Exhibit 10.5


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 D:  6114 Nancy Ridge Drive, San Diego, CA

















TABLE OF CONTENTS


	
  

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Lease of Premises

  	
  1

  
	
  2.

  	
  Basic Lease Provisions

  	
  1

  
	
  3.

  	
  Term

  	
  2

  
	
  4.

  	
  Term Commencement Date and Possession

  	
  2

  
	
  5.

  	
  Rent

  	
  2

  
	
  6.

  	
  Rent Adjustments

  	
  3

  
	
  7.

  	
  Taxes

  	
  3

  
	
  8.

  	
  Security Deposit

  	
  5

  
	
  9.

  	
  Use

  	
  6

  
	
  10.

  	
  Brokers

  	
  8

  
	
  11.

  	
  Holding Over

  	
  8

  
	
  12.

  	
  Property Management Fee

  	
  9

  
	
  13.

  	
  Condition of Premises

  	
  9

  
	
  14.

  	
  Regulations and Parking Facilities

  	
  9

  
	
  15.

  	
  Utilities and Services

  	
  10

  
	
  16.

  	
  Intentionally Omitted

  	
  11

  
	
  17.

  	
  Alterations

  	
  11

  
	
  18.

  	
  Repairs and Maintenance

  	
  12

  
	
  19.

  	
  Liens

  	
  14

  
	
  20.

  	
  Indemnification and Exculpation

  	
  14

  
	
  21.

  	
  Insurance; Waiver of Subrogation

  	
  15

  
	
  22.

  	
  Damage or Destruction

  	
  17

  
	
  23.

  	
  Eminent Domain

  	
  19

  
	
  24.

  	
  Defaults and Remedies

  	
  20

  
	
  25.

  	
  Assignment or Subletting

  	
  23

  
	
  26.

  	
  Attorneys’ Fees

  	
  26

  
	
  27.

  	
  Bankruptcy

  	
  26

  
	
  28.

  	
  Definition of Landlord

  	
  27

  
	
  29.

  	
  Estoppel Certificate

  	
  27

  
	
  30.

  	
  Purchase Option

  	
  27

  
	
  31.

  	
  Limitation of Landlord’s Liability

  	
  31

  
	
  32.

  	
  Premises Control by Landlord

  	
  31

  
	
  33.

  	
  Quiet Enjoyment

  	
  32

  
	
  34.

  	
  Subordination and Attornment

  	
  32

  
	
  35.

  	
  Surrender

  	
  33

  
	
  36.

  	
  Waiver and Modification

  	
  33

  
	
  37.

  	
  Waiver of Jury Trial and Counterclaims

  	
  33

  
	
  38.

  	
  Hazardous Materials

  	
  34

  
	
  39.

  	
  Miscellaneous

  	
  35

  
	
  40.

  	
  Option to Extend Term

  	
  37

  
	
  41.

  	
  Tenant’s Authority

  	
  37

  
	
  41.

  	
  Landlord’s Authority

  	
  38

  
	
  42.

  	
  Confidentiality

  	
  38

  
	
  43.

  	
  Odors and Exhaust

  	
  38

  
	
  44.

  	
  Excavation

  	
  38

  



 
















LEASE


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


RECITALS


A.            Landlord owns certain real property (the “Property”)
and the improvements thereon located at 6114 Nancy Ridge Drive, San Diego,
California, including the approximately 40,000 rentable square foot building
located thereon (the “Building”) in which the Premises (as defined
below) are located; and


B.            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 that certain Agreement of
Purchase and Sale dated as of March 21, 2007 (the “Purchase Agreement”).


2.2.          Rentable
Area of the Premises:  As of the Term
Commencement Date, the Rentable Area of the Premises is approximately 40,000
rentable square feet for the Building.


2.3.          Initial
monthly installment of Basic Annual Rent for the Premises (“Basic Annual
Rent”) as of the Term Commencement Date shall be $168,594.90, subject to
the rental adjustments provided in Article 6 hereof.


2.4.          Term
Commencement Date: May 2, 2007.


2.5.          Term
Expiration Date:  May 31, 2027.


2.6.          Security
Deposit: An amount equal to $168,594.90, which amount shall be increased in
accordance with Section  8.1.


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


	
  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

  



 



 1
 









 


	
  2.9.          Address
  for Notices to Landlord:

  	
   

  	
  BMR-6114-6154 Nancy Ridge Drive LLC

  
	
   

  	
   

  	
  17140 Bernardo Center Drive, Suite 222

  
	
   

  	
   

  	
  San Diego, California  92128

  
	
   

  	
   

  	
  Attn:  General Counsel/Real
  Estate

  
	
   

  	
   

  	
   

  
	
  2.10.        Address for Notices to Tenant:

  	
   

  	
  Arena Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  6166 Nancy Ridge Drive

  
	
   

  	
   

  	
  San Diego, California  92121

  
	
   

  	
   

  	
  Attn:  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Arena Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  6166 Nancy Ridge Drive

  
	
   

  	
   

  	
  San Diego, California  92121

  
	
   

  	
   

  	
  Attn:  General Counsel

  



 


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


	
  Exhibit A

  	
  Premises

  
	
  Exhibit B

  	
  Acknowledgement of Term Commencement Date and Term
  Expiration Date

  
	
  Exhibit C

  	
  Rules and Regulations

  
	
  Exhibit D

  	
  Form of Estoppel Certificate

  
	
  Exhibit E

  	
  Form of Letter of Credit

  
	
  Exhibit F

  	
  Form of Notice of Exercise of Purchase Option

  



 


3.             Term.


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


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


4.             Term Commencement Date and Possession.


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


5.             Rent.


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


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



 2
 









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


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


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


6.2.          Building
F Option: Basic Annual Rent Reduction.  Pursuant to the Purchase
Agreement, Tenant assigned to Landlord Tenant’s existing option (the “Building
F Option”) to acquire that certain real property located at 6122, 6124 and
6126 Nancy Ridge Drive, San Diego, California, including the approximately
68,000 rentable square foot building located thereon (the “Building F
Property”).  In the event: (a)
Landlord elects not to exercise the Building F Option as a result of any
casualty loss or proceeding in eminent domain in accordance with Section 1.2
of the Purchase Agreement; and (b) Tenant pays Landlord the Building F Option
Termination Payment in accordance with Section 1.2 of the Purchase
Agreement, the monthly rental installment of Basic Annual Rent shall be reduced
by the applicable amount set forth in Schedule 1 attached hereto (the “Basic
Annual Rent Reduction”), and the Basic Annual Rent as so adjusted shall be
subject to further rental adjustments as provided in Section 6.1 hereof.


7.             Taxes.


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



 3
 









municipal
and local laws, codes, ordinances, rules and regulations of Governmental
Authorities, committees, associations, or other regulatory committees, agencies
or governing bodies having jurisdiction over the Premises, Landlord or Tenant,
including both statutory and common law and hazard waste rules and regulations.


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


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


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


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


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



 4
 









8.             Security Deposit.


8.1.          Prior
to the Term Commencement Date, Tenant shall deposit with Landlord the sum set
forth in Section 2.6 (the “Security Deposit”), which sum
shall be held by Landlord as security for the faithful performance by Tenant of
all of the terms, covenants and conditions of this Lease to be kept and performed
by Tenant during the Term of this Lease. 
If Tenant defaults with respect to any provision of this Lease,
including, but not limited to, any provision relating to the payment of Rent,
then Landlord may (but shall not be required to) use, apply or retain all or
any part of the Security Deposit for the payment of any Rent or any other sum
in default, or to compensate Landlord for any other loss or damage that
Landlord may suffer by reason of Tenant’s default.  If any portion of the Security Deposit is so
used or applied, then Tenant shall, within ten (10) days following demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to its original amount, and Tenant’s failure to do so shall be
a material breach of this Lease. 
Landlord shall not be required to keep this Security Deposit separate
from its general fund, and Tenant shall not be entitled to interest on the
Security Deposit.  The provisions of this
Article 8 shall survive the expiration or earlier termination of this
Lease.  TENANT HEREBY WAIVES THE
REQUIREMENTS OF SECTION 1950.7 OF THE CALIFORNIA CIVIL CODE, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, WHICH, AMONG OTHER THINGS, (a) ESTABLISH THE TIME
FRAME BY WHICH LANDLORD MUST REFUND A SECURITY DEPOSIT UNDER A LEASE, AND/OR
(b) PROVIDE THAT LANDLORD MAY CLAIM FROM THE SECURITY DEPOSIT ONLY THOSE SUMS
REASONABLY NECESSARY TO REMEDY DEFAULTS IN THE PAYMENT OF RENT, TO REPAIR
DAMAGE CAUSED BY TENANT OR TO CLEAN THE PREMISES.


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


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


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


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


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



 5
 









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


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


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


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


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


9.             Use.


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


9.2.          Tenant
shall not use or occupy the Premises in violation of Applicable Laws; zoning
ordinances; or the certificate of occupancy issued for the Building, and shall,
upon five (5) days’ written notice from Landlord, discontinue any use of the
Premises if such use is in violation of Applicable Law or declared or claimed
by any Governmental Authority having jurisdiction to be a violation of any of
the above.  Tenant shall, at its sole
cost and expense, promptly and properly observe and comply with (including in
the making by Tenant of the any Alterations to the Premises): (a) all present
and future orders, regulations, directions, rules, laws, ordinances, and
requirements of all Governmental Authorities arising from the use or occupancy
of, or applicable to, the Premises or any portion thereof (except for any
orders, regulations, directions, rules, laws, ordinances or requirement that it
is contesting in accordance with this 



 6
 









Section 9.2);
and (b) any direction of any Governmental Authority having jurisdiction that
shall, by reason of the nature of Tenant’s use or occupancy of the Premises,
impose any duty upon Tenant or Landlord with respect to the Premises or with
respect to the use or occupation thereof. 
Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by any Governmental Authority.  Notwithstanding the foregoing, Tenant shall
not be obligated to comply with any declaration, direction or other
governmental rule or governmental action (a) whose application or validity is
being contested by Tenant diligently and in good faith by appropriate
proceedings if Tenant’s failure to comply therewith neither creates any
material risk of any financial liability or criminal sanction against Landlord
or the Premises, nor creates any material risk of damage to the Premises, nor
creates any risk to Landlord’s title to or rights in the Premises, or (b)
compliance with which shall have been excused or exempted by a nonconforming
use permit, waiver, extension or forbearance exempting it from such
declaration, direction or other governmental rule or governmental action.


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


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


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


9.6.          Tenant
shall, at Tenant’s sole cost and expense, have the right to install legally
permitted signage on the Premises (including any building thereon) (“Signage”),
which Signage shall be subject to Landlord’s prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed.  Tenant shall keep the Signage in good
condition and repair.  The size, design,
and other physical aspects of any sign shall be subject to Landlord’s written
approval prior to installation, which approval will not unreasonably be
withheld, and shall conform to all covenants, conditions, and restrictions
encumbering the Premises and all Applicable Laws. The cost of the sign(s),
including but not limited to the permitting, installation, maintenance and
removal thereof shall be at Tenant’s sole cost and expense. If Tenant fails to
maintain its sign(s), or if Tenant fails to remove such sign(s) upon
termination of this Lease, or fails to repair any damage caused by such removal
(including without limitation, painting the damaged portions of the Building
and any other portions of the Building that Landlord reasonably determines in
good faith shall be painted so that repainting the damaged portion of the
Building does not adversely affect the visual appearance of the Building, if
required by Landlord), Landlord may do so at Tenant’s expense. Tenant shall
reimburse Landlord within twenty (20) days after written demand for all
reasonable costs incurred by Landlord to effect such maintenance, removal or
repair, which amounts shall be deemed Additional Rent and shall include without
limitation, all sums disbursed, incurred or deposited by Landlord, including
Landlord’s costs, expenses and actual attorneys’ fees with interest
thereon.  Notwithstanding the foregoing,
Landlord has observed, and hereby approves, all existing signage on the
Premises, and all future repairs and replacements to such existing signage, so
long as such repairs and replacements: (a) are consistent with the size,
design, quality and other physical aspects of the existing signage, (b) are in
compliance with Applicable Laws, (c) are paid for at Tenant’s sole cost and
expense, and (d) do not adversely affect the visual appearance of the
Building.  In addition, Tenant shall have
the right to incorporate its company logo and trademarks as part of the design
of its Signage.


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



 7
 









enhancements necessary to carry the weight of such equipment in
accordance with the terms and conditions of Article 17 hereof.


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


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


10.           Brokers.


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


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


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


11.           Holding Over.


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


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


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


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



 8
 









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


13.           Condition of Premises.


13.1.        Tenant
acknowledges that immediately prior to the Term Commencement Date, Tenant
occupied the Premises, is familiar with the condition of the Premises and
accepts the entire Premises in its “as is” condition with all faults, and
Landlord makes no representation or warranty of any kind with respect to the
condition of the Premises or with respect to the suitability of the Premises
for the conduct of Tenant’s business, and Landlord shall have no obligation to
alter, repair or otherwise prepare the Premises for Tenant’s occupancy or to
pay for or construct any improvements to the Premises.  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.


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


14.           Regulations and Parking Facilities.


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


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



 9
 









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


15.           Utilities and Services.


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


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


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



 10
 









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


16.           [Intentionally Omitted].


17.           Alterations.  


17.1.        Tenant
shall, at Tenant’s sole cost and expense, have the right at any time, and from
time to time during the Term, to make such Alterations (as defined below) to
the Building, and improvements and fixtures hereafter erected on the Premises,
including, without limitation, solar panels on the roof of the Building, as
Tenant shall deem necessary or desirable in connection with the requirements of
its business, which Alterations (other than Alterations of Tenant’s movable
trade fixtures and equipment) shall be made in compliance with the requirements
described in this Article 17. 
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 



 11
 









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


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


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


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


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


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


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


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


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


18.           Repairs and Maintenance.


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



 12
 









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


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


18.3.        There shall be no abatement of Rent and no liability of Landlord by
reason of any injury to or interference with Tenant’s business arising from the
making of any repairs, Alterations or improvements in or to any portion of the
Premises, or in or to improvements, fixtures, equipment and personal property
therein unless such damage is caused by Landlord or its agents’ gross
negligence or willful misconduct.


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


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



 13
 









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


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


19.           Liens.


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


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


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


20.           Indemnification and Exculpation.


20.1.        Tenant
agrees to indemnify, defend and save Landlord harmless from and against any and
all demands, claims, liabilities, losses, costs, expenses, actions, causes of
action, damages or judgments, and all reasonable expenses (including, without
limitation, reasonable attorneys’ fees, charges and disbursements) incurred in
investigating or resisting the same (collectively, “Claims”) arising
from (a) injury or death to any person or injury to any property occurring
within or about the Premises arising directly or indirectly out of Tenant’s or
any of Tenant’s officers, employees, agents, contractors, invitees, customers
and subcontractors (collectively, “Tenant’s Agents”) use or occupancy of
the Premises, (b) a breach or default by Tenant in the performance of any of
its obligations hereunder, including, without limitation, tenant’s failure to
perform any of its obligations in Sections 9.6 and 18.1, (c) any
of the Tenant’s Alterations, (d) any determination by a Governmental Authority
that the Premises during the Term, 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 



 14
 









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


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


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


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


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


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


21.           Insurance; Waiver of Subrogation.


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



 15
 









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.


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 



 16
 









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


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


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


22.           Damage or Destruction.


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


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



 17
 









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


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


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


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


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



 18














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


22.8.        Landlord’s
obligation, should it elect or be obligated to repair or rebuild, shall be limited
to the Premises; provided that Tenant shall have the right but not the
obligation, at its expense, to replace or fully repair all of Tenant’s personal
property and any 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.


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.



 19
 








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


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


24.           Defaults and Remedies.


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


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


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


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


(a)      The abandonment of the Premises by Tenant;


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


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



 20
 








have
not yet resolved the dispute by mutual agreement or, if necessary, final court
judgment); provided that, if the nature of Tenant’s default is such that
it reasonably requires more than twenty (20) days to cure, Tenant shall not be
deemed to be in default if Tenant shall commence such cure within said twenty
(20) day period and thereafter diligently prosecute the same to completion;


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


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


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


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


(h)      The occurrence of a monetary Default or a material non-monetary Default
under the Building E Lease, the Building F 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



 21
 








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


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


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


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


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


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


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


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


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


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


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


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


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


24.9.        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 



 22
 








or not stated in this Lease.  No
waiver of any default of Tenant hereunder shall be implied from any acceptance
by Landlord of any Rent or other payments due hereunder or any omission by
Landlord to take any action on account of such default if such default persists
or is repeated, and no express waiver shall affect defaults other than as
specified in said waiver.


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


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


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


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


25.           Assignment or Subletting.


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



 23
 








Assignees”).  Notwithstanding the foregoing, Tenant shall
have the right to sublet any portion of the Premises, upon twenty (20) days
prior written notice to Landlord, but without obtaining Landlord’s prior
written consent,  to a Permitted
Subtenant subject to the conditions precedent in Section 25.9.


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


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


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


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


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


(c)      Tenant shall reimburse Landlord for Landlord’s actual and reasonable
costs and expenses, including, without limitation, reasonable attorneys’ fees,
charges and other costs or overhead expenses incurred by Landlord in connection
with the review, processing and documentation of such request in an amount not
to exceed Five Thousand Dollars ($5,000);



 24
 








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


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


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


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


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


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


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


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


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


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


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
 








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


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


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


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


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


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


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



 26
 








Tenant’s obligations under this Lease shall occur, then such adequate
assurances shall include any or all of the following, as designated by Landlord
in its sole and absolute discretion:


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


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


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


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


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


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


30.           Purchase Option.


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



 27
 








multiplied
by twelve) under this Lease, divided by (b) seven and nine-tenths percent
(7.9%) (the “Building D 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 E Lease, the Building G Lease
and, solely in the event Landlord acquires the Building F Property (as defined
in the Purchase Agreement), then from and after the closing of such acquisition
(the “Building F Acquisition”), the Building F Lease (unless the
purchase option under such Lease shall have been (1) previously exercised in
accordance with Section 30.1(c)(i) through (iv) under such Lease,
or (2) terminated in accordance with the penultimate sentence of Section
30.1(a) of such Lease) in strict accordance with the requirements of each
such lease (collectively, the “Required Leases”), and (ii) paying the
purchase option exercise price under, and in accordance with the terms and
conditions of, each Required Lease upon the closing of each such
transaction.  For purposes of clarity,
Tenant shall only have the right to exercise the Purchase Option in connection
with its purchase options under each of the Building E Lease, the Building G
Lease and from and after the Building F Acquisition, the Building F Lease and
shall not have the right to exercise the Purchase Option with respect to
individual buildings.  Notwithstanding
the foregoing, solely upon the occurrence of any of the events set forth in Sections
30.1(c)(i) through (iv) below, (1) Tenant shall have the right to
exercise the Purchase Option solely with respect to the Property, (2) Tenant
shall not have the right to exercise the respective purchase options under any
of the Required Leases at any time other than the times specified therein, and
(3) in the event Tenant elects not to acquire the Property in accordance with Section
30.1(c)(ii) or (iii), Tenant’s right to exercise its Purchase Option
under this Lease shall terminate.  Tenant
shall have no right to exercise its option to purchase the Building F Property
until the Building F Acquisition.


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


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


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


(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 



 28
 








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


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


Notwithstanding the
foregoing, in the event Tenant exercises its Purchase Option on or before the
fourth (4th) anniversary of the Execution Date, (a) the
closing of the sale under such Purchase Option shall occur on the first (1st) business day after the fourth (4th)
anniversary of the Execution Date, (b) Tenant shall continue to pay Rent in
accordance with this Lease until such closing date, and (c) Tenant shall pay
Landlord the Building D Purchase Option Exercise Price on, and calculated as
of, such closing date.



 29
 








(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 D 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
D Purchase Option Exercise Price.


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


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


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


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


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


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



 30
 








against Landlord, including the right to recover reasonable attorneys’
fees and court costs, but shall have no right to receive any other equitable
relief.  Tenant hereby waives any right
to record a lis pendens on the property other than in connection with the
filing of an action for specific performance. 
In no event shall Tenant be entitled to seek or obtain any other damages
of any kind, including, without limitation, actual, consequential, indirect or
punitive damages.  Notwithstanding the
foregoing, any liability of Landlord under this Article 30 shall be
limited strictly to the assets of Landlord only, and not to any of its general
partners or their respective partners.


31.           Limitation of Landlord’s Liability.


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


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


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


32.           Premises Control by Landlord.


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


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


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 



 31
 








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


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


34.           Subordination and Attornment.


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


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


34.3.        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 



 32
 








constitute a part.  Any change
affecting the amount or timing of the consideration to be paid by Tenant or
modifying the Term of this Lease shall be deemed as materially altering the
terms hereof.


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


35.           Surrender.


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


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


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


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


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


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


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


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



 33
 








38.           Hazardous Materials.


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


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



 34
 








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.


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.



 35
 








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.


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.



 36
 








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(a), 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.


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.



 37
 








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]



 38















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 2 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 6114 Nancy Ridge
Drive, San Diego, California.


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


3.                                       The Premises are accepted in AS IS condition.


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


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


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


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


8.                                       The obligation to pay Rent is presently in
effect and all Rent obligations on the part of Tenant under the Lease commenced
to accrue on [          ],
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:          6114
Nancy Ridge Drive (the “Premises”) in San Diego, California (the “Property”)


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


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


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


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


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


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


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


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


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


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


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



 Exhibit D-1
 









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


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


[         ],


a [         ]


	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  



 



 Exhibit D-2















EXHIBIT E


FORM OF LETTER OF CREDIT


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


LETTER OF CREDIT


Date:          ,
200    


_________________________
(the “Beneficiary”)


_________________________


_________________________


Attention:_________________


L/C. No.: _________________


Loan No. _________________


Ladies and Gentlemen:


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


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


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


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


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


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


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


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



 Exhibit E-1
 









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


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


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


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


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


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


Very truly yours,


[Issuer Signature]



 Exhibit E-2
 









EXHIBIT
A


FORM
OF SIGHT DRAFT


[BENEFICIARY LETTERHEAD]


TO:


[Name
and Address of Issuer]


SIGHT
DRAFT


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


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


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


Date:             



 Exhibit E-3
 









EXHIBIT
B


FORM
OF TRANSFER NOTICE


[BENEFICIARY LETTERHEAD]


TO:


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


TRANSFER
NOTICE


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


[Transferee Name and Address]


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


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


Date: 



 Exhibit E-4















EXHIBIT
F


FORM OF
NOTICE OF EXERCISE OF PURCHASE OPTION


[On
Tenant’s letterhead]


To:          BMR-6114-6154 Nancy Ridge Drive LLC


17140 Bernardo Center
Drive, Suite 222


San Diego, CA 92128


Attention: General Counsel/Real Estate


BioMed Realty, L.P.


c/o BioMed Realty
Trust, Inc.


17140 Bernardo Center
Drive, Suite 222


San Diego, CA 92128


Re:          Notice
of Exercise of Purchase Option


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


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


Sincerely,


TENANT:


[name of Tenant],


	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  



 



 Exhibit F-1















SCHEDULE 1


BASIC
ANNUAL RENT REDUCTION




	
  Calendar Year

  	
   

  	
  Monthly Rental

  Installment of Basic

  Annual Rent

  Reduction(1)

  	
   

  
	
  2007

  	
   

  	
  $

  	
  18,594.90

  	
   

  
	
  2008

  	
   

  	
  $

  	
  19,059.78

  	
   

  
	
  2009

  	
   

  	
  $

  	
  19,536.27

  	
   

  
	
  2010

  	
   

  	
  $

  	
  20,024.68

  	
   

  
	
  2011

  	
   

  	
  $

  	
  20,525.29

  	
   

  
	
  2012

  	
   

  	
  $

  	
  21,038.43

  	
   

  






 






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



 Schedule 1