Exhibit 10.3



 






EXHIBIT 10.3




MULTI-TENANT INDUSTRIAL LEASE 

(TRIPLE NET)




LANDLORD:




AEW/LBA ACQUISITION CO. II, LLC,

a California limited liability company




TENANT:




AURORA BIOSCIENCES CORPORATION,

a Delaware corporation





 











 





STANDARD FORM MULTI-TENANT INDUSTRIAL LEASE




TABLE OF CONTENTS




	 	 	 	 	 	 	 
	Section	 	Title	 	Page	 
	 	 	 
	 	 	 	 
	1.	 	Premises
	 	 	1	 
	2.	 	Term
	 	 	2	 
	3.	 	Rent
	 	 	3	 
	4.	 	Common Area; Operating Expenses
	 	 	3	 
	5.	 	Security Deposit
	 	 	6	 
	6.	 	Use
	 	 	7	 
	7.	 	Payments and Notices
	 	 	9	 
	8.	 	Brokers
	 	 	9	 
	9.	 	Surrender; Holding Over
	 	 	10	 
	10.	 	Taxes
	 	 	10	 
	11.	 	Possession; Condition of Premises; Repairs
	 	 	11	 
	12.	 	Alterations
	 	 	12	 
	13.	 	Liens
	 	 	13	 
	14.	 	Assignment and Subletting
	 	 	13	 
	15.	 	Entry by Landlord
	 	 	15	 
	16.	 	Utilities and Services
	 	 	15	 
	17.	 	Indemnification and Exculpation
	 	 	15	 
	18.	 	Damage or Destruction
	 	 	16	 
	19.	 	Eminent Domain
	 	 	17	 
	20.	 	Tenant’s Insurance
	 	 	18	 
	21.	 	Landlord’s Insurance
	 	 	19	 
	22.	 	Waivers of Subrogation
	 	 	19	 
	23.	 	Tenant’s Default and Landlord’s Remedies
	 	 	19	 
	24.	 	Landlord’s Default
	 	 	21	 
	25.	 	Subordination
	 	 	21	 
	26.	 	Estoppel Certificate
	 	 	21	 
	27.	 	Intentionally Omitted
	 	 	22	 
	28.	 	Modification and Cure Rights of Landlord’s Mortgagees and Lessors
	 	 	22	 
	29.	 	Quiet Enjoyment
	 	 	22	 
	30.	 	Transfer of Landlord’s Interest
	 	 	22	 
	31.	 	Limitation on Landlord’s Liability
	 	 	22	 
	32.	 	Miscellaneous
	 	 	22	 
	33.	 	Lease Execution
	 	 	24	 
	34.	 	Intentionally Omitted
	 	 	24	 
	 	 	 
	 	 	 	 
	EXHIBITS	 	 
	 	 	 	 
	 	 	 
	 	 	 	 
	EXHIBIT “A”	 	Project Site Plan
	 	 	 	 
	EXHIBIT  “B”	 	Floor Plan
	 	 	 	 
	EXHIBIT  “C”	 	Work Letter Agreement
	 	 	 	 
	EXHIBIT  “D”	 	Sample Form of Notice of Lease Term Dates
	 	 	 	 
	EXHIBIT  “E”	 	Rules and Regulations
	 	 	 	 
	EXHIBIT  “F”	 	Sample Form of Tenant Estoppel Certificate
	 	 	 	 
	EXHIBIT  “G”	 	Tenant Environmental Questionnaire
	 	 	 	 






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STANDARD FORM MULTI-TENANT INDUSTRIAL LEASE 




INDEX OF DEFINED TERMS




	 	 	 	 	 
	Term	 	Page	 
	 	 	 	 	 
	Abandonment

	 	 	19	 
	Acceptance

	 	 	6	 
	Act

	 	 	12	 
	Actual Statement

	 	 	5	 
	Applicable Laws

	 	 	7	 
	Applicable Reassessment

	 	 	11	 
	Audit Notice

	 	 	5	 
	BMS

	 	 	6	 
	BOMA

	 	 	1	 
	Common Area

	 	 	3	 
	Construction Allowance

	 	Exhibit C	 
	Declaration

	 	 	3	 
	Draw Request

	 	Exhibit C	 
	Election Date

	 	 	1	 
	Estimate Statement

	 	 	5	 
	Evidence of Completion

	 	Exhibit C	 
	Extension Option

	 	 	2	 
	Extension Options

	 	 	2	 
	Fair Market Rental

	 	 	2	 
	First Refusal Notice

	 	 	1	 
	First Refusal Space

	 	 	1	 
	Force Majeure Delays

	 	 	23	 
	Hazardous Materials

	 	 	8	 
	Increase Date

	 	 	6	 
	Indemnified Claims

	 	 	15	 
	Initial Reduction Date

	 	 	6	 
	Landlord

	 	 	1	 
	Landlord Delay

	 	Exhibit C	 
	Landlord Indemnified Parties

	 	 	8	 
	LC Delivery Date

	 	 	6	 
	Lease

	 	 	1	 
	Letter of Credit

	 	 	6	 
	Lilly

	 	 	6	 
	Management Fee

	 	 	3	 
	Nondisturbance Condition

	 	 	21	 
	Option Period

	 	 	2	 
	PCBs

	 	 	8	 
	Permitted Business

	 	 	14	 
	Permitted Transfer

	 	 	14	 
	Permitted Transferee

	 	 	14	 
	Pre-Approved Change

	 	 	12	 
	Preliminary Plans

	 	Exhibit C	 
	Proposition 13 Protection Amount

	 	 	11	 
	Proposition 13 Purchase Price

	 	 	11	 
	Real Property Taxes

	 	 	10	 
	Reassessment

	 	 	11	 
	Summary

	 	 	1	 
	Tax Increase

	 	 	11	 
	Tenant

	 	 	1	 
	Tenant Change

	 	 	12	 
	Tenant Changes

	 	 	12	 
	Tenant Improvement Allowance Items

	 	Exhibit C	 
	Tenant Improvements

	 	Exhibit C	 
	Tenant Indemnified Parties

	 	 	15	 
	Tenant Parties

	 	 	15	 
	Tenant’s Election Notice

	 	 	1	 
	Tenant’s Monthly Operating Expense Charge

	 	 	5	 
	Tenant’s Parties

	 	 	8	 
	Tenant’s Share

	 	 	1	 
	Transfer

	 	 	13	 
	Transfer Date

	 	 	14	 
	Transfer Notice

	 	 	14	 
	Transferee

	 	 	14	 







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SUMMARY
OF BASIC LEASE INFORMATION AND DEFINITIONS


This SUMMARY OF BASIC LEASE INFORMATION AND DEFINITIONS “Summary”) is hereby incorporated into and
made a part of the attached Multi-Tenant Industrial Lease which pertains to the Building described
in Section 1.4 below. All references in the Lease to the “Lease” shall include this Summary. All
references in the Lease to any term defined in this Summary shall have the meaning set forth in
this Summery for such term. Any Initially capitalized terms used in this Summary and any Initially
capitalized terms in the Lease which are not otherwise defined in this Summary shall have the
meaning given to such terms in the Lease. If there is any inconsistency between this Summary end
the Lease, the provisions of the Lease shall control.




	 	 	 	 	 
	1.1

	 	Landlord’s Address:
	 	AEW/LBA Acquisition Co., LLC
	 
	 	 	 	 
	 

	 	 	 	c/o Layton Bulling Associates
	 

	 	 	 	10251 Vista Sorrento Parkway, Suite 100
	 

	 	 	 	Attn: Mr. David C. Thomas
	 

	 	 	 	Telephone: (619) 597-8795
	 
	 	 	 	 
	1.2

	 	Tenants Address:
	 	Before Commencement Date:
	 
	 	 	 	 
	 

	 	 	 	Aurora Biosciences Corporation
	 

	 	 	 	11149 North Torrey Pines Road
	 

	 	 	 	Suite 200
	 

	 	 	 	La Jola, California 02037
	 

	 	 	 	Attn: Ms. Deborah Tower
	 

	 	 	 	Telephone: (619) 452-5000
	 
	 	 	 	 
	 

	 	 	 	After Commencement Date:
	 
	 	 	 	 
	 

	 	 	 	Aurora Biosciences Corporation
	 

	 	 	 	11010 Torreyana Road
	 

	 	 	 	La Jola, California 02037
	 

	 	 	 	Attn: Mr. Deborah Tower
	 

	 	 	 	Telephone: (819)452-5000







	1.3	 	Project: The Industrial development located at 11010
Torreyana Road in the City of La Jolla,
County of San Diego, State of California. as shown on the site plan attached hereto as Exhibit
“A” The Project includes all buildings, improvements and facilities, now or subsequently
located within such development from time to time, including, without limitation, the Building
currently located within the Project, as depicted on the site plan attached hereto as
Exhibit “A”.
	 
	1.4	 	Building: A multi-tenant Industrial building located in the Project, containing 81,204
rentable square feet, the address of which is 11010 Torreyana Road, La Jolla, California
02037.
	 
	1.5	 	Premises: Those certain premises within the Building shown on the floor plan attached hereto
as Exhibit “B”, containing approximately 55,000 rentable square feet on the ground
and third floors.
	 
	1.6	 	Monthly Operating Expense Charge: Tenants Share of Operating Expenses as provided in Section
4. Tenant’s Share is initially 67.73% (see Section 1.3).
	 
	1.7	 	Commencement Data: The earner to occur of (i) September 15,1997 or (ii) the data Tenant
commences business operations in the entire Premises. Subject to Section 11.1, Landlord will
deliver the Premises to Tenant within two (2) business days following the full execution and
delivery of this Lease.
	 
	1.8	 	Term: Eleven (11) years.
	 
	1.9	 	Rent:





	 	 	 	 	 	 	 	 	 
	Year	 	Annual Basic Rent	 	Monthly Basic Rent
	1	 	$	1,287,000.00	 	 	$	107,250.00	 
	2	 	$	1,325,010.00	 	 	$	110,487.60	 
	3	 	$	1,385,378.20	 	 	$	113,781.52	 
	4	 	$	1.408,339.50	 	 	$	117,194.98	 
	5	 	$	1,448,529.60	 	 	$	120,710.80	 
	6	 	$	1,491,985.40	 	 	$	124,332.12	 
	7	 	$	1,536,744.90	 	 	$	128,062.08	 
	8	 	$	1,582,847.20	 	 	$	131,903.04	 
	9	 	$	1,630,332.60	 	 	$	135,861.05	 
	10	 	$	1,679,242.50	 	 	$	139,936.88	 
	11	 	$	1,729,619.70	 	 	$	144,134.98	 






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	1.10	 	[Intentionally Omitted]
	 
	1.11	 	Security Deposit: See Section 5.
	 
	1.12	 	Permitted Use: General office, research and development, screen development and screening
services and the assembly and integration of Tenant’s ultra-high throughput screening system,
and any other lawful use Incidental thereto.
	 
	1.13	 	Brokers: John Bumham & Company representing
Landlord and John Bumham & Company representing
Tenant.
	 
	1.14	 	Interest Rate: The lesser of: (a) the rate announced from time to time by Wells Fargo Bank
or, if Wells Fargo Bank ceases to exist or ceases to publish such rate, then the rate
announced from time to time by the largest (as measured by deposits) chartered operating bank
operating in California, as its “prime rate” or “reference rate”, plus two percent (2%); or
(b) the maximum rate permitted by law.
	 
	1.15	 	Tenant Improvements: The tenant improvements to be installed in the Premises by Tenant as
described in the Work Letter Agreement attached hereto as Exhibit “C”.





	 	 	 	 	 	 	 	 	 
	 
	 

	 	/s/ Illegible
	 	 
	 	/s/ Illegible
	 	 
	 
	 	Landlord’s Initials
	 	 	 	Tenants Initials	 	 







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MULTI-TENANT INDUSTRIAL LEASE




This LEASE (“Lease”), which includes the preceding Summary of Basic Lease information and
Definitions (“Summary”) attached hereto and
Incorporated herein by this reference, is made as of the 7th day of APRIL, 1997,
by and between AEW/LBA ACQUISITION CO. II, LLC, a California limited
liability company (“Landlord”),
and AURORA BIOSCIENCES CORPORATION, a Delaware corporation (“Tenant”).



1. Premises.



1.1 Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
Premises upon and subject to the terms, covenants and conditions contained in this Lease to be
performed by each party.



1.2 Landlord’s Reservation of Rights. Provided Tenant’s use of and access to the Premises is not
interfered with in an unreasonable manner, Landlord reserves the right from time to time to
install, use, maintain, repair, replace and relocate pipes, ducts, conduits, wires and appurtenant
meters and equipment above the celling surfaces, below the floor
surfaces and within the walls of
the Building and the Premises.



1.3
Tenant’s Share. “Tenant’s Share” means a fraction, the numerator of which is the total
rentable square footage of the Premises and the denominator of which is the total rentable square
footage of all buildings in the Project, including the Premises, which from time to time have been
constructed within the Project (commencing at such time as the occupants of such buildings commence
to pay rent or Operating Expenses or open for business, whichever is earlier). From time to time
at Landlord’s option, Landlord’s architect may determine and redetermine the actual rentable
square footage of the Premises and other building(s) in question
(calculated in accordance with
ANSI/BOMA Z65.1-1996), and thereupon Tenant’s Share will be adjusted accordingly.



1.4 Right of First Refusal. In the event that at any time during the first two (2) years of the
Term, Landlord receives a bona fide offer to lease any space on the second (2nd) floor of the
Building (“First Refusal Space”) that Landlord desires to accept, Landlord shall give Tenant
written notice (“First Refusal Notice”) of such offer. The First Refusal Notice shall set forth the
offer and the terms thereof. On or before the date which is five (5) days after Tenant’s receipt of
the First Refusal Notice (the “Election Data”), Tenant shall deliver written notice to Landlord
(“Tenant’s Election Notice”) pursuant to which Tenant shall elect either to (i) lease the entire
First Refusal Space described in the First Refusal Notice upon the terms set forth in the First
Refusal Notice; (ii) decline to lease such First Refusal Space Identified in the First Refusal
Notice, specifying that such decline is not based upon the terms set forth in the First Refusal
Notice, but upon Tenant’s lack of need for such First Refusal Space, in which event Landlord may
lease such First Refusal space to any entity on any terms Landlord desires and Tenant’s right of
first refusal with respect to the First Refusal Space specified in the First Refusal Notice shall
thereupon terminate and be of no further force or effect; or (iii) decline to lease the First
Refusal Space, specifying that such decline is based upon the terms set forth in the First Refusal
Notice, in which event Tenant shall also specify in Tenant’s Election Notice revised terms upon
which Tenant would be willing to lease such First Refusal Space. If Tenant does not so respond in
writing to the First Refusal Notice by the Election Date. Tenant shall be deemed to have elected
the option described in clause (ii) above. If Tenant timely delivers to Landlord Tenant’s Election
Notice pursuant to clause (III) above, Landlord may elect either to: (a) lease such First Refusal
Space to Tenant upon the revised terms specified by Tenant in Tenant’s Election Notice; or (b)
lease the First Refusal Space to any person or entity upon any terms Landlord desires; provided,
however, If (1) the terms of Landlord’s proposed lease to said third party are more favorable in
any material way to the third party than those terms proposed by Tenant in Tenant’s Election
Notice, or (2) the size of the First Refusal Space to be leased to such third party is less than
the size of the First Refusal Space offered to Tenant, before entering into such third party lease,
Landlord shall notify Tenant of such move favorable terms (or such reduced size) and Tenant shall
have the right to lease the First Refusal Space upon such more favorable terms (or as to such
reduced size) by delivering written notice thereof to Landlord within five (6) days after Tenant’s
receipt of Landlord’s notice. If Tenant does not elect to lease such space from Landlord within
said five (5) day period, Tenant shall be deemed to have elected the option described in clause (ii)
above. In determining whether the terms of Landlords proposed lease to a third party are more
favorable to the third party than those terms proposed by Tenant in Tenant’s Election Notice, all
concessions shall be blended into an effective rental rate over the term of the proposed lease to
said third party and such effective rental rate shall be compared with the effective rental rate of
the terms proposed by Tenant in Tenants Election Notice. If Tenant leases any First Refusal Space
pursuant to this Section 1.4, as soon as reasonably possible
after the Election Date, Landlord and
Tenant shall enter into a lease Incorporating the terms of Tenant’s lease of the First Refusal
space. The right of first refusal set forth in this Section 1.4 shall be exercisable by the
original Tenant and a Permitted Transferee only If the original Tenant or Permitted Transferee, as
applicable, occupies the entire Premises as of the data it exercises
its right in accordance with
the terms of this Section 1.4. Tenant shall not have the right to exercise its right of first
refusal if, as of the date of the attempted exercise of such right by Tenant, Tenant is in default
under this Lease after the expiration of all applicable cure periods.



1.5 Verification of Rentable Square Feet of Premises and Building. For purposes of this Lease,
“rentable square feet” shall be calculated pursuant to the Standard Method for Measuring Floor Area
in Office Buildings, ANSI/BOMA Z65.1—1996 for rentable area
(“BOMA”), and Tenant acknowledges that
the rentable square footage of the Building may include all of, and the rentable square footage of
the Premises therefore may include a portion of, the square footage of the ground floor Common
Areas located within the Building and the Common Area and other space in the Building dedicated to
the service of the Building. At either party’s election by giving written notice thereof to the other within sixty
(60) days following the date hereof, the number of rentable square feet of the Premises end the
Building shall be subject to verification in accordance with the
provisions of this Section 1.5 by
Stevenson Systems. In the event that Stevenson Systems determines that the amounts thereof shall be
different from those set forth in this Lease, the parties shall modify all amounts, percentages and figures appearing or
referred to in this Lease to confirm to such corrected rentable square



 









 





footage, including Tenant’s Share of Operating Expenses, Basic Rent, the Management Fee and the
Construction Allowance.



2. Term.



2.1 Term; Notice of Lease Dates. The Term of this Lease shall be for the period designated in
Section 1.8 of the Summary commencing on the Commencement Date, and ending on the expiration of
such period, unless the Term is sooner terminated or extended as provided in this Lease.
Notwithstanding the foregoing, if the Commencement Date falls on any day other than the first day
of a calendar month then the term of this Lease will be measured from the first day of the month
following the month in which the Commencement Date occurs. Within ten (10) days after Landlord’s
written request, Tenant shall execute a written confirmation of the Commencement Date and
expiration date of the Term in the form of the Notice of Lease Term Dates attached hereto as
Exhibit “D”.



2.2 Early Occupancy of the Ground Floor. It is contemplated that Tenant may complete the Tenant
Improvements and commence business operations in a portion of the ground floor of the Premises
prior to the Commencement Date. In such event, Tenant shall provide Landlord with prior notice of
the date of completion of such Tenant Improvements and commencement of business operations in that
portion of the ground floor of the Premises. Such early occupancy prior to the Commencement Date
shall be subject to all of the provisions of this Lease, except that Tenant shall have no
obligation to pay Monthly Basic Rent, the Management Fee or Tenant’s Share of Operating Expenses
during such period, but Tenant shall pay the water and utility charges set forth in Section 3.6.



2.3 Options to Extend. Tenant shall have two (2) options (individually, an “Extension Option” and
collectively, the “Extension Options”) to extend the Term for a period (individually, an “Option
Period”) of five (5) years each, commencing upon the expiration of the initial Term and the
expiration of the first (1st) Option Period, as the case may be, upon the same terms and conditions
previously applicable, except for the grant of any exercised Extension Option and Annual Basic Rent
(which shall be determined as set forth below). Each Extension Option may be validly exercised only
by notice in writing received by Landlord not later than six (6) months prior to commencement of
the Option Period; provided, however, that the Extension Option may be validly exercised only if no
material default (which default is continuing after notice and the expiration of any applicable
grace period provided for in this Lease) exists as of the date of exercise and, at Landlord’s
option, as of the commencement of the Option Period. If Tenant does not exercise an Extension
Option during the exercise period set forth above in strict accordance with the provisions hereof,
the Extension Options shall forever terminate and be of no further force or effect. The Extension
Options are personal to the original Tenant and any Permitted Transferee, may not be exercised by
any person or entity other than the original Tenant or any Permitted Transferee, and shall become
null and void if the original Tenant assigns its Interest in this Lease or sublets any portion of
the Premises to anyone other than a Permitted Transferee.



Annual Basic Rent during each Option Period shall be equal to Fair Market Rental as of the
commencement of such Option Period. For purposes hereof, “Fair Market Rental” shall mean the base
rent, including escalators, payable during the relevant Option Period to a willing landlord by a
willing tenant having a similar financial responsibility, credit rating and capitalization as
Tenant then has, taking into account all other relevant factors for like and comparable
laboratory/office space improved with tenant improvements of like and comparable quality to those
then existing in the Premises in the Torrey Pines/University Towne Centre market, but excluding
the then-existing value of any Tenant Improvements or Tenant Changes paid for by Tenant in excess
of the Construction Allowance. At least five (5) months prior to the Option Period, Landlord shall
notify Tenant of the Fair Market Rental as determined by Landlord. Any dispute between the parties
hereto with respect to the amount so determined shall be resolved by appraisal, as set forth
below; provided, however, that there shall be deemed not to be such a dispute unless Tenant
notifies Landlord thereof in writing within two (2) months after Landlord so notifies Tenant of
the Fair Market Rental and Tenant sets forth in such notice Tenant’s determination of Fair Market
Rental. If, in the event of a dispute, the appraisers have not determined the Fair Market Rental
by commencement of the Option Period, Tenant shall pay as Annual Basic Rent the amount determined
by Landlord until such time as the Fair Market Rental has been determined by appraisal, whereupon
Tenant shall pay any additional amount due to Landlord based upon such subsequent determination of
Fair Market Rental. If the Annual Basic Rent so paid by Tenant is higher than that ultimately
determined by the appraisal process, then Landlord shall reimburse such difference to Tenant.



If Tenant timely notifies Landlord in writing of Tenant’s dispute regarding Landlord’s
determination of the Fair Market Rental, then Fair Market Rental shall be determined as follows.
Landlord and Tenant shall each appoint one appraiser who shall by profession be a real estate
appraiser active over the five (5) year period ending on the date of such appointment in the
appraisal of commercial properties in San Diego County and who shall not have been employed or
engaged by either party during said five (5) year period. Each such appraiser shall be appointed
within fifteen (15) days after Tenant notifies Landlord of Tenant’s dispute of Landlord’s
determination of Fair Market Rental. The two appraisers so appointed shall within fifteen (15)
days of the date of the appointment of the last appointed appraiser agree upon and appoint a third
appraiser who shall be qualified under the same criteria set forth above. The three appraisers
shall, within thirty (30) days of the appointment of the third appraiser, reach a decision as to
whether the parties shall use Landlord’s or Tenant’s submitted Fair Market Rental for the
Premises, and shall notify Landlord and Tenant thereof. Such decision shall be based upon the
criteria and variables set forth above. The new Annual Basic Rent shall thereafter be equal to the
Fair Market Rental of the Premises so selected by the appraisers. The decision of the majority of
the three appraisers shall be binding upon Landlord and Tenant. If either Landlord or Tenant falls
to appoint an appraiser within the time period specified hereinabove, the appraiser appointed by
one of them shall reach a decision, notify Landlord and Tenant thereof, and such appraiser’s
decision shall be binding upon Landlord and Tenant, If the two appraisers fail to agree upon and
appoint a third appraiser, the two appraisers shall request the presiding judge of the Superior
Court of San Diego, acting in his private capacity, or the head of the local chapter of the
leading appraisal group, to appoint the third appraiser. Each party shall pay for its own
appraiser and
one-half (1/2) of the cost of the third appraiser.



-2-









 





3. Rent.



3.1 Basic Rent. Tenant agrees to pay Landlord, as basic rent for the Premises, the Annual Basic
Rent designated in Section 1.9 of the Summary. The Annual Basic Rent shall be paid by Tenant in
twelve (12) equal monthly installments of Monthly Basic Rent in the amounts designated in Section
1.9 of the Summary in advance on the first day of each and every calendar month during the Term,
except that the first full month’s Monthly Basic Rent shall be paid upon execution of this Lease
by Tenant. Monthly Basic Rent for any partial month shall be prorated in the proportion that the
number of days this Lease is in effect during such month bears to the actual number of days in
such month.



3.2 Additional Rent. All amounts and charges payable by Tenant under this Lease in addition to
the Annual Basic Rent described in Section 3.1 above shall be considered additional rent for the
purposes of this Lease, and the word “rent” in this Lease shall include such additional rent
unless the context specifically or clearly implies that only the Annual Basic Rent is referenced.
The Annual Basic Rent and additional rent shall be paid to Landlord as provided in Section 7,
without any prior demand therefor and without any deduction or offset except as otherwise
provided herein, in lawful money of the United States of America.



3.3 Late Payments. Late payments of Monthly Basic Rent and/or any item of additional rent will be
subject to interest and a late charge as provided in Section 23.7 below.



3.4
Management Fee. Tenant shall pay to Landlord
as additional rent an annual management fee
equal to [to be based upon .48/rsf when rsf is determined
prior to Lease execution] (the
“Management Fee”). The Management Fee shall be increased on each anniversary of the Commencement
Date (or the first day of the month following the anniversary of the Commencement Date if the
Commencement Date is not the first day of a month) by an amount equal to three percent (3%) of
the Management Fee payable immediately prior to such adjustment. In the event tenant exercises
the First Negotiation Right under Section 1.4 and leases the entire Building, the Management Fee
shall thereafter be equal to two percent (2%) of the Annual Basic Rent for the Premises (taking
into account the annual increases in Annual Basic Rent and the fair market value increases in
Annual Basic Rent during the Extension Options). The Management Fee
shall be payable in twelve
(12) equal monthly installments together with Monthly Rent.



3.5 Triple-Net Lease. Except as specifically set forth herein, all rent shall be absolutely net
to Landlord so that this Lease shall yield net to Landlord, the rent to be paid each month during
the Term of this Lease. Accordingly, except as specifically set forth herein, all costs, expenses
and obligations of every kind or nature whatsoever relating to the Premises, and Tenant’s Share
of all costs, expenses and obligations of every kind or nature whatsoever relating to the
remaining portion of the Project, which may arise or become due during the Term of this Lease
shall be paid by Tenant. Nothing herein contained shall be deemed to require Tenant to pay or
discharge any liens or mortgages of any character whatsoever which may exist or hereafter be
placed upon the Project by an affirmative act or omission of Landlord.



3.6 Pre-Commencement Date Charges. From and after the delivery of the Premises to Tenant and
continuing until the Commencement Date, Tenant shall pay to Landlord, as additional rent and
within thirty (30) days following receipt of an Invoice therefor, all water and utility charges
for the Project.



4. Common
Area: Operating Expenses.



4.1 Definition of Common Area. The term “Common Area,” as used in this Lease means all areas and
the improvements thereon within the exterior boundaries of the Project now or later made
available for the general use of Landlord, Tenant and other persons entitled to occupy floor area
in the Project and their customers, including, without limitation, the parking facilities of the
Project, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, and similar areas and facilities situated within the Project which
are not reserved for the exclusive use of any Project occupants and the exterior surfaces and
roofs of all buildings (including the Building) located within the Project. Common Area shall not
include (i) the entryway to a tenant’s premises, (ii) any improvements installed by a tenant
outside of its premises, whether with or without Landlord’s knowledge or consent, or (iii) any
areas or facilities that are included in the description of premises leased to a tenant, but
Common Area shall include the ground floor entryway threshold, ground floor lobby, elevators and
all stairwells (except the middle stairwell).



4.2 Maintenance and Use of Common Area. The manner in which the Common Area shall be maintained
shall be solely determined by Landlord, but shall be consistent with the standard of such space
in similar office and research and development projects in the vicinity. If any owner or tenant
of any portion of the Project maintains Common Area located upon its parcel or demised premises
(Landlord shall have the right in its sole discretion to allow any purchaser or tenant to so
maintain Common Area located upon its parcel or demised premises and to be excluded from
participation in the payment of Common Area Expenses as provided below). Landlord shall not have
any responsibility for the maintenance of that portion of the Common Area and Tenant shall have
no claims against Landlord arising out of any failure of such owner or tenant to so maintain its
portion of the Common Area. The use and occupancy by Tenant of the Premises shall include the
right to use the Common Area (except areas used in the maintenance or operation of the Project),
in common with Landlord and other tenants of the Project and their customers and invitees,
subject to (i) any covenants, conditions and restrictions now or hereafter of record (the
“Declaration”), and (ii) such reasonable, non-discriminatory rules and regulations concerning the
Project as may be established by Landlord from time to time including, without limitation, the
Rules and Regulations attached hereto as Exhibit “E”. Tenant agrees to promptly comply
with all such rules and regulations and any reasonable, non-discriminatory amendments thereto
upon receipt of written notice from Landlord. Notwithstanding anything herein to the contrary,
Landlord agrees that the Rules and Regulations attached to this Lease
as Exhibit “E” shall not be modified or added to by Landlord in such a way as to
unreasonably interfere with Tenant’s permitted use of the Premises as set forth in this Lease.



4.3 Control of and Changes to Common Area. Landlord shall have the sole and exclusive control of
the Common Area, as well as the right to make reasonable changes to the Common Area. Provided
Landlord does not materially interfere with Tenant’s use of and access to the Premises,
Landlord’s rights shall include, but not be limited to, the right to



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(a) restrain the use of the Common Area by unauthorized persons; (b) cause Tenant to remove or
restrain persons from any unauthorized use of the Common Area if they are using the Common Area by
reason of Tenant’s presence in the Project; (c) utilize from time to time any portion of the
Common Area for promotional, entertainment, and related matters; (d) temporarily close any portion
of the Common Area for repairs, improvements or alterations, to discourage non-customer use, to
prevent public dedication or an easement by prescription from arising, or for any other reason
deemed appropriate in Landlord’s judgment; and (e) reasonably change the shape and size of the
Common Area, add, eliminate or change the location of improvements to the Common Area, including,
without limitation, buildings, lighting, parking areas, landscaped areas, roadways, walkways,
drive aisles and curb cuts.



4.4 Operating Expenses. Throughout the Term of this Lease, commencing on the Commencement Date,
Tenant agrees to pay Landlord as additional rent in accordance with the terms of this Section 4,
Tenant’s Share of Operating Expenses for the taxes and insurance for the Project and for all costs
and expenses for the operation, maintenance, repair, and replacement of the Project including,
without limitation: (i) any form of real property tax, assessment, license fee, license tax,
business license fee, commercial rental tax, levy, charge, improvement bond or similar imposition
of any kind or nature imposed by any authority having the direct power to tax, including any city,
county, state or federal government, or any school, agricultural, lighting, drainage or other
improvement or special assessment district thereof; (ii) any and all assessments under any
covenants, conditions and restrictions affecting the Project; (iii) water, sewer and other utility
charges; (iv) costs of insurance obtained by Landlord pursuant to Section 21 of this Lease; (v)
waste disposal and janitorial services; (vi) security; (vii) labor; (viii) management costs
including, without limitation: (A) wages and salaries (and payroll taxes and similar charges) of
property management employees, and (B) management office rental, supplies, equipment and related
operating expenses and commercially reasonable management/administrative fees; (ix) supplies,
materials, equipment and tools including rental of personal property; (x) repair and maintenance of
the structural portions of the buildings within the Project, including the plumbing, heating,
ventilating, air-conditioning and electrical systems installed or furnished by Landlord; (xi)
maintenance, sweeping, repairs, resurfacing, and upkeep of all parking and other Common Areas;
(xii) amortization on a straight line basis over the useful life [together with Interest at the
Interest Rate on the unamortized balance] of all capitalized expenditures which are: (A) reasonably
intended to produce a reduction in operating charges or energy consumption; or (B) required under
any governmental law or regulation that was not applicable to the Project as of the Commencement
Date (however, if such expenditure by Landlord is required solely due to Tenant’s particular use,
occupancy or alteration of the Premises, then regardless of when such law or regulation became in
effect, Tenant shall be responsible for all of such expenditure); or (C) for replacement or
restoration of any Project equipment and/or Improvements needed to operate and/or maintain the
Project at the same quality levels as prior to the replacement or restoration; (xiii) gardening and
landscaping; (xiv) maintenance of signs (other than signs of tenants of the Project); (xv) personal
property taxes levied on or attributable to personal property used in connection with the Common
Areas; (xvi) reasonable accounting, audit, verification, legal and other consulting fees; and
(xvii) any other costs and expenses of repairs, maintenance, painting, lighting, cleaning, and
similar items, including appropriate reserves.



Notwithstanding anything to the contrary in the definition of Operating Expenses set forth in this
Lease, Operating Expenses shall not include the following:




	(a)	 	depreciation on the Building and Project;
	 
	(b)	 	interest, principal, points and fees on debt or amortization on any mortgages and deeds of
trust or other debt instruments secured by the Building or the Project or any underlying
ground lease;
	 
	(c)	 	costs of repairs and general maintenance paid from insurance proceeds but excluding the
amount of any deductibles paid by Landlord;
	 
	(d)	 	repairs and replacements covered by warranties or guaranties (to the extent actually
collected by Landlord); and the cost of any repairs, alterations and additions made to
rectify or correct any major defects or significant design errors relating to the initial
design or construction of the Building and Project;
	 
	(e)	 	costs of items considered capital repairs, replacements, improvements and equipment under
generally accepted accounting principles consistently applied except for those items
expressly permitted in clause (xii) above;
	 
	(f)	 	costs of special services rendered to individual tenants (including Tenant) for which a
special charge is made to the tenant(s) receiving such special services;
	 
	(g)	 	costs of improvements for other tenants in the Building or Project;
	 
	(h)	 	costs of the Landlord for which a tenant is obligated to separately reimburse Landlord (as
opposed to reimbursement of a pro rata share thereof as an Operating Expense), including, for
example, taxes and property insurance premiums on improvements for tenants of the Building
and Project that are above the building standard;
	 
	(i)	 	costs incurred by Landlord in connection with the enforcement of the terms and conditions of
any lease in the Building or Project;
	 
	(j)	 	all costs, expenses, penalties, damages, fines and judgments from any investigation, site
monitoring, containment, cleanup, removal, restoration or other remedial work of any kind or
nature required under any local, state or federal law or regulation, any judicial order, or
by any governmental or nongovernmental entity or person as a result of or in connection with
any Hazardous Material or Hazardous Materials contamination;
	 
	(k)	 	Landlord’s general corporate overhead and general and administrative expenses;




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	(l)	 	Marketing costs, including, without limitation, leasing commissions, attorneys’ fees,
space planning costs and other costs and expenses incurred in connection with the leasing of
the Building or Project; and
	 
	(m)	 	Overhead and profit increment paid to Landlord and Landlord’s subsidiaries for goods and/or
services in or to the Building or Project to the extent the same exceeds the costs of such
goods and/or services rendered by unaffiliated third parties on a competitive basis.





4.5 Tenant’s Monthly Operating Expense Charge. From and after the Commencement Date, Tenant shall
pay to Landlord, on the first day of each calendar month during the
Term of this Lease. Tenant’s
share of an amount estimated by Landlord to be the Monthly Operating Expenses for the Project for
that month (“Tenant’s Monthly Operating Expense
Charge”).



4.6 Estimate Statement. Prior to the Commencement Date and on or about March 1st of each subsequent
calendar year during the Term of this Lease, Landlord will endeavor to deliver to Tenant a
statement (“Estimate Statement”) wherein Landlord will estimate both the Operating Expenses and
Tenant’s Monthly Operating Expense Charge for the then current calendar year. Tenant agrees to pay
Landlord, as additional rent, Tenant’s estimated Monthly Operating Expense Charge each month
thereafter, beginning with the next installment of rent due, until such time as Landlord issues a
revised Estimate Statement or the Estimate Statement for the succeeding calendar year; except that,
concurrently with the regular monthly rent payment next due following the receipt of each such
Estimate Statement, Tenant agrees to pay Landlord an amount equal to one monthly installment of
Tenant’s estimated Monthly Operating Expense Charge (less any applicable Operating Expenses already
paid) multiplied by the number of months from January, in the current calendar year, to the month
of such rent payment next due, all months inclusive. If at any time during the Term of this Lease,
but not more often than quarterly, Landlord reasonably determines that Tenant’s Share of Operating
Expenses for the current calendar year will be greater than the amount set forth in the then
current Estimate Statement, Landlord may issue a revised Estimate Statement and Tenant agrees to
pay Landlord, within ten (10) days of receipt of the revised
Estimate Statement, the difference
between the amount owed by Tenant under such revised Estimate Statement and the amount owed by
Tenant under the original Estimate Statement for the portion of the then current calendar year
which has expired. Thereafter Tenant agrees to pay Tenant’s Monthly Operating Expense Charge based
on such revised Estimate Statement until Tenant receives the next calendar year’s Estimate
Statement or a new revised Estimate Statement for the current calendar year.




4.7 Actual Statement. By March 1st of each calendar year during the Term of this Lease, Landlord
will also endeavor to deliver to Tenant a statement (“Actual
Statement”) which states Tenant’s
Share of the actual Operating Expenses for the preceding calendar year. If the Actual Statement
reveals that Tenant’s Share of the actual Operating Expenses is more than the total Additional
Rent paid by Tenant for Operating Expenses on account of the preceding calendar year, Tenant
agrees to pay Landlord the difference in a lump sum within ten (10) days of receipt of the Actual
Statement. If the Actual Statement reveals that Tenant’s Share of the actual Operating Expenses is
less than the Additional Rent paid by Tenant for Operating Expenses on account of the preceding
calendar year, Landlord will credit any overpayment toward the next monthly installment(s) of
Tenant’s Share of the Operating Expenses due under this Lease. Such obligation will be a
continuing one which will survive the expiration or earlier termination of this Lease. Prior to
the expiration or sooner termination of the Lease Term and Landlord’s acceptance of Tenant’s
surrender of the Premises, Landlord will have the right to estimate the actual Operating Expenses
for the then current Lease Year and to collect from Tenant prior to Tenant’s surrender of the
Premises, Tenant’s Percentage of any excess of such actual Operating Expenses over the estimated
Operating Expenses paid by Tenant in such Lease Year.



4.8 Miscellaneous. Any delay or failure by Landlord in delivering any Estimate Statement or Actual
Statement pursuant to this Section 4 will not constitute a waiver of its right to require an
increase in additional rent for Operating Expenses nor will it relieve Tenant of its obligations
pursuant to this Section 4, except that Tenant will not be obligated to make any payments based on
such Estimate Statement or Actual Statement until ten (10) days after receipt of such Estimate
Statement or Actual Statement. If Tenant does not object to any Actual Statement within ninety
(90) days after Tenant receives any such statement, such statement will be deemed final and
binding on Tenant. Even though the Term has expired and Tenant has vacated the Premises, when the
final determination is made of Tenant’s Share of the actual Operating Expenses for the year in
which this Lease terminates. Tenant agrees to promptly pay any increase due over the estimated
expenses paid and, conversely, any overpayment made in the event said expenses decrease shall
promptly be rebated by Landlord to Tenant. Such obligation will be a continuing one which will
survive the expiration or termination of this Lease. Prior to the expiration or sooner termination
of the Lease Term and Landlord’s acceptance of Tenant’s surrender of the Premises, Landlord will
have the right to estimate the actual Operating Expenses for the then current Lease Year and to
collect from Tenant prior to Tenant’s surrender of the Premises, Tenant’s Share of any excess of
such actual Operating Expenses over the estimated Operating Expenses paid by Tenant in such Lease
Year.



4.9 Books and Records; Audit. Landlord shall maintain books and records of the Operating Expenses
in accordance with sound accounting and management practices. If Tenant wishes to audit the amount
of Operating Expenses or any component thereof as to a particular year, Tenant must deliver to
Landlord written notice of Tenant’s desire to audit
Landlord’s books and records (“Audit Notice”).
Such audit will be conducted (i) within sixty (60) days following delivery of the Audit Notice,
(ii) during normal business hours at Landlord’s business offices or at the management office of
the Building; (iii) on consecutive business days until completed; (iv) in an expeditious manner so
as to minimize interference with Landlord’s books and records at Tenant’s sole cost and expense;
and (v) by an auditor reasonably acceptable to Landlord and Tenant (without limiting other
reasons, it will be reasonable for Landlord to disapprove an auditor on the basis that the auditor
is paid on a contingency fee basis). Tenant shall pay in a timely manner as required by this Lease
any amounts stated as due on the Actual Statement, provided that such payment shall not waive any
right to audit and/or dispute by Tenant as set forth herein. Tenant agrees to deliver to Landlord
the results of any such audit within ninety (90) days of completion of the audit. If Tenant does
not deliver an Audit Notice as to any Actual Statement within the time frames set forth
hereinabove, then such Actual Statement will be conclusively binding on Tenant.



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If Tenant’s audit reveals that Landlord has overcharged Tenant, then within thirty (30) days after
the results of such audit are made available to Landlord, Landlord shall reimburse Tenant the
amount of such overcharge. If the audit reveals that Tenant was undercharged, then within thirty
(30) days after the results of the audit are made available to Tenant, Tenant shall reimburse
Landlord the amount of such undercharge. Tenant shall pay the cost of such audit, provided that if
the audit reveals that Landlord’s determination of Tenant’s Share of Operating Expenses as set
forth in an Actual Statement was in error in Landlord’s favor by more than five percent (5%) of
the amount paid by Tenant prior to delivering the Audit Notice, then Landlord shall pay the
reasonable, third-party cost of such audit incurred by Tenant within thirty (30) days of demand by
Tenant. To the extent Landlord must pay the cost of such audit, such cost shall not exceed a
reasonable hourly charge for a reasonable amount of hours spent by such third-party in connection
with the audit. Landlord shall not be liable for any contingency fee payments to any consultants
of Tenant. Tenant agrees to keep the results of the audit and any settlement resulting therefrom
confidential and will cause its agents, employees and contractors to keep the same confidential.



5. Security Deposit.



5.1 Delivery of Letter of Credit. Within ten
(10) days following the delivery of the Premises to
Tenant (“LC Delivery Date”), and again within ten (10) days following the date Landlord gives
Tenant written notice that Landlord has disbursed $1,250,000.00 of the Construction Allowance (the
“Increase Date”), Tenant shall deliver to Landlord the Security Deposit in the form of an
unconditional, irrevocable and renewable letter of credit
(“Letter of Credit”) in favor of Landlord
in form and issued by a bank with an office (capable of honoring a demand on the Letter of Credit)
located in Orange County or San Diego County, California, reasonably satisfactory to Landlord, in
the applicable principal amount specified in Section 5.2 below, as security for the faithful
performance and observance by Tenant of the terms, provisions and conditions of this Lease. The
Letter of Credit shall state that an authorized officer or other representative of Landlord may
make demand on Landlord’s behalf for the amount owed by Tenant to Landlord, and that the issuing
bank must immediately honor such demand, without qualification or satisfaction of any conditions,
except the proper identification of the party making such demand and a certification that Tenant is
in default under this Lease, which default is continuing after notice and expiration of any
applicable grace period required by this Lease. In addition, the Letter of Credit shall Indicate
that it is transferable in its entirety by Landlord as beneficiary and that upon receiving written
notice of transfer, and upon presentation to the Issuer of the original Letter of Credit, the
issuer will reissue the Letter of Credit naming such transferee as the beneficiary. If the term of
the Letter of Credit held by Landlord will expire prior to the last
day of the Term and it is not
extended, or a new Letter of Credit for an extended period of time is not substituted, within
thirty (30) days prior to the expiration of the Letter of Credit, then Landlord may deliver written
notice of such fact to Tenant and if Tenant does not extend the
Letter of Credit or substitute a
new Letter of Credit within ten (10) days after Tenant’s receipt of such notice from Landlord,
Landlord shall be entitled to make demand for the principal amount of said Letter of Credit and,
thereafter, to hold such funds in accordance with Section 5.3
below. Tenant may, at any time,
substitute the Letter of Credit by delivering to Landlord cash in the amount of the required
principal of the Letter of Credit.



5.2 Increase and Reduction In Principal Amount of Letter of Credit. The principal amount of the
Letter of Credit shall be as follows:



	 	 	 	 	 
	Portion of Term	 	Required Principal Amount
	LC Delivery Date — Increase Date*
	 	$	1,250,000.00	 
	Increase Date — Initial Reduction Date
	 	$	2,500,000.00	 
	First year following Initial Reduction Date
	 	$	1,000,000.00	 
	Second year following Initial Reduction Date
	 	$	666,666.00	 
	Third Year following Initial Reduction Date
	 	$	333,333.00	 
	Remaining Term
	 	Equal to then-current
	 
	 	Monthly Basic Rent






The “Initial Reduction Date”
shall be the date that the satisfaction of the conditions described in
clause (a) below and either of clauses (b) and (c) below occur




	(a)	 	Tenant’s receipt of payment from Eli Lilly (“Lilly”) and Bristol Myers Squibb (“BMS”) upon
Acceptance by each company of the Automated Storage and Retrieval module for the Ultra-High
Throughput Screening System. Evidence of payment will be provided by Tenant and will include
a copy of the check or wire transfer notification and written confirmation by Lilly and BMS
that such payment is made for Acceptance of the Automated Storage and Retrieval module.
“Acceptance” is defined per existing contract language with BMS and Lilly, which Tenant
represents and warrants to Landlord is accurately described as follows:






	 	(i)	 	BMS: When BMS has determined that all Deliverables for the Automated
Storage and Retrieval Module have successfully conformed to or satisfied the
Specifications in all material respects, BMS shall give Aurora written notice thereof
(“Acceptance”), in which event BMS shall become obligated to pay such amounts as
triggered under this Agreement as a result hereof.
	 
	 	(ii)	 	LILLY: When the LILLY UHTSS Steering Committee has determined that the
Automated Storage and Retrieval module meet the Specifications for such module. Upon
Completion (Acceptance) of the Automated Storage and retrieval module at Lilly, Aurora
shall give Lilly written notice and Lilly shall become obligated to pay such amounts
provided for in the
agreement.




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	(b)	 	Tenant’s entering into an agreement with another major pharmaceutical company that is
similar in scope and nature to Tenant’s existing agreements with
BMS and Eli Lilly
concerning the production of Tenant’s Ultra-HTS system.
	 
	(c)	 	Completion of an initial public offering of securities in Tenant traded on a United States
stock exchange raising at least Ten Million Dollars ($10,000,000.00) in equity.





Notwithstanding the foregoing, if as of the applicable reduction date set forth above, (i) Tenant
is in material default under this Lease, or (ii) Landlord has given Tenant written notice that
circumstances exist that would, with notice or lapse of time, or both, constitute a material
default, then the principal amount shall not be reduced, unless and until such default or
circumstances shall have been fully cured, at which time the principal amount may be reduced as
hereinabove described.



5.3 Application of Letter of Credit. The Letter of Credit shall be held by Landlord as security for
the faithful performance by Tenant of all of the terms, covenants and conditions of this Lease. If
Tenant commits a default with respect to any provision of this Lease, Landlord may (but shall not
be required to) draw upon the Letter of Credit and use, apply or retain all or any part of the
proceeds for the payment of any sum which is in default, or for the payment of any other amount
which Landlord may spend or become obligated to spend by reason of Tenant’s default or to
compensate Landlord for any loss or damage which Landlord may suffer by reason of Tenant’s default.
If any portion of the Letter of Credit is so used or applied, Tenant shall, within ten (10) days
after demand therefor, post an additional Letter of Credit in an amount sufficient to restore the
Letter of Credit to the principal amount required under Section 5.2 above. Landlord shall not be
required to keep any proceeds from the Letter of Credit separate from its general funds and Tenant
shall not be entitled to any interest on such proceeds. Should Landlord sell its interest in the
Premises during the Term and if Landlord deposits with the purchaser thereof the Letter of Credit
or any proceeds of the Letter of Credit, thereupon Landlord shall be discharged from any further
liability with respect to the Letter of Credit and said proceeds.



6. Use.



6.1 General. Tenant shall use the Premises solely for the Permitted Use specified in Section 1.12
of the Summary, and shall not use or permit the Premises to be used for any other use or purpose
whatsoever without Landlord’s consent, which shall not be unreasonably withheld. Tenant shall
observe and comply with the “Rules and Regulations”
attached hereto as Exhibit “E”, and all
reasonable non-discriminatory modifications thereof and additions thereto from time to time put
into effect and furnished to Tenant by Landlord. Landlord shall endeavor to uniformly enforce the
Rules and Regulations, but shall have no liability to Tenant for the violation or non-performance
by any other tenant or occupant of the Project of any such Rules and Regulations. Tenant shall, at
its sole cost and expense, observe and comply with all requirements of any board of fire
underwriters or similar body relating to the Premises, and all laws, statutes, codes, rules and
regulations now or hereafter in force relating to or affecting the use, occupancy, alteration or
improvement (whether structural or non-structural) of the Premises, including, without limitation,
the provisions of Title III of the Americans with Disabilities Act of 1990 as it pertains to
Tenant’s use, occupancy, improvement and alteration of the Premises. Tenant shall not use or allow
the Premises to be used (a) in violation of the Declaration or any other recorded covenants,
conditions and restrictions affecting the Project or of any law or governmental rule or regulation,
or of any certificate of occupancy issued for the Premises or the Building, or (b) for any
improper, immoral, unlawful or reasonably objectionable purpose. Tenant shall not do or permit to
be done anything which will obstruct or unreasonably interfere with the rights of other tenants or
occupants of the Project, or Injure or annoy them. Tenant shall not cause, maintain or permit any
nuisance in, on or about the Premises, the Building or the Project, nor commit or suffer to be
committed any waste in, on or about the Premises. Tenant and Tenant’s employees and agents shall
not solicit business in the Common Area, nor shall Tenant distribute any handbills or other
advertising matter in the Common Area.



Notwithstanding the foregoing or anything to the contrary contained in this Lease, Tenant shall
not be responsible for compliance with any laws, statutes, codes, ordinances, rules, regulations
or other governmental directives (collectively, “Applicable Laws”) where such compliance is not
specifically related to or required by Tenant’s particular use, occupancy or alteration of the
Premises. For example, if any governmental authority should require the Building or the Premises
to be structurally strengthened against earthquake, or should require the removal of asbestos from
the Premises and such measures are imposed as a general requirement applicable to all tenants
rather than as a condition to or a result of Tenant’s particular use, occupancy or alteration of
the Premises, such work shall be performed by and (except to the extent such cost is a permissible
Operating Expense) at the sole cost of Landlord.



6.2 Parking. Tenant and its employees shall park their vehicles only in those portions of the
Common Area from time to time designated for such purpose by Landlord. Subject to Sections 18 and
19, Landlord shall maintain a parking ratio at the Project of at least 3.5 spaces per 1000
rentable square feet of leased space at the Project, and shall designate five (5) spaces near the
front entrance of the Building for use by visitors of the Building. The use of the parking area
shall be subject to the Parking Rules and Regulations attached hereto as Exhibit “E” and
any other reasonable, non-discriminatory rules and regulations adopted by Landlord from time to
time. Tenant shall be responsible for ensuring that its employees comply with all the provisions
of this Section and such other parking rules and regulations as may be adopted and implemented by
Landlord from time to time.



6.3 Signs, Awnings and Canopies. Tenant will not place or suffer to be placed or maintained on the
roof or on any exterior door, wall or window (or within 48 inches of any window) of the Premises
any sign, awning or canopy, or advertising matter on the glass of any window or door of the
Premises without Landlord’s prior written consent which shall not be unreasonably withheld. Tenant
agrees to maintain any such sign, awning, canopy, decoration, lettering or advertising matter as
may be approved by Landlord in good condition and repair at all times. At the expiration or
earlier termination of this Lease, at Landlord’s election, Tenant shall remove all signs, awnings,
canopies, decorations, lettering and advertising and shall repair any damage to the Building, the
Premises or the Project resulting therefrom
all at Tenant’s sole cost and expense. If Tenant fails to maintain any such approved sign, awning,
decoration, lettering, or advertising, Landlord may do so and Tenant shall reimburse Landlord for
such cost. If, without Landlord’s prior written



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consent. Tenant installs any sign, awning, decoration, lettering or advertising, or falls to
remove any such item(s) at the expiration or earlier termination of this Lease, Landlord may have
such item(s) removed and stored and may repair any damage to the Building, the Premises or the
Project at Tenant’s expense. The removal, repair and/or storage
costs shall bear interest until
paid at the maximum rate allowed by law.



Notwithstandting the foregoing, Tenant shall have the non-exclusive right to place its name on the
monument sign at the Project and the non-exclusive right to place its name on a sign on the
Building, all in compliance with applicable laws and subject to Landlord’s reasonable approval.
Subject to compliance with all applicable laws and Landlord’s reasonable approval, Tenant may
replace the existing monument sign with a larger one, and upon the lien-free completion thereof
Landlord will reimburse Tenant one-third (1/3) of the pre-approved actual costs thereof. Tenant’s
signage on the monument sign will be in a priority position over other tenants of the Project
Tenant’s rights under this paragraph shall be personal to Tenant and any Permitted Transferee.



6.4 Hazardous Materials.




	(a)	 	Except for ordinary and general office supplies, such as copier toner, liquid paper, glue,
ink and common household cleaning materials (some or all of which may constitute “Hazardous
Materials’ as defined in this Lease), Tenant agrees not to cause or permit any Hazardous
Materials to be brought upon, stored, used, handled, generated, released or disposed of on,
in, under or about the Premises, the Building, the Common Areas or any other portion of the
Project by Tenant, its agents, employees, subtenants, assignees, licensees, contractors or
invitees (collectively, Tenant’s Parties”), without the prior written consent of Landlord,
which consent Landlord may withhold in its sole and absolute discretion. Concurrently with
the execution of this Lease, Tenant agrees to complete and deliver to Landlord an
Environmental Questionnaire in the form of Exhibit
“G” attached hereto. Upon the
expiration or earlier termination of this Lease, Tenant agrees to promptly remove from the
Premises, the Building and the Project, at its sole cost and expense, any and all Hazardous
Materials, including any equipment or systems containing Hazardous Materials which are
installed, brought upon, stored, used, generated or released upon, in, under or about the
Premises, the Building and/or the Project or any portion thereof by Tenant or any of Tenant’s
Parties. To the fullest extent permitted by law, Tenant agrees to
promptly indemnify,
protect, defend and hold harmless Landlord and Landlord’s partners, officers, directors,
employees, agents, successors and assigns (collectively, landlord indemnified Parties”) from
and against any and all claims, damages, judgments, suits, causes or action, losses,
liabilities, penalties, fines, expenses and costs (including, without
limitation, clean-up,
removal, remediation and restoration costs, sums paw in settlement of claims, attorneys’
fees, consultant fees and expert fees and court costs) which arise or result from the
presence of Hazardous Materials on, in, under or about the Premises, the Building or any
other portion of the Project and which are caused or permitted by Tenant or any of Tenant’s
Parties. Tenant agrees to promptly notify Landlord of any release of
Hazardous Materials in
the Premises, the Building or any other portion of the Project which Tenant becomes aware of
during the Term of this Lease, whether caused by Tenant or any other
persons or entities. In
the event of any release of Hazardous Materials caused or permitted by Tenant or any of
Tenant’s Parties, Landlord shall have the right, but not the obligation, to cause Tenant to
immediately take all steps Landlord deems necessary or appropriate to remediate such release
and prevent any similar future release to the satisfaction of
Landlord. At all times during
the Term of this Lease. Landlord will have the right, but not the obligation, to enter upon
the Premises to Inspect, Investigate, sample and/or monitor the Premises to determine if
Tenant is in compliance with the terms of this Lease regarding Hazardous Materials. As used
in this Lease, the term “Hazardous Materials” shall mean and include any hazardous or toxic
materials, substances or wastes as now or hereafter designated under any law, statute,
ordinance, rule, regulation, order or ruling of any agency of the State, the United States
Government or any local governmental authority, Including, without limitation, asbestos,
petroleum, petroleum hydrocarbons and petroleum based products, urea formaldehyde foam
Insulation, polychlorinated biphenyis (PCBs”), and freon and
other chlorofluorocarborns. The provisions of
this Section 6.4 will survive the expiration or earlier termination of this Lease.
	 
	(b)	 	Landlord represents and warrants to Tenant that as of the date of this Lease and to
Landlord’s actual knowledge and except as disclosed in that certain Phase 1 dated December 18,
1996, prepared by Dames & Moore (i) there are no Hazardous Materials in, on, under, below or
otherwise located on or about the Premises in violation of applicable
law, and (ii) there has
been no release or migration of any Hazardous Materials in violation of applicable law onto,
beneath, upon or about the Premises.
	 
	(c)	 	Notwithstanding the foregoing, Landlord consents to the
storage and use at the Premises, and disposal from the
Premises, of certain Hazardous Materials upon the following conditions:






	 	(i)	 	The Hazardous Materials are only those materials that are necessary from time to
time for the Initial Permitted Use described in Section 1.12 of the Summary;
	 
	 	(ii)	 	The storage, use and disposal of the Hazardous Materials complies with all
applicable laws, and Tenant provides to Landlord promptly following the preparation
thereof a copy of Tenant’s quarterly injury and illness prevention program inspection
(which inspection Tenant agrees to perform on at least a quarterly basis);
	 
	 	(iii)	 	The storage, use and disposal of the Hazardous Materials does not result in
objectionable odors or health hazards to other tenants or occupants of the Project;
	 
	 	(iv)	 	Tenant obtains and maintains all permits and approvals necessary for the
storage, use and disposal of the Hazardous Materials:
	 
	 	(v)	 	Tenant has not assigned this Lease to any third Party (other than to a Permitted
Transferee);




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	 	(vi)	 	On the first day of each calendar year during the Term, Tenant shall deliver
to Landlord a disclosure statement containing the following:






	 	(1)	 	A list containing all Hazardous
Materials and the quantities thereof stored, used or disposed from  the Premises during
the preceding calendar year;
	 
	 	(2)	 	A statement that (A) the use, storage and disposal of such
Hazardous Materials complies with all applicable laws,
(B) Tenant has all
necessary permits and approvals for the use, storage and disposal thereof, and
(C) Identifies the method of disposal of such Hazardous
Materials; and
	 
	 	(3)	 	Copies of all necessary permits and approvals relating to the
use, storage and disposal of such Hazardous Materials to the extent not
previously delivered to Landlord;






	 	(vii)	 	Tenant shall immediately advise Landlord in writing of, and provide Landlord a copy
of:






	 	(1)	 	Any notice of violation or potential or alleged violation of any
law concerning Hazardous Materials received by Tenant from any governmental
agency;
	 
	 	(2)	 	Any and all inquiry, Investigation, enforcement, clean-up, removal
or governmental or regulatory actions instituted or threatened relating to Tenant
or the Premises; and
	 
	 	(3)	 	All claims made or threatened by any third party against Tenant or
the Premises relating to any Hazardous Materials.






	 	(viii)	 	The provisions of this subparagraph (c) shall not apply to the storage, use
and disposal of Hazardous Materials by a subtenant, unless the subtenant is a
Permitted Transferee.





In the event any of the preceding conditions are not satisfied, Tenant shall immediately cease the
use, storage and disposal of Hazardous Materials until all such conditions are satisfied.
Landlord’s consent to the use, storage and disposal of such Hazardous Materials shall not
constitute an assumption of the risk respecting the same and Tenant shall indemnify, protect,
defend and hold the Landlord Indemnified Parties harmless from and against the same as required by
this Section 6.4.



6.5 Refuse and Sewage. Tenant agrees not to Keep any trash, garbage, waste or other refuse on the
Premises except in sanitary containers and agrees to regularly and frequently remove same from the
Premises. Tenant shall keep all containers or other equipment used for storage of such materials in
a clean and sanitary condition. Tenant shall properly dispose of all sanitary sewage end shall not
use the sewage disposal system for the disposal of anything except as permitted by law. Tenant
shall keep the sewage disposal system free of all obstructions and in good operating condition. If
the volume of Tenant’s trash becomes excessive in Landlord’s judgment, Landlord shall have the
right to charge Tenant for additional trash disposal services and/or to require that Tenant
contract directly for additional trash disposal services at Tenant’s sole cost and expense.



6.6 Pest Control. Tenant shall, at its own cost, retain a licensed, bonded professional pest and
sanitation control service to perform inspections of the Premises as needed for the purpose of
eliminating Infestation by and controlling the presence of insects, rodents and vermin and shall
promptly cause any corrective or extermination work recommended by such service to be performed.
Such work shall be performed pursuant to a written contract, a copy of which shall be delivered to
Landlord by Tenant upon request.



6.7 Extraordinary Services. If Landlord incurs Operating Expenses or other costs for any increase
in services provided to or for the benefit of Tenant above those services normally provided by
Landlord to the other tenants in the Project and such increased services or costs result from any
act, conduct, extraordinary use and/or special request by Tenant or its employees or customers,
Tenant agrees to reimburse Landlord for the costs of such extraordinary services, within thirty
(30) days of delivery to Tenant of written invoice for such
extraordinary services. By way of example only, if Tenant should request or if Tenant’s
business operation should require extraordinary security services, lighting, cleaning and/or
repair, such extraordinary services may be billed directly to Tenant as provided in this Section
6.7 and shall be reimbursed by Tenant to Landlord as provided herein.



7. Payments
and Notices. All rent and other sums payable by Tenant to Landlord hereunder shall be
paid to Landlord at the address designated in Section 1.1 of the Summary, or to such other persons
and/or at such other places as Landlord may hereafter designate in writing. Any notice required or
permitted to be given hereunder must be in writing and may be given by personal delivery
(including delivery by nationally recognized overnight courier or express mailing service), or by
registered or certified mail, postage prepaid, return receipt requested, addressed to Tenant at
the address(es) designated in Section 1.2 of the Summary, or to
Landlord at the address(es)
designated in Section 1.1 of the Summary. Either party may, by
written notice to the other,
specify a different address for notice purposes.



8. Brokers. The parties recognize that the broker(s) who negotiated this Lease are stated in
Section 1.13 of the Summary, and agree that Landlord shall be solely responsible for the payment
of brokerage commissions to said broker(s), and that Tenant shall have no responsibility therefor
unless written provision to the contrary has been made. Each party represents and warrants to the
other, that, to its knowledge, no other broker, agent or finder (a) negotiated or was instrumental
in negotiating or consummating this Lease on its behalf, and (b) is or might be entitled to a
commission or compensation in connection with this Lease. Any broker, agent or finder of Tenant
whom Tenant has failed to disclose herein shall be paid by Tenant. Tenant shall indemnify, protect,
defend (by counsel reasonably approved in writing by Landlord) and hold Landlord harmless from and
against any and all claims, judgments, suits, causes of action,
damages, losses, Liabilities and
expenses (including attorneys’ fees and court costs) resulting from any breach by Tenant of the
foregoing representation, including, without limitation, any claims that may be asserted against
Landlord by any broker.




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agent or finder undisclosed by Tenant herein. Landlord shall Indemnify, protect, defend (by counsel
reasonably approved in writing by Tenant) and hold Tenant harmless from and against any and all
claims, judgments, suits, causes of action, damages, losses, liabilities and expenses (including
attorneys’ fees and court costs) resulting from any breach by Landlord of the foregoing
representation, including, without limitation, any claims that may be asserted against Tenant by
any broker, agent or finder undisclosed by Landlord herein. The foregoing indemnities shall survive
the expiration or earlier termination of this Lease.




9.
Surrender; Holding Over.



9.1 Surrender of Premises. Upon the expiration or sooner termination of this Lease, Tenant shall
surrender all keys for the Premises to Landlord, and Tenant shall deliver exclusive possession of
the Premises to Landlord broom clean and in good condition and repair, reasonable wear and tear and
casualty damage excepted), with all of Tenant’s personal property (and those items, if any, of
Tenant Improvements and Tenant Changes identified by Landlord pursuant to Section 12.2 below)
removed therefrom and all damage caused by such removal repaired, as required pursuant to Sections
12.2 and 12.3 below. If, for any reason, Tenant falls to surrender the Premises on the expiration
or earlier termination of this Lease (including upon the expiration of any subsequent
month-to-month tenancy consented to by Landlord pursuant to Section 9.2 below), with such removal
and repair obligations completed, then, in addition to the provisions of Section 9.3 below and
Landlord’s rights and remedies under Section 12.4 and the other provisions of this Lease, Tenant
shall Indemnify, protect, defend (by counsel reasonably approved in writing by Landlord) and hold
Landlord harmless from and against any and all claims, judgments, suits, causes of action, damages,
losses, liabilities and expenses (including reasonable attorneys’ fees and court costs) resulting
from such failure to surrender, including, without limitation, any claim made by any succeeding
tenant based thereon. The foregoing Indemnity shall survive the expiration or earlier termination
of this Lease.



9.2 Holding Over. If without Landlord’s consent, Tenant holds over after the expiration or earlier
termination of the Lease Term, Tenant shall become a tenant at sufferance only, upon the terms and
conditions set forth in this Lease so far as applicable (Including Tenant’s obligation to pay all
Common Area Expenses and any other additional rent under this Lease), but at a Monthly Basic Rent
equal to one hundred twenty-five percent (125%) of the Monthly Basic Rent applicable to the
Premises immediately prior to the date of such expiration or earlier termination. Acceptance by
Landlord of rent after such expiration or earlier termination shall not constitute a consent to a
hold over hereunder or result in an extension of this Lease.



9.3 No Effect on Landlord’s Rights. The foregoing provisions of this Section 9 are in addition to,
and do not affect, Landlord’s right of re-entry or any other rights of Landlord hereunder or
otherwise provided at law or in equity.




10. Taxes.



10.1 Real Property Taxes. Tenant agrees to pay its pro rata share of all general and special real
property taxes, assessments (including, without limitation, change in ownership taxes or
assessments), liens, bond obligations, license fees or taxes and any similar impositions in-lieu of
other impositions now or previously within the definition of real property taxes or assessments
(collectively “Real Property Taxes”) which may be levied or assessed by any lawful authority
against the Project applicable to the period from the Commencement Date until the expiration or
sooner termination of this Lease. Tenant’s pro rata share shall be apportioned according to the
floor area of the Premises as it relates to the total leasable floor area of the Building or
buildings located within the Project (including the Premises). Notwithstanding the foregoing
provisions, if the Real Property Taxes are not levied and assessed against the entire Project by
means of a single tax bill (i.e., if the Project is separated into two (2) or more separate tax
parcels for purposes of levying and assessing the Real Property Taxes), then, at Landlord’s option,
Tenant shall pay Tenant’s pro rata share of all Real Property Taxes which may be levied or assessed
by any lawful authority against the land and improvements of the separate tax parcel on which the
Building containing the Premises is located. Tenant’s pro rata share under such circumstances shall
be apportioned according to the floor area of the Premises as it relates to the total leasable
floor area of the Building or buildings situated in the separate tax parcel in which the Premises
is located.



All Real Property Taxes for the tax year in which the Commencement Date occurs and for the tax
year in which this Lease terminates shall be apportioned and adjusted so that Tenant shall not be
responsible for any Real Property Taxes for a period of time occurring prior to the Commencement
Date or subsequent to the expiration of the Term.



The amount to be paid pursuant to the provisions of this Section 10.1 shall be paid monthly in
advance as part of Tenant’s Monthly Operating Expense Charge as estimated by Landlord based on the
most recent tax bills and estimates of reappraised values (if reappraisal is to occur), commencing
with the month (or partial month on a prorated basis if such be the case) that the Commencement
Date occurs. The initial estimated monthly charge for Tenant’s pro rata share of Real Property
Taxes is Included in the Monthly Operating Expense Charge as provided in Section 4.



If at any time during the Term under the laws of the United States, or the state, county,
municipality, or any political subdivision thereof in which the Project is located, a tax or
excise on rent or any other tax however described is levied or assessed by any such political body
against Landlord on account of rent payable to Landlord hereunder or any tax based on or measured
by expenditures made by Tenant on behalf of Landlord, such tax or excise shall be considered “Real
Property Taxes” for purposes of this Section 10.1, and shall be payable in full by Tenant. At
Landlord’s option, such taxes or excises shall be payable monthly in advance on an estimated basis
as provided in this Section 10.1 or shall be payable within ten (10) days after Tenant’s receipt
of the tax bill therefor from Landlord.



10.2 Personal Property Taxes. Tenant shall be liable for, and shall pay before delinquency, all
taxes and assessments (real and personal) levied against (a) any personal property or trade
fixtures placed by Tenant in or about the Premises (including any increase in the assessed value
of the Premises based upon the value of any such personal property or trade fixtures); and (b) any
Tenant Improvements or alterations in the Premises (whether installed and/or paid for by Landlord
or Tenant). If any such taxes or assessments are levied against Landlord or Landlord’s property,




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Landlord may, after written notice to Tenant (and under proper protest if requested by Tenant)
pay such taxes and assessments, and Tenant shall reimburse Landlord therefor within ten (10)
business days after demand by Landlord; provided, however, Tenant, at its sole cost and expense,
shall have the right, with Landlord’s cooperation, to bring suit in any court of competent
jurisdiction to recover the amount of any such taxes and assessments so paid under protest.



10.3 Tenant’s Payment of Certain Tax Expenses. Notwithstanding anything to the contrary contained
in this Lease, in the event that, at any time during the Initial Term, a change in ownership of
the Project is consummated, and as a result thereof, and to the extent that in connection
therewith, the Project is reassessed (the “Reassessment”) for real estate tax purposes by the
appropriate governmental authority pursuant to the terms of Proposition 13, then the terms of this
Section 10.3 shall apply to such Reassessment. This Section 10.3 shall not apply during any Option
Period.





	(a)	 	The Tax Increase. For purposes of this Article 10, the term “Tax Increase” shall mean that
portion of the Real Property Taxes, as calculated immediately following the Reassessment,
which is attributable solely to the Reassessment. Accordingly, the term Tax Increase shall
not include any portion of the Real Property Taxes, as calculated immediately following the
Reassessment, which (i) is attributable to the initial assessment of the value of the
Project, (ii) is attributable to assessments which were pending immediately prior to the
Reassessment which assessments were conducted during, and included in, such Reassessment, or
which assessments were
otherwise rendered unnecessary following the Reassessment, or (iii) is attributable to the
annual inflationary
increase of Real Property Taxes.
	 
	(b)	 	Protection. Tenant shall be obligated to pay Tenant’s pro rata share of the first Tax
Increase, but Tenant shall not be obligated to pay any portion of any subsequent Tax
Increase.
	 
	(c)	 	Landlord’s Right to Purchase the Proposition 13 Protection Amount Attributable to a
Particular Reassessment. The amount of Real Property Taxes which Tenant is not obligated to
pay or will not be obligated to pay during the Term in connection with a particular
Reassessment pursuant to the terms of Section 10.3 shall be sometimes referred to hereafter
as a “Proposition 13 Protection Amount.” If the occurrence of a Reassessment is reasonably
foreseeable by Landlord and the Proposition 13 Protection Amount attributable to such
Reassessment can be reasonably quantified or estimated for each year commencing with the
year in which the Reassessment will occur, the terms of this Section 10.3(c) shall apply to
each such Reassessment. Upon notice to Tenant, Landlord shall have the right to purchase the
Proposition 13 Protection Amount relating to the applicable Reassessment (the “Applicable
Reassessment”), at any time, by paying to Tenant an amount equal to the “Proposition 13
Purchase Price,” as that term is defined below. As used herein, “Proposition 13 Purchase
Price” shall mean the present value of the Proposition 13 Protection Amount remaining during
the Term, as of the date of payment of the Proposition 13 Purchase Price by Landlord. Such
present value shall be calculated (I) by using the portion of the Proposition 13 Protection
Amount attributable to each remaining year during the Term that such protection is available
(as though the portion of such Proposition 13 Protection Amount benefited Tenant at the end
of each year), as the amounts to be discounted, and (ii) by using discount rates for each
amount to be discounted equal to (A) the prime interest rate, as reported in the Wall Street
Journal as of the date of Landlord’s exercise of its right to purchase plus (B) two percent
(2%) per annum. Upon such payment of the Proposition 13 Purchase Price, the provisions of
Section 10.3(b) shall not apply to any Tax Increase attributable to the Applicable
Reassessment. As Landlord will estimate the Proposition 13 Purchase Price because a
Reassessment has not yet occurred, then when such Reassessment occurs, if Landlord has
underestimated the Proposition 13 Purchase Price, then upon notice by Landlord to Tenant,
Tenant’s rent next due shall be credited with the amount of such underestimation, and if
Landlord overestimates the Proposition 13 Purchase Price, then upon notice by Landlord to
Tenant, rent next due shall be increased by the amount of the overestimation.





11.
Possession; Condition of Premises: Repairs.



11.1 Delivery of Possession. Landlord will deliver possession of the Premises to Tenant in its
current “as-is” condition (subject, however, to Section 11.2) on or before the date required by
Section 1.7 of the Summary. If, for any reason not caused by Tenant, Landlord cannot deliver
possession of the Premises to Tenant by the date required by Section 1.7 of the Summary, this
Lease will not be void or voidable, nor will Landlord be liable to Tenant for any loss or damage
resulting from such delay. If the delay in possession is caused by Tenant, then the Term and
Tenant’s obligation to pay rent will commence as of the date the Commencement Date would have
occurred but for Tenant’s delay, even though Tenant does not yet have possession. Notwithstanding
the foregoing, Landlord will not be obligated to deliver possession of the Premises to Tenant
(but Tenant will be liable for rent if Landlord can otherwise deliver the Premises to Tenant)
until Landlord has received from Tenant all of the following: (i) a copy of this Lease fully
executed by Tenant; (ii) the first installment of Monthly Basic Rent; and (iii) copies of policies
of insurance or certificates thereof as required under Section 21 of this Lease. Notwithstanding
anything to the contrary contained herein, if Landlord has not delivered the Premises to Tenant
within fifteen (15) days from the date hereof for any reason, including but not limited to force
majeure delays, Tenant shall have the right thereafter (but prior to delivery of the Premises) to
cancel this Lease by giving Landlord written notice thereof, and upon such cancellation, Landlord
shall return all sums theretofore deposited by Tenant with Landlord, and neither party shall have
any further liability to the other hereunder.



11.2 Condition of Premises. Tenant acknowledges that, except as otherwise expressly set forth in
this Lease, neither Landlord nor any agent of Landlord has made any representation or warranty
with respect to the Premises, the Building or the Project or their condition, or with respect to
the suitability thereof for the conduct of Tenant’s business. The taking of possession of the
Premises by Tenant shall
conclusively establish that the Project, the Premises, the Tenant improvements therein, the
Building and the Common Areas were at such time complete and in good, sanitary and satisfactory
condition and repair and without any obligation on Landlord’s part to make any alterations,
upgrades or improvements thereto. Notwithstanding anything to the contrary in Section 11.1 or
this Section 11.2, as of the Commencement Date (i) all plumbing, electrical, HVAC and mechanical
systems in the Premises shall be in good working order (with the exception of failures to such
systems caused by Tenant and the repairs needed to the HVAC



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system
identified in the Due Diligence Report dated December 11, 1996 prepared by Weather
Engineering, the responsibility of which will be Tenant’s at its cost and expense, but with
respect to the HVAC repairs, subject to reimbursement by Landlord from the Construction Allowance)
and (ii) the Common Areas shall comply with Title III of the Americans with Disabilities Act of
1990 (the “Act”) and all other laws applicable thereto (but without regard to the Tenant
Improvements, for which Tenant shall be responsible to ensure compliance with the Act and all
other laws applicable thereto). In the event it is determined that the condition of the Premises
or Common Areas is not as required by this Section 11.2, then it shall be the obligation of
Landlord, after written notice from Tenant, to promptly, at Landlord’s sole cost and expense,
rectify any such condition, In the event Tenant does not give Landlord written notice that any of
the plumbing, electrical, HVAC or mechanical systems are not in good working order within eighteen
(18) days from the Commencement Date, the correction of same shall be the responsibility of Tenant
at Tenant’s cost.



Landlord
warrants that: (i) as of the date hereof and as of the Commencement Date Landlord has no
actual knowledge of any material defects in the Premises or Building which could reasonably be
expected by Landlord to unreasonably interfere with Tenant’s use and enjoyment of the Premises
(however, this warranty shall not apply to defects caused by Tenant); (ii) as of the date hereof,
Landlord is the fee owner of the Premises and has the right and authority to lease the Premises to
Tenant on the terms and conditions set forth in the Lease; and (iii) as of the Commencement Date,
or as soon thereafter as is reasonably practicable, Landlord shall complete its currently planned
improvements to the exterior of the Building. As the exclusive remedy for a breach of the foregoing
warranties, Landlord shall, promptly following written notice thereof from Tenant, correct any
violation of the foregoing warranties at Landlord’s sole cost and expense. Subject to the foregoing
warranties, by entry upon the Premises, Tenant agrees to accept the Premises in their “as is”
condition.



Notwithstanding the foregoing, Tenant acknowledges that certain repairs to the Premises are needed
due to vandalism, and that Tenant will be responsible for the repair of same, subject to
reimbursement by Landlord from the Construction Allowance.



11.3 Landlord’s Repair Obligations. Except as provided in Section 11.2 above, Landlord shall, as
part of the Operating Expenses, repair, maintain and replace, as necessary, (a) the Building shell
and other structural portions of the Building (including the roof and foundations), (b) the basic
plumbing, heating, ventilating, air conditioning, sprinkler and electrical systems within the
Building core (but not any conduits or connections thereto or distribution systems thereof within
the Premises or any other tenant’s premises), and (c) the Common Areas of the Project; provided,
however, to the extent such maintenance or repairs are required as a result of any act, neglect,
fault or omission of Tenant or any of Tenant’s agents, employees, contractors, licensees or
invitees, Tenant shall pay to Landlord, as additional rent, the costs of such maintenance and
repairs. Landlord shall not be liable to Tenant for failure to perform any such repairs or
maintenance, unless Landlord shall fail to make such repairs and such failure shall continue for an
unreasonable time following written notice from Tenant to Landlord of the need for such repairs.
Without limiting the foregoing, Tenant waives the right to make repairs at Landlord’s expense under
any law, statute or ordinance now or hereafter in effect (including the provisions of California
Civil Code Section 1942 and any successive sections or statutes of a similar nature).



11.4 Tenant’s Repair Obligations. Except for Landlord’s obligations specifically set forth in
Sections 11.2, 11.3, 18.1 and 19.2 hereof, Tenant shall at all times and at Tenant’s sole cost and
expense, keep, maintain, clean, repair and preserve and replace, as necessary, the Premises and
all parts thereof including, without limitation, all Tenant Improvements, Tenant Changes, utility
meters, pipes and conduits, all heating, ventilating and air conditioning systems located within
the Premises, all fixtures, furniture and equipment, Tenant’s storefront and signs, if any, locks,
closing devices, security devices, windows, window sashes, casements and frames, floors and floor
coverings, shelving, restrooms, if any, and any alterations, additions and other property located
within the Premises in good condition and repair, reasonable wear and tear excepted. Tenant shall
replace, at its expense, any and all plate and other glass in and about the Premises which is
damaged or broken from any cause whatsoever except due to the gross negligence or willful
misconduct of Landlord, its agents or employees. Such maintenance and repairs shall be performed
with due diligence, lien-free and in a good and workmanlike manner,
by licensed contractor(s) which
are selected by Tenant and approved by Landlord, which approval Landlord shall not unreasonably
withhold or delay. Except as otherwise expressly provided in this Lease, Landlord shall have no
obligation to alter, remodel, improve, repair, renovate, redecorate or paint all or any part of
the Premises.




12. Alterations.




12.1 Tenant Changes; Conditions.





	(a)	 	Tenant shall not make any alterations, additions, improvements or decorations to the
Premises (collectively, “Tenant Changes,” and
individually, a “Tenant Change”) unless Tenant
first obtains Landlord’s prior written approval thereof, which approval Landlord shall not
unreasonably withhold. Notwithstanding the foregoing, Landlord’s prior approval shall not be
required for any Tenant Change which satisfies all of the following conditions (hereinafter a
“Pre-Approved Change”): (i) the costs of such Tenant Change does not exceed Twenty-Five
Thousand Dollars ($25,000.00) Individually; (ii) the costs of such Tenant Change when
aggregated with the costs of all other Tenant Changes made by Tenant during the Term of this
Lease do not exceed One Hundred Thousand Dollars ($100,000.00); (iii) Tenant delivers to
Landlord final plans, specifications and working drawings for such Tenant Change at least ten
(10) days prior to commencement of the work thereof; (iv) the Tenant Change does not affect
the mechanical, electrical, plumbing or life safety systems of the Premises, the roof or
structural components of the Premises or the exterior of the Premises; and (v) Tenant and
such Tenant Change otherwise satisfy all other conditions set forth in this Section 12.1.
	 
	(b)	 	All Tenant Changes shall be performed: (i) in accordance with the approved plans,
specifications and working drawings; (ii) lien-free and in a good and workmanlike manner;
(iii) in compliance with all
laws, rules and regulations of all governmental agencies and authorities including, without
limitation, the provisions of Title III of




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	 	 	the Americans with Disabilities Act of 1990; (iv) in such a manner so as not to unreasonably
interfere with the occupancy of any other tenant in the Building or any other building
located within the Project, nor impose any additional expense upon nor delay Landlord in
the maintenance and operation of the Building or any other building located within the
Project; and (v) at such times, in such manner and subject to such rules and regulations as
Landlord may from time to time reasonably designate.
	 
	(c)	 	Throughout the performance of the Tenant Changes, Tenant shall obtain, or cause its
contractors to obtain, workers compensation insurance and commercial general liability
insurance in compliance with the provisions of Section 20 of this Lease.




12.2 Removal of Tenant Changes and Tenant Improvements. All Tenant Changes and the initial Tenant
Improvements in the Premises (whether installed or paid for by Landlord or Tenant), shall become
the property of Landlord and shall remain upon and be surrendered with the Premises at the end of
the Term of this Lease; provided, however, Landlord may, by written notice delivered to on or
before the expiration of the Lease Term (or upon any sooner termination of this Lease) identify
those items of the initial Tenant Improvements and Tenant Changes which Landlord shall require
Tenant to remove at the end of the Term of this Lease. If Landlord requires Tenant to remove any
such Items as described above, Tenant shall, at its sole cost, remove the Identified items on or
before the expiration or sooner termination of this Lease and repair any damage to the Premises
caused by such removal (or, at Landlord’s option, shall pay to Landlord all of Landlord’s costs of
such removal and repair).



Notwithstanding anything to the contrary contained herein, Tenant shall not be required to remove
(i) any of the initial Tenant Improvements constructed by or on behalf of Tenant, and (ii) any
Tenant Change for which Tenant has obtained Landlord’s consent (unless at the time of Landlord’s
granting of such consent, Landlord required the removal of such Tenant Change as a condition to
such consent). Tenant shall be entitled, but not required, to remove the following described
items, provided Tenant repairs any damage to the Premises caused by such removal: phone system and
security system (if Tenant elects to remove any such system, Tenant shall also remove all wiring
associated with such system.



12.3 Removal of Personal Property. All articles of personal property owned by Tenant or installed
by Tenant at its expense in the Premises (including business and trade fixtures, furniture and
movable partitions) shall be, and remain, the property of Tenant, and shall be removed by Tenant
from the Premises, at Tenant’s sole cost and expense, on or before the expiration or sooner
termination of this Lease. Tenant shall repair any damage caused by such removal.



12.4 Tenant’s Failure to Remove. If Tenant fails to remove by the expiration or sooner termination
of this Lease all of its personal property, or any items of Tenant Improvements or Tenant Changes
identified by Landlord for removal pursuant to Section 12.2 above, Landlord may, (without
liability to Tenant for loss thereof), at Tenant’s sole cost and in addition to Landlord’s other
rights and remedies under this Lease, at law or in equity: (a) remove and store such items in
accordance with applicable law; and/or (b) upon ten (10) days’ prior notice to Tenant, sell all or
any such items at private or public sale for such price as Landlord may obtain as permitted under
applicable law. Landlord shall apply the proceeds of any such sale to any amounts due to Landlord
under this Lease from Tenant (including Landlord’s reasonable attorneys’ fees and other costs
incurred in the removal, storage and/or sale of such items), with any remainder to be paid to
Tenant.



13. Liens. Tenant shall not permit any mechanic’s, materialmen’s or other liens to be
filed against all or any part of the Project, the Building or the Premises, nor against Tenant’s
leasehold interest in the Premises, by reason of or in connection with any repairs, alterations,
improvements or other work contracted for or undertaken by Tenant or any other act or omission of
Tenant or Tenant’s agents, employees, contractors, licensees or invitees. Tenant shall, at
Landlord’s request, provide Landlord with enforceable, conditional and final lien releases (and
other reasonable evidence reasonably requested by Landlord to demonstrate protection from liens)
from all persons furnishing labor and/or materials with respect to the Premises. Landlord shall
have the right at all reasonable times to post on the Premises and record any notices of
non-responsibility which it deems necessary for protection from such liens. If any such liens are
filed, Tenant shall, at its sole cost, immediately cause such lien to be released of record or
bonded so that it no longer affects title to the Project, the Building or the Premises. If Tenant
fails to cause such lien to be so released or bonded within twenty (20) days after filing thereof,
Landlord may, without waiving its rights and remedies based on such breach, and without releasing
Tenant from any of its obligations, cause such lien to be released by any means it shall deem
proper, including payment in satisfaction of the claim giving rise to such lien. Tenant shall pay
to Landlord within five (5) days after receipt of invoice from Landlord, any sum paid by Landlord
to remove such liens, together with interest at the Interest Rate from the date of such payment by
Landlord.




14. Assignment and Subletting.



14.1 Restriction on Transfer. Tenant will not assign or encumber this Lease in whole or in part,
nor sublet all or any part of the Premises (collectively and
individually, a “Transfer”), without
the prior written consent of Landlord, which consent Landlord will not unreasonably withhold,
except as provided in this Section 14. The consent by Landlord to any Transfer shall not
constitute a waiver of the necessity for such consent to any subsequent Transfer. This prohibition
against Transfers shall be construed to include a prohibition against any assignment or subletting
by operation of law. If this Lease is Transferred by Tenant, or if the Premises or any part
thereof are Transferred or occupied by any person or entity other than Tenant, Landlord may
collect rent from the assignee, subtenant or occupant, and apply the net amount collected to the
rent herein reserved during any time that a default (after notice and expiration of applicable
grace periods) exists hereunder. No such Transfer, occupancy or collection shall be deemed a
waiver on the part of Landlord, or the acceptance of the assignee, subtenant or occupant as
Tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of
Tenant herein
contained unless expressly made in writing by Landlord. Irrespective of any Transfer, Tenant shall
remain fully liable under this Lease and shall not be released from performing any of the terms,
covenants and conditions of this Lease. Without limiting in any way Landlord’s right to withhold
its consent on any reasonable grounds, it is agreed that Landlord will not be acting unreasonably
in refusing to consent to a




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Transfer if, in Landlord’s opinion, (i) the net worth or financial capabilities of such assignee
or subtenant is less than that of Tenant at the date hereof, (ii) the proposed assignee or
subtenant does not have the financial capability to fulfill the obligations imposed by the
Transfer, (iii) the proposed Transfer involves a change of use of the Premises from that specified
herein, or (iv) the proposed assignee or subtenant is not, in Landlord’s reasonable opinion, of
reputable or good character or consistent with Landlord’s desired tenant mix for the Project. Any
proposed assignee or subtenant which Landlord does not disapprove shall be deemed a “Permitted
Business.” If Tenant is a corporation, or is an unincorporated association or partnership, the
transfer, assignment or hypothecation of any stock or interest in such corporation, association or
partnership in the aggregate in excess of fifty percent (50%) shall be deemed an assignment within
the meaning and provisions of this Section 14.1.



Notwithstanding anything to the contrary contained in this Lease, Landlord agrees that Tenant may
assign this Lease or sublet the Premises, or any portion thereof, without Landlord’s consent, to
any entity which controls, is controlled by, or is under common control with Tenant; to any entity
which results from a reincorporation, merger or consolidation with Tenant; to any entity engaged in
a joint venture with Tenant; or to any entity that acquires all or substantially all of the stock
or assets of Tenant, (hereinafter each a “Permitted
Transfer” or “Permitted Transferee,” as
applicable), provided (i) with respect to any entity that acquires all or substantially all of the
stock or assets of Tenant or an entity that results from a merger or consolidation (i.e., where
Tenant is not the surviving entity), such Permitted Transferee has a net worth equal to Tenant’s as
of the date hereof, (ii) Tenant gives Landlord written notice of the Permitted Transfer at least
ten (10) days prior to the effective date thereof, which notice provides Landlord with sufficient
information to verify the satisfaction of the criteria for a Permitted Transfer, (iii) in the case
of an assignment of this Lease, the Permitted Transferee assumes the obligations of Tenant
hereunder pursuant to an instrument reasonably acceptable to Landlord, and (iv) the Permitted
Transfer is effectuated for a bona fide business purpose and not as a means to avoid Tenant’s
obligations under this Lease. In addition, any sale or transfer of the capital stock of Tenant
shall be deemed a Permitted Transfer if (1) such sale or transfer occurs in connection with any
bona fide financing or capitalization for the benefit of Tenant, or (2) Tenant becomes a publicly
traded corporation, or (3) such sale or transfer is made to any publicly traded corporation.
Without limiting the generality of the foregoing, Landlord shall have no right to any sums or other
economic consideration resulting from any Permitted Transfer as otherwise permitted in Section 14.4
and shall have no right to terminate this Lease as a result of any Permitted Transfer as otherwise
permitted in Section 14.3.



14.2 Transfer Notice. If Tenant desires to effect a Transfer, then at least thirty (30) days prior
to the date when Tenant desires the Transfer to be effective (the “Transfer Date”), Tenant agrees
to give Landlord a notice (the “Transfer Notice”), stating the name, address and business of the
proposed assignee, sublessee or other transferee (sometimes referred to hereinafter as
“Transferee”), reasonable information (including references) concerning the character, ownership,
and financial condition of the proposed Transferee, the Transfer Date, any ownership or commercial
relationship between Tenant and the proposed Transferee, and the consideration and all other
material terms and conditions of the proposed Transfer, all in such detail as Landlord may
reasonably require.



14.3 Landlord’s Options. Within fifteen (15) days of Landlord’s receipt of any Transfer Notice,
and any additional information requested by Landlord concerning the proposed Transferee’s
financial responsibility, Landlord will notify Tenant of its election to do one of the following:
(i) consent to the proposed Transfer subject to such reasonable conditions as Landlord may impose
in providing such consent; or (ii) refuse such consent, which refusal shall be on reasonable
grounds.



14.4 Additional Conditions: A condition to Landlord’s consent to any Transfer of this Lease will
be the delivery to Landlord of a true copy of the fully executed instrument of assignment,
sublease, transfer or hypothecation, in form and substance reasonably satisfactory to Landlord.
Tenant agrees to pay to Landlord, as additional rent, one-half
(1/2) of all sums and other
consideration payable to and for the benefit of Tenant by the Transferee in excess of the rent
payable under this Lease for the same period and portion of the Premises. In calculating excess
rent or other consideration which may be payable to Landlord under this Section, Tenant will be
entitled to deduct commercially reasonable third party brokerage commissions and attorneys’ fees
and other amounts reasonably and actually expended by Tenant in connection with such assignment or
subletting (together with the unamortized cost of any Tenant improvements or Tenant Changes paid
by Tenant in excess of the Construction Allowance, which unamortized cost shall be amortized over
the remaining term of this Lease) if acceptable written evidence of such expenditures is provided
to Landlord. No Transfer (including a Permitted Transfer) will release Tenant of Tenant’s
obligations under this Lease or alter the primary liability of Tenant to pay the rent and to
perform all other obligations to be performed by Tenant hereunder. During any time that a default
(after notice and expiration of applicable grace periods) exists hereunder, Landlord may require
that any Transferee remit directly to Landlord on a monthly basis, all monies due Tenant by said
Transferee. Consent by Landlord to one Transfer will not be deemed consent to any subsequent
Transfer. In the event of default by any Transferee of Tenant or any successor of Tenant in the
performance of any of the terms hereof, Landlord may proceed directly against Tenant without the
necessity of exhausting remedies against such Transferee or successor. If Tenant effects a
Transfer (including a Permitted Transfer) or requests the consent of Landlord to any Transfer
(including a Permitted Transfer) (whether or not such Transfer is consummated), then, upon demand,
and as a condition precedent to Landlord’s consideration of the proposed assignment or sublease,
Tenant agrees to pay Landlord’s reasonable attorneys’ fees and costs and other costs actually
incurred by Landlord in reviewing such proposed assignment or sublease.



15. Entry by Landlord. Landlord and its employees and agents shall at all reasonable times
have the right to enter the Premises to inspect the same, to supply any service required to be
provided by Landlord to Tenant under this Lease, to exhibit the Premises to prospective lenders or
purchasers (or during the last year of the Term, to prospective tenants), to post notices of
non-responsibility, and/or to alter, improve or repair the Premises or any other portion of the
Building, all without being deemed guilty of or liable for any breach of Landlord’s covenant of
quiet enjoyment or any eviction of Tenant, and without abatement of rent. In exercising such entry
rights, Landlord shall endeavor to minimize, as reasonably
practicable, the interference with Tenant’s business, and shall provide Tenant with reasonable
advance written notice of such entry (except in emergency situations). Landlord shall have the
means which Landlord may deem proper to open Tenant’s doors in an emergency in order to obtain
entry to the Premises. Any entry to the Premises obtained by Landlord by any of said means or
otherwise shall not under any circumstances be construed or deemed to be




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a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant from
the Premises or any portion thereof, or grounds for any abatement or reduction of rent and
Landlord shall not have any liability to Tenant for any damages or losses on account of any such
entry by Landlord except, subject to the provisions of Section 22.1, to the extent of Landlord’s
gross negligence or willful misconduct, but Landlord shall promptly repair, at its sole cost, all
damage caused by Its entry to the extent such damage is not covered by insurance Tenant carries or
is required to carry hereunder.



16. Utilities and Services. Tenant shall be solely responsible for and shall promptly pay
all charges for heat, air conditioning, water, gas, electricity or any other utility used, consumed
or provided in, furnished to or attributable to the Premises at the rates charged by the supplying
utility companies and/or Landlord. Should Landlord elect to supply any or all of such utilities,
Tenant agrees to purchase and pay for the same as additional rent as apportioned by Landlord. The
rate to be charged to Landlord to Tenant shall not exceed the rate charged to Landlord by any
supplying utility. Tenant shall reimburse Landlord within ten (10) days of billing for fixture
charges and/or water tariffs, if applicable, which are charged to Landlord by local utility
companies. Landlord will notify Tenant of this charge as soon as it becomes known. This charge will
increase or decrease with current charges being levied against Landlord, the Premises or the
Building by the local utility company, and will be due as additional rent. In no event shall
Landlord be liable for any interruption or failure in the supply of any such utility services to
Tenant unless such interruption or failure is caused by a default hereunder by Landlord or by
Landlord’s gross negligence or willful misconduct, in which event Landlord will be liable for
damages caused by such interruption to the extent such damages are not covered by the insurance
Tenant maintains or is required to maintain hereunder.




17. Indemnification and Exculpation.



17.1 Tenant’s Assumption of Risk and Waiver. Except to the extent such matter is not covered by
the insurance required to be maintained by Tenant under this Lease and such matter is attributable
to the gross negligence or willful misconduct of Landlord, Landlord shall not be liable to Tenant,
Tenant’s employees, agents or invitees for: (i) any damage to property of Tenant, or of others,
located in, on or about the Premises, (ii) the loss of or damage to any property of Tenant or of
others by theft or otherwise, (iii) any injury or damage to persons or property resulting from
fire, explosion, falling plaster, steam, gas, electricity, water, rain or leaks from any part of
the Premises or from the pipes, appliance of plumbing works or from the roof, street or subsurface
or from any other places or by dampness or by any other cause of whatsoever nature, or (iv) any
such damage caused by other tenants or persons in the Premises, occupants of adjacent property of
the Project, or the public, or caused by operations in construction of any private, public or
quasi-public work. Landlord shall in no event be liable for any consequential damages or loss of
business or profits and Tenant hereby waives any and all claims for any such damages. All property
of Tenant kept or stored on the Premises shall be so kept or stored at the sole risk of Tenant and
Tenant shall hold Landlord harmless from any claims arising out of damage to the same, including
subrogation claims by Tenant’s insurance carriers, unless such damage shall be caused by the
negligence or willful misconduct of Landlord or a breach by Landlord of its obligations under the
lease and is not covered by insurance Tenant carries or is required to carry hereunder. Landlord
or its agents shall not be liable for interference with the light or other intangible rights.



17.2 Tenant’s Indemnification of Landlord. Tenant shall be liable for, and shall indemnify,
defend, protect and hold Landlord and Landlord’s partners, officers, directors, employees, agents,
successors and assigns (collectively, “Landlord Indemnified
Parties”) harmless from and against,
any and all claims, damages, judgments, suits, causes of action, losses, liabilities and expenses,
including reasonable attorneys’ fees and court costs
(collectively, “Indemnified Claims”), arising
or resulting from (a) any negligent or willful act or omission of Tenant or any of Tenant’s
agents, employees, contractors, subtenants, assignees, licensees or with respect to acts or
omissions within the Premises only, Tenant’s invitees
(collectively, “Tenant Parties”); (b) the
use of the Premises and Common Areas and conduct of Tenant’s business by Tenant or any Tenant
Parties, or any other activity, work or thing done, permitted or suffered by Tenant or any Tenant
Parties, in or about the Premises, the Building or elsewhere on the Project; and/or (c) any
default by Tenant of any obligations on Tenant’s part to be performed under the terms of this
Lease. In case any action or proceeding is brought against Landlord or any Landlord Indemnified
Parties by reason of any such Indemnified Claims, Tenant, upon notice from Landlord, shall defend
the same at Tenant’s expense by counsel approved in writing by Landlord, which approval shall not
be unreasonably withheld.



17.3 Landlord’s Indemnification of Tenant. Except for matters (i) covered by insurance obtained or
required to be obtained by Tenant under this Lease or (ii) the negligence or willful misconduct of
the Tenant Parties, Landlord will be liable for, and shall indemnify, protect, defend and hold
harmless Tenant and Tenant’s partners, officers, directors, employees, agents, successors and
assigns (collectively, “Tenant Indemnified Parties”), from and against, any Indemnified Claims, to
the extent any such Indemnified Claim arises or results from (a) any negligent or willful act or
omission of Landlord or any Landlord Parties; (b) any default by Landlord of any obligations on
Landlord’s part to be performed under the terms of this Lease; and (c) to the extent covered by
the insurance required to be maintained by Landlord under this Lease (or which would have been
covered if Landlord had carried such required insurance), any acts or omissions of any third
parties occurring in the Common Areas. In case any action or proceeding is brought against Tenant
or any Tenant Indemnified Parties by reason of any such injury or damage indemnified by Landlord
as set forth hereinabove,
Landlord, upon notice from Tenant, agrees to defend the same at Landlord’s expense by counsel
approved in writing by Tenant, which approval Tenant will not unreasonably withhold.



17.4 Survival; No Release of Insurers. The respective indemnification obligations of Tenant and
Landlord under Sections 17.2 and 17.3, shall survive the expiration or earlier termination of this
Lease. The respective covenants, agreements and indemnification in Sections 17.1, 17.2 and 17.3
above, are not intended to and shall not relieve any insurance carrier of its obligations under
policies required to be carried by Tenant or Landlord, pursuant to the provisions of this Lease.




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18. Damage or Destruction.



18.1 Landlord’s Rights and Obligations. In the event the Premises are damaged by fire or other
casualty that is not required to be insured hereunder by Landlord, which damage does not exceed
ten percent (10%) of the full replacement cost thereof, or, regardless of the amount of damage, if
Landlord will receive insurance proceeds sufficient to cover the costs of such repairs,
reconstruction and restoration (or Landlord would have received sufficient proceeds had Landlord
maintained the insurance required of Landlord hereunder) and if Landlord’s contractor estimates in
a writing delivered to the parties that the damage is such that the Premises may be repaired,
reconstructed or restored to substantially its condition immediately prior to such damage within
one hundred eighty (180) days from the date of such damage, then Landlord shall commence and
proceed diligently with the work of repair, reconstruction and restoration of the Premises
(including the Tenant Improvements but excluding Tenant Changes unless Tenant delivers sufficient
proceeds therefor) and this Lease shall continue in full force and effect. If Landlord is not
required to repair, reconstruct or restore the Premises pursuant to the prior sentence, then
Landlord may elect to either:





	(a)	 	promptly repair, reconstruct and restore the portion of the Premises damaged by such
casualty (including the Tenant Improvements but excluding Tenant Changes unless Tenant
delivers sufficient proceeds therefor), In which case this Lease shall continue in full force
and effect; or
	 
	(b)	 	terminate this Lease effective as of the date which is thirty (30) days after Tenant’s
receipt of Landlord’s election to so terminate.




Under any of the conditions of this Section 18.1, Landlord shall give written notice to Tenant of
its intention to repair or terminate within the earlier of forty-five (45) days after the
occurrence of such casualty, or fifteen (15) days after Landlord’s receipt of the estimate from
Landlord’s contractor. If Landlord’s contractor’s written estimate of the time to complete the
repair or restoration exceeds one hundred eighty (180) days from the date Landlord has knowledge of
the casualty, Tenant shall also have the right to terminate this Lease by giving written notice to
Landlord within thirty (30) days after Tenant’s receipt of such written estimate.



If Landlord elects to terminate this Lease because of insufficient insurance proceeds, Tenant
shall have the right within ten (10) days after the receipt of such notice to give notice to
Landlord of Tenant’s intention to fund such insufficiency in insurance proceeds, in which event
this Lease shall continue in full force and effect, and Tenant shall promptly deposit such funds
with Landlord and thereafter Landlord shall restore the Premises. If Tenant does not give such
notice within such ten (10) day period this Lease shall be terminated as of the date of Landlord’s
termination.



Upon termination of this Lease pursuant to this Section 18, an equitable adjustment shall be made
concerning advance rent and any advance payments made by Tenant to Landlord. Landlord shall, in
addition, return to Tenant within fifteen (15) days following such termination so much of Tenant’s
security deposit as has not theretofore been applied by Landlord.



18.2
Tenant’s Costs and Insurance Proceeds. In the event of any damage or destruction of all or
any part of the Premises, Tenant shall immediately: (a) notify Landlord thereof; and (b) deliver
to Landlord all insurance proceeds received by Tenant with respect to the Tenant Improvements and
Tenant Changes in the Premises to the extent such items are not covered by Landlord’s casualty
insurance obtained by Landlord pursuant to Section 21 below (excluding proceeds for Tenant’s
furniture and other personal property), whether or not this Lease is terminated as permitted in
this Section 18, and Tenant hereby assigns to Landlord all rights to receive such insurance
proceeds; provided, however, with respect to proceeds of insurance for those Tenant Changes paid
for by Tenant, in the event of a termination of this Lease, Tenant may retain a portion of the
insurance proceeds applicable to such Tenant Changes based upon a fraction, the numerator of which
is the number of months remaining in the Term (had this Lease not been terminated), and the
denominator of which is the number of months remaining in the Term at the time the Tenant Change
was installed in the Premises.



18.3 Abatement of Rent. In the event that as a result of any such damage, repair, reconstruction
and/or restoration of the Premises, Tenant’s use of the Premises or any portion thereof is
impaired, then the rent shall be equitably abated during the period that Tenant’s use of the
Premises is impaired based upon the degree of such impairment. Notwithstanding the foregoing to
the contrary, if the damage is due to the negligence or willful misconduct of Tenant or any Tenant
Parties, there shall be no abatement of rent. Except for abatement of rent as provided
hereinabove, Tenant shall not be entitled to any compensation or damages for loss of, or
interference with, Tenant’s business or use or access of all or any part of the Premises resulting
from any such damage, repair, reconstruction or restoration.



18.4 Inability to Complete. Notwithstanding anything to the contrary contained in this Section 18,
if Landlord is obligated or elects to repair, reconstruct and/or restore the damaged portion of
the Premises pursuant to Section 18.1 above, but is delayed from completing such repair,
reconstruction and/or restoration beyond the date which is four (4) months after the date
estimated by Landlord’s contractor for completion thereof pursuant to Section 18.1, by reason of
any causes beyond the reasonable control of Landlord (Including, without limitation, any delay due
to Force Majeure as defined in Section 32.16, and delays caused by Tenant or any Tenant Parties),
then either party may elect to terminate this Lease upon thirty (30) days’ prior written notice to
the other given prior to completion of such repair, reconstruction and/or restoration; provided,
however, (i) Tenant may not make such election if the delay was caused by Tenant or Tenant’s
Parties or if the remaining damage does not materially impair Tenant’s use of the Premises and
(ii) if Tenant is permitted to and does make such election, Landlord may rescind such election by
completing the repairs, reconstruction and/or restoration within thirty (30) days following
Tenant’s election. In addition, if Landlord is required or elects to restore the Premises under
the provisions of this Section 18 and does not commence such restoration within one hundred twenty
(120) days of the date Landlord has knowledge of the damage, and if such damage material impairs
Tenant’s use of the Premises,
Tenant may, at Tenant’s option, terminate this Lease by giving Landlord notice thereof at any time
prior to the commencement of such restoration. In such event, this Lease shall terminate as of the
date of such



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notice: provided, however, Landlord may rescind such termination by commencing such restoration
within thirty (30) days following such termination.



18.5 Damage to the Project. If there is a total destruction of the Project or a partial
destruction of the Project, the cost of restoration of which would exceed one-third (1/3) of the
then replacement value of the Project, by any cause whatsoever, whether or not insured against and
whether or not the Premises are partially or totally destroyed, Landlord may within the earlier of
fifteen (15) days after Landlord’s receipt of the estimate from Landlord’s contractor or
forty-five (45) days after the occurrence of such destruction, notify Tenant in writing that it
elects not to so reconstruct or restore the Project, In which event this Lease shall cease and
terminate as of the date of such destruction.



18.6 Damage Near End of Term. In addition to the termination rights in Sections 18.1 and 18.4
above, Landlord and Tenant shall have the right to terminate this Lease if any damage to the
Building or Premises occurs during the last twelve (12) months of the Term of this Lease and
Landlord’s contractor estimates In a writing delivered to the parties that the repair,
reconstruction or restoration of such damage cannot be completed within the earlier of (a) the
scheduled expiration date of the Lease Term, or (b) sixty (60) days after the date of such
casualty, provided Landlord so notifies Tenant within the earlier of fifteen (15) days after
Landlord’s receipt of the estimate from Landlord’s contractor or forty-five (45) days of the
casualty, and provided further that Tenant’s termination right under this Section 18.6 shall apply
only to damage to the Premises or material damage to the parking areas or access to the Premises.
In addition, in the event of damage to the Premises during the second (2nd) to the last year of the
Term that is not required to be insured by Landlord hereunder and which will require more than
ninety (90) days to repair, Landlord shall have the right to terminate this Lease by giving Tenant
written notice thereof within the same time period required In the preceding sentence; provided,
however, if Landlord does so terminate this Lease, Tenant shall have the right within ten (10) days
after the receipt of such notice to give notice to Landlord of Tenant’s intention to pay for the
cost of such repair, in which event this Lease shall continue in full force and effect and Tenant
shall promptly deposit such funds with Landlord and thereafter Landlord shall repair the Premises.



Notwithstanding anything to the contrary in this Lease, if, at the time of such damage, Tenant has
an Extension Option and the time for the exercise of the Extension Option has not then expired,
Tenant shall have a period of ten (10) days from Landlord’s election to terminate this Lease
pursuant to this Section 18.6 in which to elect to exercise the Extension Option. If Tenant
exercises such Extension Option during said ten (10) day period, Landlord’s election to terminate
this Lease under this Section 18.6 shall be rescinded and the other relevant provisions of Section
18 shall govern the respective rights and obligations of the parties with respect to such damage.



18.7 Waiver of Termination Right. This Lease sets forth the terms and conditions upon which this
Lease may terminate In the event of any damage or destruction. Accordingly, the parties hereby
waive the provisions of California Civil Code Section 1932, Subsection 2, and Section 1933,
Subsection 4 (and any successor statutes thereof permitting the parties to terminate this Lease as
a result of any damage or destruction).




19. Eminent Domain.



19.1 Substantial Taking. Subject to the provisions of Section 19.4 below, in case the whole of the
Premises, or such part thereof as shall substantially interfere with Tenant’s use and occupancy of
the Premises as reasonably determined by Landlord, shall be taken for any public or quasi-public
purpose by any lawful power or authority by exercise of the right of appropriation, condemnation
or eminent domain, or sold to prevent such taking, either party shall have the right to terminate
this Lease effective as of the date possession is required to be surrendered to said authority.



19.2 Partial Taking; Abatement of Rent. In the event of a taking of a portion of the Premises
which does not substantially interfere with the conduct of Tenant’s business, then, except as
otherwise provided In the immediately following sentence, neither party shall have the right to
terminate this Lease and Landlord shall thereafter proceed to make a functional unit of the
remaining portion of the Premises (but only to the extent Landlord receives proceeds therefor from
the condemning authority), and rent shall be abated with respect to the part of the Premises which
Tenant shall be so deprived on account of such taking. Notwithstanding the immediately preceding
sentence to the contrary, if any part of the Building or the Project shall be taken (whether or
not such taking substantially interferes with Tenant’s use of the Premises), Landlord may
terminate this Lease upon thirty (30) days’ prior written notice to Tenant as long as Landlord
also terminates leases of all other tenants leasing comparably sized space within the Building for
comparable lease terms.



19.3 Condemnation Award. Subject to the provisions of Section 19.4 below, in connection with any
taking of the Premises or the Building, Landlord shall be entitled to receive the entire amount of
any award which may be made or given in such taking or condemnation, without deduction or
apportionment for any estate or interest of Tenant, it being expressly understood and agreed by
Tenant that no portion of any such award shall be allowed or paid to Tenant for any so-called
bonus or excess value of this Lease, and such bonus or excess value shall be the sole property of
Landlord. Tenant shall not assert any claim against Landlord or the taking authority for any
compensation because of such taking (including any claim for bonus or excess value of this Lease);
provided, however, if any portion of the Premises is taken, Tenant shall be granted the right to
recover from the condemning authority (but not from Landlord) any compensation as may be
separately awarded or recoverable by Tenant for the taking of Tenant’s furniture, fixtures,
equipment and other personal property within the Premises, for Tenant’s relocation expenses, and
for any loss of goodwill or other damage to Tenant’s business by reason of such taking and for a
prorata share of the value of that portion of the Tenant Improvements and Tenant Changes paid for
by Tenant in excess of the Construction Allowance, which prorata share shall be based upon a
fraction, the numerator of which is the number of months remaining in the Term (had this Lease not
been terminated), and the denominator of which is the number of months remaining in the term at
the time the Tenant Improvements and Tenant Changes were installed in the Premises.



19.4 Temporary Taking. In the event of a taking of the Premises or any part thereof for temporary
use, (a) this Lease shall be and remain unaffected thereby and rent shall not abate, and (b)
Tenant shall be entitled to receive for




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itself such portion or portions of any award made for such use with respect to the period of the
taking which is within the Term, provided that if such taking shall remain in force at the
expiration or earlier termination of this Lease, Tenant shall perform its obligations under
Section 9 with respect to surrender of the Premises and shall pay to Landlord the portion of any
award which is attributable to any period of time beyond the Term expiration date. For purpose of
this Section 19.4, a temporary taking shall be defined as a taking for a period of one hundred
twenty (120) days or less.



19.5 Waiver of Termination Right. This Lease sets forth the terms and conditions upon which this
Lease may terminate in the event of a taking. Accordingly, the parties waive the provisions of the
California Code of Civil Procedure Section 1265.130 and any successor or similar statutes
permitting the parties to terminate this Lease as a result of a taking.




20. Tenant’s Insurance.



20.1 Types of Insurance. On or before the earlier of the Commencement Date or the date Tenant
commences or causes to be commenced any work of any type in or on the Premises pursuant to this
Lease, and continuing during the entire Term, Tenant shall obtain and keep in full force and
effect, the following insurance:





	(a)	 	All Risk insurance, including fire and extended coverage, sprinkler leakage, vandalism and
malicious mischief upon property of every description and kind owned by Tenant and located in
the Premises or the Building, or for which Tenant is legally liable or installed by or on
behalf of Tenant including, without limitation, furniture, equipment and any other personal
property, and any Tenant Changes (but excluding the initial Tenant Improvements previously
existing or installed in the Premises), in an amount not less then the full replacement cost
thereof.
	 
	(b)	 	Commercial general liability insurance coverage, including personal injury, bodily injury
(including wrongful death), broad form property damage, operations hazard, owner’s protective
coverage, contractual liability (including Tenant’s indemnification obligations under this
Lease, including Section 17 hereof), liquor liability (if Tenant serves alcohol on the
Premises), and owned/non-owned auto liability,
with a general aggregate of not less than Two Million Dollars
($2,000,000.00), The general aggregate amount of such commercial general liability insurance shall be increased
every five (5) years during the, Term of this Lease to an amount reasonably required by
Landlord and prudent industry practice.
	 
	(c)	 	Worker’s compensation and employer’s liability insurance, in statutory amounts and limits.
	 
	(d)	 	Loss of income, extra expense and business interruption insurance in such amounts as will
reimburse Tenant for direct or indirect loss of earnings attributable to all perils commonly
insured against by prudent tenants or attributable to prevention of access to the Premises,
Tenant’s parking areas or to the Building as a result of such perils. Tenant may elect to
self-insure this risk.
	 
	(e)	 	Any other form or forms of insurance as Tenant or Landlord or the mortgagees of Landlord may
reasonably require from time to time, in form, amounts and for insurance risks against which
a prudent tenant would protect itself, but only to the extent such risks and amounts are
available in the insurance market at commercially reasonable costs.




20.2 Requirements. Each policy required to be obtained by Tenant hereunder shall: (a) be issued by
insurers authorized to do business in the state in which the Building is located and rated not
less than financial class X, and not less than policyholder rating A in the most recent version of
Best’s Key Rating Guide (provided that, in any event, the same insurance company shall provide the
coverages described in Sections 20.1(a) and 20.1(d) above); (b) be in form reasonably satisfactory
from time to time to Landlord; (c) name Tenant as named insured thereunder and shall name Landlord
and, at Landlord’s request, Landlord’s mortgagees and ground lessors of which Tenant has been
informed in writing, as additional insureds thereunder, all as their respective interests may
appear; (d) shall not have a deductible amount exceeding Five Thousand Dollars ($5,000.00); (e)
specifically provide that the insurance afforded by such policy for the benefit of Landlord and
Landlord’s mortgagees and ground lessors shall be primary, and any insurance carried by Landlord
or Landlord’s mortgagees and ground lessors shall be excess and non-contributing; (f) except for
worker’s compensation insurance, contain an endorsement that the insurer waives its right to
subrogation as described in Section 22 below; and (g) contain an undertaking by the insurer to
notify Landlord (and the mortgagees and ground lessors of Landlord who are named as additional
insureds) in writing not less than thirty (30) days prior to any material change, reduction in
coverage, cancellation or other termination thereof. Tenant agrees to deliver to Landlord, as soon
as practicable after the placing of the required insurance, but in no event later than ten (10)
days after the date Tenant takes possession of all or any part of the Premises, certificates from
the insurance company evidencing the existence of such insurance and Tenant’s compliance with the
foregoing provisions of this Section 20). Tenant shall cause replacement certificates to be
delivered to Landlord not less than thirty (30) days prior to the expiration of any such policy or
policies. If any such initial or replacement certificates are not furnished within the time(s)
specified herein, Tenant shall be deemed to be in default under this Lease, and Landlord shall
have the right, but not the obligation, to procure such policies and certificates at Tenant’s
expense.



20.3 Effect on Insurance. Tenant shall not do or permit to be done anything which will (a) violate
or invalidate any Insurance policy maintained by Landlord or Tenant hereunder, or (b) increase the
costs of any insurance policy maintained by Landlord pursuant to Section 21 or otherwise with
respect to the Building or the Project. If Tenant’s occupancy or conduct of its business in or on
the Premises results in any increase in premiums for any insurance carried by Landlord with
respect to the Building or the Project, Tenant shall pay such increase as additional rent within
ten (10) days after being billed therefor
by Landlord. If any insurance coverage carried by Landlord pursuant to Section 21 or otherwise
with respect to the Building or the Project shall be cancelled or reduced (or cancellation or
reduction thereof shall be threatened) by reason of the use or occupancy of the Premises by Tenant
or by anyone permitted by Tenant to





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be upon the Premises, and if Tenant falls to remedy such condition within five (5) days after
notice thereof, Tenant shall be deemed to be in default under this Lease, and Landlord shall have
all remedies provided in this Lease, at law or in equity, including, without limitation, the right
(but not the obligation) to enter upon the Premises and attempt to remedy such condition at
Tenant’s cost.



21. Landlord’s Insurance. During the Term, Landlord shall insure the Common Area
improvements, the Building, the Premises and the Tenant Improvements initially installed in the
Premises pursuant to Exhibit “C” (excluding, however, Tenant’s furniture, equipment and
other personal property and Tenant Changes) at their full replacement cost against damage by fire
and standard extended coverage perils and with vandalism and malicious mischief endorsements,
rental loss coverage, at Landlord’s option, earthquake damage coverage, and such additional
coverage as Landlord deems appropriate. Landlord shall also carry commercial general liability
insurance (in an amount not less than required of Tenant under Section 20.1(b) above) and with such
reasonable deductibles as would be carried by a prudent owner of a similar building in the state in
which the Building is located. At Landlord’s option, all such insurance may be carried under any
blanket or umbrella policies which Landlord has in force for other buildings and projects. In
addition, at Landlord’s option, Landlord may elect to self-insure all or any part of such required
insurance coverage. Landlord may, but shall not be obligated to, carry any other form, or forms of
insurance as Landlord or the mortgagees or ground lessors of Landlord may reasonably determine is
advisable, The cost of insurance obtained by Landlord pursuant to this Section 21 (Including
self-insured amounts and deductibles) shall be included in Operating Expenses, except that any
increase in the premium for the property Insurance attributable to the replacement cost of the
Tenant Improvements In excess of the Construction Allowance shall not be included as Operating
Expenses, but shall be paid by Tenant concurrently with Tenant’s monthly installment of its share
of Operating Expenses.



22. Waivers of Subrogation.



22.1 Mutual Waiver of Parties. Landlord and Tenant hereby waive their rights against each other
with respect to any claims or damages or losses which are caused by or result from (a) property
damage insured against under any property insurance policy carried by Landlord or Tenant (as the
case may be) pursuant to the provisions of this Lease and enforceable at the time of such damage
or loss, or (b) property damage which would have been covered under any insurance required to be
obtained and maintained by Landlord or Tenant (as the case may be) under Sections 20 and 21 of
this Lease (as applicable) had such insurance been obtained and maintained as required therein.
The foregoing waivers shall be in addition to, and not a limitation of, any other waivers or
releases contained in this Lease.



22.2 Waiver of Insurers. Each party shall cause each property insurance policy required to be
obtained by it pursuant to Sections 20 and 21 to provide that the insurer waives all rights of
recovery by way of subrogation against either Landlord or Tenant, as the case may be, in
connection with any claims, losses and damages covered by such policy. If either party fails to
maintain property insurance required hereunder, such insurance shall be deemed to be self-insured
with a deemed full waiver of subrogation as set forth in the immediately preceding sentence.



23. Tenant’s Default and Landlord’s Remedies.



23.1 Tenant’s Default. The occurrence of any one or more of the following events shall constitute a
default under this Lease by Tenant:





	(a)	 	the abandonment of the Premises by Tenant. “Abandonment” is herein defined to include, but is
not limited to, any absence by Tenant from the Premises for fourteen (14) business days or longer
while in default of any monetary provision of this Lease;
	 
	(b)	 	the failure by Tenant to make any payment of rent or additional rent or any other payment
required to be made by Tenant hereunder, within seven (7) days of when due;
	 
	(c)	 	the failure by Tenant to observe or perform any of the express or implied covenants or
provisions of this Lease to be observed or performed by Tenant, other than as specified in
Sections 23.1(a) or (b) above, where such failure shall continue for a period of thirty (30) days
after written notice thereof from Landlord to Tenant; however, that any such notice shall be in
lieu of, and not in addition to, any notice required under California Code of Civil Procedure,
Section 1161 and provided further that, if the nature of Tenant’s default is such that more than
thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in
default if Tenant shall commence such cure within said thirty (30) day period and thereafter
diligently prosecute such cure to completion; and
	 
	(d)	 	(i) the making by Tenant of any general assignment for the benefit of creditors, (ii) the
filing by or against Tenant of a petition to have Tenant adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against the Tenant, the same is dismissed within sixty (60) days), (iii) the
appointment of a trustee or receiver to take possession of substantially all of Tenant’s assets
located at the Premises or of Tenant’s interest in this Lease, where possession is not restored to
Tenant within sixty (60) days, or (iv) the attachment, execution or other judicial seizure of
substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease
where such seizure is not discharged within sixty (60) days.




23.2 Landlord’s Remedies; Termination. In the event of any such default by Tenant, in addition to
any other remedies available to Landlord under this Lease, at law or in equity, Landlord shall
have the immediate option to terminate this Lease and all rights of Tenant hereunder. In the event
that Landlord shall elect to so terminate this Lease, then Landlord may recover from Tenant:





	(a)	 	the worth at the time of award of any unpaid rent which had been earned at the time of
such termination; plus




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	(b)	 	the worth at the time of the award of the amount by which the unpaid rent which would have
been earned after termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus
	 
	(c)	 	the worth at the time of award of the amount by which the unpaid rent for the balance of the
term after the time of award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided; plus
	 
	(d)	 	any other amount necessary to compensate Landlord for all the detriment proximately caused by
Tenant’s failure to perform its obligations under this Lease or which, in the ordinary course of
things, would be likely to result therefrom including, but not limited to: unamortized Tenant
Improvement costs; attorneys’ fees; unamortized brokers’ commissions; the costs of refurbishment,
renovation and repair of the Premises; and removal (including the repair of any damage caused by
such removal) and storage (or disposal) of Tenant’s personal property, equipment, fixtures, Tenant
Changes, Tenant Improvements and any other Items which Tenant is required under this Lease to
remove but does not remove.




As used in Sections 23.2(a) and 23.2(b) above, the “worth at the time of award” is computed by
allowing interest at the Interest Rate set forth in Section 1.14 of the Summary. As used in
Section 23.2(c) above, the “worth at the time of award” is computed by discounting such amount at
the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%).



23.3 Landlord’s Remedies; Re-Entry Rights. In the event of any such default by Tenant, in addition
to any other remedies available to Landlord under this Lease, at law or in equity, Landlord shall
also have the right, with or without terminating this Lease, to re-enter the Premises and remove
all persons and property from the Premises; such property may be removed, stored and/or disposed
of pursuant to Section 12.4 of this Lease or any other procedures permitted by applicable law. No
re-entry or taking possession of the Premises by Landlord pursuant to this Section 23.3, and no
acceptance of surrender of the Premises or other action on Landlord’s part, shall be construed as
an election to terminate this Lease unless a written notice of such intention be given to Tenant
or unless the termination thereof be decreed by a court of competent jurisdiction.



23.4 Landlord’s Remedies; Continuation of Lease. In the event of any such default by Tenant, in
addition to any other remedies available to Landlord under this Lease, at law or in equity,
Landlord shall have the right to continue this Lease in full force and effect, whether or not
Tenant shall have abandoned the Premises. The foregoing remedy shall also be available to Landlord
pursuant to California Civil Code Section 1951.4 and any successor statute thereof in the event
Tenant has abandoned the Premises. In the event Landlord elects to continue this Lease in full
force and effect pursuant to this Section 23.4, then Landlord shall be entitled to enforce all of
its rights and remedies under this Lease, including the right to recover rent as it becomes due.
Landlord’s election not to terminate this Lease pursuant to this Section 23.4 or pursuant to any
other provision of this Lease, at law or in equity, shall not preclude Landlord from subsequently
electing to terminate this Lease or pursuing any of its other remedies.



23.5 Landlord’s Right to Perform. Except as specifically provided otherwise in this Lease, all
covenants and agreements by Tenant under this Lease shall be performed by Tenant at Tenant’s sole
cost and expense and without any abatement or offset of rent. If Tenant shall fall to pay any sum
of money (other than Annual Basic Rent) or perform any other act on its part to be paid or
performed hereunder and such failure shall continue for seven (7) days with respect to monetary
obligations (or thirty (30) days with respect to non-monetary obligations or, in the event of an
emergency, such shorter period of time as may be reasonable under the circumstances) after
Tenant’s receipt of written notice thereof from Landlord, Landlord may, without waiving or
releasing Tenant from any of Tenant’s obligations, make such payment or perform such other act on
behalf of Tenant. All sums so paid by Landlord and all necessary incidental costs incurred by
Landlord in performing such other acts shall be payable by Tenant to Landlord within ten (10) days
after demand therefor as additional rent.



23.6 Interest. If any monthly installment of Annual Basic Rent or Common Area Expenses, or any
other amount payable by Tenant hereunder is not received by Landlord by the date when due, it
shall bear interest at the Interest Rate set forth in Section 1.14 of the Summary from the date’
due until paid. All Interest, and any late charges imposed pursuant to Section 23.7 below, shall
be considered additional rent due from Tenant to Landlord under the terms of this Lease.



23.7 Late Charges. Tenant acknowledges that, in addition to interest costs, the late payments by
Tenant to Landlord of any Annual Basic Rent or other sums due under this Lease will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of such costs being extremely
difficult and impractical to fix. Such other costs Include, without limitation, processing,
administrative and accounting charges and late charges that may be imposed on Landlord by the terms
of any mortgage, deed of trust or related loan documents encumbering the Premises, the Building or
the Project. Accordingly, if any monthly installment of Annual Basic Rent or Operating Expenses, or
any other amount payable by Tenant hereunder is not received by Landlord within ten (10) days of
the due date thereof, Tenant shall pay to Landlord an additional sum of five percent (5%) of the
overdue amount as a late charge, but in no event more than the maximum late charge allowed by law.
The parties agree that such late charge represents a fair and reasonable estimate of the costs that
Landlord will incur by reason of any late payment as hereinabove referred to by Tenant, and the
payment of late charges and interest are distinct and separate in that the payment of Interest is
to compensate Landlord for the use of Landlord’s money by Tenant, while the payment of late charges
is to compensate Landlord for Landlord’s processing, administrative and other costs incurred by
Landlord as a result of Tenant’s delinquent payments. Acceptance
of a late charge or interest shall
not constitute a waiver of Tenant’s default with respect to the overdue amount or prevent Landlord
from exercising any of the other rights and remedies available to Landlord under this Lease or at
law or in equity now or hereafter in effect.



23.8 [Intentionally Omitted].





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23.9 Rights and Remedies Cumulative. All rights, options and remedies of Landlord contained in
this Section 23 and elsewhere in this Lease shall be construed and held to be cumulative, and no
one of them shall be exclusive of the other, and Landlord shall have the right to pursue any one
or all of such remedies or any other remedy or relief which may be provided by law or in equity,
whether or not stated in this Lease. Nothing in this Section 23 shall be deemed to limit or
otherwise affect Tenant’s indemnification of Landlord pursuant to any provision of this Lease.



24. Landlord’s Default. Landlord shall not be in default in the performance of any
obligation required to be performed by Landlord under this Lease unless Landlord has failed to
perform such obligation within thirty (30) days after the receipt of written notice from Tenant
specifying in detail Landlord’s failure to perform; provided however, that if the nature of
Landlord’s obligation is such that more than thirty
(30) days are required for its performance,
then Landlord shall not be deemed in default if it commences such performance within such thirty
(30) day period and thereafter diligently pursues the same to completion. Upon any such uncured
default by Landlord, Tenant may exercise any of its rights provided in law or at equity; provided,
however: (a) Tenant shall have no right to offset or abate rent in the event of any default by
Landlord under this Lease, except to the extent offset rights are specifically provided to Tenant
in this Lease; (b) Tenant shall have no right to terminate this Lease; and (c) Tenant’s rights and
remedies hereunder shall be limited to the extent (i) Tenant has expressly waived in this Lease
any of such rights or remedies and/or (ii) this Lease otherwise expressly limits Tenant’s rights
or remedies, including the limitation on Landlord’s liability contained in Section 31 hereof.



25. Subordination. Without the necessity of any additional document being executed by
Tenant for the purpose of effecting a subordination, and at the election of Landlord or any
mortgagee of a mortgage or a beneficiary of a deed of trust now or hereafter encumbering all or any
portion of the Building or the Project, or any lessor of any ground or master lease now or
hereafter affecting all or any portion of the Building or the Project, this Lease shall be subject
and subordinate at all times to such ground or master leases (and such extensions and modifications
thereof), and to the lien of such mortgages and deeds of trust (as well as to any advances made
thereunder and to all renewals, replacements, modifications and extensions thereof).
Notwithstanding the foregoing, Landlord shall have the right to subordinate or cause to be
subordinated any or all ground or master leases or the lien of any or all mortgages or deeds of
trust to this Lease. In the event that any ground or master lease terminates for any reason or any
mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any
reason, at the election of Landlord’s successor in interest, Tenant shall attorn to and become the
tenant of such successor, provided such successor assumes in full and in writing Landlord’s
obligations under this Lease accruing subsequent to the date such successor acquires Landlord’s
interest. Tenant hereby waives its rights under any current or future law which gives or purports
to give Tenant any right to terminate or otherwise adversely affect this Lease and the obligations
of Tenant hereunder in the event of any such foreclosure proceeding or sale. Tenant covenants and
agrees to execute and deliver to Landlord within ten (10) days after receipt of written demand by
Landlord and in the form reasonably required by Landlord, any additional documents evidencing the
priority or subordination of this Lease with respect to any such ground or master lease or the lien
of any such mortgage or deed of trust.



Notwithstanding the foregoing, in consideration of, and as a condition precedent to, the
subordination of this Lease to any ground Lease or the lien of any mortgage or deed of trust not
in existence as of the date hereof, Landlord shall have provided Tenant with a commercially
reasonable non-disturbance agreement in favor of Tenant, in form reasonably acceptable to Tenant,
from the ground lessor or holder of the mortgage or deed of trust, as applicable. Said
non-disturbance agreement shall be in recordable form.



Tenant’s obligations under this Lease are subject to Landlord providing to Tenant within thirty
(30) days following the full execution and delivery of this Lease by the parties, a
non-disturbance and attornment agreement, in a recordable form reasonably acceptable to Tenant,
from any ground lessor or any lender that has a mortgage, deed of trust or other security device
encumbering any portion of the Project as of the date of this Lease (the “Nondisturbance
Condition”). Landlord shall exercise good faith efforts to assist in the satisfaction of the
Nondisturbance Condition. If the Nondisturbance Condition is not satisfied within such thirty (30)
day period, Tenant may, within ten (10) days thereafter, terminate this Lease (as Tenant’s sole
remedy) by giving Landlord written notice thereof prior to the date Landlord delivers such
non-disturbance agreement to Tenant. If Tenant does not elect to terminate this Lease within said
ten (10) day period, then Tenant shall be deemed to have waived the Nondisturbance Condition and
this Lease shall no longer be subject to termination pursuant to this Section 25.



26. Estoppel Certificate.



26.1 Obligations. Within ten (10) business days following a party’s written request, the other
party shall execute and deliver to the requesting party an estoppel certificate, in a form
substantially similar to the form of Exhibit “F” attached hereto (if Landlord is the
certifying party, the provisions of Exhibit “F” will be modified as appropriate),
certifying: (a) the Commencement Date of this Lease; (b) that this Lease is unmodified and in full
force and effect (or, if modified, that this Lease is in full force and effect as modified, and
stating the date and nature of such modifications); (c) the date to which the rent and other sums
payable under this Lease have been paid; (d) that there are not, to the best of the certifying
party’s knowledge, any defaults under this Lease by either Landlord or Tenant, except as specified
in such certificate; and (e) such other matters as are reasonably requested by the requesting
party. Any such estoppel certificate delivered pursuant to this Section 26.1 may be relied upon by
any mortgagee, beneficiary, purchaser or prospective purchaser of any portion of the Project or
Tenant’s leasehold estate therein, as well as their assignees.



26.2 Failure to Deliver. In addition to constituting a default hereunder, a party’s failure to
deliver such estoppel certificate within such time shall be conclusive upon the certifying party
that: (a) this Lease is in full force and effect without modification, except as may be
represented by the requesting party; (b) there are no uncured defaults in Landlord’s or Tenant’s
performance (other than the certifying party’s failure to deliver the estoppel certificate); and
(c) not more than one (1) month’s rental has been paid in advance.



27. Intentionally Omitted.




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28. Modification and Cure Rights of Landlord’s Mortgagees and Lessors.



28.1 Modifications. If, in connection with Landlord’s obtaining or entering into any financing or
ground lease for any portion of the Building or the Project, the lender or ground lessor shall
request modifications to this Lease, Tenant shall, within ten (10) days after request therefor,
execute an amendment to this Lease including such modifications, provided such modifications are
reasonable, do not increase the obligations of Tenant hereunder, or adversely affect the leasehold
estate created hereby or Tenant’s rights hereunder.



28.2 Cure Rights. In the event of any default on the part of Landlord, Tenant will give notice by
registered or certified mail to any beneficiary of a deed of trust or mortgagee covering the
Premises or ground lessor of Landlord whose address shall have been furnished to Tenant, and shall
offer such beneficiary, mortgagee or ground lessor the same opportunity to cure the default as is
provided to Landlord hereunder.



29. Quiet Enjoyment. Landlord covenants and agrees with Tenant that, upon Tenant
performing all of the covenants and provisions on Tenant’s part to be observed and performed under
this Lease (including payment of rent hereunder), Tenant shall and may peaceably and quietly have,
hold and enjoy the Premises in accordance with and subject to the terms and conditions of this
Lease as against all persons lawfully claiming the Premises.



30. Transfer of Landlord’s Interest. The term “Landlord” as used in this Lease, so far as
covenants or obligations on the part of the Landlord are concerned, shall be limited to mean and
include only the owner or owners, at the time in question, of the fee title to, or a lessee’s
interest in a ground lease of, the Project. In the event of any transfer or conveyance of any such
title or interest (other than a transfer for security purposes only), the transferor shall be
automatically relieved of all covenants and obligations on the part of Landlord contained in this
Lease accruing after the date of such transfer or conveyance. Landlord and Landlord’s transferees
and assignees shall have the absolute right to transfer all or any portion of their respective
title and interest in the Project, the Building, the Premises and/or this Lease without the consent
of Tenant, and such transfer or subsequent transfer shall not be deemed a violation on Landlord’s
part of any of the terms and conditions of this Lease.



31. Limitation on Landlord’s Liability. Notwithstanding anything contained in this Lease to
the contrary, the obligations of Landlord under this Lease (including any actual or alleged breach
or default by Landlord) do not constitute personal obligations of the individual partners,
directors, officers or shareholders of Landlord or Landlord’s partners, and Tenant shall not seek
recourse against the individual partners, directors, officers or shareholders of Landlord or
Landlord’s partners, or any of their personal assets for satisfaction of any liability with respect
to this Lease. In addition, in consideration of the benefits accruing hereunder to Tenant and
notwithstanding anything contained in this Lease to the contrary, Tenant hereby covenants and
agrees for itself and all of Its successors and assigns that the liability of Landlord for its
obligations under this Lease (including any liability as a result of any actual or alleged failure,
breach or default hereunder by Landlord), shall be limited solely to, and Tenant’s and its
successors’ and assigns’ sole and exclusive remedy shall be against, Landlord’s interest in the
Project, and no other assets of Landlord.



32. Miscellaneous.



32.1 Governing Law. This Lease shall be governed by, and construed pursuant to, the laws of the
state in which the Project is located.



32.2 Successors and Assigns. Subject to the provisions of Section 30 above, and except as
otherwise provided in this Lease, all of the covenants, conditions and provisions of this Lease
shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective
heirs, personal representatives and permitted successors and assigns; provided, however, no rights
shall inure to the benefit of any Transferee of Tenant unless the Transfer to such Transferee is
made in compliance with the provisions of Section 14, and no options or other rights which are
expressly made personal to the original Tenant hereunder or in any rider attached hereto shall be
assignable to or exercisable by anyone other than the original Tenant under this Lease, except as
otherwise provided herein.



32.3 No Merger. The voluntary or other surrender of this Lease by Tenant or a mutual termination
thereof shall not work as a merger and shall, at the option of Landlord, either (a) terminate all
or any existing subleases, or (b) operate as an assignment to Landlord of Tenant’s interest under
any or all such subleases.



32.4 Professional Fees. If either Landlord or Tenant should bring suit against the other with
respect to this Lease, including for unlawful detainer or any other relief against the other
hereunder, then all costs and expenses Incurred by the prevailing party therein (Including,
without limitation, Its actual appraisers’, accountants’, attorneys’ and other professional fees,
expenses and court costs), shall be paid by the other party.



32.5 Waiver. The waiver by either party of any breach by the other party of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any subsequent breach of the same
or any other term, covenant and condition herein contained, nor shall any custom or practice which
may become established between the parties in the administration of the terms hereof be deemed a
waiver of, or in any way affect, the right of any party to insist upon the performance by the
other in strict accordance with said terms. No waiver of any default of either party hereunder
shall be implied from any acceptance by Landlord or delivery by Tenant (as the case may be) of any
rent or other payments due hereunder or any omission by the non-defaulting party to take any
action on account of such default if such default persists or is repeated, and no express waiver
shall affect defaults other than as specified in said waiver. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any
term, covenant or condition of this Lease other than the failure of Tenant to pay the particular
rent so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of
acceptance of such rent.




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32.6 Terms and Headings. The words “Landlord” and “Tenant” as used herein shall include the plural
as well as the singular. Words used in any gender Include other genders. The Section headings of
this Lease are not a part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.



32.7 Time. Time is of the essence with respect to performance of every provision of this Lease in
which time or performance is a factor. All references in this Lease to “days” shall mean calendar
days unless specifically modified herein to be “business” days.



32.8 Prior Agreements; Amendments. This Lease, including the Summary and all Exhibits and Riders
attached hereto contains all of the covenants, provisions, agreements, conditions and
understandings between Landlord and Tenant concerning the Premises and any other matter covered or
mentioned in this Lease, and no prior agreement or understanding, oral or written, express or
implied, pertaining to the Premises or any such other matter shall be effective for any purpose. No
provision of this Lease may be amended or added to except by an agreement in writing signed by the
parties hereto or their respective successors in interest. The parties acknowledge that all prior
agreements, representations and negotiations are deemed superseded by the execution of this Lease
to the extent they are not expressly incorporated herein.



32.9 Separability. The invalidity or unenforceability of any provision of this Lease (except for
Tenant’s obligation to pay Annual Basic Rent and Operating Expenses under Sections 3 and 4 hereof)
shall in no way affect, impair or invalidate any other provision hereof, and such other provisions
shall remain valid and in full force and effect to the fullest extent permitted by law.



32.10 Recording. Neither Landlord nor Tenant shall record this Lease. However, either party may
record a short form memorandum of this Lease provided the form and substance thereof is reasonably
acceptable to the other party, and provided that prior to recordation Tenant executes and delivers
to Landlord, In recordable form, a properly acknowledged quitclaim deed or other instrument
extinguishing all of the Tenant’s rights and interest in and to the Project, the Building and the
Premises, and designating Landlord as the transferee, which deed or other instrument shall be held
by Landlord and may be recorded by Landlord once this Lease terminates or expires (but not prior
thereto). If such short form memorandum is recorded in accordance with the foregoing, the party
requesting the recording shall pay for all costs of or related to such recording, including, but
not limited to, recording charges and documentary transfer taxes.



32.11 Exhibits and Riders. All Exhibits and Riders attached to this Lease are hereby incorporated
in this Lease for all purposes as though set forth at length herein.



32.12 Auctions. Tenant shall have no right to conduct any auction in, on or about the Premises,
the Building or the Project.



32.13 Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than
the rent payment herein stipulated shall be deemed to be other than on account of the rent, nor
shall any endorsement or statement on any check or any letter accompanying any check or payment as
rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy
provided in this Lease. Tenant agrees that each of the foregoing covenants and agreements shall be
applicable to any covenant or agreement either expressly contained in this Lease or imposed by any
statute or at common law.



32.14 Financial Statements. Upon ten (10) days prior written request from Landlord (which Landlord
may make at any time during the Term but no more often than once in any calendar year), Tenant
shall deliver to Landlord a current financial statement of Tenant and any guarantor of this Lease.
Such statements shall be prepared in accordance with generally acceptable accounting principles
and certified as true in all material respects by Tenant (if Tenant is an individual) or by an
authorized officer or general partner of Tenant (if Tenant is a corporation or partnership,
respectively).



32.15 No Partnership. Landlord does not, in any way or for any purpose, become a partner of Tenant
in the conduct of its business, or otherwise, or joint venturer or a member of a joint enterprise
with Tenant by reason of this Lease. The provisions of this Lease relating to Percentage Rent
payable hereunder, if any, are included solely for the purpose of providing a method whereby rent
is to be measured and ascertained.



32.16 Force Majeure. In the event that either party hereto shall be delayed or hindered in or
prevented from the performance of any act required hereunder by reason of strikes, lock-outs,
labor troubles, inability to procure materials, failure of power, governmental moratorium or other
governmental action or inaction (including failure, refusal or delay in issuing permits, approvals
and/or authorizations), injunction or court order, riots, insurrection, war, fire, earthquake,
flood or other natural disaster or other reason of a like nature not the fault of the party
delaying in performing work or doing acts required under the terms of this Lease (but excluding
delays due to financial inability) (herein collectively,
“Force Majeure Delays”), then performance
of such act shall be excused for the period of the delay and the period for the performance of any
such act shall be extended for a period equivalent to the period of such delay. The provisions of
this Section 32.16 shall not apply to nor operate to excuse Tenant from the payment of Monthly
Basic Rent, Operating Expenses, percentage rent, if any, additional rent or any other payments
strictly in accordance with the terms of this Lease.



32.17
Counterparts. This Lease may be executed in one or more counterparts, each of which shall
constitute an original and all of which shall be one and the same agreement.



32.18 Nondisclosure of Lease Terms. Tenant acknowledges and agrees that the terms of this Lease
are confidential and constitute proprietary information of Landlord. Disclosure of the terms could
adversely affect the ability of Landlord to negotiate other leases and impair Landlord’s
relationship with other tenants. Accordingly, Tenant agrees that it,
and its


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partners, officers, directors, employees, agents and attorneys, shall not intentionally and
voluntarily disclose the terms and conditions of this Lease to any newspaper or other publication
or any other tenant or apparent prospective tenant of the Building or other portion of the Project,
or real estate agent, either directly or indirectly, without the prior written consent of Landlord,
provided, however, that Tenant may disclose the terms to prospective subtenants or assignees under
this Lease or as otherwise required by law.



32.20 Non-Discrimination. Tenant acknowledges and agrees that there shall be no discrimination
against, or segregation of, any person, group of persons, or entity on the basis of race, color,
creed, religion, age, sex, marital status, national origin, or ancestry in the leasing, subleasing,
transferring, assignment, occupancy, tenure, use, or enjoyment of the Premises, or any portion
thereof.



33. Lease Execution.



33.1 Tenant’s Authority. If Tenant executes this Lease as a partnership or corporation, then
Tenant and the persons and/or entities executing this Lease on behalf of Tenant represent and
warrant that: (a) Tenant is a duly authorized and existing partnership or corporation, as the case
may be, and is qualified to do business in the state in which the Building is located; (b) such
persons and/or entities executing this Lease are duly authorized to execute and deliver this Lease
on Tenant’s behalf in accordance with the Tenant’s partnership agreement (if Tenant is a
partnership), or a duly adopted resolution of Tenant’s board of directors and the Tenant’s by-laws
(if Tenant is a corporation); and (c) this Lease is binding upon Tenant in accordance with its
terms.



33.2 Joint and Several Liability. If more than one person or entity executes this Lease as Tenant;
(a) each of them is and shall be jointly and severally liable for the covenants, conditions,
provisions and agreements of this Lease to be kept, observed and performed by Tenant; and (b) the
act or signature of, or notice from or to, any one or more of them with respect to this Lease
shall be binding upon each and all of the persons and entities executing this Lease as Tenant with
the same force and effect as if each and all of them had so acted or signed, or given or received
such notice.



33.3 Landlord’s Authority. Landlord represents and warrants to Tenant that: (a) Landlord is a duly
authorized and existing limited liability company and is qualified to do business in California;
(b) the persons and entities executing this Lease are duly authorized to execute and deliver this
Lease on Landlord’s behalf in accordance with Landlord’s operating agreement; and (c) this Lease
is binding upon Landlord in accordance with its terms.



33.4 No Option. The submission of this Lease for examination or execution by Tenant does not
constitute a reservation of or option for the Premises and this Lease shall not become effective
as a Lease until it has been executed by Landlord and delivered to Tenant.



34. [Intentionally Omitted].



IN WITNESS WHEREOF, the parties have executed this Lease as of the day and year first above written.




	 	 	 	 	 
	“TENANT” 	AURORA BIOSCIENCES CORPORATION,

a Delaware corporation

 	 
	 	By:  	/s/
Timothy J. Rink	 
	 	 	Name:  	Timothy J. Rink	 
	 	 	Title:  	CEO President 	 
	 
	 	By:  	/s/
Deborah J. Tower
 	 
	 	 	Name:  	Deborah J. Tower	 
	 	 	Title:  	Sr. Director, Finance and Administration 	 
	 
	“LANDLORD” 	AEW/LBA ACQUISITION CO. II, LLC,

a California limited liability company

 	 
	 	By:  	LBA, Inc., a California corporation, 
its agent
 	 
	 
	 	By:  	/s/
Phil A. Belling
 	 
	 	 	Name:  	Phil A. Belling	 
	 	 	Title:  	 	 
	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



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