**Exhibit 10.31**

 

UNIVERSITYPACIFIC CENTRE OFFICE LEASE

 

 

BETWEEN

 

**ALECTAPENSIONSFÖRSÄKRING, ÖMSESIDIGT,**

a Swedish company

(*“*Landlord*”*)

 

 

and

 

 

**MAXIMPHARMACEUTICALS, INC.,**

a Delaware corporation

(“Tenant”)

 

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**UNIVERSITY PACIFIC CENTRE OFFICE LEASE**

 

TENANT:

MAXIM PHARMACEUTICALS, INC.

 

**TABLE OFCONTENTS**

 
| **ARTICLE 1.**  | **TERM**                                       |
|-----------------|------------------------------------------------|
|            |                                           |
| **ARTICLE 2.**  | **RENT**                                       |
|            |                                           |
| **ARTICLE 3.**  | **ADDITIONAL RENT**                            |
|            |                                           |
| **ARTICLE 4.**  | **SERVICES AND FACILITIES**                    |
|            |                                           |
| **ARTICLE 5.**  | **ACCEPTANCE OF PREMISES**                     |
|            |                                           |
| **ARTICLE 6.**  | **ALTERATIONS AND REPAIRS**                    |
|            |                                           |
| **ARTICLE 7.**  | **PREMISES**                                   |
|            |                                           |
| **ARTICLE 8.**  | **ASSIGNMENT AND SUBLETTING**                  |
|            |                                           |
| **ARTICLE 9.**  | **NON-LIABILITY AND INDEMNIFICATION**          |
|            |                                           |
| **ARTICLE 10.** | **INSURANCE**                                  |
|            |                                           |
| **ARTICLE 11.** | **TRANSFER OF LANDLORD’S INTEREST**       |
|            |                                           |
| **ARTICLE 12.** | **DAMAGE OR DESTRUCTION**                      |
|            |                                           |
| **ARTICLE 13.** | **DEFAULTS  AND REMEDIES**                     |
|            |                                           |
| **ARTICLE 14.** | **EMINENT DOMAIN**                             |
|            |                                           |
| **ARTICLE 15.** | **SUBORDINATION**                              |
|            |                                           |
| **ARTICLE 16.** | **SURRENDER OF PREMISES; REMOVAL OF PROPERTY** |
|            |                                           |
| **ARTICLE 17.** | **MISCELLANEOUS**                              |

 

 

EXHIBITS:

 
| A. | Floor  Plan of Premises      |
|----|------------------------------|
| B. | Work  Letter Agreement       |
| C. | Rules  and Regulations       |
| D. | Basic  Monthly Rent Schedule |
| E. | Option  to Renew and Extend  |
| F. | Right  of First Refusal      |
| G. | Right  of First Offer        |

 

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**STANDARD OFFICE LEASE**

 

 

This Lease is made asof July 31, 2003, between ALECTA PENSIONSFÖRSÄKRING,ÖMSESIDIGT, a Swedish company (“Landlord”), and MAXIM PHARMACEUTICALS,INC., a Delaware corporation (“Tenant”), who agree as follows:

 

**LEASE OF PREMISES**

 

Landlord leases toTenant and Tenant leases from Landlord, upon the provisions and conditions setforth herein, those certain premises (“Premises”) described on Exhibit“A”attached hereto, which Premises are located in that certain building known asUniversity Pacific Centre, 8899 University Center Lane, San Diego, California(“Building”), and situated upon that certain real property as more particularlydescribed on Exhibit “A” (“Real Property”). The Real Property and the Building are referred to collectively hereinas the “University Project.”

 

**BASIC LEASE PROVISIONS**

 

The following are theBasic Lease Provisions of this Lease. Other Sections of this Lease explain and define the Basic LeaseProvisions in more detail and are to be read in conjunction herewith.  In the event of any conflict between theBasic Lease Provisions and the other Sections of this Lease, the other Sectionof the Lease shall control.

 

1.             BUILDING:  University Pacific Centre, 8899 UniversityCenter Lane, San Diego, California 92122.

 

2.             PREMISES:

a.             Floor(s):  3rd and 4th Floors

b.             Suite(s):  330, 340, 350, 355 and 400

c.             Rentable area of the Premises:approximately 37,651 BOMA rentable square feet.

d.             Usable area of the Premises:approximately 35,491 BOMA usable square feet.

 

3.             TERM:   Seven (7) years, plus any partial month followingthe Commencement Date if the Commencement Date does not occur on the first dayof a calendar month.

 

4.             COMMENCEMENTDATE:  September 13, 2003.

 

5.             BASICMONTHLY RENT:  See Exhibit “D.”

 

6.             TENANT’SPRO RATA SHARE; BASE YEAR:  39.02%;such share is a fraction, the numerator of which is the total rentable area ofthe Premises (37,651 sq. ft.) and the denominator of which is the totalrentable area of the Building (96,490 sq. ft.); Base Year:  2004.

 

7.             SECURITYDEPOSIT: $69,731,56

 

8.             BROKERS:   Burnham Office Consulting Partners and TheStaubach Company - West.

 

9.             ADDRESSES:

 
| Landlord:                                                                                                                                                                           |   | Tenant:                                                                                                                  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                |   |                                                                                                                     |
| ALECTA  PENSIONSFÖRSÄKRING,  ÖMSESIDIGT, a Swedish company  Alecta Real Estate (USA), Inc.  10 Glenville Street  Greenwich, CT 06831  Attn:  Martin Van Ardenne |   | MAXIM  PHARMACEUTICALS, INC.  8899 University Center Lane, Suite 400  San Diego, CA  92122  Attn:  Dale Sander |
|                                                                                                                                                                                |   |                                                                                                                     |
| with  a copy to:                                                                                                                                                                    |   |                                                                                                                     |
|                                                                                                                                                                                |   |                                                                                                                     |
| STEPSTONE  REAL ESTATE SERVICES1660 Union Street, 4th floor  San Diego CA 92101Attn:   Lisa Ledbetter                                                                          |   |                                                                                                                     |

 

10.           PERMITTEDUSES:  General office uses and otherrelated uses that are: (a) permitted under the zoning for the Building andapplicable law and (b) comparable with other first class office buildings inSan Diego, California.  Notwithstandingthe foregoing, the Premises shall not be used for any of the following uses:treatment or evaluation of patients, whether human or animal; dispensing ofmedication or medical equipment; or any other retail medical use.

 

11.           PARKING:  Tenant shall be entitled to, from time totime, rent up to four (4) parking permits per 1,000 usable square feet leased,all within the designated parking area, surface and structure.  At Tenant’s option, up to eighteen (18) ofthese parking permits shall be for parking spaces that are covered and designatedreserved for Tenant’s executives.  Inaddition, Landlord shall provide, pursuant to Tenant’s request, three (3)reserved spaces in front of the Building designated specifically for Tenant’svisitors and vendors.  Monthly parkingcharges shall be at $25.00 per non

 

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reservedspace and $75.00 per reserved space throughout the initial Term.** **Allnon-reserved parking charges shall be waived during the first three (3) yearsof the Term.  Landlord reserves theright to separately charge Tenant’s guests and visitors for any additionalparking.

 

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**ARTICLE 1****.**

 

# **TERM**

 

1.1           Commencement Date. The Term shall commence on the Commencement Date and shall end on thedate specified in the Basic Lease Provisions.

 

1.2           Existing Leases. Tenant occupies the Premises under the following described leases (eachan “Existing Lease”):

 

### (a)           The Lease dated as of September 21,2000, between SPP Real Estate (Palm Court), Inc., a Delaware corporation, andMaxim Pharmaceuticals, Inc., a Delaware corporation for Suite 330.

 

### (b)           The Lease dated as of May 15, 2000,between SPP Real Estate (Palm Court), Inc., a Delaware corporation, and MaximPharmaceuticals, Inc., a Delaware corporation for Suites 340 and 350.

 

### (c)           The Lease dated as of April 22, 2000,between SPP Real Estate (Palm Court), Inc., a Delaware corporation, and MaximPharmaceuticals, Inc., a Delaware corporation for Suite 355.

 

### (d)           The Lease dated as of June 26, 1998,between British Pacific Properties Corporation, a California corporation, andMaxim Pharmaceuticals, Inc., a Delaware corporation for Suite 400 and the FirstAmendment thereto dated as of November 30, 1998.

 

Each Existing Lease shall, notwithstanding anyprovision set forth in such Existing Lease, terminate effective as of theCommencement Date, and shall be supplanted in all respects by this Lease;provided, however, that any claims that either party hereto may have againstthe other party hereto with respect to any Existing Lease shall survive theCommencement Date, any claim under any Existing Lease shall be deemed to be aclaim hereunder, and any default under any Existing Lease shall be deemed adefault hereunder.

 

# **ARTICLE 2.**

 

# **RENT**

 

2.1           Basic Monthly Rent.  Subject to Paragraph 2.6 and Paragraphs 5.3and 5.4 of the Work Letter Agreement, Tenant shall pay to Landlord, as monthlyrent (“Basic Monthly Rent”), the amount set forth in Item 5 of the Basic Lease Provisions.

 

The Basic Monthly Rent and all other amountspayable hereunder shall be paid to Landlord in advance on the first day of eachmonth during the Term, without deduction or offset, in lawful money of theUnited States of America at the office of Landlord in the Building, or to suchplace as Landlord may designate in writing.

 

If the Term commences on other than the first dayof a calendar month, then there shall be paid on the Commencement Date a prorata portion of the Basic Monthly Rent based upon the number of days remainingin such month.

 

2.2           Past Due Rent.  Any amount payable hereunder, includingBasic Monthly Rent and any other charge (collectively, “Rent”), not paid whendue shall bear interest from the date due until the date paid at the FederalReserve Board Discount Rate, as of such due date, plus five percent (5%) perannum (“Interest Rate”).  The payment ofsuch interest shall not excuse or cure any default or modify any obligation ofTenant under this Lease.

 

2.3           Late Fee.  Tenant acknowledges that the late payment byTenant to Landlord of Rent will cause Landlord to incur costs not contemplatedby this Lease, the exact amount of which will be difficult to ascertain.  Such costs may include, without limitation,administrative costs, processing and accounting charges, and late charges whichmay be imposed on Landlord. Accordingly, if any installment of Rent shall not be received by Landlordwithin five (5) days after the date that such amount is due and payable, thenTenant shall pay to Landlord, in addition to the interest provided above, alate charge in the amount of three percent (3%) of the amount due.  The parties agree that such late chargerepresents a fair and reasonable estimate of the costs Landlord will incur byreason of the late payment by Tenant. Acceptance of such late charge by Landlord shall not constitute a waiverof Tenant’s default with respect to such overdue amount, nor prevent Landlordfrom exercising any of its rights or remedies hereunder.  Notwithstanding anything to the contrarycontained in this Lease, Landlord will grant one (1) grace period for late rentin each 24 month period, provided that Tenant remits the delinquent rentalpayment within three (3) days of notice of such delinquency.

 

2.4           Security Deposit.  Concurrently with Tenant’s execution of thisLease, Tenant shall deposit with Landlord the sum specified in Paragraph 7 ofthe Basic Lease Provisions (the “Security Deposit”), except that Tenant mayoffset against the amount payable as Security Deposit under the Lease thesecurity

 

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deposits in theaggregate amount of the Security Deposit (the “Existing Deposits”) under theExisting Leases, which Existing Deposits shall be retained by Landlord as theSecurity Deposit upon the expiration of the Existing Leases in accordance withSection 1.2; provided, however, that if any portion of the Existing Deposits isapplied to cure a default under any of the Existing Leases, then Tenant shallalso deposit with Landlord such portion of the Existing Deposits as is soapplied by Landlord.  The SecurityDeposit shall be held by Landlord as security for the faithful performance byTenant of this Lease by Tenant.  IfTenant defaults under this Lease, Landlord may (but shall not be required to)use, apply or retain all or any part of the Security Deposit for the payment ofany Rent or to compensate Landlord for any other loss or damage which Landlordmay suffer thereby.  If any portion ofthe Security Deposit is so used or applied, Tenant shall, within ten (10) daysafter demand therefor, deposit cash with Landlord in an amount sufficient torestore the Security Deposit to the full amount thereof.  Landlord shall not be required to maintainthe Security Deposit separate from its general accounts.  If Tenant shall fully perform this Lease,the Security Deposit, or any balance thereof that has not theretofore beenapplied by Landlord, shall be returned to Tenant, without payment of interest,within ten (10) days after the expiration of the Term and after Tenant hasvacated the Premises.  In the event oftermination of Landlord’s interest in this Lease, Landlord shall transfer theSecurity Deposit to Landlord’s successor in interest whereupon Landlord shallbe released from all liability for the return or accounting therefor.  No trust relationship is created hereinbetween Landlord and Tenant with respect to the Security Deposit.

 

2.5           Rent.  For purposes hereof all amounts payable byTenant to Landlord, regardless of how described or denominated, shall beconsidered Rent.

 

2.6           Rent Abatement.

 

### (a)           Notwithstanding the provisions ofArticle 2 of this Lease and subject to Paragraph 2.6(b), Tenant shall not beobligated to pay Basic Monthly Rent for each of months two, (2), three (3),four (4) and five (5) of the Term for the entire Premises (the “Abated Rent”)until the expiration of the Term.  Ifupon the expiration of the Term Tenant has not been in material or economic defaulthereunder (following any applicable notice and cure periods), then Landlordshall forgive Tenant’s obligation to pay the Abated Rent.

 

### (b)           Tenant agrees that Landlord’sagreement to forgive Basic Monthly Rent as provided in Paragraph 2.6(a) isconditioned upon occurrence of no material or economic default on the part ofTenant under this Lease (following any applicable notice and cure periods)during the Term of this Lease.  If adefault shall occur during the Term of this Lease, then the aggregate amount ofthe Abated Rent provided to Tenant prior to such default shall becomeimmediately due and payable as additional rent under this Lease.

 

# **ARTICLE 3.**

 

# **ADDITIONALRENT**

 

3.1           Operating Expenses.  With respect to each calendar year duringthe Term, or any partial calendar year at the commencement or end of the Term,Tenant shall pay, as additional Rent in addition to Basic Monthly Rent, anamount equal to Tenant’s Pro Rata Share of any excess of the Operating Expensesfor such year over Base Year Operating Expenses; provided however, the amountof controllable Operating Expenses for each calendar year after the Base Yearshall be limited so as not to exceed the product of (a) controllable OperatingExpenses for the Base Year and (b) 1.06N; where N equals the numberof complete calendar years that have elapsed between the Commencement Date andthe beginning of such calendar year. Operating Expenses shall be prorated forany partial calendar year during the Term.

 

3.2           Definition of Operating Expenses.  The term “Operating Expenses” as used inthis Lease shall include all costs and expenses necessary to operate, repair,replace and maintain the Building and “Common Facilities” (as defined herein)in a manner deemed reasonable and appropriate by the Landlord for a first-classdevelopment.  Operating Expenses shall include,without limitation, the following:

 

### (a)           Wages,salaries and fringe benefits of all employees engaged in the operation of andmaintenance of the Building or Common Facilities, including, but not limitedto, a building superintendent and/or engineer and associate personnel;employer’s Social Security taxes, unemployment taxes and/or insurance, andother taxes to the extent levied upon such wages, salaries and fringe benefits;the cost of disability and hospitalization insurance and pension or retirementbenefits for such employees.

 

### (b)           Thecost of supplies, materials and tools used in operation, repair and maintenanceof the Building or Common Facilities.

 

### (c)           Thecost of heating, ventilation and air-conditioning (collectively, “HVAC”) gas,electricity, water, sewer usage, power and lighting, used in the Building orCommon Facilities and not separately metered to and payable by individualtenants.

 

### (d)           Thecost of replacement of any equipment which is a part of, or is used inconnection with, the operation of the Building or Common Facilities (includingalarm equipment, building mechanical equipment, window cleaning equipment andelevators) and all maintenance and service agreements on all such equipment.

 

### (e)           Thecost of insurance applicable to the Building or Common Facilities, Landlord’soperation thereof, and Landlord’s personal property used in connectiontherewith.  The form, content,

 

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### coverages, exclusions, deductibles and requirementsof any such insurance, all of which matters ultimately dictate the premiumspayable for the same, shall be as determined by Landlord or its lenders.

 

### (f)            Thecost of all companies or persons (including employment taxes and fringebenefits) which perform regular or recurring duties connected with theday-to-day operation, maintenance, repair or overhead of the Building or CommonFacilities, its equipment and the adjacent walks, landscaped areas, including,without limitation, engineers, janitors, foremen, window washers, securityservices, gardeners, and property managers or other staff engaged in themanagement of the Building or Common Facilities.

 

### (g)           Thecost of all capital improvements made to the Building or Common Facilities byLandlord which have the intent or effect of reducing applicable operatingcosts, provided that all such costs are to be amortized over such reasonableperiods as Landlord shall determine in accordance with generally acceptedaccounting principles and practices in effect at the time of acquisition of thecapital items, together with a reasonable return on capital.

 

### (h)           Thecost of all accounting, legal, and other professional fees incurred inconnection with the operation of the Building.

 

### (i)            Thecost of all independent contractors, other than those employed for tenantimprovements.

 

### (j)            Areasonable management fee, which may be payable to Landlord or a managementagent employed by Landlord and which shall be three percent (3%) of grossrents.

 

### (k)           Thecost of all services furnished by Landlord pursuant to Article 4 below,excepting only as to services which are charged separately to a particulartenant.

 

### (l)            Thecost of insured repairs to the Premises or the Building or the CommonFacilities, up to the amount of the deductible under the applicable policy ofinsurance.

 

### (m)          Realproperty taxes and assessments (including supplemental) levied and assessedagainst the Building and the Real Property (based on the current assessed valueof the Building and the Real Property). (including any increases to the samecaused by a change or deemed change of ownership in the Building and/or theReal Property, and any substitutions in lieu of real property taxes oradditional taxes levied or assessed).

 

Notwithstanding anything in this Lease to the contrary,Operating Expenses shall exclude:

 

##### (1)           Costsof a capital nature, including, but not limited to,capital repairs,replacements or improvements made to the Building or Common Facilities, exceptas expressly permitted pursuant to clause (g) above.

 

##### (2)           Leasingcommissions, attorneys’ fees, costs, disbursements, and other expenses incurredin connection with negotiations or disputes with tenants, or in connection withleasing, renovating, or improving space for tenants or other occupants orprospective tenants or other occupants of the Building.

 

##### (3)           Thecost of any service sold to any tenant (including Tenant) or other occupant forwhich Landlord is entitled to be reimbursed as an additional charge or rentalover and above the basic rent and escalations payable under the lease with thattenant.

 

##### (4)           Anydepreciation on the Building or Property.

 

##### (5)           Expensesin connection with services or other benefits of a type that are not providedto Tenant but which are provided another tenant or occupant of the Building orProperty.

 

##### (6)           Costsproximately caused by Landlord’s violation of any terms or conditions of thisLease or any other lease relating to the Building or Property.

 

##### (7)           Overheadprofit increments paid to Landlord’s subsidiaries or affiliates for managementor other services on or to the building or for supplies or other materials tothe extent that the cost of the services, supplies, or materials exceeds thecost that would have been paid had the services, supplies, or materials beenprovided by unaffiliated parties on a competitive basis.

 

##### (8)           Allinterest, loan fees, and other carrying costs related to any mortgage or deedof trust or related to any capital item, and all rental and other payable dueunder any ground or underlying lease, or any lease for any equipment ordinarilyconsidered to be of a capital nature (except janitorial equipment or officeequipment which is not affixed to the Building).

 

##### (9)           Anycompensation paid to clerks, attendants, or other persons in commercialconcessions operated by Landlord other than in connection with the operation ofthe University Project’s parking facilities.

 

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##### (10)         Advertisingand promotional expenditures.

 

##### (11)         Costsof repairs and other work occasioned by fire, windstorm, or other casualty ofan insurable nature, but only to the extent and amount of insurance proceedsactually received by Landlord with respect thereto.

 

##### (12)         Anycosts, fines, or penalties incurred due to violations by Landlord of anygovernmental rule or authority, this Lease or any other lease in the Property.

 

##### (13)         Managementcosts to the extent they exceed 3% of gross rents.

 

##### (14)         Costsfor the acquisition of sculpture, paintings or other objects of art.

 

##### (15)         Wages,salaries, or other compensation paid to any executive employees above the gradeof building manager.

 

##### (16)         Thecost of correcting any building code or other violations which were violationswhich were known to Landlord, and of which Landlord had received written noticefrom a governmental agency with authority over such violations, prior to theCommencement Date.

 

##### (17)         Thecosts of containing, removing, or otherwise remediating any contamination ofthe Property (including the underlying land and ground water) by any toxic orhazardous materials (including, without limitation, asbestos and “PCB’s”) wheresuch contamination was not caused by Tenant, but was located at the UniversityProject on the Commencement Date.

 

All areas of the University Project which are madeavailable for use by persons entitled to occupy space in the Building,including, parking areas, driveways, truckways, delivery passages, loadingdocks, sidewalks, ramps, landscaped and planted areas, stairways, hallways andinterior stairwells not located within the premises of any tenant, lobbies,elevators, elevator lobbies, restrooms not located within the premises of anytenant, and all other areas and improvements provided by Landlord for thecommon use of Landlord and tenants of the Building, and their respectiveemployees and invitees, shall be deemed to be the “Common Facilities” forpurposes hereof.

 

The term “Base Year Operating Expenses” as used inthis Lease shall mean the Operating Expenses for the Base Year described inparagraph 6 of the Basic Lease Provisions.

 

3.3           Operating Expense Escalations.  If the occupancy of the Building during anypart of any calendar year during the Term (including the Base Year) is lessthan ninety-five percent (95%), Landlord shall make an appropriate adjustmentof the variable components of Operating Expenses for that calendar year, asreasonably determined by Landlord using sound accounting and managementprincipals, to determine the amount of Operating Expenses that would have beenincurred had the Building been ninety-five (95%) occupied.  This amount shall be considered to have beenthe Operating Expenses for that calendar year. For purposes of this subsection 3.3, variable components (“VariableComponents”) include only those component expenses that are affected byvariations in occupancy levels.

 

3.4           Expense Statements.  Landlord shall provide to Tenant a writtenestimate of Operating Expenses approximately thirty (30) days prior to thecommencement of the Term and each calendar year during the Term (which amountmay be reestimated from time to time during the calendar year).  With respect to each such calendar year,Tenant shall pay to Landlord, monthly in advance, one-twelfth (1/12th) ofTenant’s Pro Rata Share of any excess of the estimated Operating Expenses forthat calendar year over the actual Operating Expenses for the Base Year.  Similarly, for any partial calendar year atthe commencement or the end of the Term, Tenant shall pay monthly its Pro RataShare of any excess of the estimated Operating Expenses for the partialcalendar year over the actual Operating Expenses for the Base Year.  If for any reason Landlord is unable toprovide to Tenant the estimate of Operating Expenses at least thirty (30) daysprior to the commencement of any calendar year during the Term, then Tenantshall continue to pay monthly the same amount of additional rent for OperatingExpenses as was applicable previously until thirty (30) days after receipt ofsuch estimate; but such delay shall not be a waiver of any such additionalamount which Tenant is otherwise obligated to pay for such preceding monthsduring the new calendar year, all of which shall be paid within thirty (30)days after receipt of the estimate.

 

3.5           Year-End Adjustments.  Within one hundred twenty (120) days afterthe end of each calendar year, Landlord shall provide Tenant with a writtencompilation, certified by Landlord or its accountant, showing in reasonabledetail the actual Operating Expenses incurred by Landlord for such year andTenant’s Pro Rata Share thereof.  Landlordand/or Tenant shall within thirty (30) days thereafter make any payment orcredit necessary to adjust Tenant’s previous payments on account of theestimated Operating Expenses covered by such annual statement to the amountshown as due from Tenant on such statement.

 

3.6           Audit Rights.

 

### (a)           Inthe event of any dispute as to any amount due hereunder by Tenant for OperatingExpenses, Tenant shall have the right upon reasonable advance written notice toinspect Landlord’s accounting records relative to Operating Expenses at theoffice in the Building in which Landlord

 

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### maintainsits records during normal business hours at any time within ninety (90) daysfollowing the furnishing by Landlord to Tenant of such statement.  If Tenant objects to Landlord’s calculationby written notice delivered to Landlord within such ninety (90) day period,then a certification as to the proper amount of Operating Expenses shall bemade by another independent Certified Public Accountant mutually agreed upon bythe parties, which certification shall be final and conclusive. Tenant agreesto pay the cost of such certification unless it is determined that Landlord’soriginal determination of Operating Expenses was in error by more than fivepercent (5%) over Tenant’s actual obligation, in which event the costs of suchcertification shall be the sole obligation of Landlord.

 

### (b)           Tenantshall keep any information from its review of Landlord’s records confidentialand shall not disclose it to any other party, except as required by law.  If requested by Landlord, Tenant shallrequire its employees or agents reviewing Landlord’s records to sign aconfidentiality agreement as a condition of Landlord providing the Accountant’sStatement to Tenant.

 

# **ARTICLE 4.**

 

# **SERVICESAND FACILITIES**

 

4.1           Landlord’s Provision of Services.

 

### (a)           Landlord shall furnish HVAC to thePremises between the hours of approximately 6:30 a.m. and 6:30 p.m., Mondaysthrough Fridays, and between the hours of approximately 8:00 a.m. to 1:00 p.m.on Saturdays except those holidays designated yearly by Landlord and except forone day per year when Landlord conducts scheduled maintenance of the Buildingelectrical system.  Landlord shall havethe right to charge Tenant for any HVAC services furnished beyond such hourly periodsbased on the actual cost of such services.

 

### (b)           Landlord shall provide customary androutine cleaning and janitorial service for the Premises; such services shallbe in accordance with the specifications delivered to Tenant by Landlord fromtime to time and otherwise consistent with other similar low-rise, first-classoffice buildings in San Diego county.

 

### (c)           Landlord shall replace buildingstandard lighting in the Premises, as required, without charge to Tenant, otherthan as a cost included in Operating Expenses.

 

### (d)           Landlord shall provide sewer anddomestic water service to the Premises.

 

4.2           Electrical Current.  Tenant shall contract directly with theappropriate electrical utility company for separately metered electricalcurrent to the Premises.  If any lights,machines, or equipment are used by the Tenant in the Premises which materiallyaffect the temperature otherwise maintained by the air conditioning system,then in the event Tenant fails to discontinue such use within a reasonable timefollowing Landlord’s notification of same, Landlord shall have the right toinstall any machinery and equipment which Landlord reasonably deems necessaryto restore temperature balance and the cost thereof, including the costs ofinstallation, operation and maintenance occasioned thereby, shall be paid byTenant to Landlord upon demand.

 

4.3           Interruption of Standard Services.  Landlord shall not be liable for theinadequacy, defect or failure in the supply of any service described inSections 4.1 and 4.2 above because of the happening of any occurrence beyondthe reasonable control of Landlord.

 

4.4           Common Facilities.  Landlord shall operate and maintain theCommon Facilities under its control consistent with other similar low-rise,first-class office buildings in San Diego county and may make or permit changesin the size, shape, location, number and extent of the Common Facilitiesprovided that such changes do not unreasonably and unnecessarily interfere withTenant’s use or enjoyment of the Premises.

 

4.5           Parking.  Tenant shall comply with the reasonablerules and regulations imposed upon Tenant and Tenant’s employees and visitorsfor any available parking in the University Project.  Except as expressly provided in Section 11 of the Basic LeaseProvisions, parking spaces provided to Tenant during the Term shall beunassigned and non-reserved.

 

4.6           Telecommunications Facilities.

 

### (a)           TelecommunicationsFacilities.  Tenant shall have the right to maintain itstelecommunication and satellite equipment upon such portion of the rooftop ofthe Building as is mutually agreed upon by Landlord and Tenant (not to exceedsixty (60) square feet), and subject to Tenant’s compliance with the rules andregulations reasonably promulgated by Landlord, from time to time, with respectto use of, and access to, the rooftop of the Building.  Tenant shall pay Landlord a license fee of$0 per year for the use of, and access to, the Building’s rooftop.  Tenant shall pay for the maintenance and repairof all antennas, satellite dishes and/or other equipment placed upon such licensedportion of the Building’s rooftop (collectively, “TelecommunicationEquipment”), as well as all utilities used to operate such TelecommunicationEquipment.  Except in the event of anemergency, Tenant covenants to repair, maintain and remove its TelecommunicationEquipment only during Normal Business Hours. The installation of Tenant’s Telecommunication Equipment shall beengineered by Landlord’s engineers with input from Tenant’s engineers atTenant’s sole cost and expense (provided that Tenant shall have the right toapply such costs against the Improvement Allowance or Additional ImprovementAllowance, as

 

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### andto the extent provided in Exhibit B). Such installation of Tenant’s Telecommunication Equipment, including theaesthetic compatibility of such Telecommunication Equipment with the design andappearance of the Building and the height and weight of the TelecommunicationEquipment, shall be subject to Landlord’s written approval, which approvalshall not be unreasonably withheld or delayed so long as Tenant shall havesubmitted to Landlord elevations and specifications for the TelecommunicationsEquipment and Tenant has obtained all necessary governmental approvals inconnection with the Telecommunications Equipment.

 

### (b)           Conditions.  Tenant’s rights to install, operate andmaintain Telecommunications Equipment are subject to the followingrequirements, each of which is both a covenant by Tenant, and a condition toTenant’s right to install, operate and maintain Telecommunications Equipment:

 

#### i.              Tenant shall be responsible forand shall timely pay all costs of repairs, operations (including utilities) andimprovements in connection with the Telecommunications Equipment, including,without limitation, any screening, any patching or strengthening of the roof ofthe Building, which may be necessary on account of, or be necessary for, theinstallation of the Telecommunications Equipment.

 

#### ii.             Installation (includinginstallation of cable risers, wires, power sources and all related equipmentand materials), operation, use, repair, maintenance and removal must be inaccordance with all Regulations (as defined below), including all federal,state and local licensing requirements and be in compliance with all applicablebuilding and fire codes, including any required conditional use permit.

 

#### iii.             Installation (includinginstallation of cable risers, wires, power sources and all related equipmentand materials), operation, use, repair, maintenance and removal must notinterfere with the telecommunications or other systems of the Building or ofany other tenant.

 

#### iv.            Installation (including installationof cable risers, wires, power sources and all related equipment and materials),operation, use, repair, maintenance and removal shall be conducted by licensedcontractors approved by Landlord, and if any roof penetration is required, alicensed roofing contractor approved by Landlord shall perform such work.

 

#### v.             The Telecommunication Equipment maynot protrude above a height equal to the highest point of the Buildingstructure.

 

#### vi.            The Telecommunication Equipmentshall not interfere in any way with the Building’s engineering, window washingor other maintenance functions.

 

#### vii.           The Telecommunication Equipment mustbe properly secured and installed so as not to be affected by high winds orother elements.

 

#### viii.          The Telecommunication Equipment mustbe properly grounded.

 

#### ix.            The installed TelecommunicationEquipment must not be visible from street level at the Project.

 

#### x.             The color, size and aesthetics ofthe Telecommunication Equipment shall be reasonably approved by Landlord.

 

#### xi.            The weight of the TelecommunicationEquipment shall not exceed the load limits of the Building.

 

#### xii.           In no event shall theTelecommunication Equipment or any appurtenant wiring or cable adversely affectany of the mechanical, electrical, life-safety, structural or other systems ofthe Building.

 

#### xiii.          Tenant shall remove theTelecommunications Equipment at the end of the Term, and shall repair anydamage to the University Project that is caused by the operation, use, repair,maintenance and removal of the Telecommunications Equipment.

 

### (c)           GovernmentApprovals.  If Tenant installs any TelecommunicationsEquipment, Tenant shall obtain, at its sole cost and expense, any and all permits,authorizations, and certificates, including, without limitation, zoningvariances or changes, as may be required with respect to suchTelecommunications Equipment from all governmental agencies.  Landlord agrees to reasonably cooperate withTenant to obtain same if required by applicable governmental agencies;provided, however, that Landlord shall not be obligated to incur any costs  for which Tenant does not reimburse Landlordor accept the imposition of any zoning change or use restrictions affecting theBuilding.

 

4.7           Emergency Generator.

 

### (a)           EmergencyGenerator.  Subject to the provisions of this Section4.7, Tenant shall have the right to install in the Building’s parking garage(at a location to be determined by Landlord) an Emergency Generator (the“Emergency Generator”), and such transfer switches, feeders, switchboards,

 

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### appurtenancesand/or additional electrical equipment, as may be necessary to connect theEmergency Generator through the existing bus duct riser to one point of connectionat the Premises for the provision of service to the Premises, consistent withthe specifications for the Emergency Generator (“Additional ElectricalEquipment”), all in accordance with plans approved under Exhibit “B” hereto andall for the provision of electricity to the Premises in the event electricityis not otherwise available to the Premises. All costs in connection with the installation, operation, use,maintenance, repair and removal of the Emergency Generator shall be the soleresponsibility of, and shall be paid by, Tenant (provided that Tenant shallhave the right to apply such costs against the Improvement Allowance orAdditional Improvement Allowance, as and to the extent provided in ExhibitB).  All costs of the distribution ofsuch service within the Premises shall be paid by Tenant.   The purpose of this Section 4.7 is topermit Tenant, at its sole expense, to install, operate, use, maintain, repairand remove the Emergency Generator and the Additional Electrical Equipment,provided that the installation, operation, use, repair, maintenance and removalof such Emergency Generator complies with the following requirements, each ofwhich is both a covenant by Tenant, and a condition to Tenant’s operation, use,repair, maintenance and removal of the Emergency Generator and the AdditionalElectrical Equipment:

 

#### i.              Installation, operation, use,repair, maintenance and removal must meet all Regulations (as defined below),including all federal, state and local licensing requirements and be in compliancewith all applicable building and fire codes, including any required conditionaluse permit.

 

#### ii.             Installation, operation, use,repair, maintenance and removal must not interfere with the Building systems orany systems of other tenants.

 

#### iii.            Installation operation, use, repair,maintenance and removal shall be conducted by licensed contractors approved byLandlord.

 

#### iv.            The Emergency Generator must beconfined to the designated space in the parking area approved by Landlord andmay not interfere with any other parking spaces for the Building.

 

#### v.             The Emergency Generator shall notinterfere in any way with the Building’s engineering or other maintenancefunctions.

 

#### vi.            The color, size and aesthetics ofthe Emergency Generator shall be reasonably approved by Landlord.

 

#### vii.           In no event shall the EmergencyGenerator or any appurtenant wiring or cable adversely affect any of themechanical, electrical, life-safety, structural or other systems of theBuilding.

 

#### viii.          Tenant shall remove the Emergency Generatorat the end of the Term, and shall repair any damage to the University Projectthat is caused by the operation, use, repair, maintenance and removal of theEmergency Generator.

 

### (b)           GovernmentApprovals.  If Tenant installs anEmergency Generator, Tenant shall obtain, at its sole cost and expense(provided that Tenant shall have the right to apply such costs against theImprovement Allowance or Additional Improvement Allowance, as and to the extentprovided in Exhibit B), any and all permits, authorizations, and certificates,including, without limitation, zoning variances or changes, as may be requiredwith respect to such Emergency Generator from all governmental agencies.  Landlord agrees to reasonably cooperate withTenant to obtain same if required by applicable governmental agencies;provided, however, that Landlord shall not be obligated to incur any costs  for which Tenant does not reimburse Landlordor accept the imposition of any zoning change or use restrictions affecting theBuilding

 

# **ARTICLE 5.**

 

# **ACCEPTANCEOF PREMISES**

 

Tenant acknowledgesthat neither Landlord nor any agent of Landlord has made any representations orwarranties with respect to the suitability or fitness of the Premises for theconduct of Tenant’s business or for any other purpose.  Tenant currently occupies the Premises underthe Existing Leases.  As such, Tenantaccepts the Premises in its current “as-is”, “where-is” condition with allfaults and deficiencies.  Anymodifications to the Premises that Tenant believes are necessary shall beperformed by Tenant pursuant to the Work Letter Agreement and, except asprovided in the Work Letter Agreement, Landlord shall have no obligation withrespect thereto.  Nothing contained inthis Article shall affect the commencement of the Term or the obligation ofTenant to pay any Rent due under this Lease.

 

# **ARTICLE 6.**

 

# **ALTERATIONSAND REPAIRS**

 

6.1           Tenant to Maintain.  Tenant shall, at its sole expense, keep the Premises in goodrepair and tenantable condition during the Term.  All repairs performed by Tenant shall be of quality or classequal to the original mode of construction.

 

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6.2           Landlord to Maintain.  Landlord shall repair and maintain the structural and mechanicalportions of the Building, including basic plumbing, HVAC, and electricalsystems (but specifically excluding any portions of such systems that arelocated within the Premises or installed by Tenant before or after the datehereof, which portions Tenant shall repair and maintain) and shall keep allCommon Areas in good, clean and sanitary order consistent with other similarlow rise, first class office buildings in San Diego county.

 

6.3           Alterations.  Tenant shall not, without the prior writtenconsent of Landlord, make any alterations, improvements or additions to the Premises(“Alterations”).  Notwithstanding theforegoing, Landlord notification, but not approval, shall be required forAlterations which cost in the aggregate $50,000 or less; provided that suchalterations:

 

### (a)           donot require a permit;

 

### (b)           donot require common area changes;

 

### (c)           donot affect the structural or watertight integrity of the Building;

 

### (d)           donot place any unreasonable additional load on the Building system;

 

### (e)           arenot visible from outside the Premises;

 

### (f)            donot detract from the exterior appearance of the Building (with the exception ofthe Telecommunications Equipment); and

 

### (g)           donot affect the Building’s systems.

 

### AllAlterations shall become Landlord’s property and remain upon the Premises atthe termination or expiration of the Lease (excepting only Tenant’s moveableoffice furniture, trade fixtures (including, without limitation, any UPSSystems, supplemental generators and supplemental HVAC installed by Tenant) andoffice and professional equipment); provided, however, that Landlord shall havethe right to require Tenant to remove such Alterations at Tenant’s cost uponthe termination or expiration of this Lease, and the repair of any damagecaused to the Premises or the Building as a result of any such removal shall bepaid for by Tenant.  Notwithstanding theforegoing, if Tenant obtains Landlord’s consent for any Alterations, thenLandlord shall notify Tenant, at the time Landlord gives its consent, whetherTenant will be required to remove such Alterations.  If Tenant is not required to obtain Landlord’s consent to anyAlteration, then within ten (10) business days after Tenant notifies Landlordthat Tenant intends to make such Alterations, Landlord shall notify Tenantwhether Tenant must remove such Alterations at the termination or expiration ofthis Lease.  All alterations,improvements and additions shall be made in a good and first class workmanlikemanner using new materials, which shall be at least equal in quality to theoriginal installations.  Tenant shalluse contractors designated by Landlord to perform all Alterations the cost ofwhich is anticipated to exceed Two Thousand Dollars ($2,000.00), unlessLandlord provides written approval of Tenant’s contractor(s).  Such approval by Landlord shall not beunreasonably withheld, conditioned or delayed so long as such contractorsatisfies Landlord’s standard requirements for contractors working in theBuilding.  Upon request, Landlord willadvise Tenant of its pre-approved contractor(s).  Tenant shall provide Landlord with copies of all plans andspecifications for all such Alterations and “as built” plans if same arecustomarily available.

 

6.4           Indemnity.  Tenant indemnifies, defends, protects andholds Landlord, the Premises, the Building and the University Projectharmless from all costs, damages, liens for labor, services and materialsrelating to work performed by Tenant or its agents, and shall defend and holdLandlord harmless from all costs, damages, liens and expenses (includingattorney’s fees and court costs) related thereto.  Tenant hereby waives all rights under, and benefit of, Sections1941 and 1942 of the California Civil Code or any successor statute thereto orsimilar statute hereafter enacted.

 

6.5           Tenant.  If, at any time, Tenant fails to make anyrepair required to the Premises, then Landlord shall have the right, if it soelects, to make such repair and to immediately charge the costs of the same,together with a fifteen percent (15%) overhead and administrative cost, toTenant as Rent.

 

6.6           Toxic Substances.  Tenant shall not maintain, create, use ordischarge any toxic or hazardous substances or materials upon the Premises orthe UniversityProject and indemnifies, defends, protects andholds Landlord harmless from all costs, damages, liens and expenses (includingattorney’s fees and court costs) related thereto.

 

# **ARTICLE 7.**

 

# **PREMISES**

 

7.1           Permitted Use.  Tenant shall use and occupy the Premises only for the permitted uses set forth in paragraph 10 of the Basic LeaseProvisions.

 

7.2           Conduct of Business.

 

### (a)           Tenant shall not do or permitanything to be done in or about the University Project which will, in any way,obstruct or interfere with the rights of other tenants or occupants of theBuilding, or injure

 

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### them, or allow the Premises to be used for anyimmoral or unlawful purpose, nor shall Tenant cause, maintain, or permit anynuisance or waste in, on, or about the University Project.

 

### (b)           Tenant shall not use the Premises orpermit anything to be done in or about the Premises which shall:  (i) conflict with any law, statute,ordinance, or governmental rule or regulation now or hereafter in effect,including, without limitation, the Americans with Disabilities Act of 1990 andany rules and regulations of the City of San Diego, the requirements of the Certificateof Occupancy for the Building or with the requirements of any covenant,condition or restriction affecting the Building (collectively, “Regulations”);or (ii) increase the rate for fire insurance currently in effect for theBuilding.  Tenant shall, at its solecost and expense, promptly comply with all Regulations in force or which mayhereafter be in force, and with the requirements of any fire insuranceunderwriters or other similar body affecting the use and occupancy of thePremises.

 

### (c)           Notwithstandinganything to the contrary contained in this Lease, throughout the term hereof,Tenant shall be responsible for compliance with any laws, codes, or ordinancesonly where such compliance is related specifically to the Tenant’s particularuse and occupancy of the Premises or common areas, or to any Alteration or anyother modifications to the Premises that are made by Tenant, its employees orits invitees.  For example, if anygovernmental authority should require buildings to be structurally strengthenedagainst earthquake, such compliance shall be performed by and at the sole costof Landlord.

 

7.3           Signs. Tenant shall have the right to maintain or modify its Building topsignage to display its name at the two (2) existing locations.  Landlord shall maintain the identificationof Tenant in the Building directories and the Building standard suite identitysignage.  Any such signage will bedesigned, constructed, operated, maintained and modified in a manner complyingwith all Regulations.  All costsassociated with the fabrication, installation, permitting, maintaining andremoving of said signage shall be the sole responsibility of, and shall be paidby, Tenant.  The purpose of this Section7.5 is to permit Tenant, at its sole expense, to install, operate, use, repair,maintain and remove the signage, provided that the installation, operation,use, repair, maintenance and removal of such signage complies with thefollowing requirements each of which is both a covenant by Tenant, and acondition to Tenant’s operation, use, repair, maintenance and removal of thesignage:

 

#### i.              Installation, operation, use,repair, maintenance and removal must be in accordance with all Regulations,including all federal, state and local licensing requirements and be in compliancewith all applicable building and fire codes, including any required conditionaluse permit.

 

#### ii.             Installation, operation, use,repair, maintenance and removal must not interfere with the Building or anyother tenant.

 

#### iii.            Installation, operation, use,repair, maintenance and removal shall be conducted by licensed contractorsapproved by Landlord, and if any roof and/or curtain wall penetration isrequired, a licensed roofing contractor or engineer or a structural contractoror engineer, as appropriate, and as approved by Landlord, shall perform suchwork.

 

#### iv.            The signage shall not interfere inany way with the Building’s engineering, window washing or other maintenancefunctions.

 

#### v.             The signage must be properlysecured and installed so as not to be affected by high winds or other elements.

 

#### vi.            The color, size and aesthetics ofthe signage shall be reasonably approved by Landlord.

 

#### vii.           In no event shall the signage or anyappurtenant wiring or cable adversely affect any of the mechanical, electrical,life-safety, structural or other systems of the Building.

 

viii.          Tenantshall remove any signage at the end of the Term, and shall repair any damage tothe University Project that is caused by the operation, use, repair,maintenance and removal of such signage.

 

7.4           Load and Equipment Limits.  Tenant shall not place a load upon any floorof the Premises which exceeds the load per square foot which such floor wasdesigned to carry, as determined by Landlord or Landlord’s structural engineer.  The cost of any such determination made byLandlord’s structural engineer shall be paid for by Tenant upon demand.  Tenant shall not install business machinesor mechanical equipment which cause noise or vibration to such a degree as tobe objectionable to Landlord or other Building tenants.

 

7.5           Notice.  Tenant shall give Landlord prompt notice ofany damage to or defective condition in any part or appurtenance of theBuilding’s mechanical, electrical, plumbing, HVAC or other systems serving,located in, or passing through the Premises.

 

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7.6           Personal Property Taxes.  Tenant shall pay before delinquency alltaxes, assessments, license fees, and other charges that are levied andassessed against Tenant’s personal property installed or located in or on thePremises, and that become payable during the Term.  On demand by Landlord, Tenant shall furnish Landlord withsatisfactory evidence of these payments.

 

# **ARTICLE 8.**

 

# **ASSIGNMENTAND SUBLETTING**

 

8.1           General.  Tenant shall not, without the prior writtenconsent of Landlord, which consent shall not be unreasonably withheld (subjectto Tenant providing financial statements, current tax returns and companybackground information, to the extent applicable, as well as any otherinformation reasonably deemed appropriate by Landlord):  (a) assign, mortgage, pledge, encumber orotherwise transfer this Lease, the term or estate hereby granted, or anyinterest hereunder; (b) permit the Premises or any part thereof to be utilizedby anyone other than Tenant (whether as concessionaire, franchisee, licensee,permittee or otherwise); or (c) except as hereinafter provided, sublet or offeror advertise for subletting the Premises or any part thereof.  Notwithstanding the foregoing, Landlord may withholdits consent to a proposed assignment or sublease if the use of the Premises bythe proposed assignee or sublessee would not be permitted under Section 7.2hereof, or the proposed assignee or sublessee is not of sound financialcondition, as reasonably determined by Landlord.  Any assignment, mortgage, pledge, encumbrance, transfer orsublease without Landlord’s consent shall be voidable and, at Landlord’selection, shall constitute a default. If Tenant is a corporation, any dissolution, merger, consolidation orother reorganization of Tenant, or the sale or other transfer of stockpossessing fifty percent (50%) or more of the total combined voting power ofall classes of Tenant’s capital stock issued, outstanding, and entitled to votefor the election of directors shall be deemed a voluntary assignment of thisLease by Tenant.  The preceding sentenceshall not apply to corporations, the stock of which is traded through anexchange or over the counter.  If Tenantis a partnership or limited liability company, a withdrawal or change, voluntary,involuntary, or by operation of law of any partner or partners, or member ormembers, owning a total of fifty percent (50%) or more of the partnership orlimited liability company, or the dissolution of the partnership, shall bedeemed a voluntary assignment of this Lease by Tenant.  If Tenant consists of more than one person,a purported assignment, voluntary, involuntary, or by operation of law, by anyone of the persons executing this Lease shall be deemed a voluntary assignmentof this Lease by Tenant.  Tenant shallprovide written notice to Landlord before Tenant offers or advertises thePremises for subletting.

 

8.2           Affiliates.  Notwithstanding the foregoing Paragraph 8.1,Tenant shall have the right, after notice thereof to Landlord (accompanied byadequate substantiation that the transferee qualifies as an Affiliate orSuccessor of Tenant as defined below), to transfer all or a portion of thePremises, or the leasehold hereunder, to an Affiliate or Successor of Tenant.  For purposes hereof, an “Affiliate” or“Successor” of Tenant means (i) Tenant’s parent corporation, any wholly ownedsubsidiary of Tenant’s parent corporation, or (ii) an entity controlling, undercommon control with or controlled by Tenant or Tenant’s parent corporation,including (x) an entity in which at least seventy percent (70%) of Tenant’spartners immediately before such assignment are partners or members or (y) anentity resulting from a merger or consolidation with Tenant or Tenant’s parentcorporation provided such successor has a net worth and liquid assets that isnot materially less than that of Tenant on the date of the applicable Transfer,or (iii) a transferee of substantially all of Tenant’s assets; but excluding,in each case, any entity formed to avoid the restrictions on transfer by Tenanthereunder and excluding any agency or department of the United StatesGovernment.  For purposes of thisdefinition, the word “control,” as used above, means with respect to a Personthat is a corporation, the right to exercise, directly or indirectly, more thanfifty percent (50%) of the voting rights attributable to the shares of thecontrolled corporation and, with respect to a Person that is not a corporation,the possession, directly or indirectly, of the power to direct or cause thedirection of the management or policies of the controlled Person.  The word “Person” means an individual,partnership, trust, corporation, firm or other entity.  In the case of any voluntary assignment ofthis Lease or an assignment of this Lease by operation of law, any suchAffiliate or Successor of Tenant must expressly assume in writing a pro ratashare of Tenant’s obligations hereunder in the proportion that the number ofsquare feet of Rentable Area of the Premises assigned to such Affiliate orSuccessor of Tenant bears to the total number of square feet of Rentable Areain the Premises, without relieving Tenant of any liability hereunder.  Paragraph 8.3 shall not be applicable toTransfers covered by this Paragraph 8.2.

 

8.3           Notice and Procedure.  If at any time or from time to time duringthe Term, Tenant desires to assign or sublet all or any part of the Premises,then at least thirty (30) days, but not more than one hundred twenty (120)days, prior to the date when Tenant desires the assignment or subletting to beeffective (the “Transfer Date”), Tenant shall give Landlord a notice (the“Notice”) which shall set forth the name, address and business of the proposedassignee or sublessee, information (including financial statements and references)concerning the character of the proposed assignee or sublessee, a detaileddescription of the space proposed to be assigned or sublet, which must be asingle, self-contained unit (the “Space”), any rights of the proposed assigneeor sublessee to use Tenant’s improvements and the like, the Transfer Date, andthe fixed rent and/or other consideration and all other material terms andconditions of the proposed assignment or subletting, all in such detail asLandlord may reasonably require.  IfLandlord requests additional detail, the Notice shall not be deemed to havebeen received until Landlord receives such additional detail.  Landlord shall deliver written notice toTenant of Landlord’s consent or absence of consent to any assignment orsublease within twenty (20) business days after Landlord’s receipt of theNotice.  If Landlord fails to deliverwritten notice of its consent to an assignment or sublease within twenty (20)business days after Landlord’s receipt of the Notice, then Landlord shall bedeemed to have consented thereto. Notwithstanding the foregoing, in the event of an assignment or

 

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sublease for morethan fifty percent (50%) of the Premises, Landlord shall have the option,exercisable by giving notice to Tenant at any time within twenty (20) daysafter Landlord’s receipt of the Notice (a) in the case of an assignment orsublease, to terminate this Lease as to the Space as of the Transfer Date, inwhich event Tenant shall be relieved of all further obligations hereunder as tothe Space; or (b) in the case of a sublease, to sublease the Space from Tenantupon the terms and conditions set forth in the Notice, except that the rentshall be the lower of the per square foot Monthly Base Rent and additional Rentdescribed in Articles 2 and 3 payable under this Lease for the Space, or thatpart of the rent and other consideration set forth in the Notice which isapplicable to the Space.  If Landlordexercises its option to sublet the Space, then Tenant shall sublet the Space toLandlord upon the terms and conditions set forth in clause (b) above; provided,however, that:  (i) Landlord shall atall times under such sublease have the right and option further to sublet theSpace without obtaining Tenant’s consent or sharing any of the economic considerationreceived by Landlord; (ii) the provisions of Section 7.2 shall not beapplicable thereto; (iii) Landlord and its subtenants shall have the right touse in common with Tenant all lavatories, corridors and lobbies which arewithin the Premises and the use of which is reasonably required for the use ofthe Space; (iv) Tenant shall have no right of set-off or abatement or any otherright to assert a default hereunder by reason of any default by Landlord undersuch sublease; and (v) Landlord’s liability under such sublease shall not bedeemed assumed or taken subject to by any successor to Landlord’s interestunder this Lease.  No failure ofLandlord to exercise either option with respect to the Space shall be deemed tobe Landlord’s consent to the assignment or subletting of all or any portion ofthe Space.  If Landlord does notexercise either option, and Landlord shall have consented to the assignment orsublease of the Space, then Tenant shall be free to assign or sublet the Spaceto any third party subject to the following conditions:

 

### (a)           The assignment or sublease shall beon the same terms set forth in the Notice given to Landlord;

 

### (b)           No assignment or sublease shall bevalid and no assignee or sublessee shall take possession of the Space until Landlordhas consented in writing to any such assignment or sublease and an executedcounterpart of the assignment or sublease has been delivered to Landlord;

 

### (c)           Each sublessee (but no sublessee ofany sublessee) shall sublet to no more than one subtenant, and no sublessee ofany sublessee shall have the right to further sublet;

 

### (d)           Any proposed subletting would notresult in more than one sublease of portions of the Premises located on the 4thfloor of the Building being in effect at any one time during the Term;

 

### (e)           If the Lease shall be assigned, orthe Premises shall be sublet, Landlord may collect Rent directly from any suchassignee or sublessee, as the case may be, in the event of default by Tenant;and

 

### (f)            Tenant shall pay to Landlord, asadditional rent under this Lease, without affecting or reducing any otherobligation of Tenant hereunder, (a) fifty percent (50%) of any sums or othereconomic consideration received by Tenant as a result of such assignment orsubletting whether denominated rent or otherwise, which exceed, in theaggregate, the total sums which Tenant is obligated to pay Landlord under thisLease (prorated as to any sublease to reflect obligations allocable to thatportion of the Premises subject to such sublease) as offset by (b) the sum ofthe following costs to the extent they are reasonable and incurred by Tenant inconnection with the sublease or assignment: (i) any brokerage commissions; (ii) legal fees in connection with thesublease or assignment; (iii) the cost of tenant improvements installed by theTenant in the Space in connection with the sublease or assignment and (iv) thecost of any other concessions reasonably incurred to induce a subtenant orassignee to enter into such sublease or assignment (but no amount shall bededucted to reflect periods when any portion of the Premises is vacant).  Tenant shall deliver to Landlord a statementwithin thirty (30) days after the end of each calendar year in which any partof the Term occurs specifying as to such calendar year, and within thirty (30)days after the expiration or earlier termination of the Term, specifying withrespect to the elapsed portion of the calendar year in which such expiration ortermination occurs, each sublease and assignment in effect during the periodcovered by such statement and, the date of its execution and delivery, thenumber of square feet of the rentable area demised thereby, and the termthereof; and a computation in reasonable detail showing:  (x) the amounts (if any) paid and payable byTenant to Landlord pursuant to this Section 8 with respect to any such subleaseor assignment for the period covered by such statement and (y) the amounts (ifany) paid and payable by Tenant to Landlord pursuant to this Section 8 withrespect to any payments received from a sublessee or assignee during suchperiod but which relate to an earlier period.

 

8.4           Continuing Liability of Tenant.  Regardless of Landlord’s consent, nosubletting or assignment shall release Tenant’s obligation or alter the primaryliability of Tenant to pay the rent and to perform all other obligations to beperformed by Tenant hereunder; provided, however, if Tenant assigns this Leaseto an Affiliate of Tenant and, based on documentation provided by Tenant,Landlord reasonably determines that the financial strength of such Affiliate ofTenant immediately after such assignment is equal to or greater than thefinancial strength of Tenant both as of the date hereof and immediately priorto such assignment, then Tenant shall be released from its primary liability topay the rent and to perform all other obligations to be performed by Tenanthereunder.  The acceptance of rent byLandlord from any other person shall not be deemed to be a waiver by Landlordof any provision hereof. Consent to one assignment or subletting shall not bedeemed consent to any subsequent assignment or subletting.  If any assignee of Tenant or any successorof Tenant defaults in the performance of any of the terms hereof, Landlord mayproceed directly against Tenant without the necessity of exhausting remediesagainst such assignee or successor. Landlord may consent to subsequent assignments or subletting of thisLease or amendments or modifications to this Lease with assignees of Tenant,without notifying Tenant, or any

 

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successor ofTenant, and without obtaining its or their consent thereto, and such actionshall not relieve Tenant of its liability under this Lease.  If Tenant assigns this Lease, or sublets allor a portion of the Premises, or requests the consent of Landlord to anyassignment or subletting, or if Tenant requests the consent of Landlord for anyact that Tenant proposes to do, then Tenant shall pay Landlord’s reasonableattorneys’ fees incurred in connection therewith.

 

8.5           Bankruptcy.  To the extent permitted underthen-applicable law, if a petition is filed by or against Tenant for reliefunder Title 11 of the United States Code, as amended (the “Bankruptcy Code”),and Tenant (including for purposes of this Section Tenant’s successor inbankruptcy, whether a trustee or Tenant as debtor in possession) assumes andproposes to assign, or proposes to assume and assign, this Lease pursuant tothe provisions of the Bankruptcy Code to any person or entity who has made oraccepted a bona fide offer to accept an assignment of this Lease on termsacceptable to Tenant, then notice of the proposed assignment setting forth (a)the name and address of the proposed assignee, (b) all of the terms andconditions of the offer and proposed assignment, and (c) the adequate assuranceto be furnished by the proposed assignee of its future performance under theLease, shall be given to Landlord by Tenant no later than twenty (20) daysafter the Tenant has made or received such offer, but in no event later thanten (10) days prior to the date on which Tenant applies to a court of competentjurisdiction for authority and approval to enter into the proposedassignment.  Landlord shall have theprior right and option, to be exercised by notice to Tenant given at any timeprior to the date on which the court order authorizing such assignment becomesfinal and non-appealable, to receive an assignment of this Lease upon the sameterms and conditions, and for the same consideration, if any, as the proposedassignee, less any brokerage commissions which may otherwise be payable out ofthe consideration to be paid by the proposed assignee for the assignment ofthis Lease.  If this Lease is assignedpursuant to the provisions of the Bankruptcy Code, Landlord:  (i) may require from the assignee a depositor other security for the performance of its obligations under the Lease in anamount substantially the same as would have been required by Landlord upon theinitial leasing to a tenant similar to the assignee; and (ii) shall receive, asadditional rent, the sums and economic consideration described in Section8.  Any person or entity to which thisLease is assigned pursuant to the provisions of the Bankruptcy Code shall bedeemed, without further act or documentation, to have assumed all of theTenant’s obligations arising under this Lease on and after the date of suchassignment.  Any such assignee shall,upon demand, execute and deliver to Landlord an instrument confirming suchassumption.  No provision of this Leaseshall be deemed a waiver of Landlord’s rights or remedies under the BankruptcyCode to oppose any assumption and/or assignment of this Lease, to require atimely performance of Tenant’s obligations under this Lease, or to regainpossession of the Premises if this Lease has neither been assumed nor rejectedwithin sixty (60) days after the date of the order for relief or within suchadditional time as a court of competent jurisdiction may have fixed.  Notwithstanding anything in this Lease tothe contrary, all amounts payable by Tenant to or on behalf of Landlord underthis Lease, whether or not expressly denominated as rent, shall constitute rentfor the purposes of Section 502(b)(6) of the Bankruptcy Code.

 

# **ARTICLE 9.**

 

# **NON-LIABILITYAND INDEMNIFICATION**

 

9.1           Tenant’s Waiver of Claims andIndemnity.  Tenant, to the extentpermitted by law, waives all claims for loss, theft or damage to property andfor injuries to persons, including death, in, upon or about the Premises, theBuilding, the Common Facilities or the University Project, from any causewhatsoever except loss, damage or injury caused solely by the gross negligenceor willful misconduct of Landlord. Tenant indemnifies, defends, protects and holds Landlord, its partners,agents, servants and employees harmless from and against any loss, liability,claim, damage or expense (including attorney’s fees and court costs) arisingout of or resulting from Tenant’s use or occupancy of the Premises, theBuilding, the Common Areas or the University Project, other than that caused solelyby the gross negligence or willful misconduct of Landlord, its partners,agents, servants or employees.

 

9.2           Negligence of Third Parties.  Neither Landlord nor its partners, agents,servants or employees shall be liable to Tenant for any damage by or from anyact of negligence of any tenant or other occupant of the UniversityProject.  Tenant agrees to pay for alldamage to the Building, the Common Facilities, the Premises or the UniversityProject, as well as all damage to tenants or occupants thereof caused byTenant’s misuse or neglect of the University Project, its apparatus orappurtenances, or caused by any licensee, contractor, agent or employee ofTenant.

 

9.3           Landlord’s Indemnity.  Landlord shall indemnify and save harmless Tenant from and againstany and all liability, liens, claims, demands, expenses, fees, costs, fines,penalties, suits, proceedings, actions and causes of action of any and everykind and nature arising or growing out of or relating to a breach of Landlordof its obligations to Tenant pursuant to this Lease, or the gross negligence orwillful misconduct of Landlord.

 

# **ARTICLE 10.**

 

# **INSURANCE**

 

10.1         Insurance to be Carried by Tenant.  Tenant shall during the Term, at its solecost  and expense, obtain and maintainthe following types of insurance:

 

### (a)           Fire and extended coverage insurance,including endorsements for vandalism, malicious mischief, theft, and sprinklerleakage, covering all of Tenant’s property, including, but not limited to,

 

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### furniture, additions, fixtures, and anything in thenature of a leasehold improvement in an amount equal to the full replacementcost of such property without deduction for depreciation;

 

### (b)           Public liability insurance, includingbodily injury and property damage, personal injury and contractual liabilitywith respect to all claims, demands or actions by any person or entity, in anyway arising from, related to, or connected with the conduct and operation ofTenant’s business in the Premises or Tenant’s use of the Premises.  Such policies shall be written on acomprehensive basis, with no more than a $5,000 deductible, with a singlecombined liability limit of not less than $2,000,000;

 

### (c)           Worker’s Compensation insurancecoverage as required by law, together with employer’s liability insurancecoverage;

 

### (d)           Business Interruption insurance insuch amounts as will reimburse Tenant for direct or indirect loss of earningsattributable to all perils commonly insured against by prudent tenants orattributable to prevention of access to the Premises or to the Building as aresult of such perils; and

 

### (e)           Any other form or forms of insuranceas the trust deed beneficiaries of Landlord may reasonably require from time totime in form, in amounts and for insurance risks against which a prudent tenantwould protect itself.

 

Each policy evidencing insurance required to becarried by Tenant pursuant to this Article shall contain a provision showingAlecta Pensionsförsäkring, Ömsesidigt.a Swedish company, and any other parties ininterest as designated by Landlord, as an additional named insureds.

 

10.2         Policy Forms and Delivery.  All policies shall be taken out frominsurers acceptable to Landlord and in form satisfactory to Landlord.  Tenant agrees that certificates of suchinsurance shall be delivered to Landlord as soon as practicable after theplacing of the required insurance, but in no event later than ten (10) daysprior to the date Tenant takes possession of the Premises.  All policies shall require that at least ten(10) days prior written notice to Landlord by the insurer prior to termination,cancellation or material change in such insurance.  Upon failure of Tenant to procure, maintain and place suchinsurance and pay all premiums and charges therefor, Landlord may, but shallnot be obligated to, purchase such insurance, and in such event, Tenant shallpay all premiums and charges therefor to Landlord as Rent within five (5) daysafter demand.

 

10.3         Use of Proceeds.  In the event of damage or destruction to theleasehold improvements in the Premises covered by insurance required to betaken out by Tenant pursuant to this Article, Tenant shall use the proceeds ofsuch insurance for the purposes of repairing or restoring such leaseholdimprovements.  In the event of damage ordestruction of the Building entitling the Landlord or Tenant to terminate thisLease pursuant to Article 12 hereof, then if the Premises have also beendamaged, Tenant will pay to Landlord that portion of its insurance proceedsrelating to the leasehold improvements in the Premises that were paid for byLandlord.

 

10.4         Waiver of Subrogation.  Each party, as to insurance policiesmaintained by them for the University Projector the Premises, shall use their best good faith efforts to obtain and maintainwaivers of subrogation against the other party hereto.

 

# **ARTICLE 11.**

 

# **TRANSFEROF LANDLORD’S INTEREST**

 

In the event of atransfer of all of Landlord’s ownership interest in the Building, other than atransfer for security purposes only, the transferor shall be automaticallyrelieved of all obligations and liabilities on the part of Landlord hereunderaccruing from and after closing of such transfer.

 

# **ARTICLE 12.**

 

# **DAMAGEOR DESTRUCTION**

 

12.1         Repair or Termination.

 

### (a)           If the Premises are damaged by fireor other casualty of the type insured by Landlord the damage shall be repairedby Landlord; provided such repairs can reasonably be made within one hundredtwenty (120) days after the commencement of repairs without the payment ofovertime or other premiums, that the insurance proceeds are sufficient to paythe costs of such repairs and that the damage does not occur during the lasttwelve (12) months of the Term. Landlord shall give written notice to Tenant within thirty (30) daysafter the occurrence of the damage if Landlord concludes the damages can be sorepaired, which notice shall set forth Landlord’s good faith estimate of theanticipated period for repairing the damage (the“Repair Period Notice”).  Until such repairs arecompleted, Basic Monthly Rent shall be abated in proportion to the part of thePremises which is unusable by Tenant in the conduct of its business (but thereshall be no abatement of Rent by reason of any portion of the Premises beingunusable for a period of three (3) days or less).  If the damage is due to the fault or neglect of Tenant or itsemployees, then there shall be no abatement of Rent.  If Landlord is required or elects to restore the Premises, thenLandlord shall not be required to restore Alterations made by Tenant, Tenant’simprovements, trade fixtures and personal property, such items being the soleresponsibility of Tenant to restore.

 

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### (b)           Landlord shall not be liable for anyfailure to make any such repairs if such failure is caused by accidents,strikes, lockouts or other conditions beyond the reasonable control ofLandlord.

 

### (c)           If (i) such repairs cannot reasonablybe made within such one hundred twenty (120) days, (ii) such repairs will costmore than the available insurance proceeds, or (iii) thedamage occurs within the last twelve (12) moths of the Term, then Landlord may, at its option, make suchrepairs within a reasonable time and, in such event, this Lease shall continuein effect and the Basic Monthly Rent shall be abated in the manner providedabove.  Landlord’s election to make suchrepairs must be evidenced by written notice to Tenant advising Tenant withinthirty (30) days after the occurrence of the damage whether or not Landlordwill make such repairs.  If Landlorddoes not so elect to make such repairs then either party may, by written noticeto the other given within sixty (60) days after the occurrence of the damage,terminate this Lease as of the date of the occurrence of such damage.

 

### (d)           If(i) the Repair Period Notice provided by Landlord indicates that theanticipated period for repairing the damage exceeds one hundred and eighty(180) days or (ii) the damage occurs within the last twelve (12) moths of theTerm, then Tenant may elect to terminate this Lease by providing written noticeto Landlord within ten (10) days after Tenant receives the Repair PeriodNotice.  If Tenant does not elect toterminate within such ten (10) day period, Tenant shall be considered to havewaived the option to terminate.

 

### (e)           With respect to any damage andrepairs, Tenant waives the provisions of Section 1932(2) and 1933(4) of theCivil Code of California or any successor statute thereto or similar statutehereinafter enacted.

 

### (f)            All proceeds of any insurancemaintained by Tenant or Landlord upon the Premises (including insurance onTenant improvements) shall be used to pay for the repairs to the propertycovered by said insurance, to the extent that repairs are made pursuant to thisArticle.

 

### (g)           If the Premises, the Building, or theCommon Facilities are damaged, and such damage is of the type insured againstunder the insurance maintained by Landlord, then the cost of repairing saiddamage up to the amount of the deductible, or any amount in excess of thecoverage under said insurance policy, shall be included as a part of theOperating Expenses.

 

### (h)           Landlord shall not have anyobligation whatsoever to repair, reconstruct, or restore the Premises or anyportion of the Building when the damage occurs during the last eighteen (18)months of the Term.

 

12.2         Loss of Enjoyment.  No damages, compensation or claim shall bepayable by Landlord to Tenant for any inconvenience, loss of business orannoyance of Tenant arising from any repair or restoration of any portion ofthe Premises or any other portion of the Building or Common Facilities performedby Landlord or its agents.  Landlordshall use good faith efforts to effect such repair or restoration promptly andin such manner as not unreasonably to interfere with Tenant’s use and occupancyof the Premises.

 

12.3         Automatic Termination.  A total destruction of the Building shallautomatically terminate this Lease.

 

# **ARTICLE 13.**

 

# **DEFAULTSAND REMEDIES**

 

13.1         Events of Default.  The occurrence of any of the following shallconstitute a material default and breach of this Lease by Tenant:

 

### (a)           Any failure by Tenant to pay Rent asand when due, where such failure continues for three (3) days after writtennotice thereof by Landlord to Tenant; provided, however, that any such noticeshall be in lieu of, and not in addition to, any notice required under Section1161, etseq. of the California Code of Civil Procedure or anysuccessor statute thereto or similar statute hereinafter enacted;

 

### (b)           Intentionally deleted;

 

### (c)           Any failure by Tenant to observe andperform any other provision of this Lease or the Rules and Regulationspromulgated by Landlord hereunder where such failure continues for thirty (30)days (or such longer period as is reasonably required to cure such item, solong as the cure is commenced within said thirty (30) day period and thereafterdiligently pursued to completion) (except with respect to subsection (e) below)after written notice thereof by Landlord to Tenant; provided, however, that anysuch notice shall be in lieu of, and not in addition to, any notice requiredunder Section 1161, etseq. of the California Code of CivilProcedure or any successor statute thereto or similar statute hereinafterenacted; or

 

### (d)           The making by Tenant of any generalassignment for the benefit of creditors; the filing by or against Tenant of apetition to have Tenant adjudged a Chapter 7 debtor or to have debts dischargedor of a petition for reorganization or arrangement under any law relating tobankruptcy (unless, in the case of a petition filed against Tenant, the same isdismissed within sixty (60) days); the appointment of a trustee or receiver totake possession of substantially all of Tenant’s assets located at the Premisesor of Tenant’s interest in this Lease, where possession is not restored toTenant within thirty (30) days; the

 

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### attachment, execution or other judicial seizure ofsubstantially all of Tenant’s assets located at the Premises or of Tenant’sinterest in this Lease, where such seizure is not discharged within thirty (30)days.

 

### (e)           Anyfailure by Tenant to observe and perform the requirements set forth in Section4.6(b)(iii) of this Lease where such failure continues for fifteen (15) daysafter written notice thereof by Landlord to Tenant; provided, however, that anysuch notice shall be in lieu of, and not in addition to, any notice requiredunder Section 1161, etseq. of the California Code of CivilProcedure or any successor statute thereto or similar statute hereinafterenacted

 

13.2         Landlord’s Remedies.

 

### (a)           In the event of any default byTenant, as defined herein, then, in addition to any other remedies available toLandlord at law or in equity, Landlord shall have the immediate option, butshall not be obligated to do so, to terminate this Lease and all rights ofTenant hereunder by giving Tenant written notice of such election toterminate.  In the event that Landlordshall elect to so terminate this Lease, then Landlord may recover from Tenant:

 

#### (i)            Theworth at the time of award of any unpaid Rent which had been earned at the timeof such termination; plus

 

#### (ii)           Theworth at the time of award of the amount by which the unpaid Rent which wouldhave been earned after termination until the time of award exceeds that portionof rental loss which Tenant proves could have been reasonably avoided; plus

 

#### (iii)          Theworth at the time of award of the amount by which the unpaid Rent for thebalance of the Term after the time of award exceeds the amount of such rentalloss which Tenant proves reasonably could be avoided; plus

 

#### (iv)          Anyother amount necessary to compensate Landlord for all the detriment proximatelycaused by Tenant’s failure to perform its obligations under this Lease or whichin the ordinary course of things would be likely to result therefrom including,but not limited to, brokerage commissions and the cost of restoring saidPremises to the condition required under this Lease; plus

 

#### (v)           AtLandlord’s election, such other amounts in addition to or in lieu of theforegoing as may be permitted from time to time by applicable law.

 

#### (vi)          Asused in (i) and (ii) above, the “worth at the time of award” shall be computedby allowing interest at the Interest Rate. As used in (iii) above, the “worth at the time of award” shall becomputed by discounting such amount at the discount rate of the Federal ReserveBank at San Francisco at the time of award, plus one (1) percentage point.

 

### (b)           In the event of any such default byTenant, Landlord shall also have the right, with or without terminating thisLease, to reenter the Premises to remove all persons and property from thePremises.  Such property may be removedand stored in a public warehouse or elsewhere at the cost of and for theaccount of Tenant.

 

### (c)           In the event of the abandonment ofthe Premises by Tenant or in the event of any default by Tenant, if Landlorddoes not elect to terminate this Lease as provided in this Section,then  Landlord may exercise the remedyand shall be entitled to all the rights provided for in California Civil CodeSection 1951.4 or any successor statute thereto or similar statute hereinafterenacted.

 

### (d)           Landlord shall not, by any reentry orother act, be deemed to have accepted any surrender by Tenant of the Premisesor Tenant’s interest therein, or be deemed to have terminated this Lease orTenant’s right to possession of the Premises, unless Landlord shall havenotified Tenant in writing that it has so elected to terminate this Lease.

 

### (e)           Landlord may suspend or discontinueall or any of the services specified in Article 4 during the continuance of anymaterial and undisputed default; and no such suspension or discontinuance willbe deemed or construed to be an eviction, constructive or actual, or anejection of Tenant.

 

### (f)            If Landlord reenters the Premises,Tenant shall have no claims for damages that may be caused by Landlord’sreentering or removing and storing the property of Tenant, and indemnifies,defends, protects and holds Landlord harmless from all losses, costs, expenses(including attorney’s fees and court costs) or damages occasioned byLandlord.  No such entry shall beconsidered or deemed to be a forcible entry by Landlord.

 

### (g)           All rights, options, and remedies ofLandlord contained in this Lease shall be construed and held to be cumulative,and no one of them shall be exclusive of the other, and Landlord shall have theright to pursue any one or all of such remedies or any other remedy or reliefwhich may be provided by law, whether or not stated in this Lease.

 

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13.3         Landlord’s Default.  Landlord shall not be deemed to be indefault under this Lease unless and until it has failed to perform any of itsobligations hereunder within thirty (30) days after written notice by Tenant toLandlord specifying the manner in which Landlord has failed to perform suchobligation; provided, however, that if the nature of Landlord’s obligation issuch that more than thirty (30) days are required for its performance, thenLandlord shall not be deemed to be in default, if it shall commence suchperformance within such thirty (30) day period and thereafter diligentlyprosecute the same to completion.  Inthe event of a default by Landlord hereunder, the extent of Landlord’sliability shall be strictly limited to and shall not extend beyond Landlord’sinterest in the University Project.

 

# **ARTICLE 14.**

 

# **EMINENTDOMAIN**

 

If forty percent(40%) or more of the rentable space in the Building or if such portion of thePremises as, in Tenant’s reasonable judgment, makes the balance of the Premisesafter restoration being made untenantable or otherwise unsuitable for Tenant’suse and requirements, shall be lawfully taken or condemned or conveyed underthreat of such taking or condemnation, for any public or quasi-public use orpurpose (such taking, condemnation or conveyance being referred to herein as a“Taking”), the Term of this Lease shall end upon, and not before, the date ofthe taking of possession by the condemning authority.  If the Lease is not so terminated, and the Premises has beenreduced in size, then Basic Monthly Rent shall be reduced in proportion to thepart of the Premises which is unusable by Tenant in the conduct of itsbusiness.  Tenant hereby assigns toLandlord the entire amount of any award/settlement made by reason of suchTaking.  If a material part of the Buildingis condemned or taken or if a substantial alteration or reconstruction of theBuilding shall, in Landlord’s opinion, be necessary or desirable as a result ofsuch Taking, Landlord may terminate this Lease by written notice to Tenantwithin thirty (30) days after the date of the Taking.  Each party waives the provisions of Code of Civil ProcedureSection 1265.130 allowing either party to petition the superior court toterminate the Lease in the event of a partial taking of the Premises.  Nothing herein contained shall be deemed orconstrued to prevent Tenant from interposing and prosecuting in any Takingproceedings a claim for the value of any fixtures or improvements installed inor made to the Premises by Tenant, or for its costs of moving or loss ofbusiness by reason of such Taking, so long as such claim does not interfere withor restrict Landlord’s claims for, and does not reduce, any award or settlementpayable to Landlord.

 

# **ARTICLE 15.**

 

# **SUBORDINATION**

 

This Lease is subjectand subordinate to all declarations of restrictions, ground leases, deeds oftrust or other security interests of any kind now or hereafter encumbering oraffecting the University Project or any portion thereof; subject, however, to thequalification that so long as Tenant is not in default under this Lease, itspeaceful use and occupancy of the Premises under this Lease shall not beimpaired, restricted or terminated by any such mortgagee, beneficiary, securedparty or ground lessor whose interest arises after the date hereof.  In the event of foreclosure or exercise ofany power of sale under any deed of trust superior to this Lease, Tenant, upondemand, shall attorn to the purchaser at any foreclosure sale or sale pursuantto the exercise of any power of sale, in which event this Lease shall notterminate and Tenant shall automatically be and become the tenant of thepurchaser; provided, however, that no landlord or purchaser at any foreclosuresale or sale pursuant to the exercise of any power of sale, or any successorthereto shall be liable for any act or omission of any prior landlord(including Landlord) or be subject to any offsets, counterclaims, or defenseswhich Tenant might have against any prior landlord (including Landlord), or bebound by any Rent which Tenant might have paid in advance to any prior landlord(including Landlord) for a period in excess of one month or by any SecurityDeposit or other prepaid charge which Tenant might have paid in advance to anyprior landlord (including Landlord), or be bound by an agreement ormodification of this Lease made after Tenant has written notice of the interestof such party, without the prior written consent of such party, or be obligatedto repair the Premises in the event of total or substantial damage beyond thatwhich can reasonably be accomplished from the net proceeds of insurance madeavailable to such Landlord.  IfLandlord encumbers the Building as security for any loan, then Landlord shalluse its commercially reasonable efforts to provide Tenant with anon-disturbance agreement on a commercially reasonable form.

 

# **ARTICLE 16.**

 

# **SURRENDEROF PREMISES; REMOVAL OF PROPERTY**

 

16.1         Tenant’s Removal of Property.  Upon the expiration or termination of theTerm of this Lease, Tenant shall quit and surrender possession of the Premisesto Landlord in as good order, condition and repair as the same are now orhereafter may be improved by Landlord or Tenant, reasonable wear and tear andrepairs which are Landlord’s obligation excepted, and in a reasonable state ofcleanliness.  In such event, Tenantshall, without expense to Landlord, remove from the Premises all debris,rubbish, furniture, equipment, business and trade fixtures (including any UPSsystems, supplemental generator and supplemental HVAC equipment installed byTenant), free-standing cabinet work, moveable partitions and other articles ofpersonal property owned by Tenant or installed or placed by Tenant at itsexpense in the Premises and all similar articles of any other persons claimingunder Tenant.  Subject to the provisionsof Paragraph 6.3, Tenant shall not remove any additions or improvements to thePremises, such as carpet, interior partition walls and doors, “built-ins”,shelves, built-in fixtures or other similar items, it being understood andagreed that such items are and shall remain the property of Landlord.  Tenant shall also repair, at its expense,all damage to the Premises resulting from such removal.

 

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## 16.2         Abandoned Property.  Whenever Landlord shall reenter the Premisesas provided in this Lease, any property of Tenant not removed by Tenant uponthe expiration of the Term of this Lease shall be treated in accordance withSection 1980 of the California Civil Code.

##  

# **ARTICLE17.**

# ** **

# **MISCELLANEOUS**

# ** **

## 17.1         Landlord’s Inspection andMaintenance.  Subject to Tenant’sreasonable security requirements, Tenant shall permit Landlord and its agentsat all reasonable times following no less than 24 hours prior notice (except incase of emergency) to enter the Premises for the purpose of inspecting the sameand(or) for the purpose of protecting the interest therein of Landlord, and totake all required materials and equipment into the Premises and perform allrequired work therein.

##  

## 17.2         Exhibition of Premises.  Subject to Tenant’s reasonable securityrequirements, Tenant shall permit Landlord and its agents to enter and passthrough the Premises at all reasonable hours following no less than 24 hoursprior notice (except in case of emergency) to:

##  

### (a)           Post notices of nonresponsibility;and

###  

### (b)          Exhibit the Premises to holders ofencumbrances and to prospective purchasers, mortgagees or lessees of theBuilding.

###  

If during the last month of the Term, if Tenantshall have removed substantially all of Tenant’s property and personnel fromthe Premises and has ceased all business operations therefrom, then, Landlordmay enter the Premises and repair, alter and redecorate the same, withoutabatement of Rent and without liability to Tenant, and such acts shall have noeffect on this Lease.

 

## 17.3         Rights Reserved by Landlord.  Landlord reserves the following rights,exercisable without liability to Tenant for (a) damage or injury to property,person or business, (b) causing an actual or constructive eviction from thePremises, or (c) disturbing Tenant’s use or possession of the Premises:

##  

### (a)           To name the University Projectand to change the name or street address of the University Project;

###  

### (b)          To install and maintain all signs onthe exterior and interior of the University Project;

###  

### (c)           To have pass keys to the Premises andall doors within the Premises, excluding Tenant’s vaults and safes;

###  

### (d)          To enter the Premises for the purposeof making inspections, repairs, alterations, additions or improvements to thePremises or the University Project and to take all stepsas may be necessary or desirable for the safety, protection, maintenance orpreservation of the Premises or the University Projector Landlord’s interest therein, or as may be necessary or desirable for theoperation or improvement of the University Projector in order to comply with the laws, orders or requirements of governmental orother authority.

###  

## 17.4         Quiet Enjoyment.  Tenant, upon paying the Rent and performingall of its obligations under this Lease, shall peaceably and quietly enjoy thePremises, subject to the terms of this Lease and to any mortgage, lease, orother agreement to which this Lease may be subordinate.

##  

## 17.5         Compliance.  Landlord shall bear the responsibility thatthe Building and Common Facilities are in compliance with all laws, rules,regulations and ordinances, including all environmental laws and the Americanwith Disabilities Act of 1990 (the ADA). Tenant shall bear the responsibility of complying with all laws, rules,regulations and ordinances, including all environmental laws and the ADA, inthe Premises.

##  

## 17.6         Force Majeure.  Any prevention, delay or stoppage of work tobe performed by Landlord or Tenant which is due to strikes, labor disputes,inability to obtain labor, materials, equipment or reasonable substitutestherefor, acts of God, governmental restrictions or regulations or controls,judicial orders, enemy or hostile government actions, civil commotion, fire orother casualty, or other causes beyond the reasonable control of the partyobligated to perform hereunder, shall excuse performance of the work by thatparty for a period equal to the duration of that prevention, delay orstoppage.  Nothing in this section,however, shall excuse or delay Tenant’s obligation to pay Rent or other chargesunder this Lease.

##  

## 17.7         Counterparts.  This Lease may be executed in multiplecounterparts, all of which shall constitute one and the same Lease.

##  

## 17.8         Execution of Lease.  No Option.  The submission of this Lease to Tenant shall be for examinationpurposes only, and does not and shall not constitute a reservation of or optionfor Tenant to lease, or otherwise create any interest of Tenant in the Premisesor any other premises within the University Project.  Execution of this Lease by Tenant and itsreturn to Landlord shall not be binding on Landlord notwithstanding any timeinterval, until Landlord has in fact signed and delivered this Lease to Tenant.

##  

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## 17.9         Further Assurances.  The parties agree to promptly sign alldocuments reasonably requested to give effect to the provisions of this Lease.

##  

## 17.10       Mortgagee Protection.  Tenant agrees to send by certified orregistered mail to any first deed of trust beneficiary of Landlord whoseaddress has been furnished to Tenant, a copy of any notice of default served byTenant on Landlord.  If Landlord failsto cure such default within the time provided for in this Lease, such beneficiaryshall have an additional thirty (30) days to cure such default; provided thatif such default cannot reasonably be cured within that thirty (30) day period,then such beneficiary shall have such additional time to cure the default as isreasonably necessary under the circumstances.

##  

## 17.11       Expenses of Litigation.  If either party incurs any expense,including reasonable attorney’s fees, in connection with any action institutedby either party by reason of any dispute under this Lease or any default oralleged default of the other party, the party prevailing in such action shallbe entitled to recover its reasonable expenses from the other party.

##  

## 17.12       Tenant’s Certificates.  Tenant agrees at any time from time to time,within twenty (20) days of receipt of written request from Landlord, toexecute, acknowledge and deliver to Landlord a statement in writing certifying:(a) that this Lease is unmodified and in full force and effect or if there havebeen modifications, that this Lease is in full force and effect as modified andstating the modifications; (b) as to the Commencement Date and expiration dateof the Term; (c) as to the dates to which the Rent and other charges hereunderhave been paid in advance, if any; (d) as to the amount of the current BasicMonthly Rent; (e) as to the subleases or assignments, if any, applicable to theLease; (f) whether or not, to the best knowledge of Tenant, Landlord is indefault in the performance of any covenant, agreement or condition contained inthis Lease, and if so, specifying each such Landlord default of which Tenantmay have knowledge; and (g) any other information reasonably requested byLandlord.  Any such statement deliveredpursuant to this Section may be relied upon by any prospective purchaser of theBuilding, or any mortgagee, ground lessor or other encumbrancer thereof, or byan assignee of any such encumbrancer.

##  

## 17.13       Holding Over.  Tenant shall have the right to extend theTerm for a period of up to two (2) months after the expiration of the Term uponthe same provisions and conditions as otherwise set forth herein (the “HoldoverExtension Period”) provided that Tenant gives Landlord at least six (6) monthsprior written notice of its intent to so extend the Lease and the duration ofthe extension.  Any holding over beyondthe Holdover Extension Period without the consent of the Landlord shall beconstrued to be a tenancy from month to month upon the same provisions andconditions as otherwise set forth herein except that the Rent shall equal 150%of the Rent payable (without reduction) during the last month of the Termhereof.  Tenant shall indemnify and holdLandlord harmless from and against all liability, costs, damages and expensesresulting from the delay by Tenant in surrendering the Premises, including anyclaims made by any succeeding or prospective tenant based on any such delay.

##  

## 17.14       Notices.  All notices, which Landlord or Tenant may be required or maydesire to serve on the other shall be in writing and shall be served bypersonal delivery or by mailing the same by registered or certified mail,postage prepaid, addressed as set forth in the Basic Lease Provisions oraddressed to such other address or addresses as either Landlord or Tenant mayfrom time to time designate to the other in writing in accordance with thisArticle.  Any notice so given by mail asprovided above shall be deemed effectively given seventy-two (72) hours afterdeposit in the mail as provided above, unless received earlier by theaddressee.  Any notice served by personaldelivery shall be deemed effectively given when delivered at the party’saddress.

##  

## 17.15       Rules and Regulations.  Tenant agrees to abide by and comply withthe Rules and Regulations delivered to Tenant by Landlord from time totime.  Landlord shall not be liable toTenant for any violation of such Rules and Regulations by any othertenant.  In the event of anyinconsistencies between this Lease and the Rules and Regulations, the languageof this Lease shall prevail.  Landlordshall have the right, from time to time, to reasonably amend and modify theRules and Regulations.  Landlord shalluse commercially reasonable efforts to enforce the Rules and Regulationsagainst other lessees of the Building, but shall have no liability for itsfailure to enforce the Rules and Regulations against any other lessee in theBuilding.

##  

## 17.16       Governing Laws.  This Lease shall be governed by andconstrued in accordance with the laws of the State of California.

##  

## 17.17       Headings and Titles.  The marginal titles to the Articles of thisLease are inserted for convenience of reference only and shall have no effectupon the construction or interpretation of any part hereof.

##  

## 17.18       Heirs and Assigns.  Subject to the limitations on assignment,subletting and transfers, this Lease shall be binding upon and shall inure tothe benefit of the parties hereto and their respective heirs, personalrepresentatives, successors and assigns.

##  

## 17.19       Time of Essence.  Time is of the essence with respect to theperformance of every provision of this Lease.

##  

## 17.20       Severability.  If any condition or provision of this Leaseshall be held invalid or unenforceable to any extent under any applicable lawor by any court of competent jurisdiction, then the remainder of this Leaseshall not be affected thereby, and each condition and provision of this Leaseshall be valid and enforceable to the fullest extent permitted by law.

##  

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## 17.21       Work Letter Agreement.  The Premises shall be finished in accordancewith the agreement of the parties entitled “Work Letter Agreement,” whichagreement is attached hereto as Exhibit B.

##  

## 17.22       Authority.  Each individual executing this Lease onbehalf of a partnership or corporation represents and warrants that she or heis duly authorized to execute and deliver this Lease on behalf of suchpartnership or corporation and that this Lease is binding upon such partnershipor corporation in accordance with its terms.

##  

## 17.23       Brokers.  Landlord shall be solely responsible for the payment of brokeragecommissions to the entity specified in Item 8 of the Basic LeaseProvisions.  If Tenant has dealt withany other real estate broker or agent or any other person in connection withthe leasing or renting of space in the Building, or assignment of the Lease orsubletting of the Premises, then Tenant shall be solely responsible for thepayment of any fee due such person, and Tenant shall indemnify, defend, protectand hold Landlord harmless from and against all liability, costs, and expenses(including attorney’s fees and court costs) in respect thereto.

##  

## 17.24       No Light, Air or View Easement.  Any diminution or shutting off of light, airor view by any structure which may be erected on lands adjacent to the University Projectshall not in any way affect this Lease or impose any liability on Landlord.

##  

## 17.25       Entire Agreement.  This Lease, along with any Exhibits affixedhereto, constitutes the entire and exclusive agreement between Landlord andTenant relative to the Premises.  ThisLease may not be changed, modified, abandoned or discharged, in whole or inpart, nor any of its provisions waived, except by a written instrument which isexecuted by both parties hereto.

##  

## 17.26       Recording.  Tenant shall not record this Lease.

##  

## 17.27       Joint and Several Liability.  If Tenant is comprised of more than oneperson or entity, then the obligations hereunder imposed upon such persons andentities shall be joint and several.

##  

## 17.28       Exhibits.  Each of the following Exhibits are attachedhereto and incorporated herein by this reference.

##  

ExhibitA - Floor Plan of Premises.

 

ExhibitB - Work Letter Agreement.

 

ExhibitC - Rules and Regulations.

 

ExhibitD - Basic Monthly Rent Schedule.

 

ExhibitE - Option to Renew and Extend

 

ExhibitF - Right of First Refusal

 

ExhibitG - Right of First Offer

 

## 17.29       Confidentiality.  Landlord and Tenant acknowledge and agree tokeep the substance of this Lease confidential and not to disclose or discussthe nature or substance of the discussions leading to the execution hereof, northe substance or detail of this Lease, with any individual or entity, except asmight be reasonably necessary to effect the intent hereof; provided, however,Tenant may disclose this Lease and the terms and conditions herein to itslawyers, accountants, investors, purchasers, potential assignees or sublessee(or any brokers assisting in connection therewith) and otherwise as may berequired by law and Landlord may disclose this Lease and the terms andconditions herein to its lawyers, accountants, potential investors, purchasersand lenders and otherwise as may be required by law.  Subject to the foregoing, Tenant shall not disclose or discussany aspect of the negotiations or detail of this Lease with any other tenant orprospective tenant of the Building or any real estate agent or broker.  Landlord and Tenant understand, acknowledgeand agree that in the event of a failure to comply with the reciprocalconfidentiality provisions detailed herein, that the non-breaching party willsuffer immediate, irreparable harm and that such party shall have the right toenforce this confidentiality agreement by injunctive or other equitableremedies.  Any violation of any of theprovisions of this confidentiality agreement shall be deemed to be an event ofdefault under this Lease.

##  

## 17.30       No Representations or Warranties.  Neither Landlord nor Landlord’s agents orattorneys have made any representations or warranties with respect to thePremises, the Building or this Lease, except as expressly set forth herein, andno rights, easements or licenses are or shall be acquired by Tenant byimplication or otherwise.

##  

## 17.31       Limitation of Liability.  Landlord’s officers, directors andshareholders shall not be liable for the performance of Landlord’s obligationsunder this Lease.  Tenant shall looksolely to Landlord to enforce Landlord’s obligations hereunder and shall notseek any damages against any of Landlord’s officers, directors andshareholders.  The liability of Landlordfor Landlord’s obligations under this Lease shall not exceed and shall belimited to Landlord’s interest in the Building, and Tenant shall not look toany other property or assets of Landlord in seeking either to enforceLandlord’s obligations under this Lease or to satisfy a judgment for Landlord’sfailure to perform such obligations.

 

21

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## 17.32       Consents.  Tenant hereby waives any monetary claimagainst Landlord which it may have based upon any assertion that Landlord hasunreasonably withheld or unreasonably delayed any requested consent, and Tenantagrees that its sole remedy shall be an action or proceeding to enforce anysuch provision or for specific performance, injunction or declaratoryjudgment.  In the event of such adetermination, the requested consent shall be deemed to have been granted;however, Landlord shall have no liability to Tenant for its refusal to givesuch consent.  The sole remedy forLandlord’s unreasonably withholding or delaying of consent shall be as providedin this Section.

##  

## 17.33       Waiver.  The failure of Landlord to exercise its rights in connection withany breach or violation of any term, covenant, or condition herein contained,shall not be deemed to be a waiver of such term, covenant or condition or anysubsequent breach of the same or any other term, covenant or condition hereincontained.  The subsequent acceptancesof Rent hereunder by Landlord shall not be deemed to be a waiver of anypreceding breach by Tenant of any term, covenant or condition of this Leaseother than the failure of Tenant to pay the particular rent so accepted,regardless of Landlord’s knowledge of such proceeding breach at the time ofacceptance of such rent.

##  

## 17.34       No Merger.  The voluntary or other surrender of thisLease by Tenant, or a mutual cancellation thereof, shall not work a merger, andshall, at the option of Landlord, terminate any and all existing subleases orsubtenancies, or operate as an assignment to Landlord of any or all of suchsubleases or subtenancies.

##  

## 17.35       Storage Premises.  Landlord hereby leases to Tenant, and Tenanthereby leases from Landlord, Tenant’s currently existing storage premises (the“Storage Premises”), comprised of approximately one thousand one hundredninety-eight (1198) rentable square feet located in the parking garage.  Tenant leases the Storage Premises “as is,”and Landlord makes no representation or warranty with respect to the StoragePremises or the condition thereof.

##  

### (a)           Use.  The Storage Premises may be used solely for storage purposes incompliance with Applicable Laws.  Tenantagrees that Tenant shall not store any toxic or corrosive materials in theStorage Premises, nor shall Tenant store any objects or groups of objects whichexceed the floor load capacity of the Storage Premises.

###  

### (b)           Term.  The term of the lease for the StoragePremises shall commence as of the Commencement Date and shall continue for aperiod coterminous with Term of this Lease, unless sooner terminated pursuanthereto, and subject to renewal pursuant to Exhibit E attached hereto; providedthat rent for the Storage Premises during any renewal or extension term shallbe determined by Landlord.

###  

### (c)           Rent.  Tenant shall pay a monthly rent for theStorage Premises in the amount of one thousand one hundred ninety-eight Dollars($1198), based on the existing storage premises, payable in advance on orbefore the first day of each calendar month during the term of the lease forthe Storage Premises.  Rent payments forpartial months during the term hereof shall be prorated on the basis of theactual number of days in said months.

###  

### (d)           Other Expenses.  Any costs or expenses for services orutilities which are attributable directly to Tenant’s use or occupancy of theStorage Premises shall be paid in full by Tenant as additional rent when suchcosts are incurred or, if Landlord makes such payments, within ten (10) daysafter being billed therefor by Landlord.

###  

### (e)           Relocation of Storage Premises.  Landlord shall have the right, at its optionand from time to time, upon not less than thirty (30) days prior written noticeto Tenant, to relocate all or any portion of the Storage Premises and tosubstitute for all or any portion of the Storage Premises other space in theBuilding or in the parking garage that comprises approximately as much space asthe Storage Premises being relocated. Such substitute Storage Premises shall be rented at the same rateapplicable to the Storage Premises being relocated.

###  

22

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IN WITNESS WHEREOF,Landlord and Tenant have executed this Lease, intending to be bound by it as ofthe date first above written.

 
| “LANDLORD”                                                     |                                                  | “TENANT”              |
|--------------------------------------------------------------------------|-------------------------------------------------------|---------------------------------|
|                                                                     |                                                  |                            |
| ALECTA PENSIONSFÖRSÄKRING, ÖMSESIDIGT,  a Swedish company | MAXIM PHARMACEUTICALS,  INC.,  a Delaware corporation |
|                                                                     |                                                  |                            |
| By:                                                                      | Alecta Investment Management U.S.A.,                  |                            | By: | /s/ Dale A. Sander |   |
|                                                                     | a Delaware corporation                                |                            |   | Name: Dale A. Sander |
|                                                                     | its Manager                                           |                            |   | Title: Vice President |
|                                                                     |                                                  |                            |   |   |
|                                                                     | By:                                                   | /s/ Martin Van Ardenne          |   |   |   |   |
|                                                                     |                                                  | Name:   Martin Van Ardenne |   | By: | /s/ Larry G. Stambaugh |   |
|                                                                     |                                                  | Title:   Asset Manager     |   |   | Name: Larry G. Stambaugh |
|                                                                     |                                                  |                            |   |   | Title: CEO |
|                                                                     |                                                  |                            |   |   |   |
|                                                                     | By:                                                   | /s/ Laura Sundquist Brom        |   |   |   |   |
|                                                                     |                                                  | Name: Laura Sundquist Brom      |   |   |   |
|                                                                     |                                                  | Title: CFO                      |   |   |   |
|                                                                          |                                                       |                                 |  |  |  |  |  |  |  |

 

23

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**EXHIBIT “A”**

 

**Floor Plan of Premises**

 

 

**THIRD FLOOR**

 

 

**FOURTH FLOOR**

 

1

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**EXHIBIT “B”**

 

**Work Letter Agreement**

 

This Work Letter Agreement (“Work LetterAgreement”) is dated for reference purposes only as July 31, 2003 and ismade by and between ALECTA PENSIONSFÖRSÄKRING,ÖMSESIDIGT, a Swedish company (“Landlord”), and MAXIM PHARMACEUTICALS,INC., a Delaware corporation (“Tenant”), as part of that certain Lease datedthe same date as this Work Letter Agreement between them, affecting that realproperty commonly known as University Pacific Center, located at 8899University Center Lane in the City of San Diego, County of San Diego, State ofCalifornia. Capitalized terms used, but not otherwise defined, in this WorkLetter Agreement shall have meanings ascribed to those terms in the Lease. Thefollowing provisions are added to the Lease and, in the event of conflictbetween this Work Letter Agreement and the Lease, this Work Letter Agreementshall prevail.

 

Tenanthereby acknowledges that Tenant has inspected the Premises, knows the conditionthereof and agrees to accept the same in “as is” condition.  It is understood and agreed that Landlord isnot obligated to install any equipment, or make any repairs, improvements oralterations to the Premises.

 

**ARTICLE I**

**DEFINITIONS**

 

1.1.  **Definitions**.Wherever used in this Work Letter Agreement, the following terms are defined asfollows:

 

1.2.  **Construction Costs**means the following costs to the extent incurred to complete the LeaseholdImprovements (including the costs of security systems, cabling and signage):

 

a.Payments to Contractors for labor, material, equipment, and fixtures suppliedpursuant to any construction contract entered into in accordance with this WorkLetter Agreement;

 

b.Fees paid to Designers for services required for construction of the LeaseholdImprovements;

 

c.Taxes, fees, charges, and levies by governmental and quasi-governmentalagencies for Permits or for inspections of the Leasehold Improvements work;

 

d.Utilities incurred in the course of the construction of the LeaseholdImprovements;

 

e.Premiums for builder’s risk insurance and other insurance required by this WorkLetter to be carried by Tenant in connection with construction of the LeaseholdImprovements; and

 

f.Costs incurred for the management and administration of the construction of theLeasehold Improvements, including, without limitation, subject to clause (iv)below, amounts paid to Tenant’s construction consultants other than Designers,wages, labor burden, and expediting, procurement, and administrative expenses.

 

In no event,however, shall Construction Costs for the Leasehold Improvements include:

 

(i)The cost of work that is not authorized by the approved Final Plans forLeasehold Improvements;

 

(ii)Costs resulting from any default by Tenant of its obligations under this WorkLetter Agreement;

 

(iii)Costs resulting from any default by any Designer or Contractor;

 

(iv)Amounts paid Tenant’s construction consultants (other than Designers) in excessof two percent (2%) of the amount of the costs described in clause (a) above;

 

(v)Costs that are recovered or are reasonably recoverable by Tenant from a thirdparty (e.g., insurers, warrantors, or tortfeasors).

 

1.3.  **Contractors**means all general contractors, design build contractors, subcontractors, andmaterial suppliers who provide labor and materials for construction of theLeasehold Improvements. To the extent required by Applicable Laws andRestrictions, each Contractor shall be duly licensed by the State of Californiaand in good professional standing.

 

1.4.  **Designers**means all architects, structural engineers, mechanical engineers, the Architectand all other design professionals that are needed to design any portion of theLeasehold Improvements, each of whom shall be duly licensed by the State ofCalifornia and in good professional standing.

 

1.5.  **Final Plans**for Leasehold Improvements are those working drawings, plans, specifications,elevations, lighting design, interior finish design, for the LeaseholdImprovements prepared by the Designers and approved by the parties inaccordance with this Work Letter Agreement.

 

1

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1.6.  **Improvement Allowance**means the Initial Improvement Allowance and any Additional ImprovementAllowance.

 

1.7.  **Initial Improvement Allowance**means the amount of ten dollars ($10.00) per usable square foot of thePremises.

 

1.8.   **Landlord’s Representative**means Lisa Ledbetter or such other person as Landlord shall designate inwriting to Tenant as its authorized representative for the purposes of administeringthis Work Letter Agreement.

 

1.9.  **Leasehold Improvements**means the improvements, modifications, and alteration of the existing Premisesto be constructed in or about the Premises by Tenant in accordance with thisWork Letter Agreement.

 

1.10.  **Tenant’s Representative**means[                  ]or such other person as Tenant shall designate in writing to Landlord as itsauthorized representative for the purposes of administering this Work LetterAgreement.

 

**ARTICLE II**

**DESIGNATION OF REPRESENTATIVES**

 

2.1.  **Designation of Representatives**.Landlord and Tenant respectively appoint Landlord’s Representative and Tenant’sRepresentative as their sole representatives for the purposes of administeringthis Work Letter Agreement. Until replaced upon by written notice, Landlord’sRepresentative and Tenant’s Representative will have the full authority andresponsibility to act on behalf Landlord and Tenant, respectively, as requiredin this Work Letter Agreement, but shall have no right to modify this WorkLetter Agreement or the Lease or to waive any material right of his or herprincipal under this Work Letter Agreement.

 

**ARTICLE III**

**PERFORMANCE OF THE WORK**

 

3.1.  **Administrative Fee**.  Tenant shall pay an administrative fee (the“Administrative Fee”) to Landlord for Landlord’s administration of thearchitectural and general contracting contracts and billing in the amount ofone-half of one percent (.5%) of the Construction Costs described in clauses(a) and (b) of the definition of Construction Costs.  Landlord may withhold, and apply against the Administrative Fee,any portion of the Improvement Allowance up to the amount of the AdministrativeFee.

 

3.2.  **Construction of Leasehold Improvements**. Tenant shall cause the Leasehold Improvements to be constructed subjectto, and in full compliance with, Section 6.3 of the Lease.

 

**ARTICLE IV**

**PAYMENT OF CONSTRUCTION COSTS**

 

4.1.  **Duty To Pay Construction Costs of Leasehold Improvements andImprovement Allowance**. Subject topayment by Landlord to Tenant of the Improvement Allowance, the LeaseholdImprovements shall be completed at the sole expense of Tenant. Landlord shalldisburse the Improvement Allowance to Tenant as follows:

 

Landlord shalldisburse to Tenant an amount equal to the lesser of the Construction Costs orthe Improvement Allowance when the Leasehold Improvements have beensubstantially completed in accordance with Section 6.3 of the Lease.

 

4.2.  **Additional Improvement Allowance**.  Tenant may, by written noticeto Landlord delivered prior to the Commencement Date, increase the ImprovementAllowance by up to five dollars ($5.00) per rentable square foot of thePremises (the “Additional Improvement Allowance”).  If Tenant uses all or part of the Additional Improvement Allowance,then Basic Monthly Rent for each month of the Term shall increase by $0.02125per rentable square foot of the Premises for each additional one dollar ($1.00)of the Additional Improvement Allowance that Landlord disburses to or on behalfof Tenant, or otherwise disburses in connection with the LeaseholdImprovements.

 

4.3.  **Characterization****of Additional Improvement Allowanceand Initial Improvement Allowance**.  Any disbursement by Landlord of any portionof the Improvement Allowance shall be deemed to be a distribution of theInitial Improvement Allowance until the full amount of the Initial ImprovementAllowance has been disbursed, and thereafter, any disbursement by Landlord ofany portion of the Improvement Allowance shall be deemed to be a disbursementof the Additional Improvement Allowance.

 

4.4  **Unused Improvement Allowance**.  Notwithstanding Section 4.1 above, ifLandlord disburses less than all of the Initial Improvement Allowance to Tenantby the beginning of the thirteenth (13th) full month of the Term,then, the unused portion of the Initial Improvement Allowance, up to fivedollars ($5.00) per usable square foot, in the aggregate, shall automaticallybe applied to reduce the Basic Monthly Rent first ensuing in the thirteenth (13th),fourteenth (14th) and fifteenth (15th) full months of theTerm.

 

2

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4.5  **Expiration of Tenant Allowance**.  Tenant’s rights with respect to theImprovement Allowance shall expire on January 1, 2005.  If Tenant has failed to request thedisbursement of any portion of the Improvement Allowance by January 1, 2005,then Tenant shall be deemed to have forfeited and lost its right to theremaining portion of the Improvement Allowance.

 

4.6  **Notice of Nonresponsibility**.Tenant shall provide Landlord with at least ten (10) days’ prior written noticebefore the date for its commencement of construction of the LeaseholdImprovements, in order to permit Landlord to post, file, and record suchNotices of Nonresponsibility and other instruments as may be necessary toprotect Landlord and its property from claims by Contractors for ConstructionCosts that are to be paid by Tenant.

 

4.7  **Liens**.  Tenant shall not permit the filing of anymechanic’s lien or other lien in connection with any Leasehold Improvements,unless such mechanic’s lien or other lien results from Landlord’s failure tomake payments when required hereby.  Ifa mechanic’s lien or other lien is filed against the Building or Real Property,Tenant shall post a statutory release bond or discharge or cause to bedischarged such lien within ten (10) days after Tenant receives notice of thefiling thereof.

 

**ARTICLE V**

**MISCELLANEOUS**

** **

**5.1 **Time of theEssence.  Time is of the essence with respect toTenant’s obligations hereunder and with respect to the expiration of theImprovement Allowance under Paragraph 5.5.

** **

5.2**  Remedies**.  Allrights and remedies of Landlord under the Lease shall apply in the event of abreach of any of the covenants contained herein.  In the event Tenant fails to make timely payment of any amountsdue hereunder, Landlord shall have all the rights and remedies provided for inthe Lease for nonpayment or late payment of Rent including, but not limited to,the right to late fees and interest as set forth in Article 2 and all otherrights and remedies as set forth in Article 13.

 

IN WITNESS WHEREOF,Landlord and Tenant have executed this Work Letter Agreement, intending to bebound by it as of the date first above written.

 
| “LANDLORD”                                                     |                                                  | “TENANT”              |
|--------------------------------------------------------------------------|-------------------------------------------------------|---------------------------------|
|                                                                     |                                                  |                            |
| ALECTA PENSIONSFÖRSÄKRING, ÖMSESIDIGT,  a Swedish company | MAXIM PHARMACEUTICALS,  INC.,  a Delaware corporation |
|                                                                     |                                                  |                            |
| By:                                                                      | Alecta Investment Management U.S.A.,                  |                            | By: | /s/ Dale A. Sander |   |
|                                                                     | a Delaware corporation                                |                            |   | Name: Dale A. Sander |
|                                                                     | its Manager                                           |                            |   | Title: Vice President, Corporate  Development |
|                                                                     |                                                  |                            |   |   |
|                                                                     | By:                                                   | /s/ Martin Van Ardenne          |   |   |   |   |
|                                                                     |                                                  | Name:   Martin Van Ardenne |   | By: | /s/ Larry G. Stambaugh |   |
|                                                                     |                                                  | Title:   Asset Manager     |   |   | Name: Larry G. Stambaugh |
|                                                                     |                                                  |                            |   |   | Title: CEO |
|                                                                     |                                                  |                            |   |   |   |
|                                                                     | By:                                                   | /s/ Laura Sundquist Brom        |   |   |   |   |
|                                                                     |                                                  | Name: Laura Sundquist Brom      |   |   |   |
|                                                                     |                                                  | Title: CFO                      |   |   |   |
|                                                                          |                                                       |                                 |  |  |  |  |  |  |

 

3

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**EXHIBIT “C”**

 

**RULES AND REGULATIONS**

 

1.             ALL REFERENCES IN THESE RULES AND REGULATIONS SHALLREFER TO LANDLORD AND TENANT UNDER THIS LEASE. IT IS UNDERSTOOD, HOWEVER, THAT THESE SAME RULES AND REGULATIONS SHALLBE ADOPTED AND OTHERWISE APPLIED TO OTHER TENANTS IN THIS BUILDING.

 

2.             Except as otherwise provided in theLease or any Exhibits thereto, no sign, placard, picture, advertisement, nameor notice shall be inscribed, displayed, printed or affixed on or to any partof the outside or inside of the Building or the University Project without the written consent of Landlordfirst had and obtained.  Landlord shallhave the right to remove any such sign, placard, picture, advertisement, nameor notice, unless Landlord has given written consent, without notice to and atthe expense of Tenant.  Landlord shallnot be liable in damages for such removal unless the written consent ofLandlord has been obtained.

 

All approved signs orlettering on doors and walls to the Premises shall be printed, painted, affixedor inscribed at the expense of Tenant by Landlord or by a person approved byLandlord in a manner and style acceptable to Landlord.

 

Tenant shall not use anyblinds, shades, awnings, or screens in connection with any window or door ofthe Premises unless approved in writing by Landlord.  Tenant shall not use any drape or window covering facing anyexterior glass surface other than the standard drape issued by Landlord.

 

3.             Except as to tenants who occupy entire floors of theBuilding: (a) no tenant shall obtain for use upon its Premises ice, drinkingwater, waxing, cleaning, interior glass polishing, rubbish removal, towel andother similar services or accept barbering or bootblacking or coffee cartservices, milk, soft drinks or other like services on the Premises, except frompersons authorized by Landlord and at the hours and consented to in advance byLandlord; and (b) no vending machines or machines of any description shall beinstalled, maintained or operated upon the Premises without the prior writtenconsent of Landlord.

 

4.             Except as otherwise provided in the Lease or anyExhibits thereto, the bulletin board or directory of the Building shall beprovided exclusively for the display of the name and location of tenants onlyand Landlord reserves the right to exclude any other names therefrom andotherwise limit the number of listings thereon.

 

5.             The sidewalks, halls, passages,exits, entrances, elevators and stairways shall not be obstructed by any of thetenants or used by them for any purpose other than for ingress to and egressfrom their respective premises.  Thehalls, passages, exits, entrances, elevators, stairways, balconies and roof arenot for the use of the general public and Landlord shall in all cases retainthe right to control and prevent access thereto by all persons whose presencein the judgment of Landlord shall be prejudicial to the safety, character,reputation and interests of the Building or the University Project and its tenants, providing that nothingherein contained shall be construed to prevent such access to persons whomTenant normally deals in the ordinary course of Tenant’s business unless suchpersons are engaged in illegal activities. Except as may be otherwise provided in the Lease with respect to theproposed heliport facility on the roof of the Building, no tenant and noemployees or invitees of any tenant shall go upon the roof of the Building.

 

6.             Each tenant, upon the termination of the tenancy, shalldeliver to Landlord the keys of offices, rooms and toilet rooms which shallhave been furnished to Tenant or which Tenant shall have made, and in the eventof loss of any keys so furnished, shall pay Landlord therefor.  Tenant shall not alter any lock nor installany new or additional lock or any bolts on any door of the Premises without thewritten consent of Landlord.

 

7.             The toilet rooms, toilets, urinals, wash bowls and otherapparatus shall not be used for any purpose other than that for which they wereconstructed and no foreign substances of any kind whatsoever shall be throwntherein and the expense of any breakage, stoppage, or damage resulting from theviolation of this rule shall be borne by Tenant who, or whose employees orinvitees, shall have caused it.

 

8.             Tenant shall not overload the floor of the Premises ordeface the Premises or any part thereof.

 

9.             No furniture or freight shall be brought into theBuilding without the consent of Landlord. All moving of the same into or out of the Building shall be via theBuilding’s freight handling facilities, unless otherwise directed by Landlord,at such time and in such manner as Landlord shall reasonably prescribe.  No hand trucks or vehicles (other than awheelchair for an individual) shall be used in passenger elevators.  Any hand trucks permitted in the Buildingmust be equipped with soft rubber tires and side guards

 

10.           Except for safes and vaults installed as part of theTenant Improvements pursuant to the Work Letter attached to the Lease, Landlordshall have the right to prescribe the weight, size and position of all safesand other heavy equipment brought into the Building and also the times andmanner of

 

1

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moving the same in and out of theBuilding.  Safes or other heavy objectsshall, if considered necessary by Landlord, stand on a platform of suchthickness as is necessary to properly distribute the weight.  Landlord will not be responsible for loss ofor damage done to the Building by moving or maintaining any such safe or otherproperty and any such damage shall be repaired at the expense of Tenant.

 

11.           Except as otherwise provided in the Lease or any Exhibitsthereto, Tenant shall not employ any person or persons other than the janitorof Landlord for the purpose of cleaning the Premises unless otherwise agreed toby Landlord.  Except with the writtenconsent of Landlord no person or persons other than those approved by Landlordshall be permitted to enter the Building for the purpose of cleaning the same.

 

Tenant shall not cause anyunnecessary labor by reason of Tenant’s carelessness or indifference in thepreservation of good order and cleanliness. Landlord shall in nowise be responsible to any Tenant for any loss ofproperty on the Premises, however occurring, or for any damage done to theeffects of any tenant by the janitor or another employee or any otherperson.  Except as otherwise provided inthe Lease or any Exhibit thereto, janitor service shall include ordinarydusting and cleaning by the janitor or any assigned to such work and shall notinclude shampooing of carpets or rugs or moving of furniture or other specialservices.  Janitor service will not befurnished on nights when rooms are occupied after 10:00 p.m.  Window cleaning shall be done only byLandlord.

 

12.           Tenant shall not use, keep or permit to be used or keptany foul or noxious gas or substance in the Premises, or permit or suffer thePremises to be occupied or used in any manner offensive or objectionable toLandlord or other occupants of the Building by reason of any noise, odorsand(or) vibrations, or interfere in any way with other tenants or those havingbusiness therein, nor shall any animals or birds be brought in or kept in orabout the Premises of the Building.

 

13.           Except for tenants who occupy entire floors of theBuilding, no cooking shall be done or permitted by any tenant on thePremises.  No tenant shall allow thePremises to be used for the manufacture or storage of merchandise, for washingclothes, for lodging, or for any improper, objectionable or immoral purpose.

 

14.           Tenant shall not use or keep in the Premises or theBuilding any kerosene, gasoline or flammable, explosive or combustible fluid ormaterial, or use any method of heating or air conditioning other than thatsupplied by Landlord.

 

15.           Landlord will direct electricians as to where and howtelephone and telegraph wires are to be introduced.  No boring or cutting for wires or stringing of wires will beallowed without written consent of Landlord. The location of telephones, call boxes and other office equipmentaffixed to the Premises shall be subject to the approval of Landlord.

 

16.           No tenant shall lay linoleum, tile, carpet or othersimilar floor covering so that the same shall be affixed to the floor of thePremises in any manner except as approved by Landlord.  The expenses of repairing any damageresulting from a violation of this rule or removal of any floor covering shallbe borne by Tenant by whom, or by whose contractors, employees or invitees, thedamage shall have been caused.

 

17.           Landlord reserves the right to closeand keep locked all entrance and exit doors and otherwise regulate access ofall persons to the halls, corridors, elevators and stairways in the Building onSundays and legal holidays and on other days between the hours of 7:00 p.m. and7:00 a.m., and at such other times as Landlord may deem advisable for theadequate protection and safety of the Building or the University Project, its tenants and propertyin the Building or the UniversityProject.  Access to the Premises may berefused unless the person seeking access is known to the employee of theBuilding or the University Project in charge, andhas a pass or is otherwise properly identified.  Landlord shall in no case be liable for damages for any errorwith regard to the admission or exclusion from the Building or the University Project of any person.

 

18.           Tenant shall see that the doors of the Premises are closedand securely locked before leaving the Building and must observe strict careand caution that all water apparatus are entirely shut off before Tenant orTenant’s employees leave the Building, and that all electricity, gas or airshall likewise be carefully shut off, so as to prevent waste or damage, and forany default or carelessness Tenant shall make good all injuries sustained byother tenants or occupants of the Building.

 

19.           Landlord may refuse admission to the Building outside ofordinary business hours to any person not known to the watchman in charge ornot having a pass issued by Landlord or not properly identified, and mayrequire all persons admitted to or leaving the Building outside of ordinarybusiness hours to register.  Any personwhose presence in the Building at any time shall in the sole judgment ofLandlord, be prejudicial to the safety, character, reputation and interests ofthe Building or its tenants may be denied access to the Building or may beejected therefrom.  Landlord may requireany person leaving the Building with any package or other object to exhibit apass from Tenant from whose Premises the package or object is being removed,but the establishment and enforcement of such requirement shall not impose anyresponsibility on Landlord for the protection of any tenant against the removalof property from the Premises of the Tenant.

 

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20.           The requirements of Tenant shall be attended to only uponapplication at the office of the Building. Employees of Landlord shall not perform any work or do anything outsideof their regular duties unless under special instructions from Landlord.

 

21.           Tenant shall use its best efforts to assure that no personshall be allowed to transport or carry beverages, food, containers, etc. on anypassenger elevators.  The transportationof such items shall be via the service elevators in such manner as prescribedby Landlord.

 

22.           Tenant shall cooperate with Landlord in obtaining maximumeffectiveness of the cooling system by closing drapes when the sun’s rays falldirectly on windows of the Premises. Tenant shall not obstruct, alter or in any way impair the efficientoperation of Landlord’s HVAC system and shall not place bottles, machines,parcels or any other articles on the induction unit enclosure so as tointerfere with air flow.

 

23.           Landlord shall have the right toprohibit any advertising by any Tenant which, in Landlord’s opinion, tends toimpair the reputation of the Building or the University Project or its desirability as a location foroffices, and upon written notice from Landlord, any Tenant shall refrain fromor discontinue such advertising.

 

24.           Canvassing, soliciting and peddlingwithin the entire UniversityProject is prohibited unless specifically approved by Landlord and each tenantshall cooperate to prevent such activity.

 

25.           Except as otherwise provided in theLease, all parking ramps and areas plus other public areas forming a part ofthe University Project shall be underthe sole and absolute control of Landlord with the exclusive right to regulateand control these areas.  Tenant agreesto conform to the rules and regulations that may be established by Landlord forthese areas from time to time.

 

26.           Whenever the consent or approval of Landlord is requiredunder these Rules and Regulations, Landlord agrees that such consent shall notbe unreasonably withheld or delayed.

 

27.           There shall be no smoking permitted at any time in theBuilding.

 

28.           In the event of any conflict between these Rules and Regulationsand the Lease, the Lease shall prevail.

 

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**EXHIBIT “D”**

 

**BASIC MONTHLY RENT SCHEDULE**

 

**1.             BASICMONTHLY RENT**

 

a)             Beginning on the Commencement Date of the Lease, theBasic Monthly Rent to be paid by the Tenant to the Landlord, which includesfull service, net of separately metered utilities, shall be as follows:

 

Months   0 through 12 - $90,362.40   ($2.40 per BOMA rentable square foot) permonth

Months 13 through 24 -$90,362.40   ($2.40 per BOMA rentablesquare foot) per month

Months 25 through 36 -$90,362.40   ($2.40 per BOMA rentablesquare foot) per month

Months 37 through 48 -$100,904.68 ($2.68 per BOMA rentable square foot) per month

Months 49 through 60 -$103,916.76 ($2.76 per BOMA rentable square foot) per month

Months 61 through 72 - $106,928.84($2.84 per BOMA rentable square foot) per month

Months 73 through 84 -$109,940.92 ($2.92 per BOMA rentable square foot) per month

 

b)            Tenant agrees to pay to Landlord the monthly rental(Basic Monthly Rent) according to the terms and conditions as specified inArticle 2 of the Lease.

 

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**EXHIBIT “E”**

 

**OPTION TO RENEW AND EXTEND**

 

1.             Provided Tenant is not in material or economic****default under the terms and conditions ofthis Lease (following any applicable notice and cure periods), Landlord herebygrants to the Tenant and/or any Affiliate the option to renew and extend theTerm of this Lease for two (2) successive terms of three (3) years (“RenewalOption”). In order to exercise a Renewal Option, Tenant shall provide writtennotice to Landlord designating the size and location of the portion of thePremises that will be subject to the Renewal Option (the “Proposed RenewalPremises”), which shall include, at a minimum, the entire (4th)floor of the Premises.  If the ProposedRenewal Space includes less than all of the Premises, but more than all of thefourth (4th) floor of the Premises, then the designation of theProposed Renewal Space shall be subject to Landlord’s approval, which approvalmay be withheld for any commercially reasonable basis, including, withoutlimitation, that (a) the remainder of the Premises will be unduly difficult tolease to third party tenants, to maintain or to use; or (b) the costs tomaintain the remainder of the Premises or the Proposed Renewal Space wouldexceed the average cost to maintain space in the Building.  The term “Renewal Premises” shall mean andrefer to the Proposed Renewal Space approved by Landlord.  If the Renewal Premises includes less thanall of the Premises but more than the fourth (4th) floor, then Tenantshall be solely responsible for all costs that arise out of Tenant’sdesignation of less than all of the Premises as the Renewal Premises, includingcosts associated with the construction of any demising walls.  The renewal and extension of the Term ofthis Lease shall be upon the same terms, conditions and provisions as containedin this Lease, except that the new Premises shall be the Renewal Premises andthe new Basic Monthly Rent shall be adjusted to equal ninety-five percent (95%)of the Market Rental Rate for comparable space in the so-called “UniversityTown Center” submarket in San Diego at the commencement of the extension term.

 

2.             Tenant shall give Landlord written notice of itsintention to exercise an extension option not less than nine (9) months and notmore than eighteen (18) months prior to the commencement date of each renewaloption term.  Within the thirty (30)days after receiving notification from the Tenant of its intention to exercisesuch option to extend, Landlord shall provide Tenant with Landlord’scalculation of the new Basic Monthly Rent and escalations, as determinedpursuant to paragraph 1 above, for the extension term.  Tenant shall within thrity (30) day afterreceipt thereof: (i) accept Landlord’s calculations or (ii) rejects Landlord’scalculation and provide Landlord with Tenant’s own calculation of Basic MonthlyRent and escalations.  Thereafter, theparties shall seek to settle the dispute by way of good faith negotiations concludedwithin sixty (60) days of Tenant’s delivery of Tenant’s calculation of BasicMonthly Rent and escalations to Landlord. If, after such good faith negotiations, the parties are still not ableor willing to agree upon the Basic Monthly Rent and escalations for thatextension term, then the matter shall be settled by arbitration in accordancewith the following procedures:

 

a)             Each party shall designate an M.A.I. appraiser qualifiedto evaluate downtown San Diego office space;

 

b)            The two (2) appraisers shall select a similarly qualifiedappraiser;

 

c)             The three (3) appraisers shall, after soliciting,accepting and reviewing such information and documentation as they may deemnecessary and appropriate, including that submitted by either party, withinthirty (30) days after appointment and taking into account (i) the uniquenature and high class quality of the Building (including, particularly, itsheight, construction, quality, ambiance and amenities), and (ii) the prevailingmarket rental for similar (equivalent) space in other buildings in theso-called “University Town Center” submarket in San Diego;

 

d)            Determine by a simple majority which of the Basic MonthlyRent and escalations calculations is closest to their own calculation orvaluation.  Whichever of Landlord’s orTenant’s Basic Monthly Rent and escalations calculation is closer to that ofthe majority of the arbitrators shall become binding; and

 

e)             Landlord and Tenant shall each pay one-half of the feesfor the arbitrators.

 

If either party fails,within ten (10) days, to designate their appraiser as set forth in Paragraph2(a) above, then the appraiser selected by the other party shall act alone andhis or her determination shall be binding.

 

3.             The “Market Rental Rate” shall be established byaveraging the annual rental rates (the “Comparable Rate”) then being paid underleases then being entered into in the so-called “University Town Center”submarket in San Diego for non-sublease, non-encumbered, non-equity, officespace comparable to the Renewal Premises, taking into consideration allpertinent factors, including but not limited to the face rental rates, rentalincrease, parking rights, new or renewal tenant improvement allowances, lengthof term, use, quality of services provided, whether operating expenses aredetermined on a base year or a triple net basis, location and/or floor levelwithin the applicable building, definition of net rentable areas, leaseholdimprovements provided (except any leasehold improvements within the RenewalPremises which were constructed solely at Tenant’s expense shall be deemed tobe building standard improvements) quality, age and location of the applicablebuilding, tenant clientele of the building, financial strength of theapplicable tenant, rental concessions and inducements being offered to

 

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new or renewal tenants (such as abatements ortenant improvement allowances), the time the particular rate underconsideration became effective, and parking (availability and cost).

 

In the event a Comparable Rate used forcomparison is a “gross rate” (i.e. the rate includes an allowance for operatingexpenses), then the Building’s share of operating expenses for the calendaryear immediately preceding the year in which the Market Rental Rate is beingdetermined shall be deducted (on the applicable per square foot basis), to theend said rate is net of all operating expenses.  Further, in the event a Comparable Rate is a “net” rate (i.e. therate does not include an allowance for operating expenses), any difference betweenoperating expenses payable under this Lease and operating expenses payable bytenants in the comparable space shall be taken into account to the same extentand in the same manner as the rental marketplace takes such differences intoaccount.

 

4.             This option to renew and extend (i) shall be personal tothe original Tenant and any Affiliate under the Lease and appurtenant to theLease, and (ii) may not be assigned, pledged or otherwise transferred, eitherseparately from the Lease or to an assignee of the Lease permitted or approvedby Landlord pursuant to the Lease, without Landlord’s prior written consent,which Landlord may grant or withhold in its sole discretion.

 

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# **EXHIBIT “F”**

 

**Right of First Refusal**

 

Provided Tenant is not inmaterial or economic****default underthe terms and conditions of this Lease (following any applicable notice andcure periods), if at any time within months one (1) through sixty-six (66) ofthe Term of the Lease, Landlord has the opportunity to offer for lease all orany portion of the second (2nd), third (3rd) or fourth (4th)floors of the Building (the “First Refusal Space”), and to the extent Landlordreceives a bona-fide third party offer for such First Refusal Space pursuant towhich Landlord would be willing to so lease such space, then Landlord shallgive written notice of such offer to Tenant or any Affiliate.  The Tenant or any Affiliate may within five(5) business days after receipt of such written notice, elect to lease all ofthe space described in Landlord’s written notice on the same terms and conditionsdescribed in Landlord’s written notice by delivery of written notice toLandlord, and the parties then shall execute an amendment to this Leaseincorporating into this Lease the terms applicable to such space.  In the event Tenant fails to elect withinthe five (5) business day period to lease the applicable First Refusal Space,then Landlord shall be free to lease such space to any third party on terms andconditions acceptable to Landlord, and if Landlord so leases such space to athird party, then the right of first refusal shall terminate as to suchspace.  Notwithstanding the foregoing,(i) such first refusal right shall commence only following the expiration orearlier termination of (A) any lease pertaining to the First Refusal Space, and(B) as to any First Refusal Space which is vacant as of the date of this Lease,each lease pertaining to any portion of such First Refusal Space entered intoby Landlord after the date of this Lease (collectively, the “Superior Leases”),including any renewal or extension of such existing or future lease, whether ornot such renewal or extension is pursuant to an express written provision insuch lease, and regardless of whether any such renewal or extension isconsummated pursuant to a lease amendment or a new lease, and (ii) such firstrefusal right shall be subordinate and secondary to all rights of expansion,first refusal, first offer or similar rights in existence as of the date ofthis Lease granted to the tenant(s) of the Superior Leases or any other leases(the rights described in items (i) and (ii), above to be known collectively, as“Superior Rights”).

 

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# **EXHIBIT “G”**

 

**Right of First Offer**

 

Subject to any currentlyexisting commitments and rights of other tenants in the Building that currentlylease space as of the date of execution of this Lease, during the firsteighteen (18) months of the initial Term of this Lease (the “Right of FirstOffer Period”), tenant shall have a right of first offer, personal to Tenant,to lease additional vacant space on floors two (2), three (3) and four (4) ofthe Building that becomes vacant during the Right of First Offer Period (the“Available Space”).  Tenant shall beentitled, from time to time, to give Landlord notice of Tenant’s interest inleasing Available Space (an “Interest Notice”), and Landlord shall provideTenant with a notice in writing (the “Available Space Notice) of AvailableSpace, if any, which will become vacant during the Right of First OfferPeriod.  Tenant shall have fifteen (15)business days after receipt of the Available Space Notice to elect in a writtennotice to Landlord to lease all of the Available Space, or any portion of theAvailable Space that is a separately demised leaseable unit, as set forththerein.  If Tenant does not elect tolease the Available Space set forth in the Available Space Notice withinfifteen (15) business days after receipt of the Available Space Notice, thenLandlord shall be free to lease such Available Space to any other Person andTenant shall not have any rights with respect to such Available Space for aperiod of one hundred fifty (150) days after expiration of said fifteen (15)business day period, and Tenant shall have such rights only if Tenant givesLandlord another Interest Notice after expiration of such one hundred fifty(150) day period.  If Tenant elects tolease any portion of the Available Space, then Tenant shall lease such portionof the Available Space on the same terms and conditions that are set forth inthis Lease, except that the tenant improvement allowance and all otherconcessions including free rent shall be prorated based on the actual number ofmonths Tenant leases said expansion space; the term with respect to suchportion of the Available Space will expire at the end of the Term; and Tenantshall pay Basic Monthly Rent based on the Term of the Lease with respect to theremainder of the Premises.  If Tenantexercises the right of first offer, then the parties shall execute an amendmentto this Lease incorporating into this Lease the terms applicable to suchspace.  Notwithstanding the foregoing,(i) such right of first offer shall commence only following the expiration orearlier termination of (A) any lease pertaining to the Available Space, and (B)as to any Available Space which is vacant as of the date of this Lease, eachlease pertaining to any portion of such Available Space entered into byLandlord after the date of this Lease (collectively, the “Superior Leases”),including any renewal or extension of such existing or future lease, whether ornot such renewal or extension is pursuant to an express written provision insuch lease, and regardless of whether any such renewal or extension isconsummated pursuant to a lease amendment or a new lease, and (ii) such rightof first offer shall be subordinate and secondary to all rights of expansion,first refusal, first offer or similar rights in existence as of the date ofthis Lease granted to the tenant(s) of the Superior Leases or any other leases(the rights described in items (i) and (ii), above to be known collectively, as“Superior Rights”).

 

No such First Right of FirstOffer may be exercised, and if exercised, the option shall be deemed canceledand shall be of no force or effect, if at the time of such exercise, the Tenantis then in material or economic default (beyond applicable notice and cureperiods) under this Lease or this Lease is not then in full force and effect.

 

The right of first refusaldescribed in this Exhibit “G” shall terminate at the expiration of the Right ofFirst Offer Period.

 

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