exv10w37



 





EXHIBIT
10.37




BUILDING LEASE AGREEMENT




     This BUILDING LEASE AGREEMENT (“Lease”) dated as of August 21, 2007 (“Effective Date”), is
entered into by and between BIOMED REALTY, L.P., a Maryland limited partnership (“Landlord”), and
ARTES MEDICAL, INC., a Delaware corporation (“Tenant”), on all of the terms and conditions set
forth below and in the attached Exhibits, each of which are incorporated into this Lease by this
reference. For and in consideration of the mutual covenants and conditions set forth in this
Lease, Landlord leases to Tenant, and Tenant leases from Landlord, the Premises as described in
Section 1.1(b) below.



     1. Basic Lease Provisions. (“Basic Lease Provisions”)



          1.1 Building and Premises:




               (a) Building. The “Building” shall mean the building and improvements located
at 5880 Pacific Center Blvd., San Diego, California 92121.



               (b) Premises. The “Premises” shall mean 31,925 square feet of rentable area
located within the Building and as depicted on the attached Exhibit “A”.



          1.2 Use: Any legally permitted use including, but not limited to, general
office and administrative uses, laboratory research, distribution, light assembly and
repair of manufactured products, subject to Section 5 below.




          1.3 Term: The term of this Lease (“Term”) shall commence upon the
Commencement Date (as defined below), and continue until December 31, 2012, subject to the
provisions of this Lease, including, without limitation, Section 2.4 below. The
“Estimated Commencement Date” shall be October 1, 2007. Landlord and Tenant acknowledge
that Tenant currently occupies a portion of the Premises (the “Infosonics Premises”)
pursuant to a sublease with Infosonics Corporation (“Infosonics”) as sublandlord, entered
into as of June 1, 2005 (as amended to date, the “Existing Sublease”) and may stay in
possession of the Infosonics Premises until the Rent Commencement Date. Landlord shall
exercise due diligence to cause that portion of the Premises not currently occupied by
Tenant under the Existing Sublease to be delivered to Tenant by the Estimated Commencement
Date; provided, however, that (a) the actual “Commencement Date” shall be
the date on which Landlord delivers the Infosonics Premises to Tenant, (b) if the
Commencement Date is later than October 15, 2007 (the “Outside Date”), then the Rent
Commencement Date (as defined below) shall be extended by one day for every day after the
Outside Date that the actual Commencement Date occurs, (c) in the event the Premises is
not delivered on the Expected Commencement Date for any reason, then (i) this Lease shall
not be void or voidable, (ii) Landlord shall not be liable to Tenant for any loss or
damage resulting therefrom, and (iii) Tenant shall not be responsible for the payment of
any Rent until the delivery of the Infosonics Premises occurs. Tenant shall have one (1)
option to extend the Term pursuant to Section 2.4 below.




          1.4 Rent: Base rent payable for the Premises (“Base Rent”) shall be as
follows:





 









 








	 	 	 
	October 1, 2007 — December 31, 2007
	 	None
	January 1, 2008 — December 31, 2008
	 	$1.75/square foot ($55,868.75) per month
	January 1, 2009 — December 31, 2009
	 	$1.82/square foot ($58,103.50) per month
	January 1, 2010 — December 31, 2010
	 	$1.89/square foot ($60,427.64) per month
	January 1, 2011 — December 31, 2011
	 	$1.97/square foot ($62,844.75) per month
	January 1, 2012 — December 31, 2012
	 	$2.05/square foot ($65,358.54) per month





Base Rent shall be payable in advance on the first (1st) day of each month during the Term,
beginning on January 1, 2008 (as the same may be adjusted pursuant to Section 1.3, the
“Rent Commencement Date”), and shall be subject to a late charge if not received by the tenth
(10th) day of such month, as provided in Section 12.4 below.




          1.5 Initial Payment: Within ten (10) days after the receipt by Tenant of a
fully executed Lease, Tenant shall pay Landlord the sum of One Hundred Seventy-Nine
Thousand Two Hundred Thirty-Two and 63/100 Dollars ($179,232.63) (“Initial Payment”)
(i.e., an amount equal to $30,868.75 for the first month’s rent, plus an amount equal to
$13,800.00 for the first full calendar monthly Operating Expenses and Real Property Taxes,
plus the $134,563.88 Security Deposit (as defined below)) in immediately available funds.




          1.6 Security Deposit: One Hundred Thirty-Four Thousand Five Hundred
Sixty-Three and 88/100 Dollars ($134,563.88) (“Security Deposit”), payable as provided in
Section 1.5 above.




          1.7 [Intentionally Deleted]




          1.8 Parking: Tenant shall be allocated all spaces in the parking area
serving or most adjacent to the Building (as distinguished from the parking area serving
or most adjacent to the adjacent building known as 5870 Pacific Center Boulevard (the
“5870 Building”)) (“Parking Area”) as such Parking Area is depicted on the diagram
attached hereto as Exhibit “B”.




          1.9 Brokers: Landlord shall pay commissions to (a) David Marino of Irving
Hughes (Tenant’s broker) and (b) David W. Odmark of Grubb & Ellis/BRE Commercial
(Landlord’s brokers), pursuant to a separate written agreement.




          1.10 Right of First Refusal: See Section 37 below.




          1.11 Tenant Improvement Allowance: See Sections 3.2 and 6.3(a) below.




     2. Term.



          2.1 Term. The terms and provisions of this Lease shall be effective as of
the Effective Date of this Lease. The Term and Commencement Date of this Lease shall be
as specified in Section 1.3 of the Basic Lease Provisions.




          2.2 Acceptance. On the Commencement Date, Tenant shall be deemed to have
accepted the Premises in their then existing condition and subject to all applicable
recorded easements and covenants, conditions and restrictions, including, without limitation, the




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Declaration of Covenants, Conditions and Restrictions for Units 2, 3, 4,
and 6 of Pacific Corporate Center recorded October 24, 1986, as File No. 86-482692
(“CC&Rs”), any recorded covenants and restrictions regarding parking and access, and all
applicable zoning and municipal, county, state and federal laws, codes, ordinances and
regulations, including without limitation, laws and regulations pertaining to the
Americans with Disabilities Act of 1990, 42 U.S.C. § 12101, et seq., as amended (“ADA”),
and the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42
§ U.S.C. 9601, et seq., as amended (collectively, “Applicable Laws”). Subject only to the
express representations of Landlord provided in Section 5.4 below, Tenant shall accept the
Premises in its “as-is”, “where is” condition and configuration, it being agreed that
Landlord shall not be required to perform any work or, except as provided above with
respect to the Allowance (as defined in Section 3.2) below, incur any costs in
connection with the construction or demolition of any improvements on, to or within the
Premises.




          2.3 Intentionally Omitted.




          2.4 Option to Extend Term. Provided that Tenant is not in default under the
Lease after the lapse of any applicable cure periods, Tenant shall have one (1) option
(“Option”) to extend the Term of the Lease for an additional period of five (5) years
(“Option Term”) on all of the same terms and conditions of the Lease, except as expressly
provided below in this Section 2.4. Tenant may exercise the Option by delivering
written notice to Landlord of its intention to so extend the term of the Lease no later
than June 30, 2012. Base Rent payable during the Option Term shall be the greater of (a)
Sixty-Seven Thousand Three Hundred Sixty-One and 75/100 ($67,361.75) per month, plus
cumulative annual increases of three percent (3%) during the Option Term, or (b)
ninety-five percent (95%) of the Market Rate (as defined below) as of the date on which
Tenant exercises the Option. The “Market Rate” shall mean the terms and conditions which
would be offered to a non-equity, non synthetic-lease tenant for comparable laboratory
space with improvements of comparable age, appearance and quality of construction located
in the Sorrento Mesa submarket of San Diego, taking into account the value of existing
tenant improvements over standard tenant improvements, parking ratios, rental rates, rent
concessions, operating expense base year, rent increases and equivalent location, access,
visibility and signage. Comparable lease terms shall be based on five (5) year
transactions with corresponding adjustments to rental rates and concessions. Landlord
shall determine the Market Rate by using its good faith judgment and shall provide written
notice of the Market Rate to Tenant within fifteen (15) days after Tenant delivers notice
of exercise of the Option. Tenant shall have thirty (30) days (“Tenant’s Review Period”) after receipt of
Landlord’s notice of the Market Rate within which to accept such rent or to reasonably
object thereto in writing. In the event that Tenant objects, Landlord and Tenant shall
attempt to agree upon the Market Rate using their good faith efforts. If Landlord and
Tenant are unable to reach agreement within fifteen (15) days following Tenant’s Review
Period (“Outside Agreement Date”), then the matter shall be submitted to arbitration as
provided in this Section 2.4 below:




               (a) Landlord and Tenant shall each appoint one independent, unaffiliated, neutral
appraiser who shall by profession be a real estate broker who has been active over the five
(5) year period ending on the date of such appointment in the valuation of leases of
comparable space in comparable buildings in the general vicinity of the Building. Each such
appraiser will be appointed within twenty (20) days after the Outside Agreement Date.



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               (b) The two (2) appraisers so appointed shall, within ten (10) days of the date of the
appointment of the last appointed appraiser, agree upon and appoint a third appraiser who
will be qualified under the same criteria set forth above for qualification of the initial
two (2) appraisers.



               (c) The determination of the appraisers shall be limited solely to the issue of whether
Landlord’s or Tenant’s last proposed (as of the Outside Agreement Date) Market Rate for the
Premises is the closest to the actual Market Rate for the Premises as determined by the
appraisers, taking into account the requirements of Section 2.4 above.



               (d) The three (3) appraisers shall, within fifteen (15) days of the appointment of the
third appraiser, reach a decision as to whether the parties shall use Landlord’s or Tenant’s
submitted Market Rate (i.e., the appraisers may only select Landlord’s or Tenant’s
submission and may not select a compromise position), and shall notify Landlord and Tenant
of the decision.



               (e) The decision of the majority of the three (3) appraisers shall be binding upon
Landlord and Tenant. The cost of each party’s appraiser shall be the responsibility of the
party selecting such appraiser, and the cost of the third appraiser shall be shared equally
by Landlord and Tenant.



               (f) If either Landlord or Tenant fails to appoint an appraiser within the time period
in Section 2.4(a) above, 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.



               (g) If the two (2) appraisers fail to agree upon and appoint a third appraiser, both
appraisers shall be dismissed and the matter to be decided shall be submitted to binding
arbitration under the auspices of JAMS (or any successor organization) in San Diego County,
California according to the then rules for commercial arbitration for such organization (but
subject to the requirements of this Section 2.4).



               (h) The cost of the arbitration shall be shared equally by Landlord and Tenant.


The Option is personal to the original Tenant and may not be assigned to any third party except to
an Affiliate in connection with a Permitted Transfer pursuant to Section 11.1 below.




     3. Rent and Tenant Improvement Allowance.



          3.1 Monthly Payment. Tenant shall pay Landlord Base Rent and Operating
Expenses set forth in Sections 1.4 and 1.7 above and Section 3.3
below without notice, demand, offset or deduction, except as otherwise provided herein.
Tenant shall pay Landlord the Initial Payment provided in Section 1.5 above upon
execution and delivery of this Lease. Rent for any period during the Term which is for
less than one calendar month shall be prorated based upon the actual number of days of the
applicable calendar month. Rent shall be payable in lawful money of the United States to
Landlord at the address stated in Section 22 below or to such other person or at
such other places as Landlord may designate in writing.





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          3.2 Tenant Improvement Allowance. Provided that Tenant is not in default
under the Lease after the lapse of any applicable notice and cure periods, Landlord agrees
to contribute the sum of One Million and 00/100 Dollars ($1,000,000.00) (“Allowance”)
toward the hard and soft costs of constructing the Initial Alterations as provided in
Section 6.3(a) below. Tenant shall be entitled to disbursements of the Allowance
for alterations made to the interior of the Building prior to the Commencement Date, which
alterations must be approved in advance in writing by Landlord, which approval shall not
be unreasonably withheld or unduly delayed. In addition to the Allowance, Landlord agrees
to contribute One Hundred Forty Thousand and 00/100 Dollars ($140,000.00) for the repair
and replacement of certain HVAC systems on the roof of the Building as previously
identified by Tenant to Landlord (the “HVAC Allowance”).




          3.3 Operating Expenses.




               (a) This Lease contemplates a transaction commonly described as a “triple-net lease”
whereby the parties intend that Tenant shall bear all of the costs related to the operation,
repair, maintenance, management, restoration and replacement of the Building or any portion
thereof, except as otherwise expressly set forth in this Lease (collectively, “Operating
Expenses”). In addition to the Base Rent, Tenant shall pay to Landlord during the Term of
this Lease one hundred percent (100%) of Operating Expenses as provided in this Section
3.3. Beginning on the Rent Commencement Date, (i) Tenant shall be responsible for
one hundred percent (100%) of the Operating Expenses attributable to the Building and the
land, landscaping, sidewalks and parking areas serving or more adjacent to the Building and
other facilities shown on Exhibit “C” (such land, landscaping, sidewalks, parking
and other facilities, the “5880 Facilities”, as distinguished from the land, landscaping,
sidewalks and parking areas serving or more adjacent to the 5870 Building), including all of
the costs related to the operation, repair, maintenance, management, restoration and
replacement of common areas; (ii) Tenant shall pay Operating Expenses directly to the service providers, contractors or other
appropriate third parties, except as provided below in this Section 3.3; (iii)
Tenant shall maintain, repair and replace the Building Systems and shall make such
structural or capital improvements to the Building as may be necessary to comply with
Tenant’s obligations under this Lease, provided, that, Tenant shall not be obligated to make
any structural or capital improvements to the foundation, roof, or structural or exterior
walls of the Building; (iv) Landlord shall be responsible only for costs related to the
foundation, roof, and structural and exterior walls of the Building; and (v) Tenant shall
continue to pay Landlord directly for the Real Property Taxes.



               (b) Operating Expenses payable by Tenant shall include, without limitation:



                    (i) costs and expenses incurred in the operation, repair, maintenance, management and
replacement of (A) surfaces, coverings and parking areas, loading and unloading areas, trash
areas, roadways, sidewalks, walkways, parkways, driveways, landscaped areas, striping,
irrigation systems, lighting facilities, fences and gates, and all taxes and assessments,
utilities, insurance premiums, administrative charges and other costs; and (B) all heating,
air conditioning, plumbing, electrical systems, life safety equipment, telecommunications
equipment, elevators and escalators, tenant directories, fire detection systems, sprinkler
systems and other equipment servicing the Building (the items in (B),
collectively,
“Building Systems”);



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                    (ii) janitorial and trash disposal for the common areas;



                    (iii) the cost incurred in connection with the implementation or operation of a
transportation system management program or similar program, and the cost of any equipment
rental agreements or personal property used in connection with the maintenance, operation or
repair of the Building;



                    (iv) the cost of the premiums for the liability and property insurance policies
(including, but not limited to, boiler and machinery insurance), earthquake and flood
insurance and other insurance policies maintained by Landlord, pursuant to Section 7
below;



                    (v) the cost of water, sewer, gas, electricity, heating, ventilation, air-conditioning
and other utilities or services provided to the Building;



                    (vi) replacing and/or adding improvements mandated by any governmental agency and any
repairs or removals necessitated thereby, except for any capital improvements, repairs
and/or replacements made by Landlord to the foundation, roof (subject to clause (ix) below),
and structural and exterior walls of the Building as these expenses shall be at Landlord’s
sole cost and expense;



                    (vii) replacing equipment or improvements (other than the foundation and the structural
and exterior walls of the Building);



                    (viii) association fees payable pursuant to the CC&Rs and any other owners’ association
dues or fees; and



                    (ix) the “amortized” amount applicable to the respective Lease year of any reasonably
incurred cost by Landlord of replacing the roof, which cost shall be amortized without
interest over the reasonable life of the replaced roof, in accordance with generally
accepted accounting principles consistently applied.



     The components of Operating Expenses listed as items (iv) and (viii) above (i.e., insurance
costs and association fees), together with Real Property Taxes, shall be paid directly by Landlord.
Tenant shall pay Landlord such costs, together with an administrative fee equal to two percent
(2%) of Base Rent, within fifteen (15) days after delivery of invoice therefor to Tenant from
Landlord, which invoice shall include the itemized bill received by Landlord for such item. Tenant
shall have no obligation to reimburse Landlord for any Operating Expenses pursuant to this Section
3.3 other than for items (iv) and (viii) above, the Real Property Taxes and the administrative fee.



          3.4 Definition of Rent. The capitalized term “Rent,” as used in this Lease,
shall mean the Base Rent, Operating Expenses and any and all monetary obligations of
Tenant under this Lease.




          3.5 Intentionally Omitted.





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     4. Security Deposit. Tenant shall deposit with Landlord upon execution hereof the Security Deposit set forth in
Section 1.6 of the Basic Lease Provisions as security for Tenant’s faithful performance of
Tenant’s obligations hereunder. If Tenant fails to pay Rent or other charges due hereunder after
the lapse of any applicable notice and cure periods, or otherwise defaults with respect to any
provision of this Lease, Landlord may use, apply or retain all or any portion of said Security
Deposit for the payment of any Rent or other charge in default, for the payment of any other sum to
which Landlord may become obligated by reason of Tenant’s default, and/or to compensate Landlord
for any loss or damage which Landlord may suffer thereby. If Landlord so uses or applies all or
any portion of the Security Deposit, Tenant shall, within ten (10) days after written demand,
deposit cash with Landlord in an amount sufficient to restore the Security Deposit to the full
amount set forth in Section 1.6 (as decreased pursuant to the last sentence of this Section
4 below, if applicable). Landlord shall not be required to keep the Security Deposit
separate from its general accounts. If Tenant performs all of Tenant’s obligations hereunder, the
Security Deposit (as decreased pursuant to the last sentence of this Section 4 below, if
applicable), or so much thereof as has not been applied by Landlord, shall be returned, without
payment of interest or other increment for its use, to Tenant (or, at Landlord’s option, to the
last assignee, if any, of Tenant’s interest hereunder) within thirty (30) days after the Term
expires and Tenant vacates the Premises. No trust relationship is created herein between Landlord
and Tenant with respect to the Security Deposit. Notwithstanding anything to the contrary
contained in this Section 4, so long as Tenant is not in default of any of its obligations
under this Lease after the lapse of any applicable cure periods, and never has been in default of
any of its material monetary obligations under this Lease after the lapse of any applicable notice
and cure periods, Landlord shall reduce the amount of the Security Deposit by Sixty Thousand Four Hundred Twenty-Seven and 64/100
Dollars ($60,427.64) on December 31, 2009, and Landlord shall apply such amount against Tenant’s
next Rent obligations coming due hereunder.



     5. Use.



          5.1 Use. The Premises shall be used and occupied only for the purpose set
forth in Section 1.2 of the Basic Lease Provisions and Tenant shall not use or
permit the Premises or any part thereof to be used for any other purpose or purposes
whatsoever. Tenant shall keep the Premises and every part thereof in a clean and safe
condition free of nuisances. Tenant shall have access to and the right to conduct its
business operations at the Premises twenty-four (24) hours a day, seven (7) days a week.




          5.2 Compliance with Law; Insurance Requirements. Tenant shall, at Tenant’s
sole cost and expense, promptly comply with all Applicable Laws (including, without
limitation, the ADA), rules, regulations, orders, the CC&Rs, and the requirements of any
insurance underwriters or ratings bureaus, now in effect or which may hereafter come into
effect, relating in any manner to the Premises and the occupation and use of the Premises
by Tenant and (subject only to Landlord’s representations in Section 2.2 above)
any improvements or alterations made to the Premises by or on behalf of Tenant. Tenant
shall conduct its business in a lawful manner and shall not use or permit the use of the
Premises or the common areas in any unlawful manner or in any manner that will tend to
create waste or a nuisance or shall tend to disturb other occupants of the Building.
Notwithstanding anything to the contrary in this Lease, no such requirement by Tenant to
comply with laws shall be construed as requiring Tenant to make





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structural or capital
improvements to the foundation, roof or structural and exterior walls of the Building.




          5.3 Rules and Regulations. Tenant agrees to comply with all of the rules and
regulations attached hereto as Exhibit “D” with respect to the Building, as the
same may be reasonably supplemented and/or modified by Landlord from time to time, and to
cause its invitees to comply with the same. Landlord shall have the right, from time to
time, to reasonably modify and amend the rules and regulations, provided that a copy of
any such modification or amendment is delivered to Tenant prior to the effective date
thereof.




          5.4 Suitability of Premises. Tenant acknowledges that it has satisfied
itself by its own independent investigation that the Premises are suitable for its
intended use, and neither Landlord nor any agent of Landlord has made any representation
or warranty as to the present or future suitability of the Premises, common areas, or
Building for the conduct of Tenant’s business. Tenant further acknowledges that, except
as otherwise set forth in this Lease, it is accepting the Premises, and that Landlord is
delivering the Premises to Tenant, on an “as is”, “where is” basis, without any
representations by Landlord regarding the condition thereof except that Landlord
represents and warrants that, as of the Effective Date, to Landlord’s actual knowledge,
without any obligation to investigate or inquire, that (a) Landlord has not received any
written notice of violation of any Applicable Laws and the Premises are not in
material violation of any Applicable Laws, (b) the foundation, roof, and structural and
exterior walls of the Building are in working order, except for minor roof leaks, and (c)
the Building Systems, excluding the elevator and roof HVAC systems, are in working order.
Landlord shall cause the elevator to be inspected and, to the extent necessary, repaired
by a qualified elevator service company so as to be fully operational on the Commencement
Date. For purposes of this Section 5.4, “knowledge” shall be limited to the
content of any and all written reports prepared for Landlord by Landlord’s employees or
consultants engaged to inspect the Premises on or prior to the Commencement Date.




          5.5 Vehicle Parking: Subject to the rules and regulations attached hereto as
Exhibit “D” and as established by Landlord from time to time, and any recorded
covenants and restrictions, Tenant and its employees, agents, customers and invitees shall
have the right to use the number of parking spaces indicated in Section 1.8 of the
Basic Lease Provisions within the Parking Area at no charge. Landlord shall have the
right to relocate and/or restripe any portion of the Parking Area in its sole discretion,
provided that the number of parking spaces allocated to Tenant shall not be decreased.




          5.6 Changes to Common Areas. Landlord shall have the right, in Landlord’s
sole discretion, from time to time to: (a) close temporarily any of the common areas for
maintenance and/or alteration purposes so long as reasonable access to the Premises
remains available; (b) use the common areas while making additional improvements, repairs
or alterations to the Building or any portion thereof provided that such use does not
materially adversely interfere with Tenant’s business operations and there is no reduction
in the parking for, or access to, the Premises; and (c) do and perform such other acts and
make such other changes in, to or with respect to the common areas and the other portions
of the Building as Landlord may reasonably deem to be appropriate provided that such acts
do not materially adversely





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interfere with Tenant’s business operations and there is no
reduction in the parking for, or access to, the Premises.




          5.7 Roof Rights.




               (a) Tenant shall have the non-exclusive right to use certain rooftop and antenna space
and certain related vertical penetrations in the rooftop and related interior space, as
designated by Landlord on and within the Building (“Antenna Space”) for the use of
communications antennas and/or satellite dishes for Tenant’s business (“Permitted
Equipment”) and for no other purposes. Tenant shall have access to the rooftop upon
twenty-four (24) hours prior notice to Landlord and when accompanied by a representative of
Landlord. The location of all of such communications antennas and/or satellite dishes shall
be at locations reasonably designated by Landlord provided that such locations will allow
Tenant to transmit and receive reception without interference (“Interference Free
Location”). If from time to time a location designated by Landlord, which initially is
acceptable to Tenant as an Interference Free Location, subsequently becomes unacceptable
because of conditions which create interference, Landlord shall designate and make available
to Tenant a new Interference Free Location. The installation and any costs relating thereto, and the maintenance, repair, insurance
obligations and liability, with respect to such communications antennas and/or satellite
dishes, shall be borne completely by Tenant.



               (b) Tenant shall, at its sole cost and expense, obtain and maintain any and all
permits, approvals and/or licenses required by the CC&Rs and any and all governmental
agencies having jurisdiction over the Building for the construction, installation and
operation of the Permitted Equipment. Tenant shall not use the Antenna Space in any way that
interferes (electronically or otherwise) with the use of the Building by Landlord or by any
third party office tenants or licensees of Landlord. Upon written notice from Landlord to
Tenant of any such interference, Tenant shall immediately eliminate or mitigate such
interference to the reasonable satisfaction of Landlord. If such interference cannot be
eliminated or mitigated to the reasonable satisfaction of Landlord within five (5) business
days following such notice, Tenant shall immediately cease operating the equipment or
portion thereof causing such interference. Tenant shall not perform any maintenance,
repairs, alterations or other work on the Permitted Equipment in any manner that disrupts or
interferes with the use of the Building by Landlord or by other tenants or licensees of
Landlord. Tenant shall not make any improvement or alteration or take any other action that
affects the integrity of the roof of the Building. Tenant shall be responsible for any
damage, which Tenant or its agents or invitees may cause to the roof.



               (c) Tenant shall cooperate with Landlord with respect to any and all maintenance and/or
repair work performed by Landlord on or to the roof (collectively, “Roof Work”) during the
term, as the same may be extended. In connection with such cooperation, Tenant shall
temporarily move and/or relocate, at Landlord’s sole cost and expense, any and all portions
of the Permitted Equipment and Tenant’s improvements on or to the portion of the Antenna
Space located on the roof to the extent and for the duration reasonably necessary to
accommodate any Roof Work. Landlord shall notify Tenant not less than fifteen (15) business
days prior to the commencement of any Roof Work. Landlord shall use commercially reasonable
efforts to prevent any interference with or to the use and operation of the Permitted
Equipment by Tenant during the performance of any Roof Work. In the event that Landlord
desires to



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remodel, improve or otherwise alter the Building so as to require the relocation
of the Permitted Equipment, then upon sixty (60) days prior notice to Tenant, Tenant shall
cooperate with Landlord in relocating the Permitted Equipment provided that (a) such
relocation is at Landlord’s expense, and (b) such relocation does not have any adverse
effect on the continued operation of the Permitted Equipment.




               (d) Upon termination of this Lease, Tenant shall (a) remove all of the Permitted
Equipment and any and all other equipment, fixtures and personal property of Tenant from the
Antenna Space, (b) repair any damage caused by such removal, and (c) surrender the Antenna
Space to Landlord free and clear of all debris.



          5.8 Intentionally Omitted.




     6. Maintenance, Repairs, Alterations and Additions.



          6.1 Landlord’s Maintenance Obligation.




               (a) Subject to the provisions of Section 8 and 13 below, and except for
damage caused by any act or omission of Tenant, or Tenant’s employees, agents, contractors
or invitees (unless such repair is of the type that would be covered by the insurance
Landlord is required to maintain under this Lease in which case Tenant shall not be
obligated to reimburse Landlord therefor), Landlord shall keep the foundation, roof, and
structural and exterior walls of the Building in good order, condition and repair. Landlord
shall not be obligated to maintain or repair any Building Systems, or any windows, doors,
plate glass or the surfaces of walls within or making up any part of the Premises. Tenant
shall promptly report in writing to Landlord any defective condition known to it which
Landlord is required to repair at its own expense. Tenant waives the benefit of any present
or future law which provides Tenant the right to repair the Premises or Property at
Landlord’s expense (but Tenant shall have the self help rights provided in Section
6.1(b) below). If as a direct result of any maintenance or repair work performed by
Landlord pursuant to this Section 6.1(a) or any other work performed by Landlord on
or within the Premises (except in connection with the provisions of Section 6.2
below), Tenant is prevented from using and does not use the Premises or any portion thereof
and (“Abatement Event”), Tenant shall give Landlord notice (“Abatement Notice”) of any such
Abatement Event, and if such Abatement Event continues beyond the “Eligibility Period” (as
defined below), then the Base Rent shall be abated entirely or reduced, as the case may be,
after expiration of the Eligibility Period for such time that Tenant continues to be so
prevented from using and does not use the Premises or a portion thereof, in the proportion
that the square footage of that portion of the Premises that Tenant is prevented from using
and does not use bears to the total square footage of the Premises. The term “Eligibility
Period” shall mean a period of five (5) consecutive business days after Landlord’s receipt
of any Abatement Notice.



               (b) Notwithstanding anything to the contrary set forth in this Section 6.1, if
Tenant provides written notice to Landlord of the need for repairs and/or maintenance which
are Landlord’s obligation to perform under Section 6.1(a) above, and Landlord fails
to undertake such repairs and/or maintenance within a reasonable period of time, given the
circumstances, after receipt of such notice (but in no event earlier than ten (10) days
after receipt of such notice except in cases where there is an immediate threat of material
and substantial



10









 




property damage or immediate threat of bodily injury, in which case such
shorter period of time as is reasonable under the circumstances), then Tenant may proceed to
undertake such repairs and/or maintenance upon delivery of an additional three (3) business
days’ notice to Landlord that Tenant is taking such required action (or no additional notice
in the event of an emergency which threatens life or where there is imminent danger to
property or a possibility that a failure to take immediate action could cause a material,
adverse disruption in Tenant’s normal and customary business activities). If such repairs
and/or maintenance were required under the terms of this Lease to be performed by Landlord
and are not performed by Landlord prior to the expiration of such three (3) business day
period (or the initial notice and repair period set forth in the first sentence of this
Section 6.1(b) in the event of emergencies where no second notice is required)
(“Outside Repair Period”), then Tenant shall be entitled to reimbursement by Landlord of
Tenant’s actual, reasonable, and documented costs and expenses in performing such maintenance and/or repairs. Such reimbursement shall be
made within thirty (30) days after Landlord’s receipt of Tenant’s invoice of such costs and
expenses, and if Landlord fails to so reimburse Tenant within such thirty (30) day period,
then Tenant shall be entitled to offset against the Rent payable by Tenant under this Lease
the amount of such invoice; provided, however, that notwithstanding the foregoing to the
contrary, if (i) Landlord delivers to Tenant prior to the expiration of the Outside Repair
Period described above, a written, reasonably particularized, objection to Tenant’s right to
receive any such reimbursement based upon Landlord’s good faith claim that such action did
not have to be taken by Landlord pursuant to the terms of this Lease, or (ii) Landlord
delivers to Tenant, within thirty (30) days after receipt of Tenant’s invoice, a written
objection to the payment of such invoice based upon Landlord’s good faith claim that such
charges are excessive (in which case, Landlord shall reimburse Tenant, within such thirty
(30) day period, the amount Landlord contends would not be excessive), then Tenant shall not
be entitled to such reimbursement or offset against Rent, but Tenant, as its sole remedy,
may notify Landlord that Tenant elects to resolve the dispute pursuant to binding
arbitration under the auspices of JAMS (or any successor organization) in San Diego County,
California according to the then rules for commercial arbitration for such organization. In
the event Tenant undertakes such repairs and/or maintenance, and such work will affect the
Building Systems, any structural portions of the Building, any areas outside the Building
and/or the exterior appearance of the Building (or any portion thereof), Tenant shall use
only those unrelated third party contractors used by Landlord in the Building for such work
unless such contractors are unwilling or unable to perform such work at competitive prices,
in which event Tenant may utilize the services of any other qualified contractor which
normally and regularly performs similar work in comparable first-class office buildings
located in the vicinity of the Building. Tenant shall comply with the other terms and
conditions of this Lease if Tenant takes the required action, except that Tenant is not
required to obtain Landlord’s consent for such repairs.




          6.2 Tenant’s Maintenance Obligations. Except as provided in Section
6.1 above, and Sections 8 and 13 below, Tenant shall keep all
portions of the Premises (including systems and equipment, the Parking Area and the
exterior access ways), and Building Systems in working order, condition and repair
(including repainting and refinishing, as needed) during the Term. Tenant shall maintain a
preventive maintenance contract providing for the regular inspection and maintenance of
the heating and air conditioning system by a heating and air conditioning contractor, and
such contract and contractor shall be subject to reasonable approval by Landlord. In
addition, except as provided in Section 6.1 above, and Sections 8 and
13 below,





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Tenant shall keep all portions of the Building and the 5880 Facilities
(together, the “5880 Property”) (including systems and equipment, the Parking Area, the
exterior access ways and landscaping) in working order, condition and repair (including
repainting and refinishing, as needed) during the Term. If any portion of the 5880
Property, or any system or equipment in the 5880 Property, that Tenant is obligated to
repair cannot be repaired or restored, Tenant shall promptly replace such portion of the
5880 Property or system or equipment, regardless of whether the benefit of such
replacement extends beyond the Term. Tenant shall fulfill all of Tenant’s obligations
under this Section 6.2 at Tenant’s sole cost and expense. If Tenant shall fail to
maintain, repair or make replacements to the Premises or the 5880 Property as required by this Section
6.2 within a reasonable period of time, given the circumstances, after receipt of
notice from Landlord (but in no event earlier than ten (10) days after receipt of such
notice except in cases where there is an immediate threat of material and substantial
property damage or immediate threat of bodily injury, in which case such shorter period of
time as is reasonable under the circumstances), Landlord may enter the Premises or any
other portions of the 5880 Property and perform such maintenance or repair (including
replacement, as needed) on behalf of Tenant. In such case, Tenant shall reimburse
Landlord for all costs reasonably incurred in performing such maintenance, repair or
replacement within ten (10) business days following the payment of such costs by Landlord.
Upon expiration of the Term or earlier termination of the Lease, Tenant shall surrender
the Premises to Landlord with all Building Systems in working order.




          6.3 Alterations and Additions.




               (a) Tenant shall have the right to construct improvements on and within the Premises
(including the repair and replacement of certain HVAC systems on the roof of the Building as
set forth in Section 3.2, the “Initial Alterations”) as provided below in this
Section 6.3(a). Prior to the commencement of construction of the Initial
Alterations, Tenant shall submit to Landlord for its approval (which shall not be
unreasonably withheld or delayed and shall be deemed approved if Landlord does not respond
within ten (10) business days after such submission) detailed construction drawings and
specifications for the Initial Alterations and the identity of the general contractor
selected by Tenant to construct the Initial Alterations. Landlord’s approval of the general
contractor to perform the Initial Alterations shall not be considered unreasonably withheld
if any such general contractor (i) does not have trade references reasonably acceptable to
Landlord, (ii) does not maintain insurance as required pursuant to the terms of this Lease,
(iii) does not have the ability to be bonded for the work in an amount of no less than
$1,000,000.00, or (iv) is not licensed as a contractor in the State of California. Tenant
shall construct or cause the construction of the Initial Alterations in full compliance with
Applicable Laws, including, without limitation, all applicable building and electrical code
requirements. The Allowance and HVAC Allowance shall be paid to Tenant or, at Landlord’s
option, to the order of the general contractor constructing the Initial Alterations, on a
monthly basis following receipt by Landlord of (1) invoices covering all labor and materials
expended and used in the Initial Alterations during such period; and (2) a sworn
contractor’s affidavit from the general contractor and a request to disburse from Tenant
containing an approval by Tenant of the work completed. Final disbursement of the Allowance
and the HVAC Allowance shall be made following receipt by Landlord of (A) unconditional lien
releases from the general contractor and all subcontractors; (B) as-built drawings for the
Initial Alterations (if applicable); and (C) the certification of Tenant and its architect
that the Initial Alterations have



12









 




been installed in a good and workmanlike manner in
accordance with the approved plans, and in accordance with Applicable Laws. The Allowance
and HVAC Allowance shall be disbursed in the amount reflected on the invoices meeting the
requirements above. Notwithstanding anything in this Lease to the contrary, Landlord shall
not be obligated to disburse any portion of the Allowance and HVAC Allowance during the
continuance of any uncured default under the Lease, and Landlord’s obligation to disburse
shall only resume when and if such default is cured. In the event that Tenant does not use the entire
Allowance or HVAC Allowance for the Initial Alterations, Landlord shall pay Tenant the
unused portion of the Allowance and HVAC Allowance within thirty (30) days after Tenant’s
request therefor (provided that each of the conditions precedent to disbursement of the
Allowance and HVAC Allowance have been satisfied relative to the Initial Alterations).




               (b) Except for the Initial Alterations, Tenant shall not, without Landlord’s prior
written consent, make any alterations or additions in, on or to the Premises. Landlord’s
consent to any such alterations or additions shall not be unreasonably withheld; provided,
however, Landlord may withhold its consent in its sole and absolute discretion with respect
to any additions or alterations that would affect the structural portions of the Building or
any Building Systems, or which can be seen from the exterior of the Premises.
Notwithstanding the foregoing, however, Tenant shall have the right to make alterations
and/or additions in, on or to the Premises that do not affect the structural portions of the
Building or any Building Systems and do not cost in excess of Thirty Thousand and 00/100
Dollars ($30,000.00) in each instance (“Permitted Alterations”), provided that (i) Tenant
shall deliver notice to Landlord not less than five (5) days prior to making any such
Permitted Alterations to allow Landlord to post notices of non responsibility and (ii) any
such Permitted Alterations shall comply with Applicable Laws. Within thirty (30) days
following the construction of any alterations and/or additions in, on or to the Premises
made by Tenant pursuant to this Section 6.3(a), Tenant shall provide Landlord with
copies of “as-built” drawings for such alterations and/or additions (if applicable). In the
event that such drawings are not provided to Landlord within such thirty (30) day period,
Landlord shall have no obligation to repair or restore any such alterations and/or additions
under this Lease in the event of any casualty to the Premises. Tenant shall have no
obligation to remove any or all alterations or additions made to the Premises or the
Building or the associated land or other improvements, including but not limited to the
Initial Alterations and any Permitted Alterations. Should Landlord permit Tenant to make
any alterations or additions, Tenant shall use only contractors expressly approved by
Landlord (which approval shall not be unreasonably withheld and shall be deemed approved if
Landlord does not respond within five (5) business days after request). Such contractors
shall carry liability and such other insurance of a type and in such reasonable amounts as
Landlord shall reasonably require, naming Tenant, Landlord, Landlord’s asset manager and
property manager and any other party Landlord reasonably specifies as additional insureds.
Before commencing the work, such contractors shall furnish Landlord with certificates of
insurance evidencing such coverage. Tenant shall also maintain a policy of “builder’s risk”
insurance coverage for such work naming Landlord, Landlord’s property manager and any other
party Landlord reasonably specifies as additional insureds, and Tenant shall provide to
Landlord a certificate evidencing such coverage prior to commencing such work. Should Tenant
make any alterations or additions without the prior approval of Landlord, or use a
contractor not expressly approved by Landlord, Landlord may, at any time during the Term of
this Lease, require that Tenant remove any part or all of the same.



13









 





               (c) Any alterations or additions in or about the Premises that Tenant shall desire to
make (other than Permitted Alterations) shall be presented to Landlord in written form, with proposed detailed plans (which plans shall be deemed
approved if Landlord does not reply within twenty (20) days after submission of such plans
to Landlord). If Landlord consents to such alteration or addition, the consent shall be
deemed conditioned upon Tenant acquiring a permit (if required) to do so from the applicable
government agencies, furnishing a copy thereof to Landlord prior to the commencement of the
work, compliance by Tenant with all conditions of said permit in a prompt and expeditious
manner, and compliance by Tenant with Landlord’s commercially reasonable construction rules
and regulations and scheduling requirements. If Landlord does not approve of any such plans
submitted by Tenant, Landlord shall set forth in writing the reasons for such disapproval.



               (d) Tenant shall pay, when due, all claims for labor or materials furnished or alleged
to have been furnished to or for Tenant at or for use in the Premises, which claims are or
may be secured by any mechanic’s or materialmen’s lien against the Premises, the Building,
or any interest therein.



               (e) Tenant shall give Landlord not less than ten (10) days notice prior to the
commencement of any work in or about the Premises by Tenant and Landlord shall have the
right to post notices of non-responsibility in or on the Premises and the Building. If
Tenant, in good faith, contests the validity of any lien, claim or demand regarding the
work, then Tenant shall, at its sole expense, defend itself and Landlord and its agents
against the same and shall pay and satisfy any adverse judgment that may be rendered thereon
before the enforcement thereof against Landlord or its agents or the Premises, the Building,
upon the condition that if Landlord shall require, Tenant shall furnish to Landlord a surety
bond satisfactory to Landlord in an amount equal to such contested lien claim or demand
indemnifying Landlord against liability for the same and holding the Premises, the Building
free from the effect of such lien or claim. In addition, Landlord may require Tenant to pay
Landlord’s reasonable attorneys’ fees and costs in participating in such action if Landlord
decides it is in Landlord’s best interest to participate.



               (f) All alterations and additions shall be done in a good, workmanlike, manner with
good quality materials and shall be the property of Landlord and remain upon and be
surrendered with the Premises at the expiration of the Term, unless Landlord requires their
removal pursuant to Section 6.3(a) above. Any trade fixtures installed and paid for
by Tenant may be removed by Tenant during the Term of this Lease and shall upon demand by
Landlord be removed upon expiration of the Term. Tenant shall in all events promptly repair
any damage caused by removal of trade fixtures. On or prior to the expiration or termination
of this Lease, Tenant shall remove any and all alterations and additions that are designated
by Landlord to be removed, as provided in this Section 6.3 above, at Tenant’s sole
cost and expense.



               (g) Tenant shall provide Landlord with “as-built” plans and specifications for any
alterations or additions (if applicable).



          6.4 Utility Additions. Tenant may install new or additional utility
facilities throughout the Building, including, but not by way of limitation, such
utilities as plumbing, electrical systems, communication systems, and fire protection and
detection systems, so long as




14









 







such installations do not have any material and adverse
effect on the Building and are installed pursuant to Section 6.3 above.




          6.5 Security System. Tenant may, in accordance with Section 6 hereof
and at its own expense, install its own security system (“Tenant’s Security System”) in
the Premises; provided, however, that Tenant shall obtain Landlord’s prior consent with
respect to the plans and specifications for Tenant’s Security System (which consent shall
not be unreasonably withheld, conditioned or delayed), and shall coordinate the
installation and operation of Tenant’s Security System with Landlord to assure that
Tenant’s Security System is reasonably compatible with the Building Systems. Tenant shall
be solely responsible, at Tenant’s sole cost and expense, for the monitoring, operation,
maintenance, repair, replacement and removal of Tenant’s Security System.




     7. Insurance; Indemnity.



          7.1 Liability Insurance-Tenant. Tenant shall at Tenant’s expense, obtain and
keep in force during the Term of this Lease (and any period prior to the Term of the Lease
during which Tenant enters the Premises to conduct any fixturization or improvement work,
and any period of occupancy after the Term of the Lease) a policy of Commercial General
Liability Insurance, or equivalent, with limits of not less than Two Million Dollars
($2,000,000.00) per occurrence of death, bodily injury, personal injury and property
damage combined (including $100,000 fire legal liability (each loss)) or in a greater
amount as reasonably determined by Landlord and shall insure Tenant, with Landlord, BioMed
Realty, L.P., BioMed Realty Trust, Inc. and Landlord’s property manager and any other
party Landlord specifies as additional insureds, against liability arising out of the use,
occupancy and/or maintenance of the Premises. Such insurance shall include a Broad Form
Commercial General Liability Endorsement covering the insuring provisions of this Lease
and the performance by Tenant of the indemnity obligations provided in Section 7.7
below. Compliance with the above requirement shall not, however, limit the liability of
Tenant hereunder.




          7.2 Liability Insurance-Landlord. Landlord shall obtain and keep in force
during the Term of this Lease a policy of Commercial General Liability Insurance, in such
amounts and with such coverage against such other risks as is consistent with landlords of
comparable buildings located in the vicinity of the Building, in such amounts as Landlord
deems advisable from time to time, insuring Landlord, but not Tenant, with respect to the
Building. Any costs incurred by Landlord pursuant to this Section 7.2 shall
constitute a portion of Operating Expenses.




          7.3 Property Insurance-Tenant. Tenant shall, at Tenant’s expense, obtain and
keep in force during the Term of this Lease, fire and extended coverage insurance, with
vandalism and malicious mischief, and sprinkler leakage endorsements, in an amount
sufficient to cover the full replacement cost, as the same may exist from time to time, of
all of Tenant’s personal property, fixtures and equipment in the Premises and the
Building.




          7.4 Property Insurance-Landlord. Landlord shall obtain and keep in force
during the Term of this Lease a policy or policies of insurance covering loss or damage to
the Building, including any casualty to the Building Systems and any common areas, but not




15









 







Tenant’s personal property, fixtures or equipment, for the full replacement value of the
Building and any common areas providing protection against perils included within the
classification “Fire and Extended Coverage,” together with insurance against sprinkler
damage (if applicable), vandalism and malicious mischief. Landlord, subject to
availability thereof, shall further insure, if Landlord deems it appropriate or if
required by applicable law, coverage against flood, environmental hazard, earthquake, loss
or failure of building equipment, rental loss during the period of repairs or rebuilding,
workmen’s compensation insurance and fidelity bonds for employees employed to perform
services and such other perils as Landlord deems advisable from time to time or may be
required by a lender having a lien on the Building. Tenant will not be named in any such
policies carried by Landlord and shall have no right to any proceeds therefrom.
Notwithstanding the foregoing, Landlord may, but shall not be deemed required to, provide
insurance for any improvements installed by Tenant or that are in addition to the standard
improvements customarily furnished by Landlord, without regard to whether or not such are
made a part of or are affixed to the Building. The policies required by Sections
7.2 and 7.4 shall contain such deductibles as Landlord or its lender may
determine. Tenant shall not do or permit to be done anything which shall invalidate the
insurance policies carried by Landlord. Tenant shall pay the entirety of any increase in
any insurance premium for the Premises over what it was immediately prior to the
commencement of the Term of the Lease if the increase is specified by Landlord’s insurance
carrier as being caused by the nature of Tenant’s occupancy or any act or omission of
Tenant, or Tenant’s invitees. Any costs incurred by Landlord pursuant to this Section
7.4 shall constitute a portion of Operating Expenses.




          7.5 Insurance Policies. All of Tenant’s insurance policies required under
this Section 7 shall (a) designate Landlord, BioMed Realty, L.P., BioMed Realty
Trust, Inc., and Landlord’s property manager, if any, and any other party that Landlord
specifies, as additional insureds (other than with respect to Tenant’s property damage
insurance described in Section 7.3 above), (b) be primary insurance as to all
claims thereunder and provide that any insurance carried by Landlord is excess and is
non-contributing with any insurance requirement of Tenant, and (c) contain a
cross-liability endorsement or severability of interest clause acceptable to Landlord.
Tenant shall deliver to Landlord copies of all insurance policies required to be
maintained by Tenant under this Section 7 or certificates evidencing the existence
and amounts of such insurance on or before the Commencement Date of this Lease. Such
policies shall be issued by insurers having a rating of A-VII or better in Best’s Key
Rating Guide. No such policy shall be cancelable or subject to reduction of coverage or
other modification except after thirty (30) days prior written notice to Landlord (except
in the event of non-payment of premium, in which case ten (10) days written notice shall
be given). Tenant shall, at least ten (10) days prior to the expiration of such policies,
furnish Landlord with renewals thereof. Tenant agrees that if Tenant does not take out
and maintain the insurance required under this Section 7, Landlord may (but shall
not be required to) procure said insurance on Tenant’s behalf and at its cost to be paid
by Tenant as Additional Rent.




          7.6 Waiver of Subrogation. Tenant and Landlord each hereby release and
relieve the other (and Landlord’s property manager, if any), and waive their entire right
of recovery against the other (and Landlord’s property manager, if any), for direct and/or
consequential loss or damage arising out of or incident to the perils required by this
Lease to be covered by property insurance carried by such party, whether due to the
negligence of Landlord





16









 







or Tenant or their agents, employees, contractors and/or invitees.
All property insurance policies required under this Lease shall be endorsed to provide for
such waivers of subrogation.




          7.7 Indemnity. Tenant shall defend, indemnify and hold harmless Landlord and
its agents, members, partners and employees, from and against any and all claims for
damage to the person or property of anyone or any entity to the extent arising from
Tenant’s use or occupancy of the Premises and Building, and shall further defend,
indemnify and hold harmless Landlord from and against any and all claims, costs and
expenses to the extent arising from any breach or default in the performance of any
obligations on Tenant’s part to be performed under the terms of this Lease, or arising
from any act or omission of Tenant, or any of Tenant’s agents, contractors, employees, or
invitees, and from and against all costs, attorneys’ fees, expenses and liabilities
incurred by Landlord as the result of any such use, conduct, activity, work, things done,
permitted or suffered, breach, default or negligence, and in dealing therewith, including
but not limited to the defense or pursuit of any claim or any action or proceeding
involved therein. In the event that any action or proceedings is brought against Landlord
by reason of any such matters, Tenant upon notice from Landlord shall defend the same at
Tenant’s expense by counsel reasonably satisfactory to Landlord (provided that any counsel
designated by any insurer of Tenant shall be deemed satisfactory to Landlord) and Landlord
shall cooperate with Tenant in such defense. Landlord need not have first paid any such
claim in order to be indemnified. Notwithstanding the foregoing, Tenant’s indemnification
obligations provided in this Section 7.7 shall not apply to any claim to the
extent arising out of the negligence or intentional acts of Landlord or of any of its
agents, contractors or employees. Tenant, as a material part of the consideration to
Landlord, hereby assumes all risk of damage to property of Tenant or any damage to any
portion of the Initial Alterations or any alterations or fixtures in the Premises, or
injury to persons, in, upon or about the Building arising from any cause and Tenant hereby
waives all claims in respect thereof against Landlord except to the extent arising from
the negligence or intentional acts of Landlord or any of its agents, contractors or
employees. Except for injury or damage arising from the negligence or willful misconduct
of Tenant or its agents, employees or contractors, Landlord shall defend, indemnify and
hold harmless Tenant and Tenant’s agents, members, partners and employees from and against
any and all claims, liabilities, obligations, penalties, causes of action, liens, damages,
costs and expenses (including, without limitation, attorneys’ fees and expenses) to the
extent arising, claimed or incurred against or by Tenant from any matter or thing arising
from (a) any negligent or willful misconduct of Landlord, Landlord’s agents, employees or
contractors, or (b) Landlord’s breach of this Lease. The provisions of this Section
7.7 shall survive the expiration or termination of this Lease.




          7.8 Exemption of Landlord from Liability. Except to the extent resulting
from or arising out of the gross negligence or intentional acts of Landlord or any of its
agents, contractors or employees, Tenant hereby agrees that Landlord shall not be liable
for injury to Tenant’s business or any loss of income therefrom or for loss of or damage
to the goods, wares, merchandise or other property of Tenant, Tenant’s employees,
invitees, customers, or any other person in or about the Premises or the Building, nor
shall Landlord be liable for injury to the person of Tenant, Tenant’s employees, agents or
contractors, whether such damage or injury is caused by or results from theft, fire,
steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or
other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures, or from any other cause, whether said damage or injury results





17









 







from conditions arising upon the Premises or upon other portions of the Building, or from other
sources or places, or from new construction or the repair, alteration or improvement of
any part of the Building, or of the equipment, fixtures or appurtenances applicable
thereto, and regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible. Landlord shall not be liable for any damages arising
from any act or neglect of any other tenant, occupant or user of the Building, nor from
the failure of Landlord to enforce the provisions of any other lease of any other tenant
of the Building.




          7.9 No Representation of Adequate Coverage. Landlord makes no representation
that the limits or forms of coverage of insurance specified in this Section 7 are
adequate to cover Tenant’s property or obligations under this Lease.




          7.10 Evidence of Insurance. Landlord and Tenant shall each furnish to the
other, upon request from time to time, certificates evidencing that any insurance policies
required hereunder are being maintained and/or certified copies of any such policies.




     8. Damage or Destruction.



          8.1 Repair of Damage to Premises by Landlord. Tenant shall promptly notify
Landlord of any damage to the Premises resulting from fire or any other casualty. If the
Premises shall be damaged by fire or other casualty, Landlord shall promptly and
diligently, subject to reasonable delays for insurance adjustment or other matters beyond
Landlord’s reasonable control, and subject to all other terms of this Section 8,
restore the Premises. Such restoration shall be to substantially the same condition of
the Premises prior to the casualty, except for modifications required by zoning and
building codes and other laws or by the holder of a mortgage or deed of trust on the
Premises, or the lessor of a ground or underlying lease with respect to the Premises, or
any other modifications deemed desirable by Landlord, provided that access to the Premises
shall not be materially impaired. In connection with such repairs and replacements,
Landlord shall, prior to the commencement of construction, submit to Tenant, for Tenant’s
review and approval (which Tenant shall not unreasonably withhold, condition or delay), all plans, specifications and working drawings
relating thereto, and Landlord shall select the contractors to perform such improvement
work. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its
visitors, or injury to Tenant’s business resulting in any way from such damage or the
repair thereof; provided however, that if such fire or other casualty shall have damaged
the Premises to the extent that Tenant’s occupancy is materially impaired, and if such
damage is not the result of the negligence or willful misconduct of Tenant or Tenant’s
employees, contractors, licensees, or invitees, Landlord shall allow Tenant a
proportionate abatement of Base Rent and Operating Expenses during the time and to the
extent that the Premises are unfit for occupancy for the purposes permitted under this
Lease, and not occupied by Tenant as a result thereof. In the event of a fire or other
casualty, Tenant will have no responsibility for rebuilding and/or restoring any common
areas.




          8.2 Landlord’s Option to Repair. Notwithstanding the provisions of Section
8.1 above, Landlord may elect not to rebuild and/or restore the Premises and
instead terminate this Lease by notifying Tenant in writing of such termination within
sixty (60) days after the date of damage, such notice to include a termination date giving
Tenant ninety (90) days to vacate the Premises, but Landlord may so elect only if the
Building shall be damaged by fire or other




18









 







casualty or cause, whether or not the Premises are affected, and one or more of the following conditions is present: (a) material repairs
cannot reasonably be completed within one hundred eighty (180) days of the date of damage
(when such repairs are made without the payment of overtime or other premiums); (b) the
holder of any mortgage or deed of trust on the Premises, or the lessor of a ground or
underlying lease with respect to the Premises shall require that the insurance proceeds or
any portion thereof be used to retire the mortgage debt, or shall terminate the ground or
underlying lease, as the case may be; or (c) the damage is not fully covered, except for
deductible amounts, by Landlord’s insurance policies. Notwithstanding the foregoing, if
thirty percent (30%) or more of the Premises are damaged by fire or other casualty or
cause and do take longer than one hundred eighty (180) days to repair from the date of the
casualty, Tenant shall be entitled to terminate this Lease by written notice to Landlord.




          8.3 Termination Right. If Landlord does not elect to terminate this Lease
pursuant to Landlord’s termination right as provided in Section 8.2 above and (a)
the damage constitutes a “Tenant Damage Event” (as defined below), and (b) the repair of
such damage cannot, in the reasonable judgment of Landlord, be completed within one
hundred eighty (180) days after being commenced, then Tenant may elect, no earlier than
sixty (60) days after the date of the damage and not later than ninety (90) days after the
date of such damage, to terminate this Lease by written notice to Landlord effective as of
the date specified in the notice, which date shall not be less than thirty (30) days nor
more than sixty (60) days after the date such notice is given by Tenant. As used herein, a
“Tenant Damage Event” shall mean damage to all or any part of the Premises by fire or
other casualty, which damage materially interferes with Tenant’s use of or access to the
Premises and would entitle Tenant to an abatement of Rent pursuant to Section 8.1
above.




          8.4 Damage Near End of Term. In the event that the Premises are destroyed or
damaged to any substantial extent during the last twelve (12) months of the Term of this
Lease, then notwithstanding anything contained in this Section 8 and in addition
to any termination rights that Landlord may have pursuant to Section 8.2, Landlord
and Tenant shall have the option to terminate this Lease by giving written notice to the
other party of the exercise of such option within sixty (60) days after such damage or
destruction, in which event this Lease shall cease and terminate as of the date of such
notice. Upon any such termination pursuant to this Section 8.4, Tenant shall pay
the Rent, properly apportioned up to such date of termination (but subject to the
abatement provisions in Section 8.1 above), and both parties hereto shall
thereafter be freed and discharged of all further obligations hereunder, except as
provided for in provisions of this Lease which by their terms survive the expiration or
earlier termination of this Lease.




          8.5 Waiver of Statutory Provisions. The provisions of this Lease, including
this Section 8, constitute an express agreement between Landlord and Tenant with
respect to any and all damage to, or destruction of, all or any part of the Premises or
any other portion of the Building, and any statute or regulation of the State of
California, including, without limitation, Sections 1932(2) and 1933(4) of the California
Civil Code, with respect to any rights or obligations concerning damage or destruction in
the absence of an express agreement between the parties, and any other statute or
regulation, now or hereafter in effect, shall have no application to this Lease or any
damage or destruction to all or any part of the Premises, the Building or any other
portion of the Building.





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     9. Taxes.



          9.1 Payment of Taxes. Except as otherwise provided in Section 3.3
above, Tenant shall pay the Real Property Taxes applicable to the Premises during the
Lease Term. Payments of annual Real Property Taxes shall be estimated by Landlord and
shall be due and payable monthly on the same date as monthly payments of Base Rent. Within
sixty (60) days after the expiration of each calendar year, Landlord shall provide Tenant
with a statement showing the actual amount of Real Property Taxes payable for the prior
calendar year. If the estimated payments of Real Property Taxes made by Tenant for such
prior year pursuant to this Section 9.1 are less than or exceed the actual Real
Property Taxes for such prior year as shown in any statement of actual Real Property Taxes
provided by Landlord, then Tenant’s account shall be adjusted to reflect the amounts due.
All deficiencies shall be payable upon receipt of invoice and all overpayments made by
Tenant shall be applied as a credit by Landlord to the next installment of Real Property
Taxes. Failure of Landlord to timely furnish any statement of Real Property Taxes for any
period during the Term of this Lease shall not relieve Tenant from paying Real Property
Taxes pursuant to this Section 9.1 nor prejudice Landlord from enforcing its
rights under this Section 9.1. If any Real Property Taxes to be paid by Tenant
shall cover any period of time prior to or after the expiration or sooner termination of
the Term, such Real Property Taxes shall be equitably prorated to cover only the period of
time within the applicable tax fiscal year this Lease is in effect, and Landlord shall
reimburse Tenant for any overpayment after such proration.




          9.2 Definition of “Real Property Taxes”. As used herein, the term “Real
Property Taxes” shall include any form of real estate tax or assessment, general, special,
ordinary or extraordinary, any assessment district charge pursuant to any existing or
future assessment district, and any license fee, commercial rental tax, improvement bond
or bonds, levy or tax (other than inheritance, income, franchise or estate taxes) imposed
on the Premises or any portion thereof by any authority having the direct or indirect
power to tax, including any city, county, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement district thereof, as
against any legal or equitable interest or Landlord in the Premises or in any portion
thereof, as against Landlord’s right to rent or other income therefrom, and as against
Landlord’s business of leasing the Premises. The term “Real Property Taxes” shall also
include any tax, fee, levy, assessment or charge (i) in substitution of, partially or
totally, or as a supplement to any tax, fee, levy, assessment or charge included within
the definition of “Real Property Taxes” above or (ii) which is imposed by reason of this
transaction, any modifications or changes hereto. Notwithstanding the foregoing, Real
Property Taxes shall not include fines, penalties or interest assessed against Landlord by
the taxing authority. In the event Landlord receives a refund or other return of Real
Property Taxes (including any award received as a result of Landlord’s successful protest
of the amount of Real Property Taxes) for which Tenant previously paid Landlord, then such
refunded amount (less the costs incurred by Landlord in obtaining such refund) shall be
applied to reduce the amount of Real Property Taxes for the calendar year in which such
refunded amount is received prior to calculating Tenant’s payment of Real Property Taxes
for such calendar year.




          9.3 Joint Assessment. If Tenant’s personal fixtures, the taxes for which are
to be paid separately by Tenant under Sections 9.2 or 9.4, are not
separately assessed, Tenant’s portion of that tax shall be equitably determined by
Landlord from the respective valuations




20









 







assigned in the assessor’s work sheets or such other information (which may include the cost of construction) as may be reasonably
available. Landlord’s reasonable determination thereof, in good faith, shall be
conclusive.




          9.4 Personal Property Taxes. Tenant shall pay prior to delinquency all taxes
assessed against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Tenant contained in the Premises or elsewhere. If any of Tenant’s
said personal property shall be assessed with Landlord’s real property, Tenant shall pay
to Landlord the taxes attributable to Tenant within thirty (30) days after receipt of a
written statement setting forth the taxes applicable to Tenant’s property.




          9.5 Right to Contest. Following Tenant’s request therefor, with respect to
any Real Property Taxes imposed against the real property underlying the Building, Tenant
shall have the right, at Tenant’s sole cost and expense, to reasonably file with or
against the taxing authority imposing such Real Property Taxes (but not against Landlord)
a protest or challenge of the validity of any such Real Property Taxes imposed, provided
that: (i) Tenant shall timely file and diligently pursue such protest or challenge and
keep Landlord apprised in writing of the status thereof (and Landlord shall have the right to participate in any such protest or challenge); and (ii) the
existence of the protest or challenge will not subject Landlord or the real property
underlying the Building to any interest, fines, penalties or any costs whatsoever nor
prevent the exercise by Landlord of any right or remedy affecting the Building, the real
property or Landlord. Landlord shall provide Tenant with notice of any increase in Real
Property Taxes assessed against such real property promptly after Landlord receives a tax
bill evidencing such increase.




          9.6 Installments. All assessments of Real Property Taxes which are not
specifically charged to Tenant because of what Tenant has done, which can be paid by
Landlord in installments without the imposition of fees, penalties or interest, shall be
paid by Landlord in the maximum number of installments that are permitted by law without
the imposition of fees, penalties or interest; provided, however, that if the prevailing
practice in buildings comparable to the Building in the vicinity of the Building is to pay
such assessments on an earlier basis, and Landlord pays on such earlier basis, such
assessments shall be included in Real Property Taxes as paid by Landlord.




     10. Utilities. Electricity service, water, sewer and gas service (if required by Tenant) to the Building
shall be separately metered at Landlord’s sole cost and expense. Landlord shall also pay for
connection fees related to such utilities. Tenant shall pay for all of the actual use thereof.
There shall be no abatement of Rent and Landlord shall not be liable in any respect whatsoever for
the inadequacy, stoppage, interruption or discontinuance of any utility or service due to riot,
strike, labor dispute, breakdown, accident, repair or other cause beyond Landlord’s reasonable
control or due to laws or cooperation with governmental requirements.



     11. Assignment and Subletting.



          11.1 Landlord’s Consent Required. Tenant shall not sell, assign, mortgage,
pledge, hypothecate, encumber or otherwise transfer this Lease or any interest herein, and
shall not sublet the Premises or any portion thereof, without the prior written consent of
Landlord in





21









 







each instance (which shall not be unreasonably withheld, conditioned or
delayed) and any attempt to do so without such consent shall be voidable at Landlord’s
election (all of the foregoing are hereafter sometimes referred to collectively as
“Transfers” and any person to whom any Transfer is made or sought to be made is
hereinafter sometimes referred to as a “Transferee”). The parties hereby agree that it
shall be reasonable for Landlord to withhold consent to any proposed Transfer where one or
more of the following apply, without limitation as to other reasonable grounds for
withholding consent:




               (a) Tenant is in material default under the Lease beyond any applicable cure period (as
defined in Section 12.1);



               (b) the Transferee intends to use the portion of the Premises subject to the Transfer
(“Subject Space”) for purposes which are not permitted under this Lease; or



               (c) the Transfer will result in more than a reasonable and safe number of occupants per
floor within the Subject Space.


Notwithstanding any provision of this Section 11 to the contrary, Tenant shall have the
right to assign the Lease at any time without Landlord’s consent (and without the application of
Sections 11.2, 11.5 and 11.12 below) (a) to any Affiliate (as defined
below) or any entity which owns or is owned by an Affiliate; (b) any entity acquiring substantially
all of the assets of Tenant; or (c) another entity in connection with the merger of Tenant with
such entity (each a “Permitted Transfer”), provided that such transaction is not a subterfuge by
Tenant to avoid its obligations under this Lease. For purposes of the Lease, “Affiliate” shall mean
any entity which is controlled by (directly or indirectly) Tenant, or which controls (directly or
indirectly) Tenant, or which is under common control with Tenant. Tenant shall notify Landlord of
any Permitted Transfer prior to or within ten (10) days after the effective date thereof.
Notwithstanding anything in this Lease to the contrary, provided that Landlord is a Real Estate
Investment Trust, Landlord shall have the right to withhold its consent to a Transfer (exclusive of
a Permitted Transfer) if such Transfer would cause Landlord’s ownership investment in the Building
to fail to comply with Section 856(d) of the Internal Revenue Code (the “Code”) for any of the
following reasons: (i) the rental or other amounts to be paid by the Transferee would be based, in
whole or in part, on the income or profits derived by the business activities of such Transferee;
(ii) Tenant is required to furnish or render any services to such Transferee with respect to which
transfer consideration is required to be paid; (iii) Tenant is required to manage or operate the
portion of the Premises or any capital additions so transferred, with respect to which transfer
consideration is required to be paid; (iv) the Transferee is a person in which Landlord owns an
interest, directly or indirectly (by applying constructive ownership rules set forth in Section
856(d)(5) of the Code or any successor statute); or (v) the Transfer would cause any portion of the
amounts to be received by Landlord pursuant to this Lease to fail to qualify as “rents from real
property” within the meaning of Section 856(d) of the Code, or any similar or successor provision
thereto or which could cause any other income of Landlord to fail to qualify as income described in
Section 856(c)(2) of the Code (collectively, the “REIT Qualification Condition”); provided,
however, that in the event of a Permitted Transfer, Landlord shall have the right, within thirty
(30) days following receipt of the notice from Tenant of such Permitted Transfer to notify Tenant
in writing that such Permitted Transfer does not conform to the REIT Qualification Condition
(specifying in reasonable detail the basis for such asserted nonconformance) and Tenant shall have
thirty (30)





22









 







days after receipt of such notice from Landlord to cure such nonconformance, and if not
cured within such thirty (30) day period, such nonconformance shall constitute a default under
Section 12.1 of this Lease entitling Landlord to exercise its rights as provided in Section 12.2(a)
of this Lease.




          11.2 Tenant’s Application. If Tenant desires at any time to enter into a
Transfer, Tenant shall submit to Landlord at least thirty (30) days prior to the proposed
effective date of the Transfer (“Proposed Effective Date”), in writing, a notice of intent
to Transfer (“Transfer Notice”), which Transfer Notice shall include:




               (a) the Proposed Effective Date, which shall be no less than thirty (30) days nor more
than ninety (90) days after the sending of such notice;



               (b) the name of the proposed Transferee;



               (c) the nature of the proposed Transferee’s business to be carried on in the Premises;



               (d) the terms and provisions of the proposed Transfer;



               (e) such information as Landlord may reasonably request concerning the proposed
Transferee, including recent financial statements and bank references; and



               (f) evidence reasonably satisfactory to Landlord that the proposed Transferee (if the
Transfer involves a transfer of possession) will immediately occupy and thereafter use the
Subject Space for the entire term of the Transfer.



          11.3 Approval Procedure. If Landlord approves a Transfer, Tenant shall,
prior to the Proposed Effective Date, submit to Landlord an executed original of the
Transfer agreement together with Landlord’s standard form consent to Transfer for
execution by Landlord. No purported Transfer shall be deemed effective as against Landlord
and no proposed Transferee shall take occupancy unless such consent is so executed by
Landlord. If Landlord fails to approve or disapprove a proposed Transfer within fifteen
(15) business days after request by Tenant, such Transfer shall be deemed approved.




          11.4 Required Provisions. Any and all Transfer agreements shall:




               (a) contain such items as are described in Tenant’s Transfer Notice under Section
11.2 or as otherwise agreed by Landlord;



               (b) prohibit further Transfers without Landlord’s consent under this Section
11;



               (c) impose the same obligations and conditions (including the same use provisions) on
the Transferee as are imposed on Tenant by this Lease (except as to Rent and Term or as
otherwise agreed by Landlord);



23









 





               (d) be expressly subject and subordinate to each and every provision of this Lease;



               (e) have a term that expires on or before the expiration of the Term of this Lease; and



               (f) provide that Tenant and/or Transferee shall pay Landlord the amount of any
additional costs or expenses incurred by Landlord for repairs, maintenance or otherwise as a
result of any change in the nature of occupancy caused by the Transfer.


Tenant shall deliver to Landlord one executed copy of any and all written instruments evidencing or
relating to the Transfer.




          11.5 Fees for Review. Tenant shall pay to Landlord any and all reasonable
costs and expenses, including actual attorneys’ fees, and any property management
expenses, incurred by Landlord in connection with reviewing each such transaction, up to a
maximum amount of One Thousand Five Hundred and 00/100 Dollars ($1,500.00) for each
transaction. Tenant shall pay any such costs and expenses to Landlord within thirty (30)
days after written request.




          11.6 No Release of Tenant. No consent by Landlord to any Transfer by Tenant
shall relieve Tenant of any obligation to be performed by Tenant under this Lease, whether
occurring before or after such consent or Transfer. Landlord’s consent to any Transfer
shall not relieve Tenant from the obligation to obtain Landlord’s express prior written
consent to any other Transfer. The acceptance by Landlord of payment from any other person
shall not be deemed to be a waiver by Landlord of any provision of this Lease or to be a
consent to any subsequent Transfer, or be a release of Tenant from any obligation under
this Lease.




          11.7 Assumption of Obligations. Each Transferee shall assume all obligations
of Tenant under this Lease and shall be and remain liable jointly and severally with
Tenant for the payment of the Rent and the performance of all the terms, covenants,
conditions and agreements herein contained on Tenant’s part to be performed for the Term
of this Lease. No Transfer shall be binding on Landlord unless the Transferee delivers to
Landlord a counterpart of the instrument of Transfer in recordable form which contains a
covenant of assumption by the Transferee satisfactory in substance and form to Landlord,
consistent with the above requirements. The failure or refusal of the Transferee to
execute such instrument of assumption shall not release or discharge the Transferee from
its liability to Landlord hereunder. Landlord shall have no obligation whatsoever to
perform any duty to or respond to any request from any subtenant, it being the obligation
of Tenant to administer the terms of its sublease.




          11.8 Deemed Transfers. Except for a Permitted Transfer, for purposes of this
lease, the term “Transfer” shall also include the following transactions, which shall be
subject to all of the provisions of this Section 11: (a) if the Tenant is a
non-publicly traded corporation, (i) the dissolution, merger, consolidation or other
reorganization of Tenant, the sale or transfer of more than an aggregate of fifty percent
(50%) of the voting shares of Tenant (other than to immediate family members by reason of
gift or death) within a twelve (12) month period, or (ii) the sale, mortgage,
hypothecation or pledge of more than an aggregate of fifty percent (50%) of




24









 







the value of the unencumbered assets of Tenant within a twelve (12) month period; or (b) if Tenant is a
partnership, the withdrawal or change, voluntary, involuntary or by operation of law, of
fifty percent (50%) or more of the partners, or a transfer of fifty percent (50%) or more
of the partnership interests, within a twelve (12) month period, or the dissolution of the
partnership without immediate reconstitution thereof.




          11.9 Assignment by Operation of Law. No interest of Tenant in this Lease
shall be assignable by operation of law.




          11.10 Assignment of Sublease Rents. Tenant immediately and irrevocably
assigns to Landlord, as security for Tenant’s obligations under this Lease, all rent from
any subletting of all or any part of the Premises, and Landlord, as assignee and as
attorney-in-fact for Tenant for purposes hereof, or a receiver for Tenant appointed on
Landlord’s application, may collect such rents and apply same toward Tenant’s obligations
under this Lease; except that, until the occurrence of an act of default by Tenant, Tenant
shall have the right and license to collect such rents, subject to Landlord’s right to
receive and Tenant’s obligation to pay to Landlord pursuant to Section 11.5 above.




          11.11 Right to Sublease. Tenant shall be permitted, upon prior written
notice to Landlord (without otherwise triggering the provisions of this Section
11, but subject to Landlord’s right to object to such sublease if the terms of
such sublease would fail to satisfy the REIT Qualification Condition), to enter into any
sublease of individual offices within the Premises on a form pre-approved by Landlord not
to exceed twenty-five percent (25%) of the rentable square feet of the Premises in the
aggregate, and such sublease(s) shall not be deemed a Transfer under this Section 11;
provided that (a) Tenant shall give Landlord prior written notice of any such sublease(s)
and promptly provide Landlord with any documents or information requested by Landlord
regarding such sublease(s) (including, but not limited to, applicable certificates of
insurance), (b) Tenant shall not be permitted to have more than two (2) such subleases in
existence at any given time, and (c) Tenant shall not be permitted to separately demise
any such subleased space nor shall such subtenants be permitted to maintain a separate
reception area in the Premises. However, any proposed sublease that would result in an
aggregate amount of subleased space greater than twenty-five percent (25%) of the rentable
square feet of the Premises shall require Landlord’s prior written consent and shall be
deemed a Transfer under this Section 11.




          11.12 Profits. If any Transfer (other than any Permitted Transfer) provides
for the receipt by, on behalf of Tenant of any consideration for the Transfer (including,
without limitation, a premium rental for a sublease or lump sum payment for an assignment,
but excluding Tenant’s reasonable costs in marketing and subleasing the Premises) in
excess of the rental and other charges payable by Tenant under this Lease, Tenant shall
pay fifty percent (50%) of all of such excess to Landlord, after deductions for any
transaction costs incurred by Tenant, including marketing expenses, tenant improvement
allowances actually provided by Tenant, cash concessions, brokerage commissions and
attorneys’ fees. If said consideration consists of cash paid to Tenant, payment to
Landlord shall be made promptly following receipt by Tenant of such cash payment.




     12. Default; Remedies.



25









 





          12.1 Default. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Tenant:




               (a) The breach by Tenant of any of the provisions of Sections 6.3(a),
(b) or (d) (Alterations and Additions), 11.1 (Assignment and
Subletting), 29.2 (Subordination), 32 (Auctions, Other Sales and Cessation
of Business), or 40.1 (Easements), and the failure of Tenant to cure such default
within ten (10) business days after notice from Landlord.



               (b) The failure by Tenant to make any payment of Rent or any other payment required to
be made by Tenant hereunder, as and when due, where such failure shall continue for a period
of five (5) business days after notice thereof from Landlord to Tenant. In the event that
Landlord serves Tenant with a notice regarding such nonpayment pursuant to any applicable
summary eviction statute (including California Code of Civil Procedure Section 1161, et
seq.), such notice shall also constitute the notice required by this Section
12.1(b).



               (c) The failure by Tenant to observe or perform any of the covenants, conditions or
provisions of this Lease to be observed or performed by Tenant other than those referenced
in Sections 12.1(a) and (b) above, where such failure shall continue for a
period of thirty (30) days after written notice thereof from Landlord to Tenant; provided,
however, that if the nature of Tenant’s noncompliance 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 commences such cure within said thirty (30) day period and thereafter diligently
pursues such cure to completion.


To the extent permitted by law, such thirty (30) day notice shall constitute the sole and exclusive
notice required to be given to Tenant under any applicable summary eviction statute (including
California Code of Civil Procedure Section 1161, et seq).




               (d) (i) The making by Tenant of any arrangement or assignment for the benefit of
creditors; (ii) Tenant becoming a “debtor” as defined in the Bankruptcy Code or any
successor statute, unless, in the case of a petition filed against 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 thirty (30) 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 thirty (30) days, all of which are hereby deemed to be non-curable
defaults without the necessity of any notice by Landlord to Tenant thereof.



               (e) The existence of materially false information in any financial statement given to
Landlord by Tenant, or its successor in interest or by any guarantor of any of Tenant’s
obligations hereunder.



               (f) The existence of a material default by Tenant in the payment of “Base Rent” or
“Operating Expenses” (as respectively defined in the lease of the 5870 Building) beyond any
applicable cure period under the provisions of Section 12.1(b) of the lease of the 5870
Building .



26









 





          12.2 Remedies. In the event of any material default of this Lease by Tenant,
Landlord may at any time thereafter, with or without notice or demand and without limiting
Landlord in the exercise of any right or remedy which Landlord may have by reason of such
default:




               (a) Terminate this Lease and Tenant’s right to possession of the Premises by any lawful
means, in which case Tenant shall immediately surrender possession of the Premises to
Landlord. In such event, Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenant’s default including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys’ fees, and any real estate
commission actually paid; the worth at the time of award by the court having jurisdiction
thereof of the amount by which the unpaid rent for the balance of the Term after the time of
such award exceeds the amount of such rental loss for the same period that Tenant proves
could be reasonably avoided; and that portion of the leasing commission paid by Landlord
pursuant to Section 14 applicable to the unexpired Term of this Lease. As used
herein, the term “rent” shall be deemed to be and to mean all sums of every nature required
to be paid by Tenant pursuant to the terms of this Lease.



               (b) Without terminating this Lease, re-enter and take possession of the Premises or any
part thereof, and expel Tenant and those claiming through or under Tenant, and remove the
effects of both or either, and relet the Premises, or any part thereof, in Landlord’s or
Tenant’s name, but for the account of Tenant. In such event, Tenant shall in no manner be
relieved from liability for payment of rent covering the balance of the Term of this Lease,
and Landlord’s retaking shall not be considered an acceptance of the Premises nor a
manifestation of an intent to terminate this Lease.



               (c) Landlord shall have the remedy described in California Civil Code Section 1951.4.
Accordingly, Landlord may maintain Tenant’s right to possession in which case this Lease
shall continue in effect whether or not Tenant shall have vacated or abandoned the Premises.
In such event Landlord shall be entitled to enforce all of Landlord’s rights and remedies
under this Lease, including the right to recover the rent as it becomes due hereunder.



               (d) Pursue any other remedy now or hereafter available to Landlord under the laws or
judicial decisions of the state in which the Premises are located.



          12.3 Default by Landlord. Landlord shall not be in default under this Lease
unless Landlord fails to perform obligations required by Landlord within thirty (30) days
after written notice by Tenant to Landlord and to the holder of any mortgage or deed of
trust covering the Premises or ground lessor of the Premises whose name and address shall
have theretofore been furnished to Tenant in writing, specifying wherein Landlord has
failed to perform such obligation; provided however, that if the nature of Landlord’s
obligation is such that more than thirty (30) days are required for performance then
Landlord shall not be in default if Landlord commences performance
within such thirty (30) day period and thereafter diligently pursues the same to
completion.





27









 








          12.4 Late Charges. If any installment of Base Rent, Operating Expenses, or
any other sum due from Tenant shall not be received by Landlord or Landlord’s designee on
or prior to the tenth (10th) day of the month due, Tenant shall pay to Landlord a late
charge equal to four percent (4%) of such overdue amount. Acceptance of such late charge
by Landlord shall in no event constitute a waiver of Tenant’s default with respect to such
overdue amount, nor prevent Landlord from exercising any of the other rights and remedied
granted hereunder.




          12.5 Interest on Past-Due Obligations. Any amount not paid by Tenant to
Landlord when due shall bear interest (“Interest Rate”) from the date due at the lesser of
(a) ten percent (10%) per annum or (b) the maximum rate than allowable by law, except that
interest shall not be payable on any late charge. Payment of interest shall not excuse or
cure any default by Tenant.




     13. Condemnation. If all or any portion of the Premises or the Building are taken under the power of eminent
domain, or sold under the threat of the exercise of said power (all of which are herein called
“condemnation”), Landlord shall have the option in its sole discretion to terminate this Lease as
of the taking of possession by the condemning authority, by giving written notice to Tenant of such
election within thirty (30) days after receipt of notice of a taking by condemnation, provided that
if so much of the Premises is taken, or if access to the Premises is impaired, by such condemnation
as would substantially and adversely affect the operation of Tenant’s business conducted from the
Premises, Tenant shall have the option, to be exercised only in writing within thirty (30) days
after the condemning authority takes such possession, to terminate this Lease as of the date the
condemning authority takes such possession. If neither Landlord nor Tenant terminates this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect, but if a portion
of the Premises shall be taken, the Base Rent and Operating Expenses shall be reduced in the
proportion that the floor area of the Premises taken bears to the total floor area of the Premises.
Common areas taken shall be excluded from the common areas usable by Tenant and no reduction of
Rent shall occur with respect thereto or by reason thereof. Any award for taking of all or any part
of the Premises or the Building under the power of eminent domain or any payment made under threat
of the exercise of such power shall be the property of Landlord, whether such award shall be made
as compensation for diminution in value of the leasehold or for the taking of the fee, or as
severance damages; provided, however, that Tenant shall be entitled to any separate award for loss
of or damage to Tenant’s trade fixtures, goodwill, removable personal property and unamortized
alterations and improvements that have been paid for by Tenant out of Tenant’s own funds (and not
paid for by Landlord out of the Allowance or otherwise). In the event that this Lease is not
terminated by reason of such condemnation, Landlord shall to the extent of severance damages
received by Landlord in connection with such condemnation, repair any damage to the Premises caused
by such condemnation except to the extent that Tenant has been reimbursed therefor by the
condemning authority. Tenant hereby waives any and all rights it might otherwise have pursuant to
Section 265.130 of the California Code of Civil Procedure.



     14. Broker’s Fee. Tenant and Landlord each represent and warrant to the other that neither has had any dealings
with any person, firm, broker or finder (other than the persons whose names are set forth in
Section 1.9 above) in connection with the negotiations of this Lease and/or the
consummation of the transaction contemplated hereby, and that it does not know of any other broker
or other person, firm or entity who is entitled to any commission or finder’s fee



28









 




in connection
with such transactions, and Tenant and Landlord each hereby defend, indemnify and hold the other
harmless from and against any costs, expenses, attorneys’ fees or liability for compensation or
charges which may be claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying party.




     15. Estoppel Certificates and Financial Statements. Tenant shall at any time upon fifteen (15) days prior written notice from the Landlord
execute, acknowledge and deliver to Landlord and any lender of Landlord or prospective purchaser of
the Building a statement in writing (i) certifying that this Lease is unmodified and in full force
and effect (or, if modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date to which the rent and other
charges are paid in advance, if any, (ii) acknowledging that there are not, to Tenant’s knowledge,
any uncured defaults on the part of Landlord, or specifying such defaults if any are claimed; and
(iii) confirming such other factual information regarding the status of this Lease as may be
reasonably requested. Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises. Failure to deliver such statement within such time shall
be conclusive upon such party that (i) this Lease is in full force and effect, without modification
except as may be represented by the requesting party, (ii) there are no uncured defaults in the
requesting party’s performance, and (iii) if Landlord is the requesting party, not more than one
month’s Rent has been paid in advance. Tenant further agrees to deliver to Landlord, or to any
lender or purchaser designated by Landlord, audited financial statements of Tenant for the
preceding three (3) years within fifteen (15) business days following written request therefor from
Landlord, provided that such request shall not be made more than one (1) time per year during the
Term of the Lease. All such financial statements shall be received by Landlord and such lender or
purchaser in confidence and shall be used only for purposes of evaluating the financing or
purchasing of the Building.



     16. Landlord’s Liability. The term “Landlord” as used herein shall mean only the owner or owners, at the time in
question, of the fee title or a Tenant’s interest in any ground lease of the Building. In the event
of any transfer of such title or interest, Landlord herein named (and in case of any subsequent
transfers, then the grantor) shall be relieved from and after the date of such transfer of all
liability as respects Landlord’s obligations thereafter to be performed, provided that any funds in
the hands of Landlord or the then grantor at the time of such transfer, in which Tenant has an
interest, shall be delivered to the grantee. The obligations contained in this Lease to be
performed by Landlord shall be binding on Landlord’s successors and assigns only during their
respective periods of ownership.



     17. Severability. The invalidity of any provision of this Lease as determined by a court of competent
jurisdiction shall in no event affect the validity of any other provision hereof.



     18. Force Majeure. Any obligation of either party which is delayed or not performed due to an act of God, strike,
riot, shortage of labor or materials, war (whether declared or undeclared), laws, governmental
regulations or restrictions or any other governmental action or inaction, or any other cause of any
kind whatsoever which is beyond such party’s reasonable control, shall not constitute a default
hereunder and shall be performed within a reasonable time after the end of the cause for delay or
nonperformance; provided, however, that this Section 18 is not intended to and shall not
extend the time period for the payment of any monetary amounts



29









 




due from either party to the other
party under this Lease nor relieve either party from its monetary obligations to the other under
this Lease.




     19. Time is of the Essence. Time is of the essence with respect to the obligations to be performed under this Lease.



     20. Additional Rent. All monetary obligations of Tenant to Landlord under the terms of this Lease, including but
not limited to any expenses payable by Tenant hereunder, shall be deemed to be rent.



     21. Incorporation of Prior Agreements; Amendments. This Lease contains all agreements of the parties with respect to any matter mentioned herein.
No prior or contemporaneous agreement or understanding pertaining to any such matter shall be
effective. This Lease may be modified in writing only, signed by the parties in interest at the
time of the modification. Except as otherwise stated in this Lease, Tenant hereby acknowledges that
neither the Broker designated in Section 1.9 above, nor the Landlord nor any employee or
agent of any of such persons has made any oral or written warranties or representations to Tenant
relative to the condition or use by Tenant of the Premises or the Building and Tenant acknowledges
that, subject only to the provisions of Section 2.2 above, Tenant assumes all
responsibility regarding the California Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all Applicable Laws in effect during
the Term of this Lease.



     22. Notices. Any notice, demand or statement required or permitted to be given hereunder shall be in
writing and may be given by personal delivery, by certified or registered United States Mail (“U.S.
Mail”), by recognized overnight courier service, or by telecopier, addressed to a party at the
address specified below or such other address for notice purposes as may be later specified by
notice to the other party, except that upon Tenant’s taking possession of the Premises, the
Premises shall constitute Tenant’s address for notice purposes. Notices shall be deemed given
upon actual receipt at the address required, or if by registered or certified U.S. Mail, postage
prepaid, when delivered, or if by telecopier, upon electronic confirmation of good receipt by the
receiving telecopier, whichever first occurs. A copy of all notices required or permitted to be
given to Landlord hereunder shall be concurrently transmitted to such other party or parties at
such addresses as Landlord may from time to time hereafter designate by notice to Tenant.



	 	 	 
	If to Landlord:

	 	Biomed Realty, L.P.

17140 Bernardo Center Drive, Suite 222

San Diego, CA 92128

Attn: General Counsel/Real Estate

Telecopier: (858) 485-9840
	 
	 	 
	If to Tenant:

	 	Artes Medical, Inc.

5870 Pacific Center Blvd.

San Diego, CA 92121






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	 	Attn: Peter Wulff

Telecopier: (858) 550-9997
	 
	 	 
	With a copy to:

	 	Heller Ehrman LLP

333 Bush Street

San Francisco, CA 94108

Attn: K. William Neuman, Esq.

Telecopier: (415) 772-6268






     23. Waivers. No waiver by either party of any provision hereof shall be deemed a waiver of any other
provision hereof or of any subsequent breach by the other party of the same or any other provision.
Either party’s consent to, or approval of, any act shall not be deemed to render unnecessary the
obtaining of such party’s consent to or approval of any subsequent act by the other party. The
acceptance of Rent hereunder by Landlord shall not be a waiver of any preceding breach by Tenant of
any provision hereof, 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.



     24. Condition Precedent. This Lease shall not be effective until, and it shall be a condition precedent to the
effectiveness of this Lease that, the following conditions have been satisfied: (a) Landlord shall
have completed its purchase of the Building and the Premises (“Acquisition”) from The Lichter
Family Trust First Amended and Restated Declaration of Trust Dated November 7, 1996 and The
Satterlee Family Trust UTD April 24, 1986, and (b) Infosonics and Landlord shall have executed a
termination agreement for the termination of Infosonics’ lease of the 5880 Property in a form
acceptable to Landlord in its sole and absolute discretion. Landlord shall promptly notify
Tenant of the satisfaction or failure of the immediately preceding conditions precedent. If the
conditions set forth in this Section 24 are not satisfied or waived by both Landlord and Tenant on
or before December 1, 2007, this Lease shall become null and void.



     25. Holding Over. If Tenant, with or without Landlord’s consent, remains in possession of all or any part of the
Premises after the expiration or earlier termination of the Term of this Lease, such occupancy
shall be a tenancy from month to month, only, upon all of the provisions of this Lease pertaining
to the obligations of Tenant, except for Base Rent. If Tenant holds over after the expiration or
earlier termination of the Term of this Lease for thirty (30) days or less, then for such thirty
(30) day hold-over period (or portion thereof) Tenant shall pay monthly Base Rent in advance in an
amount equal to one hundred twenty-five percent (125%) of monthly Base Rent payable immediately
preceding the expiration of the Term. If Tenant holds over for more than thirty (30) days after the
expiration or earlier termination of the Term of this Lease, then for such hold-over period
beginning on the thirty-first (31st) day after the expiration or earlier termination of the Term of
this Lease, Tenant shall pay monthly Base Rent in advance in an amount equal to one hundred fifty
percent (150%) of monthly Base Rent payable immediately preceding the expiration of the Term.
Nothing contained in this Section 25 shall be construed as consent by Landlord to any
holding over by Tenant, and Landlord expressly reserves the right to require Tenant to surrender
possession of the Premises to Landlord as provided in this Lease upon the expiration or other
termination of this Lease. The provisions of



31









 




this Section 25 shall not be deemed to limit
or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If
Tenant fails to surrender the Premises upon the termination or expiration of this Lease and
Landlord provides Tenant with at least fifteen (15) business days prior written notice that
Landlord has a signed proposal or lease from a succeeding tenant to lease the Premises, in addition
to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify
and hold Landlord harmless from all loss, costs (including reasonable attorneys’ fees) and
liability resulting from such failure, including, without limiting the generality of the foregoing,
any claims made by any succeeding Tenant founded upon such failure to surrender, and any lost
profits to Landlord resulting therefrom.




     26. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, whenever possible, be
cumulative with all other remedies at law or in equity.



     27. Covenants and Conditions. Each provision of this Lease to be performed by Tenant shall be deemed both a covenant and a
condition.



     28. Binding Effect; Choice of Law. Subject to any provisions hereof restricting assignment or subletting by Tenant and subject to
the provisions of Section 16, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the laws of the State of
California and any litigation concerning this Lease between the parties hereto shall be initiated in the County of
San Diego.



     29. Subordination.



          29.1. This Lease, including but not limited to any option or right of first refusal granted
hereby, is subordinate to any ground lease, mortgage, deed of trust or any other security interest
now or hereafter affecting the Building, and to any and all advances made on the security thereof
and to all renewals, modifications, consolidations, replacements and extensions thereof, provided,
however, that Tenant’s subordination of this Lease to any future ground lessor or holder of a
security interest affecting the Building is conditioned upon Tenant’s receipt of a non-disturbance
agreement in favor of Tenant from such ground lessor or holder of a security interest.
Notwithstanding such subordination, Tenant’s right to quiet possession of the Premises shall not be
disturbed if Tenant is not in default after the lapse of any applicable cure periods and so long as
Tenant shall pay the rent and observe and perform all of the provisions of this Lease, unless this
Lease is otherwise terminated pursuant to its terms. If such a lender exists as of the date hereof,
on or prior to the Commencement Date, Landlord shall obtain a Subordination, Non-Disturbance and
Attornment Agreement executed by its lender in favor of Tenant, whereby such lender agrees, among
other things, to recognize this Lease and Tenant’s right to quiet possession of the Premises in the
event that such lender becomes the owner of the Building through foreclosure or otherwise.
Notwithstanding such subordination, any ground lessor, mortgagee, trustee or holder of any other
security interest shall have the right, at its election upon written notice to Tenant, to have this
Lease be made prior to its ground lease or the lien of its mortgage, deed of trust or other
security interest, whether this Lease is dated prior or subsequent to the date of said ground
lease, mortgage, deed of trust or other security interest or the date of recording thereof. Upon
termination of any ground lease or foreclosure of any mortgage, deed of trust or other security
interest, Tenant shall attorn, without any deductions or set offs whatsoever, to the ground
Landlord or any purchaser upon foreclosure.




32









 








          29.2. Tenant agrees to execute any reasonable documents required to effectuate subordination
or attornment, or to make this Lease prior to any ground lease or any mortgage, deed of trust or
other security interest, if requested by Landlord or any ground lessor or holder of a mortgage,
trust deed or other security interest. Tenant’s failure to execute such documents within fifteen
(15) days after written demand shall constitute a material default by Tenant hereunder without
further notice to Tenant.




     30. Attorneys’ Fees; Jury Trial. If either party named herein brings an action to enforce the terms hereof or declare rights
hereunder, the prevailing party shall be entitled to reasonable attorneys’ fees paid by the losing
party as fixed by the court whether or not such action is pursued to decision or judgment. The
attorneys’ fees award shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys’ fees reasonably incurred in good faith. Landlord shall be
entitled to reasonable attorneys’ fees and all other costs and expenses incurred in the preparation
and service of notice of default and consultations in connection therewith, whether or not a legal
action is subsequently commenced. Each party hereby waives any right to a trial by
jury in any action to enforce the specific performance of this Lease, for damages for the breach
hereof, or otherwise for enforcement of any remedy hereunder.



     31. Landlord’s Access.



          31.1. Landlord and Landlord’s agents shall have the right to enter the Premises at reasonable
times after twenty-four (24) hours notice to Tenant (except in the event of an emergency) for the
purpose of inspecting the same, performing any services required of Landlord, showing the same to
prospective purchasers, lenders, or tenants, taking such measures, erecting such scaffolding or
other necessary structures, making such alterations, repairs, improvements, or additions to the
Premises or to the Building as Landlord may reasonably deem necessary or desirable and the
erecting, using and maintaining of utilities, services, pipes and conduits through the Premises
and/or other premises as long as there is no material adverse effect. on Tenant’s use of the
Premises. Landlord may at any time during the last one hundred twenty (120 days) of the Tern hereof
place on or about the Premises “For Lease” signs.




          31.2. All activities of Landlord pursuant to this Section 31 shall be without
abatement of Rent, nor shall Landlord have any liability to Tenant for the same.




          31.3. Landlord shall have the right to retain keys to the Premises and to unlock all doors in
or upon the Premises other than files, vaults and safes, and in the case of emergency to enter the
Premises by any reasonably appropriate means, and any such entry shall not be deemed a forcible or
unlawful entry or detainer of the Premises or an eviction. Tenant waives any charges for damages
or injuries or interference with Tenant’s property or business in connection therewith, except to
the extent resulting from or arising out of the gross negligence or intentional acts of Landlord or
any of its agents, contractors or employees.




     32. Auctions and Other Sales. Tenant shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any
auction upon the Premises or the common areas without Landlord’s prior written consent.
Notwithstanding anything to the contrary in this Lease,



33









 




Landlord shall not be obligated to exercise any standard of reasonableness in determining whether to grant such consent.




     33. Signs. Subject to Landlord’s prior written approval (which shall not be unreasonably withheld,
conditioned or delayed), Tenant shall be permitted to install, at Tenant’s cost, the maximum
identity signage on the Building permitted by law at locations reasonably approved by Landlord
(including, without limitation, a sign on the top of the Building) and one monument sign at a
location reasonably approved by Landlord all in compliance with the CC&Rs and all applicable
governmental sign regulations. Landlord agrees that, during the Term of this Lease, Tenant shall
have the exclusive right to signage on and in the Building. Following the installation of the
signs, Tenant shall maintain the same, at Tenant’s sole cost, in a clean and sightly condition and
in good working order throughout the Lease Term. Upon the expiration or earlier termination of this
Lease, Tenant shall, at Tenant’s sole cost, remove all signage from the Premises and repair any and
all damage, if any, caused by such removal.



     34. Merger. The voluntary or other surrender of this Lease, or a mutual cancellation thereof, or a
termination by Landlord, shall not work a merger, and shall, at the option of Landlord, terminate
all or existing subtenancies or may, at the option of Landlord, operate as an assignment to
Landlord of any or all such subtenancies.



     35. Consents. Except for matters for which there is a standard of consent or approval specifically set forth
in this Lease (other than a reasonableness standard), and except for matters which could adversely
affect (i) the Building Systems, (ii) the structural aspects of the Building, (iii) the common
areas, or (iv) the exterior appearance of the Building or any buildings therein (including, without
limitation, signs), in which case Landlord shall have the right to act in its sole and absolute
discretion as to the matters described in items (i), (ii), (iii) and (iv) above, any time the
consent or approval of Landlord or Tenant is required under this Lease, such consent or approval
shall not be unreasonably withheld, conditioned or delayed.



     36. Quiet Possession. Upon Tenant paying the rent for the Premises and observing and performing all of the
covenants, conditions and provisions on Tenant’s part to be observed and performed hereunder,
Tenant shall have quiet possession of the Premises for the entire Term subject to all of the
provisions of this Lease.



     37. Right of First Refusal to Purchase Building. Provided that Tenant is not in default under this Lease, Tenant shall have a ROFR (as defined
below), on the following terms and conditions (which ROFR shall be superior to the similar ROFR of
the Tenant of the 5870 Building with respect to the Combined Building Property (if the Building
Property and the 5870 Building Property are offered for sale together), as such terms are defined
below):



               (a) Tenant shall have the ROFR during the Term. Landlord agrees that during the Term,
prior to accepting an offer to purchase either (a) the Building and the underlying real
property and associated improvements (the “Building Property”), or (b) both the Building
Property and the 5870 Building and the underlying real property and associated improvements
(the “5870 Building Property”, and together with the Building Property, the “Combined
Building Property”), from any third party, Landlord shall promptly submit a copy of any bona
fide offer to purchase the Building Property or the Combined Building Property



34









 




(each as applicable, the “Offer Property”) from such third party that Landlord is prepared to accept
(“Offer”) to Tenant. Tenant shall have the right (“ROFR”) to elect to purchase the Offer
Property on terms and conditions identical to those contained in the Offer, provided that
Tenant delivers written notice exercising its ROFR within five (5) business days following
delivery of the copy of the Offer from Landlord to Tenant. If Tenant duly and timely
exercises the ROFR, Landlord and Tenant shall promptly enter into a commercially reasonable
purchase agreement (“Purchase Agreement”) for the Offer Property on terms and conditions
identical to those contained in the Offer (modified as appropriate (i) to reflect the Tenant and its organizational
structure, (ii) to delete any provisions that were particular to the third party or could
not generally be satisfied by anyone other than the third party, and (iii) if the third
party had, prior to the submission of the Offer to Tenant, been afforded a period of time to
review any documents or conduct any due diligence or arrange financing with respect to the
Offer Property, to include an equivalent period of time for Tenant to do the same). If for
any reason, Tenant fails to duly and timely exercise the ROFR, or if Tenant properly
exercises such right but thereafter for any reason does not enter into the Purchase
Agreement within ten (10) days after exercise of the ROFR (unless the delay is caused by
Landlord), then Landlord shall be free to sell the Offer Property to the third party on the
terms and conditions of the Offer, and the ROFR shall be null and void; provided, however,
that Tenant shall have the ROFR with respect to any subsequent sale of any Offer Property by
the new owner of the Offer Property. In the event that Landlord does not sell the Offer
Property to the third party on the terms and conditions of the Offer, the ROFR shall
continue in accordance with the foregoing procedure, provided that Tenant is not in default
under this Lease after the lapse of any applicable cure periods. Notwithstanding the
foregoing, however, if Tenant timely exercises the ROFR and fails to enter into a Purchase
Agreement on the terms and conditions of the applicable Offer within the foregoing ten (10)
day period (through no fault of Landlord), then the ROFR and the provisions of this section
shall terminate and be of no further force and effect. The ROFR is personal to the original
Tenant hereunder and is not assignable to any third party except to an Affiliate in
connection with a Permitted Transfer.




               (b) In the event that the ROFR is duly exercised, this Lease shall terminate and be of
no further force and effect (except with respect to Tenant’s and Landlord’s indemnification
obligations under this Lease) upon the closing of Tenant’s purchase of the Offer Property.
In the event that the ROFR is exercised but the Escrow does not close, this Lease shall
continue in full force and effect. In the event that the ROFR terminates pursuant to this
Section 37, Tenant shall execute and acknowledge, and Landlord may cause to be
recorded, a quitclaim deed in commercially reasonable form (“Quitclaim Deed”) within ten
(10) business days following Landlord’s demand for the same. If Tenant fails to execute the
Quitclaim Deed within such ten (10) business day period, Landlord may execute the Quitclaim
Deed on behalf of Tenant as Tenant’s attorney-in-fact. Tenant does hereby make and
irrevocably appoint Landlord as Tenant’s attorney-in-fact and in Tenant’s name, place and
stead, to execute such Quitclaim Deed.



     38. Security Measures; Landlord’s Reservations.



          38.1. Except as otherwise provided herein, Tenant hereby acknowledges that Landlord shall have
no obligation whatsoever to provide guard service or other security measures for the benefit of the
Premises or the Building. Tenant assumes all responsibility for the protection of Tenant, its
agents, and invitees and the property of Tenant and of Tenant’s





35









 







agents and invitees from acts of
third parties. Nothing herein contained shall prevent Landlord at Landlord’s sole option from
providing security protection for the Building or any part thereof.




          38.2. Landlord shall have the following rights:




               (a) To change the name, address or title of the Building upon not less than ninety (90)
days prior written notice to Tenant provided that Landlord shall pay for Tenant’s reasonable
and documented costs for the (i) printing and mailing of announcements of such change(s) and
(ii) printing of new business cards, in an amount not to exceed One Thousand and 00/100
Dollars ($1,000.00);



               (b) Subject to Tenant’s approval (which approval shall not be unreasonably withheld)
to, at Landlord’s expense, provide and install Building standard graphics on the Building
and such portions of the common areas as Landlord shall reasonably deem appropriate;



               (c) Subject to Tenant’s approval (which approval shall not be unreasonably withheld) to
place such signs, notices or displays as Landlord reasonably deems necessary or advisable
upon the roof and/or exterior of the Building or any other building in the Building or on
pole signs or anywhere in the common areas; provided, however, in no event shall such signs,
notices or displays contain the name of any third party.



          38.3. Tenant shall not suffer or permit anyone, except in emergency, and except as otherwise
provided herein, to go upon the roof of the Building without Landlord’s consent.




     39. Structures. The obstruction of Tenant’s view, air, or light by any structure erected in the vicinity of
the Building, whether by Landlord or third parties, shall in no way affect this Lease or impose any
liability upon Landlord.



     40. Authority. If Tenant is a corporation, trust, or general or limited partnership, Tenant, and each
individual executing this Lease on behalf of such entity represent and warrant that such individual
is duly authorized to execute and deliver this Lease on behalf of said entity and shall, within
fifteen (15) days after execution of this Lease, deliver to Landlord evidence of such authority
reasonably satisfactory to Landlord.



     41. Execution. Preparation of this Lease by Landlord or Landlord’s agent and submission of same to Tenant
shall not be deemed an offer to Tenant to lease. This Lease shall become binding upon Landlord and
Tenant only when fully executed by both parties. This Lease may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute one document.



     42. Lender Modification. Tenant agrees to make such reasonable modifications to this Lease as may be reasonably
required by a lender in connection with obtaining of normal financing or refinancing of the
Building provided that in no event shall such modifications materially increase Tenant’s
obligations under this Lease or materially decrease Tenant’s rights under this Lease.



     43. Hazardous Material.



36









 





          43.1. Except for supplies typically used in the ordinary course of business in commercially
reasonable amounts in accordance with all Applicable Laws, Tenant shall not cause or permit any
Hazardous Material (as hereinafter defined) to be brought upon, kept or used in or about the
Premises by Tenant, its agents, employees, contractors or invitees, without the prior written
consent of Landlord, which consent may be granted or withheld in Landlord’s sole discretion. For
the purpose of this Lease, “Hazardous Material” shall include oil, flammable explosives, asbestos,
urea formaldehyde, radioactive materials or waste, or other hazardous, toxic, contaminated or
polluting materials, substances or wastes, including, without limitation, any “hazardous
substances,” “hazardous wastes,” “hazardous materials” or “toxic substances” as such terms are
defined in the Resource Conservation and Recovery Act and the Comprehensive Environmental Response,
Compensation and Liability Act, and in any other law, ordinance, rule, regulation or order
promulgated by the federal or state government, or any other governmental entity having
jurisdiction over the Building or the parties to this Lease, but excluding mold, fungus, dust and
other natural contaminants. If Tenant breaches the obligations set forth in this paragraph, or if
the presence of Hazardous Material in the Premises or at the Building by Hazardous Material
otherwise occurs for which Tenant is legally liable to Landlord for damage resulting therefrom,
then Tenant shall defend, indemnify and hold harmless Landlord and its agents, members, partners
and employees from any and all claims, judgments, damages, penalties, fines, costs, liabilities or
losses, including, without limitation, diminution in value of the Building, damages for the loss or
restriction on use of rentable or usable space in or of any amenity of the Building, damages
arising from any adverse impact on leasing space in the Building, sums paid in settlement of
claims, and any attorneys’ fees, consultant fees and expert fees which arise during or after the
Term of this Lease as a result of such contamination. This indemnification of Landlord by Tenant
shall survive expiration or termination of this Lease and includes, without limitation, costs
incurred in connection with any investigation of site conditions or any cleanup, remedial, removal
or restoration work required by federal, state or local governmental agency or political
subdivision because of Hazardous Material present in, or under the Premises. Without limiting the
foregoing, if the presence of any Hazardous Material caused or permitted by Tenant results in any
contamination of the Building, Tenant shall promptly take all actions, at its sole expense, as are
necessary to return the Building to the condition existing prior to the introduction of any such
Hazardous Material; provided that Landlord’s approval of such actions shall first be obtained,
which approval shall not be unreasonably withheld so long as such actions would not potentially
have any material adverse long-term or short-term effects on the Building. Landlord shall be
responsible, at Landlord’s sole cost and expense and not as a part of Operating Expenses, for the
removal, encapsulation or remediation (as applicable) of any Hazardous Material which existed in,
on or about the Building as of the Commencement Date and for which Tenant is not otherwise
responsible for pursuant to this Section 43, to the extent that such removal, encapsulation
or remediation is required by Applicable Laws. Landlord shall defend, indemnify and hold harmless
Tenant and its agents, members, partners and employees, from and against any and all loss of rents
and/or damages, liabilities, judgments, costs, claims, liens, expenses, penalties, permits and
attorney’s and consultant’s fees to the extent arising out of or involving any Hazardous Material for which
Landlord is responsible for pursuant to this Section 43.




          43.2. Tenant shall deliver to Landlord true and correct copies of the following documents
(hereinafter referred to as the “Documents”) relating to the current handling, storage, disposal
and emission of Hazardous Materials by Tenant at the Building Property (collectively,





37









 







“Hazardous
Materials Activities”), with such delivery of the Documents to occur prior to the Commencement Date
or, if unavailable at that time, promptly following the receipt from or submission to any
governmental agency or authority: permits for any Hazardous Materials Activities; closure reports
relating to any Hazardous Materials; any storage and management plans for Hazardous Materials which
have been submitted to or approved by any governmental agency or authority; and any currently
uncured notices of violation of Applicable Laws from any governmental agency or authority relating
to any Hazardous Materials Activities. Tenant has not installed any underground storage tanks and
no underground storage tanks shall be permitted to be installed by Tenant without the prior
approval of Landlord, which approval may be withheld by Landlord in its sole discretion. Tenant
shall not be required to provide Landlord with any portion of the Documents containing information
of a proprietary nature that, in and of themselves, do not contain a reference to any Hazardous
Materials or activities related to Hazardous Materials.




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




     44. Landlord Exculpation. It is expressly understood and agreed that notwithstanding anything in this Lease to the
contrary, and notwithstanding any Applicable Laws to the contrary, the liability of Landlord
hereunder and any recourse by Tenant against Landlord shall be limited solely and exclusively to
the interest of Landlord in and to the Building, including the rents, profits and proceeds
therefrom. Neither Landlord, nor any of its members, affiliates, tenants-in-common, managers or
employees shall have any personal liability therefor, and Tenant hereby expressly waives and
releases such personal liability on behalf of itself and all persons claiming by, through or under
Tenant.



     45. Prohibition Against Recording. Neither this Lease, nor any memorandum, affidavit or other writing with respect thereto, shall
be recorded by Tenant or by anyone acting through, under or on behalf of Tenant.



     46. Rules and Regulations. In the event of a conflict between the terms and provisions of this Lease and the Rules and
Regulations attached hereto as Exhibit “D”, the terms and provisions of this Lease shall
prevail.



     47. Tenant Exculpation. No director, officer, employee or agent of Tenant shall have any personal liability related to
this Lease, and Landlord expressly waives and releases such personal liability on behalf of itself
and all persons claiming by, through or on behalf of Landlord. In no event will Tenant be
responsible for any consequential damages (including, without limitation, lost profits) related to
this Lease, except pursuant to California Civil Code Sections 1951.2 and 1951.4 and as provided in
Section 25 above.



     48. Counterparts. This Lease may be executed by the parties hereto in any number of counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. An executed counterpart of



38









 




this Lease delivered by
facsimile transmission by either party shall be deemed an originally executed counterpart.




     49. Lot Split. Landlord reserves the right to record a subdivision of the single legal parcel currently
containing the Building and the building located at 5870 Pacific Center Boulevard into two (2)
legal parcels (“Lot Split”) in the Official Records of San Diego County; provided,
however, that any documentation of the Lot Split is subject to the review and reasonable
approval by Tenant to ensure that Tenant’s vehicular and pedestrian access rights to the 5880
Building over the applicable areas of the 5870 Parcel are preserved for the benefit of Tenant.
Following the Lot Split, one new parcel would consist of the portion of the original parcel located
at 5880 Pacific Center Boulevard (“5880 Parcel”), including the Building, and the other new parcel
will consist of the portion of the original parcel located at 5870 Pacific Center Boulevard (“5870
Parcel”), including the building thereon. If Landlord proceeds with the Lot Split, Tenant’s
obligations under Section 3.3 will continue with respect to the 5880 Parcel, and all references to
the “5880 Facilities” shall mean all facilities included within the definition thereof that are
located on the 5880 Parcel.



     50. Attachments. Attached hereto are the following documents which constitute a part of this Lease:



     Exhibit “A”: The Premises



     Exhibit “B”: Parking Area



     Exhibit “C”: 5880 Facilities



     Exhibit “D”: Rules and Regulations



39









 





     IN WITNESS WHEREOF, this Building Lease Agreement is executed as of the Effective Date.



	 	 	 	 	 
	LANDLORD:  	 BIOMED REALTY, L.P.,

a Maryland limited partnership

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	TENANT:  	 ARTES MEDICAL, INC.,

a Delaware corporation

 	 
	 	By:  	 	 
	 	 	Name:  	Peter Wulff 	 
	 	 	Title:  	Chief Financial Officer 	 
	 



Signature Page to Building Lease Agreement





 









 








EXHIBIT “A”




The Premises 




EXHIBIT “A”





 









 








EXHIBIT “B”




Parking Area




EXHIBIT “B”




 









 








EXHIBIT “C”




5880 Facilities




EXHIBIT “C”




 









 








EXHIBIT “D”




Rules and Regulations




General Rules



1. Tenant shall not suffer or permit the obstruction of any common areas, including
driveways and walkways.



2. Landlord reserves the right to refuse access to any persons Landlord in good faith judges
to be a threat to the safety, reputation, or property of the Building and/or its occupants.



3. Tenant shall not make or permit any noise or odors that annoy or interfere with other
tenants or persons having business within the Building.



4. Tenant shall not keep animals (except guide animals) or birds within the Building, and
shall not bring bicycles, motorcycles or other vehicles into portions of the Building that
are not designated as authorized for same (provided, however, that Tenant may bring bicycles
into the Premises and may use a forklift in the warehouse portion of the Premises).



5. Tenant shall not make, suffer or permit litter except in appropriate receptacles for that
purpose.



6. Tenant shall be responsible for the inappropriate use of any toilet rooms, plumbing or
other utilities, except for use by Landlord’s agents or employees. No foreign substances of
any kind are to be inserted therein.



7. Except as permitted by the Lease, Tenant shall not deface the walls, partitions or other
surfaces of the Premises or the Building.



8. Tenant shall not suffer or permit anything in or around the Premises that causes
excessive vibration or floor loading in any part of the Building.



9. Furniture, significant freight and equipment shall be moved into or out of the Building
only with the Landlord’s knowledge and consent, and subject to such reasonable limitations,
techniques and timing, as may be designated by Landlord. Tenant shall be responsible for any
damage to the Building arising from any such activity.



10. Tenant shall not employ any service or contractor for services or work to be performed
in the Building, except as reasonably approved by Landlord.



11. Tenant shall return all keys at the termination of its tenancy and shall be responsible
for the cost of replacing any keys that are lost.




EXHIBIT “D”




 









 







12. Except as permitted by the Lease, no window coverings, shades or awnings shall be
installed or used by Tenant without Landlord’s prior written consent, which shall not be
unreasonably withheld, conditioned or delayed.



13. No tenant, employee or invitee shall go upon the roof of the Building except as
expressly provided in the Lease.



14. Tenant shall not suffer or permit smoking or carrying of lighted cigar or cigarettes in
areas reasonably designated by Landlord or by applicable governmental agencies as nonsmoking
areas.



15. Tenant shall not use any method of heating or air conditioning other than as provided by
Landlord or any dedicated system approved by Landlord.



16. The Premises shall not be used for lodging, cooking or food preparation. Notwithstanding
the foregoing, Underwriters’ Laboratory-approved equipment and microwave ovens may be used
in the Premises for heating food and brewing coffee, tea, hot chocolate and similar
beverages, provided that such use is in accordance with all Applicable Laws, and does not
cause odors which are objectionable to Landlord and other tenants.



17. Tenant shall comply with all safety, fire protection and evacuation regulations
established by Landlord or any applicable governmental agency.



18. Landlord reserves the right to waive any one of these rules or regulations, and/or as to
any particular tenant, and any such waiver shall not constitute a waiver of any other rule
or regulation or any subsequent application thereof to such tenant.



19. Tenant assumes all risks from theft or vandalism to the Premises and agrees to keep the
Premises locked as may be required.



20. Landlord reserves the right to make such other reasonable rules and regulations as it
may from time to time deem necessary for the appropriate operation and safety of the
Building and its occupants. Landlord shall provide Tenant with copies of any new and/or
modified rules or regulations prior to the effective date thereof. Tenant agrees to abide by
these and such other rules and regulations.




Parking Rules



1. Parking areas shall be used only for parking passenger vehicles and delivery trucks.



2. Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant
or Tenant’s employees, suppliers, shippers, customers, or invitees to be loaded, unloaded or
parked in areas other than those designated by Landlord for such activities.




EXHIBIT “D”




 









 







3. Landlord reserves the right to refuse the sale of monthly identification devices to any
person or entity that willfully refuses to comply with the applicable rules, regulations,
laws and/or agreements.



4. Users of the parking areas will obey all posted signs and park only in the areas
designated for vehicle parking.



5. Unless otherwise instructed, every person using the parking areas is required to park and
lock his own vehicle. Landlord will not be responsible for any damage to vehicles, injury to
persons or loss of property, all of which risks are assumed by the party using the parking
areas.



6. The maintenance of vehicles in the parking areas or common areas is prohibited. The
washing, waxing or cleaning of vehicles in designated areas shall be permitted during normal
business hours.



7. Tenant shall be responsible for seeing that all its employees, agents and invitees comply
with the applicable parking rules, regulations, laws and agreements.



8. Landlord reserves the right to reasonably modify these rules and/or adopt such other
reasonable and non-discriminatory rules and regulations as it may deem necessary for the
property operation of the parking area.



9. Such parking use as is herein provided is intended merely as a license only and no
bailment is intended or shall be created hereby.




EXHIBIT “D”