**Exhibit 10.23**

 

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4)

and 240.24b-2.

 

**LEASE AGREEMENT**

 

THIS LEASE AGREEMENT is made as of this 12th day of January,2006, between ARE-NEXUS CENTRE II, LLC, a Delaware limited liability company (“**Landlord**”), and SENOMYX, INC., a Delawarecorporation (“**Tenant**”).

 

**BASIC LEASE PROVISIONS**

 

**Address:**                                               4767Nexus Centre Drive, San Diego, California

 

**Premises:**                                        Theentirety of the Building (as defined below), containing approximately 64,000rentable square feet, to be constructed by Landlord, including a “basement”parking structure (the “**Basement ParkingStructure**”), a service loading dock, ramp and adjacent loading area,surface parking and a trellis-screened equipment yard (the “**Equipment Yard**”), on that legal parcelcommonly known as Parcel 2 of Parcel Map 17892, in the City of San Diego,County of San Diego, State of California, according to a map filed in theOffice of the County Recorder of San Diego County on August 6, 1997, and asdepicted on **Exhibit A**.

 

**Project**:                                                     Thereal property on which the building (the “**Building**”)in which the Premises are located, together with all improvements thereon andappurtenances thereto as described on **ExhibitB**.

 

**BaseRent:**                                    Subjectto adjustment of Base Rent (i) as provided in Section 1 of this Lease,based on the rentable square footage (“**RSF**”)Determination procedure set forth therein, as agreed to by Landlord and Tenant,and (ii) as described in Section 4 of this Lease if Tenant elects toreceive the Additional Tenant Improvement Allowance, the Base Rent payablefollowing the Rent Commencement Date shall be as follows:

 

$192,000.00 per month for Lease Year one of the Term (based on 64,000square feet of rentable area), based on the monthly rental rate of $3.00 perRSF;$197,760.00 per month for Lease Year two of the Term (based on 64,000 squarefeet of rentable area), based on the monthly rental rate of $3.09 per RSF;$203,520.00 per month for Lease Year three of the Term (based on 64,000 squarefeet of rentable area), based on the monthly rental rate of $3.18 per RSF;$209,920.00 per month for Lease Year four of the Term (based on 64,000 squarefeet of rentable area), based on the monthly rental rate of $3.28 per RSF;$216,320.00 per month for Lease Year five of the Term (based on 64,000 squarefeet of rentable area), based on the monthly rental rate of $3.38 per RSF;$222,720.00 per month for Lease Year six of the Term (based on 64,000 squarefeet of rentable area), based on the monthly rental rate of $3.48 per RSF;$229,120.00 per month for Lease Year seven of the Term (based on 64,000 squarefeet of rentable area), based on the monthly rental rate of $3.58 per RSF;$236,160.00 per month for Lease Year eight of the Term (based on 64,000 squarefeet of rentable area), based on the monthly rental rate of $3.69 per RSF;

 
|  |   | Copyright © 2005, Alexandria Real Estate Equities,  Inc.  ALL RIGHTS RESERVED.  Confidential and Proprietary – Do Not Copy  or Distribute.  Alexandria and the  Alexandria Logo are registered trademarks of Alexandria Real Estate Equities,  Inc. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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$243,200.00 per month for Lease Year nine of the Term (based on 64,000square feet of rentable area), based on the monthly rental rate of $3.80 perRSF;$250,240.00 per month for Lease Year ten of the Term (based on 64,000 squarefeet of rentable area), based on the monthly rental rate of $3.91 per RSF.

 

**RentableArea of Premises: **approximately64,000 RSF

 

**Tenant’sShare of Operating Expenses:** 100%

 
| **Security Deposit:**  $0.00 | ** ** | **Target Commencement Date:**  September 1, 2006 |
|-----------------------------------|------------|-------------------------------------------------------|

 
| **Tenant Improvement Allowance:** |   | Approximately $9,600,000, based on the Landlord’s maximum  contribution toward Tenant Improvements of $150 per RSF; subject, however, to  (i) such increased contribution as Landlord may elect pursuant to  Section 1(c) of the Work Letter, and (ii) Tenant’s right to receive an  “Additional Tenant Improvement Allowance” of approximately $320,000, based on  the $5.00 per RSF in accordance with Section 4 below and Section 7(b)  of the Work Letter. |
|-----------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **Rent Commencement Date:**       |   | April 1, 2007, subject to adjustment for Landlord Delays, if any, in  accordance with Section 2(a) of this Lease.                                                                                                                                                                                                                                                                                                                                                                                 |
| ** **                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **Base Term:**                    |   | A term beginning on the Commencement Date (as defined below) and  ending February 28, 2017.                                                                                                                                                                                                                                                                                                                                                                                                       |
| ** **                        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **Permitted Use:**                |   | Wet laboratory research and development uses, related office and  other related uses and otherwise in compliance with the provisions of Section  7 hereof. “Related uses” shall include, without limitation, Tenant’s  preparation of food and beverage products for testing and marketing  incidental to Tenant’s research and development of flavors, flavor enhancers,  and taste modulators for the packaged food and beverage industry.                                  |
|                                   |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  |  |  |  |  |

 
| **Address for Rent Payment:**                                                                                        | ** ** | **Landlord’s Notice Address:**                                                                             |
|----------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------|
| 385 E. Colorado  Boulevard, Suite 299  Pasadena, CA 91101  Attention: Accounts Receivable                            |       | 385 E. Colorado  Boulevard, Suite 299  Pasadena, CA 91101  Attention: Corporate Secretary                       |
|                                                                                                                 |       |                                                                                                            |
| **Tenant’s Notice Address:**                                                                                    | ** ** | ** **                                                                                                      |
| Prior to January  1, 2007:  11099 N. Torrey Pines Road  La Jolla, CA 92037  Attention:  Chief Financial Officer |       | After January 1,  2007:  4767 Nexus Centre Drive  San Diego, CA 92121  Attention:  Chief Financial Officer |

 

The followingExhibits and Addenda are attached hereto and incorporated herein by thisreference:

 
| ý**EXHIBIT A** - PREMISES DESCRIPTION       |   | ý**EXHIBIT B** - DESCRIPTION OF  PROJECT          |
|--------------------------------------------------|--------|--------------------------------------------------------|
| ý**EXHIBIT C** – WORK LETTER           |   | ý**EXHIBIT D** - COMMENCEMENT DATE                |
| ý**EXHIBIT E** - RULES AND REGULATIONS      |   | ý**EXHIBIT F** - TENANT’S PERSONAL  PROPERTY |
| ý**EXHIBIT G**– PARKING                |   | ý**EXHIBIT H**– SURRENDER PLAN               |
| ý**EXHIBIT I**– ENVIRONMENTAL  REPORTS |   |                                                   |

 

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# 1.                                       **Lease of Premises**.

 

## (a)                                  Upon andsubject to all of the terms and conditions hereof, Landlord hereby leases thePremises to Tenant and Tenant hereby leases the Premises from Landlord. Theportions of the Project which are not part of the Premises are collectivelyreferred to herein as the “**Common Areas.**”  Landlord reserves the right to modify CommonAreas, provided that such modifications do not materially adverselyaffect:  (i) Tenant’s access to thePremises, the Basement Parking Structure, Building loading dock, or EquipmentYard; (ii) Tenant’s use of the Premises for the Permitted Use; or (iii)incorporate the building commonly known as 4757 Nexus Centre Drive, San Diego,California (“**Building 4757**”)or any portion thereof, or any portion of any other building or parcel adjacentto the Premises into the Common Areas of the Premises. Notwithstanding theforegoing, Landlord shall not modify (other than required repairs) the Trellis(as defined in Section 3(k) of the Work Letter) or the Screening Solution (asdefined in Section 3(h) of the Work Letter) without the consent of Tenant, suchconsent not to be unreasonably withheld, conditioned or delayed. Throughout theTerm, but subject to the limitations set forth in Section 10 below,Tenant shall have the right to access the Premises across certain of theparking areas and driveways located on the real property on whichBuilding 4757 is located; provided that, neither Tenant nor its agents,servants, employees, invitees, assigns, subtenants and contractors (each a “**Tenant Party**” and collectively, “**Tenant Parties**”) shall have any right topark any of their vehicles within the parking areas located on the Building4757 parcel. As a material inducement to Tenant to enter into this Lease,Landlord made and entered into that certain Road Construction and DedicationAgreement dated December 22, 2005 (the “**RoadAgreement**”), with Nexus Science Center University City, LLC, aCalifornia limited liability company (“**Nexus**”), andLandlord hereby covenants to perform Landlord’s obligations under the RoadAgreement, and to cooperate with Tenant, at no additional expense to Landlord,in the event Tenant exercises any of its rights as third party beneficiary ofsuch Road Agreement. In such event, Tenant shall be solely responsible forcosts and expenses that Tenant elects to incur (and without obligation to doso) in enforcing its rights thereunder. Landlord covenants that Landlord shallnot modify, amend or terminate the Road Agreement in any manner which adverselyaffects Tenant, nor waive any obligation of Nexus under the Road Agreement inany manner which adversely affects Tenant, without the prior written approvalof Tenant, which shall not be unreasonably withheld, conditioned or delayed byTenant.

##  

## (b)                                 Landlordshall cause the Premises to be measured by Landlord’s Architect promptly afterthe Tenant’s Work (as defined in the Work Letter) is substantially completed(but not later than the Rent Commencement Date) and shall submit Landlord’sArchitect’s determination of the Rentable Area of the Premises (the “**Proposed Determination**”) to Tenant for itsreview (at Tenant’s sole expense) and approval, which shall not be unreasonablywithheld, conditioned or delayed. If Tenant objects to the ProposedDetermination, Tenant may provide written notice to Landlord of Tenant’sobjection to the Proposed Determination within 10 business days of the receiptof the Proposed Determination and in such event the Rentable Area of thePremises will be decided pursuant to the arbitration mechanism described in Section1(c) (with the Tenant-approved Proposed Determination, or the Rentable Areaof the Premises determined by arbitration, hereinafter referenced to as the “**Determination**”). If Tenant does not providewritten notice of its objection to the Proposed Determination within such 10business day time period, Tenant’s right to object to the ProposedDetermination shall be deemed waived. The Rentable Area of the Premises shallbe calculated according to the 1996 Standard Method of Measuring Floor Area inOffice Buildings as adopted by the Building Owners and Managers Association(ANSI/BOMA Z65.1-1996), provided, however, that no floor area of the Building(nor of the Basement Parking Structure or Equipment Yard) other than the floorarea of the first and second floors of the Building shall be included in thedetermination of the Rentable Area of the Premises (i.e. regardless of whetherany portion of the Basement Parking Structure, roof or the Equipment Yardincludes any storage areas, machinery or electrical rooms or HVAC chillerfacilities, such areas shall not be included in the conversion factor used toadjust usable area of the Premises to rentable area, but any such areas shallbe included to the extent that they are located within the Building on eitherthe first or second floor of the Building). Notwithstanding the foregoing, forpurposes of determining Base Rent and regardless of the actual rentable squarefootage of the Premises, the Rentable Area of the Premises shall be adjusted asnecessary such that the Determination of the Rentable Area of the Premises forpurposes of Tenant’s Base Rent obligations and Landlord’s Tenant ImprovementAllowance contributions shall not be greater

 

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than 65,280 rentable square feet nor less than 62,720 rentable squarefeet, provided that the Premises shall be constructed in material conformancewith the LI Plans (as defined in the Work Letter).

##  

## (c)                                  **Arbitration**.

##  

### (i)                                     Within ten(10) days of Tenant’s written notice to Landlord of its election to arbitratethe determination of the Rentable Area of the Premises, each party shalldeliver to the other a proposal containing the Rentable Area of the Premisesthat the submitting party believes to be correct (“**RSF Proposal**”). If either party fails to timely submit an RSFProposal, the other party’s submitted proposal shall determine the RentableArea of the Premises. If both parties submit RSF Proposals, then Landlord andTenant shall meet within seven (7) days after delivery of the last RSF Proposaland make a good faith attempt to mutually appoint a single Arbitrator (anddefined below) to determine the Rentable Area of the Premises. If Landlord andTenant are unable to agree upon a single Arbitrator, then each shall, bywritten notice delivered to the other within ten (10) days after the meeting,select an Arbitrator. If either party fails to timely give notice of itsselection for an Arbitrator, the other party’s submitted proposal shalldetermine the Rentable Area of the Premises. The two (2) Arbitrators soappointed shall, within five (5) business days after their appointment, appointa third Arbitrator. If the two (2) Arbitrators so selected cannot agree on theselection of the third Arbitrator within the time above specified, then eitherparty, on behalf of both parties, may request such appointment of such thirdArbitrator by application to any state court of general jurisdiction in thejurisdiction in which the Premises are located, upon ten (10) days priorwritten notice to the other party of such intent.

###  

### (ii)                                  The decisionof the Arbitrator(s) shall be made within thirty (30) days after theappointment of a single Arbitrator or the third Arbitrator, as applicable. Thedecision of the single Arbitrator shall be final and binding upon the parties. Theaverage of the two closest Arbitrators in a three Arbitrator panel shall befinal and binding upon the parties. Each party shall pay the fees and expensesof the Arbitrator appointed by or on behalf of such party and the fees andexpenses of the third Arbitrator shall be borne equally by both parties. If theRentable Area of the Premises is not determined by the Rent Commencement Date,then Tenant shall pay Landlord Base Rent in an amount equal to the Base Rentpayable if the Rentable Area of the Premises equaled 64,000 rentable squarefeet until the final Determination is made. After the Determination of theRentable Area of the Premises, the parties shall make any necessary adjustmentsto such payments made by Tenant. Landlord and Tenant shall then execute anamendment recognizing the Rentable Area of the Premises.

###  

### (iii)                               For purposesof this Section 1(c), an “**Arbitrator**”shall be any person appointed by or on behalf of either party or appointedpursuant to the provisions hereof and shall (i) be an architect with not lessthan ten (10) years of experience who devotes substantially all of his or hertime to architectural work at the time of appointment and (ii) be in allrespects impartial and disinterested.

###  

## (d)                                 **Adjustments.**In the event that pursuant to theprocedure described in this Section 1, it is determined that theDetermination of the Rentable Area of the Premises shall be different from theamount estimated in the Basic Lease Provisions, all amounts, percentages andfigures appearing or referred to in this Lease based upon such estimated amount(including, without limitation, the amount of the “Base Rent” and Base Rentadjustment, if applicable pursuant to Section 4 of this Lease, and theamount of the Tenant Improvement Allowance and any Additional TenantImprovement Allowance requested by Tenant, as such terms are defined in theWork Letter) shall be modified in accordance with the final Determination ofthe Rentable Area of the Premises.

 

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# 2.                                       **Delivery; Acceptance of Premises; Commencement Date.**

#  

# (a)                                  **Delivery**. Subject to the occurrence of TenantDelays and Force Majeure Delays, Landlord shall (i) cause Initial Deliveryto occur on or before February 1, 2006, (ii) cause the Building to be inWater-Tight Delivery condition on or before May 1, 2006, (iii) deliver thePremises to Tenant on or before the Target Commencement Date, with SubstantialCompletion of Landlord’s Work (“**Delivery**”or “**Deliver**”) and (iv) causeFinal Completion of the Landlord’s Finish Work on or before the later of(a) thirty (30) days following Landlord’s receipt of Tenant’s Finish WorkNotice and (b) the date upon which Tenant shall have completed the TenantImprovements in their entirety.

#  

If Landlord fails to: (w) cause Initial Delivery to occur on orbefore February 1, 2006, (x) cause the Building to be in Water TightDelivery condition on or before May 1, 2006, (y) Deliver the Premises onor before the Target Commencement Date or (z) cause Final Completion ofLandlord’s Finish Work to occur on or before the later of (A) thirty (30) daysfollowing Landlord’s receipt of Tenant’s Finish Work Notice and (B) thedate upon which Tenant shall have completed the Tenant Improvements in theirentirety, Landlord shall not be liable to Tenant for any loss or damage resultingtherefrom, and this Lease shall not be void or voidable except as set forth in Section2(e) hereof**.**Notwithstandingthe foregoing, if due to a Landlord Delay (I) Initial Delivery does notoccur on or before February 1, 2006, (II) the Building is not inWater-Tight Delivery condition on or before May 1, 2006, (III) SubstantialCompletion of Landlord’s Work has not occurred on or before the TargetCommencement Date, or (IV) Final Completion of the Landlord’s Finish Workdoes not occur on or before the later of (u) thirty (30) days followingLandlord’s receipt of Tenant’s Finish Work Notice and (v) the date upon whichTenant shall have completed the Tenant Improvements in their entirety, and anysuch Landlord Delay, respectively, causes delays in both the commencement ofapplicable portions of Tenant’s Work and the completion of Tenant’s Work suchthat Tenant is unable to obtain a certificate of occupancy (or its equivalent)for the Premises by January 1, 2007, as Tenant’s sole and exclusive remedy for suchfailure(s) except as set forth in Section 2(e) hereof the RentCommencement Date shall be extended by one day for each day of such LandlordDelay. As a condition to any such extension of the Rent Commencement Date,Tenant shall be required to provide written notice to Landlord from time totime and on an ongoing basis of any such delay in the commencement andcompletion of the Tenant’s Work due to Landlord Delay. As used herein, theterms “**Tenant Delays,**” “**Force Majeure Delays,**” “**Initial Delivery,**” “**Water-Tight Delivery,**” “**Substantial Completion of Landlord’s Work,**”“**Final Completion of Landlord’s Finish Work,**”“**Tenant’s Finish Notice,**”****“**Tenant’sFinish Work Notice,**” “**TenantImprovements**” and “**Landlord Delay**”shall have the meanings set forth for such terms in the Work Letter.

 

(b)                                 **Commencement Date**. The “**Commencement Date**” shall be the laterof:  (1) the Completion Date (as definedin the Work Letter); and (2) the Target Commencement Date. Upon request ofLandlord, Tenant shall execute and deliver a written acknowledgment of theCommencement Date and****the RentCommencement Date are established in the form of the “Acknowledgement ofCommencement Date” attached to this Lease as **ExhibitD**; provided, however, Tenant’s failure to execute anddeliver such acknowledgment shall not affect Landlord’s rights hereunder. The “**Term**” of this Lease shall be the Base Term,as defined above in the Basic Lease Provisions and any Extension Terms whichTenant may elect pursuant to Section 40****hereof. Any occupancy of the Premises prior to the Rent CommencementDate shall be subject to all of the terms of this Lease, except that Tenantshall not be obligated to pay any Rent (aside from the cost of any utilitiesduring such period of occupancy) to Landlord for such occupancy.

 

(c)                                  **Acceptance of Premises**. Except as set forthin the Work Letter, Tenant shall accept the Premises in their condition as ofthe Commencement Date, subject to Landlord’s Substantial Completion of Landlord’sWork and Final Completion of Landlord’s Finish Work, and all punch list itemsassociated therewith, and subject to all applicable Legal Requirements (asdefined in Section 7 hereof) and Tenant’s taking possession of thePremises shall be conclusive evidence that Tenant accepts the Premises and thatthe Premises were in good condition at the time possession was taken; provided,however, that the foregoing presumption relates only to Landlord’s constructionand delivery obligations relating to Rent commencement, and shall not limit anyof Landlord’s obligations under Section 7(c), Section 13 or elsewhere in thisLease, including, without limitation, the Work Letter. Landlord herebyrepresents to Tenant that, excluding the documents related to the finaldedication of the portion of Project

 

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to be dedicated for use as part of Executive Drive, Landlord has noactual knowledge of any recorded restrictions on Landlord’s title to theProject or restrictions which are pending submission for recording which havenot been delivered by Landlord to Tenant prior to Lease execution. Tenantagrees and acknowledges that, except as expressly set forth elsewhere in thisLease, neither Landlord nor any agent of Landlord has made any representationor warranty with respect to the condition of all or any portion of the Premisesor the Project, and/or the suitability of the Premises or the Project for theconduct of Tenant’s business, and Tenant waives any implied warranty that thePremises or the Project are suitable for the Permitted Use. This Leaseconstitutes the complete agreement of Landlord and Tenant with respect to thesubject matter hereof and supersedes any and all prior representations,inducements, promises, agreements, understandings and negotiations which arenot contained herein. Tenant and Landlord in executing this Lease do so inreliance upon the other party’s representations, warranties, acknowledgmentsand agreements contained herein.

 

(d)                                 **Determination of Substantial Completion and FinalCompletion**. If Tenant objects to Landlord’s determination of thedate of Substantial Completion and/or the date of Final Completion (each, a “**Completion Determination**”), Tenant mayprovide written notice to Landlord of Tenant’s objection to the applicableCompletion Determination within 10 business days of the receipt of theCompletion Determination and in such event the date of Substantial Completionand/or the date of Final Completion as applicable will be decided pursuant tothe arbitration mechanism described in this Section 2(d). If Tenant doesnot provide written notice of its objection to the Completion Determinationwithin such 10 business day time period, Tenant’s right to object to theCompletion Determination shall be deemed waived.

 

### (i)                                     Within ten(10) days of Tenant’s written notice to Landlord of its election to arbitratethe determination of the Completion Determination, Tenant shall deliver toLandlord the certification of Tenant’s Architect (as defined in the WorkLetter) containing the date of Substantial Completion and/or Final Completionthat Tenant’s Architect believes to be correct (“**Completion Proposal**”). If Tenant fails to timely submit aCompletion Proposal, Landlord’s Completion Determination shall determine thedate of Substantial Completion and/or Final Completion as applicable. If Tenantsubmits a Completion Proposal, then Landlord and Tenant shall meet within seven(7) days after delivery of Tenant’s Completion Proposal and make a good faithattempt to mutually appoint a single Arbitrator (and defined below) todetermine the date of Substantial Completion and/or Final Completion asapplicable. If Landlord and Tenant are unable to agree upon a singleArbitrator, then each shall, by written notice delivered to the other withinten (10) days after the meeting, select an Arbitrator. If either party fails totimely give notice of its selection for an Arbitrator, the other party’ssubmitted proposal shall determine the date of Substantial Completion and/orFinal Completion as applicable. The two (2) Arbitrators so appointed shall,within five (5) business days after their appointment, appoint a thirdArbitrator. If the two (2) Arbitrators so selected cannot agree on theselection of the third Arbitrator within the time above specified, then eitherparty, on behalf of both parties, may request such appointment of such thirdArbitrator by application to any state court of general jurisdiction in thejurisdiction in which the Premises are located, upon ten (10) days priorwritten notice to the other party of such intent.

###  

### (ii)                                  The decisionof the Arbitrator(s) shall be made within thirty (30) days after theappointment of a single Arbitrator or the third Arbitrator, as applicable. Thesingle Arbitrator shall determine which of the Completion Determination or theCompletion Proposal is closest to being correct. The decision of the singleArbitrator shall be final and binding upon the parties. Each party shall paythe fees and expenses of the Arbitrator appointed by or on behalf of such partyand the fees and expenses of the third Arbitrator shall be borne equally byboth parties. After the determination of the date of Substantial Completionand/or Final Completion as applicable, the parties shall make any necessaryadjustments to the Rent Commencement Date. Landlord and Tenant shall thenexecute an amendment recognizing the Rent Commencement Date.

 

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### (iii)                               For purposesof this Section 2(d), an “**Arbitrator**”shall be any person appointed by or on behalf of either party or appointedpursuant to the provisions hereof and shall (i) be an architect with not lessthan ten (10) years of experience who devotes substantially all of his or hertime to architectural work at the time of appointment and (ii) be in allrespects impartial and disinterested.

###  

(e)                                  **Termination Due to Landlord Delay**. Subjectto the occurrence of Tenant Delays and Force Majeure Delays, if SubstantialCompletion of Landlord’s Work does not occur on or before December 31, 2007,then beginning January 1, 2008 until such time as Substantial Completion hasoccurred Tenant shall have the right to send Landlord a written notice (the “**Late Delivery Termination Notice**”) statingTenant’s election to terminate this Lease without payment or penalty of anykind unless Landlord causes Substantial Completion to occur within thirty (30)days following Landlord’s receipt of the Late Delivery Termination Notice. Failureof Substantial Completion to occur within thirty (30) days following Landlord’sreceipt of the Late Delivery Termination Notice shall result in the automatictermination of this Lease without further liability of either party to theother as of the end of such thirtieth (30th) day. Tenant agrees to execute suchdocuments as may be reasonably requested by Landlord in order to evidence thetermination of this Lease.

 

# 3.                                       **Rent**.

#  

## (a)                                  **Base Rent**. Tenant shall pay to Landlord inadvance, without demand, abatement, deduction or set-off, monthly installmentsof Base Rent on or before the first day of each calendar month after the RentCommencement Date, in lawful money of the United States of America, at theoffice of Landlord for payment of Rent set forth above, or to such other personor at such other place as Landlord may from time to time designate in writingat least thirty (30) days in advance of such change becoming effective. Paymentsof Base Rent for any fractional calendar month shall be prorated. Theobligation of Tenant to pay Base Rent and other sums to Landlord and theobligations of Landlord under this Lease are independent obligations; providedthat the foregoing shall not limit Tenant’s rights under applicable law in theevent Landlord breaches Tenant’s covenant of quiet enjoyment or fails todeliver the Premises as required by the Work Letter. Tenant shall have no rightat any time to abate, reduce, or set-off any Rent (as defined in Section 5)due hereunder except for any abatement as may be expressly provided in thisLease. For purposes of this Lease, “**LeaseYear**” shall mean each period of twelve (12) consecutive monthscommencing on the Rent Commencement Date, provided that Lease Year ten shallexpire no later than February 28, 2017, regardless of the actual CommencementDate.

##  

## (b)                                 **Additional Rent**. In addition to Base Rent, Tenant agreesto pay to Landlord as additional rent (“**AdditionalRent**”):  (i) Tenant’s Share of“Operating Expenses” (as defined in Section 5), and (ii) any and allother amounts Tenant assumes or agrees to pay under the provisions of thisLease, including, without limitation, any and all other sums that may becomedue by reason of any default of Tenant or failure to comply with theagreements, terms, covenants and conditions of this Lease to be performed byTenant, after any applicable notice and cure period.

##  

# 4.                                       **Base Rent Adjustments**. Base Rent shall be increased(a) as of the Rent Commencement Date by an amount equal to $4,270.69 permonth (based on the estimated Rentable Area of the Premises of 64,000 squarefeet of rentable area, one hundred eighteen (118) months amortization periodand a ten percent (10%) interest rate, but subject to adjustment in accordancewith Section 1(d) above) if Tenant requests and receives theAdditional Tenant Improvement Allowance (as defined in the Work Letter) inwriting on or before the earlier of (i) substantial completion of theTenants’ Work, and (ii) the Rent Commencement Date and (b) asprovided in the Basic Lease Provisions. If Base Rent is increased pursuant toclause (a) of the preceding sentence such increase shall apply to Base Rentpayable throughout the Term (e.g. if Tenant requests and receives theAdditional Tenant Improvement Allowance, Base Rent for Lease Year two of theTerm would be $202,030.69 per month, Base Rent for Lease Year three of the Termwould be $207,790.69 per month, etc.).

 

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# 5.                                       **Operating Expense Payments**. Landlord shall deliver to TenantLandlord’s reasonable estimate, in writing, of Operating Expenses for eachensuing calendar year during the Term (the “**AnnualEstimate**”), which may be revised by Landlord from time to time, butno more than twice during such calendar year. During each month of the Term, onthe same date that Base Rent is due, Tenant shall pay Landlord an amount equalto one-twelfth (1/12th) of Tenant’s Share of the Annual Estimate. Paymentsfor any fractional calendar month shall be prorated.

#  

The term “**Operating Expenses**”means all costs and expenses of any kind or description whatsoever incurred oraccrued each calendar year by Landlord with respect to the Project****(including, without duplication, Taxes (asdefined in Section 9), capital repairs and improvements which are notexcluded below (amortized over the useful life of such capital items withinterest imputed on the unamortized balance at the rate of the “**Prime Rate**” as published in the Money Ratessection of The Wall Street Journal plus 2% calculated as of the last businessday of each calendar quarter, as reasonably determined by Landlord), and thecosts of Landlord’s third-party property manager or, if there is no third partyproperty manager, administration rent, in the amount of two percent (2%) ofBase Rent, excluding only:

 

## (a)                                  the originalconstruction costs of the Project and costs of correcting defects in suchoriginal construction made during the initial seven (7) years of the Term (orwhich are required as a result of any defects in such construction discoveredwithin such seven (7) year period, regardless of Landlord’s failure to makesuch repairs or renovations if disclosed to Landlord within such period);

##  

## (b)                                 intentionallydeleted;

##  

## (c)                                  the cost ofany capital repairs or improvements made with respect to the Project (i) whichare performed within the first seven (7) years of the Term except for (x) thecost of capital improvements or replacements intended to effect economies inthe operation or maintenance of the Project, or any portion thereof, and (y)capital improvements or replacements required under any Legal Requirementsenacted or first enforced after the Compliance Date or pursuant to modified LegalRequirements if such modifications first become effective or enforced after theCompliance Date, or (ii) which are required as a result of any defects in theconstruction of the Project discovered within such seven (7) year period,regardless of Landlord’s failure to make such repairs or renovations ifdisclosed to Landlord within such period (unless, and except to the extentthat, such capital repairs are attributable to the negligence or willfulmisconduct of Tenant or anyone under Tenant’s control in the use, occupancy,operation, maintenance or alteration of the Premises or the failure of Tenantto maintain the Premises in accordance with Section 14 hereof, in whichcase there shall be no such limitation with respect to that portion of the costof any capital repairs attributable to Tenant’s negligence or willfulmisconduct);

##  

## (d)                                 structuralrepairs or improvements to the Building roof (i.e. exclusive of the roofmembrane) or the Building (inclusive of the footings and foundations, BasementParking Structure pads and ramps, and the structural walls, floors and roofsupports of the Building and the Equipment Yard) (unless, and except to theextent, attributable to the negligence or willful misconduct of Tenant oranyone under Tenant’s control in the use, occupancy, operation, maintenance oralteration of the Premises);

##  

## (e)                                  interest,principal payments of Mortgage (as defined in Section 27) debts ofLandlord, financing costs and amortization of funds borrowed by Landlord,whether secured or unsecured and all payments of base rent (but not taxes oroperating expenses) under any ground lease or other underlying lease of all orany portion of the Project;

##  

## (f)                                    depreciationof the Project (except for the amortization of any capital improvements, thecost of which are includable in Operating Expenses to the extent permittedherein);

##  

## (g)                                 advertising,legal and space planning expenses and leasing commissions and other costs andexpenses incurred in procuring and leasing space to tenants for the Project,including any leasing

 

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office maintained in the Project, free rent and construction allowancesfor tenants, and any advertising or marketing expenses;

##  

## (h)                                 legal andother expenses incurred in the negotiation or enforcement of leases or inLandlord’s defense of any action brought under this Lease or otherwise pursuantto Landlord’s defense of Tenant’s quiet enjoyment of the Premises (but subjectto recovery in accordance with the terms of this Lease including pursuant to Section44(l) hereof);

##  

## (i)                                     completing,fixturing, improving, renovating, painting, redecorating or other work, whichLandlord pays for or performs for other tenants within their premises, andcosts of correcting defects in such work;

##  

## (j)                                     salaries, wages,benefits and other compensation paid to officers and employees of Landlordabove the level of project engineer, or who are not assigned in whole, to theoperation, management, maintenance or repair of the Project, or if assigned tothe Project as a portion of such person’s employment obligations, in excess ofan equitable share of such person’s compensation based on services rendered tothe Premises;

##  

## (k)                                  generalorganizational, administrative and overhead costs relating to maintainingLandlord’s existence, either as a corporation, partnership, or other entity,including general corporate, legal and accounting expenses;

##  

## (l)                                     costs(including attorneys’ fees and costs of settlement, judgments and payments inlieu thereof) incurred in connection with disputes with tenants, otheroccupants, or prospective tenants, and costs and expenses, including legalfees, incurred in connection with negotiations or disputes with employees,consultants, management agents, leasing agents, purchasers or mortgagees of theBuilding;

##  

## (m)                               costsincurred by Landlord due to the violation by Landlord, its employees, agents orcontractors or any tenant of the terms and conditions of any lease of space inthe Project or any Legal Requirement;

##  

## (n)                                 penalties,fines or interest incurred as a result of Landlord’s inability or failure tomake payment of Taxes and/or to file any tax or informational returns when due,or from Landlord’s failure to make any payment of Taxes or any payment pursuantto private assessments or equipment leases, if any, required to be made byLandlord hereunder before delinquency;

##  

## (o)                                 overhead andprofit increment paid to Landlord or to subsidiaries or affiliates of Landlordfor goods and/or services in or to the Project to the extent the same exceedsthe costs of such goods and/or services rendered by unaffiliated third partieson a competitive basis;

##  

## (p)                                 costs ofLandlord’s charitable or political contributions, or of fine art maintained atthe Project;

##  

## (q)                                 costsincurred in the sale or refinancing of the Project;

##  

## (r)                                    net incometaxes of Landlord or the owner of any interest in the Project, franchise,capital stock, gift, estate or inheritance taxes or any federal, state or localdocumentary taxes imposed against the Project or any portion thereof or interesttherein;

##  

## (s)                                  any expensesotherwise includable within Operating Expenses to the extent actuallyreimbursed by persons other than tenants of the Project under leases for spacein the Project, including but not limited to Taxes, insurance and maintenanceand repairs related to the parking areas of the Project paid by tenant(s) ofBuilding 4757 or other third parties with parking rights at the Project fromtime to time;

 

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## (t)                                    costs orexpenses resulting from the recordation of any covenants or restrictionsagainst the title to the Project following the date hereof;

##  

## (u)                                 any costs orexpenses associated with the maintenance, repair, improvement or alteration ofBuilding 4757, or any portion of the legal parcel on which Building 4757 islocated, including, but not limited to the parking areas (including any repairsor resurfacing of the existing parking areas of Building 4757), landscapedareas and driveways located on such parcel;

##  

## (v)                                 Any costs orexpenses which are duplicative of maintenance and repair costs and expensesincurred by Tenant in satisfaction of Tenant’s maintenance and repairobligations under this Lease, as long as Tenant is not in default for itsfailure to perform such obligations;

##  

## (w)                               OperatingExpense reserves (including reserves for Taxes);

##  

## (x)                                   Costs orexpenses for the acquisition of sculpture, paintings or other works of art, butnot the reasonable expenses of maintaining, repairing and insuring same ifworks of art are required to be installed by any Legal Requirement;

##  

## (y)                                 The costs ofany “tap fees” or one time lump sum sewer, water or other utility connectionfees for the Project;

##  

## (z)                                   Costs orfees relating to the defense of Landlord’s title to or interest in the Buildingand/or the Project, or any part thereof;

##  

## (aa)                            Rentals andother related expenses, if any, incurred in leasing air conditioning systems orother equipment ordinarily considered to be of a capital nature to the extentsuch costs exceed the amount otherwise includable in Operating Expenseshereunder if purchased rather than leased by Landlord;

##  

## (bb)                          Costsincurred in connection with environmental testing, clean up, response action orremediation on, in or under or about the Project (other than the Premises),except to the extent the responsibility of Tenant pursuant to the express termsof this Lease in which case Tenant shall be solely responsible for the coststhereof;

##  

## (cc)                            Costs whichwould be recoverable by Landlord pursuant to its insurance policies for whichLandlord seeks payment from Tenant as an Operating Expense (provided, however,that nothing contained within this clause (cc) is intended to require Landlordto submit claims for matters which Landlord does not reasonably believe arecovered by its insurance policies); and

##  

## (dd)                          Any costs,fees or expenses for management, supervision, overhead or administration whichare in addition to or which are duplicative of Landlord’s management fee oradministration rent described above.

##  

Within ninety (90) days after the end of each calendar year (or suchlonger period as may be reasonably required but not more than one hundredeighty (180) days), Landlord shall furnish to Tenant a statement (an “**Annual Statement**”) showing in reasonabledetail:  (a) the total and Tenant’s Shareof actual Operating Expenses for the previous calendar year, and (b) the totalof Tenant’s payments in respect of Operating Expenses for such year. If Tenant’sShare of actual Operating Expenses for such year exceeds Tenant’s payments ofOperating Expenses for such year, the excess shall be due and payable by Tenantas Rent within thirty (30) days after delivery of such Annual Statement toTenant. If Tenant’s payments of Operating Expenses for such year exceed Tenant’sShare of actual Operating Expenses for such year Landlord shall pay the excessto Tenant within thirty (30) days after delivery of such Annual Statement,except that after the expiration, or earlier termination of the Term or ifTenant is

 

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delinquent in its obligation to pay Rent, Landlord shall pay the excessto Tenant after deducting all other amounts due Landlord.

 

The Annual Statement shall be final and binding upon Tenant unlessTenant, within thirty (30) days after Tenant’s receipt thereof, shall contestany item therein by giving written notice to Landlord, specifying each itemcontested and the reason therefor. If, during such thirty (30) day period,Tenant reasonably and in good faith questions or contests the accuracy of Landlord’sstatement of Tenant’s Share of Operating Expenses, Landlord will provide Tenantwith access to Landlord’s books and records relating to the operation of theProject and such information as Landlord reasonably determines to be responsiveto Tenant’s questions (the “**ExpenseInformation**”). If after Tenant’s review of such Expense Information,Landlord and Tenant cannot agree upon the amount of Tenant’s Share of OperatingExpenses, then Tenant shall have the right to have an independent publicaccounting firm selected by Tenant from among the five (5) largest in theUnited States, with offices in San Diego County, working pursuant to a feearrangement other than a contingent fee (at Tenant’s sole cost and expense) andapproved by Landlord (which approval shall not be unreasonably withheld ordelayed), audit and/or review the Expense Information for the year in question(the “**Independent Review**”). Theresults of any such Independent Review shall be binding on Landlord and Tenant.If the Independent Review shows that the payments actually made by Tenant withrespect to Operating Expenses for the calendar year in question exceeded Tenant’sShare of Operating Expenses for such calendar year, Landlord shall at Landlord’soption either (i) credit the excess amount to the next succeeding installmentsof estimated Operating Expenses or (ii) pay the excess to Tenant within thirty(30) days after delivery of such statement, except that after the expiration orearlier termination of this Lease or if Tenant is delinquent in its obligationto pay Rent, Landlord shall pay the excess to Tenant after deducting all otheramounts due Landlord. If the Independent Review shows that Tenant’s paymentswith respect to Operating Expenses for such calendar year were less than Tenant’sShare of Operating Expenses for the calendar year, Tenant shall pay thedeficiency to Landlord within thirty (30) days after delivery of such statement.If the Independent Review shows that Tenant has overpaid with respect toOperating Expenses by more than five percent (5%) then Landlord shall reimburseTenant for all costs incurred by Tenant for the Independent Review. OperatingExpenses for the calendar years in which Tenant’s obligation to share thereinbegins and ends shall be prorated.

 

“**Tenant’s Share**” shall bethe percentage set forth in the Basic Lease Provisions as Tenant’s Share. BaseRent, Tenant’s Share of Operating Expenses and all other amounts payable byTenant to Landlord hereunder are collectively referred to herein as “**Rent**.”

 

# 6.                                       **Additional Improvements**.

#  

## (a)                                  Subject to Section12 hereof and to all Legal Requirements (as defined below), Tenant shallhave the right to construct, from time to time, Hazardous Materials (as definedbelow) storage areas, equipment rooms, and general storage facilities withinthe Basement Parking Structure and the other Tenant Parking Spaces (as definedin Section 10 below) of the Project, and within the boundaries of theEquipment Yard depicted on **Exhibit A**,which may be used by Tenant for Hazardous Materials storage (including, but notlimited to, hazardous safety structures within the Equipment Yard), equipmentrooms and other storage facilities associated with Tenant’s occupancy of theBuilding, at no additional Base Rent for the use of such facilities (nor shallsuch storage areas in the Basement Parking Structure or in the other TenantParking Spaces of the Project or in the Equipment Yard be incorporated into anyconversion factor used in the determination of Rentable Area of the Premises). Landlordshall have the right to be exercised at the time of Tenant’s request forLandlord’s consent to construct such Hazardous Materials storage areas,equipment rooms and general storage facilities, in its sole and absolutediscretion, to require Tenant to remove any such improvements installed byTenant as part of such storage area rights and restore all such areas to theirintended use upon the expiration or earlier termination of the Term. Tenantshall not be entitled to any additional Tenant Parking Spaces should any suchimprovements made by Tenant eliminate any parking spaces otherwise madeavailable to Tenant at the Project.

 

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## (b)                                 Subject to Section12 and Section 42 of this Lease, all Legal Requirements and to therequirements of Landlord’s warranties relating to the roof of the Building, theBasement Parking Structure and the Equipment Yard (if any), at no cost toTenant, for so long as Tenant leases the entire Building, Tenant shall have theexclusive right during the Term to use the roof of the Building, the BasementParking Structure and the Equipment Yard for the purpose of installing,operating and maintaining an antennae, supplemental air-conditioning units, airhandlers, de-ionized water equipment and other mechanical and electricalequipment (the “**Supplemental Equipment**”).In addition to the Equipment Yard, Landlord shall make available for the forthe exclusive use of Tenant (A) a portion of the Project which may bedesignated by Tenant as a screened trash enclosure and (B) a portion of theProject in close vicinity to the Building loading dock which may be designatedby Tenant for the storage of Tenant’s liquid nitrogen tanks or other liquidstorage tanks. The cost for constructing any such improvements shall be payableby Tenant, subject to reimbursement from the TI Fund (as defined in the WorkLetter).

##  

# 7.                                       **Use**.

#  

## (a)                                  **Permitted Use.**The Premises shall be used solely for thePermitted Use set forth in the Basic Lease Provisions, and in compliance withall laws, orders, judgments, ordinances, regulations, codes, directives,permits, licenses, covenants and restrictions now or hereafter applicable tothe Premises, and to the use and occupancy thereof, including, withoutlimitation, Title III of the Americans With Disabilities Act (“**ADA**”) and any requirements of the Planned Industrial District (collectively, “**Legal Requirements**” and each, a “**Legal Requirement**”) provided, however, thatLandlord shall not consent to any restrictive covenants on the Project that materiallyrestrict Tenant’s Permitted Use or which cause Tenant to incur any additionalcosts otherwise excluded from Operating Expenses. Tenant shall, upon five (5)days’ written notice from Landlord, discontinue any use of the Premises whichis declared by any Governmental Authority having jurisdiction to be a violationof a Legal Requirement. Tenant will not use or permit the Premises to be usedfor any purpose or in any manner that would void Tenant’s or Landlord’sinsurance or increase the insurance risk (unless the use associated with suchincreased risk is consistent with the Permitted Use, including, withoutlimitation, the controlled use of volatile chemical compounds and biologicalreagents in Tenant’s research and development activities, consistent with goodlaboratory practices). Tenant shall not permit any part of the Premises to beused as a “place of public accommodation”, as defined in the ADA or any similarlegal requirement. Tenant shall reimburse Landlord promptly upon demand for anyadditional premium charged for any such insurance policy by reason of Tenant’sfailure to comply with the provisions of this Section 7 or otherwisecaused by Tenant’s use and/or occupancy of the Premises. Tenant will use thePremises in a careful, safe and proper manner and will not commit or permitwaste, overload the floor or structure of the Premises, subject the Premises touse that would damage the Premises or obstruct or interfere with the rights ofLandlord or tenants of Building 4757, including conducting or giving notice ofany auction, liquidation, or going out of business sale on the Premises, orusing or allowing the Premises to be used for any unlawful purpose. Tenantshall cause any equipment or machinery to be installed in the Premises so as toreasonably prevent sounds or vibrations from the Premises from extending intoCommon Areas, or other space in the Project. Tenant shall not place anymachinery or equipment in or upon the Premises whose weight exceeds 1,000pounds of live load per square foot or transport or move such items through theCommon Areas of the Project or in the Project elevators in excess of theelevator weight capacity rating, without the prior written consent of Landlord.Except as may be provided under the Work Letter, Tenant shall not, without theprior written consent of Landlord, use the Premises in any manner which willrequire ventilation, air exchange, heating, gas, steam, electricity or waterbeyond the then-existing capacity of the Project.

##  

## (b)                                 **Tenant Improvements and Alterations.**Tenant atits sole expense shall make all alterations or modifications to the Premiseswhich may be imposed by Legal Requirements pursuant to Tenant’s construction orinstallation of the Tenant Improvements (other than to the extent required as aresult of any non-compliance of Landlord’s Work with such Legal Requirements ineffect at the time the applicable portion of the Landlord’s Work wasSubstantially Completed or the applicable portion of Landlord’s Finish Work wasFinally Completed in accordance with the Work Letter, which alterations ormodifications shall be Landlord’s obligation at its sole cost and expense) orimposed pursuant to any

 

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subsequent alterations to the Premises made by Tenant, or that arerequired by Legal Requirements first imposed, modified or supplemented afterthe applicable portion of the Landlord’s Work was Substantially Completed orthe applicable portion of Landlord’s Finish Work was Finally Completed,respectively, in accordance with the Work Letter (including, withoutlimitation, compliance of the Premises with modifications to the accessibilityrequirements ADA).

##  

## (c)                                  **Compliance with Legal Requirements**. Landlordshall correct, repair or replace any non-compliance of the Landlord’s Work,including, but not limited to the Building shell, Building Systems and theCommon Areas, with all applicable Legal Requirements in effect as of the dateof Substantial Completion of Landlord’s Work, and with respect to Landlord’sFinish Work, the date of Final Completion thereof (as applicable, the “**Compliance Date**”), including, withoutlimitation, the provisions of ADA in effect as of the Compliance Date. Saidcosts of compliance shall be Landlord’s sole cost and shall not be included aspart of Operating Expenses. Landlord shall correct, repair or replace anynon-compliance of the Building structure or Common Areas with any changes oramendments to the ADA in effect after the Compliance Date, provided that(subject to the limitations of Section 5 above) the cost of such repairsor replacements (amortized over the useful life thereof using Landlord’s marketcost of funds if capital in nature) shall be included as Operating Expensespayable by Tenant in accordance with Section 5 above. All other ADAcompliance issues which pertain to the Premises, including, without limitation,in connection with Tenant’s construction of the Tenant Improvements or anyalterations or other improvements to the Premises (and any resulting ADAcompliance requirements in the Common Areas), and the operation of Tenant’sbusiness and employment practices in the Premises, shall be the responsibilityof Tenant at its sole cost and expense. The repairs, corrections orreplacements required of Landlord or of Tenant under the foregoing provisionsof this Section 7(c) shall be made promptly by Landlord or Tenant, asapplicable, following notice of non-compliance from any applicable GovernmentalAuthority (as defined in Section 9 below).

##  

# 8.                                       **Holding Over**. If, with Landlord’s express writtenconsent, Tenant retains possession of the Premises after the termination of theTerm, (i) unless otherwise agreed in such written consent, such possessionshall be subject to immediate termination by Landlord at any time, (ii) all ofthe other terms and provisions of this Lease (including, without limitation,the adjustment of Base Rent pursuant to Section 4 hereof) shall remainin full force and effect (excluding any expansion or renewal option or othersimilar right or option) during such holdover period, (iii) Tenant shallcontinue to pay Base Rent in the amount payable upon the date of the expirationor earlier termination of this Lease or such other amount as Landlord mayindicate, in Landlord’s sole and absolute discretion, in such written consent,and (iv) all other payments shall continue under the terms of this Lease. IfTenant remains in possession of the Premises after the expiration or earliertermination of the Term without the express written consent of Landlord, (A)Tenant shall become a tenant at sufferance upon the terms of this Lease exceptthat the monthly rental shall be equal to (x) one hundred percent (100%)of Rent in effect during the last thirty (30) days of the Term (payable on aper diem basis) for the first sixty (60) days that Tenant is a tenant atsufferance (y) one hundred fifty percent (150%) of Rent in effect during thelast thirty (30) days of the Term commencing upon the sixty-first (61st)day that Tenant is a tenant at sufferance, and (B) Tenant shall be responsiblefor all damages suffered by Landlord resulting from or occasioned by Tenant’sholding over, including for consequential damages; provided, however, thatLandlord shall not be entitled to consequential damages resulting from anyholdover by Tenant of sixty (60) days or less from the end of the Term. Noholding over by Tenant, whether with or without consent of Landlord, shalloperate to extend this Lease except as otherwise expressly provided, and this Section8 shall not be construed as consent for Tenant to retain possession of thePremises. Acceptance by Landlord of Rent after the expiration of the Term orearlier termination of this Lease shall not result in a renewal of this Lease.

#  

# 9.                                       **Taxes**. Landlord shall pay, as part ofOperating Expenses, all taxes, levies, assessments and governmental charges ofany kind (collectively referred to as “**Taxes**”)imposed by any federal, state, regional, municipal, local or other governmentalauthority or agency, including, without limitation, quasi-public agencies(collectively, “**Governmental Authority**”)during the Term, including, without limitation, all Taxes:  (i) imposed on or measured by or based, inwhole or in part, on rent payable to Landlord under this Lease and/or from therental by Landlord of the Project or any portion thereof, or (ii) based on the

 

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square footage, assessed value or other measure or evaluation of anykind of the Premises or the Project, or (iii) assessed or imposed by or on theoperation or maintenance of any portion of the Premises or the Project,including parking, or (iv) assessed or imposed by, or at the direction of, orresulting from statutes or regulations, or interpretations thereof, promulgatedby, any Governmental Authority, or (v) imposed as a license or other feeon Landlord’s business of leasing space in the Project. Landlord may contest byappropriate legal proceedings the amount, validity, or application of any Taxesor liens securing Taxes. Taxes shall not include any net income taxes imposedon Landlord unless such net income taxes are in substitution for any Taxespayable hereunder. If any such Tax is levied or assessed directly againstTenant, then Tenant shall be responsible for and shall pay the same at suchtimes and in such manner as the taxing authority shall require. Tenant shallpay, prior to delinquency, any and all Taxes levied or assessed against anypersonal property or trade fixtures placed by Tenant in the Premises, whetherlevied or assessed against Landlord or Tenant. If any Taxes on Tenant’spersonal property or trade fixtures are levied against Landlord or Landlord’sproperty, or if the assessed valuation of the Project is increased by a valueattributable to improvements in or alterations to the Premises, whether ownedby Landlord or Tenant and whether or not affixed to the real property so as tobecome a part thereof, higher than the base valuation on which Landlord fromtime-to-time allocates Taxes to all tenants in the Project, Landlord shall havethe right, but not the obligation, to pay such Taxes. Landlord’s determinationof any excess assessed valuation shall be binding and conclusive; provided thatsuch determination is reasonable and made in good faith. The amount of any suchpayment by Landlord shall constitute Additional Rent due from Tenant toLandlord immediately upon demand. Tax refunds, if any, shall be creditedagainst Taxes for the year paid, including any interest which may be receivedthereon from the taxing authority, and Landlord shall refund to Tenant withinthirty days (30) after receipt of any such tax refund, the amount to whichTenant is entitled plus its pro-rata share of any interest corresponding tosuch amount to the extent received from the Governmental Authority, provided Tenantpaid Taxes for the year relating to such refund. Any assessment of Taxes shallbe deemed imposed in the maximum number of installments permitted by applicableLegal Requirement, whether or not actually paid.

#  

# Provided that Tenant isnot in Default, if Tenant reasonably believes that the amount of any Tax isimproper for any reason, Tenant may notify Landlord in writing of Tenant’sdesire that such Tax amount be contested or challenged and thereafter at Tenant’ssole cost and expense and in Tenant’s own name or, whenever necessary in thename of Landlord (provided that Tenant has first received the prior writtenconsent of Landlord which consent shall not be unreasonably withheld) contestsuch Tax with the applicable Governmental Authority. Tenant shall indicate thebasis for Tenant’s contention that such Tax amount is improper in Tenant’snotice to Landlord. Upon receipt of any such request from Tenant, Landlordshall promptly meet with Tenant to discuss whether or not it is appropriate toinitiate a challenge or contest of such Tax amount or to take no action withrespect thereto; provided however, that if Tenant is liable for the Tax amount,Landlord agrees to reasonably cooperate with Tenant’s legal challenge to suchTax obligation at Tenant’s sole cost and expense.

#  

# Landlord shall notvoluntarily issue any assessments or bonds for the Project which would increaseTenant’s payment of Taxes without Tenant’s prior written consent, which may bewithheld in Tenant’s sole and absolute discretion; provided that the foregoinglimitation shall in no way limit Tenant’s obligation to pay any Taxes owed onaccount of assessments or bonds for the Project that are initiated or issued byany Governmental Authority or person other than Landlord.

#  

# 10.                                 **Parking; Vehicular Access**.

#  

## (a)                                  Subject toall matters of record, Force Majeure, a Taking (as defined in Section 19below), and a reduction of parking spaces pursuant to Section 6(a)hereof, Landlord shall make available to Tenant during the Term not less thanone hundred seventy-six (176) parking spaces (before any Tenant Alterationswhich may reduce the number of spaces available) identified on **Exhibit G** hereto (the “**Tenant Parking Spaces**”), subject in eachcase to Landlord’s reasonable rules and regulations, which shall not bediscriminatorily enforced by Landlord. As long as Tenant is the sole tenant ofthe Building, Tenant shall have the right, at Tenant’s sole cost, to designateTenant Parking Spaces in the vicinity of

 

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the Building entrance and identified on **Exhibit G**, as reserved for Tenant’s guests, visitors, oremployees. Landlord will not charge Tenant any parking rent for the use of theProject’s parking spaces. Tenant shall not Overburden the parking areas of theProject. For purposes hereof Tenant shall be deemed to “**Overburden**” the parking areas of theProject if Tenant allows any Tenant Parties to utilize parking spaces on theProject in excess of the combination of the Tenant Parking Spaces and thenumber of other parking spaces at the Project which have been assigned to thirdparties other than Tenant (such other parking spaces being referred to as the “**Excess Parking Spaces**”) without the consent of Landlord orthe third parties holding such parking rights. Landlord and Tenant acknowledgethat as of the date hereof 57 unreserved parking spaces have been assigned tothe Building 4757 tenant. If Tenant Overburdens the parking area of the Projectin violation of this Section 10, Landlord may require Tenant to obtainalternative off-Project parking for such excess use. If any of the TenantParking Spaces are eliminated during the Term solely as a result of the matterswithin Landlord’s reasonable control (as opposed to matters not within Landlord’sreasonable control such as condemnation or casualty) and not in connection witha benefit being provided by Landlord specifically for Tenant (e.g., at Tenant’srequest), Landlord shall make reasonable substitute parking (for the number ofspaces eliminated) available for use by Tenant, which shall be located oneither the Building 4757 parcel or any other adjacent parcel unless Landlordprovides reasonable accommodations for Tenant’s employees in the form ofregular shuttle service during Tenant’s normal business hours in the Premises. Tenantshall not permit any Tenant Party to park on the real property on whichBuilding 4757 is located.

##  

## (b)                                 Landlordshall promulgate reasonable non-discriminatory rules and regulations to Tenantand the tenant(s) of Building 4757 and any other third party who may haveparking rights at the Project from time to time regarding shared parking at theProject as well as ingress and egress to the Project from Building 4757 and toBuilding 4757 from the Project. Specifically, such rules and regulations willprovide that, except as may otherwise be agreed to by Tenant and the tenant(s)of Building 4757, (i) commencing upon the date that Executive Drive is open topublic use to the point which is adjacent to the Project, during normalbusiness hours (x) neither Tenant nor any Tenant Party shall access the Projectthrough the real property on which Building 4757 is located and that allingress and egress shall occur via Executive Drive and (y) no tenant ofBuilding 4757 or any other third party who may have parking rights at theProject or in the parking areas of Building 4757 from time to time nor any ofsuch tenants or third party’s employees, guests, invitees or visitors shallaccess Building 4757 or the Excess Parking Spaces of the Project via ExecutiveDrive and that all ingress and egress to Building 4757 shall occur through thereal property on which Building 4757 is located, and (ii) the tenant(s) ofBuilding 4757 or any other third party who may have parking rights at theProject or in the parking areas of Building 4757 from time to time shall notutilize any of the Tenant Parking Spaces.

##  

## (c)                                  Landlordshall not be responsible for enforcing Tenant’s parking rights or access rightsagainst any third parties. Notwithstanding the foregoing, following writtennotice from Tenant to Landlord disclosing with reasonable detail the manner inwhich Tenant’s parking rights have been violated, Landlord agrees to usecommercially reasonable efforts to enforce the rights of Tenant to the TenantParking Spaces as against the tenant(s) of Building 4757 and any other thirdparty who may have parking rights at the Project or in the parking areas ofBuilding 4757 from time to time. Tenant shall have the right to directlyenforce its parking rights as to the Tenant Parking Spaces at no cost orexpense to Landlord, including, without limitation, the designation of thoseTenant Parking Spaces in the vicinity of the Excess Parking Spaces as for theExclusive Use of Tenant and the Tenant Parties if the tenant(s) of Building4757 or any other third party who may have parking rights at the Project or inthe parking areas of Building 4757 from time to time consistently utilize anyof the Tenant Parking Spaces. If the Building 4757 tenant(s) or any other thirdparty who may have parking rights at the Project or in the parking areas ofBuilding 4757 from time to time consistently utilize Executive Drive as amanner of ingress and egress, following written notice to Landlord and areasonable period of time for Landlord to attempt to correct the misuse ofingress and egress by such Building 4757 tenant(s) or any other third party whomay have parking rights at the Project or in the parking areas of Building 4757from time to time, Tenant shall have the right at Tenant’s sole cost andexpense and subject to the requirements of Section 12 hereof, toimplement such reasonable traffic control and reduction measures as Tenantreasonably deems necessary to preclude the use of Executive Drive as a mannerof ingress and egress by Building 4757

 

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tenant(s) or any other third party who may have parking rights at theProject or in the parking areas of Building 4757 from time to time, including,without limitation, the right to install traffic control improvements in theProject, such as speed bumps, rumble strips, card-activated arm bars and thelike, only to the extent permitted by applicable Legal Requirements.

##  

# 11.                                 **Utilities, Services**. Subject to the terms of this Section 11,Landlord shall provide refuse and trash collection and shall provide hook-upswith respect to water, electricity, heat, light, power, telephone, sewer, andother utilities (including gas and fire sprinklers to the extent the Project isplumbed for such services) (refuse and trash collection, water, electricity,heat, light, power, telephone, sewer and other utilities collectively, the “**Utilities**”). Landlord shall pay, asOperating Expenses (to the extent not excluded therefrom), all maintenancecharges for Utilities, and any storm sewer charges or other similar charges forUtilities imposed by any Governmental Authority or Utility provider, and anytaxes, penalties, surcharges or similar charges thereon. Landlord, at its solecost and expense and not as an Operating Expense, shall be solely responsiblefor and shall pay all tie-in costs, meter deposits and any other hook-up feesand initial service deposits required to initially connect the public Utilitiesto the Project; and Landlord shall, at Landlord’s sole cost and expense, causethe public Utilities to be separately metered and demised from theBuilding 4757 parcel. The cost of all applicable Utilities provided to thePremises during the Term of this Lease shall be paid by Tenant, prior todelinquency, directly to the applicable utility provider, and Landlord shallprovide for the initial transfer of all such Utilities into Tenant’s name atthe Premises on or about the Commencement Date. Any utility deposit made byTenant shall be Tenant’s sole and separate property. No interruption or failureof Utilities shall result in eviction or constructive eviction of Tenant,termination of this Lease or, unless attributable to Landlord’s grossnegligence or willful misconduct, the abatement of Rent. Notwithstanding theforegoing, if as a result of any interruption or failure of Utilities that isdue to Landlord’s gross negligence or willful misconduct and not as a result ofa failure by any utility service provider or the actions of any other party notunder the control of Landlord, the Premises or a portion of the Premises isrendered untenantable (meaning that Tenant is unable to use the Premises in thenormal course of it business and does not in fact use that portion of thePremises) (a “**Service Failure**”),then Tenant shall be entitled to an abatement of Base Rent with respect to theportion of the Premises Tenant is prevented from using by reason of the ServiceFailure if the Service Failure is not remedied within five (5) days followingthe Tenant’s provision of written notice to Landlord of the occurrence of aService Failure or if Service Failures for any twelve (12) month period totalmore than ten (10) days (whether or not consecutive) (the “**Service Failure Threshold**”). Base Rentshall be abated commencing on the first day following the passage of theService Failure Threshold and continue until Tenant is no longer so preventedfrom using such portion of the Premises. In no event shall Tenant be chargedany mark up or premium for overtime or after hours operation of the Buildingheating, ventilating and air-conditioning (“**HVAC**”)systems.

#  

Landlord’s sole obligation for either providing emergency generators orproviding emergency back-up power to Tenant shall be: (i) to provide emergencygenerators with not less than the stated capacity of the emergency generatorsprovided as part of Landlord’s Work (the “**EmergencyGenerators**”), and (ii) to obtain all necessary permits and licensesfor the installation of the Emergency Generators (including any air qualitypermits for the initial operation thereof). Tenant shall be solely responsiblefor maintaining (a) the Emergency Generators which maintenanceresponsibility shall include contracting with a third-party to maintain theEmergency Generators as per the manufacturer’s standard maintenance guidelinesand (b) all necessary permits and licenses relating to the EmergencyGenerators (including any air quality permits) including those initiallyobtained by Landlord. Following initial delivery of the Emergency Generators ingood operating condition and in compliance with all Legal Requirements and freeof construction defects, Landlord shall have no additional obligation tomaintain the Emergency Generators in operational condition, or to provide anyreplacement emergency generators or back-up power or to supervise, oversee orconfirm that the third-party maintaining the Emergency Generators ismaintaining the Emergency Generators as per the manufacturer’s standardguidelines or otherwise; provided, however, that if the Emergency Generators arenot operational for any reason other than Tenant’s negligent maintenance,repair or operation of the Emergency Generator, Tenant shall be permitted, inTenant’s sole discretion, to cause the Emergency Generators to be replaced withTenant-owned emergency generators and/or supplemental back-up power supplies asa Notice-Only Alteration

 

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(as defined in Section 12 below), which equipment shall be removed byTenant from the Project upon the expiration or earlier termination of thisLease provided that Tenant restores the pad on which the Emergency Generatorswere located to a condition capable of receiving a replacement generator, capsall conduits and otherwise restores the area surrounding the Emergency Generatorsto its condition prior to the original installation thereof. During any periodof replacement, repair or maintenance of the Emergency Generators when theEmergency Generators are not operational, including any delays thereto due tothe inability to obtain parts or replacement equipment, Landlord shall have noobligation to provide Tenant with an alternative back-up generator orgenerators or alternative sources of back-up power. Tenant expresslyacknowledges and agrees that Landlord does not guarantee that the EmergencyGenerators will be operational at all times or that emergency power will beavailable to the Premises when needed. Except as provided above, all permitsfor the operation of the Emergency Generators or any other emergencygenerator(s) shall be the responsibility of Tenant.

 

# 12.                                 **Alterations and Tenant’s Property**. Anyalterations, additions, or improvements made to the Premises by or on behalf ofTenant, including additional locks or bolts of any kind or nature upon anydoors or windows in the Premises, but excluding installation, removal orrealignment of furniture systems (other than removal of furniture systems ownedor paid for by Landlord) not involving any modifications to the structure orconnections (other then by ordinary plugs or jacks) to Building Systems (asdefined in Section 14) (“**Alterations**”)shall be subject to Landlord’s prior written consent, which may be given orwithheld in Landlord’s sole discretion if any such Alteration affects thestructure, foundation, roof, load bearing walls or safety of the Building, butwhich shall otherwise not be unreasonably withheld or delayed. Landlord shallapprove or disapprove of any such request within ten (10) business days of itsreceipt of such request consent. Notwithstanding the foregoing, Tenant mayconstruct nonstructural Alterations that do not affect the watertight integrityof the Building, do not place any unreasonable load on the Building Systems,are not visible from outside the Premises and do not detract from the exteriorappearance of the Building (with the exception of rooftop antennae, which shallbe approved by Landlord if appropriately screened in accordance with LegalRequirements) in the Premises without Landlord’s prior approval if the cost ofsuch Alteration on an individual basis does not exceed $25,000 (a “**Notice-Only Alteration**”), provided Tenantnotifies Landlord in writing of such intended Notice-Only Alteration, and suchnotice shall be accompanied by plans and specifications (if such Alterationsrequire plans and specifications), work contracts and such other informationconcerning the nature and cost of the Notice-Only Alteration as may bereasonably requested by Landlord, which notice and accompanying materials shallbe delivered to Landlord not less than 15 business days in advance of anyproposed construction. In addition, with respect to any nonstructuralAlterations that do not affect the watertight integrity of the Building, do notplace any unreasonable load on the Building systems, are not visible fromoutside the Premises and do not detract from the exterior appearance of theBuilding (with the exception of rooftop antennae, which shall be approved byLandlord if appropriately screened in accordance with Legal Requirements) thecost of which, on an individual basis, will exceed $25,000 but not $50,000(collectively with the Notice-Only Alterations, “**Permitted Alterations**”), Tenant shall request Landlord’sconsent for such Alterations, which consent shall not be unreasonably withheldby Landlord, and if Landlord fails to respond to Tenant’s request for consentwithin ten (10) business days following such request, Landlord’s consent shallbe deemed to have been granted to Tenant with respect to the Alteration(s)described therein. Notwithstanding the foregoing, Permitted Alterations subjectto the foregoing rights of Tenant shall not exceed $250,000 in the aggregateover the Term. If Landlord approves any Alterations, Landlord may impose suchconditions on Tenant in connection with the commencement, performance andcompletion of such Alterations as Landlord may deem appropriate in Landlord’sreasonable discretion. Any request for approval shall be in writing, deliverednot less than fifteen (15) business days in advance of any proposedconstruction, and accompanied by plans and specifications (if such Alterationsrequire plans and specifications), bid proposals, work contracts and such otherinformation concerning the nature and cost of the alterations as may bereasonably requested by Landlord, including the identities and mailingaddresses of all persons performing work or supplying materials. Tenant shallalso deliver “as-built” plans for all Alterations if the same are customarilyavailable. Landlord’s right to review plans and specifications and to monitorconstruction shall be solely for its own benefit, and Landlord shall have noduty to ensure that such plans and specifications or construction comply withapplicable Legal Requirements. Tenant shall cause, at its sole cost andexpense, all Alterations to

 

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comply with reasonable insurance requirements and with LegalRequirements and shall implement at its sole cost and expense any alteration ormodification required by Legal Requirements as a result of any Alterations. Tenantshall pay to Landlord, as Additional Rent, on demand, Landlord’s actual out ofpocket costs of plan review. Before Tenant begins any Alteration, Landlord maypost on and about the Premises notices of non-responsibility pursuant to applicablelaw. Tenant shall reimburse Landlord for, and indemnify and hold Landlordharmless from, any expense incurred by Landlord by reason of faulty work doneby Tenant or its contractors, delays caused by such work, or inadequatecleanup.

#  

Tenant shall keep all Alterations work free and clear of liens, andshall provide (and cause each contractor or subcontractor to provide)certificates of insurance for workers’ compensation and other coverage inamounts and from an insurance company reasonably satisfactory to Landlordprotecting Landlord against liability for personal injury or property damageduring construction. Upon completion of any Alterations, Tenant shall deliverto Landlord (i) the names of all contractors and subcontractors who did thework and final lien waivers from all such contractors and subcontractors, and(ii) “as built” plans for any such Alterations if “as built” plans arecustomarily prepared in connection with the applicable Alterations.

 

Other than (A) the items, if any, listed on **Exhibit F** attached hereto, (B) any items agreed by Landlord inwriting to be included on **Exhibit F**in the future, and (C) any trade fixtures, machinery, equipment and otherpersonal property not paid for out of the TI Fund (as defined in the WorkLetter) which may be removed without material damage to the Premises, whichdamage shall be repaired (including capping or terminating utility hook-upsbehind walls) by Tenant during the Term (collectively, “**Tenant’s Property**”), all property of anykind paid for with the TI Fund, all Alterations, real property fixtures,built-in machinery and equipment, built-in casework and cabinets and othersimilar additions and improvements built into the Premises so as to become anintegral part of the Premises such as fume hoods which penetrate the roof orplenum area, built-in cold rooms, built-in warm rooms, walk-in cold rooms,walk-in warm rooms, deionized water systems, glass washing equipment,autoclaves, chillers, built-in plumbing, electrical and mechanical equipmentand systems, and any power generator and transfer switch****(collectively, “**Installations**”) shall be and shall remain the property ofLandlord during the Term and following the expiration or earlier termination ofthe Term, shall not be removed by Tenant at any time during the Term and shallremain upon and be surrendered with the Premises as a part thereof inaccordance with Section 28 following the expiration or earliertermination of this Lease; provided, however, that Landlordshall, at the time its approval of such Installation is requested or at thetime it receives notice of a Notice-Only Alteration**notify Tenant if it has elected to cause Tenant to removesuch Installation upon the expiration or earlier termination of this Lease; provided,further, that Landlord shall not be permitted to request that Tenantremove any specific Installation unless in Landlord’s reasonable judgment suchInstallation is either (x) not consistent with standard office/laboratoryconstruction or (y) has customized or unique features (other than featuresconsistent with standard lab and research and development facilities withrelated office use) which would detract from the value or utility of theBuilding and are required to be removed by Landlord as a condition to Landlord’sapproval of such Installation. If Landlord so elects, Tenant shall remove suchInstallation upon the expiration or earlier termination of this Lease andrestore any damage caused by or occasioned as a result of such removal,including, when removing any of Tenant’s Property which was plumbed, wired orotherwise connected to any of the Building Systems, capping off all suchconnections behind the walls of the Premises and repairing any holes. Duringany such restoration period, Tenant shall pay Rent to Landlord as providedherein (including pursuant to Section 8 hereof to the extent such periodextends beyond the expiration or earlier termination of this Lease) as if saidspace were otherwise occupied by Tenant.

 

# 13.                                 **Landlord’s Repairs**. Landlord shall maintain all of thestructural elements of the Building roof (i.e. exclusive of the roof membrane)and Building (inclusive of the footings and foundations, Basement ParkingStructure pads and ramps, and the structural walls, floors and roof supports ofthe Building and the Equipment Yard), and all capital repairs, replacements orimprovements to the Project (including, but not limited to, capital itemsrelating to the Building Systems described in Section 14 below), andsubject to Tenant’s rights under Section 14 below, shall maintainthe roof membrane, the exterior of the Building, the parking areas and otherCommon Areas of the Project, in good repair, reasonable wear

 

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and tear and uninsured losses and damages caused by Tenant, or by anyof the Tenant Parties excluded. Losses and damages caused by Tenant or anyTenant Party shall be repaired by Landlord, and to the extent suchTenant-caused damages are not covered by insurance policies for which Landlordseeks payment from Tenant as an Operating Expenses (provided, however, thatnothing contained herein is intended to require Landlord to submit claims formatters which Landlord does not reasonably believe are covered by its insurancepolicies), such uninsured repair costs shall be made at Tenant’s sole cost andexpense; provided that the foregoing shall not be deemed to supersede theLandlord’s waiver of subrogation in Section 17 below. Landlordreserves the right to stop Building Systems services when necessary (i) by reasonof accident or emergency, or (ii) for planned repairs, alterations orimprovements, which are, in the judgment of Landlord, desirable or necessary tobe made, until said repairs, alterations or improvements shall have beencompleted; provided any cessation of services shall be scheduled with Tenantfollowing a reasonable amount of notice under the circumstances, unless anemergency situation requires immediate interruption. Subject to Landlord’sobligation in the preceding sentence, Landlord shall have no responsibility orliability for failure to supply Building Systems services during any suchperiod of interruption. Tenant shall promptly give Landlord written notice ofany repair required by Landlord pursuant to this Section 13, after whichLandlord shall have a reasonable opportunity to effect such repair. Landlordshall not be liable for any failure to make any repairs or to perform anymaintenance unless such failure shall persist for an unreasonable time afterTenant’s written notice of the need for such repairs or maintenance. Tenantwaives its rights under any state or local law to terminate this Lease or tomake such repairs at Landlord’s expense and agrees that the parties’ respectiverights with respect to such matters shall be solely as set forth herein. Repairsrequired as the result of fire, earthquake, flood, vandalism, war, or similarcause of damage or destruction shall be controlled by Section 18.

#  

# 14.                                 **Tenant’s Repairs**.

#  

## (a)                                  Subject to Section13 hereof, Tenant, at its expense, shall repair, replace and maintain ingood condition all portions of the Premises and the Project, including, withoutlimitation, entries, doors, ceilings, interior windows, interior walls, theinterior side of demising walls, HVAC, plumbing, fire sprinklers, elevators andall other building systems serving the Premises, the Common Areas and all otherportions of the Project (“**Building Systems**”).Such repair and replacement shall exclude any and all structural repairs orreplacements to the Building and the Project, which shall be performed byLandlord as an Operating Expense subject to the limitations of Section 5above. Should Tenant fail to make any such repair or replacement or fail tomaintain the Premises, Landlord shall give Tenant notice of such failure. IfTenant fails to commence cure of such failure within fifteen (15) days ofLandlord’s notice, and thereafter diligently prosecute such cure to completion,Landlord may perform such work and shall be reimbursed by Tenant within thirty(30) days after demand therefor; provided, however, that if such failure byTenant creates or could create an emergency, Landlord may immediately commencecure of such failure and shall thereafter be entitled to recover the costs ofsuch cure from Tenant. Subject to Sections 17 and 18, Tenantshall bear the full uninsured cost of any repair or replacement to any part ofthe Project that results from damage caused by Tenant or any Tenant Party andany repair that benefits only the Premises.

##  

## (b)                                 Notwithstandinganything to the contrary herein, Tenant shall manage the Premises and Projectat its sole cost and expense (excluding, however, repairs required by casualtyand any items for which Landlord is responsible pursuant to this Lease),provided that Landlord shall have the right to take over responsibility formanaging any aspect of the Premises that Landlord reasonably believes is notbeing properly maintained by Tenant, provided, however, that Tenant firstreceives notice of such deficiency and thereafter fails to cure such deficiencywithin fifteen (15) days of notice thereof. If Landlord takes over managementof the Premises the management fee set forth in Section 5 hereof shallbe increased to three percent (3%) of Base Rent. Tenant shall submit allservice contracts with janitors, gardeners, contractors and vendors requiredfor Tenant’s repair and maintenance of the Building to Landlord for itsapproval, not to be unreasonably withheld, conditioned or delayed. Tenant shalldeliver Landlord promptly after receipt copies of all other contracts orinvoices related to Tenant’s maintenance of the Project. Tenant agrees that, inits maintenance of the landscaping and parking areas of the Project, it

 

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will reasonably consider, without obligation, opportunities proposed byLandlord for the provision of efficient common services to the landscaped andparking areas of the Project and the project on which Building 4757 is located.If requested by Tenant in writing, Landlord shall use commercially reasonableefforts to obtain for the benefit of Tenant reimbursement from tenant(s) ofBuilding 4757 of an equitable share of Tenant’s costs to maintain the parkingareas of the Project used by tenant(s) of Building 4757, excluding howevercosts or expenses for items which are not separately metered or assessed, suchas the costs of electricity or irrigation. Tenant shall submit with any suchrequest for reimbursement such reasonable documentation as Landlord or theBuilding 4757 tenant(s) require, including but not limited to contracts andinvoices and the manner for determining the share of such costs and expensesrequested to be paid by the Building 4757 tenant(s).

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# 15.                                 **Liens**.

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## (a)                                  Tenant shalldischarge, by bond or otherwise, any mechanic’s lien filed against the Premisesor against the Project for work claimed to have been done for, or materialsclaimed to have been furnished to, Tenant within fifteen (15) days after thefiling thereof, at Tenant’s sole cost, and shall otherwise keep the Premisesand the Project free from any liens arising out of work performed, materialsfurnished or obligations incurred by Tenant. Should Tenant fail to dischargeany lien described herein, Landlord shall have the right, but not theobligation, to pay such claim or post a bond or otherwise provide security toeliminate the lien as a claim against title to the Project and the cost thereofshall be immediately due from Tenant as Additional Rent. If Tenant shall leaseor finance the acquisition of office equipment, furnishings, or other personalproperty of a removable nature utilized by Tenant in the operation of Tenant’sbusiness, Tenant warrants that any Uniform Commercial Code Financing Statementfiled as a matter of public record by any lessor or creditor of Tenant willupon its face or by exhibit thereto indicate that such Financing Statement isapplicable only to removable personal property of Tenant located within thePremises. In no event shall the address of the Project be furnished on thestatement without qualifying language as to applicability of the lien only toremovable personal property, located in an identified suite held by Tenant.

##  

## (b)                                 Notwithstandingthe foregoing, Tenant shall have the right, from time to time, to grant andassign security interests in that portion of Tenant’s Property (exclusive ofInstallations) located in or at the Premises that Tenant specifically describeson a written list submitted to Landlord that is the sole property of Tenant andnot Landlord (the “**Tenant’s Lien Property**”).Landlord agrees to execute, at Tenant’s sole cost and expense,commercially-reasonable waiver forms but which are not blanket lien waiversreleasing Landlord’s interest in the Tenant’s Lien Property in favor of anypurchase money seller, lessor or lender who has financed the Tenant’s LienProperty. Without limiting the effectiveness of the foregoing, provided that noDefault shall have occurred and be continuing, Landlord shall, upon the requestof Tenant, and at the Tenant’s sole cost and expense, execute and deliver anyinstruments reasonably necessary or appropriate to confirm any such grant,release, dedication, transfer, annexation or amendment to any person or entitypermitted under this paragraph including Landlord waivers with respect to anyof the foregoing, and such acknowledgment shall include, if requested by theperson holding such security interest, the right to enter upon the Premisesfollowing a Tenant Default for a period not to exceed thirty (30) days, for thelimited purpose of removing any portion of the Tenant’s Lien Property which isso secured, provided that the secured party agrees to repair any damagesresulting from the exercise of such right. Tenant shall indemnify and holdLandlord harmless from and against any and all Claims in any manner directly orindirectly related to any security interests in Tenant’s Lien Property.

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# 16.                                 **Indemnification**. Tenant hereby indemnifies and agrees todefend, save and hold 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 incurred in investigating orresisting the same (including, without limitation, reasonable attorneys’ fees,charges and disbursements and costs of suit) (collectively, “**Claims**”), for injury or death to persons ordamage to property occurring within or about the Premises, arising directly orindirectly out of use or occupancy of the Premises by Tenant or its employees,agents or guests, for Tenant’s violation of any Legal Requirements with respectto the Project or a breach or default by Tenant in the performance of any ofits

 

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obligations hereunder, except to the extent attributable to the willfulmisconduct or gross negligence of Landlord, Landlord’s violation of any LegalRequirements with respect to the Building, or a material breach of Landlord’sobligations or representations under this Lease. Notwithstanding anything tothe contrary in this Lease, Landlord shall not be released from, and shallindemnify, defend, save and hold Tenant harmless from and against all Claimsand all and all reasonable expenses incurred in investigating or resisting thesame (including, without limitation, reasonable attorneys’ fees anddisbursements) arising from the gross negligence or willful misconduct ofLandlord or its agents or guests, Landlord’s violation of any LegalRequirements with respect to the Building, or a material breach of Landlord’sobligations or representations under this Lease. Landlord shall not be liableto Tenant for, and Tenant assumes all risk of damage to, personal property(including loss of records kept within the Premises) if the cause of suchdamage is of a nature which, if Tenant had elected to maintain fire and theftinsurance with extended coverage and business records endorsement available ona commercially reasonable basis, would be a loss subject to settlement by theinsurance carrier including, but not limited to, damage or losses caused by fire,electrical malfunctions, gas explosion, and water damage of any type including,but not limited to, broken water lines, malfunction of fire sprinkler system,roof leakage or stoppages of lines unless and except if such loss is due to thegross negligence or willful misconduct of Landlord, its agents or guests,Landlord’s violation of any Legal Requirements with respect to the Building, ora material breach of Landlord’s obligations or representations under this Lease.Tenant further waives any and all Claims for injury to Tenant’s business orloss of income relating to any such damage or destruction of personal propertyrelating to any such damage or destruction of personal property including anyloss of records. Landlord shall not be liable for any damages arising from anyact, omission or neglect of any tenant in the Project or of any otherthird-party. Security devices and services, if any, while intended to detercrime may not in given instances prevent theft or other criminal acts of thirdparties and the risk than any security device or service may malfunction orotherwise be circumvented by a criminal is assumed by Tenant. Tenant shall atTenant’s sole cost obtain insurance coverage to the extent Tenant desiresprotection against such criminal acts.

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# 17.                                 **Insurance; Waiver of Subrogation**.

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## (a)                                  Landlord, aspart of Operating Expenses, shall carry insurance upon the Building (includingbut not limited to the Tenant Improvements, Alterations and Building Systems),in an amount equal to full replacement cost (exclusive of the costs ofexcavation, foundations and footings, and without reference to depreciationtaken by Landlord upon its books or tax returns) providing protection againstany peril generally included within the classification “Fire and ExtendedCoverage” together with insurance against sprinkler damage (if applicable),vandalism and malicious mischief. Landlord, subject to availability and costthereof and, as part of Operating Expenses (but not to be deemed as beingrequired of Landlord) shall further carry as Landlord deems appropriatecoverage against flood, environmental hazard and earthquake, loss or failure ofBuilding equipment, rental loss during the period of repair or rebuild, workmen’scompensation insurance and fidelity bonds for employees employed to performservices. Landlord, as part of Operating Expenses, shall carry public liabilityinsurance with single limit of not less than $1,000,000.00 for death or bodilyinjury, or property damage with respect to the Building.

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## (b)                                 Tenant, atits sole cost and expense, shall maintain during the Term commercial generalliability insurance, with a minimum limit of not less than $2,000,000 peroccurrence with respect to the Premises. The commercial general liabilityinsurance policy shall name Landlord, without liability for premiums, asadditional insureds; be issued by insurance companies which have a rating ofnot less than policyholder rating of A- and financial category rating of atleast Class XII in “Best’s Insurance Guide”; shall not be cancelable (i) forreasons other than nonpayment of premium unless at least thirty (30) days priorwritten notice shall have been given to Landlord from the insurer, and (ii) fornonpayment of premium unless at least ten (10) days prior written notice shallhave been given to Landlord from the insurer; and shall be written as primarypolicies, not contributing with and not in excess of the coverage whichLandlord may carry. Certificates of insurance showing the limits of coveragerequired hereunder and showing Landlord as an additional insured, shall bedelivered to Landlord by Tenant upon commencement of the Term and upon eachrenewal of said insurance. Tenant’s policy may be a “blanket

 

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policy” with an aggregate per location endorsement which specificallyprovides that the amount of insurance shall not be prejudiced by other lossescovered by the policy. Tenant shall, at least twenty (20) days prior to theexpiration of such policies, furnish Landlord with renewal certificates. Tenantagrees that if Tenant does not take out and maintain such insurance, Landlordmay (but shall not be required to) procure said insurance on Tenant’s behalfand at its cost to be paid as Additional Rent.

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## (c)                                  Tenantassumes the risk of damage to any fixtures, goods, inventory, merchandise,equipment, and leasehold improvements, and Landlord shall not be liable forinjury to Tenant’s business or any loss of income therefrom relative to suchdamage, subject to the other provisions of this Lease. Tenant at Tenant’s costshall carry such insurance as Tenant desires for protection with respect topersonal property of Tenant or business interruption.

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## (d)                                 In eachinstance where insurance is to name Landlord as an additional insured, Tenantshall upon written request of Landlord also designate and furnish certificatesso evidencing Landlord as additional insured to:  (i) any lender of Landlord holding a securityinterest in the Project or any portion thereof, (ii) the landlord under anylease wherein Landlord is tenant of the real property on which the Building islocated, if the interest of Landlord is or shall become that of a tenant undera ground or other underlying lease rather than that of a fee owner, and/or(iii) any management company retained by Landlord to manage the Project.

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## (e)                                  Notwithstandinganything to the contrary in this Lease, Landlord and Tenant each hereby waiveany and all rights of recovery against the other or against officers,directors, employees, agents, and representatives of the other, on account ofloss or damage occasioned to such waiving party or its property or the propertyof others under the control of the waiving party that is caused by or resultsfrom a risk which is actually or required to be insured against under thisLease without regard to the negligence or willful misconduct of the entity soreleased. The property insurance obtained by Landlord and Tenant shall includethe foregoing waiver of subrogation by the insurers and all rights based upon anassignment from its insured, against Landlord or Tenant, and their respectiveofficers, directors, employees, managers, agents, invitees and contractors (“**Related Parties**”), in connection with anyloss or damage thereby insured against, which shall not be modified orterminated without prior written notice to the other party as set forth below. Neitherparty nor its respective Related Parties shall be liable to the other for lossor damage caused by any risk insured against under property insurance requiredto be maintained hereunder, and each party waives any claims against the otherparty, and its respective Related Parties, for such loss or damage. The failureof a party to insure its property shall not void this waiver. Such waiversshall continue as long as the parties’ respective insurers so permit. Anytermination of such a waiver shall be by written notice of circumstances ashereinafter set forth. Landlord and Tenant upon obtaining the policies ofinsurance required or permitted under this Lease shall give notice to theinsurance carrier or carriers that the foregoing mutual waiver of subrogationis contained in this Lease. If such policies shall not be obtainable with suchwaiver or shall be so obtainable only at a premium over that chargeable withoutsuch waiver, the party seeking such policy shall notify the other thereof, andthe latter shall have ten (10) days thereafter to (a) procure suchinsurance with companies reasonably satisfactory to the other party or(b) agree to pay such additional premium. If neither (a) nor (b) are done,this waiver of subrogation shall have no effect during such time as suchpolicies shall not be obtainable or the party in whose favor a waiver ofsubrogation is desired refuses to pay the additional premium. If such policiesshall be unobtainable, but shall be subsequently obtainable, neither partyshall be subsequently liable for a failure to obtain such insurance until areasonable time after notification thereof by the other party. If the foregoingwaivers shall contravene any law with respect to exculpatory agreements, theliability of Landlord or Tenant shall be deemed not released but shall besecondary to the other’s insurer. Landlord and its respective Related Partiesshall not be liable for, and Tenant hereby waives all claims against suchparties for, business interruption and losses occasioned thereby sustained byTenant or any person claiming through Tenant resulting from any accident oroccurrence in or upon the Premises or the Project from any cause whatsoever.

 

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## (f)                                    Landlord mayrequire insurance policy limits to be raised to conform with requirements ofLandlord’s lender and/or to bring coverage limits to levels then beinggenerally required of new tenants within the Project.

##  

# 18.                                 **Restoration**. If, at any time during the Term, anyportion of the Project or the Premises are damaged or destroyed by a fire orother insured casualty, Tenant shall immediately notify Landlord of theoccurrence thereof and Landlord shall notify Tenant within 60 days afterdiscovery of such damage as to the amount of time Landlord reasonably estimatesit will take to restore the Project or the Premises commencing upon Tenant’sreceipt of all applicable Hazardous Materials Clearances (as defined below), asapplicable (the “**Restoration Period**”).If the Restoration Period is estimated to exceed nine (9) months (the “**Maximum Restoration Period**”), Landlord may,in such notice, elect to terminate this Lease as of the date that is seventy-five(75) days after the date of discovery of such damage or destruction; provided,however, that notwithstanding Landlord’s election to restore, Tenant mayelect to terminate this Lease by written notice to Landlord delivered withinten (10) days of receipt of a notice from Landlord estimating a RestorationPeriod for the Premises longer than the Maximum Restoration Period. Unless**either Landlord or Tenant so elects toterminate this Lease, Landlord shall, subject to receipt of sufficientinsurance proceeds (with any deductible to be treated as a current OperatingExpense), promptly restore the Premises (excluding the improvements installedby Tenant or by Landlord and paid for by Tenant), subject to delays arisingfrom the collection of insurance proceeds, from Force Majeure events or asneeded to obtain any license, clearance or other authorization of any kindrequired to enter into and restore the Premises issued by any GovernmentalAuthority having jurisdiction over the use, storage, handling, treatment, generation,release, disposal, removal or remediation of Hazardous Materials in, on orabout the Premises (collectively referred to herein as “**Hazardous Materials Clearances**”); provided,however, that if repair or restoration of the Premises is not substantiallycomplete as of the end of the Maximum Restoration Period or, if longer, theRestoration Period, Landlord may, in its sole and absolute discretion, electnot to proceed with such repair and restoration, or Tenant may by writtennotice to Landlord delivered within ten (10) business days of the expiration ofthe Maximum Restoration Period or, if longer, the Restoration Period, elect toterminate this Lease, in which event Landlord shall be relieved of itsobligation to make such repairs or restoration and this Lease shall terminateas of the date that is seventy-five (75) days after the later of:  (i) discovery of such damage or destruction,or (ii) the date all required Hazardous Materials Clearances are obtained, butLandlord shall retain any Rent paid and the right to any Rent payable by Tenantprior to such election by Landlord or Tenant.

#  

Tenant, at its expense, shall promptly perform, subject to delaysarising from the collection of insurance proceeds, from Force Majeure (asdefined in Section 34) events or to obtain Hazardous MaterialClearances, all repairs or restoration not required to be done by Landlord andshall promptly re-enter the Premises and commence doing business in accordancewith this Lease. Tenant shall use diligent efforts to obtain all necessaryHazardous Materials Clearances. Notwithstanding the foregoing, either Landlordor Tenant may terminate this Lease if (a) the Premises are damaged duringthe last one (1) year of the Term and Landlord reasonably estimates that itwill take more than two (2) months to repair such damage following receipt ofall necessary Hazardous Materials Clearances, or (b) if insurance proceedsare not available for such restoration; provided, however, that the partyelecting to terminate this Lease provides written notice of such election tothe other party within ten (10) days after Landlord notifies Tenant of theamount of time required to repair such damage. Subject to receipt of sufficientinsurance proceeds (with any deductible to be treated as a current OperatingExpense) Rent shall be abated from the date of the casualty until the Premisesare repaired and restored, in the proportion which the area of the Premises, ifany, which is not usable by Tenant bears to the total area of the Premises,unless Landlord provides Tenant with other space during the period of repairthat is suitable for the temporary conduct of Tenant’s business and pays forTenant’s relocation costs and expenses, and in such event Tenant’s rent shallreflect the fair market rent of the replacement premises. Such abatement shallbe the sole remedy of Tenant, and except as provided in this Section 18,Tenant and Landlord waive any right either of them may have to terminate theLease by reason of damage or casualty loss.

 

The provisions of this Lease, including this Section 18,constitute an express agreement between Landlord and Tenant with respect to anyand all damage to, or destruction of, all or any part of the

 

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Premises, or any other portion of the Project, and any statute orregulation which is now or may hereafter be in effect shall have no applicationto this Lease or any damage or destruction to all or any part of the Premisesor any other portion of the Project, the parties hereto expressly agreeing thatthis Section 18 sets forth their entire understanding and agreement withrespect to such matters.

 

# 19.                                 **Condemnation**. If the whole or any material part ofthe Premises or the Project (which expressly includes the parking rights ofTenant and the Equipment Yard usage pursuant to this Lease) is taken for anypublic or quasi-public use under governmental law, ordinance, or regulation, orby right of eminent domain, or by private purchase in lieu thereof (a “**Taking**” or “**Taken**”), and the Taking would in Landlord’s reasonablejudgment either prevent or materially interfere with Tenant’s use of thePremises (“**Material Taking**”), thenupon written notice by Tenant to Landlord this Lease shall terminate and Rentshall be apportioned as of said date. Notwithstanding the foregoing, if Tenantreasonably disputes Landlord’s determination that the Taking would or wouldnot, as the case may be, constitute a Material Taking and the parties are notable to resolve such dispute, either Landlord or Tenant by written notice tothe other (a “**Condemnation Arbitration Notice**”)may require that the matter to be resolved in accordance with the arbitrationmethod described in Section 43.

#  

If part of the Premises shall be Taken, and this Lease is notterminated as provided above, Landlord shall promptly restore the Premises andthe Project as nearly as is commercially reasonable under the circumstances totheir condition prior to such partial Taking (including, but not limited to,providing reasonable replacement parking spaces and storage facilities if suchCommon Areas Improvements are affected) and the rentable square footage of theBuilding, the rentable square footage of the Premises, Tenant’s Share ofOperating Expenses and the Rent payable hereunder during the unexpired Termshall be reduced to such extent as may be fair and reasonable under thecircumstances. Upon any such Taking, Landlord shall be entitled to receive theentire price or award from any such Taking without any payment to Tenant, andTenant hereby assigns to Landlord Tenant’s interest, if any, in such award. Tenantshall have the right, without limitation, to make a separate claim against thecondemning authority (but not Landlord) for such compensation as may beseparately awarded or recoverable by Tenant for moving expenses and to seek aseparate award for damage to Tenant’s trade fixtures. Tenant hereby waives anyand all rights it might otherwise have pursuant to any provision of state lawto terminate this Lease upon a partial Taking of the Premises or the Project.

 

# 20.                                 **Events of Default**. Each of the following events shall be adefault (“**Default**”) by Tenantunder this Lease:

#  

## (a)                                  **Payment Defaults**. Tenant shall fail to pay anyinstallment of Rent or any other payment hereunder when due; provided that nomore than once per any consecutive twelve (12) month period and no more thanthree (3) times total throughout the Term, Tenant shall have a three (3)business day grace period following notice of such failure from Landlord to paysuch overdue amounts; provided that such notice shall be satisfied by deliveryof a notice to pay rent or quit as required under California law.

##  

## (b)                                 **Insurance**. Any insurance required to be maintainedby Tenant pursuant to this Lease shall be canceled or terminated or shallexpire or shall be reduced or materially changed, or Landlord shall receive anotice of nonrenewal of any such insurance and Tenant shall fail to obtainreplacement insurance at least fifteen (15) days before the expiration of thecurrent coverage.

##  

## (c)                                  **Abandonment**. Tenant shall abandon the Premisesexcept in the event that Tenant has performed all of its obligations under Section28 prior to such abandonment and continues to perform all of its otherobligations under this Lease during such abandonment.

##  

## (d)                                 **Improper Transfer**. Tenant shall assign, sublease orotherwise transfer or attempt to transfer all or any portion of Tenant’sinterest in this Lease or the Premises except as expressly permitted herein, orTenant’s interest in this Lease shall be attached, executed upon, or otherwisejudicially seized and such action is not released within ninety (90) days ofthe action.

 

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## (e)           **Liens**. Tenant shall fail to discharge orotherwise obtain the release of any lien placed upon the Premises in violationof this Lease within thirty (30) days after any such lien is filed against thePremises.

##  

## (f)            **Insolvency Events**. Tenant or any guarantor or surety ofTenant’s obligations hereunder shall: (A) make a general assignment for the benefit of creditors; (B) commenceany case, proceeding or other action seeking to have an order for reliefentered on its behalf as a debtor or to adjudicate it a bankrupt or insolvent,or seeking reorganization, arrangement, adjustment, liquidation, dissolution orcomposition of it or its debts or seeking appointment of a receiver, trustee,custodian or other similar official for it or for all or of any substantialpart of its property (collectively a “**Proceedingfor Relief**”); (C) become the subject of any Proceeding for Reliefwhich is not dismissed within ninety (90) days of its filing or entry; or (D)die or suffer a legal disability (if Tenant, guarantor, or surety is anindividual) or be dissolved or otherwise fail to maintain its legal existence(if Tenant, guarantor or surety is a corporation, partnership or other entity).

##  

## (g)           **Estoppel Certificate or Subordination Agreement.**Tenant failsto execute any document required from Tenant under Sections 23 or 27within five (5) days after a second notice requesting such document.

##  

## (h)           **Other Defaults**. Tenant shall fail to comply with anyprovision of this Lease other than those specifically referred to in this Section20, and, except as otherwise expressly provided herein, such failure shallcontinue for a period of thirty (30) days after written notice thereof fromLandlord to Tenant.

##  

Any notice givenunder Section 20(h) hereof shall: (i) specify the alleged default, (ii) demand that Tenant cure suchdefault, (iii) be in lieu of, and not in addition to, or shall be deemed to be,any notice required under any provision of applicable law, and (iv) not bedeemed a forfeiture or a termination of this Lease unless Landlord electsotherwise in such notice; provided that if the nature of Tenant’sdefault pursuant to Section 20(h) is such that it cannot be cured by thepayment of money and reasonably requires more than thirty (30) days to cure,then Tenant shall not be deemed to be in default if Tenant commences such curewithin said thirty (30) day period and thereafter diligently prosecutes thesame to completion; provided, however, that such cure shall be completedno later than ninety (90) days from the date of Landlord’s notice.

 

# 21.           **Landlord’s Remedies**.

#  

## (a)           **Payment By Landlord; Interest**. Upon aDefault by Tenant hereunder, Landlord may, without waiving or releasing anyobligation of Tenant hereunder, make such payment or perform such act. All sumsso paid or incurred by Landlord, together with interest thereon, from the datesuch sums were paid or incurred, at the annual rate equal to twelve percent(12%) per annum or the highest rate permitted by law (the “**Default Rate**”), whichever is less, shall bepayable to Landlord on demand as Additional Rent. Nothing herein shall beconstrued to create or impose a duty on Landlord to mitigate any damagesresulting from Tenant’s Default hereunder.

##  

## (b)           **Late Payment Rent**. Late payment by Tenant to Landlord ofRent and other sums due will cause Landlord to incur costs not contemplated bythis Lease, the exact amount of which will be extremely difficult andimpracticable to ascertain. Such costs include, but are not limited to,processing and accounting charges and late charges which may be imposed onLandlord under any Mortgage covering the Premises. Therefore, if anyinstallment of Rent due from Tenant is not received by Landlord within five (5)days after the date such payment is due, Tenant shall pay to Landlord anadditional sum equal to five percent (5%) of the overdue Rent as a late charge;provided that such late charge shall not accrue upon the first late payment inany twelve (12) month period if Tenant provides the full amount due within five(5) days after receipt of notice from Landlord that such amount was notreceived when due. The parties agree that this late charge represents a fairand reasonable estimate of the costs Landlord

 

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will incur by reason of late payment by Tenant. In addition to the latecharge, Rent not paid when due shall bear interest at the Default Rate from thefifth (5th) day after the date due until paid.

##  

## (c)           **Remedies**. Upon the occurrence of a Default,Landlord, at its option, without further notice or demand to Tenant, shall havein addition to all other rights and remedies provided in this Lease, at law orin equity, the option to pursue any one or more of the following remedies, eachand all of which shall be cumulative and nonexclusive, without any notice ordemand whatsoever.

##  

### (i)            Terminatethis Lease, or at Landlord’s option, Tenant’s right to possession only, inwhich event Tenant shall immediately surrender the Premises to Landlord, and ifTenant fails to do so, Landlord may, without prejudice to any other remedywhich it may have for possession or arrearages in rent, enter upon and takepossession of the Premises and expel or remove Tenant and any other person whomay be occupying the Premises or any part thereof, without being liable for prosecutionor any claim or damages therefor;

###  

### (ii)           Upon anytermination of this Lease, whether pursuant to the foregoing Section 21(c)(i)or otherwise, Landlord may recover from Tenant the following:

###  

#### (A)          The worth at the time of award of anyunpaid rent which has been earned at the time of such termination; plus

####  

#### (B)           The worth at the time of award of theamount by which the unpaid rent which would have been earned after terminationuntil the time of award exceeds the amount of such rental loss that Tenant provescould have been reasonably avoided; plus

####  

#### (C)           The worth at the time of award of theamount by which the unpaid rent for the balance of the Term after the time ofaward exceeds the amount of such rental loss that Tenant proves could have beenreasonably avoided; plus

####  

#### (D)          Any other amount necessary to compensateLandlord for all the detriment proximately caused by Tenant’s failure toperform its obligations under this Lease or which in the ordinary course ofthings would be likely to result therefrom, specifically including, but notlimited to, brokerage commissions and advertising expenses incurred, expensesof remodeling the Premises or any portion thereof for a new tenant, whether forthe same or a different use, and any special concessions made to obtain a newtenant; and

####  

#### (E)           At Landlord’s election, such otheramounts in addition to or in lieu of the foregoing as may be permitted fromtime to time by applicable law.

####  

The term “**rent**”as used in this Section 21 shall be deemed to be and to mean all sums ofevery nature required to be paid by Tenant pursuant to the terms of this Lease,whether to Landlord or to others. As used in Sections 21(c)(ii) (A) and (B),above, the “**worth at the time of award**”shall be computed by allowing interest at the Default Rate. As used in Section21(c)(ii)(C) above, the “**worth at thetime of award**” shall be computed by discounting such amount at thediscount rate of the Federal Reserve Bank of San Francisco at the time of awardplus 1%.

 

### (iii)          Landlord maycontinue this Lease in effect after Tenant’s Default and recover rent as itbecomes due (Landlord and Tenant hereby agreeing that Tenant has the right tosublet or assign hereunder, subject only to reasonable limitations). Accordingly,if Landlord does not elect to terminate this Lease following a Default byTenant, Landlord may, from time to time, without terminating this Lease,enforce all of its rights and remedies hereunder, including the right torecover all Rent as it becomes due.

 

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### (iv)          Whether ornot Landlord elects to terminate this Lease following a Default by Tenant,Landlord shall have the right to terminate any and all subleases, licenses,concessions or other consensual arrangements for possession entered into byTenant and affecting the Premises or may, in Landlord’s sole discretion,succeed to Tenant’s interest in such subleases, licenses, concessions orarrangements. Upon Landlord’s election to succeed to Tenant’s interest in anysuch subleases, licenses, concessions or arrangements, Tenant shall, as of thedate of notice by Landlord of such election, have no further right to orinterest in the rent or other consideration receivable thereunder.

###  

### (v)           Independentof the exercise of any other remedy of Landlord hereunder or under applicablelaw, Landlord may conduct an environmental test of the Premises as generallydescribed in Section 30(d) hereof, at Tenant’s expense.

###  

## (d)           **Effect of Exercise**. Exercise by Landlord of any remedieshereunder or otherwise available shall not be deemed to be an acceptance ofsurrender of the Premises and/or a termination of this Lease by Landlord, itbeing understood that such surrender and/or termination can be effected only bythe express written agreement of Landlord and Tenant or except as provided in Section 41of this Lease. Any law, usage, or custom to the contrary notwithstanding,Landlord shall have the right at all times to enforce the provisions of thisLease in strict accordance with the terms hereof; and the failure of Landlordat any time to enforce its rights under this Lease strictly in accordance withsame shall not be construed as having created a custom in any way or mannercontrary to the specific terms, provisions, and covenants of this Lease or ashaving modified the same and shall not be deemed a waiver of Landlord’s rightto enforce one or more of its rights in connection with any subsequent default.A receipt by Landlord of Rent or other payment with knowledge of the breach ofany covenant hereof shall not be deemed a waiver of such breach, and no waiverby Landlord of any provision of this Lease shall be deemed to have been madeunless expressed in writing and signed by Landlord. To the greatest extentpermitted by law, Tenant waives all right of redemption in case Tenant shall bedispossessed by a judgment or by warrant of any court or judge. Any relettingof the Premises or any portion thereof shall be on such terms and conditions asLandlord in its sole discretion may determine.

##  

# 22.           **Assignment and Subletting**.

#  

## (a)           **General Prohibition**. Without Landlord’s prior writtenconsent subject to and on the conditions described in this Section 22,Tenant shall not, directly or indirectly, voluntarily or by operation of law,assign this Lease or sublease the Premises or any part thereof or mortgage,pledge, or hypothecate its leasehold interest or grant any concession orlicense within the Premises, and any attempt to do any of the foregoing shallbe void and of no effect. Except in the case of a Permitted Assignment (asdefined below), if Tenant is a corporation, partnership or limited liabilitycompany, with respect to shares or other ownership interests thereof which arenot actively traded upon a stock exchange or in the over-the-counter market,any transfer or series of transfers whereby forty-nine percent (49%) or more ofsuch issued and outstanding shares or other ownership interests of suchcorporation are, or voting control is, transferred (but excepting transfers onany national exchange as long as Tenant is publicly traded or upon deaths ofindividual owners) from a person or persons or entity or entities which wereowners thereof at time of the execution of this Lease to persons or entitieswho were not owners of shares or other ownership interests of the corporation,partnership or limited liability company at time of execution of this Lease,shall be deemed an assignment of this Lease requiring the consent of Landlordas provided in this Section 22.

##  

## (b)           **Permitted Transfers**. If Tenant desires to assign, sublease,hypothecate or otherwise transfer this Lease or sublet the Premises other thanpursuant to a Permitted Assignment (as defined below), then at least fifteen(15) days, but not more than forty-five (45) days, before the date Tenantdesires the assignment or sublease to be effective (the “**Assignment Date**”), Tenant shall giveLandlord a notice (the “**Assignment Notice**”)containing such information about the proposed assignee or sublessee, includingthe proposed use of the Premises and any Hazardous Materials proposed to beused, stored handled, treated, generated in or released or disposed of from thePremises, the

 

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Assignment Date, any relationship between Tenant and the proposedassignee or sublessee, and all material terms and conditions of the proposedassignment or sublease, including a copy of any proposed assignment or subleasein its final form, and such other information as Landlord may deem reasonablynecessary or appropriate to its consideration whether to grant its consent. Landlordmay, by giving written notice to Tenant within fifteen (15) days after receiptof the Assignment Notice:  (i) grant suchconsent or (ii) refuse such consent (which consent will not be unreasonablywithheld or delayed) (provided that Landlord shall further have the right toreview and approve or disapprove the proposed form of sublease prior to theeffective date of any such subletting). Tenant shall reimburse Landlord for allof Landlord’s reasonable out-of-pocket expenses in connection with itsconsideration of any Assignment Notice. Notwithstanding the foregoing, Tenantshall be permitted to assign its interest in this Lease or sublet all or aportion of the Premises upon thirty (30) days prior written notice to Landlordbut without Landlord’s prior written consent to an entity which (A) (1)controls, is controlled by, or is under common control with Tenant; (2) resultsfrom a merger of, reorganization of, or consolidation with Tenant; or (3)acquires substantially all of the stock or assets of Tenant, as a goingconcern, with respect to the business that is being conducted in the Premises;and (B) has a tangible net worth (as determined in accordance with generallyaccepted accounting principles (“**GAAP**”))following such transfer which is equal to or greater than the tangible networth (as determined in accordance with GAAP) of Tenant as of the same date,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 theassignment (each a “**Permitted Assignment**”).In addition, a sale or transfer of the capital stock or interests in ormemberships in Tenant shall be deemed a Permitted Assignment if such sale ortransfer occurs in connection with any bona fide financing or capitalizationfor the benefit of Tenant. Any assignment or sublease pursuant to a PermittedAssignment shall not relieve the assigning Tenant of any liability under thisLease. For all purposes of this Lease, the term “Tenant” shall mean Tenant andany transferee pursuant to a Permitted Assignment assuming Tenant’s interest inthis Lease. Landlord acknowledges and agrees that Landlord’s right under thisparagraph to receive notice in the case of a Permitted Assignment is not intendedto create a consent right in favor of Landlord as to the transactionconstituting the Permitted Assignment but rather the right to receive priornotice of a Permitted Assignment and Landlord shall keep all non-publicinformation made available by Tenant to Landlord regarding the proposedPermitted Assignment confidential until the effective date of said PermittedAssignment.

##  

## (c)           **Additional Conditions**. As a condition to any such assignmentor subletting, whether or not Landlord’s consent is required, Landlord mayrequire:

##  

### (i)            that anyassignee or subtenant agree, in writing at the time of such assignment orsubletting, that if Landlord gives such party notice that Tenant is in defaultunder this Lease, such party shall thereafter make all payments otherwise dueTenant directly to Landlord, which payments will be received by Landlordwithout any liability except to credit such payment against those due under theLease, and any such third-party shall agree to attorn to Landlord or itssuccessors and assigns should this Lease be terminated for any reason; provided,however, in no event shall Landlord or its successors or assigns beobligated to accept such attornment; and

###  

### (ii)           A list ofHazardous Materials, certified by the proposed assignee or sublessee to be trueand correct, which the proposed assignee or sublessee intends to use, store,handle, treat, generate in or release or dispose of from the Premises, togetherwith copies of all documents relating to such use, storage, handling,treatment, generation, release or disposal of Hazardous Materials by theproposed assignee or subtenant in the Premises or on the Project, prior to theproposed assignment or subletting, including, without limitation:  permits; approvals; reports andcorrespondence; storage and management plans; plans relating to theinstallation of any storage tanks to be installed in or under the Project bysuch assignee or subtenant (provided, said installation of tanks shall only bepermitted after Landlord has given its written consent to do so, which consentmay be withheld in Landlord’s sole and absolute discretion); and all closureplans or any other documents required by any and all federal, state and localGovernmental Authorities for any storage tanks installed in, on or under theProject, by such assignee or subtenant, for the closure of any such tanks. NeitherTenant nor any such proposed assignee or

 

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### subtenantis required, however, to provide Landlord with any portion(s) of the suchdocuments containing information of a proprietary nature which, in and ofthemselves, do not contain a reference to any Hazardous Materials or hazardousactivities.

###  

## (d)           **No Release of Tenant, Sharing of Excess Rents**. Notwithstandingany assignment or subletting, Tenant and any guarantor or surety of Tenant’sobligations under this Lease shall at all times remain fully and primarilyresponsible and liable for the payment of Rent and for compliance with all ofTenant’s other obligations under this Lease. Except in the case of a PermittedAssignment, if the rental amount received by Tenant from a sublessee orassignee (or a combination of the rental received pursuant to such sublease orassignment plus any bonus or other consideration therefor in any form,exclusive of the reasonable sales price of Tenant’s Property) exceeds the sumof******theRent payable by Tenant under this Lease (which shall exclude, however, any Rentpayable under this Section 22(d)) and actual and reasonable brokeragefees, legal costs, costs paid to Landlord pursuant to its consent to suchsubletting or assignment, and any design or construction fees and costsdirectly related to and required pursuant to the terms of any such sublease),then Tenant shall be bound and obligated to pay Landlord as Additional Renthereunder fifty percent (50%) of such net rental amount received by Tenant inexcess of Tenant’s Rent (“**Excess Rent**”)within ten (10) days following receipt thereof by Tenant. Notwithstanding theforegoing, upon and after a Default Tenant shall be bound and obligated to payLandlord as Additional Rent hereunder one hundred percent (100%) of Excess Rentwithin 10 days following receipt thereof by Tenant. Notwithstanding theforegoing, the calculation of Excess Rent shall be determined by the aggregateincome and expense attributable to all subleases and assignments of Tenant atthe Property at the time of such determination. If Tenant shall sublet thePremises or any part thereof, Tenant hereby immediately and irrevocably assignsto Landlord, as security for Tenant’s obligations under this Lease, all rentfrom any such subletting, and Landlord as assignee and as attorney-in-fact forTenant, or a receiver for Tenant appointed on Landlord’s application, maycollect such rent and apply it toward Tenant’s obligations under this Lease;except that, until the occurrence of a Default, Tenant shall have the right tocollect such rent; provided that, Tenant shall use commercially reasonableefforts to collect the contract rents due from any such transferee.

##  

## (e)           **No Waiver**. The consent by Landlord to anassignment or subletting shall not relieve Tenant or any assignees of thisLease or any sublessees of the Premises from obtaining the consent of Landlordto any further assignment or subletting nor shall it release Tenant or anyassignee or sublessee of Tenant from full and primary liability under the Lease.The acceptance of Rent hereunder, or the acceptance of performance of any otherterm, covenant, or condition thereof, from any other person or entity shall notbe deemed to be a waiver of any of the provisions of this Lease or a consent toany subletting, assignment or other transfer of the Premises.

##  

# 23.           **Estoppel Certificate.**Tenant shall, within ten (10) businessdays of written notice from Landlord, execute, acknowledge and deliver astatement in writing in any form reasonably requested by a proposed lender orpurchaser, (i) certifying that this Lease is unmodified and in full force andeffect (or, if modified, stating the nature of such modification and certifyingthat this Lease as so modified is in full force and effect) and the dates towhich the rental and other charges are paid in advance, if any, (ii)acknowledging that there are not, to Tenant’s actual knowledge, any uncureddefaults on the part of Landlord hereunder, or specifying such defaults if anyare claimed, and (iii) setting forth such further factual information withrespect to the status of this Lease or the Premises as may be reasonablyrequested thereon; provided that Tenant shall not be required to provideproprietary information pursuant to such request. Any such statement may berelied upon by any prospective purchaser or encumbrancer of all or any portionof the real property of which the Premises are a part. Tenant’s failure todeliver such statement within such time shall, at the option of Landlord, beconclusive upon Tenant that the Lease is in full force and effect and withoutmodification except as may be represented by Landlord in any certificateprepared by Landlord and delivered to Tenant for execution.

#  

# 24.           **Quiet Enjoyment**. So long as Tenant is not in Defaultunder this Lease, Tenant shall, subject to the terms of this Lease, at alltimes during the Term, have peaceful and quiet enjoyment of the

 

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Premises against any person claiming by, through or under Landlord, orotherwise claiming an interest in the Project.

#  

# 25.           **Prorations.**All prorations required or permitted tobe made hereunder shall be made on the basis of a three hundred sixty (360) dayyear and thirty (30) day months.

#  

# 26.           **Rules and Regulations**. Tenant shall, at all times during theTerm, comply with all reasonable rules and regulations at any time or from timeto time established by Landlord covering use of the Premises and the Project. Thecurrent rules and regulations are attached hereto as **Exhibit E**. If there is any conflict between said rules andregulations and other provisions of this Lease, the terms and provisions ofthis Lease shall control. Landlord shall not have any liability or obligationfor the breach of any rules or regulations by other tenants in the Project andshall not enforce such rules and regulations in a discriminatory manner.

#  

# 27.           **Subordination**. Landlord represents and warrants thatas of the date of this Lease, the Project is not encumbered by a mortgage, deedof trust or ground lease. This Lease and Tenant’s interest and rights hereunderare hereby made and shall be subject and subordinate at all times to the lienof any Mortgage now existing or hereafter created on or against the Project orthe Premises, and all amendments, restatements, renewals, modifications,consolidations, refinancing, assignments and extensions thereof, without thenecessity of any further instrument or act on the part of Tenant; provided,however that Landlord shall use commercially reasonable efforts to obtain forthe benefit of Tenant from any Holder of a future Mortgage a commerciallyreasonable non-disturbance agreement which provides, among other things, thatso long as there is no Default hereunder, this Lease shall not be terminatedand Tenant’s right to possession of the Premises shall not be disturbed by theHolder of any such Mortgage. Notwithstanding the foregoing, Tenant shallexecute and deliver, upon ten (10) business days prior written notice, suchfurther instrument or instruments evidencing such subordination of this Leaseto the lien of any such Mortgage or Mortgages as may be required by Landlord. However,if any such Holder so elects, this Lease shall be deemed prior in lien to anysuch Mortgage or Mortgages regardless of the date and Tenant will execute astatement in writing to such effect at Landlord’s request. In the event anyproceedings are brought for foreclosure, or in the event of the exercise of thepower of sale under an Mortgage, Tenant shall at the election of the purchaserat such foreclosure or sale attorn to the purchaser upon any such foreclosureor sale and recognize such purchaser as the Landlord under this Lease, so longas such purchaser executes a written recognition agreement in form reasonablysatisfactory to Landlord and Tenant providing that, so long as Tenant is not inDefault hereunder, Tenant’s rights of occupancy shall not be disturbed andTenant shall receive all of the rights and services provided for under thisLease. Notwithstanding anything to the contrary in this Section 27, as acondition to Tenant’s obligation to subordinate its leasehold interest to theinterests of a Holder, Landlord shall obtain from any such Holder a writtenrecognition agreement in form reasonably satisfactory to Landlord, Tenant andthe Holder providing that Tenant’s rights of occupancy shall not be disturbedin the event of a termination of the Mortgage, and that in the event of such terminationor foreclosure, so long as Tenant is not in Default hereunder, Tenant shallreceive all of the rights and services provided under this Lease. The term “**Mortgage**” whenever used in this Lease shallbe deemed to include deeds of trust, security assignments and any otherencumbrances, and any reference to the “**Holder**”of a Mortgage shall be deemed to include the beneficiary under a deed of trust.

#  

# 28.           **Surrender**.

#  

## (a)           Upon theexpiration of the Term or earlier termination of Tenant’s right of possession,Tenant shall surrender the Premises to Landlord in the same condition asreceived, subject to any Alterations or Installations permitted by Landlord toremain in the Premises, free of Hazardous Materials brought upon, kept, used,stored, handled, treated, generated in, or released or disposed of from, thePremises by any person other than Landlord and its Related Parties(collectively, “**Tenant HazMat Operations**”),and released of all Hazardous Materials Clearances, broom clean, ordinary wearand tear and casualty loss and condemnation covered by Sections 18 and 19excepted. At least three (3) months prior to the surrender of the Premises,Tenant shall deliver to Landlord a narrative description of the

 

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actions proposed (or required by any Governmental Authority) to betaken by Tenant in order to surrender the Premises (including any Installationspermitted by Landlord to remain in the Premises) at the expiration or earliertermination of the Term, free from any residual impact from the Tenant HazMatOperations, and otherwise released for unrestricted use and occupancy, whichactions shall be generally consistent with the surrender plan attached heretoas **Exhibit H** (the “**Surrender Plan**”). Such Surrender Plan shallbe accompanied by a current listing of (i) all Hazardous Materialslicenses and permits held by or on behalf of any Tenant Party with respect tothe Premises, and (ii) all Hazardous Materials used, stored, handled, treated,generated, released or disposed of from the Premises, and shall be subject tothe review and approval of Landlord’s environmental consultant. In connectionwith the review and approval of the Surrender Plan, upon the request ofLandlord, Tenant shall deliver to Landlord or its consultant such additionalnon-proprietary information concerning Tenant HazMat Operations as Landlordshall request. Landlord shall be permitted to require reasonable modificationsto account for changes in Legal Requirements following the date of this Leaseor resulting from any change in the nature or quantity of the chemical,biological or radiological materials or substances utilized by Tenant duringthe Term as compared to materials or substances utilized by Tenant at thepremises located at 11099 North Torrey Pines Road which Tenant occupies as ofthe date of this Lease, including but not limited to changes in the types ofexperiments being conducted by Tenant, the presence of any storage tankswhether above or below ground and the introduction of radioactive materials byTenant. On or before such surrender, Tenant shall deliver to Landlord evidencethat the approved Surrender Plan shall have been satisfactorily completed andLandlord shall have the right, subject to reimbursement at Tenant’s expense asset forth below, to cause Landlord’s environmental consultant to inspect thePremises and perform such additional procedures as may be deemed reasonablynecessary to confirm that the Premises are, as of the effective date of suchsurrender or early termination of the Lease, free from any residual impact fromTenant HazMat Operations. Tenant shall reimburse Landlord, as Additional Rent,for the actual out-of pocket expense incurred by Landlord for Landlord’senvironmental consultant to review and approve the Surrender Plan (whichapproval shall not be unreasonably withheld or conditioned) and to visit thePremises and verify satisfactory completion of the same, which cost shall notexceed Five Thousand Dollars ($5,000). Landlord shall have the unrestricted rightto deliver such Surrender Plan and any report by Landlord’s environmentalconsultant with respect to Tenant’s surrender of the Premises to any subsequenttenant, or to any purchaser of Landlord’s interest in the Project, any Holderof a Mortgage on the Premises, any ground lessor holding fee title to theProject parcel or any other third party who Landlord reasonably determines hasa need to review the Surrender Plan.

##  

## (b)           If Tenantshall fail to complete the requirements of the Surrender Plan, or if suchSurrender Plan, whether or not approved by Landlord, shall fail to adequatelyaddress any residual effect of Tenant HazMat Operations in, on or about thePremises, Landlord shall have the right to take such actions as Landlord maydeem reasonable or appropriate to assure that the Premises and the Project aresurrendered free from any residual impact from Tenant HazMat Operations, thecost of which actions shall be reimbursed by Tenant as Additional Rent, withoutregard to the limitation set forth in the first paragraph of this Section 28.

##  

## (c)           Tenant shallimmediately return to Landlord all keys and/or access cards to parking, theProject, restrooms or all or any portion of the Premises furnished to orotherwise procured by Tenant. If the Premises security system is installed atLandlord’s sole cost and expense, and any such access card or key is lost,Tenant shall pay to Landlord, at Landlord’s election, either the cost ofreplacing such lost access card or key or the cost of reprogramming the accesssecurity system in which such access card was used or changing the lock orlocks opened by such lost key. Any Tenant’s Property, Alterations and propertynot so removed by Tenant as permitted or required herein shall be deemedabandoned and may be stored, removed, and disposed of by Landlord at Tenant’sexpense, and Tenant waives all claims against Landlord for any damagesresulting from Landlord’s retention and/or disposition of such property. Allobligations of Landlord and Tenant hereunder not fully performed as of thetermination of the Term, including the obligations of Tenant under Section30 hereof, shall survive the expiration or earlier termination of the Term,including, without limitation, indemnity obligations, payment obligations withrespect to Rent and obligations concerning the condition and repair of thePremises.

 

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## (d)           Notwithstandinganything to the contrary herein, (i) Tenant shall be required to removeany cabling it installs in the Building upon the expiration or earliertermination of this Lease to the extent required by applicable building code orother governmental requirement or any governmental official and(ii) Tenant shall not be obligated to remove any of the Tenant Improvements(except for Tenant’s Building-top signage) or other telecommunication orsecurity systems (other than Tenant’s rooftop antennae, if any, or as providedin clause (i) of this sentence) upon the expiration or earlier termination ofthis Lease unless in Landlord’s reasonable judgment any Tenant Improvements areeither (1) not consistent with standard office/laboratory construction or(2) have customized or unique features (other than features consistentwith standard lab and research and development facilities with related officeuse) which would detract from the value or utility of the Building and arerequired to be removed by Landlord as a condition to Landlord’s approval of theTI Construction Drawings (as defined in the Work Letter).

##  

# 29.           **Waiver of Jury Trial**. TENANT AND LANDLORD WAIVE ANY RIGHT TOTRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHERSOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISINGOUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED ORDELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.

#  

# 30.           **Environmental Requirements**.

#  

## (a)           **Prohibition/Compliance/Indemnity**. Tenantshall not cause or, as to any Tenant Party, permit any Hazardous Materials (ashereinafter defined) to be brought upon, kept, used, stored, handled, treated,generated in or about, or released or disposed of from, the Premises or theProject in violation of applicable Environmental Requirements (as hereinafterdefined) by Tenant or any Tenant Party. If Tenant breaches the obligationstated in the preceding sentence, or if the presence of Hazardous Materials inthe Premises during the Term results in contamination of the Premises, theProject or any adjacent property, or if contamination of the Premises, theProject or any adjacent property by Hazardous Materials brought into, kept,used, stored, handled, treated, generated in or about, or released or disposedof from, the Premises by anyone other than Landlord and Landlord’s employees,agents and contractors, otherwise occurs during the Term or any holding over,Tenant shall indemnify, defend and hold Landlord, its officers, directors,employees, agents and contractors harmless from any and all actions (including,without limitation, remedial or enforcement actions of any kind, administrativeor judicial proceedings, and orders or judgments arising out of or resultingtherefrom), costs, claims, damages (including, without limitation, damagesbased upon diminution in value of the Premises or the Project, or the loss of,or restriction on, use of the Premises or any portion of the Project), expenses(including, without limitation, attorneys’, consultants’ and experts’ fees,court costs and amounts paid in settlement of any claims or actions), fines, forfeituresor other civil, administrative or criminal penalties, injunctive or otherrelief (whether or not based upon personal injury, property damage, orcontamination of, or adverse effects upon, the environment, water tables ornatural resources), liabilities or losses (collectively, “**Environmental Claims**”) which arise duringor after the Term as a result of such contamination, except to the extent theHazardous Materials are present as the result of the acts of Landlord orLandlord’s employees, agents and contractors. This indemnification of Landlordby Tenant includes, without limitation, costs incurred in connection with anyinvestigation of site conditions or any cleanup, treatment, remedial, removal,or restoration work required by any federal, state or local GovernmentalAuthority because of Hazardous Materials present in the air, soil or groundwater above, on, or under the Premises. Without limiting the foregoing, if thepresence of any Hazardous Materials on the Premises, the Building, the Projector any adjacent property caused or permitted by Tenant or any Tenant Partyresults in any contamination of the Premises, the Building, the Project or anyadjacent property, Tenant shall promptly take all actions at its sole expense,except to the extent the Hazardous Materials are present as the result of theacts of Landlord or Landlord’s employees, agents and contractors, and inaccordance with applicable Environmental Requirements as are necessary toreturn the Premises, the Building, the Project or any adjacent property to thecondition existing prior to the time of such contamination, provided thatLandlord’s approval of such action shall first be obtained, which approvalshall not unreasonably be withheld so long as such actions would not potentiallyhave any material adverse long-term or short-term effect on the Premises, theBuilding or the Project.

 

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Notwithstanding anything to the contrary contained in this Section30, Tenant shall not be responsible for, and the indemnification and holdharmless obligation set forth in this paragraph shall not apply to, thepresence of Hazardous Materials in, on or about the Project (other than withinthe Premises) unless the presence of such Hazardous Materials (i) is theresult of a breach by Tenant of any of its obligations under this Lease,(ii) was caused by Tenant or any Tenant Party, (iii) was contributedto by Tenant or any Tenant Party (but Tenant’s responsibility andindemnification and hold harmless obligation shall be limited to the extentthat Tenant or any Tenant Party contributed to the presence of HazardousMaterials), (iv) was exacerbated by Tenant or any Tenant Party (except ifTenant or the Tenant Party had no prior knowledge (and can reasonably demonstratethat they had no prior knowledge) of the existence of such Hazardous Materials,or (v) originates from the Premises during Tenant’s (or any assignee’s orsublessee’s) occupancy of the Premises (or any portion thereof).

##  

## (b)           **Business.**Landlord acknowledges that it is not theintent of this Section 30 to prohibit Tenant from using the Premises forthe Permitted Use. Tenant may operate its business according to prudentindustry practices so long as the use or presence of Hazardous Materials isstrictly and properly monitored according to all then applicable EnvironmentalRequirements. As a material inducement to Landlord to allow Tenant to useHazardous Materials in connection with its business, Tenant agrees to deliverto Landlord prior to the Commencement Date a list identifying each type ofHazardous Materials to be brought upon, kept, used, stored, handled, treated,generated on, or released or disposed of from, the Premises and setting forthany and all governmental approvals or permits required in connection with thepresence, use, storage, handling, treatment, generation, release or disposal ofsuch Hazardous Materials on or from the Premises (“**Hazardous Materials List**”). Tenant shall deliver to Landlordan updated Hazardous Materials List at least once a year and one additionaltime per year following the written request of Landlord. Tenant shall deliverto Landlord true and correct copies of the following documents (the “**Haz Mat Documents**”), if any, relating tothe use, storage, handling, treatment, generation, release or disposal ofHazardous Materials prior to the Commencement Date, or if unavailable at thattime, concurrent with the receipt from or submission to a GovernmentalAuthority:  permits; approvals; reportsand correspondence; storage and management plans, notice of violations of anyLegal Requirements; plans relating to the installation of any storage tanks tobe installed in or under the Project (provided, said installation of tanksshall only be permitted after Landlord has given Tenant its written consent todo so, which consent may be withheld in Landlord’s sole and absolutediscretion); all closure plans or any other documents required by any and allfederal, state and local Governmental Authorities for any storage tanks installedin, on or under the Project for the closure of any such tanks; and a SurrenderPlan (to the extent surrender in accordance with Section 28 cannot beaccomplished in three (3) months). Tenant is not required, however, to provideLandlord with any portion(s) of the Haz Mat Documents containing information ofa proprietary nature which, in and of themselves, do not contain a reference toany Hazardous Materials or hazardous activities. It is not the intent of this Section30 to provide Landlord with information which could be detrimental toTenant’s business should such information become possessed by Tenant’scompetitors.

##  

## (c)           **Tenant Representation and Warranty**. Tenanthereby represents and warrants to Landlord that, (i) neither Tenant nor any ofits legal corporate predecessors has been required by any prior landlord (otherthan ARE 11099 North Torrey Pines Road, LLC), lender or Governmental Authorityat any time to take remedial action in connection with Hazardous Materialscontaminating a property which contamination was permitted by Tenant of suchpredecessor or resulted from Tenant’s or such predecessor’s action or use ofthe property in question, and (ii) Tenant is not subject to any enforcementorder issued by any Governmental Authority in connection with the use, storage,handling, treatment, generation, release or disposal of Hazardous Materials(including, without limitation, any order related to the failure to make arequired reporting to any Governmental Authority). If Landlord determines thatthis representation and warranty was not true as of the date of this leaseLandlord shall have the right to terminate this Lease in Landlord’s sole andabsolute discretion.

##  

## (d)           **Testing**. Landlord shall have the right toconduct annual tests of the Premises to determine whether any contamination ofthe Premises or the Project has occurred as a result of Tenant’s use. Suchtests shall be conducted at Landlord’s sole cost and expense (and not includedas an

 

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Operating Expense), unless such tests are conducted pursuant to Section21 hereof or reveal that Tenant has not complied with any EnvironmentalRequirement, in which case Tenant shall reimburse Landlord for the reasonablecost of such tests. Landlord and Tenant shall cooperate with one another toschedule such testing at a mutually acceptable time. Tenant shall have theright to have a representative present during such testing. If Tenant, atTenant’s expense, conducts its own tests of the Premises using third-partycontractors and test procedures reasonably acceptable to Landlord which testsare certified to Landlord, Landlord shall accept such tests in lieu of theannual tests. In addition, at any time, and from time to time, prior to theexpiration or earlier termination of the Term, Landlord shall have the right toconduct appropriate tests of the Premises and the Project to determine ifcontamination has occurred as a result of Tenant’s use of the Premises. Inconnection with such testing, upon the request of Landlord, Tenant shalldeliver to Landlord or its consultant such non-proprietary informationconcerning the use of Hazardous Materials in or about the Premises by Tenant orany Tenant Party. If contamination has occurred for which Tenant is liableunder this Section 30, Tenant shall pay all costs to conduct such tests.If no such contamination for which Tenant is liable is found, Landlord shallpay the costs of such tests (which shall not constitute an Operating Expense). Landlordshall provide Tenant with a copy of all third-party, non-confidential reportsand tests of the Premises made by or on behalf of Landlord during the Termwithout representation or warranty and subject to a confidentiality agreement. Tenantshall, at its sole cost and expense, promptly and satisfactorily remediate anyenvironmental conditions identified by such testing in accordance with allEnvironmental Requirements. Landlord’s receipt of or satisfaction with anyenvironmental assessment in no way waives any rights which Landlord may haveagainst Tenant.

##  

## (e)           **Tanks**. Tenant shall have no right to installor use any underground storage tanks at the Premises or the Project. If otherstorage tanks storing Hazardous Materials located on the Premises or theProject are used by Tenant or are hereafter placed on the Premises or theProject by Tenant, Tenant shall install, use, monitor, operate, maintain,upgrade and manage such storage tanks, maintain appropriate records, obtain andmaintain appropriate insurance, implement reporting procedures, properly closeany storage tanks, and take or cause to be taken all other actions necessary orrequired under applicable state and federal Legal Requirements, as such nowexists or may hereafter be adopted or amended in connection with the installation,use, maintenance, management, operation, upgrading and closure of such storagetanks.

##  

## (f)            **Tenant’s Obligations**. Tenant’s obligations under this Section30 shall survive the expiration or earlier termination of the Lease. Duringany period of time after the expiration or earlier termination of this Leaserequired by Tenant or Landlord to complete the removal from the Premises of anyHazardous Materials which Tenant is required under this Lease to remove(including, without limitation, the release and termination of any licenses orpermits restricting the use of the Premises and the completion of the approvedSurrender Plan), Tenant shall continue to pay the full Rent in accordance withthis Lease for any portion of the Premises not relet by Landlord in Landlord’ssole discretion, which Rent shall be prorated daily.

##  

## (g)           **Definitions.**As used herein, the term “**Environmental Requirements**” means allapplicable present and future statutes, regulations, ordinances, rules, codes,judgments, orders or other similar enactments of any Governmental Authorityregulating or relating to health, safety, or environmental conditions on,under, or about the Premises or the Project, or the environment, includingwithout limitation, the following:  theComprehensive Environmental Response, Compensation and Liability Act; theResource Conservation and Recovery Act; and all state and local counterpartsthereto, and any regulations or policies promulgated or issued thereunder. Asused herein, the term “**Hazardous Materials**”means and includes any substance, material, waste, pollutant, or contaminantlisted or defined as hazardous or toxic, or regulated by reason of its impactor potential impact on humans, animals and/or the environment under anyEnvironmental Requirements, asbestos and petroleum, including crude oil or anyfraction thereof, natural gas liquids, liquefied natural gas, or synthetic gasusable for fuel (or mixtures of natural gas and such synthetic gas). As definedin Environmental Requirements, Tenant is and shall be deemed to be the “**operator**” of Tenant’s “**facility**” and the “**owner**” of all Hazardous Materials broughton the Premises by Tenant or any Tenant Party, and the wastes, by-products, orresidues generated, resulting, or produced therefrom.

 

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## (h)           **Landlord Representation and Warranty;****Baseline Environmental Reports**. Landlordhereby represents and warrants that, to Landlord’s actual knowledge as of thetime of the execution of this Lease, and subject to the contents of thedocuments, reports or other written information regarding the environmentalcondition of the Project described on **ExhibitI** hereto, the Project does not contain any pre-existing HazardousMaterials in violation of any Environmental Requirements. Tenant herebyacknowledges receipt of all items set forth on **Exhibit I** hereto and accepts the Project in the conditiondescribed therein.

##  

# 31.           **Tenant’s Remedies/Limitation of Liability**. Landlordshall not be in default hereunder unless Landlord fails to perform any of itsobligations hereunder within thirty (30) days after written notice from Tenantspecifying such failure (unless such performance will, due to the nature of theobligation, require a period of time in excess of thirty (30) days, then after suchperiod of time as is reasonably necessary). Upon any default by Landlord,Tenant shall give notice by registered or certified mail to any Holder of aMortgage covering the Premises and to any landlord of any lease of property inor on which the Premises are located and Tenant shall offer such Holder and/orlandlord a period of sixty (60) days to cure the default (unless suchperformance will, due to the nature of the obligation, require a period of timein excess of sixty (60) days, in which case such Holder and/or Landlord shallhave such period of time as is reasonably necessary to effect a cure providedthat Holder and/or Landlord is diligent in attempting to effect such cure),including time to obtain possession of the Project, whether by power of sale,judicial action or other legal means reasonably available to such Holder, tothe extent such means are necessary to effect a cure; provided Landlordshall have furnished to Tenant in writing the names and addresses of all suchpersons who are to receive such notices. All obligations of Landlord hereundershall be construed as covenants, not conditions; and, except as may beotherwise expressly provided in this Lease, Tenant may not terminate this Leasefor breach of Landlord’s obligations hereunder.

#  

Notwithstanding the foregoing, if any claimed Landlord defaulthereunder (regardless of the cure period set forth in the first sentence ofthis Section 31), will immediately, materially and adversely affectTenant’s ability to conduct its business in the Premises (a “**Material Landlord Default**”), Tenant shall,as soon as reasonably possible, but in any event within two (2) business daysof obtaining knowledge of such claimed Material Landlord Default, give Landlordwritten notice of such claim and telephonic notice to Tenant’s principalcontact with Landlord. Such written notice shall specifically state in boldface type that Tenant claims that a “Material Landlord Default” has occurred. Landlordshall then have two (2) business days to commence cure of such claimed MaterialLandlord Default and shall diligently prosecute such cure to completion. Ifsuch claimed Material Landlord Default is not a default by Landlord hereunder,or if Tenant failed to give Landlord the notice required hereunder within two(2) business days of learning of the conditions giving rise to the claimedMaterial Landlord Default, Landlord shall be entitled to recover from Tenant,as Additional Rent, any costs incurred by Landlord in connection with such curein excess of the costs, if any, that Landlord would otherwise have been liableto pay hereunder. If Landlord fails to commence cure of any claimed MaterialLandlord Default as provided above, Tenant may commence and prosecute such cureto completion, and shall be entitled to recover the costs of such cure (but notany consequential or other damages) from Landlord, to the extent of Landlord’sobligation to cure such claimed Material Landlord Default hereunder, subject tothe limitations set forth in the immediately preceding sentence of thisparagraph and the other provisions of this Lease.

 

All obligations of Landlord under this Lease will be binding uponLandlord only during the period of its ownership of the Premises and notthereafter. The term “**Landlord**” inthis Lease shall mean only the owner for the time being of the Premises. Uponthe transfer by such owner of its interest in the Premises, such owner shallthereupon be released and discharged from all obligations of Landlordthereafter accruing, but such obligations shall be binding during the Term uponeach new owner for the duration of such owner’s ownership. Notwithstanding theforegoing, to the extent the Landlord originally named in this Lease (the “**Original Landlord**”) assigns or otherwisetransfers its interest in the Project prior to Landlord’s completion of all of(i) the Landlord’s Work pursuant to the Work Letter and (ii) thedistribution of the entire TI Allowance timely requested by Tenant(collectively, the “**Original LL Requirements**”),then the Original Landlord shall remain personally responsible for suchOriginal LL Requirements following such assignment or transfer.

 

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# 32.           **Inspection and Access**. Except in the case of an emergency,Landlord and its agents, representatives, and contractors may enter thePremises during normal business hours of Tenant’s business operations in thePremises, subject to Tenant’s reasonable security and safety requirements(including, but not limited to, escorted access in any laboratory facilities),to inspect the Premises (including, without limitation, the state of themaintenance, repairs, decorations and order of the Premises) and to make suchrepairs as may be required or permitted pursuant to this Lease and for anyother business purpose. Landlord and Landlord’s representatives may enter thePremises during business hours on not less than forty-eight (48) hours advancewritten notice (except in the case of emergencies in which case no such noticeshall be required and such entry may be at any time) for the purpose ofeffecting any such repairs, inspecting the Premises, or, subject to acommercially reasonable non-disclosure agreement, if required by Tenant fromany such third parties, for the purpose of showing the Premises to prospectivepurchasers or other third parties required due to Landlord’s ownership oroperation of the Project and, during the last year of the Term, to prospectivetenants. Landlord may erect a suitable sign on the Building stating(i) the Premises are available to let during the last twelve (12) monthsof the Term and/or (ii) that the Project is available for sale. Landlordshall not otherwise allow any broker or Landlord signs to be erected orinstalled on the Building. Subject to the limitation of Section 1(a)above, and subject to Landlord’s obligations under Section 10 relatingto parking spaces, Landlord may grant easements, make public dedications,designate Common Areas and create restrictions on or about the Premises, providedthat no such easement, dedication, designation or restriction materially,adversely affects Tenant’s use or occupancy of the Premises for the PermittedUse or materially increase Tenant’s cost of occupying or operating ormaintaining the Premises. At Landlord’s request, Tenant shall execute suchinstruments as may be necessary for such permitted easements, dedications orrestrictions. Tenant shall at all times, except in the case of emergencies,have the right to escort Landlord or its agents, representatives, contractorsor guests while the same are in the Premises, provided such escort does notmaterially and adversely affect Landlord’s access rights hereunder.

#  

# 33.           **Security**. Tenant acknowledges and agrees thatsecurity devices and services, if any, while intended to deter crime may not ingiven instances prevent theft or other criminal acts and that Landlord is notproviding any security services with respect to the Premises. Tenant agreesthat Landlord shall not be liable to Tenant for, and Tenant waives any claimagainst Landlord with respect to, any loss by theft or any other damagesuffered or incurred by Tenant in connection with any unauthorized entry intothe Premises or any other breach of security with respect to the Premises byany person other than Landlord or any of its Related Parties; provided that theforegoing shall not be deemed to supersede the waiver of subrogation in Section17 above. Tenant shall be solely responsible for the personal safety ofTenant’s officers, employees, agents, contractors, guests and invitees while anysuch person is in, on or about the Premises and/or the Project. Tenant shall atTenant’s cost obtain insurance coverage to the extent Tenant desires protectionagainst such criminal acts.

#  

# 34.           **Force Majeure**. Except for the payment of Rent orreimbursement of any allowance or overpayment by Tenant to Landlord, neitherLandlord nor Tenant shall be held responsible or liable for delays in theperformance of its obligations hereunder to the extent caused by or arising outof, any acts of God, strikes, lockouts, labor troubles or disputes not withinLandlord’s reasonable control, embargoes, quarantines, failure of, or inabilityto obtain, power or utilities to the Project, delay in transportation ofconstruction materials or inability to obtain labor or materials (or reasonablesubstitutes therefor) not attributable to the other party’s (or its employees’,agents’ or contractors’) negligence or willful failure, fire, vandalism,accident, flood, weather or other casualty, governmental restrictions, orders,limitations, regulations, controls, or requirements not attributable to theother party’s (or its employees’, agents’ or contractors’) negligence orwillful failure, riot, insurrection, civil commotion, sabotage, explosion, war,terrorism, national or local emergency, national, regional, or local disasters,calamities, or catastrophes, and other causes or events beyond the reasonablecontrol of the other party (collectively, “**ForceMajeure**”). Claims of Force Majeure Delay due to weather shall besubstantiated by delivery to the party not claiming the Force Majeure Delay ofnotices or other documents affirming the existence and length of such weatherrelated delay claimed as a Force Majeure Delay, including industry standarddocumentation.

 

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# 35.           **Brokers, Entire Agreement, Amendment**. Landlordand Tenant each represents and warrants that it has not dealt with any broker,agent or other person (collectively, “**Broker)**in connection with this transaction and that no Broker brought aboutthis transaction, other than Phase 3 Properties who Landlord shall pay acommission to per the terms of a separate commission agreement between Landlordand Broker. Landlord and Tenant each hereby agree to indemnify and hold theother harmless from and against any claims by any Broker, other than thebroker, if any named in this Section 35, claiming a commission or otherform of compensation by virtue of having dealt with Tenant or Landlord, asapplicable, with regard to this leasing transaction.

#  

# 36.           **Limitation on Landlord’s Liability.**NOTWITHSTANDINGANYTHING SET FORTH HEREIN OR IN ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANTTO THE CONTRARY:  (A) LANDLORD SHALL NOTBE LIABLE TO TENANT OR ANY OTHER PERSON FOR (AND TENANT AND EACH SUCH OTHERPERSON ASSUME ALL RISK OF) LOSS, DAMAGE OR INJURY, WHETHER ACTUAL ORCONSEQUENTIAL TO:  TENANT’S PERSONALPROPERTY OF EVERY KIND AND DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADEFIXTURES, EQUIPMENT, INVENTORY, SCIENTIFIC RESEARCH, SCIENTIFIC EXPERIMENTS,LABORATORY ANIMALS, PRODUCT, SPECIMENS, SAMPLES, AND/OR SCIENTIFIC, BUSINESS,ACCOUNTING AND OTHER RECORDS OF EVERY KIND AND DESCRIPTION KEPT AT THE PREMISESAND ANY AND ALL INCOME DERIVED OR DERIVABLE THEREFROM; (B) THERE SHALL BE NOPERSONAL RECOURSE TO LANDLORD FOR ANY ACT OR OCCURRENCE IN, ON OR ABOUT THEPREMISES OR ARISING IN ANY WAY UNDER THIS LEASE OR ANY OTHER AGREEMENT BETWEENLANDLORD AND TENANT WITH RESPECT TO THE SUBJECT MATTER HEREOF AND ANY LIABILITYOF LANDLORD HEREUNDER SHALL BE STRICTLY LIMITED SOLELY TO LANDLORD’S INTERESTIN THE PROJECT, OR ANY PROCEEDS FROM THE OPERATION OR LEASE THEREOF, OR ANYSALE OR CONDEMNATION, OR THE FINANCING THEREOF AND ANY INSURANCE PROCEEDSPAYABLE IN RESPECT OF LANDLORD’S INTEREST IN THE PROJECT OR IN CONNECTION WITHANY SUCH LOSS; AND (C) IN NO EVENT SHALL ANY PERSONAL LIABILITY BE ASSERTEDAGAINST ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS.UNDER NO CIRCUMSTANCES SHALL LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS,EMPLOYEES, AGENTS OR CONTRACTORS BE LIABLE FOR INJURY TO TENANT’S BUSINESS ORFOR ANY LOSS OF INCOME OR PROFIT THEREFROM. NOTWITHSTANDING ANYTHING TO THECONTRARY HEREIN, TENANT SHALL NOT BE OBLIGATED TO REPAIR OR REPLACE, NOR SHALLLANDLORD NOR ANY MORTGAGEE OF LANDLORD HAVE ANY INTEREST IN, ANY TRADEFIXTURE(S) OR EQUIPMENT OWNED BY TENANT, HOWEVER CHARACTERIZED, TO THE EXTENTSUCH PERSONAL PROPERTY IS DAMAGED OR DESTROYED AS A RESULT OF LANDLORD’S GROSSNEGLIGENCE OR WILLFUL MISCONDUCT AND SUCH LOSS IS NOT COVERED BY TENANT’SINSURANCE.

#  

# 37.           **Severability**. If any clause or provision of thisLease is illegal, invalid or unenforceable under present or future laws, thenand in that event, it is the intention of the parties hereto that the remainderof this Lease shall not be affected thereby. It is also the intention of theparties to this Lease that in lieu of each clause or provision of this Leasethat is illegal, invalid or unenforceable, there be added, as a part of thisLease, a clause or provision as similar in effect to such illegal, invalid orunenforceable clause or provision as shall be legal, valid and enforceable.

#  

# 38.           **Signs; Exterior Appearance**.

#  

## (a)           Tenant shallnot, except as otherwise permitted in this Section 38, without the priorwritten consent of Landlord, which shall not be unreasonably withheld byLandlord:  (i) attach any awnings,exterior lights, decorations, balloons, flags, pennants, banners, painting orother projection to any outside wall of the Project, (ii) use any curtains,blinds, shades or screens other than Landlord’s standard window coverings,(iii) coat or otherwise sunscreen the interior or exterior of any windows,(iv) place any equipment, furniture or other items of personal property onany exterior balcony, or (v) paint, affix or exhibit on any part of thePremises or the Project any signs, notices, window or door lettering, placards,decorations, or advertising media of any type which can be viewed from theexterior of

 

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the Premises. Interior signs on doors and the directory tablet shall beinscribed, painted or affixed by Tenant at the sole cost and expense of Tenant.

##  

## (b)           Notwithstandingthe foregoing, as long as Tenant continues to lease the entire Premises and isnot in uncured Default, Tenant may install external signage as follows:  (i) Building top in one or more locationsconsistent with applicable City of San Diego sign ordinances, (ii) adequatevisitor parking and directional signage, (iii) shared space on the existingmonument sign at the main entrance to the Project, until the monument signdescribed in clause (iv) is completed and (iv) subject to the approval of theCity of San Diego and compliance with all Legal Requirements, at Landlord’ssole cost and expense as part of Landlord’s Work, subject to Tenant’s approvalas to the design of its lettering and logo thereon (which Tenant shall notunreasonably withhold, condition or delay), one (1) monument sign (the “**Monument Sign**”) at the entrance to theexisting Project from Executive Drive, consistent in style and scale with theexisting Project monument sign, promptly upon completion of the extension ofExecutive Drive. Notwithstanding the foregoing, Tenant’s rights with respect tothe Monument Sign may be transferred to permitted subtenants and assigns. Tenant,at Tenant’s sole cost and expense, shall also have the right to install anddisplay other corporate or product signage or video displays within thePremises.

##  

## (c)           The signagedescribed in clause (iv) of Section 38(b) shall be provided at Landlord’ssole cost and expense except with respect to lettering and logo of thepermitted occupants of the Premises which shall be at Tenant’s sole cost andexpense (such expense shall be reimbursable out of the TI Fund, but subject tothe $25,000 cap described below). The signage described in clauses (i) through(iii) of Section 38(b) shall be at Tenant’s sole cost and expenseincluding, (x) the cost of such signage; (y) the cost of obtainingpermits and approvals for such signage, if any; and (z) the cost ofinstalling such signage; which expenses shall be reimbursable out of the TIFund; provided that the reimbursement out of the TI Fund for Tenant’s signageshall not exceed $25,000.

##  

## (d)           Except asotherwise provided for herein, Tenant shall bear all expenses relating to thecost of maintaining, repairing and replacing Tenant’s signage and costsassociated with the removal of Tenant’s signage, repair of any damage caused bysuch removal, and restoration of the site of Tenant’s signage on the Buildingor the Project to the condition in which those portions of the Building orProject existed before the installation of Tenant’s signage.

##  

## (e)           Ontermination or expiration of the Term or on expiration of Tenant’s signagerights under this Section 38, Landlord shall have the right topermanently remove Tenant’s signage, repair any damage caused by such removal,and restore those parts of the Building on which Tenant’s signage was locatedto the condition that existed before the installation of Tenant’s Sign.

##  

## (f)            Tenant shallat all times during the Term maintain Tenant’s signage in working order and ina condition consistent with the quality and character of the Project and theBuilding exterior.

##  

## (g)           Tenant shallhave the right to change the signage to conform to changes in Tenant’s name andlogo provided that with respect to the Building top signage such changes do notrequire that the original sign undergo any changes other than the change inTenant’s name and logo, as permitted under this Lease, and that Tenant givesLandlord not less than fifteen (15) business days advance notice of suchproposed changes. In addition, with respect to the Monument Sign, Tenant shallhave the right to change the Monument Sign to conform to changes in Tenant’sname and logo and the name and logos of other occupants of the Premises, aspermitted under this Lease, provided that Tenant gives Landlord with not lessthan 15 business days advance notice of such proposed changes.

##  

## (h)           Subject toconformance with all applicable City of San Diego ordinances and other LegalRequirements and otherwise in accordance with this Section 38, beginningas of the date of execution of this Lease through and including the date uponwhich removal of such sign is necessary to complete the external skin of theBuilding in the normal course of construction, Tenant shall be permitted tohang one

 

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temporary banner sign on the Building identifying the Premises as thefuture premises of Tenant. The cost for such temporary signage shall not besubject to reimbursement by Landlord pursuant to the TI Allowance (as definedin the Work Letter). The location and content of such banner sign shall besubject to the prior written approval of Landlord, such approval not to beunreasonably withheld.

##  

# 39.           **Notice of Availability**

#  

## (a)           **Expansion in Building 4757**. If at any time any Available Space (asdefined below) in Building 4757 becomes available for lease or if Landlordexpects to engage in efforts to market Building 4757 for sale to anyone otherthan the existing tenant of Building 4757, Landlord shall give notice of suchavailability or anticipated marketing efforts to Tenant (the “**Notice Right**”). For purposes of this Section 39(a),“**Available Space**” shall mean anyspace in Building 4757 which is not occupied by a tenant or which is occupiedby an existing tenant whose lease is expiring within six (6) months or less andsuch tenant does not wish to renew (whether or not such tenant has a right torenew) its occupancy of such space. Notwithstanding the foregoing, Tenanthereby acknowledges that it does not have any right of first offer, right offirst refusal, option or similar right with respect to Building 4757.

##  

## (b)           **Consent to Sublease or Assignment**. Notwithstandinganything to the contrary in the current lease of Building 4757 or any otherlease of Building 4757, as long as Tenant is not in default under this Lease(beyond the expiration of notice and cure periods), Landlord shall not refuseto consent to the subletting or assignment of such lease to Tenant (norrecapture such premises in Building 4757) if Tenant and the tenant of Building4757 agree to commercially reasonable terms of a sublease, or the assignment ofthe lease, of Building 4757; provided, however, that in no event shall Landlordbe obligated to consent to (i) any modification of the terms and provisions ofsuch lease; (ii) any release of the existing tenant of Building 4757, anyguarantor or any other party holding liability under such lease; or (iii)substantive terms and provisions of such sublease or assignment. Landlord shallnot be permitted to withhold its consent to any substantive terms or provisionsof the sublease or assignment which do not impose any additional obligation orliability on Landlord.

##  

## (c)           **Exceptions**. Notwithstanding the above, the NoticeRight shall not be in effect:

##  

### (i)            during anyperiod of time that Tenant is in Default under any provision of the Lease;

###  

### (ii)           if Tenanthas been in Default under any provision of the Lease three (3) or more times,whether or not the Defaults are cured, during the twelve (12) month periodprior to the date on which Tenant seeks to exercise the Expansion Right;

###  

### (iii)          with respectto a sale of the Building to any entity which controls, is controlled by, or isunder common control with Landlord or Alexandria Real Estate Equities, Inc.; or

###  

### (iv)          with respectto a sale of the Building in conjunction with the sale of any other property orproperties held by Alexandria Real Estate Equities, Inc.

###  

## (d)           **Rights Personal**. The Notice Right is personal toSenomyx, Inc. and is not assignable without Landlord’s consent, which may begranted or withheld in Landlord’s sole discretion separate and apart from anyconsent by Landlord to an assignment of Tenant’s interest in the Lease exceptthat it may be assigned in connection with any Permitted Assignment of thisLease.

##  

# 40.           **Right to Extend Term**. Tenant shall have the one time right toextend the Term of the Lease upon the following terms and conditions:

#  

## (a)           **Extension Rights**. Tenant shall have the right (each, the “**Extension Right**”) to extend the term ofthis Lease for one (1) five (5) year period (the “**Extension Term**”) on the same terms and

 

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conditions as this Lease (other than Base Rent) by giving Landlordwritten notice (the “**Extension Notice**”)of its election to exercise the Extension Right no later than twelve (12)months prior to the expiration of the Base Term of the Lease. Upon the commencementof the Extension Term, Base Rent shall be payable:  (i) Ninety-five Percent (95%) of the MarketRate (as defined below), but not less than (ii) one hundred three percent(103%) of the Base Rent Payable in Lease Year ten (10). On each annual anniversaryof the first day of the first full month during the Extension Term, Base Rentshall increase by multiplying Base Rent payable immediately before such date bythe CPI Adjustment Percentage (as defined below) and adding the resultingamount to the Base Rent payable immediately before such adjustment date. Forpurposes hereof, “**CPI Adjustment Percentage**”means (a) a fraction, stated as a percentage, the numerator of which shall bethe Index for the calendar month three (3) months before the month in which theadjustment date occurs, and the denominator of which shall be the Index for thecalendar month three (3) months before the last adjustment date or, if no priorBase Rent adjustment has been made, three (3) months before the first day ofthe first full month during the Extension Term, less (b) 1.00; provided,however, that in no event shall the CPI Adjustment Percentage in any year beless than three percent (3%) or more than six percent (6%). “**Index**” means the “Consumer Price Index-AllUrban Consumers San Diego-Carlsbad-San Marcos Metropolitan Statistical Area,All Items” compiled by the U.S. Department of Labor, Bureau of LaborStatistics, (1982-84 = 100). If a substantial change is made in the Index, therevised Index shall be used, subject to such adjustments as Landlord mayreasonably deem appropriate in order to make the revised Index comparable tothe prior Index. If the Bureau of Labor Statistics ceases to publish the Index,then the successor or most nearly comparable index, as reasonably determined byLandlord, shall be used, subject to such adjustments as Landlord may reasonablydeem appropriate in order to make the new index comparable to the Index. Landlordshall give Tenant written notice indicating the Base Rent, as adjusted pursuantto this Section 40, and the method of computation and Tenant shall payto Landlord an amount equal to any underpayment of Base Rent by Tenant withinfifteen (15) days of Landlord’s notice to Tenant. Failure to deliver suchnotice shall not reduce, abate, waive or diminish Tenant’s obligation to paythe adjusted Base Rent. As used herein, “**MarketRate**” shall mean the then market rental rate (including annualincreases, if applicable) for similar buildings with similar improvements insimilar condition (based on normal wear and tear) at the expiration of the BaseTerm as reasonably determined by Landlord and agreed to by Tenant. The MarketRate may, at Tenant’s written election, incorporate a $10.00 per rentablesquare foot refurbishment fee payable by Landlord for cosmetic refurbishment ofthe Premises during the Extension Term. There shall be no Landlord supervisoryfee for such refurbishment which shall be funded in the form of cash on thecommencement of the Extension Term regardless of whether or not such refurbishmentis completed on such date. Between the date of Landlord’s receipt of theExtension Notice and that date which is two hundred seventy (270) days prior tothe expiration of the Base Term of this Lease (the “**Extension Rent Negotiation Period**”), the parties shall attemptin good faith to determine the Market Rate for the Premises during theExtension Term if Landlord and Tenant are unable in good faith to agree, intheir respective sole discretion, upon a mutually satisfactory Market Rate(including annual Base Rent increases) by the expiration of the Extension RentNegotiation Period, then the Market Rate will be determined in accordance withthe arbitration method as described in Section 43.

##  

## (b)           **Right Personal**. The Extension Right is personal to Senomyx,Inc. and is not assignable without Landlord’s consent, which may be granted orwithheld in Landlord’s sole discretion separate and apart from any consent byLandlord to an assignment of Tenant’s interest in the Lease**except that it may be assigned inconnection with any Permitted Assignment of this Lease; and, provided that ifTenant extends the Term hereunder any subtenancies of the Premises may beextended to include some or all of the Extension Term without Landlord’s priorconsent*.*

##  

## (c)           **Exceptions**. Notwithstanding anything set forthabove to the contrary, the Extension Right shall not be in effect and Tenantmay not exercise any of the Extension Right:

##  

### (i)            during anyperiod of time that Tenant is in Default under any provision of this Lease beyondany applicable cure period; or

 

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### (ii)           if Tenanthas been in Default under any provision of this Lease three (3) or more times,whether or not the Defaults are cured, during the twelve (12) month period immediatelyprior to the date that Tenant intends to exercise the Extension Right, whetheror not the Defaults are cured.

###  

## (d)           **No Extensions**. The period of time within which theExtension Right may be exercised shall not be extended or enlarged by reason ofTenant’s inability to exercise the Extension Right.

##  

## (e)           **Termination**. The Extension Right shall terminate andbe of no further force or effect even after Tenant’s due and timely exercise ofthe Extension Right, if, after such exercise, but prior to the commencementdate of the Extension Term, (i) Tenant fails to timely cure any default byTenant under this Lease; or (ii) Tenant has Defaulted three (3) or more timesduring the period from the date of the exercise of an Extension Right to thedate of the commencement of the Extension Term, whether or not such Defaultsare cured.

##  

# 41.           **Termination Right**.

#  

## (a)           Tenant willhave the one-time right, by written notice to Landlord delivered no later thanJune 30, 2013, to terminate this Lease (the “**TerminationRight**”) effective as of March 31, 2014, subject to Tenant paying atermination fee in an amount equal to the sum of the following:  (a) the unamortized amount of the TIAllowance (amortized at an eight percent (8%) annual rate of interest over theBase Term), *plus*(b) theunamortized amount of leasing commissions paid by Landlord in connection withthis Lease (amortized at an eight percent (8%) annual interest rate over theBase Term), *plus* (c) six (6)times the monthly Base Rent payable in March 2014 (the “**Termination Fee**”). Such fee shall bepayable fifty percent (50%) in immediately available funds upon Tenant’sdelivery of written notice of termination (the “**First Installment**”) and the remaining fifty percent (50%) inimmediately available funds on or before March 31, 2014 (the “**Second Installment**”). If Tenant fails totimely pay the Second Installment in accordance with the preceding sentence,Landlord may give Tenant notice of such payment default (the “**Second Installment Default Notice**”). Uponreceipt of the Second Installment Default Notice Tenant shall have two (2)business days to pay the Second Installment. If Tenant fails to pay the SecondInstallment within such two (2) business day period, Tenant shall have nofurther right to notice or cure, such failure shall be a Default hereunder and,in addition to any other rights and remedies available to Landlord, Landlordmay retain the First Installment. In addition, if Tenant fails to timely payeither installment of the Termination Fee in accordance with this Section 41the Termination Right shall immediately terminate and be of no further forceand effect.

##  

## (b)           **Right Personal**. The Termination Right is personal toSenomyx, Inc. and is not assignable without Landlord’s consent, which may begranted or withheld in Landlord’s sole discretion separate and apart from anyconsent by Landlord to an assignment of Tenant’s interest in the Lease**except that it may be assigned inconnection with any Permitted Assignment of this Lease*.*

##  

## (c)           **Exceptions**. Notwithstanding anything set forthabove to the contrary, the Termination Right shall not be in effect and Tenantmay not exercise the Termination Right:

##  

### (i)            during anyperiod of time that Tenant is in Default under any provision of this Lease,unless, with respect to monetary defaults only, the Termination Fee isincreased to reimburse Landlord all amounts owed by Tenant as a result of suchDefault; or

###  

### (ii)           if Tenanthas been in Default under any provision of this Lease three (3) or more timeswhether or not the Defaults are cured, during the twelve (12) month periodimmediately prior to the date that Tenant intends to exercise the TerminationRight, whether or not the Defaults are cured.

 

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# 42.           **Roof Equipment.**

#  

## (a)           Except asset forth in Section 42(f) below, Tenant shall have the sole andexclusive right to install and operate any Roof Equipment on the roof of theBuilding as long as Tenant is the sole tenant of the Premises. The precisespecifications and a general description of the Roof Equipment (as definedbelow) along with all documents Landlord reasonably requires to review theinstallation of the Roof Equipment (the “**RoofEquipment Plans and Specifications**”) shall be submitted to Landlordfor Landlord’s written approval no later than 20 days before Tenant commencesto install the Roof Equipment. Tenant shall be solely responsible for obtainingall necessary governmental and regulatory approvals and for the cost ofinstalling, operating, maintaining and removing the Roof Equipment. Tenantshall notify Landlord upon completion of the installation of the Roof Equipment.If Landlord determines that the Roof Equipment does not comply with theapproved Roof Equipment Plans and Specifications, that the Building has beendamaged during installation of the Roof Equipment or that the installation wasdefective, Landlord shall notify Tenant of any noncompliance or detectedproblems and Tenant immediately shall cure the defects. If the Tenant fails toimmediately cure the defects, Tenant shall pay to Landlord upon demand thecost, as reasonably determined by Landlord, of correcting any defects andrepairing any damage to the Building caused by such installation. If at anytime Landlord, in its sole discretion, deems it necessary, Tenant shall provideand install, at Tenant’s sole cost and expense, appropriate aestheticscreening, reasonably satisfactory to Landlord, for the Roof Equipment (the “**Aesthetic Screening**”).

##  

## (b)           Landlordagrees that the roof rights granted herein shall be deemed appurtenant toTenant’s leasehold rights in the Premises throughout the Lease Term, and Tenantshall have access to the roof of the Building for the purpose of installing,maintaining, repairing, replacing and removing the Roof Equipment, the appurtenancesthereto and any Aesthetic Screening, all of which shall be performed by Tenantat Tenant’s sole cost and risk. It is agreed, however, that only authorizedengineers, employees or properly authorized contractors of Tenant, FCC (definedbelow) inspectors, or persons under their direct supervision will be permittedto have access to the roof of the Building. Tenant further agrees to exercisefirm control over the people requiring access to the roof of the Building inorder to keep to a minimum the number of such people having access to the roofof the Building and the frequency of their visits.

##  

## (c)           Prior toSubstantial Completion of Landlord’s Work, Landlord shall use commerciallyreasonable efforts to cause Landlord’s roof contractor to cooperate with Tenant’sArchitect and any contractor retained by Tenant for the installation of anyantennae, satellite dishes or other communication equipment ( as such equipmentmay be modified or supplemented from time to time during the Term, the “**Communications Equipment**”) and anysupplemental air-conditioning units, air handlers, de-ionized water stills andrelated equipment, and any other mechanical and electrical equipment includedin the Tenant Improvements which are to be installed on the roof of theBuilding (collectively with the Communication Equipment, and as modified orsupplemented from time to time during the Term, the “**Roof Equipment**”), in the design and installation thereof,provided that Tenant can provide all necessary construction information inconnection with such design and installation in accordance with Landlord’sconstruction schedule for completion of Landlord’s Work. Tenant agrees tocontract with Landlord’s roof contractor for the installation of any RoofEquipment. It is further understood and agreed that the installation,maintenance, operation, replacement and removal of the Roof Equipment, theappurtenances and the Aesthetic Screening, if any, is not permitted to damagethe Building or the roof thereof, or interfere with the use of the Building androof by Landlord. Tenant agrees to be responsible for any damage caused to theroof or any other part of the Building, caused by Tenant or any of its agentsor representatives.

##  

## (d)           Tenantshall, at its sole cost and expense, and at its sole risk, install, operate andmaintain the Communications Equipment in a good and workmanlike manner, and incompliance with all Building, electric, communication, and safety codes,ordinances, standards, regulations and requirements, now in effect or hereafterpromulgated, of the Federal Government, including, without limitation, theFederal Communications Commission (the “**FCC**”),the Federal Aviation Administration (“**FAA**”)or any successor agency of either the FCC or FAA having jurisdiction over radioor telecommunications, and of the state, city and county in which the Buildingis located. Under this Lease,

 

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Landlord and its agents assume no responsibility for the licensing,operation and/or maintenance of the Roof Equipment. Tenant has theresponsibility of carrying out the terms of its FCC license, if any, in allrespects. The Roof Equipment shall be connected to the power supply in strictcompliance with all applicable Building, electrical, fire and safety codes. Exceptas expressly provided for herein, neither Landlord nor its agents shall beliable to Tenant for any stoppages or shortages of electrical power furnishedto the Roof Equipment or the roof because of any act, omission or requirementof the public utility serving the Building, or the act or omission of any othertenant, invitee or licensee or their respective agents, employees orcontractors, or for any other cause beyond the reasonable control of Landlord,and Tenant shall not be entitled to any rental abatement for any such stoppageor shortage of electrical power. Neither Landlord nor its agents shall have anyresponsibility or liability for the conduct or safety of any of Tenant’srepresentatives, repair, maintenance and engineering personnel while in or onany part of the Building or the roof.

##  

## (e)           Except asotherwise provided for herein, the Communications Equipment, the appurtenancesthereto and the Aesthetic Screening, if any, shall remain the personal propertyof Tenant, and shall be removed by Tenant at its own expense at the expirationor earlier termination of this Lease or Tenant’s right to possession hereunder.Tenant shall repair any damage caused by such removal, including the patchingof any holes to match, as closely as possible, the color surrounding the areawhere the equipment and appurtenances were attached. Tenant agrees to maintainall of the Roof Equipment placed on or about the roof or in any other part ofthe Building in proper operating condition and maintain same in satisfactorycondition as to appearance and safety in Landlord’s sole discretion unless suchRoof Equipment is blocked from eye-level view within the Project by AestheticScreening. Such maintenance and operation shall be performed in a manner toavoid any interference with any other tenants of the Project or Landlord’smaintenance and repairs of the Building. Tenant agrees that at all times duringthe Term, it will keep the roof of the Building free of all trash or wastematerials produced by Tenant or Tenant’s agents, employees or contractors.

##  

## (f)            Tenant shallnot allow any provider of telecommunication, video, data or related services (a“**Telecom Provider**”) to locate anyequipment on the roof of the Building for any purpose whatsoever. Subject toTenant’s prior written approval of the terms and conditions of each suchcontract with a Telecom Provider, including, without limitation, the location,screening, appearance and technical parameters of such Telecom Provider’sequipment, such Telecom Provider’s rights of access to the roof of the Buildingthrough the Premises, and the coverage of such Telecom Provider’s insurancewith respect to its activities on or about the Project, Landlord shall have theright to contract with Telecom Providers to lease or license a portion of theroof of the Building for the purpose of locating equipment thereon; provided,however, that Landlord shall be solely responsible for any costs and expensesassociated with entering into any such contract or installing improvements tosupport the separately-metered use of the Building roof by any TelecomProviders, including, without limitation, the cost of equipment screening,electrical meters, brokerage or legal fees and any other legitimatetransactional costs (which shall not be included as Operating Expenses, butwhich may be passed through directly to the respective Telecom Provider asadditional rent and if not paid by such Telecom Provider shall be considered indetermining Telecom Excess Rent). Tenant shall refer any Telecom Providers whocontact Tenant regarding use of the roof of the Building to Landlord, and withrespect to any such referred Telecom Provider Landlord shall determine whetherto permit such Telecom Provider to locate its equipment on the roof of theBuilding in its reasonable discretion. If Landlord elects to contract with anyTelecom Provider with respect to the use of the roof of the Building, suchelection to be in Landlord’s sole discretion except as set forth in the priorsentence, Landlord and Tenant shall split that portion of the lease rent orlicense fee actually received by Landlord in excess of Landlord’s costs andexpenses incurred pursuant to such lease or license with respect to suchTelecom Provider as reasonably determined by Landlord (“**Telecom Excess Rent**”), as if such TelecomExcess Rent was paid to Tenant as Excess Rent pursuant to Section 22(d)of this Agreement, except that any Telecom Excess Rent payable by Landlord toTenant shall be paid quarterly in arrears within thirty (30) days following theend of each calendar quarter throughout the Term. Landlord shall usecommercially reasonable efforts to collect the contract rents due from any suchTelecom Provider. In no event shall any equipment of the Telecom

 

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Provider cause any disturbance or interference to the CommunicationsEquipment or any other equipment of Tenant or of any of its subtenants orassigns in the Premises or on the roof of the Building.

##  

## (g)           If Tenantdefaults under any of the terms and conditions of this Section 42 orthis Lease, and Tenant fails to cure said Default within the time allowed by Section20 of this Lease if Landlord exercises its remedy of terminating thisLease, Landlord shall be permitted to remove the Communications Equipment, theappurtenances and the related Aesthetic Screening, if any, and to repair atTenant’s sole cost and expense any damage caused to the roof or any other partof the Building as a result of such removal, to the extent such damage is notattributable to the gross negligence or willful misconduct of Landlord or itsemployees, agents or contractors. Tenant shall be liable for all reasonablecosts and expenses Landlord incurs in removing the Tenant’s Roof Equipment, theappurtenances thereto and the Aesthetic Screening associated therewith, if any.

##  

# 43.           **Arbitration.**

#  

## (a)           **Condemnation.**

##  

### (i)            Within ten(10) days of the delivery of a Condemnation Arbitration Notice, each partyshall deliver to the other a proposal in support of that party’s position as towhether or not the Taking (or proposed Taking, as the case may be) constitutesa Material Taking (“**Condemnation Proposal**”).If either party fails to timely submit a Condemnation Proposal, the other party’sposition shall be binding on Landlord and Tenant. If both parties submitCondemnation Proposals, then Landlord and Tenant shall meet within seven (7)days after delivery of the last Condemnation Proposal and make a good faithattempt to mutually appoint a single Arbitrator (defined below) to determine whetheror not the Taking (or proposed Taking, as the case may be) constitutes aMaterial Taking. If Landlord and Tenant are unable to agree upon a singleArbitrator, then each shall, by written notice delivered to the other withinten (10) days after the meeting, select an Arbitrator. If either party fails totimely give notice of its selection for an Arbitrator, the other party’ssubmitted Condemnation Proposal shall determine whether or not the Taking (orproposed Taking, as the case may be) constitutes a Material Taking. The two (2)Arbitrators so appointed shall, within five (5) business days after theirappointment, appoint a third Arbitrator. If the two (2) Arbitrators so selectedcannot agree on the selection of the third Arbitrator within the time abovespecified, then either party, on behalf of both parties, may request suchappointment of such third Arbitrator by application to any state court ofgeneral jurisdiction in the jurisdiction in which the Premises are located,upon ten (10) days prior written notice to the other party of such intent.

###  

### (ii)           The decisionof the Arbitrator(s) shall be made within thirty (30) days after theappointment of a single Arbitrator or the third Arbitrator, as applicable. Thedecision of the single Arbitrator shall be final and binding upon the parties. Eachparty shall pay the fees and expenses of the Arbitrator appointed by or onbehalf of such party and the fees and expenses of the third Arbitrator shall beborne equally by both parties.

###  

## (b)           **Right to Extend Term.**

##  

### (i)            Within ten(10) days of the expiration of the Extension Rent Negotiation Period, eachparty shall deliver to the other a proposal containing the Market Rate andescalations that the submitting party believes to be correct (“**Extension Proposal**”). If either party failsto timely submit an Extension Proposal, the other party’s submitted proposalshall determine the Base Rent and escalations for the Extension Term. If bothparties submit Extension Proposals, then Landlord and Tenant shall meet withinseven (7) days after delivery of the last Extension Proposal and make a goodfaith attempt to mutually appoint a single Arbitrator (and defined below) todetermine the Market Rate and escalations. If Landlord and Tenant are unable toagree upon a single Arbitrator, then each shall, by written notice delivered tothe other within ten

 

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### (10)days after the meeting, select an Arbitrator. If either party fails to timelygive notice of its selection for an Arbitrator, the other party’s submittedExtension Proposal shall determine the Base Rent for the Extension Term. Thetwo (2) Arbitrators so appointed shall, within five (5) business days aftertheir appointment, appoint a third Arbitrator. If the two (2) Arbitrators so selectedcannot agree on the selection of the third Arbitrator within the time abovespecified, then either party, on behalf of both parties, may request suchappointment of such third Arbitrator by application to any state court ofgeneral jurisdiction in the jurisdiction in which the Premises are located,upon ten (10) days prior written notice to the other party of such intent.

###  

### (ii)           The decisionof the Arbitrator(s) shall be made within thirty (30) days after theappointment of a single Arbitrator or the third Arbitrator, as applicable. Thedecision of the single Arbitrator shall be final and binding upon the parties. Theaverage of the two closest Arbitrators in a three Arbitrator panel shall befinal and binding upon the parties. Each party shall pay the fees and expensesof the Arbitrator appointed by or on behalf of such party and the fees andexpenses of the third Arbitrator shall be borne equally by both parties. If theMarket Rate and escalations are not determined by the first day of theExtension Term, then Tenant shall pay Landlord Base Rent in an amount equal tothe Base Rent in effect immediately prior to the Extension Term and increasedby the Rent Adjustment Percentage until such determination is made. After thedetermination of the Market Rate and escalations, the parties shall make anynecessary adjustments to such payments made by Tenant. Landlord and Tenantshall then execute an amendment recognizing the Market Rate and escalations forthe Extension Term. Notwithstanding the foregoing, within thirty (30) days ofthe determination of the Market Rate and escalations, Landlord, in Landlord’ssole and exclusive discretion, may provide Tenant with written notice that BaseRent for the Extension Term will be equal to one hundred three percent (103%)of the Base Rent payable in Lease Year 10 in which case Base Rent for theExtension Term shall be payable at one hundred three percent (103%) of the BaseRent payable in Lease Year 10 (subject to increase in accordance with Section 40(a).)

###  

## (c)           For purposesof this Section 43, an “**Arbitrator**”shall be any person appointed by or on behalf of either party or appointedpursuant to the provisions hereof and: (i) shall be (A) a member of the American Institute of Real EstateAppraisers with not less than ten (10) years of experience in the appraisal ofimproved office and biotech R&D and wet laboratory/industrial real estatein the greater San Diego metropolitan area, or (B) a licensed commercial realestate broker with not less than fifteen (15) years experience representinglandlords and/or tenants in the leasing of biotech R&D or life sciencesspace in the greater San Diego metropolitan area, (ii) devotingsubstantially all of their time to professional appraisal or brokerage work, asapplicable, at the time of appointment and (iii) be in all respects impartialand disinterested.

##  

# 44.           **Miscellaneous**.

#  

## (a)           **Notices**. All notices or other communicationsbetween the parties shall be in writing and shall be deemed duly given upondelivery or refusal to accept delivery by the addressee thereof if delivered inperson, or upon actual receipt if delivered by reputable overnight guarantycourier, addressed and sent to the parties at their addresses set forth above. Landlordand Tenant may from time to time by written notice to the other designateanother address for receipt of future notices.

##  

## (b)           **Joint and Several Liability**. If and when included within the term “**Tenant**,” as used in this instrument, thereis more than one person or entity, each shall be jointly and severally liablefor the obligations of Tenant.

##  

## (c)           **[Intentionally Deleted]**

##  

## (d)           **Recordation**. Neither this Lease nor a memorandum oflease shall be filed by or on behalf of Tenant in any public record (except asrequired as part of Tenant’s filing obligations by the

 

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Securities & Exchange Commission or any other GovernmentalAuthority). Landlord may prepare and file, and upon request by Landlord Tenantwill execute, a memorandum of lease.

##  

## (e)           **Interpretation**. The normal rule of construction to theeffect that any ambiguities are to be resolved against the drafting party shallnot be employed in the interpretation of this Lease or any exhibits oramendments hereto. Words of any gender used in this Lease shall be held andconstrued to include any other gender, and words in the singular number shallbe held to include the plural, unless the context otherwise requires. Thecaptions inserted in this Lease are for convenience only and in no way define,limit or otherwise describe the scope or intent of this Lease, or any provisionhereof, or in any way affect the interpretation of this Lease.

##  

## (f)            **Not Binding Until Executed**. The submission by Landlord or Tenant ofthis Lease to the other party shall have no binding force or effect, shall notconstitute an option for the leasing of the Premises, nor confer any right orimpose any obligations upon either party until execution of this Lease by bothparties.

##  

## (g)           **Limitations on Interest**. It is expressly the intent of Landlordand Tenant at all times to comply with applicable law governing the maximumrate or amount of any interest payable on or in connection with this Lease. Ifapplicable law is ever judicially interpreted so as to render usurious anyinterest called for under this Lease, or contracted for, charged, taken,reserved, or received with respect to this Lease, then it is Landlord’s andTenant’s express intent that all excess amounts theretofore collected byLandlord be credited on the applicable obligation (or, if the obligation hasbeen or would thereby be paid in full, refunded to Tenant), and the provisionsof this Lease immediately shall be deemed reformed and the amounts thereaftercollectible hereunder reduced, without the necessity of the execution of any newdocument, so as to comply with the applicable law, but so as to permit therecovery of the fullest amount otherwise called for hereunder.

##  

## (h)           **Choice of Law**. Construction and interpretation of thisLease shall be governed by the internal laws of the state in which the Premisesare located, excluding any principles of conflicts of laws.

##  

## (i)            **Time**. Time is of the essence as to theperformance of all obligations of the parties under this Lease.

##  

## (j)            **Incorporation by Reference**. All exhibits and addenda attachedhereto are hereby incorporated into this Lease and made a part hereof. If thereis any conflict between such exhibits or addenda and the terms of this Lease,such exhibits or addenda shall control.

##  

## (k)           **Certain Repairs and Services**. Notwithstanding any other provision ofthis Lease, Landlord, for itself and its employees, agents and contractors,reserves the right to refuse to perform any repairs or services in any portionof the Premises which Landlord is required to perform under the terms of thisLease, and which, pursuant to Tenant’s routine safety guidelines, practices orcustom or prudent industry practices, require any form of protective clothingor equipment other than safety glasses. In any such case, Tenant shall contractwith parties who are acceptable to Landlord, in Landlord’s reasonablediscretion, for all such repairs and services, and Landlord shall, to theextent required, equitably adjust Tenant’s Share of Operating Expenses inrespect of such repairs or services to reflect that Landlord is not providingsuch repairs or services to Tenant.

##  

## (l)            **Attorneys’ Fees.**If a dispute of any type arises, or anaction is filed under this Lease based in contract, tort or equity, or thisLease gives rise to any other legal proceeding between any of the partieshereto, the prevailing party shall be entitled to recover from the losing partyreasonable attorneys’ fees, costs and expenses, including, but not limited to,expert witness fees, accounting and engineering fees, and any otherprofessional fees incurred in connection with the prosecution or defense ofsuch action, whether the action is prosecuted to a final judgment. For purposesof this Lease, the terms “attorneys’ fees,” “costs” and “expenses” shall alsoinclude the fees and expenses incurred by counsel to

 

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the parties hereto for photocopies, duplications, deliveries, postage,telephone and facsimile communications, transcripts of proceedings relating tothe action and all other costs not ordinarily recoverable under California Codeof Civil Procedure § 1033.5(b), and all fees billed for law clerks, paralegals,librarians, secretaries and others not admitted to the bar but performingservices under the supervision of an attorney. The terms “attorneys’ fees,” “costs”and “expenses” shall also include, without limitation, fees and costs incurredin the following proceedings:  (a)mediations; (b) arbitrations; (c) bankruptcy proceedings; (d) appeals; (e)post-judgment motions and collection actions; and (f) garnishment, levy anddebtor examinations. The prevailing party shall also be entitled to attorneys’fees and costs after any dismissal of an action.

 

**[ Signatures on next page ]**

 

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as ofthe day and year first above written.

 

 
|       | **TENANT:**                               |
|------------|-------------------------------------------|
|       |                                      |
| ** ** | **SENOMYX,  INC.,**                       |
|       | **a  Delaware corporation**               |
|       |                                      |
|       |                                      |
|       | By:                                       | /s/ Kent Snyder |
|       | Its:                                      | Chief Executive  Officer |
|       |                                      |   |
|       | **LANDLORD:**                             |
|       |                                      |   |   |   |
| ** ** | **ARE-NEXUS  CENTRE II, LLC,**            |
|       | **a  Delaware limited liability company** |
|       |                                      |   |   |   |
|       |                                      |   |   |   |
|       | By:                                       | ALEXANDRIA REAL ESTATE  EQUITIES, L.P., |
|       |                                      | a Delaware limited  partnership, |
|       |                                      | its managing member |
|       |                                      |   |   |   |
|       |                                      | By: | ARE-QRS Corp., |
|       |                                      |   | a Maryland corporation, |
|       |                                      |   | its general partner |
|       |                                      |   |   |   |
|       |                                      |   | By: | /s/  Jennifer Pappas |
|       |                                      |   |   |   |
|       |                                      |   | Name: | Jennifer  Pappas |
|       |                                      |   | Title: | V.P.  and Assistant Secretary |
|       |                                      |   | Date: | January  12, 2006 |
|            |                                           |  |  |  |  |  |  |

 

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**EXHIBIT A TO LEASE**

 

**DESCRIPTION OF PREMISES**

 

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**EXHIBIT B TO LEASE**

 

**DESCRIPTION OF PROJECT**

 

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**EXHIBIT C TO LEASE**

 

**WORK LETTER**

 

THIS WORK LETTER dated as of January 12, 2006 (this “**Work Letter**”) is made and entered into byand between ARE-NEXUS CENTRE II, LLC, a Delaware limited liability company (“**Landlord**”), and SENOMYX, INC., a Delawarecorporation (“**Tenant**”), and isattached to and made a part of the Lease dated as of January 12, 2006 (the “**Lease**”), by and between Landlord and Tenant.Any initially capitalized terms used but not defined herein shall have themeanings given them in the Lease.

 

# 1.             **General Requirements**.

#  

## (a)           **Tenant’s Authorized Representative**. Tenantdesignates Tony Rogers and Gary Ghio (either such individual acting alone, “**Tenant’s Representative**”) as the onlypersons authorized to act for Tenant pursuant to this Work Letter. Landlordshall not be obligated to respond to or act upon any request, approval, inquiryor other communication (“**Communication**”)from or on behalf of Tenant in connection with this Work Letter unless suchCommunication is in writing from Tenant’s Representative. Tenant may changeeither Tenant’s Representative at any time upon not less than five (5) businessdays advance written notice to Landlord. No period set forth herein for anyapproval of any matter by Tenant’s Representative shall be extended by reasonof any change in Tenant’s Representative. Neither Tenant nor Tenant’sRepresentative shall be authorized to direct Landlord’s contractors in theperformance of Landlord’s Work (as hereinafter defined).

##  

## (b)           **Landlord’s Authorized Representative**. Landlorddesignates Jeff Ryan and Vin Ciruzzi (either such individual acting alone, “**Landlord’s Representative**”) as the onlypersons authorized to act for Landlord pursuant to this Work Letter. Tenantshall not be obligated to respond to or act upon any request, approval, inquiryor other Communication from or on behalf of Landlord in connection with thisWork Letter unless such Communication is in writing from Landlord’sRepresentative. Landlord may change either Landlord’s Representative at anytime upon not less than five (5) business days advance written notice to Tenant.No period set forth herein for any approval of any matter by Landlord’sRepresentative shall be extended by reason of any change in Landlord’sRepresentative. Landlord’s Representative shall be the sole persons authorizedto direct Landlord’s contractors in the performance of Landlord’s Work.

##  

## (c)           **Architects, Consultants and Contractors**.

##  

### (i)            Landlord andTenant hereby acknowledge and agree that: (a) Architects Delawie, Wilkes, Rodrigues, Barker shall be thearchitect (“**Landlord’s Architect**”)for the Landlord Improvements, and (b) Pacific Cornerstone Architects shall bethe architect (“**Tenant’s Architect**”)for the Tenant Improvements. Notwithstanding the foregoing, (A) Landlord shallhave the right at any time in Landlord’s sole discretion to designate as itsarchitect a different architect which architect shall thereafter be “**Landlord’s Architect**” and (B) Tenant shallhave the right at any time, but subject to Landlord’s prior approval (whichshall not be unreasonably withheld, conditioned or delayed) to designate adifferent architect which architect shall thereafter be “**Tenant’s Architect**”.

###  

### (ii)           The TenantImprovements general contractor shall be selected by Tenant (subject toLandlord’s prior approval which shall not be unreasonably withheld, conditionedor delayed) pursuant to a competitive negotiated bid of the general conditionsand fee from DPR Construction, Inc. (“**DPR**”)based on competitive negotiated bids from DPR and two (2) other generalcontractors reasonably acceptable to Landlord with substantial experience inthe engineering design of wet lab research and development facilities. If DPRis not willing to match Tenant’s selected competitive negotiated bid pursuantto the bid process, Landlord shall have the right to cause DPR to be the TenantImprovements general contractor if Landlord increases the

 

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### TIAllowance in the amount by which DPR’s general conditions and fee negotiatedbid exceeds the competitive negotiated bid of the tenant-selected generalcontractor. Landlord shall participate in Tenant’s general contractornegotiated and competitive bid process and Tenant shall share copies of thecompetitive negotiated bids received with Landlord on an “open book” basis. Landlordshall have the right to pre-approve all subcontractors retained by the TenantImprovements general contractor for the major trades, which approval shall notbe unreasonably withheld, conditioned or delayed.

###  

### (iii)          Tenant’smechanical, electrical and plumbing engineer shall be retained by Tenant as asubconsultant to Tenant’s Architect, and shall be selected by Tenant (subjectto Landlord’s prior approval which shall not be unreasonably withheld,conditioned or delayed) pursuant to a competitive negotiated bid of the fee forengineering services from TKG Consulting Engineers (“**TKG**”) based on competitive negotiated bids from TKG and two(2) other qualified engineers reasonably acceptable to Landlord withsubstantial experience in the construction of wet lab research and developmentfacilities. If TKG is not willing to match Tenant’s selected competitivenegotiated bid pursuant to the bid process, Landlord shall have the right tocause TKG to be the Tenant’s mechanical, electrical and plumbing engineer ifLandlord increases the TI Allowance in the amount by which TKG’s negotiated feebid exceeds the competitive negotiated bid of the tenant-selected engineer,taking into account any differences in the scope of services of Tenant’sselected engineer as compared with TKG. Landlord shall participate in Tenant’smechanical, electrical and plumbing engineer negotiated and competitive bidprocesses and Tenant shall share copies of all competitive negotiated bidsreceived with Landlord on an “open book” basis.

###  

# 2.             **Definitions**.

#  

## (a)           “**Base Building Systems**” shall mean allmechanical, electrical, plumbing, and HVAC equipment and systems included inthe Landlord Improvements that serve the Premises.

##  

## (b)           “**Design Problem**” shall mean that the TenantImprovements shown in the TI Design Drawings or the TI Construction Drawings,as the case may be, will either: (i) have an adverse effect on Landlord’s Work;(ii) cause the cancellation of Landlord’s insurance on the Building; (iii)result in non-compliance of the Landlord Improvements or Tenant Improvementswith Legal Requirements or (iv) not comport to good design and engineeringpractices.

##  

## (c)           “**Final Completion**” shall mean certificationfrom Landlord’s Architect that (i) the punch list items that existed on thedate of Substantial Completion of Landlord’s Work have been completed and (ii)that the Landlord’s Finish Work has been completed in substantial accordancewith the LI Plans, except for minor “punch-list” items associated with suchfinish work, which do not materially affect Tenant’s ability to occupy andoperate its business in the Premises, and Minor Variations.

##  

## (d)           “**Force Majeure Delay**” shall mean any delayin Landlord’s Work or Tenant’s Work to the extent caused by or arising out ofForce Majeure. Delays in Tenant’s ability to obtain the necessary permits andlicenses for the Tenant Improvements not attributable to the negligence orwillful failure of Tenant or any of its agents, employees or contractors, ornegligence or willful failure of Landlord or any of its agents, employees or contractors,shall be considered a Force Majeure Delay as long as Tenant is diligentlyworking with the applicable governmental authority to obtain such permits andlicenses.

##  

## (e)           “**Initial Delivery**” shall mean the date thatLandlord first grants Tenant continuous access to the Building for the purposeof commencing Tenant’s Work, subject to Tenant’s satisfaction of the safety andinsurance requirements set forth herein.

##  

## (f)            “**Landlord Delay**” shall mean any delay inperformance of Landlord’s Work to the extent caused by or attributable to anycause other than a Tenant Delay or a Force Majeure Delay.

 

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## (g)           “**Landlord’s Finish Work**” shall mean theBuilding lobby improvements, bathroom improvements and any other portions ofLandlord’s Work set forth on Schedule C or mutually agreed upon by Landlord andTenant following approval of the Tenant Improvement Plans and schedule.

##  

## (h)           “**Landlord Improvements**” shall mean theimprovements set forth in the LI Plans.

##  

## (i)            “**Landlord’s Work**” shall mean the work ofconstructing the Landlord Improvements in substantial conformance to the LIPlans (subject only to Minor Variations and any other changes that arepermitted hereunder).

##  

## (j)            “**LI Plans**” shall mean the plans attachedhereto as **Schedule A**.

##  

## (k)           “**Minor Variations**” shall mean anymodifications which do not materially affect the appearance of the Building orthe Premises and which are reasonably required: (i) to comply with all applicable Legal Requirements and/or to obtain orto comply with any building permit required for Landlord’s Work; (ii) to complywith any request by Tenant for modifications to Landlord’s Work; (iii) tocomport with good design, engineering, and construction practices that are notmaterial; or (iv) to make reasonable adjustments for field deviations orconditions encountered during the construction of Landlord’s Work.

##  

## (l)            “**Substantial Completion of Landlord’s Work**”shall mean completion of Landlord’s Work such that: (i) the Base BuildingSystems have been delivered to Tenant in good working order; (ii) Landlord’s Architect has certified that the Landlord Improvements are completedin accordance with the LI Plans (with the exception of Final Completion of theLandlord’ Finish Work), except for minor “punch-list” items which do notmaterially affect Tenant’s ability to install the Tenant Improvements in thePremises; (iii) Tenant has been provided with the number of parking spaces towhich it is entitled under the Lease, subject to any reduction in spaces byTenant for construction or other purposes, including, without limitation, ascontemplated pursuant to Section 6 of the Lease; and (iv) Tenanthas been tendered continuous and uninterrupted access to the Project and thePremises.

##  

## (m)          “**Tenant Delay**” shall mean delays incompletion of Landlord’s Work or Tenant’s Work to the extent attributable to orarising out of:  (i) Tenant’s failure tocomply with any time deadlines in this Work Letter, or any other breach byTenant of the terms of this Work Letter; (ii) Changes (as hereinafter defined)made or associated with reasonable consideration of Changes requested by Tenantto the LI Plans after approval of the same by Landlord, whether or not suchchanges are actually performed; (iii) Tenant’s request for materials,components, finishes, installations or improvements if Tenant requires suchitems notwithstanding Landlord’s notice of the lack of availability of suchitems, unless such items are designated in the LI Plans or pursuant to theBuilding 4757 screening requirement, in which case any changes shall be deemedForce Majeure Delays; (iv) Tenant’s delay in providing information critical tothe normal progression of Landlord’s Work within a reasonable period of timefollowing Landlord’s written request to Tenant’s designated representative forsuch information; or (v) Tenant’s failure to deposit with Landlord theExcess TI Costs (as defined below) within ten (10) days following thedetermination of such excess amount pursuant to the Budget, or within five (5) daysfollowing an increase in such budgeted amount due to a Change Request or anyother reason.

##  

## (n)           “**Tenant Improvements**” shall mean allimprovements that are not included in Landlord’s Work and which Tenant requiresfor its use and occupancy of the Premises.

##  

## (o)           “**Tenant’s Work**” shall mean the work ofconstructing the Tenant Improvements.

##  

## (p)           “**Water-Tight Delivery**” shall mean thatLandlord’s Work shall have been constructed by Landlord to a condition wherethe roof, exterior walls, windows and doors of the Building are in awater-tight condition and are sealed against leakage due to rain and othernormal weather conditions, and the

 

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Building has been delivered to Tenant in a condition reasonablypermitting Tenant to install the Tenant Improvements without interfering withthe Substantial Completion of Landlord’s Work.

##  

# 3.             **Performance of Landlord’s Work**.

#  

## (a)           **Permitting of Landlord’s Work**. Allpermits required for the construction of Landlord’s Work shall be obtained andpaid for by Landlord at its sole cost and expense. If any GovernmentalAuthority having jurisdiction over the construction of Landlord’s Work or anyportion thereof shall impose terms or conditions upon the construction thereofwhich:  (i) are inconsistent withLandlord’s obligations hereunder, (ii) increase the cost of constructingLandlord’s Work, or (iii) will materially delay the construction ofLandlord’s Work, Landlord and Tenant shall reasonably and in good faith seekmeans by which to mitigate or eliminate any such adverse terms and conditions.

##  

## (b)           **Completion of Landlord’s Work**. Landlordshall cause Substantial Completion of the Landlord’s Work to occur on or beforethe Target Commencement Date (subject to Tenant Delays and Force MajeureDelays). Upon the Substantial Completion of Landlord’s Work, Landlord shallrequire Landlord’s Architect and the general contractor performing Landlord’sWork to execute and deliver, for the benefit of Tenant and Landlord, aCertificate of Substantial Completion in the form of the American Institute ofArchitects document G704. Landlord shall act in a commercially reasonablemanner in its construction of the Landlord Improvements to accommodate Tenant’sconstruction of the Tenant Improvements.

##  

## (c)           **Delivery of the Premises**. When Substantial Completion of Landlord’sWork shall have occurred, subject to the remaining terms and provisions of thisSection 3(c), Tenant shall accept the Premises. Tenant’s takingpossession and acceptance of the Premises shall not constitute a waiverof:  (i) Tenant’s ability to requireLandlord to correct (A) any defect in Landlord’s Work, whether or not coveredby any warranty with respect to workmanship (including installation ofequipment) or material (exclusive of equipment provided directly bymanufacturers), or (B) any non-compliance of Landlord’s Work with Code, or (ii)any claim that Landlord’s Work was not completed substantially in accordancewith the LI Plans (subject to Minor Variations and such other changes as are permittedhereunder) (collectively, a “**ConstructionDefect**”). Tenant shall have one (1) year after SubstantialCompletion of Landlord’s Work within which to notify Landlord of any suchConstruction Defect discovered by Tenant which Landlord is required to correct(at Landlord’s sole cost and expense, and not as Operating Expense) regardlessof whether such defect is covered by any warranty, and Landlord shall usereasonable efforts to remedy or cause the responsible contractor to remedy anysuch Construction Defect within thirty (30) days thereafter. Notwithstandingthe foregoing, Landlord shall not be in default under the Lease if**the applicable contractor, despiteLandlord’s reasonable efforts, fails to remedy such Construction Defect withinsuch thirty (30) day period, but Landlord, within thirty (30) days thereafter,commences and diligently and continuously prosecutes such remedial action tocompletion. If Landlord fails to timely perform any repair or replacement ofany Construction Defect which will immediately and adversely affect Tenant’sability to conduct its business in the Premises within thirty (30) days afterdelivery of Tenant’s notice that such defective condition exists (or suchlonger period as may be required if Landlord is diligently pursuing remedialaction within such 30-day period), Tenant shall have the right to replace orrepair such Construction Defect in accordance with the requirements of Section31 of the Lease. Notwithstanding the foregoing, if Landlord disputes anitem in question, any reimbursement shall be subject to reconciliationfollowing the final determination of the disputed item.

##  

## (d)           **Construction Warranties**. Landlord shall obtain customarywarranties and guaranties from the contractor(s) performing the Landlord’s Workand/or the manufacturers of equipment installed as part of the Landlord’s Work,and shall cooperate with Tenant in obtaining any extended warranties requestedby Tenant, but Landlord shall be under no obligation to incur additionalexpense in order to obtain extended warranties. Landlord shall, upon request byTenant, use its good faith efforts to pursue its rights under any suchwarranties obtained by Landlord for the benefit of Tenant, and unless suchefforts are required to comply with Landlord’s compliance obligations underSection 7(c) or its repair obligations under Section 13 of the Lease, Landlordshall be under no obligation to incur any expense in

 

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connection with asserting rights under such warranties or guarantiesagainst either the contractor or the manufacturer. Tenant shall be named as athird-party beneficiary under all construction and equipment warranties(including without limitation, the roof and all mechanical, electrical andplumbing equipment, which Landlord shall endeavor to obtain for a minimumwarranty term of ten (10) years from the date of Substantial Completion ofLandlord’s Work), with the right to enforce such warranties directly againstthe obligor named therein; provided that Tenant shall not enforce any suchwarranties as long as the work associated with such warranties is not requiredfor Tenant’s quiet enjoyment of the Premises for the Permitted Uses andLandlord is diligently acting to cause the work associated with such warrantiesto be performed within any applicable notice and cure period for suchperformance; and notwithstanding the foregoing, if Tenant takes any actionpursuant to its self-help rights under the Lease, Tenant shall have the rightto seek performance of any warranty obligations pursuant thereto. The cost ofcausing the construction and equipment warranties to have terms in excess ofone (1) year shall be at Tenant’s sole discretion, and if so elected by Tenant,at Tenant’s sole cost and expense (but subject to reimbursement out of the TIFund).

##  

## (e)           **Commencement Date Delay**. The “**CompletionDate**” shall occur upon Substantial Completion of Landlord’s Work,except to the extent that Substantial Completion of Landlord’s Work shall havebeen actually delayed by a Tenant Delay. If Substantial Completion of Landlord’sWork is delayed due to a Tenant Delay, then Landlord shall cause Landlord’sArchitect to certify the date on which Landlord’s Work would have beencompleted but for such Tenant Delay and such certified date shall be theCompletion Date.

##  

## (f)            **Changes**. Landlord shall be permitted to makeMinor Variations to the LI Plans without Tenant’s consent, but shall notifyTenant of any Minor Variations that may have an effect on Tenant’s remainingconstruction of the Tenant Improvements or that materially change Tenant’s useor occupancy of the Premises. All other modifications to the LI Plans shall besubject to Tenant’s prior consent, which consent shall not be unreasonablywithheld, conditioned or delayed.

##  

## (g)           **Landlord’s Finish Work**. Landlord shall cause Final Completionof Landlord’s Finish Work to occur no later than the later of (i) thirty(30) days after Landlord’s receipt of written notice from Tenant to Landlordrequesting Landlord’s performance of Landlord’s Work necessary to achieve FinalCompletion of Landlord’s Finish Work (which notice shall be given at that pointin the construction of the Tenant Improvements when Tenant is reasonablysatisfied that Landlord’s Finish Work is not likely to be damaged by Tenant’sWork) (“**Tenant’s Finish Work Notice**”)and (ii) the date upon which Tenant shall have completed all of the TenantImprovements. Provided that Tenant has delivered the Tenant’s Finish WorkNotice, Landlord shall not be liable for damage to or replacement of Landlord’sFinish Work resulting from the concurrent completion of Landlord’s Finish Workand Tenant’s Work, except to the extent attributable to Landlord’s or any ofits employees’ or contractors’ active negligence or willful failure to performsuch work in accordance with good construction practices.

##  

## (h)           **Screening Solution; Separate Metering**. Subject tothe consent of the **Building 4757**tenant, which Landlord shall use commercially reasonable efforts to obtain, aspart of Landlord’s Work, Landlord shall install reasonable screening of thehazardous materials storage containers associated with Building 4757 fromvisibility from the Building (the “**ScreeningSolution**”) and shall cause all utilities and services including,without limitation, irrigation and electricity to the Project to be separatelymetered from the adjacent parcel on which Building 4757 is located. The designfor and materials to be used in connection with the Screening Solution are morespecifically described in **Schedule B**hereto.

##  

## (i)            **Equipment Yard**. As part of the construction of theEquipment Yard, Landlord shall install (as part of the Landlord’s Work)electrical conduits and water supply piping between the Building and theEquipment Yard in accordance with the LI Plans, and storm drains within theEquipment Yard shall be installed in accordance with the existing buildingpermits and the LI Plans. Any proposed and permitted storm drains requiringrelocation by Tenant’s Architect shall be treated as a Change, with permitapproval to be obtained as part of the approval for the TI ConstructionDrawings (as defined below) and paid for by Tenant, subject to reimbursementfrom the TI Fund (as defined below).

 

5

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## (j)            **Hazardous Materials Storage Area**. Landlordhas obtained permitted approval from the City of San Diego for the location ofa hazardous materials storage area (as shown more specifically on the LI Plans)(“**Hazardous Materials Storage Area**”),and shall be responsible as part of Landlord’s Work for completing only thoseimprovements relating to the Hazardous Materials Storage Area shown on the LIPlans. If the location of the Hazardous Materials Storage Area as shown on theLI Plans is required to be moved to a different part of the Project by the Cityof San Diego or requested to be moved to a different part of the Project byTenant, Tenant shall be responsible for obtaining the approval of the City ofSan Diego for the alternate location of the Hazardous Materials Storage Areaand shall pay Landlord from the TI Fund the difference in expense to Landlordin completing the applicable portion of Landlord’s Work at the new location ascompared to the current location, if any (the presently anticipated expense toLandlord for completing the applicable portion of Landlord’s Work is ThreeThousand Dollars ($3,000). Landlord will cooperate with Tenant in Tenant’sefforts to obtain approvals for any locations outside the current permitted andapproved location for the Hazardous Materials Storage Area shown on the LIPlans. Tenant shall be responsible for any governmental approvals required forinstallation of hazardous materials storage container(s) within the HazardousMaterials Storage Area following Landlord’s construction thereof.

##  

## (k)           **Trellis**. Landlord agrees to include as part ofthe Landlord’s Work, a central plant enclosures screening trellis (the “**Trellis**”). The Trellis shall be installedpursuant to plans, specifications and drawings drafted by Landlord’s Architectand approved by Tenant (which approval shall not be unreasonably withheld,conditioned or delayed). Notwithstanding the foregoing, the Trellis may beinstalled as part of Landlord’s Finish Work, provided that Landlord causes theTrellis to be completed no later then January 1, 2007.

##  

# 4.             **Tenant Improvements**.

#  

## (a)           **Tenant Improvements**. Other than funding the TI Allowance asprovided herein and delivering the Landlord’s Work in accordance with the timerequirements of Section 2 of the Lease, and otherwise in accordance withthe Work Letter in order to permit Tenant to construct the Tenant Improvements,Landlord shall not have any obligation whatsoever with respect to Tenant’sWork, except as expressly provided in this Work Letter. Subject to Landlord’stimely satisfaction of its delivery obligations set forth in Section 2 of theLease, Tenant shall use its commercially reasonable efforts to cause the TenantImprovements to be constructed to a condition permitting Tenant to be issued acertificate of occupancy or its equivalent on or before January 1, 2007.

##  

## (b)           **Tenant’s Space Plans**. Tenant shall deliver to Landlordschematic drawings and outline specifications (the “**TI Design Drawings**”) detailing Tenant’s requirements for theTenant Improvements by February 1, 2006. The TI Design Drawings shall besubject to the prior approval of Landlord and Landlord’s Architect, whichapproval shall not be unreasonably withheld, conditioned or delayed more thanfive (5) business days after receipt thereof, and then only if the TI DesignDrawings would cause a Design Problem. Landlord shall deliver to Tenant thewritten objections, questions or comments of Landlord and the Landlord’sArchitect, if any, with regard to the TI Design Drawings within such timeperiod. Tenant shall cause the TI Design Drawings to be revised to address suchwritten comments and shall resubmit said drawings to Landlord for approval inaccordance with the preceding requirements. Such process shall continue untilLandlord has approved the TI Design Drawings. If Landlord fails to respondwithin the five (5) business days for Landlord’s approval or reasonabledisapproval of the TI Design Drawings, Tenant may provide a second notice toLandlord requesting such approval, and if such second notice does not result inTenant’s receipt within five (5) business days of Landlord’s approval or theDesign Problem cited by Landlord for its disapproval, then such failure torespond shall be deemed Landlord’s approval of the submitted TI DesignDrawings.

##  

## (c)           **Working Drawings**. Not later than seventy-five (75)business days following the approval of the TI Design Drawings by Landlord,Tenant shall cause Tenant’s Architect to prepare and deliver to Landlord forreview and comment construction plans, specifications and drawings for theTenant Improvements (“**TI ConstructionDrawings**”), which TI Construction Drawings shall be prepared

 

6

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substantially in accordance with the TI Design Drawings. Tenant shallbe solely responsible for ensuring that the TI Construction Drawings reflectTenant’s requirements for the Tenant Improvements; provided that Landlord shallkeep Tenant’s Architect apprised of any Minor Variations to the LI Plans, andshall defend and hold Tenant harmless from any and all increased costs ofTenant’s Work and the redesign of the Tenant Improvements arising from Landlord’sfailure to provide Tenant’s Architect with notice of such Minor Variationswithin ten (10) days following the date on which any such Minor Variation ismade. The TI Construction Drawings shall be subject to the prior approval ofLandlord and Landlord’s Architect, which approval shall not be unreasonablywithheld, conditioned or delayed more than five (5) business days after receiptthereof, and then only if the TI Construction Drawings would cause a DesignProblem. Landlord shall, within such five (5) business day period followingLandlord’s receipt of all of the TI Construction Drawings, either (i) approvethe TI Construction Drawings, (ii) approve the TI Construction Drawings subjectto specified conditions which must be stated in a reasonably clear and completemanner to be satisfied by Tenant prior to submitting the Landlord-approved TIConstruction Drawings for TI Permits as set forth in Section 5(a) below, to theextent the TI Construction Drawings contain a Design Problem, or (iii)disapprove and return the TI Construction Drawings to Tenant with requestedrevisions to the extent the TI Construction Drawings contain a Design Problem;provided, however, that Landlord may not disapprove any matter that isconsistent with the TI Design Drawings. Tenant and Tenant’s Architect shallconsider all such comments in good faith and shall, within five (5) businessdays after receipt, notify Landlord how Tenant proposes to respond to suchcomments. Provided that the design reflected in the TI Construction Drawings isconsistent with the TI Design Drawings, Landlord shall approve the TIConstruction Drawings submitted by Tenant. Once approved by Landlord, subjectto the provisions of Section 7(d) below, Tenant shall not materiallymodify the TI Construction Drawings except as may be reasonably required inconnection with the issuance of the TI Permit (as defined in Section 5(a)below). If Landlord fails to respond within the five (5) business days forLandlord’s approval or reasonable disapproval of the TI Construction Drawings,Tenant may provide a second notice to Landlord requesting such approval, and ifsuch second notice does not result in Tenant’s receipt within five (5) businessdays of Landlord’s approval or the Design Problem cited by Landlord for itsdisapproval, then such failure to respond shall be deemed Landlord’s approvalof the submitted TI Construction Drawings. Any changes to the TI ConstructionDrawings following Landlord’s and Tenant’s approval of same requested by Tenantshall be processed as provided in Section 6 hereof.

##  

## (d)           **Progress Prints**. Tenant shall provide Landlord withprogress prints as modified during each stage of the review and approvalprocess.

##  

## (e)           **Warranty**. Landlord shall be named as athird-party beneficiary under all construction and equipment warranties relatedto any Tenant Improvements, with the right to enforce such warranties directlyagainst the obligor named therein; provided that Landlord shall not enforce anysuch warranties as long as Tenant is not in Default under the Lease.

##  

# 5.             **Performance of Tenant’s Work**.

#  

## (a)           **Commencement and Permitting of Tenant’s Work**. Tenantshall commence construction of the Tenant Improvements following Tenant’s receiptof a building permit (the “**TI Permit**”)authorizing the construction of the Tenant Improvements consistent with the TIConstruction Drawings approved by Landlord (and Tenant shall provide Landlordwith a copy of the TI Permit, promptly following receipt. Notwithstanding theforegoing, Tenant, at Tenant’s sole and exclusive risk and otherwise inaccordance with the terms hereof and the TI Construction Drawings, may commencecertain Tenant Improvements Work prior to receipt of the TI Permit. Tenant, atits sole cost and expense (but subject to reimbursement out of the TI Fund),shall be responsible for the filing of plans for the Tenant Improvementsincluding all fees and related costs and for securing all permits and licensesrequired therefore provided that the cost of obtaining the TI Permit shall bepayable from the TI Fund. Landlord shall assist Tenant in obtaining the TIPermit. Notwithstanding the foregoing, prior to commencing construction of theTenant Improvements, Tenant shall first deliver to Landlord: (i) copies ofeach fully executed contract entered into between (A) Tenant and Tenant’sArchitect and (B) Tenant and the Tenant Improvements general contractor,and pertaining to the Tenant Improvements and (ii) certificates of

 

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insurance from any person performing work on Tenant’s behalf within thePremises evidencing the following coverage: (1) commercial generalliability coverage with loss limits in industry standard amounts,(2) workers’ compensation coverage in amounts required by applicable LegalRequirements, (3) employers liability coverage with loss limits of notless than $1,000,000 per occurrence, (4) automobile liability coverage inan amount not less than $1,000,000 per accident, (5) ”Builder’s All Risk”coverage in an amount approved by Landlord not exceeding the cost ofconstruction of the Tenant Improvements and (6) as to Tenant’s Architect only,professional liability coverage in an amount of not less than $1,000,000 peroccurrence******(the“**Tenant Improvements Deliveries**”).Tenant, Landlord and Alexandria Real Estate Equities, Inc. will be named asadditional insureds on the commercial general liability policy or policies andautomotive liability policy or policies.

##  

## (b)           **Selection of Materials, Etc.**Where morethan one type of material or structure is indicated on the TI ConstructionDrawings approved by Tenant and Landlord, the determination shall be made byTenant in Tenant’s reasonable discretion, unless the material or structure affectsthe structure, foundation, roof, load bearing walls or safety of the Buildingin which case determination shall be made by Landlord in Landlord’s reasonablediscretion.

##  

# 6.             **Changes**. Any changes requested by Tenant to theLandlord’s Work or the Tenant Improvements after the delivery and approval byLandlord of the TI Design Drawings, shall be requested and instituted inaccordance with the provisions of this Section 6 and shall be subject tothe written approval of Landlord, such approval not to be unreasonablywithheld, conditioned or delayed.

#  

## (a)           **Tenant’s Right to Request Changes**. If Tenantshall request changes to Landlord’s Work or the TI Construction Drawings (“**Changes**”), Tenant shall request suchChanges by notifying Landlord in writing in substantially the same form as theAIA standard change order form AIA G701 (a “**ChangeRequest**”), which Change Request shall detail the nature and extentof any such Change. Such Change Request must be signed by Tenant’sRepresentative. Landlord shall review and approve or disapprove such ChangeRequest within ten (10) business days thereafter, provided that Landlord’sapproval shall not be unreasonably withheld, conditioned or delayed.

##  

## (b)           **Implementation of Changes**. If Landlord approves such Change andTenant deposits with Landlord any Excess TI Costs (as defined in Section7(d) below) required in connection with such Change within five (5) daysthereof, Tenant may cause the approved Change to be instituted.

 

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# 7.             **Costs**.

#  

## (a)           **Budget For Tenant Improvements**. Before thecommencement of construction of the Tenant Improvements, Tenant shall obtainand deliver to Landlord a detailed breakdown, by trade, of the costs incurredor which will be incurred, in connection with the design and construction ofTenant’s Work (the “**Budget**”). TheBudget shall be based upon the TI Construction Drawings approved by Landlordand shall include a payment to Landlord of administrative rent (“**Administrative Rent**”) equal to 1% of the TICosts (as hereinafter defined) for monitoring and inspecting the constructionof Tenant’s Work, which sum shall be payable from the TI Fund. SuchAdministrative Rent shall include, without limitation, all out-of-pocket costs,expenses and fees incurred by or on behalf of Landlord arising from, out of, orin connection with, such monitoring of the construction of the TenantImprovements, and shall be payable out of the TI Fund. If the Budget is greaterthan the TI Allowance, Tenant shall deposit with Landlord the difference, incash, within 10 days following the determination of such excess amount pursuantto the Budget, for disbursement by Landlord as described in Section 7(d).

##  

## (b)           **TI Allowance**. Landlord shall provide to Tenant atenant improvement allowance (collectively, the “**TI Allowance**”) as follows:

##  

### (i)            a “**Tenant Improvement Allowance**” in themaximum amount of $150.00 per rentable square foot in the Premises, orapproximately $9,600,000 in the aggregate, which is included in the Base Rentset forth in the Lease; and

###  

### (ii)           an “**Additional Tenant Improvement Allowance**” inthe amount of $5.00 per rentable square foot in the Premises, or approximately$320,000 in the aggregate, which shall, to the extent used, result inadjustments to the Base Rent as set forth in the Lease.

###  

At any time priorto the earlier of (a) substantial completion of the Tenant’s Work and(b) the Rent Commencement Date, Tenant shall notify Landlord whether ithas elected to receive from Landlord the Additional Tenant ImprovementAllowance. Such election shall be final and binding on Tenant, and may notthereafter be modified without Landlord’s consent, which may be granted orwithheld in Landlord’s sole and absolute discretion. The TI Allowance shall bedisbursed in accordance with this Work Letter. Except as set forth below,Tenant shall have no right to the use or benefit (including any reduction toBase Rent) of any portion of the TI Allowance not required for the constructionof (x) the Tenant Improvements described in the TI Construction Drawingsapproved pursuant to Section 4(c) or (y) any Changes pursuant to Section6. Notwithstanding the foregoing, if Tenant does not use the full amount ofthe TI Allowance, the unused portion (subject to a cap of $10.00 per rentablesquare foot of the Premises, or approximately $640,000) shall be applied so asto delay the Rent Commencement Date for the period of time necessary to reflectan abatement of Rent equal to such unused portion.

 

## (c)           **Costs Includable in TI Fund**. The TI Fund shall be used solely forthe payment of design, permit and construction costs, incurred by Tenant inconnection with the construction of the Tenant Improvements, including, withoutlimitation, the cost of preparing the TI Design Drawings and the TIConstruction Drawings, the purchase of all fixed equipment and materialsincorporated into the Tenant Improvements, and all related tax obligations, allother costs set forth in the Budget, including Landlord’s Administrative Rent,the cost of Changes and those costs associated with construction and designexpenses that do not require a construction permit prior to Tenant’s receipt ofconstruction permits for the Tenant Improvements, up to $25,000 of Tenant’ssignage costs pursuant to Section 38(c) of the Lease, and any othercosts subject to reimbursement out of the TI Allowance as set forth in thisWork Letter or in the Lease (collectively, “**TICosts**”). As part of the costs covered by the TI Allowance, Tenantshall also be permitted to retain the services of an independent constructionmanager selected by Tenant and reasonably approved by Landlord to supervise theconstruction of the Tenant Improvements on behalf of Tenant. Landlord herebyconsents to the hiring of Gary Ghio of G2 Facilities Management Consulting; anyfurther change of construction manager shall again require Landlord’s approval,which approval shall not be

 

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unreasonably withheld conditioned or delayed. Landlord shall have theright to approve the cost and scope of services to be provided by Tenant’sconstruction manager, which approval shall not be unreasonably withheld,conditioned or delayed. Notwithstanding anything to the contrary containedherein, the TI Fund shall not be used to purchase any furniture, personal propertyor other non-Building System materials or equipment, including, but not belimited to, biological safety cabinets and other scientific equipment notincorporated into the Improvements.

##  

## (d)           **Excess TI Costs**. It is understood and agreed thatLandlord is under no obligation to bear any portion of the cost of any of theTenant Improvements except to the extent of the TI Allowance. If at any timeand from time-to-time, the remaining TI Costs under the Budget exceed theremaining unexpended TI Allowance, Tenant shall deposit with Landlord, as acondition precedent to Landlord’s obligation to complete the Landlord’s Work,one hundred percent (100%) of the then current TI Cost in excess of theremaining TI Allowance (“**Excess TI Costs**”)within ten(10) days following the determination of such excess amount pursuantto an approved Change which results in an increase to the Budget. If Tenantfails to deposit, or is late in depositing, the amount of the Excess TI Costswith Landlord, Landlord shall have all of the rights and remedies set forth inthe Lease for nonpayment of Rent (including, but not limited to, the right tointerest at the Default Rate and the right to assess a late charge), and forpurposes of any litigation instituted with regard to such amounts the same willbe considered Rent. Any Excess TI Costs held by Landlord, together with theremaining TI Allowance, is herein referred to as the “**TI Fund**.” Any Excess TI Costs deposited with Landlord shall be the first fundsdisbursed to pay TI Costs. Notwithstanding anything to the contrary set forthin this Section 7(d), Tenant shall be fully and solely liable forTI Costs in excess of the TI Allowance. If upon Substantial Completion of theTenant Improvements and the payment of all sums due in connection therewiththere remains any undisbursed TI Fund, Tenant shall be entitled to suchundisbursed TI Fund solely to the extent of any Excess TI Costs deposit Tenanthas actually made with Landlord.

##  

## (e)           **Payment for TI Costs**. Following delivery of the Budget andthe Tenant Deliveries, Landlord shall pay TI Costs once a month against a drawrequest in a commercially reasonable form, containing such certifications, lienwaivers (including a conditional lien release for each progress payment andunconditional lien releases for the prior month’s progress payment), inspectionreports and other matters as Landlord customarily obtains, to the extent ofLandlord’s approval thereof for payment, no later than 30 days followingreceipt of such draw request. Upon completion of the Tenant Improvements,Tenant shall deliver to Landlord:  (i)certificates setting forth the names of all contractors and subcontractors whodid the work and final unconditional lien waivers from all such contractors andsubcontractors; (ii) “as built” plans for such Tenant Improvements (1 copy inprint format and two (2) copies in electronic CAD format), (iii) acertificate of substantial completion in form AIA G704, (iv) a certificateof occupancy (or its equivalent) and (v) copies of all operating manualsand warranties. Tenant may begin submitting draw requests for the reimbursementof costs Tenant incurs in connection with the drafting of the TI DesignDrawings at any time after that date which is thirty (30) days after the dateLease is executed. In the event that Landlord fails to pay any of the TIAllowance in the manner and within the time required pursuant to this WorkLetter, following written notice from Tenant to Landlord of such failure, andprovided that Landlord does not cure such failure within ten (10) business daysof such notice, then, in addition to any other rights and remedies at law orequity, Tenant may credit against Tenant’s next obligations to pay Rent underthe Lease such unfunded amount, plus interest at the Default Rate from the datesuch payment was required until the date of the rental credit. The foregoingright of Tenant to credit against rent due shall not apply if Landlordreasonably disputes in writing any or all of its obligation to reimburse Tenantfrom the TI Allowance.

##  

# 8.             **Tenant Access**.

#  

## (a)           **Tenant’s Access Rights**. Landlord hereby agrees to permit Tenantaccess, at Tenant’s sole risk and expense, to the Building without anyobligation to pay Rent: (i) as of the date of Initial Delivery in order toperform Tenant’s Work provided that such Tenant’s Work is coordinated withLandlord’s Architect and Landlord’s general contractor, and complies with theLease and all other reasonable restrictions and conditions Landlord may imposeand (ii) prior to the completion of Landlord’s Work, to inspect and observework in process; all such access shall be during normal business hours or atsuch other times as are reasonably designated by Landlord. Landlord shall notcharge directly or

 

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indirectly for the use of elevators, hoists, water, electricity, HVAC,security, or parking used at the Premises prior to the Commencement Date. Notwithstandingthe foregoing, neither Tenant nor the Tenant Parties shall have any right toenter onto the Premises or the Project unless and until Tenant has delivered toLandlord evidence reasonably satisfactory to Landlord demonstrating that theinsurance required to be obtained by Tenant pursuant to Section 5(a)above, has been placed in connection with such pre-commencement access, and isin full force and effect. Any entry by Tenant shall comply with all establishedsafety practices of Landlord’s contractor and Landlord until completion ofLandlord’s Work and acceptance thereof by Tenant.

##  

## (b)           **No Interference**. Neither Tenant nor any Tenant Partyshall interfere with the performance of Landlord’s Work, nor with anyinspections or issuance of final approvals by the County of San Diego or theCity of San Diego; provided, however, that Landlord and Tenant shall actreasonably to cause their respective contractors, service providers, andworkmen involved in the construction of Landlord’s Work and Tenant’s Work toact in labor harmony with one another.

##  

## (c)           **No Acceptance of Premises**. The fact that Tenant may, with Landlord’sconsent, enter into the Project prior to the date of Substantial Completion ofLandlord’s Work for the purpose of performing any Tenant’s Work shall not bedeemed an acceptance by Tenant of possession of the Premises, but in such eventTenant shall indemnify and hold Landlord harmless from any loss of or damage toTenant’s property, completed work, fixtures, equipment, materials ormerchandise, and from liability for death of, or injury to, any person, to theextent caused by the willful misconduct or negligence of Tenant or any TenantParty.

##  

## (d)           **Notification of Delays**. Not less than once each calendar monthfrom the date of this Work Letter through the Commencement Date, Landlord shalldeliver to Tenant written notification of the number of days during theimmediately preceding calendar month Landlord’s performance under this WorkLetter or the Lease was delayed as a result of Tenant Delays. Not less thanonce each calendar month from the date of this Work Letter through theCommencement Date, Tenant shall deliver to Landlord written notification of thenumber of days during the immediately preceding calendar month Tenant’sperformance under this Work Letter or the Lease was delayed as a result ofLandlord Delays or Force Majeure Delays. Claims of Force Majeure Delay onaccount of weather shall be substantiated by delivery to the party not claimingthe Force Majeure Delay of notices or other documents of the affected party’scontractor affirming the existence and length of such weather related delay,including industry standard documentation.

##  

# 9.             **Miscellaneous**.

#  

## (a)           **Consents**. Whenever consent or approval of eitherparty is required under this Work Letter, that party shall not unreasonablywithhold, condition or delay such consent or approval, except as may beexpressly set forth herein to the contrary.

##  

## (b)           **Modification**. No modification, waiver or amendment ofthis Work Letter or of any of its conditions or provisions shall be bindingupon Landlord or Tenant unless in writing signed by Landlord and Tenant.

##  

## (c)           **Counterparts**. This Work Letter may be executed in anynumber of counterparts but all counterparts taken together shall constitute asingle document.

##  

## (d)           **Governing Law**. This Work Letter shall be governed by,construed and enforced in accordance with the internal laws of the state inwhich the Premises are located, without regard to choice of law principles ofsuch State.

##  

## (e)           **Time of the Essence**. Time is of the essence of this WorkLetter and of each and all provisions thereof.

 

11

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## (f)            **Default**. Notwithstanding anything set forthherein or in the Lease to the contrary, Landlord shall not have any obligationto perform any work hereunder or to fund any portion of the TI Fund during anyperiod Tenant is in Default under the Lease.

##  

## (g)           **Severability**. If any term or provision of this WorkLetter is declared invalid or unenforceable, the remainder of this Work Lettershall not be affected by such determination and shall continue to be valid andenforceable.

##  

## (h)           **Merger**. All understandings and agreements, oralor written, heretofore made between the parties hereto and relating to Tenant’sWork are merged in this Work Letter, which alone (but inclusive of provisionsof the Lease incorporated herein and the final approved constructions drawingsand specifications prepared pursuant hereto) fully and completely expresses theagreement between Landlord and Tenant with regard to the matters set forth inthis Work Letter.

##  

## (i)            **Entire Agreement**. This Work Letter is made as a part ofand pursuant to the Lease and, together with the Lease, constitutes the entireagreement of the parties with respect to the subject matter hereof. This WorkLetter is subject to all of the terms and limitation set forth in the Lease, andneither party shall have any rights or remedies under this Work Letter separateand apart from their respective remedies pursuant to the Lease.

 

**[ Signatures on next page ]**

 

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**IN WITNESS WHEREOF,** Landlord andTenant have executed this Work Letter to be effective on the date first abovewritten.

 
| TENANT:                               |                                 |
|---------------------------------------|--------------------------------------|
|                                  |                                 |
|                                  |                                 |
| SENOMYX,  INC.                        |                                 |
| a  Delaware corporation               |                                 |
|                                  |                                 |
| By:                                   |   /s/  Kent Snyder         |   |
| Its:                                  |   Chief  Executive Officer |   |
|                                  |                                 |
|                                  |                                 |
| LANDLORD                              |                                 |
|                                  |                                 |
|                                  |                                 |
| ARE-NEXUS  CENTRE II, LLC,            |                                 |
| a  Delaware limited liability company |                                 |

 
| By:    | ALEXANDRIA  REAL ESTATE EQUITIES, L.P., |
|--------|-----------------------------------------|
|   | a  Delaware limited partnership,        |
|   | its  managing member                    |

 
|   |   |                                      |
|--------|--------|-------------------------------------------|
|   | By:    | ARE-QRS  Corp.,                           |   |
|   |   | a  Maryland corporation,                  |   |
|   |   | its  general partner                      |   |
|   |   |                                      |   |
|   | By:    |   /s/  Jennifer Pappas          |   |
|   |   |                                      |   |
|   | Name:  |   Jennifer  Pappas              |   |
|   | Title: |   V.P.  and Assistant Secretary |   |
|   | Date:  |   January  12, 2006             |   |

 

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**SCHEDULE A TO WORK LETTER**

 

**LI Plans**

 

Shell & Core Plans:  Allimprovements per City of San Diego permitted drawings dated 12/20/04 (Issuedfor Bid 4/13/05) prepared by architects Delawie Wilkes Rodrigues Barkerentitled Alexandria Technology Center-UTC 2, Core Building – CP1 as adjusted bythe agreed to Value Engineering between Landlord and Tenant and subject toMinor Variations as more fully described in the Work Letter.

 

Central Plant Plans:  Allimprovements per City of San Diego permitted drawings dated 02/14/05 (Issuedfor Bid 4/13/05) prepared by architects Delawie Wilkes Rodrigues Barker entitledAlexandria Technology Center-UTC 2, Core Building – CP2 & Site Enclosurefor Shell Building Central Plant Equipment as adjusted by the agreed to ValueEngineering between Landlord and Tenant and subject to Minor Variations as morefully described in the Work Letter.

 

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**SCHEDULE B TO WORK LETTER**

 

**Screening Solution**

 

A ten foot high chain link fence (see drawing) with privacy slats.

 

[DRAWING OMITTED]

 

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**SCHEDULE C TO WORK LETTER**

 

**Landlord’s Finish Work**

 

1. Trellis

 

2. Building Lobby Improvements

 

3. Bathroom Improvements

 

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**EXHIBIT D TO LEASE**

 

**ACKNOWLEDGMENT OF COMMENCEMENT DATE**

 

This **ACKNOWLEDGMENT OF COMMENCEMENTDATE** is made as of this       day of              ,                     ,between ARE-NEXUS CENTRE II, LLC, a Delaware limited liability company (“**Landlord**”), and SENOMYX, INC., a Delawarecorporation (“**Tenant**”), and isattached to and made a part of the Lease dated as of             ,           (the “**Lease**”), by and between Landlord and Tenant.Any initially capitalized terms used but not defined herein shall have themeanings given them in the Lease.

 

Landlord and Tenant hereby acknowledge and agree, for all purposes ofthe Lease, that the Commencement Date of the Base Term of the Lease is             ,             ,******the “RentCommencement Date is                 ,           and thetermination date of the Base Term of the Lease shall be midnight on February28, 2017.

 

IN WITNESS WHEREOF, Landlord and Tenant have executed thisACKNOWLEDGMENT OF COMMENCEMENT DATE to be effective on the date first abovewritten.

 
| **TENANT:**                           |   |
|---------------------------------------|--------|
|                                  |   |
|                                  |   |
| **SENOMYX, INC.,**                    |   |
| a  Delaware corporation               |   |
|                                  |   |
| By:                                   |   |   |
| Its:                                  |   |   |
|                                  |   |
| **LANDLORD:**                         |   |
|                                  |   |
| **ARE-NEXUS CENTRE II, LLC,**         |   |
| a  Delaware limited liability company |   |

 
| By:    | ALEXANDRIA  REAL ESTATE EQUITIES, L.P., |
|--------|-----------------------------------------|
|   | a  Delaware limited partnership,        |
|   | its  managing member                    |

 
|   |   |                     |
|--------|--------|--------------------------|
|   | By:    | ARE-QRS  Corp.,          |   |
|   |   | a  Maryland corporation, |   |
|   |   | its  general partner     |   |
|   |   |                     |   |
|   | By:    |                     |   |
|   |   |                     |   |
|   | Name:  |                     |   |
|   | Title: |                     |   |
|   | Date:  |                     |   |
|        |        |                          |  |  |  |  |

 

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**EXHIBIT E TO LEASE**

 

**Rules and Regulations**

 

The sidewalk, entries,and driveways of the Project shall not be obstructed by Tenant, or any TenantParty, or used by them for any purpose other than ingress and egress to andfrom the Premises.

 

# 1.             Tenant shallnot place any objects, including antennas, outdoor furniture, etc., in theCommon Areas, other than the Basement Parking Structure and Equipment Yard.

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# 2.             Except foranimals assisting the disabled and associated with Tenant’s research anddevelopment Permitted Uses, no animals shall be allowed in the offices, halls,or corridors in the Project.

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# 3.             Tenant shallnot disturb the occupants of the adjoining buildings by the use of any radio ormusical instrument or by the making of loud or improper noises.

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# 4.             If Tenantdesires telegraphic, telephonic or other electric connections in the Premises,Landlord or its agent will direct the electrician as to where and how the wiresmay be introduced; and, without such direction, no boring or cutting of wireswill be permitted. Any such installation or connection shall be made at Tenant’sexpense, subject to reimbursement from the TI Allowance.

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# 5.             Tenant shallnot install or operate any steam or gas engine or boiler, or other mechanicalapparatus in the Premises, except as specifically approved in the Lease or inthe TI Design Drawings. The use of oil, gas or inflammable liquids for heating,lighting or any other purpose is expressly prohibited. Explosives or otherarticles deemed extra hazardous shall not be brought into the Project.

#  

# 6.             Parking anytype of recreational vehicles is specifically prohibited on or about theProject. Except for the overnight parking of operative vehicles, no vehicle ofany type shall be stored in the parking areas at any time. In the event that avehicle is disabled, it shall be removed within 48 hours. There shall be no “ForSale” or other advertising signs on or about any parked vehicle. All vehiclesshall be parked in the designated parking areas in conformity with all signsand other markings.

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# 7.             Tenant shallmaintain the Premises free from infestation by rodents, insects and otherpests.

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# 8.             Landlordreserves the right to exclude or expel from the Project any person who, in thejudgment of Landlord, is intoxicated or under the influence of liquor or drugsor who shall in any manner do any act in violation of the Rules and Regulationsof the Project.

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# 9.             Tenant shallnot cause any unnecessary labor by reason of Tenant’s carelessness orindifference in the preservation of good order and cleanliness.

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# 10.           Tenant shallgive Landlord prompt notice of any defects in the water, lawn sprinkler,sewage, gas pipes, electrical lights and fixtures, heating apparatus, or anyother service equipment affecting the Premises.

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# 11.           Tenant shallnot permit the dumping of waste or refuse or permit any harmful materials to beplaced in any drainage system or sanitary system in or about the Premises in violationof any Hazardous Materials Laws.

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# 12.           All moveabletrash receptacles provided by the trash disposal firm for the Premises must bekept in the trash enclosure areas, if any, provided for that purpose.

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# 13.           No auction,public or private, will be permitted on the Premises or the Project.

 

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# 14.           No awningsshall be placed over the windows in the Premises except with the prior writtenconsent of Landlord.

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# 15.           The Premisesshall not be used for lodging, sleeping or for any immoral or illegal purposesor for any purpose other than that specified in the Lease. No gaming devicesshall be operated in the Premises.

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# 16.           Tenant shallascertain from Landlord the maximum amount of electrical current which can safelybe used in the Premises, taking into account the capacity of the electricalwiring in the Project and the Premises and the needs of other tenants, andshall not use more than such safe capacity. Landlord’s consent to theinstallation of electric equipment shall not relieve Tenant from the obligationnot to use more electricity than such safe capacity.

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# 17.           Tenantassumes full responsibility for protecting the Premises from theft, robbery andpilferage.

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# 18.           Tenant shallnot install or operate on the Premises any machinery or mechanical devices of anature not related to Tenant’s Permitted Use of the Premises and shall keep allsuch machinery free of vibration, noise and air waves which may be transmittedbeyond the Premises.

 

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**EXHIBIT F TO LEASE**

 

**TENANT’S PERSONAL PROPERTY**

 

[***]

 

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***ConfidentialTreatment Requested

 

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**EXHIBIT G TO LEASE**

 

**PARKING**

****

 

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**EXHIBIT H TO LEASE**

 

**SURRENDERPLAN**

 

1.     Tenant’s environmental contractor (“Contractor”)will prepare and send a written 30-day advance notice to Department of HealthServices, Radiological Health Branch in Sacramento, CA regarding Intent toVacate facility along with form RH 5314, Certificate of Disposition ofMaterials. Landlord hereby consents to the hiring of Occupational Services,Inc. as the Contractor; any change of Contractor shall require Landlord’sapproval, which approval shall not be unreasonably withheld conditioned ordelayed.

 

Contractor will surveybenches, floors, sinks, work areas, fume hoods, and storage areas in theradiation laboratories that are to be closed-out using appropriate surveyinstruments to determine if fixed contamination is present. Contractor will uselarge area gas proportional detectors for beta emitting radionuclides and a lowenergy gamma scintillation probe for I-125. Contractor will then collect anestimated 1,000 wipe test samples from the laboratory surfaces, includingsinks, benches, floors, return air vents, floor drains and adjacent hallways,to determine if removable surface contamination is present. Wipe test sampleswill be analyzed at Contractor’s counting laboratory using Contractor’s Beckmanmodel LS 6000SE liquid scintillation counter calibrated with NIST traceable H-3and C- 14 reference sources and Contractor’s Gamma Counter calibrated with anI-125 reference source. The counting results will be reported in units ofdpm/100 cm2.

 

Contractor will report locationsof elevated contamination to Tenant. A “location of elevated contamination” isan area where removable or fixed contamination is greater than the MinimumDetectable Concentration (MDC) of our instruments. Contractor will retest andresurvey the “locations of elevated contamination” to verify adequatedecontamination. The closeout survey, and accompanying report that documentsthe survey, will include the physical survey of the site, preparation of thewipes for LSC and Gamma counting, preparation of the license amendment requestwith survey report (~35 page document including data sheets) and review by asenior Contractor Health Physicist.

 

The amendment application andfinal termination report will be prepared according to guidelines contained in:

 

•      NUREG 1507, Minimum Detectable Concentrationswith Typical Radiation Survey Instruments for Various Contaminants and FieldConditions (http://techconf.llnl.gov/radcri/1507.html)

•      MARSSIM, the Multi-Agency Radiation Survey andSite Investigation Manual. (http://www.epa.gov/radiation/marssim/)

 

Areas with elevatedcontamination will be cleaned by Contractor. The cleaned area will beresurveyed by Contractor to confirm that elevated contamination has beenremoved by the cleaning.

 

Contractor will prepare adetailed written amendment to Tenant’s RML requesting the addition of Tenant’snew facility. The amendment will include electronic maps demarcating theradioactive materials receipt, package open, use, storage, and disposallocations (decay in storage and isotope disposal sinks). We will includedetailed tables listing each room name and room number to be listed on thelicense. We will include new sewer release limits on discharges to the sanitarysewer.

 

2.     Contractor will chemically decontaminateTenant’s biological safety cabinets and incubators with paraformaldehyde beforethey are moved or shipped. The decontamination procedures will

 
|  |   | Copyright © 2005, Alexandria Real Estate Equities,  Inc.  ALL RIGHTS RESERVED.  Confidential and Proprietary – Do Not Copy  or Distribute.  Alexandria and the  Alexandria Logo are registered trademarks of Alexandria Real Estate Equities,  Inc. |
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adhere to the NSF 49Standard. Contractor will start the work in the evening, between 4:00 p.m. –6:00 p.m.

 

The decontamination processtakes approximately 14 hours, during which the cabinets will be encapsulatedwith plastic sheeting and duct tape. **Nopersons****are permitted to enter theentire suite during the decontamination****process**. There will be no human access into the suite untilContractor returns the following morning to remove the encapsulation andneutralize the agent. At that time the decontamination process is complete andpersons may enter the suite.

 

3.     Contractor will biologically decontaminateTenant’s walk-in cold rooms. Contractor will issue a signed certificate ofdecontamination for each walk-in cold room. The walk-in cold rooms will besprayed down with Sporicidin, a registered disinfectant and cleaner and then foggedwith Actril® Cold Sterilant.

 

4.     Contractor will wipe down the chemical fumehoods once empty. Only the accessible portions of fumehoods (not ducting orfans) will be cleaned. Inaccessible areas (i.e., the plenums and duct workabove the fume hood) will not be cleaned. Contractor will issue signedcertificates documenting the cleaning. Contractor is not conductingconfirmatory sampling after cleaning to verify the fume hoods are completelyfree of hazardous substances.

 

5.     Contractor will wipe down the flammableliquid, acid, base, and chemical cabinet storage cabinet once they are empty.

 

6.     Contractor will issue signed certificatesdocumenting the cleaning. Contractor is not conducting confirmatory samplingafter cleaning to verify the cabinets are completely free of hazardoussubstances.

 

7.     Contractor will contact vendors, conduct sitewalk, and obtain quotes from qualified vendors for the transportation anddisposal of chemicals.

 

8.     Contractor will request gas supplier(s) topick up compressed gas cylinders from facility.

 

9.     Contractor will contact biohazardous wastehauler and have biohazardous materials and biohazardous waste disposed of usinga registered hauler.

 

10.   Contractor will physically verify thatcontainers of hazardous materials have been disposed of from the site.

 

11.   Contractor will perform the following stepsassociated with Tenant licenses and permitting agreements:

 

•      Send letter to the agency to terminate the SanDiego Industrial Wastewater permit, and attend final inspection, if conductedby regulator.

 

•      Send letter to the agency to terminate the SanDiego County Health Department permit and attend final inspection, if conductedby regulator.

 

•      Send letter to the agency to terminate the EPAHazardous Waste Identification Number and attend final inspection, if conductedby regulator.

 

•      Send letter to the agency to terminate the SanDiego Fire Department Permit and attend final inspection, if conducted byregulator.

 

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•      If follow up correspondence is required by theRadiological Health Branch in Sacramento, CA after the initial amendment issubmitted, the time spent preparing the response letter will be invoiced atContractor’s hourly rate and will be paid for entirely by Tenant.

 

12.   Tenant will contract a janitorial contractorto conduct cleaning so that the building is “broom clean”.

 

13.   Tenant shall provide a written report ofContractor documenting that all measures required herein have been completed inaccordance with the requirements hereof.

 

14.   Tenant and its Contractor shall participate inany measures taken by Landlord to verify the performance of the aforementionedsurrender requirements, including but not limited to, phone interviews and sitevisits.

 

15.   Tenant shall remain liable for all of theobligations and requirements set forth herein notwithstanding its hiring of theContractor.

 

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**EXHIBIT I TO LEASE**

 

**LISTOF ENVIRONMENTAL REPORTS**

 

1.     ENVIRON,**2/6/03**:  Phase I EnvironmentalSite Assessment, 4757 Nexus Centre Drive, San Diego, California.

 

2.     ENVIRON,**1/6/06**:  Phase IEnvironmental Site Assessment Update and Limited Phase II Investigation, 4757and 4767 Nexus Centre Drive, San Diego, California.

 

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