all sums disbursed, incurred or deposited by Landlord, including Landlord’s
costs, expenses and actual attorneys’ fees with interest thereon.  Notwithstanding the foregoing, Landlord has
observed, and hereby approves, all existing signage on the Premises, and all
future repairs and replacements to such existing signage, so long as such
repairs and replacements: (a) are consistent with the size, design, quality and
other physical aspects of the existing signage, (b) are in compliance with
Applicable Laws, (c) are paid for at Tenant’s sole cost and expense, and (d) do
not adversely affect the visual appearance of the Building.  In addition, Tenant shall have the right to
incorporate its company logo and trademarks as part of the design of its
Signage.


9.7.                              Tenant shall only place equipment within the
Premises with floor loading consistent with the structural design of the
Building without Landlord’s prior written approval, and such equipment shall be
placed in a location designed to carry the weight of such equipment.  If Tenant desires to place equipment within
the Premises that exceeds the floor loading consistent with the structural
design of the Building, Tenant shall make any structural enhancements necessary
to carry the weight of such equipment in accordance with the terms and
conditions of Article 17 hereof.


9.8.                              Tenant shall not (a) use or allow the
Premises to be used for unlawful purposes or (b) cause, maintain or permit any
waste in, on or about the Premises.


9.9.                              Notwithstanding any other provision herein to
the contrary but subject to Section 9.2 hereof, Tenant shall be
responsible for all liabilities, costs and expenses arising out of or in
connection with the compliance during the Term of the Premises with the
Americans with Disabilities Act, 42 U.S.C. § 12101, et seq. (together with
regulations promulgated pursuant thereto, the “ADA”).


10.                                 Brokers.


10.1.                        Tenant represents and warrants that it knows
of no other real estate broker or agent other than Antaeus Capital, Inc. (“Antaeus”)
/ Coastline Capital Partners (“Coastline Capital” and, together with
Antaeus, the “Brokers”), that is or might be entitled to a commission in
connection with this Lease.  Tenant shall
compensate Antaeus in relation to this Lease pursuant to a separate agreement
between Tenant and Antaeus, and it is Tenant’s understanding that Antaeus will
compensate Coastline Capital in relation to this Lease pursuant to a separate
agreement between Antaeus and Coastline Capital.  Landlord represents and warrants that it
knows of no other real estate broker or agent other than Brokers that is or
might be entitled to a commission in connection with this Lease.


10.2.                        Tenant and Landlord represent and warrant to
the other that no broker or agent has made any representation or warranty
relied upon by it in its decision to enter into this Lease, other than as
contained in this Lease.


10.3.                        Tenant acknowledges and agrees that the
employment of brokers by Landlord is for the purpose of solicitation of offers
of leases from prospective tenants and that no authority is granted to any
broker to furnish any representation (written or oral) or warranty from
Landlord unless expressly contained within this Lease.  Landlord is executing this Lease in reliance
upon Tenant’s representations, warranties and agreements contained within Sections
10.1 and 10.2, and Tenant is executing this Lease in reliance upon
Landlord’s representations, warranties and agreements contained within Sections 10.1
and 10.2.


11.                                 Holding Over.


11.1.                        If, with Landlord’s prior written consent,
Tenant holds possession of all or any part of the Premises after the Term,
Tenant shall become a tenant from month to month after the expiration or
earlier termination of the Term, and in such case Tenant shall continue to pay
(a) the Basic Annual Rent in accordance with Article 5, as adjusted
in accordance with Article 6, and (b) any amounts for which Tenant
would otherwise be liable under this Lease if the Lease were still in effect,
including, without limitation, payments for Taxes and insurance.  Any such month-to-month tenancy shall be
subject to every other term, covenant and agreement contained herein.



 8
 









11.2.                        Notwithstanding the foregoing, if Tenant
remains in possession of the Premises after the expiration or earlier
termination of the Term without Landlord’s prior written consent, Tenant shall
become a tenant at sufferance subject to the terms and conditions of this
Lease, except that the per diem monthly rent shall be equal to: (a) for the
first three (3) months that Tenant remains in possession of the Premises after
the expiration or earlier termination of this Lease,  one hundred twenty-five percent (125%) of the
Basic Annual Rent in effect during the last thirty (30) days of the Term; and
(b) for any time thereafter that Tenant remains in possession of the Premises
after the expiration or earlier termination of this Lease, one hundred fifty
percent (150%) of the Basic Annual Rent in effect during the last thirty (30)
days of the Term.


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


11.4.                        The foregoing provisions of this Article 11
are in addition to and do not affect Landlord’s right of reentry or any other
rights of Landlord hereunder or as otherwise provided by Applicable Laws.


12.                                 Property Management Fee. 
Tenant shall pay to Landlord on the first day of each calendar month of
the Term, as Additional Rent, the “Property Management Fee,” which shall
equal one percent (1%) of the monthly installment of Basic Annual Rent then due
from Tenant.


13.                                 Condition of Premises.


13.1.                        Tenant acknowledges that immediately prior to
the Term Commencement Date, Tenant occupied the Premises, is familiar with the
condition of the Premises and accepts the entire Premises in its “as is”
condition with all faults, and Landlord makes no representation or warranty of
any kind with respect to the condition of the Premises or with respect to the
suitability of the Premises for the conduct of Tenant’s business, and Landlord
shall have no obligation to alter, repair or otherwise prepare the Premises for
Tenant’s occupancy or to pay for or construct any improvements to the Premises
other than, if required by Section 1.3.2 of the Purchase Agreement, the
Building G Additional Purchase Price.  It
is understood and agreed that Landlord is not obligated to install any
equipment, or make any repairs, improvements or Alterations to the Premises,
including the Tenant Improvements. 
Tenant’s possession of the Premises as of the Term Commencement Date
shall, except as otherwise agreed to in writing by Landlord and Tenant,
conclusively establish that the Premises were at such time in good, sanitary
and satisfactory condition and repair.


13.2.                        NOTWITHSTANDING ANYTHING TO THE CONTRARY
HEREIN, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT LANDLORD IS LEASING THE
PREMISES “AS IS” AND “WHERE IS,” AND WITH ALL FAULTS AND THAT, LANDLORD IS
MAKING NO REPRESENTATIONS AND WARRANTIES WHETHER EXPRESS OR IMPLIED, BY
OPERATION OF LAW OR OTHERWISE, WITH RESPECT TO THE QUALITY OR PHYSICAL
CONDITION OF THE PREMISES, THE INCOME OR EXPENSES FROM OR OF THE PREMISES, OR
THE COMPLIANCE OF THE PREMISES WITH APPLICABLE BUILDING OR FIRE CODES,
ENVIRONMENTAL LAWS OR OTHER LAWS, RULES, ORDERS OR REGULATIONS.  WITHOUT LIMITING THE FOREGOING, IT IS
UNDERSTOOD AND AGREED THAT LANDLORD MAKES NO WARRANTY WITH RESPECT TO THE
HABITABILITY, SUITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.  TENANT AGREES THAT IT ASSUMES
FULL RESPONSIBILITY FOR, AND THAT IT HAS HAD AN OPPORTUNITY TO PERFORM
EXAMINATIONS AND INVESTIGATIONS OF THE PREMISES, INCLUDING SPECIFICALLY,
WITHOUT LIMITATION, EXAMINATIONS AND INVESTIGATIONS FOR THE PRESENCE OF
ASBESTOS, PCBS AND OTHER HAZARDOUS SUBSTANCES, MATERIALS AND WASTES (AS THOSE
TERMS MAY BE DEFINED HEREIN OR BY APPLICABLE FEDERAL OR STATE LAWS, RULES OR
REGULATIONS) ON OR IN THE PREMISES. 
WITHOUT LIMITING THE FOREGOING, TENANT IRREVOCABLY WAIVES ALL CLAIMS
THAT EXIST AS OF THE EXECUTION DATE AGAINST LANDLORD WITH RESPECT TO ANY
ENVIRONMENTAL CONDITION, INCLUDING CONTRIBUTION AND INDEMNITY CLAIMS, WHETHER
STATUTORY OR OTHERWISE.  TENANT ASSUMES FULL
RESPONSIBILITY (AS BETWEEN LANDLORD AND TENANT) FOR ALL COSTS AND EXPENSES
REQUIRED TO CAUSE THE PREMISES TO COMPLY WITH ALL APPLICABLE BUILDING AND



 9
 









FIRE CODES, MUNICIPAL ORDINANCES,
ENVIRONMENTAL LAWS AND OTHER LAWS, RULES, ORDERS, AND REGULATIONS.


14.                                 Regulations and Parking Facilities.


14.1.                        Tenant shall faithfully observe and comply
with the rules and regulations attached hereto as Exhibit C, together with such other reasonable and
nondiscriminatory rules and regulations as are hereafter promulgated by
Landlord in its reasonable discretion (the “Rules and Regulations”).  During the Term, Landlord shall not
promulgate any rules and regulations that (a) have a material adverse effect on
Tenant’s use or occupancy of the Premises, or (b) materially increase Tenant’s
costs under this Lease, without Tenant’s prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed.


14.2.                        Tenant shall have a non-exclusive license to
use all parking facilities located on the Premises during the Term except to
the extent of any covenants, conditions and restrictions existing as of the
Execution Date providing for rights in favor of others to use the parking
facilities in common with Tenant. 
Landlord shall not use or grant a license or any other right to use the
parking facilities located on the Premises to any person or entity (other than
Tenant pursuant to the terms and conditions of this Lease and any Required
Lease (as defined below)).


14.3.                        Landlord reserves the right to subdivide the
real property; provided, however, that such right shall be exercised in a way
that does not materially adversely affect Tenant’s beneficial use and occupancy
of the Premises in any way whatsoever, including Tenant’s Permitted Use and
Tenant’s access to the Premises and use of parking facilities serving the
Premises.


15.                                 Utilities and Services.


15.1.                        Tenant shall, at Tenant’s sole cost and
expense, hire contractors and procure and maintain contracts, in customary form
and substance for, and with contractors adequately qualified and experienced in
the maintenance of the following equipment and improvements, if and when
installed on the Premises (a) HVAC equipment, (b) boilers and pressure vessels,
(c) fire extinguishing systems, including fire alarm and smoke detection
devices, (d) landscaping and irrigation systems (to the extent not maintained
by the owners’ association), (e) roof coverings and drains, (f) clarifiers, (g)
basic utility feeds to the perimeter of the Building (except to the extent the
owner’s association, City of San Diego or applicable utility provider is
responsible for such maintenance) and (h) any other equipment reasonably
required by Landlord; provided, however, Tenant may provide such maintenance
using its own personnel so long as it hires personnel with adequate experience
and qualifications in maintaining such equipment.  Tenant shall deliver to Landlord copies of
any such contracts that contemplate total expenditures for such services of One
Hundred Thousand Dollars ($100,000) or more.  
Notwithstanding the foregoing, in the event Tenant fails either to
maintain the contracts required under this Section 15.1 or to employ
experienced and qualified personnel, Landlord reserves the right, upon three
(3) days prior written notice to Tenant, to procure and maintain any such
contracts which Tenant has failed to maintain, and if Landlord so elects,
Tenant shall reimburse Landlord, upon demand, for the actual documented costs
thereof.


15.2.                        Within sixty (60) days after the Term
Commencement Date, and within sixty (60) days after the beginning of each
calendar year during the Term, Landlord shall give Tenant a good faith written
estimate for such calendar year of the cost of insurance provided by Landlord,
in connection with the Premises (“Insurance Costs”), and any repair and
maintenance expenses Landlord incurs pursuant to Section 18.4 (“Landlord’s
Maintenance Costs”).  Such written
estimate shall be consistent with then prevailing expenses in the applicable
industries and reflect allowable expenditures by Landlord pursuant to this
Lease.  Tenant shall pay such estimated
amount to Landlord in advance in equal monthly installments. Within ninety (90)
days after the end of each calendar year, Landlord shall furnish to Tenant a
statement showing in reasonable detail the Insurance Costs and Landlord’s
Maintenance Costs incurred by Landlord during such year (the “Annual
Statement”), and Tenant shall pay to Landlord the Insurance Costs and
Landlord’s Maintenance Costs incurred in excess of the payments previously made
by Tenant within ten (10) days of receipt of the Annual Statement.  In the event that the payments previously
made by Tenant for Insurance Costs and Landlord’s Maintenance Costs exceed
Tenant’s obligation, such excess amount shall be credited by Landlord to the
Rent or other



 10
 









charges next due and owing, provided
that, if the Term has expired, Landlord shall promptly remit such excess amount
to Tenant.


15.3.                        Tenant shall make all arrangements for and
pay for all water, electricity, air, sewer, refuse, gas, heat, light, power,
telephone service and any other service or utility Tenant requires at the
Premises.  Landlord shall cooperate with
Tenant, at Tenant’s sole cost and expense, in its arrangements for such
services and utilities and shall use commercially reasonable efforts to avoid
impeding the continued provision of such services and utilities to the Premises
in any way.  Landlord shall not be liable
for, nor shall any eviction of Tenant result from, the unintentional failure
(unless such failure is caused by Landlord’s willful misconduct or gross
negligence), or Landlord’s inability, to furnish any utility or service,
whether or not such failure is caused by accident; breakage; repair; strike,
lockout or other labor disturbance or labor dispute of any character; act of
terrorism; shortage of materials, which shortage is not unique to Landlord or
Tenant, as the case may be; or governmental regulation, moratorium or other
governmental action (collectively, “Force Majeure”).  In the event of such failure, Tenant shall
not be entitled to termination of this Lease, any abatement or reduction of
Rent, or relief from the operation of any covenant or agreement of this
Lease.  Tenant shall pay for, prior to
delinquency of payment therefor, any utilities and services that may be
furnished to the Premises during or, if Tenant occupies the Premises after the
expiration or earlier termination of the Term, after the Term.


15.4.                        Tenant shall not, without Landlord’s prior
written consent, use any device in the Premises that will in any way increase
the amount of ventilation, air exchange, gas, steam, electricity or water
beyond the then existing capacity of the Building.


16.                                 Tenant Improvements.


16.1.                        Tenant Improvements. Tenant shall have the right at any time,
and from time to time during the Term, to construct the Optional Improvements
on the Premises (collectively, the “Tenant Improvements”), as Tenant
shall deem necessary or desirable, which Tenant Improvements shall be made in
compliance with the requirements described in this Article 16.
Tenant shall be solely responsible for all costs and expenses in connection
with any Tenant Improvements constructed on the Premises at no cost to Landlord
other than, if required by Section 1.3.2 of the Purchase Agreement, the
Building G Additional Purchase Price. Tenant shall reimburse Landlord for any
extra expenses incurred by Landlord during the Term by reason of faulty work
done by Tenant or its architects or contractors in connection with any of the
Tenant Improvements.  Landlord will
reasonably cooperate with Tenant’s obtaining of approvals from Governmental
Authorities, including providing letters of permission, consent letters,
applications and similar authorizations. 
Upon payment of the Building G Additional Purchase Price, all Tenant
Improvements shall (a) become part of the Premises and the property of
Landlord, (b) remain upon and be surrendered with the Premises as a part
thereof, and (c) remain on the Premises and not be removed by Tenant at any
time during the Term, other than items that Tenant replaces with a comparable
item of equal quality and quantity as existed as of the time of such removal.


16.2.                        Plans.  Tenant’s architect, Smith
Consulting Architects, or such other architect who is reasonably acceptable to
Landlord, shall be responsible for the preparation of plans for such Tenant
Improvements (the “Plans”). 
Tenant shall prepare and submit to Landlord for Landlord’s approval the
Plans.  Landlord shall notify Tenant in
writing within seven (7) days after receipt of the Plans whether Landlord
approves or objects to the Plans and (in a reasonably detailed description) of
the manner, if any, in which the Plans are objectionable.  If Landlord objects to the Plans, then Tenant
shall revise the Plans and cause Landlord’s permissible objections (based on
the allowable grounds for such objections described in this Section 16.2)
to be remedied in the revised Plans to Landlord. Landlord shall not withhold
its approval to the Plans unless the Tenant Improvements to be constructed in
accordance with such Plans: (a) create a foreseeable risk of violating any Law,
including zoning ordinances; (b) violate any recorded document affecting the
Premises; provided that during the Term, Landlord shall not record any document
affecting the Premises which has (or will have in the event Tenant exercises
the Purchase Option and acquires the Premises) a material adverse effect on
Tenant’s use or occupancy of the Premises without Tenant’s prior written
consent, which consent shall not be unreasonably withheld, conditioned or
delayed; (c) are not reasonably consistent with the architecture and overall
design of comparable office buildings in the surrounding Sorrento Mesa/Sorrento
Valley area; (d) are not at least equivalent to the then existing quality of
the Building and other office buildings in the vicinity of the Building; (e)
involves a use of the



 11
 









Premises that is inconsistent with the
Permitted Use of the Premises; or (f) are reasonably expected to reduce the
value of the Building or the Premises (each, a “Tenant Improvement Design
Problem”).  Landlord’s approval of,
or objection to, the revised Plans and Tenant’s correction of the same shall be
in accordance with this Section 16.2 until Landlord has approved the
Plans in writing.  The iteration of the
Plans that is approved by Landlord without objection shall be referred to
herein as the “Approved Plans.”


16.3.                        Changes.  Any changes to the Approved
Plans (each, a “TI Change”) requested by Tenant which causes a Tenant
Improvement Design Problem shall be subject to the written approval of
Landlord, which approval shall not be unreasonably withheld or delayed.


16.4.                        Landlord’s Approval. 
Landlord shall respond to all requests for consents, approvals or
directions made by Tenant pursuant to this Section 16 within seven (7)
days following Landlord’s receipt of such request.  If Landlord fails to respond within such
seven (7) days period, then Tenant shall provide Landlord with a second written
notice stating that “Landlord’s failure to respond within three (3) days after
Tenant’s second notice shall be deemed approval by Landlord,” and if Landlord
does not respond within such three (3) day period, then Landlord shall be
deemed to have approved such item.


16.5.                        Construction of Tenant Improvements. Tenant covenants and agrees that all work
done by Tenant or Tenant’s contractors in connection with such Tenant
Improvements shall be performed: (a) by licensed contractors (unless done by
qualified employees of Tenant); (b) in a good and workmanlike manner; and (c)
in full compliance with Applicable Laws. Tenant shall require its contractors
and subcontractors performing such Tenant Improvements to name Landlord and its
affiliates and lenders as additional insureds on their respective insurance policies.


16.6.                        Completion of Tenant Improvements. 
Tenant shall complete such Tenant Improvements in all respects in
accordance with the provisions of this Lease. 
The applicable Tenant Improvements shall be deemed completed at such
time as Tenant shall furnish to Landlord:


(a)                                        A certificate of occupancy from the City of
San Diego for such Tenant Improvements;


(b)                                       Either (i) a final unconditional waiver of
liens from each contractor and any other individual or entity for whom payment
is requested in connection with such Tenant Improvements and their respective
subcontractors, if any (other than contractors and any other individuals or
entities and their respective subcontractors, if any, requesting payment of
less than One Thousand Five Hundred Dollars ($1,500)), in the form prescribed
by Section 3626 of the California Civil Code which provides that such
individual or entity, as applicable, unconditionally waives and releases all
mechanics’ liens and other similar encumbrances, stop notices and bond rights
with respect to all work performed by such individual or entity, as applicable
(the “Building G Unconditional Waiver”),
except to the extent Tenant does not receive any unconditional waivers of liens
from any contractors and other individuals or entities and their respective
subcontractors, if any, for whom payment is requested in connection with such
work and the lien period has lapsed without any such contractors or other
individuals or entities and their respective subcontractors, if any, recording
mechanics liens; or (ii) Tenant posts a bond in an amount sufficient to ensure
full payment of any mechanic’s liens and other similar encumbrances for which
Landlord has not received a Building G Unconditional Waiver, including any
potential interest, late charge or penalties;


(c)                                        All other certifications and approvals with
respect to such Tenant Improvements that may be required from any Governmental
Authority and any board of fire underwriters or similar body for the use and
occupancy of the Building;


(d)                                         Complete “as-built” drawing print sets and
electronic CADD files on disc showing such Tenant Improvements to the extent
Tenant obtains such files (or files in such other format as Tenant maintains
for its records);


(e)                                        Upon Landlord’s request, documentation
showing the amounts expended by Tenant with respect to such Tenant
Improvements, together with supporting documentation reasonably acceptable to
Landlord; and



 12
 









(f)                                            A Certificate of Substantial Completion in
the form of the American Institute of Architects document G704, or such other
form reasonably approved by Landlord, executed by the project architect and the
general contractor.


17.                                 Alterations.  


17.1.                        Subject to Article 16, Tenant shall,
at Tenant’s sole cost and expense, have the right at any time, and from time to
time during the Term, to make such Alterations (as defined below) to the
Building, and improvements and fixtures hereafter erected on the Premises,
including, without limitation, solar panels on the roof of the Building, as
Tenant shall deem necessary or desirable in connection with the requirements of
its business, which Alterations (other than Alterations of Tenant’s movable
trade fixtures and equipment) shall be made in compliance with the requirements
described in this Article 17; provided, however, the
Optional Improvements shall be made in compliance with the requirements of Article
16.  Tenant shall make no
alterations, additions or improvements in or to the Premises or engage in any
construction, demolition, reconstruction, renovation, or other work of any kind
in, at, or serving the Premises (“Alterations”) without Landlord’s prior
written approval, which approval Landlord may withhold in its sole and absolute
discretion in connection with any Alteration that: (a) adversely affects the
exterior appearance of the Building or the Premises; (b) adversely affects the
structural aspects of the Building, including, without limitation, the roof, foundation, load bearing walls and structural
elements of the Premises; (c) adversely affects any base-building system or equipment, including, without
limitation, the base building HVAC, mechanical, electrical, plumbing or life
safety systems; (d) violates any Applicable Law; (e) violates any recorded
document affecting the Premises; provided that during the Term, Landlord shall
not record any document affecting the Premises which has (or will have in the
event Tenant exercises the Purchase Option and acquires the Premises) a
material adverse effect on Tenant’s use or occupancy of the Premises without Tenant’s
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed; (f) causes the Building to be inconsistent with the
then existing quality of the Building and other office buildings in the
vicinity of the Building; (g) involves a use of the Premises that is
inconsistent with the Permitted Use of the Premises; or (h) reduces the value
of the Building or the Premises (each, a “Design Problem”).


17.2.                        Notwithstanding the foregoing, Tenant may
make non-structural Alterations to the Premises (“Acceptable Changes”) upon at least ten (10) business days
prior written notice to Landlord but without Landlord’s prior consent provided
(a) the Acceptable Changes do not involve Design Problems; and (b) the cost of
such Acceptable Changes do not exceed Seventy-Five Thousand Dollars ($75,000)
per occurrence or an aggregate amount of One Hundred Seventy-Five Thousand
Dollars ($175,000) in any twelve (12) month period; provided, however,
Tenant shall not be required to provide Landlord any notice in connection with
any non-structural Alterations in any twelve (12) month period where the total
combined cost of such non-structural Alterations do not exceed Twenty Thousand
Dollars ($20,000).


17.3.                        If Landlord’s approval of proposed Alterations
is required, Tenant shall provide Landlord, at least ten (10) days in advance
of any proposed construction, with plans, specifications, bid proposals, work
contracts, requests for laydown areas and such other information concerning the
nature and cost of the Alterations as Landlord may reasonably request.  If Landlord’s approval of the proposed
Alterations is required, Landlord shall notify Tenant in writing within ten
(10) business days after receipt of the applicable plans, whether Landlord has
approved or disapproved the plans (and, in the case of disapproval, shall
provide a detailed explanation of the reason(s) for disapproval).  If Landlord’s approval of proposed
Alterations is not required, Tenant shall (a) give Landlord at least ten (10)
business days’ prior written notice of the proposed commencement of such
proposed Alterations, and (b) a copy of the applicable plans upon Landlord’s
written request after Tenant’s completion of the Alterations.


17.4.                        Tenant shall not construct or permit to be
constructed partitions or other obstructions in a manner that will interfere
with free access to mechanical installation or service facilities of the
Building.


17.5.                        Tenant shall accomplish any work performed on
the Premises in such a manner as to permit any fire sprinkler system and fire
water supply lines to remain fully operable at all times, unless such
interruption in service is temporary and commercially reasonable



 13
 









arrangements are made for the provision of
temporary services, all in accordance with Applicable Laws and the applicable
insurance policies.


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


17.7.                        All Alterations shall (a) unless, prior to
such construction or installation Landlord elects otherwise, become the
property of Landlord upon the expiration or earlier termination of the Term,
(b) remain upon and be surrendered with the Premises as a part thereof, and (c)
remain on the Premises and not be removed by Tenant at any time during the
Term, other than items that Tenant replaces with a comparable item of equal
quality and quantity as existed as of the time of such removal.  The Premises shall at all times remain the property of
Landlord and shall be surrendered to Landlord upon the expiration or earlier
termination of this Lease.  Subject to
the first sentence of this Section 17.7, the Tenant’s Personal Property,
whether owned by Tenant or leased by Tenant from a
lessor/owner (the “Owner/Secured Party”), shall be and remain the
property of Tenant or any such Owner/Secured Party and may be removed by Tenant
or any such Owner/Secured Party at any time. 
Tenant shall promptly repair any damage to the Property caused by the
removal of Tenant’s Personal Property. 
The Premises shall at all times remain the property of Landlord and
shall be surrendered to Landlord upon the expiration or earlier termination of
this Lease.


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


17.9.                        If Tenant shall fail to remove any of its
effects from the Premises prior to termination of this Lease, then Landlord
may, at its option, remove the same in any manner that Landlord shall choose
and store said effects without liability to Tenant for loss thereof or damage
thereto, and Tenant shall pay Landlord, upon demand, any costs and expenses
incurred due to such removal and storage or Landlord may, at its sole option
and without notice to Tenant, sell such property or any portion thereof at
private sale and without legal process for such price as Landlord may obtain
and apply the proceeds of such sale against any (a) amounts due by Tenant to
Landlord under this Lease and (b) any expenses incident to the removal, storage
and sale of said personal property.


17.10.                  Notwithstanding any other provision of this Article 17
to the contrary, in no event shall Tenant remove any improvement from the
Premises as to which Landlord directly contributed payment without Landlord’s
prior written consent, unless Tenant replaces such improvement with
improvements having equal or greater value than those removed, as reasonably
determined by, and subject to the prior written approval of, Landlord, which
approval shall not be unreasonably withheld, conditioned or delayed.


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


17.12.                  Tenant shall reimburse Landlord for any extra
expenses incurred by Landlord during the Term by reason of faulty work done by
Tenant or its contractors.


17.13.                  Tenant shall require its contractors and
subcontractors performing work on the Premises to name Landlord and its
affiliates and lenders as additional insureds on their respective insurance
policies.


18.                                 Repairs and Maintenance.


18.1.                        Tenant, at its sole cost and expense, shall
maintain and keep the Premises, all improvements thereon, and all appurtenances
thereto, including but not limited to sidewalks,



 14
 









parking areas, curbs, roads,
driveways, lighting standards, landscaping, sewers, water, gas and electrical
distribution systems and facilities, drainage facilities, and all signs, both
illuminated and non-illuminated that are now or hereafter on the Premises, in
good condition (ordinary wear and tear excepted) and in a manner consistent
with the Permitted Use provided, however, Tenant shall not be required to
maintain any of the foregoing to the extent such maintenance is the
responsibility of an owners’ association, City of San Diego or any utility
provider.  Tenant shall make all repairs,
replacements and improvements, including, without limitation, all structural,
roof, HVAC, plumbing and electrical repairs, replacements and improvements
required, and shall keep the same free and clear from all rubbish and
debris.  All repairs made by Tenant shall
be at least equal in quality to the original work, and shall be made only by a
licensed, bonded contractor approved in advance by Landlord (which shall not be
unreasonably withheld, conditioned or delayed); provided, however,
Tenant may make such repairs using its own personnel so long as it hires
personnel with adequate experience and qualifications in performing such work; provided,
further, that such contractor or qualified personnel need not be bonded
or approved by Landlord if the Alterations, repairs, additions or improvements
to be performed do not exceed Seventy-Five Thousand Dollars ($75,000) per
occurrence or an aggregate amount of One Hundred Seventy-Five Thousand Dollars
($175,000) in any twelve (12) month period. 
Tenant shall not take or omit to take any action, the taking or omission
of which shall cause waste, damage or injury to the Premises, ordinary wear and
tear excepted.


18.2.                        Tenant shall, and shall cause Tenant’s
contractors or agents to, maintain the lines designating the parking spaces in
good condition and paint the same as often as may be necessary, so that they
are discernable at all times; resurface the parking areas as necessary to
maintain them in good condition; paint any exterior portions of the Building as
necessary to maintain them in good condition; maintain the roof and landscaping
in good condition; maintain sight screens, barricades or enclosures around any
waste or storage areas; and take all reasonable precautions to insure that the
drainage facilities of the roof are not clogged and are in good and operable
condition at all times; provided, however, Tenant shall not be required to
maintain any of the foregoing that are the responsibility of any Governmental
Authority or an owners’ association to maintain.


18.3.                        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, or in or to improvements, fixtures,
equipment and personal property therein unless such damage is caused by
Landlord or its agents’ gross negligence or willful misconduct.


18.4.                        Landlord shall not be required to maintain or
make any repairs or replacements of any nature or description whatsoever to the
Premises.  Except for repairs arising as
a result of damage caused by Landlord or its agents’ gross negligence or
willful misconduct, Tenant hereby expressly waives the right to make repairs at
the expense of Landlord as provided for in any Applicable Laws in effect at the
time of execution of this Lease, or in any other Applicable Laws that may
hereafter be enacted, and waives its rights under Applicable Laws relating to a
landlord’s duty to maintain its premises in a tenantable condition.  Notwithstanding the foregoing, if Tenant
shall fail during the Term, after reasonable notice, to maintain or to commence
and thereafter to proceed with diligence to make any repair required of it
pursuant to the terms of this Lease, Landlord, without being under any
obligation to do so and without thereby waiving such default by Tenant, may so
maintain or make such repair and may charge Tenant for the costs thereof.  Any expense reasonably incurred by Landlord
in connection with the making of such repairs may be billed by Landlord to
Tenant monthly or, at Landlord’s option, immediately, and shall be due and
payable within twenty (20) days after such billing or, at Landlord’s option,
may be deducted from the Security Deposit.


18.5.                        During the Term, Landlord and Landlord’s
agents shall have the reasonable right to enter upon the Premises or any
portion thereof for the purposes of performing any repairs or maintenance
Landlord is permitted to make pursuant to this Lease, and of ascertaining the
condition of the Premises or whether Tenant is observing and performing Tenant’s
obligations hereunder, all without unreasonable interference from Tenant or
Tenant’s Agents.  Except for emergency
maintenance or repairs, the right of entry contained in this paragraph shall be
exercisable at reasonable times, at reasonable hours and on reasonable notice
in compliance with Section 32.3 hereof, conducted in a manner that
protects Tenant’s intellectual property and does not unreasonably interfere
with Tenant’s business.



 15
 









18.6.                        Tenant shall, upon the expiration or sooner
termination of the Term, surrender the Premises to Landlord in as good of a
condition as when received, ordinary wear and tear and casualty excepted.  Landlord shall have no obligation to alter,
remodel, improve, repair, decorate or paint the Premises or any part thereof.


18.7.                        This Article 18 relates to
repairs and maintenance arising in the ordinary course of operation of the Premises
and any related facilities.  In the event
of fire, earthquake, flood, vandalism, war, terrorism, natural disaster or
similar cause of damage or destruction, Article 22 shall apply in
lieu of this Article 18.


19.                                 Liens.


19.1.                        Subject to the immediately succeeding
sentence Tenant shall keep the Premises free from any liens arising out of work
performed, materials furnished or obligations incurred by Tenant.  Tenant further covenants and agrees that any
mechanic’s lien filed against the Premises for work claimed to have been done
for, or materials claimed to have been furnished to, shall be discharged or
bonded by Tenant within twenty (20) days after the filing thereof, at Tenant’s
sole cost and expense.


19.2.                        Should Tenant fail to discharge or bond against
any lien of the nature described in Section 19.1, Landlord may, at
Landlord’s election, pay such claim or post a bond or otherwise provide
security to eliminate the lien as a claim against title, and Tenant shall
within twenty (20) days, reimburse Landlord for the costs thereof as Additional
Rent.


19.3.                        In the event that Tenant leases or finances
the acquisition of office equipment, furnishings or other personal property of
a removable nature utilized by Tenant in the operation of Tenant’s business, Tenant
warrants that any Uniform Commercial Code financing statement executed by
Tenant shall, upon its face or by exhibit thereto, indicate that such financing
statement is applicable only to removable personal property of Tenant located
within the Premises.  In no event shall
the address of the Premises be furnished on a financing statement without
qualifying language as to applicability of the lien only to removable personal
property located within the Premises. 
Should any holder of a financing statement executed by Tenant record or
place of record a financing statement that appears to constitute a lien against
any interest of Landlord or against equipment that may be located other than
within an identified suite leased by Tenant, Tenant shall, within twenty (20)
days after filing such financing statement, (a) cause a copy of the lender
security agreement or other documents to which the financing statement pertains
to be furnished to Landlord to facilitate Landlord’s ability to demonstrate
that the lien of such financing statement is not applicable to Landlord’s
interest and (b) take commercially reasonable efforts to cause Tenant’s lender
to amend such financing statement and any other documents of record to clarify
that any liens imposed thereby are not applicable to any interest of Landlord
in the Premises.


20.                                 Indemnification and Exculpation.


20.1.                        Tenant agrees to indemnify, defend and save
Landlord harmless from and against any and all demands, claims, liabilities,
losses, costs, expenses, actions, causes of action, damages or judgments, and
all reasonable expenses (including, without limitation, reasonable attorneys’
fees, charges and disbursements) incurred in investigating or resisting the
same (collectively, “Claims”) arising from (a) injury or death to any
person or injury to any property occurring within or about the Premises arising
directly or indirectly out of Tenant’s or any of Tenant’s officers, employees,
agents, contractors, invitees, customers and subcontractors (collectively, “Tenant’s
Agents”) use or occupancy of the Premises, (b) a breach or default by
Tenant in the performance of any of its obligations hereunder, including,
without limitation, tenant’s failure to perform any of its obligations in Sections
9.6 and 18.1, (c) any of the Tenant Improvements or any of the
Tenant’s Alterations, (d) any determination by a Governmental Authority that
the Premises during the Term, the Tenant Improvements or any of Tenant’s
Alterations at any time, fails or failed to comply with the ADA, and (e) any
and all cost or liability for compensation claimed by any other broker or
agent, other than the Brokers, employed or engaged by Tenant or claiming to
have been employed or engaged by Tenant, except to the extent caused by
Landlord’s Parties’ willful misconduct or gross negligence.


20.2.                        Notwithstanding any provision of Section
20.1 to the contrary, Landlord shall not be liable to Tenant for, and
Tenant assumes all risk of, damage to personal property or scientific



 16
 









research, including, without limitation, loss
of records kept by Tenant within the Premises and damage or losses caused by
fire, electrical malfunction, gas explosion or water damage of any type
(including, without limitation, broken water lines, malfunctioning fire
sprinkler systems, roof leaks or stoppages of lines), unless any such loss is
due to Landlord’s willful disregard of written notice by Tenant of need for a
repair that Landlord is responsible to make for an unreasonable period of time
or to Landlord Parties’ willful misconduct or gross negligence.  Tenant further waives any claim for injury to
Tenant’s business or loss of income relating to any such damage or destruction
of personal property as described in this Section 20.2 except to the
extent caused by Landlord Parties’ willful misconduct or gross negligence.


20.3.                        Landlord shall not be liable for any damages
arising from any act, omission or neglect of any third party other than the
gross negligence or willful misconduct of the Landlord Parties.


20.4.                        Tenant acknowledges that security devices and
services, if any, while intended to deter crime, may not in given instances
prevent theft or other criminal acts. 
Landlord shall not be liable for injuries or losses caused by criminal
acts of third parties other than Landlord’s affiliates and agents, and Tenant
assumes the risk that any security device or service may malfunction or
otherwise be circumvented by a criminal. 
Tenant may, subject to Article 17, at its expense, install such
security devices and contract for such services as Tenant determines are
appropriate to deter crime or otherwise protect against criminal acts.  If Tenant desires protection against such
criminal acts, then Tenant shall, at Tenant’s sole cost and expense, obtain
appropriate insurance coverage.


20.5.                        Landlord agrees to indemnify, defend and save
Tenant harmless from and against any and all Claims arising from (a) injury or
death to any person or injury to any property occurring within or about the
Premises arising directly or indirectly out of Landlord Parties’ willful
misconduct or gross negligence, (b) a breach or default by Landlord in the
performance of its obligations hereunder, or (c) any and all cost or liability
for compensation claimed by any other broker or agent, other than the Brokers,
employed or engaged by Landlord or claiming to have been employed or engaged by
Landlord.


20.6.                        If a party (the “Indemnified Party”)
becomes aware of a Claim which would reasonably be expected to result in an
obligation to indemnify the Indemnified Party by the other party (the “Obligated
Party”) under this Lease, the Indemnified Party shall notify the Obligated
Party thereof in writing within thirty (30) days after it becomes so aware,
giving a reasonably detailed description of the Claim to the extent then known,
and providing a copy of any written demand, notice, summons or other paper
received by the Indemnified Party; provided, however, the
Indemnified Party’s failure to provide the Obligated Party notice under this Section
20.6 shall not relieve the Obligated Party’s liability hereunder except to
the extent such failure to provide notice created or exacerbated the Obligated
Party’s liability hereunder.  In
addition, the Indemnified Party shall not settle any Claims under Sections
20.1 and 20.5 without the Obligated Party’s prior written consent,
which consent shall not be unreasonably withheld, conditioned or delayed.


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


21.                                 Insurance; Waiver of Subrogation.


21.1.                        Landlord shall maintain insurance for the
Premises in amounts equal to full replacement cost (exclusive of the costs of
excavation, foundations and footings, and without reference to depreciation
taken by Landlord upon its books or tax returns) or such lesser coverage as
Landlord may elect, provided that such coverage shall not be less than
ninety percent (90%) of such full replacement cost or the amount of such
insurance Landlord’s lender, mortgagee or beneficiary (each, a “Lender”),
if any, requires Landlord to maintain (but Tenant shall not be required to pay
the incremental costs of obtaining limits greater than the full replacement
cost, as determined by Landlord in its reasonable discretion), providing
protection against any peril generally included within the classification “Fire
and Extended Coverage,” together with insurance against sprinkler damage (if
applicable), vandalism and malicious mischief. 
Landlord, subject to availability thereof, shall further insure, if
Landlord deems it appropriate, coverage against flood, environmental hazard and
earthquake, loss or failure of building equipment, rental loss during the
period of repairs or rebuilding, workmen’s



 17
 









compensation insurance and
fidelity bonds for employees employed to perform services.  Notwithstanding the foregoing, Landlord may,
but shall not be deemed required to, provide insurance for any improvements or
Alterations installed by Tenant hereunder, without regard to whether or not
such improvements or Alterations are made a part of or are affixed to the
Buildings; provided, however, upon payment of the Building G
Additional Purchase Price, the Premises hereunder shall include the Tenant
Improvements constructed in accordance with Section 16.


21.2.                        In addition, Landlord shall carry public
liability insurance with a single limit of not less than One Million Dollars
($1,000,000) for death or bodily injury, or property damage with respect to the
Premises.


21.3.                        Tenant shall, at its own cost and expense,
procure and maintain in effect, beginning on the Term Commencement Date, and
continuing throughout the Term (and occupancy by Tenant, if any, after
termination of this Lease) commercial general liability insurance with limits
of not less than Two Million Dollars ($2,000,000) per occurrence for death or
bodily injury and not less than Two Million Dollars ($2,000,000) for property
damage with respect to the Premises (including $100,000 fire legal liability
(each loss)).


21.4.                        The insurance required to be purchased and
maintained by Tenant pursuant to this Lease shall name Landlord, BioMed Realty,
L.P., BioMed Realty Trust, Inc., and their respective officers, employees,
agents, general partners, members, subsidiaries, affiliates and Lenders (“Landlord
Parties”) as additional insureds. 
Said insurance shall be with companies having a rating of not less than
policyholder rating of A and financial category rating of at least Class XII in
“Best’s Insurance Guide.”  Tenant shall
obtain for Landlord from the insurance companies or cause the insurance
companies to furnish certificates of coverage to Landlord.  The insurer shall endeavor to provide
Landlord at least thirty (30) days’ prior written notice of any reduction of
coverage, other modification or cancellation of such policy (except in the
event of non-payment of premium, in which case ten (10) days written notice
shall be given).  All such policies shall
be written as primary policies, not contributing with and not in excess of the
coverage that Landlord may carry.  Tenant’s
policy may be a “blanket policy” that specifically provides that the amount of
insurance shall not be prejudiced by other losses covered by the policy.  Tenant shall, on or before the expiration of
such policies, furnish Landlord with a copy of a certificate of insurance for
Tenant from a duly licensed insurance company showing all premiums due on the
renewal or successor policy have been paid at the time such premiums are due
and payable and showing the insurance provided by the renewal or successor
policy to be in full force and effect. 
Tenant agrees that if Tenant does not take out or does not maintain such
insurance, Landlord may (but shall not be required to) procure said insurance
on Tenant’s behalf and at its cost to be paid by Tenant as Additional Rent.


21.5.                        Subject to Section 20.5, Tenant assumes the
risk of damage to any fixtures, goods, inventory, merchandise, equipment and
leasehold improvements, and Landlord shall not be liable for injury to Tenant’s
business or any loss of income therefrom, relative to such damage, all as more
particularly set forth within this Lease. 
Tenant shall, at Tenant’s sole cost and expense, carry such insurance as
Tenant desires for Tenant’s protection with respect to personal property of
Tenant or business interruption.


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


21.7.                        Landlord and Tenant each hereby waive any and
all rights of recovery against the other or against the officers, directors,
employees, agents and representatives of the other on account of loss or damage
occasioned by such waiving party or its property or the property of others
under such waiving party’s control, in each case to the extent that such loss
or damage is insured against under any fire and extended coverage insurance
policy that either Landlord or Tenant may have in force at the time of such
loss or damage.  Such waivers shall
continue so long as their respective insurers so permit.  Any termination of such a waiver shall be by
written notice to the other party, containing a description of the
circumstances hereinafter set forth in this



 18
 









Section 21.7. 
Landlord and Tenant, upon obtaining the policies of insurance required
or permitted under this Lease, shall give notice to the insurance carrier or
carriers that the foregoing mutual waiver of subrogation is contained in this
Lease.  If such policies shall not be
obtainable with such waiver or shall be so obtainable only at a premium over
that chargeable without such waiver, then the party seeking such policy shall
notify the other of such conditions, and the party so notified shall have ten
(10) days thereafter to either (a) procure such insurance with companies
reasonably satisfactory to the other party or (b) agree to pay such additional
premium.  If the parties do not
accomplish either (a) or (b), then this Section 21.7 shall have no
effect during such time as such policies shall not be obtainable or the party
in whose favor a waiver of subrogation is desired refuses to pay the additional
premium.  If such policies shall at any
time be unobtainable, but shall be subsequently obtainable, then neither party
shall be subsequently liable for a failure to obtain such insurance until a
reasonable time after notification thereof by the other party.  If the release of either Landlord or Tenant,
as set forth in the first sentence of this Section 21.7, shall
contravene Applicable Laws, then the liability of the party in question shall
be deemed not released but shall be secondary to the other party’s insurer.


21.8.                        Landlord may require insurance policy limits
required under this Lease to be raised to conform with requirements of Landlord’s
Lender, if any, to bring coverage limits to levels then being required of
similarly situated tenants under leases of premises that are comparable
in size to the Premises, used for similar purposes as the Premises are used and
located in buildings comparable in quality to, and in the general vicinity of,
the Building.  In addition, upon each
tenth (10th) anniversary of the Term Commencement
Date, Landlord may require
insurance policy limits required under this Lease to be adjusted by the
percentage change in the Consumer Price Index for All Urban Consumers for the
San Diego metropolitan area, as published by the United States Department of
Labor’s Bureau of Labor Statistics from the Term Commencement Date through such
tenth (10th) anniversary of the Term Commencement Date.


21.9.                        Any costs incurred by Landlord pursuant to
this Article 21 shall be included as Insurance Costs payable by Tenant
pursuant to this Lease; provided, however, with respect to
insurance coverage for environmental hazard and earthquake, if any, maintained
by Landlord under Section 21.8, the costs included as Insurance Costs
payable by Tenant pursuant to this Lease shall not exceed an amount equal to
Tenant’s pro rata portion of the cost to Landlord of maintaining portfolio-wide
policies with limits of up to $10,000,000 for environmental hazard and up to
$20,000,000 for earthquake, in each case as may be adjusted by Landlord in its
sole and absolute discretion on each anniversary of the Term Commencement Date
of this Lease by the then most recent available 12-month percentage change in
the Consumer Price Index for All Urban Consumers for the San Diego metropolitan
area, as published by the United States Department of Labor’s Bureau of Labor
Statistics.


22.                                 Damage or Destruction.


22.1.                        In the event of a partial destruction of the
Premises by fire or other perils covered by extended coverage insurance not exceeding
thirty percent (30%) of the full insurable value thereof, and provided
that (a) the damage thereto is such that the Premises may be repaired,
reconstructed or restored to substantially the same condition as existed
immediately before such damage and destruction in accordance with Applicable
Laws within a period of twelve (12) months from the date of the happening of
such casualty and (b) Landlord shall receive insurance proceeds sufficient to
cover the cost of such repairs (except for any deductible amount provided by
Landlord’s policy, which deductible amount, if paid by Landlord, shall
constitute an Insurance Cost), Landlord shall commence and proceed diligently
with the work of repair, reconstruction and restoration of the Premises, and
the provisions of this Lease shall continue in full force and effect except as
otherwise provided in this Article 22.


22.2.                        In the event of any damage to or destruction
of the Premises other than as described in Section 22.1, Landlord may
elect to repair, reconstruct and restore the Premises in which case the
provisions of this Lease shall continue in full force and effect except as
otherwise provided in this Article 22. 
Landlord shall give written notice to Tenant of its election to repair,
reconstruct or restore the Premises or to terminate this Lease within sixty
(60) days following the date of damage or destruction (the “Landlord’s
Restoration Notice”).  Landlord shall include with the
Landlord’s Restoration Notice a good faith estimate (the “Restoration Estimate”)
prepared by Landlord’s architect or engineer of: (a) the time required to
substantially complete the repair, reconstruction or restoration of the
Premises to its original condition in compliance with Applicable Laws (the “Restoration
Period”), and (b) the costs and expenses incurred or to



 19
 









be incurred in restoring such damage and
destruction, including, without limitation, the design costs, project
management costs, insurance costs and all other costs in connection with the
repair, reconstruction or restoration of such damage or destruction (the “Restoration
Costs”).  If Landlord elects to
repair, reconstruct and restore the Premises but the estimated Restoration
Period set forth in the Landlord’s Restoration Notice is greater than
twenty-four (24) months, then Tenant shall have the right to terminate this
Lease as of the date of such damage or destruction within twenty (20) business
days following the date upon which Tenant receives the Landlord’s Restoration
Notice.  If Landlord elects to terminate
this Lease, then this Lease shall terminate as of the date of such damage or
destruction; provided, however, if Landlord elects to terminate
this Lease, then Tenant may elect, within such twenty (20) business days
following the date upon which Tenant receives the Landlord’s Restoration
Notice, to exercise the Purchase Option in accordance with Section
30.1(c)(ii), in which event Tenant shall receive any insurance proceeds
resulting from such damage; and provided  further, if the
Restoration Period set forth in the Restoration Estimate is less than
thirty-six (36) months, Tenant may elect, within such twenty (20) business days
following the date upon which Tenant receives the Landlord’s Restoration
Notice, to deposit with Landlord an amount that is sufficient to cover any
shortfall between the amount of insurance proceeds Landlord expects to receive
in connection with the damage or destruction and the expected Restoration Costs
set forth in the Restoration Estimate (the “Restoration Deposit”), so
long as Tenant: (1) reaffirms its intention to pay all Rent as such Rent
becomes due and owing under this Lease; (2) waives any claim to offsets,
defenses or abatement of such Rent as a consequence of such damage or
destruction without regard to the duration of the Restoration Period; and (3)
deposits with Landlord the Restoration Deposit, in which event this Lease shall
remain in full force and effect and Landlord shall repair, reconstruct or
restore such damage or destruction in accordance with the terms and conditions of
Section 22.6, and in the event Landlord thereafter notifies Tenant at
any time that the expected Restoration Costs exceed the remaining Restoration
Deposit and remaining insurance proceeds to be received by Landlord, Tenant
shall within ten (10) days after such notice pay the amount of such deficiency
to Landlord.  Landlord shall have the
right to use the Restoration Deposit to cover all costs and expenses in excess
of the insurance proceeds received by Landlord necessary to complete the
repair, reconstruction or restoration of such damage or destruction.  In addition, if the actual cost of such
repair, reconstruction or restoration exceeds the amount of the Restoration
Fund, Tenant shall promptly deposit with Landlord such excess to be included in
the Restoration Fund.  Any sum which
remains in the Restoration Fund upon completion of the repair, reconstruction
or restoration of such damage or destruction after the payment of all
Restoration Costs shall be promptly refunded to Tenant.


22.3.                        Upon any termination of this Lease under any
of the provisions of this Article 22 (and provided Tenant does not
exercise the Purchase Option), the parties shall be released thereby without
further obligation to the other from the date possession of the Premises is
surrendered to Landlord, except with regard to (a) items occurring prior to the
damage or destruction and (b) provisions of this Lease that, by their express
terms, survive the expiration or earlier termination hereof.


22.4.                        Except as set forth in Section 22.2,
in the event of repair, reconstruction and restoration as provided in this Article 22,
all Rent to be paid by Tenant under this Lease shall be abated proportionately
based on the extent to which Tenant’s use of the Premises is impaired during
the period of such repair, reconstruction or restoration; provided,
however, that the amount of such abatement shall be reduced by the proceeds of
lost rental income insurance actually received by Tenant with respect to the
Premises.


22.5.                        Notwithstanding anything to the contrary
contained in this Article 22, should Landlord be delayed or
prevented from completing the repair, reconstruction or restoration of the
damage or destruction to the Premises after the occurrence of such damage or
destruction by Force Majeure, then the time for Landlord to commence or
complete repairs shall be extended on a day-for-day basis.


22.6.                        If, and solely to the extent, Landlord is
obligated to or elects to repair, reconstruct or restore as herein provided,
then Landlord shall be obligated to make such repair, reconstruction or
restoration only with regard to: (a) those portions of the Premises that were
originally provided at Landlord’s expense, and (b) those portions of the
Premises that are covered by the insurance Landlord is required to, or has
elected to, obtain in accordance with Article 21.  Landlord shall not be obligated to repair,
reconstruct or restore improvements not



 20















originally provided by Landlord or at Landlord’s expense to the extent
not covered by the insurance Landlord is required to, or has elected to, obtain
in accordance with Article 21.


22.7.                        Notwithstanding anything to the contrary contained in this Article 22,
Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises if the damage resulting from any casualty covered under
this Article 22 occurs during the last twenty-four (24) months of
the Term unless Tenant exercises the Extension Option to extend, in which event
Landlord shall not have any obligation to repair, reconstruct or restore the
Premises if the damages resulting from any casualty covered under this Article 22
occurs during the last twenty-four (24) months of any extension hereof, or to
the extent that insurance proceeds are not available therefor.


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


23.                                 Eminent Domain.


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


23.2.                        In the event of a partial taking of the Premises, or of drives,
walkways or parking areas serving the Premises for any public or quasi-public
purpose by any lawful power or authority by exercise of right of appropriation,
condemnation, or eminent domain, or sold to prevent such taking, then Tenant
may elect to terminate this Lease as of such taking if such taking is, in
Tenant’s reasonable opinion, of a material nature such as to make it
impracticable or infeasible to continue use of the unappropriated portion for
purposes of renting office or laboratory space.


23.3.                        In the event a partial taking of the Premises is threatened (in
writing) or instituted by any lawful power or authority by exercise of the
right of appropriation, condemnation or eminent domain with respect to: (a)
twenty-five percent (25%) or more of the Premises, or (b) the condemnation
award is less than the cost to repair the unappropriated portion of the
Premises (“Condemnation Restoration Costs”), Landlord may, upon thirty
(30) days prior written notice to Tenant (the “Landlord’s Condemnation
Notice”), elect to either (i) terminate this Lease, or (ii) continue this
Lease in accordance with Section 23.5. 
Landlord shall include with the Landlord’s Condemnation Notice a good
faith estimate (the “Condemnation Restoration Estimate”) prepared by
Landlord’s architect or engineer of the costs and expenses incurred or to be
incurred in restoring the unappropriated portion of the Premises.  If Landlord elects to terminate this Lease
because the condemnation award is less than the cost to repair the unappropriated
portion of the Premises, then Tenant may elect, within fifteen (15) days
following the date upon which Tenant receives Landlord’s Condemnation Notice,
to either (1) exercise the Purchase Option in accordance with Section
30.1(c)(iii), in which event Tenant shall receive any condemnation proceeds
resulting from such condemnation, or (2) deposit with Landlord an amount that
is sufficient to cover any shortfall between the amount of the condemnation
award Landlord expects to receive in connection with the partial taking of the
Premises and the expected Condemnation Restoration Costs set forth in the
Condemnation Restoration Estimate (the “Condemnation Restoration Deposit”),
so long as Tenant: (x) reaffirms its intention to pay all Rent as such Rent
becomes due and owing under this Lease; (y) waives any claim to offsets,
defenses or abatement of such Rent as a consequence of such damage or
destruction without regard to the duration of the restoration period; and (z)
deposits with Landlord the Condemnation Restoration Deposit, in which event
this Lease shall remain in full force and effect and Landlord shall repair,
reconstruct or restore the unappropriated portion of the Premises, and in the
event Landlord thereafter notifies Tenant at any time that the expected
Condemnation Restoration Costs exceeds the remaining Condemnation Restoration
Deposit and remaining condemnation



 21
 









proceeds to be received by Landlord, Tenant shall within ten (10) days
after such notice pay the amount of such deficiency to Landlord.


23.4.                        Tenant shall be entitled to any award that is specifically awarded as
compensation for (a) the taking of Tenant’s personal property that was
installed at Tenant’s expense, and (b) the costs of Tenant moving to a new
location.  Except as set forth in the
previous sentence, any award for such taking shall be the property of Landlord.


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


24.                                 Defaults and Remedies.


24.1.                        Late payment by Tenant to Landlord of Rent and other sums due shall
cause Landlord to incur costs not contemplated by this Lease, the exact amount
of which shall be extremely difficult and impracticable to ascertain.  Such costs include, but are not limited to,
processing and accounting charges and late charges that may be imposed on
Landlord by the terms of any mortgage or trust deed covering the Premises.  Therefore, if any installment of Rent due
from Tenant is not received by Landlord within five (5) days after written
notice that such payment is due, Tenant shall pay to Landlord an additional sum
of four percent (4%) of the overdue Rent as a late charge.  The parties agree that this late charge
represents a fair and reasonable estimate of the costs that Landlord shall
incur by reason of late payment by Tenant.


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


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


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


(a)                  The abandonment of the Premises by Tenant;


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


(c)                  The failure by Tenant to observe or perform
any material obligation or material covenant contained herein (other than
described in Sections 24.4(a) and 24.4(b)) to be



 22
 









performed by Tenant, where
such failure shall continue for a period of twenty (20) days after written
notice thereof from Landlord to Tenant (except where Tenant has contested in
good faith the existence of a breach of a material obligation or material
covenant and the parties have not yet resolved the dispute by mutual agreement
or, if necessary, final court judgment); provided that, if the nature of
Tenant’s default is such that it reasonably requires more than twenty (20) days
to cure, Tenant shall not be deemed to be in default if Tenant shall commence
such cure within said twenty (20) day period and thereafter diligently
prosecute the same to completion;


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


(e)                  A receiver, trustee or custodian is appointed
to or does take title, possession or control of all or substantially all of
Tenant’s assets and such circumstance is not reversed within sixty (60) days;


(f)                    Tenant files a voluntary petition under the
United States Bankruptcy Code or any successor statute (the “Bankruptcy Code”)
or an order for relief is entered against Tenant pursuant to a voluntary or
involuntary proceeding commenced under any chapter of the Bankruptcy Code;


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


(h)                 The occurrence of a monetary Default or a
material non-monetary Default under the Building D Lease, the Building E Lease
or the Building F Lease (each as defined in the Purchase Agreement);


(i)                     The occurrence of any Transfer that is not in
compliance with the provisions of Article 25, where such failure shall
continue for a period of three (3) business days after written notice thereof
from Landlord to Tenant; or


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


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


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


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


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


(c)                  The worth at the time of award of the amount
by which the unpaid Rent for the balance of the Term after the time of award
exceeds that portion of the loss of



 23
 









Landlord’s rental income
from the Premises that Tenant proves could have been reasonably avoided; plus


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


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


As used in Sections 24.5(a) and 24.5(b), “worth at the
time of award” shall be computed by allowing interest at the rate specified in Section
24.1.  As used in Section 24.5(c)
above, the “worth at the time of the award” shall be computed by taking the
present value of such amount, using the discount rate of the Federal Reserve
Bank of San Francisco at the time of the award plus one (1) percentage point.


24.6.                        In addition to any other remedies available to Landlord at law or in
equity and under this Lease, Landlord shall have the remedy described in
California Civil Code Section 1951.4 (Landlord may continue this Lease in
effect after Tenant’s Default and abandonment and recover Rent as it becomes
due, provided Tenant has the right to sublet or assign, subject only to
reasonable limitations).  In addition,
Landlord shall not be liable in any way whatsoever for its failure or refusal
to relet the Premises.  For purposes of
this Section 24.6, the following acts by Landlord will not constitute
the termination of Tenant’s right to possession of the Premises:


(a)                  Acts of maintenance or preservation or
efforts to relet the Premises, including, but not limited to, alterations,
remodeling, redecorating, repairs, replacements or painting as Landlord shall
consider advisable for the purpose of reletting the Premises or any part
thereof; or


(b)                 The appointment of a receiver upon the
initiative of Landlord to protect Landlord’s interest under this Lease or in
the Premises.


Notwithstanding the foregoing, in the event of a Default by Tenant,
Landlord may elect at any time to terminate this Lease and to recover damages
to which Landlord is entitled.  If
Landlord does not elect to terminate this Lease as provided in Section 24.5,
then Landlord may, from time to time, recover all Rent as it becomes due under
this Lease.


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


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


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


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


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


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



 24
 









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


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


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


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


24.13.                  In
the event of any default by Landlord, Tenant shall give notice by registered or
certified mail to any (a) beneficiary of a deed of trust or
(b) mortgagee under a mortgage covering the Premises or any portion
thereof and to any landlord of any lease of land upon or within which the
Premises are located, and shall offer such beneficiary, mortgagee or landlord
the Lender’s Cure Period to cure the default, including
time to obtain possession of the Premises by power of sale or a judicial action
if such should prove necessary to effect a cure; provided that Landlord shall
promptly furnish to Tenant in writing, upon written request by Tenant, the
names and addresses of all such persons who are to receive such notices.  “Lender’s Cure Period” shall mean sixty (60)
days after written notice from Tenant within which to cure or correct such
default (of which the initial thirty (30) days may run concurrently with the
thirty (30) days after written notice from Tenant described in Section 24.12
above); provided, however, if such default cannot be cured or
corrected within that time, then Lender’s Cure Period shall include such
additional time as may be necessary to cure such default if such mortgagee,
beneficiary or landlord has commenced to cure such Default within such sixty
(60) day period and is diligently pursuing the remedies or steps necessary to cure
or correct such default; provided, further, if such mortgagee,
beneficiary or landlord requires possession of the Premises to prosecute such
cure, and such mortgagee, beneficiary or landlord commences foreclosure
proceedings within such sixty (60) day period (or is unable to commence
foreclosure proceedings because of a bankruptcy proceeding involving Landlord
or Tenant, but commences such foreclosure proceeding promptly after it is
permitted to do so), then such sixty (60) day period shall commence to run only
on the conveyance of the Premises pursuant to such proceeding.


25.                                 Assignment or Subletting.


25.1.                        Except as hereinafter expressly permitted, Tenant shall not, either
voluntarily or by operation of Applicable Laws, directly or indirectly sell,
hypothecate, assign, pledge, encumber or otherwise transfer this Lease, or
sublet the Premises (each, a “Transfer”), without Landlord’s prior
written consent, which consent Landlord may not unreasonably delay, condition
or withhold.  Notwithstanding the foregoing,
Tenant shall have the right to Transfer the Premises, upon twenty (20) days
prior written notice to Landlord but without obtaining Landlord’s prior written
consent, to a corporation or other entity which is a successor-in-interest to
Tenant, by way of merger, consolidation or corporate reorganization, or by the
purchase of all or substantially all of the assets or the controlling ownership
interests of Tenant provided that (a) such merger or consolidation, or
such acquisition or assumption, as the case may be, is for a good business
purpose and not principally for the purpose of transferring this Lease, and
(b) the net worth (as determined in accordance with generally accepted
accounting principles (“GAAP”) of the assignee is not less than the net
worth (as determined in accordance with GAAP) of



 25
 









Tenant as of the date of Tenant’s then most current quarterly or annual
financial statements, and (c) such assignee shall agree in writing to
assume all of the terms, covenants and conditions of this Lease arising after
the effective date of the assignment (collectively, the “Permitted Assignees”).  Notwithstanding the foregoing, Tenant shall
have the right to sublet any portion of the Premises, upon twenty (20) days
prior written notice to Landlord, but without obtaining Landlord’s prior
written consent,  to a Permitted
Subtenant subject to the conditions precedent in Section 25.9.


25.2.                        In the event Tenant desires to effect a Transfer, then, at least twenty
(20) days prior to the date when Tenant desires the assignment or sublease to
be effective (the “Transfer Date”), Tenant shall provide written notice
to Landlord (the “Transfer Notice”) containing information concerning
the character, relevant business experience and financial responsibility and
status of the proposed transferee, assignee or sublessee; the Transfer Date;
any ownership or commercial relationship between Tenant and the proposed
transferee, assignee or sublessee; and the consideration and all other material
terms and conditions of the proposed Transfer, all in such detail as Landlord
shall reasonably require (the “Transfer Information”).  Tenant shall also reimburse Landlord for
Landlord’s actual and reasonable costs and expenses, including, without
limitation, reasonable attorneys’ fees, charges and other costs or overhead
expenses incurred by Landlord in connection with the review, processing and
documentation of such request in an amount not to exceed Five Thousand Dollars
($5,000);


25.3.                        Landlord, in determining whether consent should be given to a proposed
Transfer, may give consideration to (a) the financial strength of such
transferee or assignee (notwithstanding Tenant remaining liable for Tenant’s
performance), and (b) any change in use that such transferee, assignee or
sublessee proposes to make in the use of the Premises to the extent any such
change in use is not a Permitted Use.  In
no event shall Landlord be deemed to be unreasonable for declining to consent
to a Transfer to a transferee or assignee lacking financial qualifications
(commensurate with the obligations proposed to be undertaken in connection with
such a Transfer) or seeking a change in the Permitted Use, or jeopardizing
directly or indirectly the status of Landlord or any of Landlord’s affiliates
as a Real Estate Investment Trust under the Internal
Revenue Code of 1986. 
Notwithstanding anything contained in this Lease to the contrary, (w) no
Transfer shall be consummated on any basis such that the rental or other
amounts to be paid by the occupant, assignee, manager or other transferee
thereunder would be based, in whole or in part, on the income or profits
derived by the business activities of such occupant, assignee, manager or other
transferee; (x) Tenant shall not furnish or render any services to an occupant,
assignee, manager or other transferee with respect to whom transfer
consideration is required to be paid, or manage or operate the Premises or any
capital additions so transferred, with respect to which transfer consideration
is being paid; (y) Tenant shall not consummate a Transfer with any person in
which Landlord owns an interest, directly or indirectly (by applying
constructive ownership rules set forth in Section 856(d)(5) of the Internal
Revenue Code (the “Revenue Code”)); and (z) Tenant shall not consummate
a Transfer with any person or in any manner that could cause any portion of the
amounts received by Landlord pursuant to this Lease or any sublease, license or
other arrangement for the right to use, occupy or possess any portion of the
Premises to fail to qualify as “rents from real property” within the meaning of
Section 856(d) of the Revenue Code, or any similar or successor provision
thereto or which could cause any other income of Landlord to fail to qualify as
income described in Section 856(c)(2) of the Revenue Code.  The immediately preceding sentence shall not
apply if ownership of the Property is transferred or conveyed to a person or
entity other than a real estate investment trust or affiliate thereof.


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


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


(b)                 Tenant shall provide Landlord with the
Transfer Information;


(c)                  Tenant shall reimburse Landlord for Landlord’s
actual and reasonable costs and expenses, including, without limitation,
reasonable attorneys’ fees, charges and other costs or overhead expenses
incurred by Landlord in connection with the review, processing



 26
 









and documentation of such
request in an amount not to exceed Five Thousand Dollars ($5,000);


(d)                 Subject to Section 25.8, if Tenant’s
transfer of rights or sharing of the Premises provides for the receipt by, on
behalf of or on account of Tenant of any consideration of any kind whatsoever
(including, without limitation, a premium rental for a sublease or lump sum
payment for an assignment, but excluding Tenant’s reasonable costs in marketing
and subleasing the Premises) in excess of the rental and other charges due to
Landlord under this Lease, Tenant shall pay fifty percent (50%) of all of such
excess to Landlord, after deductions for any transaction costs incurred by
Tenant, including marketing expenses, tenant improvement allowances actually
provided by Tenant, alterations, cash concessions, brokerage commissions,
attorneys’ fees and free rent.  If said
consideration consists of cash paid to Tenant, payment to Landlord shall be
made upon receipt by Tenant of such cash payment;


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


(f)                    Any such consent to Transfer (if such consent
is required hereunder) shall be effected on Landlord’s forms, subject to changes
by Tenant that are satisfactory to Landlord in its reasonable discretion;


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


(h)                 Such proposed transferee, assignee or
sublessee’s use of the Premises shall not violate Section 2.7;


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


(j)                     Tenant shall pay all transfer and other taxes
(including interest and penalties) assessed or payable for any Transfer;


(k)                  Landlord’s consent (if such consent is
required hereunder) (or waiver of its rights) for any Transfer shall not waive
Landlord’s right to consent to any later Transfer;


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


(m)               A list of Hazardous Materials (as defined in Section
38.6 below), certified by the proposed transferee, assignee or sublessee to
be true and correct, which the proposed transferee, assignee or sublessee
intends to use, store, handle, treat, generate in or release or dispose of from
the Premises, together with copies of all documents relating to such use,
storage, handling, treatment, generation, release or disposal of Hazardous
Materials by the proposed assignee or subtenant in the Premises, including,
without limitation: permits; approvals; reports and correspondence; storage and
management plans; plans relating to the installation of any storage tanks to be
installed in or under the Premises (provided, such installation of tanks shall
only be permitted after Landlord has given its written consent to do so, which
consent may not be unreasonably withheld); and all closure plans or any other
documents required by any and all federal, state and local Governmental
Authorities for any storage tanks installed in, on or under the Premises for
the closure of any such tanks.  Neither
Tenant nor any such proposed transferee, assignee or sublessee is required,
however, to provide Landlord with any portion(s) of such documents containing
information of a proprietary nature which, in and of themselves, do not contain
a reference to any Hazardous Materials or hazardous activities.



 27
 









25.5.                        Any Transfer that is not in compliance with the provisions of this Article 25
shall be void and constitute a “Default” hereunder after the lapse of any
applicable notice and cure period set forth in Section 24.4(i).


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


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


25.8.                        Notwithstanding any contrary provision of this Article 25,
the original Tenant named hereunder (but not any assignee or subtenant other
than Permitted Assignees) shall have the right, without the receipt of Landlord’s
consent, but on prior written notice to Landlord, to license (but not sublease)
up to an aggregate of up to ten percent (10%) of the rentable square feet of
the Premises to individuals or entities (each, a “Business Affiliate”),
which license to a Business Affiliate shall be on and subject to all of the
following conditions:  (a) Tenant
shall have a direct contractual business relationship (relating to a primary
business of Tenant conducted in the Premises and other than Business Affiliate’s
use of the Premises) with each such Business Affiliate and any such Business
Affiliate’s use of the Premises shall be directly and primarily related to such
business relationships; (b) each such Business Affiliate shall be of a
character and reputation consistent with the quality of the Building; (c) each
such license shall clearly specify that it is only a contract right and that
the Business Affiliate is not a subtenant and has no interest in real property;
(d) each such Business Affiliate’s use of the Premises is in a manner
consistent with the Permitted Use; (e) no demising walls or separate
entrances shall be constructed in the Premises to accommodate any such license;
(f) the term of such license shall not exceed six (6) months unless otherwise
agreed to in writing by Landlord; (g) the primary motivation for Tenant’s grant
of such license is not to provide space to such Business Affiliate; and (h)
such Business Affiliate shall pay no rent to Tenant in respect of such
license.  No such license shall relieve
Tenant from any liability under this Lease.


25.9.                        Notwithstanding any contrary provision of this Article 25,
the original Tenant named hereunder (but not any assignee or subtenant other
than Permitted Assignees) shall have the right, without the receipt of Landlord’s
consent, but on prior written notice to Landlord, to sublet up to an aggregate
of up to thirty-five percent (35%) of the rentable square feet of the Premises
to individuals or entities (each, a “Permitted Subtenant”) on and
subject to all of the following conditions: 
(a) the net worth (as determined in accordance with generally
accepted accounting principles (“GAAP”) of such Permitted Subtenant is
not less than Five Million Dollars ($5,000,000); (b) each such Permitted
Subtenant shall be of a character and reputation consistent with the quality of
the Building; (c) each such Permitted Subtenant’s use of the Premises is in a
manner consistent with the Permitted Use; (d) the term of such sublease shall
not exceed four (4) years unless otherwise agreed to in writing by Landlord;
and (e) all rent and other compensation paid to Tenant by such Permitted
Subtenant shall be subject to Section 25.4(d).  No such sublease shall relieve Tenant from
any liability under this Lease.


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


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


27.                                 Bankruptcy.  In the event a debtor, trustee
or debtor in possession under the Bankruptcy Code, or another person with
similar rights, duties and powers under any other Applicable Laws,



 28
 









proposes to cure any default under this Lease or to assume or assign
this Lease and is obliged to provide adequate assurance to Landlord that (a) a
default shall be cured, (b) Landlord shall be compensated for its damages
arising from any breach of this Lease and (c) future performance of Tenant’s
obligations under this Lease shall occur, then such adequate assurances shall
include any or all of the following, as designated by Landlord in its sole and
absolute discretion:


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


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


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


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


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


29.                                 Estoppel Certificate. 
Tenant shall, within fifteen (15) days after receipt of written notice
from Landlord, execute, acknowledge and deliver a statement in writing
substantially in the form attached hereto as Exhibit D, or on any other
form reasonably requested by a proposed Lender or purchaser, (a) certifying
that this Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification and certifying that this Lease as so
modified is in full force and effect) and the dates to which rental and other
charges are paid in advance, if any, (b) acknowledging (if accurate) that
there are not, to Tenant’s knowledge, any uncured defaults on the part of
Landlord hereunder, or specifying such defaults if any are claimed, and (c)
setting forth such further information with respect to this Lease or the
Premises as may be reasonably requested thereon.  Any such statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of the real
property of which the Premises are a part. 
Tenant’s
failure to deliver such statement within the prescribed time shall be
binding upon Tenant that there are no uncured defaults on the part of Landlord
hereunder and that this Lease is in full force and effect and without
modification except as may be represented by Landlord in any certificate
prepared by Landlord and delivered to Tenant for execution and that all other
statements set forth in such certificate are true and correct.  Likewise, Landlord shall, within fifteen (15)
days after receipt of written notice from Tenant, execute, acknowledge and
deliver an estoppel certificate containing substantially the same content shown
on Exhibit D (as appropriately modified to reflect that the
certificate is being executed by Landlord in favor of Tenant).  Landlord’s failure to deliver such estoppel
certificate within the prescribed time shall be binding upon Landlord that
there are no uncured defaults on the part of Tenant hereunder and that this
Lease is in full force and effect and without modification except as may be
represented by Tenant in any certificate prepared by Tenant and delivered to
Landlord for execution and that all other statements set forth in such
certificate are true and correct.


30.                                 Purchase Option.


30.1.                        Grant of Option.  Landlord hereby
grants to Tenant the exclusive option (the “Purchase Option”) to purchase the Property, including, without
limitation, the Premises, for an



 29
 









amount
equal to (a) the annualized aggregate Basic Annual Rent for the month in which
the Closing Date (as defined below) occurs (i.e., the Basic Annual Rent for the
entire month in which the Closing Date occurs (without giving effect to any
free rent or rent abatement), multiplied by twelve) under this Lease, divided
by (b) seven and nine-tenths percent (7.9%) (the “Building G Purchase Option
Exercise Price”),
subject to the following provisions:


(a)          The Purchase Option is conditioned upon Tenant: (i) concurrently
exercising its purchase option under the Building D Lease, the Building E Lease
and, solely in the event Landlord acquires the Building F Property (as defined
in the Purchase Agreement), then from and after the closing of such acquisition
(the “Building F Acquisition”), the Building F Lease (unless the
purchase option under such Lease shall have been (1) previously exercised in
accordance with Section 30.1(c)(i) through (iv) under such Lease,
or (2) terminated in accordance with the penultimate sentence of Section
30.1(a) of such Lease) in strict accordance with the requirements of each
such lease (collectively, the “Required Leases”), and (ii) paying the
purchase option exercise price under, and in accordance with the terms and
conditions of, each Required Lease upon the closing of each such
transaction.  For purposes of clarity,
Tenant shall only have the right to exercise the Purchase Option in connection
with its purchase options under each of the Building D Lease, the Building E
Lease and from and after the Building F Acquisition, the Building F Lease and
shall not have the right to exercise the Purchase Option with respect to
individual buildings.  Notwithstanding
the foregoing, solely upon the occurrence of any of the events set forth in Sections
30.1(c)(i) through (iv) below, (1) Tenant shall have the right to
exercise the Purchase Option solely with respect to the Property, (2) Tenant
shall not have the right to exercise the respective purchase options under any
of the Required Leases at any time other than the times specified therein, and
(3) in the event Tenant elects not to acquire the Property in accordance with Section
30.1(c)(ii) or (iii), Tenant’s right to exercise its Purchase Option
under this Lease shall terminate.  Tenant
shall have no right to exercise its option to purchase the Building F Property
until the Building F Acquisition.


(b)         Tenant shall have no right to exercise the Purchase Option: (i) while a
monetary Default or a material non-monetary Default exists under this Lease or
any Required Lease; provided that, if the nature of Tenant’s
non-monetary Default is such that it could not reasonably be cured before the
deadline for Tenant’s exercise of the Purchase Option, then the deadline for
Tenant’s exercise of the Purchase Option shall be extended so long as Tenant
promptly commences such cure and thereafter diligently prosecutes the same to
completion; (ii) during the period of time any monthly installment of Basic
Annual Rent under this Lease or any Required Lease is due and unpaid; or (iii)
in the event this Lease or any of the Required Leases are terminated (other
than any termination as a consequence of a casualty or condemnation or pursuant
to Section 30.1(c)(v)) or rejected as a result of a Tenant bankruptcy.


(c)          The closing of the sale under such Purchase Option must occur on the
tenth, fifteenth, or twentieth anniversary of the Execution Date or, in the
event Tenant exercises its Purchase Option in accordance with Sections
30.1(c)(i) through (iv) below, thirty (30) days after Tenant
exercises its Purchase Option (the applicable date, the “Closing Date”).  Tenant may only exercise the Purchase Option
by Tenant delivering to Landlord written notice exercising the Purchase Option
substantially in the form attached hereto as Exhibit F (the “Purchase
Option Exercise Notice”) at least twelve (12) months before the
corresponding anniversary; provided, however,


(i)                                     in the event Landlord directly or indirectly
transfers its interest in the Property or this Lease to a party other than
Landlord’s Affiliate (as defined in the Purchase Agreement) or a special
purpose entity formed solely to own the Property,  Landlord
shall give Tenant written notice of such transfer (“Landlord’s Assignment
Notice”) and Tenant shall have a period of fifteen (15) days after receipt
of Landlord’s Assignment Notice to exercise its Purchase Option at the Building
G Purchase Option Exercise Price in accordance with the terms and conditions of
this Article 30, subject to Tenant’s satisfaction of each of the
conditions contained in Sections 30.1(e) and (f).  “Affiliate” of Landlord means (x) an
entity that directly or indirectly controls, is controlled by or is under
common control with such landlord, (y) a partnership or other entity in which
such landlord described in (x) is a partner or other owner, or (z) an entity
that acquires substantially all of the assets or stock of such landlord; and
the term “control” means the power to direct the management of such landlord
through voting rights, ownership or contractual obligations.



 30
 









(ii)                                  in the event Landlord elects to terminate
this Lease pursuant to Landlord’s Restoration Notice delivered to Tenant in
accordance with Section 22.2, Tenant shall have a period of twenty (20)
business days after receipt of Landlord’s Restoration Notice to exercise its
Purchase Option at the Building G Purchase Option Exercise Price in accordance
with the terms and conditions of this Article 30, subject to Tenant’s
satisfaction of each of the conditions contained in Sections 30.1(e) and
(f).  Notwithstanding the
foregoing, in no event shall Tenant’s exercise of the Purchase Option in
accordance with this Section 30.1(c)(ii) affect or reduce the Building G
Purchase Option Exercise Price.  Landlord
will assign to Tenant the right to receive and retain any casualty insurance
proceeds resulting from such damage.


(iii)                               in the event Landlord elects to terminate
this Lease pursuant to Landlord’s Condemnation Notice delivered to Tenant in
accordance with Section 23.3, Tenant shall have a period of twenty (20)
business days after receipt of Landlord’s Condemnation Notice to exercise its
Purchase Option at the Building G Purchase Option Exercise Price in accordance
with the terms and conditions of this Article 30, subject to Tenant’s
satisfaction of each of the conditions contained in Sections 30.1(e) and
(f).  Notwithstanding the
foregoing, in no event shall Tenant’s exercise of the Purchase Option in
accordance with this Section 30.1(c)(iii) affect or reduce the Building
G Purchase Option Exercise Price. 
Landlord will assign to Tenant the right to receive and retain any
condemnation proceeds resulting from such condemnation.


(iv)                              in the event Landlord transfers its interest
in the Property or this Lease to an entity other than Landlord’s Affiliate and
such entity files a voluntary petition under the Bankruptcy Code or an order
for relief is entered against such entity pursuant to a voluntary proceeding
commenced under any chapter of the Bankruptcy Code, Landlord shall give Tenant
written notice of such proceeding (“Landlord’s Bankruptcy Notice”) and
Tenant shall have a period of twenty (20) days after receipt of Landlord’s
Bankruptcy Notice to exercise its Purchase Option at the Building G Purchase
Option Exercise Price in accordance with the terms and conditions of this Article
30 to the extent permitted by the Bankruptcy Code and other Applicable
Laws, subject to Tenant’s satisfaction of each of the conditions contained in Sections
30.1(e) and (f).


(v)                                 in the event Landlord elects to terminate
this Lease in accordance with Section 24.5, Tenant shall have a period
of twenty (20) business days after receipt of Landlord’s notice of termination
to exercise its Purchase Option at the Building G Purchase Option Exercise Price
in accordance with the terms and conditions of this Article 30, subject
to (i) Tenant’s compliance with each of the terms contained in Sections
30.1(e) and (f), (ii) Tenant’s exercise of its purchase option under
each of the Required Leases (Tenant shall not have the right to exercise the
Purchase Option under this Section 30.1(c)(v) without exercising its
purchase option under each of the Required Leases), and (iii) Tenant’s
prepayment of all Rent due from Tenant under this Lease from the termination
date through the closing of the sale under the Purchase Option; provided,
however, Tenant shall not have the right to exercise its Purchase Option
under this Section 30.1(c)(v) in the event Landlord’s termination of
this Lease was due to Tenant’s failure to pay either (x) any monthly
installment of Basic Annual Rent or (y) any insurance costs, Taxes or Property
Management Fee.  Notwithstanding
the foregoing, nothing in this Section 30.1(c)(v) shall limit the
liability of Tenant under this Lease or Landlord’s ability to exercise any of
its rights and remedies available at law or in equity or under this Lease,
including Article 24 of this Lease.


(vi)                              in the event (a) Tenant exercises its
purchase option under any of the Required Leases, and (b) such Required Lease
imposes a condition that Tenant exercise its Purchase Option under this Lease,
Tenant shall concurrently exercise its Purchase Option under this Lease at the
Building G Purchase Option Exercise Price in accordance with the terms and
conditions of this Article 30, subject to Tenant’s satisfaction of each
of the conditions contained in Sections 30.1(a) and (b), and each
of the provisions contained in Sections (e) and (f).


Notwithstanding the
foregoing, in the event Tenant exercises its Purchase Option on or before the
fourth (4th) anniversary of the Execution Date, (a) the
closing of the sale under such Purchase Option shall occur on the first (1st) business day after the fourth (4th)
anniversary of the Execution Date, (b) Tenant shall continue to pay Rent in
accordance with



 31
 









this Lease until such
closing date, and (c) Tenant shall pay Landlord the Building G Purchase Option
Exercise Price on, and calculated as of, such closing date.


(d)         If Tenant does not timely deliver the Purchase Option Exercise Notice
on or before the nineteenth anniversary of the Execution Date, the Purchase
Option shall terminate except as provided in Section 30.1(b); time being
of the essence with respect to the delivering thereof.  If Tenant timely delivers the Purchase Option
Exercise Notice to Landlord, then Landlord shall sell to Tenant, and Tenant
shall purchase from Landlord, the Property for the Building G Purchase Option
Exercise Price. Notwithstanding the foregoing, (i) any amounts due from Tenant to Landlord pursuant to this Lease and any
prorations in favor of Landlord shall be paid by Tenant on the Closing Date,
and (ii) any prorations in favor of Tenant shall be offset against the Building
G Purchase Option Exercise Price.


(e)          The Property shall be sold in its
then-current, as-is, with all faults conditions and without any representation
and warranty, expressed or implied, whatsoever; provided, however, Landlord
shall satisfy all monetary obligations on the Property (including, without
limitation, mechanics and materialmens liens or claims thereof, any liens or
encumbrances that secure obligations for borrowed money and any encumbrances to
title which are created by Seller after the Effective Date), and all
nonmonetary encumbrances on the Property which were entered into after the Term
Commencement Date and which have not been consented to by Tenant.  Notwithstanding the foregoing, in the event
Landlord enters into any nonmonetary encumbrance in accordance with Section
32.1 or otherwise required by Applicable Laws and Landlord elects to
request Tenant’s consent in connection with any such encumbrance, Tenant’s
consent shall not be unreasonably withheld, conditioned or delayed.


(f)            Any condemnation or damage to the Property
(other than damage caused by the willful misconduct or gross negligence of
Landlord or its affiliates) shall not affect Tenant’s obligations to purchase
the Property after Tenant delivers the Purchase Option Exercise Notice and
shall not affect the Building G Purchase Option Exercise Price.  Landlord will assign to Tenant the right to
receive and retain any casualty insurance proceeds or condemnation proceeds
resulting from such damage or condemnation.


(g)         Upon the termination of the Purchase Option herein granted, (i) Tenant
shall execute and deliver such documents as Landlord may reasonably request to
evidence the termination thereof, and (ii) Landlord may execute, file and
record an instrument evidencing the termination of the Purchase Option herein
granted.  If Tenant fails to execute and
deliver such documents, then Landlord may do so.  Tenant hereby appoints Landlord its attorney
in fact for such purpose, which appointment is coupled with an interest and is
irrevocable.  Tenant shall pay all
transaction costs (including title insurance premiums and transfer taxes in
connection with the conveyance of the Property to Tenant).


30.2.                        No Representations and Warranties.  Tenant acknowledges that
neither Landlord nor any of its agents or representatives has made any oral or
written representations or warranties concerning the Property of any nature
whatsoever and that Tenant will be relying on its own independent investigation
thereof.


30.3.                        Assignment of Purchase Option.  The Purchase Option and Tenant’
rights and obligations under this Article 30 are personal to Tenant, may
not be exercised by any assignee or transferee of Tenant and shall irrevocably
terminate upon any Transfer of this Lease. 
Notwithstanding the foregoing, Tenant shall have the right to assign
this Lease without Landlord’s prior written consent to a Permitted Assignee in
accordance with Section 25.1, and in such event the Purchase Option
shall not terminate and may be exercised by such Permitted Assignee, but only
if  (a) Tenant notifies Landlord in
writing prior to the effectiveness of such assignment to such Permitted
Assignee, and (b) prior to or concurrently with such assignment, such Permitted
Assignee assumes all of Tenant’s obligations under this Article 30.  Notwithstanding the foregoing, in no event
shall Landlord’s consent to a Transfer under Article 25 (to the extent
such consent is required) be deemed to include the Purchase Option or the
provisions of this Article 30 unless explicitly agreed to in writing by
Landlord.


30.4.                        Tenant’s Remedies.  In the event the closing of the sales transaction
pursuant to the Purchase Option shall fail to occur by reason of a default in
Landlord’s obligations under this Article 30, Tenant may elect one of
the following two remedies: (a) reimbursement from



 32
 









Landlord for Tenant’s reasonable actual documented out of pocket costs
incurred in connection with this Article 30 (provided that said sum
recoverable as reimbursement shall not exceed One Hundred Thousand Dollars
($100,000)); or (b) enforce specific performance of this Article 30
against Landlord, including the right to recover reasonable attorneys’ fees and
court costs, but shall have no right to receive any other equitable
relief.  Tenant hereby waives any right
to record a lis pendens on the property other than in connection with the
filing of an action for specific performance. 
In no event shall Tenant be entitled to seek or obtain any other damages
of any kind, including, without limitation, actual, consequential, indirect or
punitive damages.  Notwithstanding the
foregoing, any liability of Landlord under this Article 30 shall be
limited strictly to the assets of Landlord only, and not to any of its general
partners or their respective partners.


31.                                 Limitation of Landlord’s Liability.


31.1.                        If Landlord is in default under this Lease and, as a consequence,
Tenant recovers a monetary judgment against Landlord, the judgment shall be
satisfied only out of (a) the proceeds of sale received on execution of the
judgment and levy against the right, title and interest of Landlord in the
Premises, (b) rent or other income from such real property receivable by
Landlord and/or (c) the consideration received by Landlord from the sale,
financing, refinancing or other disposition of all or any part of Landlord’s
right, title or interest in the Premises. 
Notwithstanding the foregoing, the foregoing limitation shall not apply
to any default by Landlord of its obligation to convey the Property to Tenant
following Tenant’s exercise of its Purchase Option.


31.2.                        Except as described in Section 31.1, Landlord shall not be personally
liable for any deficiency under this Lease. 
If Landlord is a partnership or joint venture, then the partners of such
partnership shall not be personally liable for Landlord’s obligations under
this Lease, and no partner of Landlord shall be sued or named as a party in any
suit or action relating to the obligations of Landlord under this Lease, and
service of process shall not be made against any partner of Landlord relating
to the obligations of Landlord under this Lease except as may be necessary to
secure jurisdiction of the partnership or joint venture.  If Landlord is a corporation, then the
shareholders, directors, officers, employees and agents of such corporation
shall not be personally liable for Landlord’s obligations under this Lease, and
no shareholder, director, officer, employee or agent of Landlord shall be sued
or named as a party in any suit or action, and service of process shall not be
made against any shareholder, director, officer, employee or agent of Landlord.  If Landlord is a limited liability company,
then the members of such limited liability company shall not be personally
liable for Landlord’s obligations under this Lease, and no member of Landlord
shall be sued or named as a party in any suit or action, and service of process
shall not be made against any member of Landlord except as may be necessary to
secure jurisdiction of the limited liability company.  No partner, shareholder, director, employee,
member or agent of Landlord shall be required to answer or otherwise plead to
any service of process, and no judgment shall be taken or writ of execution
levied against any partner, shareholder, director, employee or agent of
Landlord, relating to the obligations of Landlord under this Lease.


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


32.                                 Premises Control by Landlord.


32.1.                        Landlord reserves full control over the Premises to the extent not
inconsistent with Tenant’s rights under this Lease, including, without
limitation, Landlord’s right to subdivide the Property, convert the Building to
condominium units, grant easements and licenses to third parties, and maintain
or establish ownership of the Building separate from fee title to the Property.


32.2.                        Tenant shall, at Landlord’s request, promptly execute such further
documents as may be reasonably appropriate to assist Landlord in the
performance of its obligations hereunder; provided that Tenant need not
execute any document that creates additional liability for Tenant or that
deprives Tenant of the quiet enjoyment and use of the Premises as provided by
this Lease.



 33
 









32.3.                        During the Term, Landlord may, at any and all reasonable times during
non-business hours (or during business hours if Tenant so requests), and upon
two (2) business days’ prior notice (provided that no time restrictions
shall apply or advance notice be required if an emergency necessitates
immediate entry), enter the Premises to (a) inspect the same and to determine
whether Tenant is in compliance with its obligations hereunder, (b) supply any
service Landlord is required to provide hereunder, (c) show the Premises to
prospective purchasers or tenants during the final year of the Term (as
extended if Tenant exercises the Extension Option), and (d) post notices of
nonresponsibility.  In no event shall
Tenant’s Rent abate as a result of Landlord’s activities pursuant to this Section 32.3;
provided, however, that all such activities shall be conducted in
such a manner so as to cause as little interference to Tenant as is reasonably
possible, and Landlord shall safeguard all of Tenant’s property, including
intellectual property, within the Premises. 
Landlord shall comply with Tenant’s customary restrictions, policies and
procedures for security and access, particularly with respect to any areas of
the Premises containing fragile or expensive equipment or confidential or
proprietary information or materials.  If
an emergency necessitates immediate access to the Premises, Landlord may use
such reasonable force as Landlord believes is appropriate under the
circumstances to enter the Premises, and any such entry to the Premises shall
not constitute a forcible or unlawful entry to the Premises, a detainer of the
Premises, or an eviction of Tenant from the Premises or any portion thereof.


33.                                 Quiet Enjoyment.  So
long as Tenant is not in default under this Lease, Landlord or anyone acting
through or under Landlord shall not disturb Tenant’s occupancy of the Premises,
except as permitted by this Lease.


34.                                 Subordination and Attornment.


34.1.                        Subject to the delivery of the non-disturbance agreements described in
this Article 34 as a condition precedent to any such subordination,
this Lease shall be subject and subordinate to the lien of any mortgage, deed
of trust, or lease in which Landlord is tenant now or hereafter in force
against the Premises or any portion thereof and to all advances made or
hereafter to be made upon the security thereof without the necessity of the
execution and delivery of any further instruments on the part of Tenant to
effectuate such subordination.  In
consideration of, and as a condition precedent to, Tenant’s agreement to permit
its interest pursuant  to this Lease to
be subordinated to any particular future ground or underlying lease of the
Building or the Premises or to the lien of any mortgage or trust deed, hereafter
enforced against the Building or the Premises and to any renewals, extensions,
modifications, consolidations and replacements thereof, Landlord shall deliver
to Tenant a non-disturbance agreement on (a) the form of non-disturbance
agreement customarily used by the lessor under such ground lease or underlying
lease or the holder of such mortgage or trust deed or (b) another commercially
reasonable form, provided in either instance that such form (i) is reasonably
acceptable to Tenant, and (ii) recognizes Tenant’s Purchase Option.  Landlord’s delivery to Tenant of
non-disturbance agreement(s) in favor of Tenant from any ground lessors,
mortgage holders or lien holders of Landlord who later came into existence at
any time prior to the expiration of the Term shall be in consideration of, and
a condition precedent to, Tenant’s agreement to be bound by the terms of this Article 34.  Tenant shall be entitled, at Tenant’s sole
cost and expense, to record any such non-disturbance agreement promptly after
full execution and delivery of such agreement.


34.2.                        Notwithstanding the foregoing, subject to Landlord’s compliance with
the terms of Section 34.1, Tenant shall execute and deliver upon demand
such further instrument or instruments evidencing such subordination of this
Lease to the lien of any such mortgage or mortgages or deeds of trust or lease
in which Landlord is tenant as may be required by Landlord; provided, however,
if any such mortgagee, beneficiary or Landlord under lease wherein Landlord is
tenant so elects, this Lease shall be deemed prior in lien to any such lease,
mortgage, or deed of trust upon or including the Premises regardless of date
and Tenant shall execute a statement in writing to such effect at Landlord’s
request.  If Tenant fails to execute any
document required from Tenant under this Section within ten (10) days after
written request therefor, Tenant hereby constitutes and appoints Landlord or
its special attorney-in-fact to execute and deliver any such document or
documents in the name of Tenant.  Such
power is coupled with an interest and is irrevocable.  Within five (5) business days after Landlord
executes any document in accordance with this Section 34.2 as Tenant’s
attorney-in-fact, Landlord shall provide Tenant a copy of such document.



 34
 









34.3.                        Upon written request of Landlord and opportunity for Tenant to review,
Tenant agrees to execute any Lease amendments not materially altering the terms
of this Lease, if required by a mortgagee or beneficiary of a deed of trust
encumbering real property of which the Premises constitute a part incident to
the financing of the real property of which the Premises constitute a
part.  Any change affecting the amount or
timing of the consideration to be paid by Tenant or modifying the Term of this Lease
shall be deemed as materially altering the terms hereof.


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


35.                                 Surrender.


35.1.                        At least ten (10) days prior to Tenant’s surrender of possession of any
part of the Premises, Tenant shall provide Landlord with (a) a facility
decommissioning and Hazardous Materials closure plan for the Premises (“Exit
Survey”), and (b) written evidence of all appropriate governmental releases
obtained by Tenant in accordance with Applicable Laws, including, without
limitation, laws pertaining to the surrender of the Premises.  In
addition, Tenant agrees to remain responsible after the surrender of the
Premises for the remediation of any recognized environmental conditions set forth
in the Exit Survey and compliance with any recommendations set forth in the
Exit Survey.  Tenant’s obligations under this Section 35.1 shall
survive the expiration or earlier termination of the Lease.


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


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


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


35.5.                        All permanently attached equipment, permanently attached fixtures,
additions and improvements attached to or built into the Premises, including,
without limitation, all floor and wall coverings, built-in cabinet work and
paneling, sinks and related plumbing fixtures, laboratory benches, exterior
venting fume hoods, ductwork, conduits, electrical panels and circuits,
together with all additions and accessories thereto is the property of Landlord
and shall remain upon and be surrendered with the Premises as a part thereof.


35.6.                        In the event Tenant has performed any Alterations in accordance with
this Lease, upon surrender of the Premises, Tenant shall reimburse Landlord for
any extra costs and expenses incurred by Landlord by reason of any delays in
re-leasing the Premises caused by Tenant’s removal of such Alterations.


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


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



 35
 









use or occupancy of the Premises; or any claim of injury or damage
related to this Lease or the Premises.


38.                                 Hazardous Materials.


38.1.                        Tenant shall not cause or permit any Hazardous Materials (as
hereinafter defined) to be brought upon, kept or used in or about the Premises
in violation of Applicable Laws by Tenant, its agents, employees, contractors
or invitees.  If Tenant breaches such
obligation, or if the presence of Hazardous Materials as a result of such a
breach results in contamination of the Premises or any adjacent property, or if
contamination of the Premises or any adjacent property by Hazardous Materials
otherwise occurs during the Term of this Lease or any extension or renewal
hereof or holding over hereunder (other than in connection with substances that
migrated to the Premises from any adjoining property, except in the event
Tenant is aware of such contamination and neither remedies such contamination
nor promptly notifies Landlord of the existence of such contamination), then
Tenant shall indemnify, save, defend and hold Landlord, its agents and
contractors harmless from and against any and all claims, judgments, damages,
penalties, fines, costs, liabilities and losses (including, without limitation,
diminution in value of the Premises or any portion thereof; damages for the
loss or restriction on use of rentable or usable space or of any amenity of the
Premises; damages arising from any adverse impact on marketing of space in the
Premises; and sums paid in settlement of claims, attorneys’ fees, consultants’
fees and experts’ fees) that arise during or after the Term as a result of such
breach or contamination.  This
indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any
cleanup, remedial, removal or restoration work required by any Governmental
Authority because of Hazardous Materials present in the air, soil or
groundwater above, on or under the Premises. 
Without limiting the foregoing, if the presence of any Hazardous
Materials in, on, under or about the Premises or any adjacent property caused
or permitted by Tenant results in any contamination of the Premises or any
adjacent property, then Tenant shall promptly take all actions at its sole cost
and expense as are necessary to return the Premises and any adjacent property
to their respective condition existing prior to the time of such contamination;
provided that Landlord’s written approval of such action shall first be
obtained, which approval Landlord shall not unreasonably withhold (provided
that no time restrictions shall apply or advance approval be required if an
emergency necessitates the remediation of such contamination so long as Tenant
promptly provides Landlord written notice of any action taken by Tenant
pursuant to this Section 38.1); and provided, further, that it
shall be reasonable for Landlord to withhold its consent if such actions could
have a material adverse long-term or short-term effect on the Premises.  Notwithstanding the foregoing, Landlord shall
neither (a) settle any Claims under this Section 38.1 without Tenant’s
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed, nor (b) except in the case of an emergency (where there
is imminent threat of injury to persons or damage to property), enter into any
agreement with a third party for any cleanup, remedial, removal or restoration
work in connection with such breach or contamination other than in the event an
emergency necessitates immediate entry, without first providing Tenant prior
written notice.


38.2.                        Landlord acknowledges that it is not the intent of this Article 38
to prohibit Tenant from operating its business as described in Section 2.7
above.  Tenant may operate its business
according to the custom of Tenant’s industry so long as the use or presence of
Hazardous Materials is strictly and properly monitored according to Applicable
Laws.  As a material inducement to
Landlord to allow Tenant to use Hazardous Materials in connection with its
business, Tenant agrees to deliver to Landlord prior to the Term Commencement
Date a list identifying each type of Hazardous Material expected to be present
on the Premises and setting forth any and all governmental approvals or permits
required in connection with the presence of such Hazardous Material on the
Premises (the “Hazardous Materials List”).  Within twenty (20) days after Landlord gives
to Tenant a written request (which request shall not be made more frequently
than annually), Tenant shall deliver to Landlord an updated Hazardous Materials
List.  Tenant shall deliver to Landlord
true and correct copies of the following documents received from or submitted
to any Government Authority (hereinafter referred to as the “Documents”)
relating to the handling, storage, disposal and emission of Hazardous Materials
prior to the Term Commencement Date or, if unavailable at that time, concurrent
with the receipt from or submission to any Governmental Authority:  permits; approvals; reports and
correspondence; storage and management plans; notices of violations of
Applicable Laws; plans relating to the installation of any storage tanks to be
installed in or under the Premises (provided that installation of
storage tanks shall only be permitted after Landlord has given Tenant its
written



 36
 









consent to do so, which consent Landlord may withhold in its sole and
absolute discretion); and all closure plans or any other documents required by
any and all Governmental Authorities for any storage tanks installed in, on or
under the Premises for the closure of any such storage tanks.  Tenant shall not be required, however, to
provide Landlord with any portion of the Documents containing information of a
proprietary nature that, in and of themselves, do not contain a reference to
any Hazardous Materials or activities related to Hazardous Materials.


38.3.                        At any time, and from time to time, 
prior to the expiration of the Term, Landlord shall have the right to
conduct appropriate tests of the Premises to demonstrate that Hazardous
Materials are present or that contamination has occurred due to Tenant or
Tenant’s agents, employees or invitees. 
Tenant shall pay all reasonable costs of any test of the Property
demonstrating that Tenant has breached any provision of this Lease regarding
Hazardous Materials or has any clean-up obligations under this Article 38.  Such tests shall be conducted in a manner
that minimizes any interference with Tenant’s normal operations on the
Premises.


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


38.5.                        Tenant’s obligations under this Article 38 shall survive the
expiration or earlier termination of this Lease.  During any period of time needed by Tenant or
Landlord after the termination of this Lease to complete the removal from the
Premises of any such Hazardous Materials, Tenant shall continue to pay Rent in
accordance with this Lease, which Rent shall be prorated daily.


38.6.                        As used herein, the term “Hazardous Material” means any
hazardous or toxic substance, material or waste that is or becomes regulated by
any Governmental Authority.


39.                                 Miscellaneous.


39.1.                        This Lease shall be deemed and construed to be an “absolute net lease”
and, except as herein expressly provided, Landlord shall receive all payments
required to be made by Tenant free from all charges, assessments, impositions,
expenses and deductions of any and every kind or nature whatsoever.  Landlord shall not be required to furnish any
services or facilities or to make any repairs, replacements or Alterations of
any kind in or on the Premises except as specifically provided herein. Tenant
shall receive all invoices and bills relative to the Premises and, except as
otherwise provided herein, shall pay for all expenses directly to the person or
company submitting a bill without first having to forward payment for the
expenses to Landlord.  Tenant shall at
Tenant’s sole cost and expense be responsible for the management of the
Premises, shall maintain the landscaping and parking lot (to the extent the
landscaping and parking lot are not maintained by the owner’s association), and
shall make those additional repairs and Alterations required of Tenant
hereunder to maintain the Premises in a condition consistent with the quality
of the condition as of the Execution Date, ordinary wear and tear excepted.


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


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


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


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



 37
 









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


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


39.8.                        If any provision of this Lease is held invalid or inoperative, then so
far as is reasonable and possible the remainder of this Agreement shall be
deemed valid and operative and, to the greatest extent legally possible, effect
shall be given to the intent manifested by the portion held invalid or inoperative.


39.9.                        Either party may, but shall not be obligated to, record a short form
memorandum of this Lease, including a description of the Purchase Option
granted under Article 30 above. 
Each party agrees to execute and deliver such memorandum upon the other
party’s request.  Neither party shall
record this Lease.  Tenant shall be
responsible for the cost of recording any memorandum of this Lease, including
any transfer or other taxes incurred in connection with said recordation.


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


39.11.                  Each
of the covenants, conditions and agreements herein contained shall inure to the
benefit of and shall apply to and be binding upon the parties hereto and their
respective heirs; legatees; devisees; executors; administrators; and permitted
successors, assigns, sublessees.  Nothing
in this Section 39.11 shall in any way alter the provisions of this
Lease restricting assignment or subletting.


39.12.                  Any
notice, consent, demand, bill, statement or other communication required or
permitted to be given hereunder shall be in writing and shall be given by
personal delivery, overnight delivery with a reputable nationwide overnight
delivery service, or certified mail (return receipt requested), and if given by
personal delivery, shall be deemed delivered upon receipt; if given by
overnight delivery, shall be deemed delivered one (1) day after deposit with a
reputable nationwide overnight delivery service; and, if given by certified
mail (return receipt requested), shall be deemed delivered three (3) business
days after the time the notifying party deposits the notice with the United
States Postal Service.  Any notices given
pursuant to this Lease shall be addressed to Tenant at the Premises, or to
Landlord or Tenant at the addresses shown in Sections 2.9 and 2.10,
respectively.  Either party may, by
notice to the other given pursuant to this Section, specify additional or
different addresses for notice purposes.


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


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


39.15.                  Tenant
agrees that it shall promptly furnish to Landlord, from time to time, upon
Landlord’s written request, the most recent audited year-end financial
statements reflecting Tenant’s current financial condition.  Tenant shall, within ninety (90) days after
the end of Tenant’s financial year or as soon thereafter as available, furnish
Landlord with a certified copy of Tenant’s audited year-end financial
statements for the previous year (unless Tenant is a public company that is
listed on a United States stock exchange). 
Tenant represents and warrants that all financial statements, records
and information furnished by Tenant to Landlord in connection with this Lease
are true, correct and complete in all respects. 
Notwithstanding the foregoing, the provisions of this Section 39.15
shall not apply to Tenant so long as Tenant is a publicly traded company that
is listed on a United States stock exchange.



 38
 









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


39.17.                  This
Lease is subject to any recorded covenants, conditions or restrictions on the
Premises or Property (the “CC&Rs”). 
Tenant shall comply with the CC&Rs.


39.18.                  Any
notice of default or breach under this Lease shall be given only if the party
giving the notice has a reasonable, good faith belief that a default or breach
has occurred.


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


40.1.                        Tenant shall have two (2) consecutive options to extend the Term of
this Lease for five (5) years each on the same terms and conditions as this
Lease.  Basic Annual Rent shall be
adjusted on the first (1st) day of the extension term and each annual
anniversary date thereof in accordance with Article 6.


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


40.3.                        The Extension Option is conditional upon Tenant giving Landlord written
notice of its election to exercise the Extension Option at least twelve (12)
months prior to the end of the expiration of the then-current Term.  Time shall be of the essence as to Tenant’s
exercise of any Extension Option.  Tenant
assumes full responsibility for maintaining a record of the deadlines to
exercise any Extension Option.  Tenant
acknowledges that it would be inequitable to require Landlord to accept any
exercise of any Extension Option after the date provided for in this paragraph.


40.4.                        Notwithstanding anything contained in this Article 40, Tenant
shall not have the right to exercise the Extension Option: (a) during any time
that Tenant is in Default under any provision of this Lease or the Required
Leases (provided, however, that, for purposes of this Section
40.4(b), Landlord shall not be required to provide Tenant with notice of
such Default but upon Tenant’s notification to Landlord of Tenant’s intent to
exercise the Extension Option, Landlord shall promptly provide Tenant with
written notice of such Defaults to which Landlord is aware) and continuing
until Tenant cures any such Default, if such Default is susceptible to being
cured; or (b) in the event that Tenant has defaulted in the performance of its
obligations under this Lease three (3) or more times and a service or late
charge has become payable under Section 24.1 for each of such defaults
during the twelve (12)-month period immediately prior to the date that Tenant
intends to exercise an Extension Option, whether or not Tenant has cured such
defaults.  Notwithstanding the foregoing,
if the nature of such default is such that it could reasonably be cured before
the deadline for Tenant’s exercise of the Extension Option, then the deadline
for Tenant’s exercise of the Extension Option shall be extended for five (5)
days to provide Tenant the opportunity to cure such default.


40.5.                        Except as provided in Section 40.4, the period of time within
which Tenant may exercise an Extension Option shall not be extended or enlarged
by reason of Tenant’s inability to exercise such Extension Option because of
the provisions of Section 40.4.


40.6.                        All of Tenant’s rights under the provisions of the Extension Option
shall terminate and be of no further force or effect even after Tenant’s due
and timely exercise of the Extension Option if, after such exercise, but prior
to the commencement date of the new term, (a) Tenant fails to pay to Landlord a
monetary obligation of Tenant for a period of twenty (20) days after written
notice from Landlord to Tenant, (b) Tenant fails to commence to cure a default
(other than a monetary default) within thirty (30) days after the date Landlord
gives notice to Tenant of such default, (c) Tenant commences to cure a default
(other than a monetary default) but does not prosecute to completion prior to
the commencement date of the extended Term (unless Tenant is diligently
prosecuting to completion and merely needs additional time), or (d) Tenant has defaulted
under this Lease three (3) or more times and a service or late charge under Section
24.1 has become payable for any such default, whether or not Tenant has
cured such defaults.



 39
 









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


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


43.                                 Confidentiality.  Neither party
shall disclose any terms or conditions of this Lease (including Rent) or give a
copy of this Lease to any third party, and Landlord shall
not release to any third party any nonpublic financial information or nonpublic
information about Tenant’s ownership structure that Tenant gives Landlord, except
(a) if required by Applicable Laws or in any judicial proceeding, provided
that the releasing party has given the other party reasonable notice of such
requirement, if feasible, (b) to a party’s attorneys, accountants,
lenders, brokers and other bona fide consultants or advisers, provided
such third parties agree to be bound by this Section, or (c) to bona fide
prospective assignees or subtenants of this Lease, provided they agree in
writing to be bound by this Section. 
Notwithstanding the foregoing, either Landlord or Tenant may file a copy
of this Lease in connection with any NASDAQ or SEC filing.  The parties shall reasonably cooperate with
each other in connection with such filing.


44.                                 Odors and Exhaust.  If
the Building has an adequate ventilation system, Tenant shall vent the Premises
through such system.  Tenant shall comply
with Applicable Laws in connection with the venting of fumes and odors from the
Premises.


45.                                 Excavation.  If any excavation shall be
made upon land adjacent to or under the Building, or shall be authorized to be
made, Tenant shall afford to the person causing or authorized to cause such
excavation license to enter the Premises for the purpose of performing such
work as said person shall deem reasonably necessary to preserve and protect the
Building from injury or damage and to support the same by proper foundations,
without any claim for damages or liability against Landlord (except in the case
of Landlord Parties’ willful misconduct or gross negligence) and without
reducing or otherwise affecting Tenant’s obligations under this Lease.  Any such work must be conducted in a manner
that minimizes disruption and inconvenience to Tenant.


[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]



 40















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


BMR-6114-6154 NANCY RIDGE DRIVE LLC:

a
Delaware limited liability company


	
  By:

  	
  BioMed Realty, L.P.,

  
	
   

  	
  a Maryland limited partnership,

  
	
   

  	
  its sole member

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary A. Kreitzer

  	
   

  
	
   

  	
  Name:

  	
  Gary A. Kreitzer

  
	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARENA PHARMACEUTICALS, INC.:

  
	
  a Delaware corporation

  
	
   

  
	
  By:

  	
  /s/ Robert E. Hoffman

  	
   

  
	
  Name:

  	
  Robert E. Hoffman

  	
   

  
	
  Title:

  	
  VP, Finance and CFO

  	
   

  



 


















EXHIBIT A


PREMISES


ALL THAT CERTAIN REAL PROPERTY SITUATED IN THE COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:


PARCEL A:


PARCEL 3 OF PARCEL MAP NO. 17347, IN THE CITY OF SAN DIEGO, COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, AS PER THE MAP THEREOF FILED IN THE OFFICE OF
THE SAN DIEGO COUNTY RECORDER ON APRIL 13, 1994 AS FILE NO. 1994-0242762 OF
OFFICIAL RECORDS.


PARCEL B:


A NONEXCLUSIVE
EASEMENT FOR INGRESS AND EGRESS BY VEHICULAR AND PEDESTRIAN TRAFFIC AND VEHICLE
PARKING UPON, OVER AND ACROSS THE “COMMON AREA” FOR THE BENEFIT OF THE OWNER,
PRESENT AND FUTURE, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, TENANTS,
CUSTOMERS AND INVITEES, TOGETHER WITH A NONEXCLUSIVE EASEMENT UNDER AND THROUGH
THE “COMMON AREA” FOR THE INSTALLATION, MAINTENANCE, REMOVAL, AND REPLACEMENT
OF WATER DRAINAGE SYSTEMS OR STRUCTURES, WATER MAINS, SEWERS, WATER SPRINKLER
SYSTEM LIENS, TELEPHONE OR ELECTRICAL CONDUITS OR SYSTEMS, GAS MAINS AND ANY
OTHER PUBLIC UTILITIES AND/OR SERVICE EASEMENTS, AS CREATED SET FORTH, DEFINED,
DESCRIBED AND GRANTED IN THAT CERTAIN “DECLARATION OF RECIPROCAL EASEMENTS OF
THE SORRENTO RIDGE BUSINESS PARK PLANNED INDUSTRIAL DEVELOPMENT” RECORDED APRIL
13, 1994 AS FILE NO. 1994-0242763 OF OFFICIAL RECORDS.



 Exhibit A-1















EXHIBIT B


ACKNOWLEDGEMENT OF TERM
COMMENCEMENT DATE

AND TERM EXPIRATION DATE


THIS ACKNOWLEDGEMENT OF TERM COMMENCEMENT DATE AND TERM EXPIRATION DATE
is entered into as of [              ],
20[    ], with reference to that certain Lease (the “Lease”)
dated as of May 2, 2007, by Arena Pharmaceuticals, Inc., a Delaware corporation
(“Tenant”), in favor of BMR-6114-6154
Nancy Ridge Drive LLC, a Delaware limited liability company (“Landlord”).  All capitalized terms used herein without
definition shall have the meanings ascribed to them in the Lease.


Tenant hereby confirms the
following:


1.                                       The Premises are located at 6118 Nancy Ridge
Drive, San Diego, California.


2.                                       Tenant accepted possession of the Premises
under the Lease on May 2, 2007.


3.                                       The Premises are accepted in AS IS condition


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


5.                                       In accordance with the provisions of Section
3.3 of the Lease, the Term Commencement Date is May 2, 2007, and, unless
the Lease is terminated or extended prior to the Term Expiration Date pursuant
to its terms, the Term Expiration Date shall be May 31, 2027.


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


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


8.                                       The obligation to pay Rent is presently in
effect and all Rent obligations on the part of Tenant under the Lease commenced
to accrue on May 2, 2007.


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


[REMAINDER OF THIS PAGE INTENTIONALLY LEFT
BLANK]



 Exhibit B-1
 









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


ARENA PHARMACEUTICALS, INC.,

a Delaware corporation


	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  



 



 Exhibit B-2















EXHIBIT C


RULES AND REGULATIONS


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


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


2.                                       Tenant shall not place a load upon any floor
of the Premises that exceeds the load per square foot that (a) such floor was
designed to carry or (b) is allowed by Applicable Laws.


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


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


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


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


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



 Exhibit C-1















EXHIBIT D


FORM OF ESTOPPEL CERTIFICATE


To:                              BMR-6114-6154 Nancy Ridge Drive LLC

17140 Bernardo Center Drive, Suite 222

San Diego, CA 92128

Attention: General Counsel/Real Estate


BioMed
Realty, L.P.

c/o BioMed Realty Trust, Inc.

17140 Bernardo Center Drive, Suite 222

San Diego, CA 92128


Re:                               6118
Nancy Ridge Drive (the “Premises”) in San Diego, California (the “Property”)


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


1.                                       Tenant
is a tenant at the Property under a lease (the “Lease”) for the Premises
dated as of May 2, 2007.  The Lease has
not been cancelled, modified, assigned, extended or amended [except as
follows:  [              ]],
and there are no other agreements, written or oral, affecting or relating to
Tenant’s lease of the Premises or any other space at the Property.  The lease term expires on [              ],
20[    ].


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


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


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


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


6.                                       Landlord
was not required to perform any work or tenant improvements for Tenant under
the Lease.


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


8.                                       Tenant
has the following expansion rights for the Property:  [              ].  Tenant has the following options to purchase
the Property: [                                                          ].


9.                                       To
Tenant’s knowledge, no hazardous wastes have been generated, treated, stored or
disposed of by or on behalf of Tenant in, on or around the Premises in
violation of any environmental laws that have not been corrected.


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



 Exhibit D-1
 









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


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


[              ],


a [              ]


	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  



 



 Exhibit D-2















EXHIBIT E


FORM OF LETTER OF CREDIT


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


LETTER OF CREDIT


Date:               ,
200    


	
  

  	
  (the “Beneficiary”)

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  
	
  L/C. No.:

  	
   

  	
   

  
	
  Loan No. :

  	
   

  	
   

  
				



 


Ladies and Gentlemen:


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


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


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


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


We agree, irrevocably, and
irrespective of any claim by any other person, to honor drafts drawn under and
in conformity with this L/C, within the maximum amount of this L/C, presented
to us on or before the Expiry Date, provided we also receive (on or before the
Expiry Date) any other Drawing Documentation this L/C requires.


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


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


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



 Exhibit E-1
 









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


The Expiry Date shall
automatically be extended by one year (but never beyond           
the “Outside Date”) unless, on or before the date 60 days before any
Expiry Date, we have given Beneficiary notice that the Expiry Date shall not be
so extended (a “Nonrenewal Notice”). We shall promptly upon request
confirm any extension of the Expiry Date under the preceding sentence by
issuing an amendment to this L/C, but such an amendment is not required for the
extension to be effective. We need not give any notice of the Outside Date.


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


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


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


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


Very truly yours,


[Issuer Signature]



 Exhibit E-2
 









EXHIBIT
A


FORM
OF SIGHT DRAFT


[BENEFICIARY LETTERHEAD]


TO:


[Name
and Address of Issuer]


SIGHT
DRAFT


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


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


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


	
  Date:

  	
   

  	
   

  



 



 Exhibit E-3
 









EXHIBIT
B


FORM
OF TRANSFER NOTICE


[BENEFICIARY LETTERHEAD]


TO:


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


TRANSFER
NOTICE


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


[Transferee Name and Address]


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


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


	
  Date:

  	
   

  	
   

  



 



 Exhibit E-4















EXHIBIT
F


FORM OF
NOTICE OF EXERCISE OF PURCHASE OPTION


[On
Tenant’s letterhead]


To:                              BMR-6114-6154 Nancy Ridge Drive LLC

17140 Bernardo Center Drive, Suite 222

San Diego, CA 92128

Attention: General Counsel/Real Estate


BioMed
Realty, L.P.

c/o BioMed Realty Trust, Inc.

17140 Bernardo Center Drive, Suite 222

San Diego, CA 92128


Re:                               Notice
of Exercise of Purchase Option


The
undersigned Tenant hereby exercises its option to purchase the real property
located at [                    ]
Nancy Ridge Drive, San Diego, California in accordance with Section 30 of those
certain Leases dated May 2, 2007 by and between BMR-6114-6154 Nancy Ridge Drive
LLC and Arena Pharmaceuticals, Inc.


Please
call the undersigned immediately at                         
if you have any questions.


Sincerely,


TENANT:


[name of Tenant],


	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  



 



 Exhibit F-1















SCHEDULE 1


BASIC
ANNUAL RENT INCREASE




	
  Calendar Year

  	
   

  	
  Additional

  Monthly Rental

  Installment of

  Basic Annual Rent

  	
   

  
	
  2007

  	
   

  	
  $

  	
  7,500.00

  	
   

  
	
  2008

  	
   

  	
  $

  	
  7,687.50

  	
   

  
	
  2009

  	
   

  	
  $

  	
  7,879.69

  	
   

  
	
  2010

  	
   

  	
  $

  	
  8,076.68

  	
   

  
	
  2011

  	
   

  	
  $

  	
  8,278.60

  	
   

  
	
  2012

  	
   

  	
  $

  	
  8,485.56

  	
   

  






 



 Schedule 1
 









SCHEDULE 2


BASIC
ANNUAL RENT REDUCTION




	
  Calendar Year

  	
   

  	
  Monthly Rental

  Installment of Basic

  Annual Rent

  Reduction(1)

  	
   

  
	
  2007

  	
   

  	
  $

  	
  14,411.05

  	
   

  
	
  2008

  	
   

  	
  $

  	
  14,771.33

  	
   

  
	
  2009

  	
   

  	
  $

  	
  15,140.61

  	
   

  
	
  2010

  	
   

  	
  $

  	
  15,519.12

  	
   

  
	
  2011

  	
   

  	
  $

  	
  15,907.10

  	
   

  
	
  2012

  	
   

  	
  $

  	
  16,304.78

  	
   

  






 


 


 






(1)  Amount shown is amount by which the monthly
installment of the Basic Annual Rent shall be reduced.



 Schedule 2