Exhibit 10.7


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 F:  6122, 6124 and 6126 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

  	
   

  	
  4

  
	
  6.

  	
   

  	
  Rent Adjustments

  	
   

  	
  5

  
	
  7.

  	
   

  	
  Taxes

  	
   

  	
  5

  
	
  8.

  	
   

  	
  Rentable Area

  	
   

  	
  6

  
	
  9.

  	
   

  	
  Security Deposit

  	
   

  	
  6

  
	
  10.

  	
   

  	
  Use

  	
   

  	
  8

  
	
  11.

  	
   

  	
  Brokers

  	
   

  	
  10

  
	
  12.

  	
   

  	
  Holding Over

  	
   

  	
  10

  
	
  13.

  	
   

  	
  Property Management Fee

  	
   

  	
  10

  
	
  14.

  	
   

  	
  Condition of Premises

  	
   

  	
  10

  
	
  15.

  	
   

  	
  Regulations and Parking Facilities

  	
   

  	
  11

  
	
  16.

  	
   

  	
  Utilities and Services

  	
   

  	
  12

  
	
  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

  	
   

  	
  29

  
	
  27.

  	
   

  	
  Bankruptcy

  	
   

  	
  29

  
	
  28.

  	
   

  	
  Definition of Landlord

  	
   

  	
  29

  
	
  29.

  	
   

  	
  Estoppel Certificate

  	
   

  	
  29

  
	
  30.

  	
   

  	
  Purchase Option

  	
   

  	
  30

  
	
  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.                                   Robert B. Kahn, Trustee of the revocable
trust of Robert Bernardo Kahn, U.D.T. dated December 7, 1990, as to an
undivided 30% interest; Galen E. Rogers, Trustee of the Galen E. Rogers
Family Trust as amended and restated U.D.T. dated December 5, 1991, as to an
undivided 30% interest; Advanced Scientific Systems M, Inc., a California
corporation, as to an undivided 10% interest; and Applied Clinical Research,
Inc., a California corporation, as to an undivided 30% interest (collectively,
the “Existing Owner”) and Tenant, entered into that certain Standard
Industrial/Commercial Multi-Tenant Lease – Net dated March 20, 2002 (as
amended, the “Existing Lease”), pursuant to which: (1) the Existing
Owner leases a portion of the building located at 6122, 6124 and 6126 Nancy
Ridge Drive in San Diego, California (the “Building”) (which Building
together with all parking areas, driveways, beneficial easements and other
appurtenances, are referred to herein as the “Property”) to Tenant on the
terms and conditions set forth in the Existing Lease; and (2) the Existing
Owner granted Tenant the option to purchase the Property, as more particularly
described in the Existing Lease (the “Option”);


B.                                     Tenant and Landlord (as successor in interest
to BioMed Realty, L.P., a Maryland limited partnership), entered into that
certain Agreement of Purchase and Sale dated as of March 21, 2007 (the “Purchase
Agreement”), pursuant to which, among other things, (1) Tenant assigned the
Option to Landlord, and (2) Landlord agreed to exercise the Option on the terms
and conditions set forth in the Purchase Agreement;


C.                                     Tenant desires to remain in possession of the
Property after Landlord acquires a fee interest in the Property; and


D.                                    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, 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 the Purchase Agreement to be consummated at the
Closing (as defined in the Purchase Agreement).


2.2.                              Rentable Area of the Premises:  Approximately 68,000 sq. ft.



 1
 









2.3.                              Initial monthly installment of Basic Annual
Rent for the Premises (“Basic Annual Rent”) as of the Term Commencement
Date shall be $64,997.99, subject to the rental adjustments provided in Article 6
hereof.


2.4.                              Estimated Term Commencement Date: March 31,
2012.


2.5.                              Term Expiration Date:  May 31, 2027.


2.6.                              Security Deposit: An amount of $64,997.99.


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.


	
  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.                              The “Term Commencement Date” shall be
the day that Landlord acquires a fee interest in the Property from the Existing
Owner pursuant to the exercise and consummation of the Option (which date shall
be on or about the Estimated Term Commencement Date).  Tenant 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 



 2
 









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.  If the Term Commencement Date does not occur
by the Estimated Term Commencement Date for any reason whatsoever other than a
breach by Landlord of its obligation under the Purchase Agreement to exercise
the Option and consummate the purchase of the Property, then this Lease shall
not be void or voidable and Landlord shall not be liable to Tenant for any loss
or damage resulting therefrom; provided, however, (a) if the Term
Commencement Date does not occur by the date sixty (60) days after the
Estimated Term Commencement Date by reason of Landlord’s failure to exercise
the Option and consummate the purchase of the Property, then Tenant shall have
the right to terminate this Lease, and in such an event, Tenant shall have no
further obligations hereunder, or (b) if Landlord’s assignment of the Option to
Tenant occurs pursuant to that Assignment of Option delivered at the Closing in
connection with the consummation of the transactions contemplated by the
Purchase Agreement (which assignment is described in Section 4.2(g)
below), then this Lease shall automatically terminate.


4.2.                              Executory Period.  From
the Execution Date through the Term Commencement Date (the “Executory Period”):


(a)                                          Option.  Landlord shall not amend,
modify, assign or terminate (by agreement with the Existing Owner, making an
election under the Option or otherwise) the terms and conditions of the Option
without obtaining the prior approval of Tenant.


(b)                                         Existing Lease and Other Agreements. 
Tenant shall perform each of its obligations under the Existing Lease
and all other agreements affecting the Premises and shall enforce the
obligations of the Existing Owner under the Existing Lease against the Existing
Owner in good faith.  Landlord shall pay
the Building F Purchase Option Exercise Price in connection with the
consummation of its purchase of the Property following the exercise of the
Option.  Tenant shall neither amend,
modify, nor terminate (by agreement with the Existing Owner, making any
election under the Existing Lease or otherwise) the Existing Lease in any way
that would adversely affect Landlord’s exercise of the Option or the Premises
after the Term Commencement Date without Landlord’s prior written consent.


(c)                                          Lease.  Tenant shall perform and
comply with Sections 4.2, 10.1, 15, 19, 25, 29
and 38 hereof.  For purposes of
clarity, Tenant’s obligations under this Section 4.2(c) shall solely
refer to the portion of the Premises that Tenant is occupying pursuant to the
Existing Lease.


(d)                                         Leasing Arrangements. 
Tenant shall neither: (i) enter into any lease or sublease of space or
other occupancy agreement affecting the Premises or any portion of the Premises
unless Tenant complies with Article 25 hereof and provides in any such
sublease or other occupancy agreement that such sublease or other occupancy
surviving the Term Commencement Date shall continue to be a sublease with
Tenant serving as the sublandlord or an occupancy that is subordinate to this
Lease without Landlord owing any duties or obligations to such subtenant or
occupant, nor (ii) assign or transfer its rights under the Existing Lease,
without first obtaining Landlord’s prior written consent (which consent shall
not be unreasonably withheld) and in any event only in accordance with Article
25 hereof.


(e)                                          Access.  Landlord and its agents,
employees, consultants, lenders and representatives shall, at any and all
reasonable times during non-business hours (or during business hours if
Landlord 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), have reasonable access to the portion
of the Premises leased by Tenant under the Existing Lease and all books and
records for the Premises that are in Tenant’s possession (except for any of
Tenant’s scientific materials and business records relating, except to a de
minimis extent, primarily to its business operations conducted at the Property
as opposed to primarily the ownership of the Property) for the purpose of
monitoring and inspecting the condition of the portion of the Premises leased
by Tenant under the Existing Lease and Tenant’s obligations under this
Lease.  Tenant shall use commercially
reasonable efforts to cause the Existing Owner, to provide Landlord reasonable
access to the portion of the Premises that is not leased by Tenant under the
Existing Lease.  In addition, Tenant
shall make written request of the Existing Owner to provide the books and
records reasonably requested by Landlord, including, without limitation, all
Phase One / Phase Two Environmental Assessments for the Property, 



 3
 









asbestos audits of the Property,
environmental reports related to the Property; and any notices from or to any
governmental authority regarding hazardous materials on or relating to the
Property (it being understood that Tenant does not control the Existing Owner
and is not warranting that any such confirmation or documents will be
provided).


(f)                                            Termination of Lease.  In
the event: (i) the closing conditions set forth in Section 7.1 of the Purchase
Agreement are not satisfied or waived (which waiver shall be in Landlord’s sole
and absolute discretion), by March 31, 2012 or as otherwise mutually
agreed to by the parties, and as a result thereof Landlord does not exercise
the Option; (ii) the Property is damaged or destroyed, and in accordance with
Section 4.3(a) of the Purchase Agreement, Landlord exercises its right not to
acquire the Property; (iii) the Existing Lease has been amended which adversely
affected the Option and which has not been consented to by Landlord, and as a
result thereof Landlord does not exercise the Option, (iv) eminent domain
proceedings are threatened (in writing) or instituted with respect to the
Property, and in accordance with Section 4.3(b) of the Purchase Agreement,
Landlord exercises its right not to acquire the Property; or (v) Landlord
exercises the Option and the Existing Owner breaches its obligation to convey
the Property to Landlord in accordance with the terms and conditions of the
Option and neither Landlord nor Tenant (in Landlord’s name at Tenant’s sole
cost) pursues an action against Existing Owner for specific performance; then,
subject to Section 4.2(g),  this
Lease shall terminate effective as of the occurrence of any of the events
described in subsections (i) through (v) above. 
Upon such termination, (x) if, and only to the extent, required under
Section 1.2 of the Purchase Agreement, Tenant shall pay Landlord the Building F
Option Termination Payment (as defined in the Purchase Agreement), (y) the
Security Deposit shall be promptly refunded to Tenant, and (z) all further
rights and obligations of the parties under this Lease shall terminate except
for those obligations of the parties that expressly survive such termination.


(g)                                         Assignment of Option.  In
the event Landlord (i) terminates this Lease as a consequence of the occurrence
of any event described in subsections (i), (ii), (iii) or (iv) of Section
4.2(f) above, or (ii) does not exercise the Option on or before March 31,
2012, (1) Landlord’s assignment of the Option to Tenant shall be and become
effective in accordance with, and pursuant to, that certain Assignment of
Option delivered at the Closing contemplated by the Purchase Agreement, without
recourse, (2) Tenant shall pay Landlord the Building F Option Termination
Payment, if required under the Purchase Agreement, and (iii) the Security
Deposit shall be refunded to Tenant promptly upon request, and all further
rights and obligations of the parties under this Lease shall terminate except
for those obligations of the parties that expressly survive such termination.


4.3                                 Indemnity.  Subject to Section 20.6,
Tenant agrees to indemnify, defend and hold Landlord harmless from and against
any and all Claims (as defined below) arising out of, or in connection with,
(i) any compensation claimed by any broker or agent, other than the Brokers (as
defined below), employed or engaged by Tenant or claiming to have been employed
or engaged by Tenant, (ii) 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 Tenant’s employees’, agents’ or guests’ use or occupancy of
the Premises or a breach or default by Tenant in the performance of any of its
obligations under the Existing Lease or this Lease, and (iii) any Hazardous
Materials (as defined below) brought upon, kept or used in or about the
Premises by Tenant or by Tenant’s officers, employees, agents, contractors,
invitees, customers and subcontractors (collectively, “Tenant’s Agents”),
except to the extent caused by Landlord’s Parties willful misconduct or gross
negligence.  The indemnity provisions
contained in this Section 4.3 shall survive the expiration or earlier
termination of this Lease.


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 



 4
 









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 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.


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 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 



 5
 









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 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.  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.                                       Rentable Area. 
Landlord and Tenant stipulate that the Rentable Area of the Building is
68,000 square feet.


9.                                       Security Deposit.


9.1.                              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.  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 



 6
 









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 9 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.


9.2.                              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.


9.3.                              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.


9.4.                              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.


9.5.                              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.


(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 9.5.


(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 



 7
 









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 9.4 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.


10.                                 Use.


10.1.                        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.


10.2.                        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 10.2); 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 



 8
 









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.


10.3.                        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.


10.4.                        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.


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


10.6.                        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
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.


10.7.                        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.


10.8.                        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.


10.9.                        Notwithstanding any other provision herein to
the contrary but subject to Section 10.2 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 



 9
 









Disabilities Act, 42 U.S.C. § 12101, et seq.
(together with regulations promulgated pursuant thereto, the “ADA”).


11.                                 Brokers.


11.1.                        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.


11.2.                        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.


11.3.                        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
11.1 and 11.2, and Tenant is executing this Lease in reliance upon
Landlord’s representations, warranties and agreements contained within Sections 11.1
and 11.2.


12.                                 Holding Over.


12.1.                        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.


12.2.                        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.


12.3.                        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.


12.4.                        The foregoing provisions of this Article 12
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.


13.                                 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.


14.                                 Condition of Premises.


14.1.                        Tenant acknowledges that immediately prior to
the Execution Date, Tenant occupied a portion of the Premises and expects to
continue to occupy a portion of the Premises 



 10
 









under the Existing Lease, and control the
use, maintenance and repair of such portion of the Premises during the
Executory Period to the extent required under the Existing Lease.  Tenant is familiar with the condition of the
Premises and accepts the entire Premises (including the portion of the Premises
that is not currently occupied by Tenant) in its “as is” condition (other than
to the extent Tenant improves any portion of the Premises during the Executory
Period with Landlord’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed) 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. 
It is understood and agreed that Landlord is not obligated to install
any equipment, or make any repairs, improvements or Alterations to the
Premises.  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.


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


15.                                 Regulations and Parking Facilities.


15.1.                        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 either the Executory Period or 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.


15.2.                        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)).


15.3.                        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 



 11
 









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.


16.                                 Utilities and Services.


16.1.                        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 16.1 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.


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


16.3.                        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.


16.4.                        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.



 12
 









17.                                 Alterations.


17.1.                        Tenant shall 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.  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 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 



 13
 









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, 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, 



 14
 









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.


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, 



 15
 









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 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
10.7 and 18.1, (c) any of the Tenant Alterations, (d) any
determination by a Governmental Authority that the Premises during the Term, 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 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 



 16
 









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
4.3, 20.1, 20.5 and 25.10 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 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.



 17
 









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 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 



 18
 









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 Execution 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 Execution 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 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 



 19
 









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 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



 20














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 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 Alterations
constructed by Tenant pursuant to this Lease, provided Tenant is not
then in monetary Default under this Lease.


22.9.                        Notwithstanding the foregoing, in the event the Premises are damaged or destroyed
during the Executory Period, the time periods set forth in this Article 22
shall not commence until the Term Commencement Date.


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 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



 21
 








(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 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 



 22
 








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 G 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 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 



 23
 








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.


24.9.                        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 



 24
 








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 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 



 25
 








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 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 



 26
 








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.


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.



 27
 








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.  In
addition, Chem Navigator and Existing Owner shall constitute Permitted
Subtenants inasmuch as the Purchase Agreement contemplates the possibility of
subleases to them as of the Term Commencement Date.


25.10.                  If the Existing Owner exercises its right to
occupy a portion of the Premises in accordance with Paragraph 51(e) of the
Existing Lease, (a) Tenant hereby agrees that such occupancy shall constitute a
sublease between Existing Owner, as subtenant, and Tenant, as sublandlord, and
that Existing Owner will not be a tenant of Landlord, (b) Tenant shall assume
and perform all of the obligations of the landlord under and related to the
Existing Owner’s occupancy, and (c) subject to Section 20.6, Tenant
shall defend, indemnify and hold harmless Landlord from and against any
liability, damages, causes of action, expenses, and attorneys’ fees incurred by
Landlord (i) in connection with Existing Owner’s occupancy of any portion of
the Premises, or (ii) by reason of the failure of Tenant to fulfill, perform,
discharge, and observe its obligations with respect to Existing Owner’s
occupancy of the Premises.


25.11.                  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.



 28
 








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, 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 



 29
 








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
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 F
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 the Building G 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 the
Building G 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), the
Tenant’s right to exercise its Purchase Option under this Lease shall
terminate.


(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
F 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 



 30
 








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.


(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 F 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 F
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 F 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
F 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 F 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 F 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 (i) any monthly
installment of Basic Annual Rent or (ii) 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 F 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).



 31
 








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 this Lease until such closing date, and (c) Tenant shall pay
Landlord the Building F 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
F 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 F 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 as 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 F 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.



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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 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; 



 33
 








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.


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 



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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.


34.3.                        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 



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in any way connected with this Lease; the
relationship between Landlord and Tenant; Tenant’s 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 



 36
 








installation of storage tanks shall only be
permitted after Landlord has given Tenant its written 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.



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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.



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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 4 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 6122, 6124, 6126
Nancy Ridge Drive, San Diego, California.


2.                                       Tenant accepted possession of the Premises
under the Lease on [       ], 20[  ].


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 [       ],
2012, 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 [       ], 20[  ].


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:                               6122,
6124, 6126 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],



 Exhibit D-1
 









[LANDLORD],
BioMed Realty, L.P., BioMed Realty Trust, Inc., and any mortgagee of the
Property and their respective successors and assigns.


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