**Exhibit 10.5**

 

**THIRD LEASE EXTENSION AGREEMENT**

** **

**Building #6**

**1360 O’Brien Drive**

**Menlo Park, California 94025**

** **

**THIS THIRD LEASE EXTENSION AGREEMENT (this “Agreement”) is made andentered into on March 18, 2008 by and between MENLO BUSINESS PARK, LLC, aCalifornia limited liability company (“Lessor”), and DEPOMED, INC., aCalifornia corporation (“Lessee”).**

 

**RECITALS**

 

A.            Lessor andLessee entered into a Lease dated February 4, 2000, the Lease ExtensionAgreement dated April 30, 2003 and the Second Lease Extension Agreementdated July 28, 2006 (the “Lease”) of the premises referred to as Building#6 located at 1360 O’Brien Drive, Menlo Park, California 94025, moreparticularly described on Exhibit “A” attached to the Lease andincorporated by reference herein (the “Premises”).  The Premises contain approximately 20,624rentable square feet of space.

 

B.            The expirationdate of the Second Extension Term of the Lease is June 30, 2009.Lessor and Lessee wish to extend the expiration date of the Second ExtensionTerm of the Lease, subject to the terms and conditions set forth herein.

 

**AGREEMENT**

 

NOWTHEREFORE, in consideration of the mutual covenants contained herein, theparties agree as follows:

 

1.             Defined Terms.  Terms defined in the Lease and used in thisAgreement shall have the meaning ascribed to them in the Lease.

 

2.             Extension ofTerm.

 

(a)           The term of the Lease ishereby extended for a period of thirty-one (31) calendar months commencing on July 1,2009 and ending on January 31, 2012 (the “Third Extension Term”).  The Third Extension Term shall be upon all ofthe same terms and conditions of the Lease, except that the Monthly Base Rentpayable by Lessee to Lessor during the Third Extension Term shall be as setforth in Paragraph 3 hereof.

 

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(b)           The option to extendprovided for in Paragraph 3 of the Lease shall be for one (1`) period of sixty(60) calendar months immediately following the expiration of the ThirdExtension Term and shall otherwise be upon the same terms and conditions as setforth in Paragraph 3 of the Lease.

 

3.             Monthly BaseRent.  Lessee shall pay to LessorMonthly Base Rent during the Third Extension Term, in monthly installments inadvance on a triple net basis in lawful money of the United States, as follows:

 

(a)           Under the terms of the SecondLease Extension Agreement, the next Rental Adjustment Date is scheduled tooccur on May 1, 2008, resulting in a new Monthly Base Rent ofFifty-Four Thousand Six Hundred Fifty-Three and Sixty Hundredths Dollars($54,653.60) per month ($2.65/square foot/NNN).

 

(b)           Commencing on May 1, 2009,  (the “Rental Adjustment Date”), and on eachanniversary date of this commencement, the Monthly Base Rent shall be adjusted to reflect any increase in the cost of living.  The adjustment shall be calculated upon thebasis of the United States Department of Labor, Bureau of Labor StatisticsConsumer Price Index, all items, for all Urban Consumers - SanFrancisco-Oakland-San Jose (1982-84=100), hereafter referred to as the “Index.”  The Index for said subgroup published mostrecently as of the end of the calendar month immediately preceding the month inwhich the commencement date of the Third Extension Term occurs shall beconsidered the “Base Index.”

 

(b)   The Monthly Base Rentshall be adjusted as of the Rental Adjustment Date to an amount equal to theproduct obtained by multiplying the Monthly Base Rent for the Premisescommencing on May 1, 2009 referred to in Paragraph 3(a) above),by a fraction, the numerator of which is the Index most recently published asof the end of the calendar month immediately preceding the Rental AdjustmentDate and the denominator of which is the base Index; provided that in no eventshall the Monthly Base Rent be increased on the Rental Adjustment Date to anamount less than three percent (3%) per annum or more than six percent (6%) perannum of the Monthly Base Rent payable immediately before the Rental AdjustmentDate.  The Monthly Base Rent as soadjusted shall continue through January 31, 2012, the expirationdate of the Third Extension Term.

 

(d)           When the new Monthly Base Rent is determined for the Rental AdjustmentDate, Lessor shall give Lessee written notice of the amount of the new MonthlyBase Rent and how the new Monthly Base Rent figure was computed in accordancewith subparagraphs 3(b) and 3(c) above.  Lessee shall pay to Lessor retroactively anyunpaid increase in Monthly Base Rent due from and after the Rental AdjustmentDate.  If the Index does not exist on theRental Adjustment Date in the same 

 

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format as referred to in subparagraph 3(b) above, Lessor shallsubstitute in lieu thereof an index reasonably comparable to the Index referredto above which is acceptable to Lessee and which is then published by theBureau of Labor Statistics, or successor or similar governmental agency, or ifno governmental agency then publishes an index, Lessor shall substitutetherefor any index commonly accepted which is published by a reputable privateorganization.

 

(e)           Monthly Base Rent for any partial month shall be prorated on the basis ofthe number of calendar days in such month.

 

4.             AdditionalRent; Operating Expenses and Taxes.  In addition to the Monthly Base Rent payableby Lessee pursuant to Paragraph 3 above, Lessee shall pay to Lessor during theThird Extension Term, as Additional Rent, Operating Expenses and Taxes pursuantto Paragraph 5 of the Lease.

 

**5.****            **Condition of the Premises.  Lessee is currently in possession of thePremises and is conducting business thereon pursuant to the Lease.  Lessee agrees to accept the Premises in its “asis” condition at the commencement of the Second Extension Term, subject to theperformance by Lessor of Lessor’s obligations under Paragraph 14(a) of theLease.  Lessee acknowledges that Lessorhas not inspected the Premises as a condition to entering into this Agreement.Accordingly, Lessee agrees that the execution and delivery of this Agreement byLessor shall not constitute the approval by Lessor of any alternations to thePremises of which Lessor lacks actual knowledge, or the waiver by Lessor of anyprovisions of the Lease relating to alternations.

 

**6.****            **SecurityDeposit.  Lessor acknowledges thatLessor has received from Lessee and is currently holding thesum of One Hundred Forty-five Thousand Four Hundred and Forty Hundredths Dollars ($145,400.40) in cash (the “Security Deposit”), as security for Lessee’s faithfulperformance of Lessee’s obligations under the Lease.  Lessor shall continue to hold the SecurityDeposit during the remainder of the initial term and during the Third ExtensionTerm pursuant to Paragraph 7 of the Lease.

 

7.             Real EstateBrokers.  Lessorshall pay a leasing commission to Tarlton Properties, Inc., who has actedas exclusive leasing agent for Lessor in connection with this Agreement,pursuant to a separate agreement between Lessor and said broker.  Lessor shall also pay leasing commissions toGVA Kidder Mathews, who have acted as leasing agents for Lessee in connectionwith this Agreement, pursuant to an agreement between Lessor and saidbrokers.  Each party represents andwarrants to the other party that it has not had any dealings with any realestate broker, finder, or other person with respect to this Agreement otherthan the above named brokers.  Each partyshall hold harmless the other party from all damages, expenses, and liabilitiesresulting from any claims that may be asserted against the other party by anybroker, finder, or other person with whom the other party has or purportedlyhas dealt, other than the above named brokers.

 

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8.             Notices.  Paragraph 24, Notices, of the Lease isamended to read as follows:

 

“24.         Notices.  All notices, statements, demands, requests,or consents given hereunder by either party to the other shall be in writingand shall be personally delivered or sent by United States mail, registered orcertified, return receipt requested, postage prepaid, and addressed to theparties as follows:

 
| Lessor: | Menlo Business Park, LLC          |
|---------|-----------------------------------|
|    | c/o Tarlton Properties, Inc. |
|    | 955  Alma Street                  |
|    | Palo Alto, California 94301       |
|    |                              |
|    | Attention: John C. Tarlton        |
|    | Telephone: (650) 330-3600         |
|    |                              |
| Lessee: | Depomed, Inc.                |
|    | 1330 O’Brien Drive           |
|    | Menlo Park, California 94025      |
|    |                              |
|    | Attention:                        | Carl  Pelzel |
|    | Telephone:                        | 650-462-5900 |

 

All such notices or other communicationsgiven hereunder shall be addressed to the parties to such other address aseither party may have furnished to the other as a place for the service ofnotice.  Notices shall be deemed givenupon receipt or attempted delivery where delivery is not accepted.”

 

9.             Counterparts.  This Agreement may be executed in one or morecounterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.

 

10.           ContinuingEffect.  The parties acknowledge thatthe Lease remains in full force and effect as amended hereby, and with theinitial term further extended as provided herein.

 

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INWITNESS WHEREOF, the parties have executed this Agreement as of the date setforth above.

 
|   | “Lessor”                     |
|--------|----------------------------------------|
|   | MENLO BUSINESS PARK, LLC               |
|   | a California limited liability company |
|   |                                   |
|   |                                   |
|   | By:                                    | /s/ J.O. Oltmans, II |
|   |                                   | J. O. Oltmans, II, Manager |
|   |                                   |   |
|   |                                   |   |
|   | By:                                    | /s/ James R. Swartz |
|   |                                   | James R. Swartz, Manager |
|   |                                   |   |
|   |                                   |   |
|   | “Lessee”                     |
|   | DEPOMED, INC.,                         |
|   | a California corporation               |
|   |                                   |
|   |                                   |
|   | By:                                    | /s/ Carl A. Pelzel |
|   |                                   |   Carl Pelzel,  President and CEO |

 

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