**Exhibit 10.3**

 

**FIRST LEASE EXTENSION AGREEMENT**

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**Building #7, Suite H**

**1430 O’Brien Drive**

**Menlo Park, California 94025**

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**THIS LEASE EXTENSION AGREEMENT (this “Agreement”) is made and enteredinto on March 18, 2008 by and between MENLO BUSINESS PARK, LLC, a Californialimited liability company (“Lessor”), and DEPOMED, INC., a Californiacorporation (“Lessee”).**

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**RECITALS**

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A.            Lessor andLessee entered into a Lease dated July 28, 2006 (the “Lease”) of thepremises referred to as Building #7, Suite H, located at 1430 O’BrienDrive, Menlo Park, California 94025, more particularly described on Exhibit “A”attached to the Lease and incorporated by reference herein (the “Premises”).  The Premises contain approximately 9,255rentable square feet of space.

 

B.            The expirationdate of the initial term of the Lease is June 30, 2009.  Lessor and Lessee wish to extend theexpiration date of the initial term of the Lease, subject to the terms andconditions 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 ofInitial Term.

 

(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 “First Extension Term”).  The First 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 First Extension Term shall be as setforth in Paragraph 3 hereof.

 

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

 

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

 

(a)           Commencing on July 1,2009, and continuing through June 30, 2010, the sum of TwentyThousand Eight Hundred Twenty-Three and Seventy-Five Hundredths Dollars($20,823.75) per month ($2.25/square foot/NNN).

 

 (b)          Commencingon July 1, 2010 (the “Rental Adjustment Date”), on each anniversarydate of the commencement the Monthly Base Rent shall be adjusted to reflect any increases 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 allUrban Consumers - San Francisco-Oakland-San Jose (1982-84=100), hereafterreferred to as the “Index.”  The Indexfor said subgroup published most recently as of the end of the calendar monthimmediately preceding the month in which the commencement date of the ExtensionTerm occurs shall be considered the “Base Index.”

 

(c)           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 July 1, 2010 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 immediately payable before the Rental AdjustmentDate.  The Monthly Base Rent as so adjustedshall continue through January 31, 2012, the expiration date of theinitial Term of the Lease.

 

(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 format as referred to in subparagraph 3(b) above,Lessor shall substitute in lieu thereof an index reasonably comparable to theIndex referred to above which is acceptable to Lessee and which is thenpublished by the Bureau of Labor Statistics, or successor or similargovernmental agency, or if no governmental agency then publishes an index,Lessor shall substitute therefor any index commonly accepted which is publishedby a reputable private organization.

 

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(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 theFirst Extension Term, as Additional Rent, Operating Expenses and Taxes pursuantto Paragraph 5 of the Lease.

 

5.             Condition ofthe Premises.  Lessee iscurrently in possession of the Premises and is conducting business thereonpursuant to the Lease.  Lessee agrees toaccept the Premises in its “as is” condition at the commencement of theExtension Term, subject to the performance by Lessor of Lessor’s obligationsunder Paragraph 14(a) of the Lease. Lessee acknowledges that Lessor has not inspected the Premises as acondition to entering into this Agreement. Accordingly, Lessee agrees that theexecution and delivery of this Agreement by Lessor shall not constitute theapproval by Lessor of any alterations to the Premises of which Lessor lacksactual knowledge, or the waiver by Lessor of any provisions of the Leaserelating to alterations.

 

6.             SecurityDeposit.  Lessor acknowledges thatLessor has received from Lessee and is currently holding thesum of Fifteen Thousand Seven Hundred Thirty-Three and Fifty Hundredths Dollars ($15,733.50) 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 First 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 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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