**Exhibit10.155**

 

**AMERICANINDUSTRIAL REAL ESTATE ASSOCIATIONSTANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE – NET(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)**

 

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

 

1.1                                 **Parties:** This Lease **(“Lease”)**, dated for reference purposesonly, December 15, 1997, is made by and between The Childs FamilyInvestment Partnership, L.P. and The A.J. Gardner Family Trust, U/T/A 3/5/81 **(“Lessor”)** and The Immune ResponseCorporation, a Delaware Corporation **(“Lessee”)**,(collectively the **“Parties,”** orindividually a **“Party”**).

 

1.2                                 **Premises:** That certain real property,including all improvements therein or to be provided by Lessor under the termsof this Lease, and commonly known as 5931, Darwin Court, Carlsbad, California92008 located in the County of San Diego, State of California and generallydescribed as (describe briefly the nature of the property and, if applicable,the “**Project**”, if the property islocated within a Project) An approximately 31,200 square foot concrete tilt up freestandingbuilding and appurtances located in the Carlsbad Research Center. (SeeAddendum) **(“Premises”)**. (See alsoParagraph 2)

 

1.3.                              **Term**: Ten (10) years and Zero (0) months **(“Original Term”)** commencing See Addendum **(“Commencement Date”)** and ending onehundred twenty (120) months there after **(“ExpirationDate”)**. (See also Paragraph 3)

 

1.4                                 **Early Possession:** See Addendum **(“Early Possession Date”)**. (See alsoParagraphs 3.2 and 3.3)

 

1.5                                 **Base Rent:** $18,408.00 (See Addendum) permonth **(“Base Rent”)**, payable onthe first (1st) day of each month commencing on the Commencement Date (See alsoParagraph 4)

 

ý  If this box is checked, there are provisionsin this Lease for the Base Rent to be adjusted.

 

1.6                                 **Base Rent Paid Upon Execution:** $18,408.00(Eighteen Thousand Four Hundred Eight and no/100ths Dollars) as Base Rent forthe period first month following the Commencement Date.

 

1.7                                 **Security Deposit:** $24,024.00 **(“Security Deposit”)**. (See also Paragraph5)

 

1.8                                 **Agreed Use:** See Addendum (See alsoParagraph 6)

 

1.9                                 **Insuring Party.** Lessor is the **“Insuring Party”** unless otherwise statedherein. (See also Paragraph 8)

 

1.10                           **Real Estate Brokers:** (See also Paragraph15)

 

(a) **Representation:** The following real estatebrokers (collectively, the **“Brokers”**)and brokerage relationships exist in this transaction (check applicable boxes):

 

ý                                    DavidOnosko, CB Commercial Real Estate Group, Inc represents Lessor exclusively **(“Lessor’s Broker”)**;

 

ý                                    WilliamDriscoll, CB Commercial Real Estate Group, Inc represents Lessee exclusively **(“Lessee’s Broker”)**; or

 

o                                    representsboth Lessor and Lessee **(“Dual Agency”)**.

 

(b)  **Payment toBrokers:** Upon execution and delivery of this Lease by both Parties,Lessor shall pay to the Broker the fee agreed to in their separate writtenagreement (or if there is no such agreement, the sum of    % of the total Base Rent for the brokerageservices rendered by said Broker).

 

1.11  **Guarantor.**The obligations of the Lessee under this Lease are to be guaranteed by N/A **(“Guarantor”)**. (See also Paragraph 37).

 

1.12  **Addendaand Exhibits.** Attached hereto is an Addendum or Addenda consistingof 15 pgs through      and Exhibits 1.2, 5, 6.2, 50and 56, all of which constitute a part of this Lease.

 

2.  **Premises**.

 

2.1  **Letting.**Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, thePremises, for the term, at the rental, and upon all of the terms, covenants andconditions set forth in this Lease. Unless otherwise provided herein, any statement of size set forth inthis Lease, or that may have been used in calculating rental, is anapproximation which the Parties agree is reasonable and the rental basedthereon is not subject to revision whether or not the actual size is more orless.

 

2.2  **Condition.**Lessor shall deliver the Premises to Lessee broom clean and free of debris onthe Commencement Date or the Early Possession Date, whichever first occurs **(“Start Date”)**, and, so long as therequired service contracts described in Paragraph 7.1(b) below are obtained byLessee within thirty (30) days following the Start Date, warrants that theexisting electrical, plumbing, fire sprinkler, lighting, heating, ventilatingand air conditioning systems (“HVAC”), loading doors, if any, and all othersuch elements in the Premises, other than those constructed by Lessee, shall bein good operating condition on said date and that the structural elements ofthe roof, bearing walls and foundation of any buildings on the Premises (the“Building”) shall be free of material defects. If a non-compliance with saidwarranty exists as of the Start Date, Lessor shall, as Lessor’s sole obligationwith respect to such matter, except as otherwise provided in this Lease,promptly after receipt of written notice from Lessee setting forth withspecificity the nature and extent of such non-compliance, rectify same atLessor’s expense. If, after the Start Date, Lessee does not give Lessor writtennotice of any non-compliance with this warranty within: (i) one year* as to thesurface of the roof and the structural portions of the roof, foundations andbearing walls, (ii) six (6) months as to the HVAC systems, (iii) thirty (30)days as to the remaining systems and other elements of the Building, correctionof such non-compliance shall be the obligation of Lessee at Lessee’s sole costand expense. * as to patent defects and three (3) years as to latent defects

 

2.3  **Compliance.**Lessor warrants that the improvements on the Premises comply with allapplicable laws, covenants or restrictions or record, building codes,regulations and ordinances **(“ApplicableRequirements”)** in effect on the Start Date. Said warranty does notapply to the use to which Lessee will put the Premises or to any Alterations orUtility Installations (as defined in Paragraph 7.3 (a)) made or to be made byLessee. NOTE: Lessee is responsible for determining whether or not the zoningis appropriate for Lessee’s intended use, and acknowledges that past uses ofthe Premises may no longer be allowed. If the Premises do not comply with saidwarranty, Lessor shall, except as otherwise provided, promptly after receipt ofwritten notice from Lessee setting forth with specificity the nature and extentof such non-compliance, rectify the same at Lessor’s expense. If Lessee doesnot give Lessor written notice of a non-compliance with this warranty withinsix (6) months following the Start Date, correction of that non-complianceshall be the obligation of Lessee at Lessee’s sole cost and expense. If theApplicable Requirements are hereafter changed (as opposed to being in existenceat the Start Date, which is addressed in Paragraph 6.2(e) below) so as torequire during the term of this Lease the construction of an addition to or analteration of the Building, the remediation of any Hazardous Substance, or thereinforcement or other physical modification of the Building **(“Capital Expenditure”)**, Lessor and Lesseeshall allocate the cost of such work as follows:

 

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(a) Subject to Paragraph2.3(c) below, if such Capital Expenditures are required as a result of thespecific and unique use of the Premises by Lessee as compared with uses bytenants in general, Lessee shall be fully responsible for the cost thereof,provided, however that such Capital Expenditure is required during the last two(2) years of this Lease and the cost thereof exceeds six (6) months’ Base Rent.Lessee may instead terminate this Lease unless Lessor notifies Lessee, inwriting, within ten (10) days after receipt of Lessee’s termination notice thatLessor has elected to pay the difference between the actual cost thereof andthe amount equal to six (6) months’ Base Rent. If Lessee elects Termination,Lessee shall immediately cease the use of the Premises which requires suchCapital Expenditure and deliver to Lessor written notice specifying atermination date at least ninety (90) days thereafter. Such termination dateshall, however, in no event be earlier than the last day that Lessee couldlegally utilize the Premises without commencing such Capital Expenditure.

 

(b) If such CapitalExpenditure is not the result of the specific and unique use of the Premises byLessee (such as, governmentally mandated seismic modifications), then Lessorand Lessee shall allocate the obligation to pay for such costs pursuant to theprovisions of Paragraph 7.1 (c): provided, however, that if such CapitalExpenditure is required during the last two years of this Lease or if Lessorreasonably determines that it is not economically feasible to pay its sharethereof, Lessor shall have the option to terminate this Lease upon ninety (90)days prior written notice to Lessee unless Lessee notifies Lessor, in writing,within ten (10) days after receipt of Lessor’s termination notice that Lesseewill pay for such Capital Expenditure. If Lessor does not elect to terminate,and fails to tender its share of any such Capital Expenditure, Lessee mayadvance such funds and deduct same, with Interest, from Rent until Lessor’sshare of such costs have been fully paid. If Lessee is unable to financeLessor’s share, or if the balance of the Rent due and payable for the remainderof this Lease is not sufficient to fully reimburse Lessee on an offset basis,Lessee shall have the right to terminate this Lease upon thirty (30) dayswritten notice to Lessor.

 

(c) Notwithstanding theabove, the provisions concerning Capital Expenditures are intended to applyonly to non-voluntary, unexpected, and new Applicable Requirements. If theCapital Expenditures are instead triggered by Lessee as a result of an actualor proposed change in use, change in intensity of use, or modification to thePremises then, and in that event, Lessee shall be fully responsible for thecost thereof, and Lessee shall not have any right to terminate this Lease.

 

**2.4.****                            Acknowledgements.**Lessee acknowledges that: (a) it has been advised by Lessor and/or Brokersto satisfy itself with respect to the condition of the Premises (including butnot limited to the electrical, HVAC and fire sprinkler systems, security,environmental aspects, and compliance with Applicable Requirements), and theirsuitability for Lessee’s intended use, (b) Lessee has made such investigationas it deems necessary with reference to such matters and assumes allresponsibility therefore as the same relate to its occupancy of the Premises, and(c) neither Lessor, Lessor’s agents, nor any Broker has made any oral orwritten representations or warranties with respect to said matters other thanas set forth in this Lease. In addition, Lessor acknowledges that: (a) Brokerhas made no representations, promises or warranties concerning Lessee’s abilityto honor the Lease or suitability to occupy the Premises, and (b) it isLessor’s sole responsibility to investigate the financial capability and/orsuitability of all proposed tenants.

 

**2.5.****                            Lesseeas Prior Owner/Occupant.** The warranties made by Lessor in Paragraph 2 shallbe of no force or effect if immediately prior to the Start Date Lessee was theowner or occupant of the Premises. In such event, Lessee shall be responsiblefor any necessary corrective work.

 

**3.****                                      Term.**

 

**3.1****                               Term.**  The Commencement Date, Expiration Date andOriginal Term of this Lease are as specified in Paragraph 1.3.

 

**3.2.****                            EarlyPossession.**  If Lessee totally orpartially occupies the Premises prior to the Commencement Date, the obligationto pay Base Rent shall be abated for the period of such early possession. Allother terms of this Lease (including but not limited to the obligations to payReal Property Taxes and insurance premiums and to maintain the Premises) shall,however, be in effect during such period. Any such early possession shall noteffect the Expiration Date.

 

**3.3.****                            Delayin Possession.** Lessor agrees to use its best commercially reasonableefforts to deliver possession of the Premises to Lessee by December 31,1997. If, despite said efforts, Lessor is unable to deliver possession asagreed, Lessor shall not be subject to any liability therefor, nor shall suchfailure affect the validity of this Lease. Lessee shall not, however, beobligated to pay Rent or perform its other obligations until it receivespossession of the Premises. If possession is not delivered within sixty (60)days after the Commencement Date, Lessee may, at its option, by notice inwriting within ten (10) days after the end of such sixty (60) day period, cancelthis Lease, in which event the Parties shall be discharged from all obligationshereunder. If such written notice is not received by Lessor within said ten(10) day period, Lessee’s  right tocancel shall terminate. Except as otherwise provided, if possession is nottendered to Lessee*. but minus any days of delay caused by the acts oromissions of Lessee. If possession of the Premises is not delivered within four(4) months after December 31, 1997, this Lease shall terminate unlessother agreements are reached between Lessor and Lessee, in writing.

 

**3.4.****                            LesseeCompliance.** Lessor shall not be required to tender possession of thePremises to Lessee until Lessee complies with its obligation to provideevidence of insurance (Paragraph 8.5). Pending delivery of such evidence,Lessee shall be required to perform all of its obligations under this Leasefrom and after the Start Date. including the Payment of Rent, notwithstandingLessor’s election to withhold possession pending receipt of such evidence of insurance.Further, if Lessee is required to perform any other conditions prior to orconcurrent with the Start Date, the Start Date shall occur but Lessor may electto withhold possession until such conditions are satisfied.

 

4.                                       **Rent**.

 

4.1                                 **Rent Defined**.  All monetary obligations of Lessee to Lessor under the terms ofthis Lease (except for the Security Deposit) are deemed to be rent (“Rent”).

 

4.2                                 **Payment**. Lessee shall cause payment of Rent to be received by Lessor in lawfulmoney of the Unites States, without offset or deduction, on or before the dayon which it is due.  Rent for any periodduring the term hereof which is for less than one (1) full calendar month shallbe prorated based upon the actual number of days of said month.  Payment of Rent shall be made to Lessor atits address stated herein or to such other persons or place as Lessor may fromtime to time designate in writing. Acceptance of a payment which is less than the amount then due shall notbe a waiver of Lessor’s rights to the balance of such Rent, regardless ofLessor’s endorsement of any check so stating.

Rent shall be payable toLANDCO and mailed to 432 So.  BentleyAve Los Angeles, CA 90049-3513.

 

5.                                       **Security Deposit**.  Lessee shall deposit with Lessor upon execution hereof theSecurity Deposit as security for Lessee’s faithful performance of itsobligations under this Lease.  If Lesseefails to pay Rent, or otherwise Defaults under this Lease, Lessor may use,apply or retain all or any portion of said Security Deposit for the payment ofany amount due Lessor or to reimburse or compensate Lessor for any liability,expense, loss or damage which Lessor may suffer or incur by reasonthereof.  If Lessor uses or applies allor any portion of said Security Deposit, Lessee shall within ten (10) daysafter written request therefor deposit monies with Lessor sufficient to restoresaid Security Deposit to the full amount required by this Lease. If the BaseRent increases during the term of this Lease, Lessee shall, upon writtenrequest from Lessor, deposit additional moneys with Lessor so that the totalamount of the Security Deposit shall at all times bear the same proportion tothe increased Base Rent as the initial Security Deposit born to the initialBase Rent.  Should the Agreed Use beamended to accommodate a material change in the business of Lessee or toaccommodate a sublessee or assignee, Lessor shall have the right to increasethe Security Deposit to the extent necessary, in Lessor’s reasonable judgment,to account for any increased wear and tear that the Premises may suffer as aresult thereof.  If a change in controlof Lessee occurs during this Lease and following such change the financialcondition of Lessee is, in Lessor’s reasonable judgment, significantly reduced,Lessee shall deposit such additional monies with Lessor as shall be sufficientto cause the Security Deposit to be at a commercially reasonable level based onsaid change in financial condition. Lessor shall not be required to keep the Security Deposit separate fromits general accounts.  Within fourteen(14) days after the expiration or termination of this Lease, if Lessor electsto apply the Security Deposit only to unpaid Rent and otherwise within thirty(30) days after the Premises have been vacated pursuant to Paragraph 7.4(c)below, Lessor shall return that portion of the Security Deposit not used orapplied by Lessor.  No part of theSecurity Deposit shall be considered to be held in trust, to bear interest orto be prepayment for any monies to be paid by Lessee under this Lease.

 

6.                                       **Use**.

 

6.1                                 **Use**. Lessee shall use and occupy the Premises only for the Agreed use, or anyother legal use which is reasonably comparable thereto, and for no otherpurpose.  Lessee shall not use or permitthe use of the Premises in a manner that is unlawful, creates damage, waste ora nuisance or that disturbs owners and/or occupants of, or causes damage toneighboring properties.  Lessor shallnot unreasonably withhold

 

by December 31, 1997the April 1, 1998 date in 1.3 shall be extended by the number of daysbeyond December 31, 1997 that the Lessor delivered possession.

 

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or delay its consent toany written request for a modification of the Agreed Use, so long as the samewill not impair the structural integrity of the improvements on the Premises orthe mechanical or electrical systems therein, is not significantly moreburdensome to the Premises. If Lessor elects to withhold consent, Lessor shallwith five (5) business days after such request give written notification ofsame, which notice shall include an explanation of Lessors objections to thechange in use.

 

6.2.                              **Hazardous Substances.      **(See Addendum)

 

**(a)  Reportable Uses Require Consent.**  The term “Hazardous Substance” as used in thisLease shall mean any product, substance or waste whose presence, use,manufacture, disposal, transportation, or release, either by itself or incombination with other materials expected to be on the Premises, is either: (i)potentially injurious to the public health, safety or welfare, the environmentor the Premises, (ii) regulated or monitored by any governmental authority, or(iii) a basis for potential liability of Lessor to any governmental agency orthird party under any applicable statute or common law theory. HazardousSubstances shall include, but not be limited to, hydrocarbons, petroleum,gasoline, and/or crude oil or any products by-products or fractionsthereof.  Lessee shall not engage in anyactivity in or on the Premises which constitutes a Reportable Use of HazardousSubstances without the express prior written consent of Lessor and timelycompliance (at Lessee’s expense) with all Applicable Requirements.  **“ReportableUse”** shall mean (i) the installation or use of any above or belowground storage tank, (ii) the generation, possession, storage, use,transportation, or disposal of a Hazardous Substance that requires a permitfrom, or with respect to which a report, notice, registration or business planis required to be filed with, any governmental authority, and/or (iii) thepresence at the Premises of a Hazardous Substance with respect to which anyApplicable Requirements requires that a notice be given to persons entering oroccupying the Premises or neighboring properties.  Notwithstanding the foregoing, Lessee may use any ordinary andcustomary materials reasonably required to be used in the normal course of theAgreed Use, so long as such use is in compliance with all ApplicableRequirements, is not a Reportable Use, and does not expose the Premises orneighboring property to any meaningful risk of contamination or damage orexpose Lessor to any liability therefor. In addition, Lessor may condition its consent to any Reportable Use uponreceiving such additional assurances as Lessor reasonably deems necessary toprotect itself, the public, the Premises and/or the environment against damage,contamination, injury and/or liability, including, but not limited to, theinstallation (and removal on or before Lease expiration or termination) ofprotective modifications (such as concrete encasements) and/or increasing theSecurity Deposit.

 

**(b)  Duty to Inform Lessor.**  If Lessee knows, or has reasonable cause tobelieve, that a Hazardous Substance has come to be located in, on under orabout the Premises, other than as previously consented to by Lessor, Lesseeshall immediately give written notice of such fact to Lessor, and provideLessor with a copy of any report, notice, claim or other documentation which ithas concerning the presence of such Hazardous Substance.

 

**(c)  LesseeRemediation.**  Lesseeshall not cause or permit any Hazardous Substance to be spilled or released in,on, under, or about the Premises (including through the plumbing or sanitarysewer system) and shall promptly at Lessee’s expense, take all investigatoryand/or remedial action reasonably recommended, whether or not formally orderedor required, for the cleanup of any contamination of , and for the maintenance,security and/or monitoring of the Premises or neighboring properties, that wascaused or materially contributed to by Lessee, or pertaining to or involvingany Hazardous Substance brought onto the Premises during the term of thisLease, by or for Lessee, or any third party.

 

**(d)  Lessee Indemnification.**Lessee shall indemnify, defend and hold Lessor, its agents, employees, lendersand ground lessor, if any, harmless from and against any and all loss of rentsand/or damages, liabilities, judgments, claims, expenses, penalties, andattorneys and consultants’ fees arising out of or involving any HazardousSubstance brought onto the Premises by or for Lessee, or any third party(provided, however, that Lessee shall have no liability under this Lease withrespect to underground migration of any Hazardous Substance under the Premisesfrom adjacent properties unless migration is from an affiliated company).Lessee’s obligations shall include, but not be limited to, the effects of anycontamination or injury to person, property or the environment created orsuffered by Lessee, and the cost of investigation, removal, remediation,restoration and/or abatement, and shall survive  the expiration or termination of this Lease. No termination,cancellation or release agreement entered into by Lessor and Lessee shallrelease Lessee from its obligations under this Lease with respect to HazardousSubstances, unless specifically so agreed by Lessor in writing at the time ofsuch agreement.

 

**(e)  Lessor Indemnification.**  Lessor and its successors and assigns shallindemnify, defend, reimburse and hold Lessee, its employees and lenders,harmless from and against any and all environmental damages which existed as aresult of Hazardous Substances on the Premises prior to Start Date or which arecaused by the gross negligence, or intentional acts of Lessor, its agents oremployees. Lessor’s obligations, as and when required by the ApplicableRequirements, shall include, but not be limited to, the cost of investigation,removal, remediation, restoration and/or abatement, and shall survive the expirationor termination of this Lease.

 

**(f)  Investigations and Remediations.**  Lessor shall retain the responsibility andpay for any investigations or remediation measures required by governmentalentities having jurisdiction with respect to the existence of HazardousSubstances on the Premises prior to the Start Date. Lessee shall cooperatefully in any such activities at the request of Lessor, including allowingLessor and Lessor’s agents to have reasonable access to the Premises atreasonable times in order to carry out Lessor’s investigative and remedialresponsibilities.

 

**(g)  Landlord Termination Option.**  If a Hazardous Substance Condition occursduring the term of this Lease, unless Lessee is legally responsible therefor(in which case Lessee shall make the investigation and remediation thereofrequired by the Applicable Requirements and this Lease shall continue in fullforce and effect, but subject to Lessor’s rights under Paragraph 6.2(d) andParagraph 13), Lessor may, at Lessor’s option, either (i) investigate andremediate such Hazardous Substance Condition, if required, as soon asreasonably possible at Lessor’s expense, in which event this Lease shallcontinue in full force and effect, or (ii) if the estimated cost to remediatesuch condition exceeds twelve (12) times the then monthly Base Rent or$100,000, whichever is greater, give written notice to Lessee, within thirty(30) days after receipt by Lessor of knowledge of the occurrence of suchHazardous Substance Condition, of Lessor’s desire to terminate this Lease as ofthe date sixty (60) days following the date of such notice. In the event Lessorelects to give a termination notice, Lessee may, within ten (10) daysthereafter, give written notice to Lessor of Lessee’s commitment to pay theamount by which the cost of the remediation of such Hazardous SubstanceCondition exceeds an amount equal to twelve (12) times the then monthly BaseRent or $100,000, whichever is greater. Lessee shall provide Lessor with said funds or satisfactory assurance thereofwithin thirty (30) days following such commitment.  In such event, this Lease shall continue in full force andeffect, and Lessor shall proceed to make such remediation as soon as reasonablypossible after the required funds are available. If Lessee does not give suchnotice and provide the required funds or assurance thereof within the timeprovided, this Lease shall terminate as of the date specified in Lessor’snotice of termination.

 

6.3                                 **Lessee’s Compliance with Applicable Requirements.**  Except as otherwise provided in this Lease,Lessee, shall, at Lessee’s sole expense, fully, diligently and in a timelymanner, materially comply with all Applicable Requirements, the requirements ofany applicable fire insurance underwriter or rating bureau, and therecommendations of Lessor’s engineers and/or consultants which relate in anymanner to the Premises, without regard to whether said requirements are now ineffect or become effective after the Start Date. Lessee shall, within ten (10)days after receipt of Lessor’s written request, provide Lessor with copies ofall permits and other documents, and other information evidencing Lessee’scompliance with any Applicable Requirements specified by Lessor, and shallimmediately upon receipt, notify Lessor in writing (with copies of anydocuments involved) of any threatened or actual claim, notice, citation,warning, complaint or report pertaining to or involving the failure of Lesseeor the Premises to comply with any Applicable Requirements.

 

6.4                                 **Inspection; Compliance.**  Lessor and Lessor’s Lender and consultantsshall have the right to enter into Premises at any time, in the case of anemergency, and otherwise at reasonable times, for the purpose of inspecting thecondition of the Premises and for verifying compliance by Lessee with thisLease. The cost of any such inspections shall be paid by Lessor, unless aviolation of Applicable Requirements, or a contamination is found to exist orbe imminent, or the inspection is requested or ordered by a governmental authority.In such case, Lessee shall upon request reimburse Lessor for the cost of suchinspections, so long as such inspection is reasonably related to the violationor contamination.

 

**7.****                                      Maintenance;Repairs, Utility Installations; Trade Fixtures and Alterations.**

 

7.1                                 **Lessee’s Obligations.**

 

(a) **In General.**  Subject to the provisions of Paragraph 2.2 (Condition), 2.3(Compliance), 6.3 (Lessee’s Compliance with Applicable Requirements), 7.2(Lessor’s Obligations), 9 (Damage or Destruction), and 14 (Condemnation),Lessee shall, at Lessee’s sole expense, keep

 

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the Premises, UtilityInstallations, and Alterations in good order, condition and repair (whether ornot the portion of the Premises requiring repairs, or the means of repairingthe same, are reasonably or readily accessible to Lessee, and whether or notthe need for such repairs occurs as a result of Lessee’s use, any prior use,the elements or the age of such portions of the Premises), including, but notlimited to, all equipment or facilities, such as plumbing, HVAC, electrical,lighting facilities, boilers, pressure vessels, fire protection system,fixtures, walls (interior and exterior), foundations, ceilings, roofs, floors,windows, doors, plate glass, skylights, landscaping, driveways, parking lots,fences, retaining walls, signs, sidewalks and parkways located in, on, oradjacent to the Premises. Lessee, in keeping the Premises in good order,condition and repair, shall exercise and perform good maintenance practices,specifically including the procurement and maintenance of the service contractsrequired by Paragraph 7.1(b) below. Lessee’s obligations shall includerestorations, replacements or renewals when necessary to keep the Premises andall improvements thereon or a part thereof in good order, condition and stateof repair. Lessee shall, during the term of this Lease, keep the exteriorappearance of the Building in a first-class condition consistent with theexterior appearance of other similar facilities of comparable age and size inthe vicinity, including, when necessary, the exterior repainting of theBuilding.

 

(b)  **Service Contracts.** Lessee shall, atLessee’s sole expense, procure and maintain contracts, with copies to Lessor,in customary form and substance for, and with contractors specializing andexperienced in the maintenance of the following equipment andimprovements.  (“**Basic Elements**”), if any, as and wheninstalled on the Premises: (i) HVAC equipment, (ii) boiler, and pressure vessels,(iii) fire protection systems, (iv) landscaping and irrigation systems, (v)roof covering and drains, and (vi) asphalt and parking lots, (vii) clarifiersand (viii) any other equipment, if reasonably required by Lessor.  Lessee may use its own qualified personnelwith Lessor’s approval which shall not be unreasonably withheld.

 

(c)  **Replacement.** Subject to Lessee’sindemnification of Lessor as set forth in Paragraph 8.7 below, and withoutrelieving Lessee of liability resulting from Lessee’s failure to exercise andperform good maintenance practices, if the Basic Elements described inParagraph 7.1(b) cannot be repaired other than at a cost which is in excess of50% of the cost of replacing such Basic Elements, then such Basic Elementsshall be replaced by Lessor, and the cost thereof shall be prorated between theParties and Lessee shall only be obligated to pay, each month during theremainder of the term of this Lease, on the date on which Base Rent is due, anamount equal to the product of multiplying the cost of such replacement as suchuseful life is specified pursuant to Federal income tax regulations orguidelines for depreciation thereof (including interest on the unamortizedbalance as is then commercially reasonable in the judgment of Lessor’saccountants), with Lessee reserving the right to prepay its obligation at anytime.

 

7.2                                 **Lessor’s Obligations**. Subject to theprovisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 9 (Damage orDestruction) and 14 (Condemnation), it is intended by the Parties hereto thatLessor have no obligation, in any manner whatsoever, to repair and maintain thePremises, or the equipment therein , all of which obligations are intended tobe that of the Lessee. It is the intention of the Parties that the terms of thisLease govern the respective obligations of the Parties as to maintenance andrepair of the Premises, and they expressly waive the benefit of any statute nowor hereafter in effect to the extent it is inconsistent with the terms of thisLease.

 

7.3                                 **Utility Installations; Trade Fixtures; Alterations.**(See Addendum)

 

(a)  **Definitions; Consent Required**. The term “**Utility Installations**” refers to all floorand window coverings, air lines, power panels, electrical distribution,security and fire protection systems, communication systems, lighting fixtures,HVAC equipment, plumbing, and fencing in or on the Premises. The term “**Alterations**” shall mean any modification ofthe improvements, other than Utility Installations or Trade Fixtures, whetherby addition or deletion.  “**Lessee Owned Alterations and/or Utility Installations**”are defined as Alterations and/or Utility Installations made by Lessee that arenot yet owned by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make anyAlterations or Utility Installations to the Premises without Lessor’s priorwritten consent. Lessee may, however, make non-structural Utility Installationsto the interior of the Premises (excluding the roof) without such consent butupon notice to Lessor, as long as they are not visible from the outside, do notinvolve puncturing, relocating or removing the roof or any existing walls, andthe cumulative cost thereof during this Lease as extended does not exceed$50,000 in the aggregate or $10,000 in any one year.

 

(b)  **Consent**. Any Alterations or UtilityInstallations that Lessee shall desire to make and which require the consent ofthe Lessor shall be presented to Lessor in written form with detailed plans.Consent shall be deemed conditioned upon Lessee’s: (i) acquiring all applicablegovernmental permits, (ii) furnishing Lessor with copies of both the permitsand the plans and specifications prior to commencement of the work, and (iii)compliance with all conditions of said permits and other ApplicableRequirements in a prompt and expeditious manner. Any Alterations or UtilityInstallations shall be performed in a workmanlike manner with good andsufficient materials. Lessee shall promptly upon completion furnish Lessor withas-built plans and specifications. For work which costs an amount equal to thegreater of one month’s Base Rent, or $10,000, Lessor may condition its consentupon Lessee providing a lien and completion bond in an amount equal to one andone-half times the estimated cost of such Alteration or Utility Installation and/orupon Lessee’s posting an additional Security Deposit with Lessor.

 

(c)  **Indemnification**. Lessee shall pay, whendue, all claims for labor or materials furnished or alleged to have beenfurnished to or for Lessee at or for use on the Premises, which claims are ormay be secured by any mechanic’s or materialmen’s lien against the Premises orany interest therein.  Lessee shall giveLessor not less than ten (10) days’ notice prior to the commencement of anywork in, on or about the Premises, and Lessor shall have the right to postnotices of non-responsibility.  IfLessee shall contest the validity of any such lien, claim or demand, thenLessee shall, at its sole expense defend and protect itself, Lessor and the Premisesagainst the same and shall pay and satisfy any such adverse judgment that maybe rendered thereon before the enforcement thereof. If Lessor shall require,Lessee shall furnish a surety bond in an amount equal to one and one-half timesthe amount of such contested lien, claim or demand, indemnifying Lessor againstliability for the same. If Lessor elects to participate in any such action,Lessee shall pay Lessor’s attorney’s fees and costs.

 

**7.4****                               Ownership;Removal; Surrender; and Restoration.**

 

(a)  **Ownership**. Subject to Lessor’s right to requireremoval or elect ownership as hereinafter provided, all Alterations and UtilityInstallations, made by Lessee shall be the property of Lessee, but considered apart of the Premises. Lessor may, at any time, elect in writing to be the ownerof all or any specified part of the Lessee Owned Alterations and UtilityInstallations. Unless otherwise instructed per Paragraph 7.4(b) hereof, allLessee Owned Alterations and Utility Installations shall, at the expiration ortermination of this Lease, become the property of Lessor and be surrendered byLessee with the Premises.

 

(b)  **Removal.** By delivery to Lessee of writtennotice from Lessor not later than ninety (90) days prior to the end of the termof this Lease, Lessor may require that any or all Lessee Owned Alterations orUtility Installations be removed by the expiration or termination of thisLease. Lessor may require the removal at any time of all or any part of anyLessee Owned Alterations or Utility Installations made without the requiredconsent.

 

(c)  **Surrender/Restoration.** Lessee shallsurrender the Premises by the Expiration Date or any earlier termination date,with all of the improvements, parts and surfaces thereof broom clean and freeof debris, and in good operating order, condition and state of repair, ordinarywear and tear excepted. “Ordinary wear and tear” shall not include any damageor deterioration that would have been prevented by good maintenance practice.Lessee shall repair any damage occasioned by the installation, maintenance or removalof Trade Fixtures, furnishings, and equipment as well as the removal of anystorage tank installed by or for Lessee, and the removal , replacement, orremediation of any soil, material or groundwater contaminated by Lessee. TradeFixtures shall remain the property of Lessee and shall be removed by Lessee.The failure by Lessee to timely vacate the Premises pursuant to this Paragraph7.4(c) without the express written consent of Lessor shall constitute aholdover under the provisions of Paragraph 26 below.

 

**8.****                                      Insurance;Indemnity.**

 

**8.1**                               **Payment for Insurance.** Lessee shall pay forall insurance required under paragraph 8 except to the extent of the costattributable to liability insurance carried by Lessor under Paragraph 8.2(b) inexcess of $2,000,000 per occurrence. Premiums for policy periods commencingprior to or extending beyond the Lease term shall be prorated to correspond tothe Lease term. Payment shall be made by Lessee to Lessor on a monthly basisalong with other estimated Triple Net Expenses.

 

**8.2****                               LiabilityInsurance.**

 

(a) **Carried by Lessee.** Lessee shall obtain andkeep in force a Commercial General Liability Policy of Insurance protectingLessee

 

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and Lessor against claims for bodily injury, personal injury andproperty damage based upon or arising out of the ownership, use, occupancy ormaintenance of the Premises and all areas appurtenant thereto.  Such insurance shall be on an occurrencebasis providing single limit coverage in an amount not less than $2,000,000 peroccurrence with an “Additional Insured-Managers or Lessors of PremisesEndorsement” and contain the “Amendment of the Pollution Exclusion Endorsement”for damage caused by heat, smoke or fumes from a hostile fire.  The Policy shall not contain anyintra-insured exclusions as between insured persons or organizations, but shallinclude coverage for liability assumed under this Lease as an “insuredcontract” for the performance of Lessee indemnity obligations under this Lease.  The limits of said insurance shall not,however, limit the liability of Lessee nor relieve lessee of any obligationhereunder.  All insurance carried byLessee shall be primary to and not contributory with any similar insurancecarried by Lessor, whose insurance shall be considered excess insurance only.

 

(b)  **Carried byLessor**.  Lessor may maintainliability insurance as described in Paragraph 8.2(a), in addition to, and notin lieu of the insurance required to be maintained by Lessee.  Lessee shall not be named as an additionalinsured therein.

 

8.3                                 **Property Insurance – Building, Improvements and RentalValue.**

 

(a)  **Buildingand Improvements**.  Theinsuring Party shall obtain and keep in force a policy or policies in the nameof Lessor, with loss payable to Lessor and to any Lender insuring loss ofdamage to the Premises.  The amount ofsuch insurance shall be equal to the full replacement cost of the Premises, asthe same shall exist from time to time, or the amount required by any Lenders,but in no event more than the commercially reasonable and available insurablevalue thereof.  If Lessor is theInsuring Party, however, Lessee Owned Alterations and Utility installations,Trade Fixtures, and Lessee’s personal property shall be insured by Lessee underParagraph 8.4 rather than by Lessor.  Ifthe coverage is available and commercially appropriate, such policy or policiesshall insure against all risks of direct physical loss or damage includingearthquake (except the perils of Flood), including coverage for debris removaland the enforcement of any Applicable Requirements requiring the upgrading,demolition, reconstruction or replacement of any portion of the Premises as theresult of a covered loss.  Said policyor policies shall also contain an agreed valuation provision in lieu of anycoinsurance clause, waiver of subrogation, and inflation guard protectioncausing an increase in the annual property insurance coverage amount by afactor of not less than the adjusted U.S. Department of Labor Consumer PriceIndex for All Urban Consumers for the city nearest to where the Premises arelocated.  If such insurance coverage hasa deductible clause, the deductible amount shall not exceed $1,000 peroccurrence, and Lessee shall be liable for such deductible amount in the eventof an Insured Loss.

 

(b)  **RentalValue**.  The Insuring Partyshall obtain and keep in force a policy or policies in the name of Lessor withloss payable to Lessor and any Lender, insuring the loss of the full Rent forone (1) year.  Said insurance shallprovide that in the event the Lease is terminated by reason of an insured loss,the period of indemnity for such coverage shall be extended beyond the date ofthe completion of repairs or replacement of the Premises, to provide for onefull year’s loss of Rent from the date of any such loss.  Said insurance shall contain an agreedvaluation provision in lieu of any coinsurance clause, and the amount ofcoverage shall be adjusted annually to reflect the projected Rent otherwisepayable by Lessee, for the next twelve (12) month period.  Lessee shall be liable for any deductibleamount in the event of such loss.

 

(c)  **AdjacentPremises**.  If the Premisesare part of a larger building, or of a group of buildings owned by Lessor whichare adjacent to the Premises, the Lessee shall pay for any increase in thepremiums for the property insurance of such building or buildings if saidincrease is caused by Lessee’s acts, omissions, use or occupancy of thePremises.

 

8.4                                 **Lessee’s Property/Business Interruption Insurance**.

 

(a)  **PropertyDamage**.  Lessee shall obtainand maintain insurance coverage on all of Lessee’s personal property, TradeFixtures, and Lessee Owned Alterations and Utility Installations.  Such insurance shall be full replacementcost coverage with a deductible of not to exceed $1,000 per occurrence.  The proceeds from any such insurance shallbe used by Lessee for the replacement of personal property, Trade Fixtures andLessee Owned Alterations and Utility Installations.  Lessee shall provide Lessor with written evidence that suchinsurance is in force.

 

(b)  **BusinessInterruption**.  If reasonablyavailable, and if Lessor requests Lessee to do so in writing, Lessee shallobtain and maintain loss of income and extra expense insurance in amounts aswill reimburse Lessee for direct or indirect loss of earnings attributable toall perils commonly insured against by prudent lessees in the business ofLessee or attributable to prevention of access to the Premises as a result ofsuch perils.

 

(c)  **NoRepresentation of Adequate Coverage**.  Lessor makes no representation that the limits or forms ofcoverage of insurance specified herein are adequate to cover Lessee’s property,business operations or obligations under this Lease.

 

8.5                                 **Insurance Policies**.  Insurance required herein shall be bycompanies duly licensed or admitted to transact business in the state where thePremises are located, and maintaining during the policy term a “GeneralPolicyholders Rating” of at least B+, V, as set forth in the most current issueof “Best’s Insurance Guide”, or such other rating as may be required by aLender.  Lessee shall not do or permitto be done anything which invalidates the required insurance policies.  Lessee shall, prior to the Start Date,deliver to Lessor certified copies of polices of such insurance or certificatesevidencing the existence and amounts of the required insurance.  No such policy shall be cancelable orsubject to modification except after thirty (30) days prior written notice toLessor.  Lessee shall, at least thirty(30) days prior to the expiration of such policies, furnish Lessor withevidence of renewals or “insurance binders” evidencing renewal thereof, orLessor may order such insurance and charge the cost thereof to Lessee, whichamount shall be payable by Lessee to Lessor upon demand.  Such policies shall be for a term of atleast one year, or the length of the remaining term of this Lease, whichever isless.  If either Party shall fail toprocure and maintain the insurance required to be carried by it, the otherParty may, but shall not be required to, procure and maintain the same.

 

8.6                                 **Waiver of Subrogation**.  Without affecting any other rights orremedies, Lessee and Lessor each hereby release and relieve the other, andwaive their entire right to recover damages against the other, for loss of ordamage to its property arising out of or incident to the perils required to beinsured against herein.  The effect ofsuch releases and waivers is not limited by the amount of insurance carried orrequired, or by any deductibles applicable hereto.  The Parties agree to have their respective property damageinsurance carriers waive any right to subrogation that such companies may haveagainst Lessor or Lessee, as the case may be, so long as the insurance is notinvalidated thereby.

 

8.7                                 **Indemnity**. Except for Lessor’s sole negligence, Lessee shall indemnify, protect,defend and hold harmless the Premises, Lessor and its agents, Lessor’s masteror ground lessor, partners and Lenders, from and against any and all claims,loss of rents and/or damages, liens, judgments, penalties, attorneys’ andconsultants’ fees, expenses and/or liabilities arising out of, involving, or inconnection with, the use and/or occupancy of the Premises by Lessee.  If any action or proceeding is broughtagainst Lessor by reason of any of the foregoing matters, Lessee shall uponnotice defend the same at Lessee’s expense by counsel reasonably satisfactoryto Lessor and Lessor shall cooperate with Lessee in such defense.  Lessor need not have first paid any suchclaim in order to be defended or indemnified.

 

8.8                                 **Exemption of Lessor from Liability**.  Lessor shall not be liable for injury ordamage to the person or goods, wares, merchandise or other property of Lessee,Lessee’s employees, contractors, invitees, customers, or any other person in orabout the Premises, whether such damage or injury is caused by or results fromfire, steam, electricity, gas, water or rain, or from the breakage, leakage,obstruction or other defects of pipes, fire sprinklers, wires, appliances,plumbing, HVAC or lighting fixtures, or from any other cause, whether the saidinjury or damage results from conditions arising upon the Premises or uponother portions of the Building of which the Premises are a part, or from othersources or places.  Lessor shall not beliable for any damages arising from any act or neglect of any other tenant ofLessor.  Notwithstanding Lessor’snegligence or breach of this Lease, Lessor shall under no circumstances beliable for injury to Lessee’s business or for any loss of income or profittherefrom.

 

9.                                       **Damage or Destruction**.

 

9.1                                 **Definitions**.

 

(a)  **“PremisesPartial Damage”** shall mean damage or destruction to the improvementson the Premises, other than Lessee Owned Alterations and Utility Installations,which can reasonably be repaired in six (6) months or less from the date of thedamage or destruction.  Lessor shallnotify Lessee in writing within thirty (30) days from the date of the damage ordestruction as to whether or not the damage is Partial or Total.

 

(b)  **“PremisesTotal Destruction”** shall mean damage or destruction to the Premises,other than Lessee Owned Alterations and Utility Installations, which cannotreasonably be repaired in six (6) months or less from the date of the damage ordestruction.  Lessor shall notify Lesseein writing within thirty (30) days from the date of the damage or destructionas to whether or not the damage is Partial or Total.

 

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(c) **“Insured Loss”** shall mean damage ordestruction to improvements on the Premises, other than Lessee OwnedAlterations and Utility Installations and Trade Fixtures, which was caused byan event required to be covered by the insurance described in Paragraph 8.3(a),irrespective of any deductible amounts or coverage limits involved.

 

(d) **“Replacement Cost”** shall mean the cost torepair or rebuild the improvements owned by Lessor at the time of theoccurrence to their condition existing immediately prior thereto, includingdemolition, debris removal and upgrading required by the operation ofApplicable Requirements, and without deduction for depreciation.

 

(e) **“Hazardous Substance Condition”** shall meanthe occurrence or discovery of a condition involving the presence of, or a contaminationby, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under thePremises.

 

9.2                                 **Partial Damage - Insured Loss.** If aPremises Partial Damage that is an Insured Loss occurs, then Lessor shall, atLessor’s expense, repair such damage (but not Lessee’s Trade Fixtures or LesseeOwned Alterations and Utility Installations) as soon as reasonably possible andthis Lease shall continue in full force and effect; provided, however, thatLessee shall, at Lessor’s election, make the repair of any damage ordestruction the total cost to repair of which is $10,000 or less, and, in suchevent, Lessor shall make any applicable insurance proceeds available to Lesseeon a reasonable basis for that purpose. Notwithstanding the foregoing, if therequired insurance was not in force or the insurance proceeds are notsufficient to effect such repair, the Insuring Party shall promptly contributethe shortage in proceeds (except as to the deductible which is Lessee’sresponsibility) as and when required to complete said repairs. In the event,however, such shortage was due to the fact that, by reason of the unique natureof the improvements, full replacement cost insurance coverage was notcommercially reasonable and available, Lessor shall have no obligation to payfor the shortage in insurance proceeds or to fully restore the unique aspectsof the Premises unless Lessee provides Lessor with the funds to cover same, oradequate assurance thereof, within ten (10) days following receipt of writtennotice of such shortage and request therefor. If Lessor receives said funds oradequate assurance thereof within ten (10) day period, the party responsiblefor making the repairs shall complete them as soon as reasonably possible andthis Lease shall remain in full force and effect. If such funds or assuranceare not received, Lessor may nevertheless elect by written notice to Lesseewithin ten (10) days thereafter to: (i) make such restoration and repair as iscommercially reasonable with Lessor paying any shortage in proceeds, in whichcase this Lease shall remain in full force and effect, or have this Leaseterminate thirty (30) days thereafter. Lessee shall not be entitled toreimbursement of any funds contributed by Lessee to repair any such damage ordestruction. Premises Partial Damage due to flood or earthquake shall besubject to Paragraph 9.3, notwithstanding that there may be some insurancecoverage, but the net proceeds of any such insurance shall be made availablefor the repairs if made by either Party.

 

9.3                                 **Partial Damage - Uninsured Loss.** If aPremises Partial Damage that is not an Insured Loss occurs, unless caused by anegligent or willful act of Lessee (in which event Lessee shall make therepairs at Lessee’s expense), Lessor may either: (i) repair such damage as soonas reasonably possible at Lessor’s expense, in which event this Lease shallcontinue in full force and effect, or (ii) terminate this Lease by givingwritten notice to Lessee within thirty (30) days after receipt by Lessor ofknowledge of the occurrence of such damage. Such termination shall be effectivesixty (60) days following the date of such notice. In the event Lessor electsto terminate this Lease. Lessee shall have the right within ten (10) days afterreceipt of the termination notice to give written notice to Lessor of Lessee’scommitment to pay for the repair of such damage without reimbursement fromLessor.  Lessee shall provide Lessorwith said funds or satisfactory assurance thereof within thirty (30) days aftermaking such commitment. In such event this Lease shall continue in full forceand effect, and Lessor shall proceed to make such repairs as soon as reasonablypossible after the required funds are available. If Lessee does not make therequired commitment, this Lease shall terminate as of the date specified in thetermination notice.

 

9.4                                 **Total Destruction.**  Notwithstanding any other provision hereof,if a Premises Total Destruction occurs, this Lease shall terminate sixty (60)days following such Destruction. If the damage or destruction was caused by thegross negligence or willful misconduct of Lessee, Lessor shall have the rightto recover Lessor’s damages from Lessee except as provided in Paragraph 8.6.

 

9.5                                 **Damage Near End of Term**. If at any timeduring the last six (6) months of this Lease there is damage for which the costto repair exceeds one (1) month’s Base Rent, whether or not an Insured Loss,Lessor may terminate this Lease effective sixty (60) days following the date ofoccurrence of such damage by giving a written termination notice to Lesseewithin thirty (30) days after the date of occurrence of such damage.Notwithstanding the foregoing, if Lessee at that time has an exercisable optionto extend this Lease or to purchase the Premises, then Lessee may preserve thisLease by, (a) exercising such option and (b) providing Lessor with any shortagein insurance proceeds (or adequate assurance thereof) needed to make therepairs on or before the earlier of (i) the date which is ten days afterLessee’s receipt of Lessor’s written notice purporting to terminate this Lease,or (ii) the day prior to the date upon which such option expires. If Lesseeduly exercises such option during such period and provides Lessor with funds(or adequate assurance thereof) to cover any shortage in insurance proceeds,Lessor shall, at Lessor’s commercially reasonable expense, repair such damageas soon as reasonably possible and this Lease shall continue in full force andeffect. If Lessee fails to exercise such option and provide such funds orassurance during such period, then this Lease shall terminate on the datespecified in the termination notice and Lessee’s option shall be extinguished.

 

9.6                                 **Abatement of Rent; Lessee’s Remedies.**

 

(a) **Abatement.** In the event of Premises Partial Damage or Premises Total Destruction ora Hazardous Substance Condition for which Lessee is not responsible under thisLease, the Rent payable by Lessee for the period required for the repair,remediation or restoration of such damage shall be abated in proportion to thedegree to which Lessee’s use of the Premises is impaired, but not to exceed theproceeds received from the Rental Value insurance. All other obligations ofLessee hereunder shall be performed by Lessee, and Lessor shall have noliability for any such damage, destruction, remediation, repair or restorationexcept as provided herein.

 

(b) **Remedies**. If Lessor shall be obligated torepair or restore the Premises and does not commence, in a substantial andmeaningful way, such repair or restoration within ninety (90) days after suchobligation shall accrue, Lessee may, at any time prior to the commencement ofsuch repair or restoration, give written notice to Lessor and to any Lenders ofwhich Lessee has actual notice, of Lessee’s election to terminate this Lease ona date not less than sixty (60) days following the giving of such notice. IfLessee gives such notice and such repair or restoration is not commenced withinthirty (30) days thereafter, this Lease shall terminate as of the datespecified in said notice. If the repair or restoration is commenced within saidthirty (30) days, this Lease shall continue in full force and effect. **“Commence”** shall mean either theunconditional authorization of the preparation of the required plans, or thebeginning of the actual work on the Premises, whichever first occurs.

 

9.7                                 **Termination-Advance Payments.** Upontermination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, anequitable adjustment shall be made concerning advance Base Rent and any otheradvance payments made by Lessee to Lessor. Lessor shall, in addition, return toLessee so much of Lessee’s Security Deposit as has not been, or is not thenrequired to be, used by Lessor.

 

9.8                                 **Waive Statutes.** Lessor and lessee agreethat the terms of this Lease shall govern the effect of any damage to ordestruction of the Premises with respect to the termination of this Lease andhereby waive the provisions of any present or future statute to the extentinconsistent herewith.

 

10.                                 **Real Property Taxes.**

 

10.1                           **Definition of “Real Property Taxes.”** Asused herein, the term **“Real Property Taxes”**shall include any form of assessment; real estate, general, special, ordinaryor extraordinary, or rental levy or tax (other than inheritance, personalincome or estate taxes); improvement bond; and/or license fee imposed upon orlevied against any legal or equitable interest of Lessor in the Premises.Lessor’s right to other income therefrom, and/or Lessor’s business of leasing,by any authority having the direct or indirect power to tax and where the fundsare generated with reference to the Building address and where the proceeds sogenerated are to be applied by the city, county or other local taxing authorityof a jurisdiction within which which the Premises are located. The term **“Real Property Taxes”** shall also includeany tax, fee, levy, assessment or charge, or any increase therein, imposed byreason of events occurring during the term of this Lease, including but notlimited to, a change in the ownership of the Premises. Not withstanding theforegoing, Lessee shall not be responsible for any increase in Real PropertyTaxes during the first five (5) years following the Start Date.

 

10.2

 

(a) **Payment of Taxes.** Lessee shall pay the RealProperty Taxes applicable to the Premises during the term of this Lease*.Lessee shall promptly furnish Lessor with satisfactory evidence that such taxeshave been paid. If any such taxes shall cover any period of time prior to orafter the expiration or 

 

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*on a monthly basis alongwith other estimated Triple Net charge paid to Lessor.

 

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termination of this Lease, Lessee’s share ofsuch taxes shall be prorated to cover only that portion of the tax billapplicable to the period that this Lease is in effect, and Lessor shallreimburse Lessee for any overpayment. If Lessee shall fail to pay any requiredReal Property Taxes, Lessor shall have the right to pay the same, and Lesseeshall reimburse Lessor therefor upon demand.

 

(b) **Advance Payment.** In the event Lessee incursa late charge on any Rent payment, Lessor may, at Lessor’s option, estimate thecurrent Real Property Taxes, and require that such taxes be paid in advance toLessor by Lessee, either: (i) in a lump sum amount equal to the installmentdue, at least twenty (20) days prior to the applicable delinquency date, or(ii) monthly in advance with the payment of the Base Rent. If Lessor elects torequire payment monthly in advance, the monthly payment shall be an amountequal to the amount of the estimated installment of taxes divided by the numberof months remaining before the month in which said installment becomesdelinquent. When the actual amount of the applicable tax bill is known, theamount of such equal monthly advance payments shall be adjusted as required toprovide the funds needed to pay the applicable taxes. If the amount collectedby Lessor is insufficient to pay such Real Property Taxes when due, Lesseeshall pay Lessor, upon demand, such additional sums as are necessary to paysuch obligations. All moneys paid to Lessor under this Paragraph may beintermingled with other moneys of Lessor and shall not bear interest. In theevent of a Breach by Lessee in the performance of its obligations under thisLease, then any balance of funds paid to Lessor under the provisions of thisParagraph may at the option of Lessor, be treated as an additional SecurityDeposit.

 

10.3                           **JointAssessment.** If the Premises are not separately assessed,Lessee’s liability shall be an equitable proportion of the Real Property Taxesfor all of the land and improvements included within the tax parcel assessed,such proportion to be conclusively determined by Lessor from the respectivevaluations assigned in the assessor’s work sheets or such other information asmay be reasonably available.

 

10.4                           **PersonalProperty Taxes.**Lessee shall pay, prior to delinquency, all taxesassessed against and levied upon Lessee Owned Alterations, UtilityInstallations, Trade Fixtures, furnishings, equipment and all personal propertyof Lessee. When possible, Lessee shall cause such property to be assessed andbilled separately from the real property of Lessor. If any of Lessee’s saidpersonal property shall be assessed with Lessor’s real property, Lessee shallpay Lessor the taxes attributable to Lessee’s property within ten (10) daysafter receipt of a written statement.

 

11.                                 **Utilities.** Lessee shall pay for all water, gas, heat, light,power, telephone, trash disposal and other utilities and services supplied tothe Premises, together with any taxes thereon. If any such services are notseparately metered to Lessee, Lessee shall pay a reasonable proportion, to bedetermined by Lessor, of all charges jointly metered.

 

12.           **Assignment and Subletting.**

 

12.1                           **Lessor’sConsent Required.      -     **See Addendum

 

(d) An assignment or subletting withoutconsent shall, at Lessor’s option, be a Default curable after notice perParagraph 13.1(c), or a noncurable Breach without the necessity of any noticeand grace period. If Lessor elects to treat such unapproved assignment orsubletting as a noncurable Breach, Lessor may either: (i) terminate this Lease,or (ii) upon thirty (30) days written notice, increase the monthly Base Rent toone hundred ten percent (110%) of the Base Rent then in effect. Further, in theevent of such Breach and rental adjustment, (i) the purchase price of anyoption to purchase the Premises held by Lessee shall be subject to similaradjustment to one hundred ten percent (110%) of the price previously in effect,and (ii) all fixed and non-fixed rental adjustments scheduled during theremainder of the Lease term shall be increased to One Hundred Ten Percent(110%) of the scheduled adjusted rent.

 

(e) Lessee’s remedy for any breach ofParagraph 12.1 by Lessor shall be limited to compensatory damages and/orinjunctive relief.

 

12.2         **Terms and Conditions Applicable toAssignment and Subletting.**

 

(a) Regardless of Lessor’s consent, anyassignment or subletting shall not: (i) be effective without the expresswritten assumption by such assignee or sublessee of the obligations of Lesseeunder this Lease (ii) release Lessee of any obligations hereunder, or (iii)alter the primary liability of Lessee for the payment of Rent or for theperformance of any other obligations to be performed by Lesse.

 

(b) Lessor may accept Rent or performance ofLessee’s obligations from any person other than Lessee pending approval ordisapproval of an assignment. Neither a delay in the approval or disapproval ofsuch assignment nor the acceptance of Rent or performance shall constitute awaiver or estoppel of Lessor’s right to exercise its remedies for Lessee’sDefault or Breach.

 

(c) Lessor’s consent to any assignment orsubletting shall not constitute a consent to any subsequent assignment orsubletting.

 

(d) In the event of any Default or Breach byLessee, Lessor may proceed directly against Lessee, any Guarantors or anyoneelse responsible for the performance of Lessee’s obligations under this Lease,including any assignee or sublessee, without first exhausting  Lessor’s remedies against any other personor entity responsible therefore to Lessor, or any security held by Lessor.

 

(e) Each request for consent to an assignmentor subletting shall be in writing, accompanied by information relevant toLessor’s determination as to the financial and operational responsibility andappropriateness of the proposed assignee or sublessee, including but notlimited to the intended use and/or required modification of the Premises, ifany, together with a fee of $1,000 or ten percent (10%) of the current monthlyBase Rent applicable to the portion of the Premises which is the subject of theproposed assignment or sublease, whichever is greater, as consideration forLessor’s considering and processing said request. Lessee agrees to provideLessor with such other or additional information and/or documentation as may bereasonably requested.

 

(f) Any assignee of, or sublessee under, thisLease shall, by reason of accepting such assignment or entering into suchsublease, be deemed to have assumed and agreed to conform and comply with eachand every term, covenant, condition and obligation herein to be observed orperformed by Lessee during the term of said assignment or sublease, other thansuch obligations as are contrary to or inconsistent with provisions of anassignment or sublease to which Lessor has specifically consented to inwriting.

 

12.3         **Additional Terms and ConditionsApplicable to Subletting.**The following terms andconditions shall apply to any subletting by Lessee of all or any part of thePremises and shall be deemed included in all subleases under this Lease whetheror not expressly incorporated therein:

 

(a) Lessee hereby assigns and transfers toLessor all of Lessee’s interest in all Rent payable on any sublease, and Lessormay collect such Rent and apply same toward Lessee’s obligations under thisLease; provided, however, that until a Breach shall occur in the performance ofLessee’s obligations, Lessee may collect said Rent. Lessor shall not, by reasonof the foregoing or any assignment of such sublease, nor by reason of thecollection of Rent, be deemed liable to the sublessee for any failure of Lesseeto perform and comply with any of Lessee’s obligations to such sublessee.  Lessee hereby irrevocably authorizes anddirects any such sublessee, upon receipt of a written notice from Lessorstating that a Breach exists in the performance of Lessee’s obligations underthis Lease, to pay to Lessor all Rent due and to become due under the sublease.Sublessee shall rely upon any such notice from Lessor and shall pay all Rentsto Lessor without any obligation or right to inquire as to whether such Breachexists, notwithstanding any claim from Lessee to the contrary.

 

(b) In the event of a Breach by Lessee,Lessor may, at its option, require sublessee to attorn to Lessor, in whichevent Lessor shall undertake the obligations of the sublessor under suchsublease from the time of the exercise of said option to the expiration of suchsublease; provided, however, Lessor shall not be liable for any prepaid rentsor security deposit paid by such sublessee to such sublessor or for any priorDefaults or Breaches of such sublessor.

 

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(c) Any matter requiring the consent of thesublessor under a sublease shall also require the consent of Lessor.

 

(d) No sublessee shall further assign orsublet all or any part of the Premises without Lessor’s prior written consent.

 

(e) Lessor shall deliver a copy of any noticeof Default or Breach by Lessee to the sublessee, who shall have the right tocure the Default of Lessee within the grace period, if any, specified in suchnotice. The sublessee shall have a right of reimbursement and offset from andagainst Lessee for any such Defaults cured by the sublessee.

 

13.                                 **Default; Breach; Remedies.**

 

13.1                           **Default;Breach.**   A **“Default”** is defined as a failure by the Lessee to comply withor perform any of the terms, covenants, conditions or rules under thisLease.  A **“Breach”** is defined as the occurrence of one or more of thefollowing Defaults, and the failure of Lessee to cure such Default within anyapplicable grace period:

 

(a) The abandonment of the Premises; or thevacating of the Premises without providing a commercially reasonable level ofsecurity, or where the coverage of the property insurance described inParagraph 8.3 is jeopardized as a result thereof, or without providingreasonable assurances to minimize potential vandalism.

 

(b) The failure of Lessee to make any paymentof Rent or any other monetary payment required to be made by Lessee hereunder,whether to Lessor or to a third party, when due, to provide reasonable evidenceof insurance or surety bond, or to fulfill any obligation under this Leasewhich endangers or threatens life or property, where such failure continues fora period of three (3) business days following written notice to Lessee.

 

(c) The failure by Lessee to provide (i)reasonable written evidence of compliance with Applicable Requirements, (ii)the service contracts, (iii) the rescission of an unauthorized assignment orsubletting, (iv) a Tenancy Statement, (v) a requested subordination, (vi)evidence concerning any guaranty and/or Guarantor, (vii) any document requestedunder Paragraph 42 (easements), or (viii) any other documentation orinformation which Lessor may reasonably require of Lessee under the terms ofthis Lease, where any such failure continues for a period of ten (10) daysfollowing written notice to Lessee.

 

(d) A Default by Lessee as to the terms, covenants,conditions or provisions of this Lease, or of the rules adopted under Paragraph40 hereof, other than those described in subparagraphs 13.1(a), (b) or (c),above, where such Default continues for a period of thirty (30) days afterwritten notice; provided, however, that if the nature of Lessee’s Default issuch that more than thirty (30) days are reasonably required for its cure, thenit shall not be deemed to be a Breach if Lessee commences such cure within saidthirty (30) day period and thereafter diligently prosecutes such cure tocompletion.

 

(e) The occurrence of any of the followingevents: (i) the making of any general arrangement or assignment for the benefitof creditors; (ii) becoming a “debtor” as defined in 11 U.S.C. § 101 orany successor statute thereto (unless, in the case of a petition filed againstLessee, the same is dismissed within sixty (60) days); (iii) the appointment ofa trustee or receiver to take possession of substantially all of Lessee’sassets located at the Premises or of Lessee’s interest in this Lease, wherepossession is not restored to Lessee within thirty (30) days; or (iv) theattachment, execution or other judicial seizure of substantially all ofLessee’s assets located at the Premises or of Lessee’s interest in this Lease,where such seizure is not discharged within thirty (30) days; provided,however, in the event that any provision of this subparagraph (e) is contraryto any applicable law, such provision shall be of no force or effect, and notaffect the validity of the remaining provisions.

 

(f) The discovery that any financialstatement of Lessee or of any Guarantor given to Lessor was materially false.

 

(g) If the performance of Lessee’sobligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii)the termination of a Guarantor’s liability with respect to this Lease otherthan in accordance with the terms of such guaranty, (iii) a Guarantor’sbecoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’srefusal to honor the guaranty, or (v) a Guarantor’s breach of its guarantyobligation on an anticipatory basis, and Lessee’s failure, within sixty (60)days following written notice of any such event, to provide written alternativeassurance or security, which, when coupled with the then existing resources ofLessee, equals or exceeds the combined financial resources of Lessee and theGuarantors that existed at the time of execution of this Lease.

 

13.2                           **Remedies.**If Lessee failsto perform any of its affirmative duties or obligations, within ten (10) daysafter written notice (or in case of an emergency, without notice), Lessor may,at its option, perform such duty or obligation on Lessee’s behalf, includingbut not limited to the obtaining of reasonably required bonds, insurance policies,or governmental licenses, permits or approvals. The costs and expenses of anysuch performance by Lessor shall be due and payable by Lessee upon receipt ofinvoice therefor. If any check given to Lessor by Lessee shall not be honoredby the bank upon which it is drawn, Lessor, at its option, may require allfuture payments to be made by Lessee to be by cashier’s check. In the event ofa Breach, Lessor may, with or without further notice or demand, and withoutlimiting Lessor in the exercise of any right or remedy which Lessor may have byreason of such Breach:

 

(a) Terminate Lessee’s right to possession ofthe Premises by any lawful means, in which case this Lease shall terminate andLessee shall immediately surrender possession to Lessor. In such event Lessorshall be entitled to recover from Lessee: (i) the unpaid Rent which had beenearned at the time of termination; (ii) the worth at the time of award of theamount by which the unpaid rent which would have been earned after terminationuntil the time of award exceeds the amount of such rental loss that the Lesseeproves could have been reasonably avoided; (iii) the worth at the time of awardof the amount by which the unpaid rent for the balance of the term after thetime of award exceeds the amount of such rental loss that the Lessee provescould be reasonably avoided; and (iv) any other amount necessary to compensateLessor for all the detriment proximately caused by the Lessee’s failure toperform its obligations under this Lease or which in the ordinary course ofthings would be likely to result therefrom, including but not limited to thecost of recovering possession of the Premises, expenses of reletting, includingnecessary renovation and alteration of the Premises, reasonable attorney’s fees,and that portion of any leasing commission paid by Lessor in connection withthis Lease applicable to the unexpired term of this Lease. The worth at thetime of award of the amount referred to in provision (iii) of the immediatelypreceding sentence shall be computed by discounting such amount at the discountrate of the Federal Reserve Bank of the District within which the Premises arelocated at the time of award plus one percent (1%). Efforts by Lessor tomitigate damages caused by Lessee’s Breach of this Lease shall not waiveLessor’s right to recover damages under Paragraph 12. If termination of thisLease is obtained through the provisional remedy of unlawful detainer, Lessorshall have the right to recover in such proceeding any unpaid Rent and damagesas are recoverable therein, or Lessor may reserve the right to recover all orany part thereof in a separate suit. If a notice and grace period requiredunder Paragraph 13.1 was not previously given, a notice to pay rent or quit, orto perform or quit given to Lessee under the unlawful detainer statute shallalso constitute the notice required by Paragraph 13.1. In such case, theapplicable grace period required by Paragraph 13.1 and the unlawful detainerstatute shall run concurrently, and the failure of Lessee to cure the Defaultwithin the greater of the two such grace periods shall constitute both anunlawful detainer and a Breach of this Lease entitling Lessor to the remediesprovided for in this Lease and/or by said statute.

 

(b) Continue the Lease and Lessee’s right topossession and recover the Rent as it becomes due, in which event Lessee maysublet or assign, subject only to reasonable limitations. Acts of maintenance,efforts to relet, and/or the appointment of a receiver to protect the Lessor’sinterests, shall not constitute a termination of the Lessee’s right topossession.

 

(c) Pursue any other remedy now or hereafteravailable under the laws or judicial decisions of the state wherein thePremises are located. The expiration or termination of this Lease and/or thetermination of Lessee’s right to possession shall not relieve Lessee fromliability under any indemnity provisions of this Lease as to matters occurringor accruing during the term hereof or by reason of Lessee’s occupancy of the Premises.

 

13.3                           **InducementRecapture.** Any agreement for free or abated rent or othercharges, or for the giving or paying by Lessor to or for Lessee of any cash orother bonus, inducement or consideration for Lessee’s entering into this Lease,all of which concessions are hereinafter referred to as “**Inducement Provisions**,” shall be deemedconditioned upon Lessee’s full and faithful performance of all of the terms,covenants and conditions of this Lease. Upon Breach of this Lease by Lessee,any such inducement Provision shall automatically be deemed deleted from thisLease and of no further force or effect, and any rent, other charge, bonus,inducement or consideration theretofore abated, given or paid by Lessor undersuch an inducement Provision shall be immediately due and payable by Lessee toLessor, notwithstanding any subsequent cure of said Breach by Lessee. Theacceptance by Lessor of rent or the cure of the Breach which initiated theoperation of this paragraph shall not

 

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be deemed a waiver byLessor of the provisions of this paragraph unless specifically so stated inwriting by Lesser at the time of such acceptance.

 

13.4                           **Late Charges.**Lessee hereby acknowledgesthat late payment by Lessee of Rent will cause Lessor to incur costs notcontemplated by this Lease, the exact amount of which will be extremelydifficult to ascertain. Such costs include, but are not limited to, processingand accounting charges, and late charges which may be imposed upon Lessor byany Lender.  Accordingly, if any Rentshall not be received by Lessor within five (5) days after such amount shall bedue, then, without any requirement for notice to Lessee, Lessee shall pay toLessor a one-time late charge equal to ten percent (10%) of each such overdueamount. The parties hereby agree that such late charge represents a fair andreasonable estimate of the costs Lessor will incur by reason of such latepayment. Acceptance of such late charge by Lessor shall in no event constitutea waiver of Lessor’s Default or Breach with respect to such overdue amount, norprevent the exercise of any of the other rights and remedies granted hereunder.In the event that a late charge is payable hereunder, whether or not collected,for three (3) consecutive installments of Base Rent, then notwithstanding anyprovision of this Lease to the contrary, Base Rent shall, at Lessor’s option,become due and payable quarterly in advance.

 

13.5                           **Interest.** Any monetary payment due Lessorhereunder, other than late charges, not received by Lessor within thirty (30)days following the date on which it was due, shall bear interest from thethirty-first (31st) day after it was due. The interest (“Interest”) chargedshall be equal to the prime rate charged by the largest state chartered bank inthe state in which the Premises are located plus 4%, but shall not exceed themaximum rate allowed by law. Interest is payable in addition to the potentiallate charge provided for in Paragraph 13.4.

 

13.6                           **Breach by Lessor.**

 

(a)                                  **Notice of Breach.** Lessor shall not bedeemed in breach of this Lease unless Lessor fails within a reasonable time toperform an obligation required to be performed by Lessor. For purposes of thisParagraph, a reasonable time shall in no event be less than thirty (30) daysafter receipt by Lessor, and any Lender whose name and address shall have beenfurnished Lessee in writing for such purpose, of written notice specifyingwherein such obligation of Lessor has not been performed; provided, however,that if the nature of Lessor’s obligation is such that more than thirty (30)days are reasonably required for its performance, then Lessor shall not be inbreach if performance is commenced within such thirty (30) day period andthereafter diligently pursued to completion.

 

(b)                                 **Performance by Lessee on Behalf of Lessor.**In the event that neither Lessor nor Lender cures said breach within thirty (30) days after receipt of said notice,or if having commenced said cure they do not diligently pursue it tocompletion, then Lessee may elect to cure said breach at Lessee’s expense andoffset from Rent an amount equal to the greater of one month’s Base Rent or theSecurity Deposit, and to pay an excess of such expense under protest, reservingLessee’s right to reimbursement from Lessor. Lessee shall document the cost ofsaid cure and supply said documentation to Lessor.

 

14.                                 **Condemnation.**  If the Premises or any portion thereof are taken under the powerof eminent domain or sold under the threat of the exercise of said power (collectively“**Condemnation**”), this Lease shallterminate as to the part taken as of the date the condemning authority takestitle or possession, whichever first occurs. If more than ten percent (10%) ofany building, or more than twenty-five percent (25%) of the land area notoccupied by any building, is taken by Condemnation, Lessee may, at Lessee’soption, to be exercised in writing within ten (10) days after Lessor shall havegiven Lessee written notice of such taking (or in the absence of such notice, withinten (10) days after the condemning authority shall have taken possession)terminate this Lease as of the date the condemning authority takes suchpossession. If Lessee does not terminate this Lease in accordance with theforegoing, this lease shall remain in full force and effect as to the portionof the Premises remaining, except that the Base Rent shall be reduced inproportion to the reduction in utility of the Premises caused by suchCondemnation. Condemnation awards and/or payments shall be the property ofLessor, whether such award shall be made as compensation for diminution invalue of the leasehold, the value of the part taken, or for severance damages;provided, however, that Lessee shall be entitled to any compensation forLessee’s relocation expenses, loss of business goodwill and/or Trade Fixtures,without regard to whether or not this Lease is terminated pursuant to theprovisions of this Paragraph. All Alterations and Utility Installations made tothe Premises by Lessee, for purposes of Condemnation only, shall be consideredthe property of the Lessee and Lessee shall be entitled to any and allcompensation which is payable therefor. In the event that this Lease is notterminated by reason of the Condemnation, Lessor shall repair any damage to thePremises caused by such Condemnation.

 

15.           **Broker’s Fee.**

 

15.3                           **Representations and Indemnities of BrokerRelationships.** Lessee and Lessor each represent and warrant to theother that it has had no dealings with any person, firm, broker or finder (otherthan the Brokers, if any) in connection with this lease, and that no one otherthan said named Brokers is entitled to any commission or finder’s fee inconnection herewith. Lessee and lessor do each hereby agree to indemnify,protect, defend or other similar party by reason of any dealings or actions ofthe indemnifying Party, including any costs, expenses, attorneys’ feesreasonably incurred with respect thereto.

 

16.                                 **Tenancy Statement/Estoppel Certificate.**

 

16.1                           EachParty (as “**Responding Party**”) shallwithin ten (10) days after written notice from the other Party (the “**Requesting Party**”) execute, acknowledge anddeliver to the Requesting Party an estoppel certificate in writing, in formsimilar to the then most current “Tenancy Statement” form published by theAmerican Industrial Real Estate Association, plus such additional information,confirmation and/or statements as may be reasonably requested by the RequestingParty.

 

16.2                           IfLessor desires to finance, refinance, or sell the Premises, or any partthereof, Lessee and all Guarantors shall deliver to any potential lender orpurchaser designated by Lessor such financial statements as may be reasonablyrequired by such lender or purchaser, including but not limited to Lessee’sfinancial statements for the past three (3) years. All such financialstatements shall be received by Lessor and such lender or purchaser inconfidence and shall be used only for the purposes herein set forth.

 

17.                                 **Definition of Lessor**. The term “Lessor” asused herein shall mean the owner or owners at the time in question of the feetitle to the Premises, or, if this is a sublease, of the Lessee’s interest inthe prior lease. In the event of a transfer of Lessor’s title or interest inthe Premises or this Lease. Lessor shall deliver to the transferee or assignee(in cash or by credit) any unused Security Deposit held by Lessor. Upon suchtransfer or assignment and delivery of the Security Deposit, as aforesaid, theprior Lessor shall be relieved of all liability with respect to the obligationsand/or covenants under this Lease thereafter to be performed by theLessor.  Subject to the foregoing, theobligations and/or covenants in this Lease to be performed by the Lessor shallbe binding only upon the Lessor  ashereinabove defined. Notwithstanding the above, the original Lessor under thisLease, and all subsequent holders of the Lessor’s interest in this Lease shallremain liable and responsible with regard to the potential duties andliabilities of Lessor pertaining to Hazardous Substances as outlined inParagraph 6 above.

 

18.                                 **Severability**. The invalidity of anyprovision of this Lease, as determined by a court of competent jurisdiction,shall in no way affect the validity of any other provision hereof.

 

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19.                                 **Days**. Unless otherwise specifically indicated to the contrary, the word “days”as used in this Lease shall mean and refer to calendar days.

 

20.                                 **Limitation on Liability**. Except with respect to Lessor’s fraud, gross negligence or willfulmisconduct, the obligations of Lessor under this Lease shall not constitutepersonal obligations of Lessor, the individual partners of Lessor or its ortheir individual partners, directors, officers or shareholders, and Lesseeshall look to the Premises, and to no other assets of Lessor, for thesatisfaction of any liability of Lessor with respect to this Lease, and shallnot seek recourse against the individual partners of Lessor, or its or theirindividual partners, directors, officers or shareholders, or any of theirpersonal assets for such satisfaction.

 

21.                                 **Time of Essence**. Time is of the essence with respect to the performance of allobligations to be performed or observed by the Parties under the Lease.

 

22.                                 **No Prior or Other Agreements**;  **Broker Disclaimer**. This Lease contains allagreements between the Parties with respect to any matter mentioned herein, andno other prior or contemporaneous agreement or understanding shall beeffective. Lessor and Lessee each represents and warrants to the Brokers thatit has made, and is relying solely upon, its own investigation as to thenature, quality, character and financial responsibility of the other Party tothis Lease and as to the nature, quality and character of the Premises. Brokershave no responsibility with respect thereto or with respect to any default orbreach hereof by either Party. The liability (including court costs andAttorney’s fees), of any Broker with respect to negotiation, execution,delivery or performance by either Lessor or Lessee under this Lease or anyamendment or modification hereto shall be limited to an amount up to the feereceived by such Broker pursuant to this Lease: provided, however, that theforegoing limitation on each Broker’s liability shall not be applicable to anygross negligence or willful misconduct of such Broker.

 

23.                                 **Notices**.

 

23.1  **NoticeRequirements**. All notices required or permitted by this Lease shallbe in writing and may be delivered in person (by hand or by courier) or may besent by regular, certified or registered mail or U.S. Postal Service ExpressMail, with postage prepaid, or by facsimile transmission, and shall be deemedsufficiently given if served in a manner specified in this Paragraph 23. Theaddresses noted adjacent to a Party’s signature on this Lease shall be thatParty’s address for delivery of mailing of notices. Either Party may by writtennotice to the other specify a different address for notice, except that uponLessee’s taking possession of the Premises, the Premises shall constituteLessee’s address for notice.  A copy ofall notices to Lessor shall be concurrently transmitted to such party orparties at such addresses as Lessor may from time to time hereafter designatein writing.

 

23.2  **Date ofNotice**. Any notice sent by registered or certified mail, returnreceipt requested, shall be deemed given on the date of delivery shown on thereceipt card, or if no delivery date is shown, the postmark thereon. If sent byregular mail the notice shall be deemed given forty-eight (48) hours after thesame is addressed as required herein and mailed with postage prepaid. Noticesdelivered by United States Express Mail or overnight courier that guaranteenext day delivery shall be deemed given twenty-four (24) hours after deliveryof the same to the Postal Service or courier. Notices transmitted by facsimiletransmission or similar means shall be deemed delivered upon telephoneconfirmation of receipt, provided a copy is also delivered via delivery ormail. If notice is received on a Saturday, Sunday or legal holiday, it shall bedeemed received on the next business day.

 

24.                                 **Waivers**. No waiver by Lessor of the Default orBreach of any term, covenant or condition hereof by Lessee, shall be deemed awaiver of any other term, covenant or condition hereof, or of any subsequentDefault or Breach by Lessee of the same or of any other term, covenant orcondition hereof. Lessor’s consent to, or approval of, any act shall not bedeemed to render unnecessary the obtaining of Lessor’s consent to, or approvalof, any subsequent or similar act by Lessee, or be construed as the basis of anestoppel to enforce the provision or provisions of this Lease requiring suchconsent. The acceptance of Rent by Lessor shall not be a waiver of any Defaultor Breach by Lessee. Any payment by Lessee may be accepted by Lessor on accountof moneys or damages due Lessor, notwithstanding any qualifying statements orconditions made by Lessee in connection therewith, which such statements and/orconditions shall be of no force or effect whatsoever unless specifically agreedto in writing by Lessor at or before the time of deposit of such payment.

 

25.                                 **Recording**. Either Lessor or Lessee shall, upon request of the other, execute,acknowledge and deliver to the other a short form memorandum of this Lease forrecording purposes. The Party requesting recordation shall be responsible forpayment of any fees applicable thereto.

 

26.                                 **No Right**** To Holdover.**  Lessee has no right to retain possession ofthe Premises or any part thereof beyond the expiration or termination of thisLease.  In the event that Lessee holdsover, then the Base Rent shall be increased to one hundred fifty percent (150%)of the Base Rent applicable during the month immediately preceding theexpiration or termination.  Nothingcontained herein shall be construed as consent by Lessor to any holding over byLessee.

 

27.                                 **Cumulative Remedies**.  Noremedy or election hereunder shall be deemed exclusive but shall, whereverpossible, be cumulative with all other remedies at law or in equity.

 

28.                                 **Covenants and Conditions**;  **Construction of Agreement.** All provisions of this Lease to be observedor performed by Lessee are both covenants and conditions.  In construing this Lease, all headings andtitles are for the convenience of the parties only and shall not be considereda part of this Lease.  Whenever requiredby the context, the singular shall include the plural and vice versa.  This Lease shall not be construed as ifprepared by one of the parties, but rather according to its fair meaning as awhole, as if both parties had prepared it.

 

29.                                 **Binding Effect**;  **Choice of Law.**  This Lease shall be binding upon the parties, their personalrepresentatives, successors and assigns and be governed by the laws of theState in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall beinitiated in the county in which the Premises are located.

 

30.                                 **Subordination;  Attornment; Non-Disturbance**.

 

30.1  **Subordination**.  This Lease and any Option granted herebyshall be subject and subordinate to any ground lease, mortgage, deed of trust,or other hypothecation or security device (collectively, “Security Device”),now or hereafter placed upon the Premises, to any and all advances made on thesecurity thereof, and to all renewals, modifications, and extensionsthereof.  Lessee agrees that the holdersof any such Security Devices shall have no liability or obligation to performany of the obligations of Lessor under this Lease.  Any Lender may elect to have this Lease and/or any Option grantedhereby superior to the lien of its Security Device by giving written noticethereof to Lessee, the Lease and such Options shall be deemed prior to suchSecurity Device, notwithstanding the relative dates of the documentation orrecordation thereof.

 

30.2  **Attornment**.  Subject to the non-disturbance provision ofParagraph 30.3, Lessee agrees to attorn to a Lender or any other party whoacquires ownership of the Premises by reason of a foreclosure of a SecurityDevice, and that in the event of such foreclosure, such new owner shall not:(i) be liable for any act or omission of any prior lessor or with respect toevents occurring prior to acquisition of ownership; (ii) be subject to anyoffsets or defenses which Lessee might have against any prior lessor, or (iii)be bound by prepayment of more than one (1) month’s rent.

 

30.3  **Non-Disturbance**.  With respect to Security Devices enteredinto by Lessor after the execution of this Lease, Lessee’s subordination of thisLease shall be subject to receiving a commercially reasonable non-disturbanceagreement (a “Non-Disturbance Agreement”) from the Lender which Non-DisturbanceAgreement provides that Lessee’s possession of the Premises, and this Lease,including any options to extend the term hereof, will not be disturbed so longas Lessee is not in Breach hereof and attorns to the record owner of thePremises.  Further, within sixty (60)days after the execution of this Lease, Lessor shall use its commerciallyreasonable efforts to obtain a Non-Disturbance Agreement from the holder of anypre-existing Security Device which is secured by the Premises.  In the event that Lessor is unable toprovide the Non-Disturbance Agreement within said sixty (60) days, then Lesseemay, at Lessee’s option, directly contact Lessor’s lender and attempt tonegotiate for the execution and delivery of a Non-Disturbance Agreement.

 

30.4  **Self-Executing**.  The agreements contained in this Paragraph30 shall be effective without the execution of any further documents; provided,however, that, upon written request from Lessor or a Lender in connection witha sale, financing or refinancing of the Premises, Lessee and Lessor shallexecute such further writings as may be reasonably required to separatelydocument any subordination, attornment and/or Non-Disturbance Agreementprovided for herein.

 

31.                                 **Attorneys’ Fees**.  Ifany Party brings an action or proceeding to enforce the terms hereof or declarerights hereunder, the Prevailing Party (as hereafter defined) in any suchproceeding, action, or appeal thereon, shall be entitled to reasonableattorneys’ fees.  Such fees may beawarded in the same suit or recovered in a separate suit, whether or not suchaction or proceeding is pursued to decision or

 

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judgment. The term,**“Prevailing Party”** shall include, withoutlimitation, a Party who substantially contains or defeats the relief sought, asthe case may be, whether by compromise, settlement, judgment, or theabandonment by the other Party of its claim or defense. The attorneys’ feesaward shall not be computed in accordance with any court fee schedule, butshall be such as to fully reimburse all attorneys’ fees reasonably incurred. Inaddition, Lessor shall be entitled to attorneys’ fees, costs and expensesincurred in the preparation and service of notices of Default and consultationsin connection therewith, whether or not a legal action is subsequentlycommenced in connection with such Default or resulting Breach.

 

32.                                 **Lessor’s Access**; **Showing Premises; Repairs.** Lessor and Lessor’s agents shallhave the right to enter the Premises at any time, in the case of an emergency,and otherwise at reasonable times for the purpose of showing the same toprospective purchasers, lenders, or lessees, and making such alterations,repairs, improvements or additions to the Premises as Lessor may deemnecessary. All such activities shall be without abatement of rent or liabilityto Lessee. Lessor may at any time place on the Premises any ordinary “For Sale”signs and Lessor may during the last six (6) months of the term hereof place onthe Premises any ordinary “For Lease” signs. Lessee may at any time place on orabout the Premises any ordinary “For Sublease” sign.

 

33.                                 **Auctions**. Lessee shall not conduct, norpermit to be conducted, any auction upon the Premises without Lessor’s priorwritten consent. Lessor shall not be obligated to exercise any standard ofreasonableness in determining whether to permit an auction.

 

34.                                 **Signs**. Except for ordinary “For Sublease”signs, Lessee shall not place any sign upon the Premises without Lessor’s priorwritten consent. All signs must comply with all Applicable Requirements.

 

35.                                 **Termination**; **Merger**.****Unlessspecifically stated otherwise in writing by Lessor, the voluntary or othersurrender of this Lease by Lessee, the mutual termination or cancellationhereof, or a termination hereof by Lessor for Breach by Lessee, shallautomatically terminate any sublease or lessor estate in the Premises;provided, however, that Lessor may elect to continue any one or all existingsubtenancies. Lessor’s failure within ten (10) days following any such event toelect to the contrary by written notice to the holder of any such lesserinterest, shall constitute Lessor’s election to have such event constitute thetermination of such interest.

 

36.                                 **Consents**. Except as otherwise providedherein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consentshall not be unreasonably withheld or delayed. Lessor’s actual reasonable costsand expenses (including but not limited to architects’, attorneys’, engineers’,and other consultants’ fees) incurred in the consideration of, or response to,a request by Lessee for any Lessor consent, including but not limited toconsents to an assignment, a subletting or the presence or use of a HazardousSubstance, shall be paid by Lessee upon receipt of an invoice and supportingdocumentation therefor. Lessor’s consent to any act, assignment or sublettingshall not constitute an acknowledgement that no Default or Breach by Lessee ofthis Lease exists, nor shall such consent be deemed a waiver of any thenexisting Default or Breach, except as may be otherwise specifically stated inwriting by Lessor at the time of such consent. The failure to specify hereinany particular condition to Lessor’s consent shall not preclude the impositionby Lessor at the time of consent of such further or other conditions as arethen reasonable with reference to the particular matter for which consent isbeing given. In the event that either Party disagrees with any determinationmade by the other hereunder and reasonably requests the reasons for suchdetermination, the determining party shall furnish its reasons in writing andin reasonable detail within ten (10) business days following such request.

 

37.                                 **Guarantor**.

 

37.1  **Execution**.The Guarantors, if any, shall each execute a guaranty in the form most recentlypublished by the American Industrial Real Estate Association, and each suchGuarantor shall have the same obligations as Lessee under this Lease.

 

37.2  **Default**.It shall constitute a Default of the Lessee if any Guarantor fails or refuses,upon request to provide: (a) evidence of the execution of the guaranty,including the authority of the party signing on Guarantor’s behalf to obligateGuarantor, and in the case of a corporate Guarantor, a certified copy of aresolution of its board of directors authorizing the making of such guaranty,(b) current financial statements, (c) a Tenancy Statement, or (d) writtenconfirmation that the guaranty is still in effect.

 

38.                                 **Quiet Possession**. Subject to payment byLessee of the Rent and performance of all of the covenants, conditions andprovisions on Lessee’s part to be observed and performed under this Lease,Lessee shall have quiet possession and quiet enjoyment of the Premises duringthe term hereof.

 

39.                                 **Options**.

 

39.1  **Definition**.**“Option”** shall mean: (a) the rightto extend the term of or renew this Lease or to extend or renew any lease thatLessee has on other property of Lessor; (b) the right of first refusal or firstoffer to lease either the Premises or other property of Lessor; (c) the rightto purchase or the right of first refusal to purchase the Premises or otherproperty of Lessor.

 

39.2  **OptionsPersonal****To Original Lessee**.Each Option granted to Lessee in this Lease is personal to the original Lessee,and cannot be assigned or exercised by anyone other than said original Lesseeand only while the original Lessee is in full possession of the Premises and,if requested by Lessor, with Lessee certifying that Lessee has no intention ofthereafter assigning of subletting.

 

39.3  **Multiple****Options**. In the event that Lesseehas any multiple Options to extend or renew this Lease, a later Option cannotbe exercised unless the prior Options have been validly exercised.

 

39.4  **Effect ofDefault on Options**.

 

(a)  Lessee shall have no right to exercise anOption: (i) during the period commencing with the giving of any notice ofDefault and continuing until said Default is cured, (ii) during the period oftime any Rent is unpaid (without regard to whether notice thereof is givenLessee), (iii) during the time Lessee is in Breach of this Lease, or (iv) in theevent that Lessee has been given three (3) or more notices of Default, whetheror not the Defaults are cured, during the twelve (12) month period immediatelypreceding the exercise of the Option.

 

(b)  The period of time within which an Optionmay be exercised shall not be extended or enlarged by reason of Lessee’sinability to exercise an Option because of the provisions of Paragraph 39.4(a).

 

(c)  An Option shall terminate and be of nofurther force or effect, notwithstanding Lessee’s due and timely exercise ofthe Option, if, after such exercise and prior to the commencement of theextended term, (i) Lessee fails to pay Rent for a period of thirty (30) daysafter such Rent becomes due (without any necessity of Lessor to give noticethereof), (ii) Lessor gives to Lessee three (3) or more notices of separateDefault during any twelve (12) month period, whether do not the Defaults arecured, or (iii) if Lessee commits a Breach of this Lease.

 

40.                                 **Multiple Buildings**. If the Premises are apart of a group of buildings controlled by Lessor, Lessee agrees that it willobserve all reasonable rules and regulations which Lessor may make from time totime for the management, safety, and care of said properties, including thecare and cleanliness of the grounds and including the parking, loading andunloading of vehicles, and that Lessee will pay its fair share of commonexpenses incurred in connection therewith.

 

41.                                 **Security Measures**. Lessee herebyacknowledges that the rental payable to Lessor hereunder does not include thecost of guard service or other security measures, and that Lessor shall have noobligation whatsoever to provide same. Lessee assumes all responsibility forthe protection of the Premises, Lessee, its agents and invitees and theirproperty from the acts of third parties.

 

42.                                 **Reservations**. Lessor reserves to itself theright, from time to time, to grant, without the consent or joinder of  Lessee, such easements, rights anddedications that Lessor deems necessary, and to cause the recordation of parcelmaps and restrictions, so long as such easements, rights, dedications, maps andrestrictions do not unreasonably interfere with the use of the Premises byLessee. Lessee agrees to sign any documents reasonably requested by Lessor toeffectuate any such easement rights, dedication, map or restrictions.

 

43.                                 **Performance Under Protest**. If at any time adispute shall arise as to any amount or sum of money to be paid by one Party tothe other under the provisions hereof, the Party against whom the obligation topay the money is asserted shall have the right to make payment “under protest”and such payment shall not be regarded as a voluntary payment and there shallsurvive the right on the part of said Party to institute suit for recovery ofsuch sum. If it shall be adjudged that there was no legal obligation on thepart of said Party to pay such sum or any part thereof, said Party shall beentitled to recover such sum or so much thereof as it was not legally requiredto pay.

 

44.                                 **Authority**. If either Party hereto is acorporation, trust, limited liability company, partnership, or similar entity,each individual executing this Lease on behalf of such entity represents andwarrants that he or she is duly authorized to execute and deliver this Lease onits behalf. Each party shall, within thirty (30) days after request, deliver tothe other party satisfactory evidence of such authority.

 

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45.                                 **Conflict**. Any conflict between the printedprovisions of this Lease and the typewritten or handwritten provisions shall becontrolled by the typewritten or handwritten provisions.

 

46.                                 **Offer**. Preparation of this Lease by eitherParty or their agent and submission of same to the other Party shall not bedeemed an offer to lease to the other Party. This Lease is not intended to bebinding until executed and delivered by all Parties hereto.

 

47.                                 **Amendments**. This Lease may be modified onlyin writing, signed by the Parties in interest at the time of the modification.As long as they do not materially change Lessee’s obligations hereunder, Lesseeagrees to make such reasonable non-monetary modifications to this Lease as maybe reasonably required by a Lender in connection with the obtaining of normalfinancing or refinancing of the Premises.

 

48.                                 **Multiple****Parties**.If more than one person or entity is named herein as either Lessor or Lessee,such multiple Parties shall have joint and several responsibility to complywith the terms of this Lease.

 

49.                                 **Mediation and Arbitration of Disputes**. AnAddendum requiring the Mediation and/or the Arbitration of all disputes betweenthe Parties and/or Brokers arising out of this Lease ý**is**o**is not** attached to this Lease.

 

LESSOR AND LESSEE HAVECAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINEDHEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARYCONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE ISEXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THEINTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.

 

ATTENTION:NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REALESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT,OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THEPARTIES ARE URGED TO:

 

1.                                       SEEKADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.

2.                                       RETAINAPPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THEPREMISES.  SAID INVESTIGATION SHOULDINCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES,THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOFAND OPERATING SYSTEMS AND THIS SUITABILITY OF THE PREMISES FOR LESSEE’S INTENDEDUSE.

 

WARNING:IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONSOF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE INWHICH THE PREMISES IS LOCATED.

 

The parties hereto haveexecuted this Lease at the place and on the dates specified above theirrespective signatures.

 
| Executed at:                                                         |                                |                              | Executed at:                                                         |                         |
|----------------------------------------------------------------------|-------------------------------------|-----------------------------------|----------------------------------------------------------------------|------------------------------|
| on:                                                                  |                                |                              | on:                                                                  |                         |
| By LESSOR:                                                           |                                | By LESSEE:                        |
| The Childs Family  Investment Partnership, L.P.                      |                                | The Immune Response  Corporation, |
| and The A.J. Gardner  Family Trust, U/T/A 3/5/81                     |                                | a Delaware Corporation            |
|                                                                 |                                |                              |
| By:                                                             | /s/ Roland A. Childs                |                              | By:                                                                  | /s/ Paula Baxter Atkins      |
| Name Printed:                                                        | Roland A. Childs                    |                              | Name Printed:                                                        | Dennis J. Carlo, Ph. D.      |
| Title:                                                               |                                |                              | Title:                                                               |                         | President Chief  Executive Officer |
|                                                                 |                                |                              |
| By:                                                                  | /s/ Allan J. Gardner                |                              | By:                                                                  | /s/ Dennis J. Carlo,  Ph. D. |
| Name Printed:                                                        | Allan J. Gardner                    |                              | Name Printed:                                                        |                         |
| Title:                                                               |                                |                              | Title:                                                               |                         |
| Address: c/o LANDCO –  432 South Bentley Avenue                 |                                | Address:                          |                                                                 |
|                                                                 | Los  Angeles, California 90049-3513 |                              |                                                                 |
| Telephone: (310)                                                     | 476-3209                            |                              | Telephone:  (      )                   |                         |
| Facsimile: (310)                                                     | 476-0111                            |                              | Facsimile:(       )               |                         |
| Federal ID No.                                                       |                                |                              | Federal ID No.                                                       |
| BROKER:                                                              |                                | BROKER:                           |
|                                                                 |                                |                              |
| Executed at                                                          |                                |                              | Executed at                                                          |                         |
| on:                                                                  |                                |                              | on:                                                                  |                         |
|                                                                 |                                |                              |
| By:                                                                  |                                |                              | By:                                                                  |                         |
| Name Printed:                                                        |                                |                              | Name Printed:                                                        |                         |
| Title:                                                               |                                |                              | Title                                                                |                         |
| Address:                                                             |                                |                              | Address:                                                             |                         |
|                                                                 |                                |                              |
| Telephone:  (         ) |                                |                              | Telephone:  (         ) |                         |
| Facsimile:  (        )       |                                |                              | Facsimile:  (         ) |                         |
| Federal ID No.                                                       |                                |                              | Federal ID No.                                                       |                         |
|                                                                      |                                     |                                   |                                                                      |                              |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

NOTE:            These forms are oftenmodified to meet changing requirements of law and industry needs. Always writeor call to make sure you are utilizing the most current form: AMERICANINDUSTRIAL REAL ESTATE ASSOCIATION, 700 So. Flower Street, Suite 600 LosAngeles, California 90017. (213) 687-8777. Fax No. (213) 687-8616

 

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**ADDENDUM TOLEASE**

 

ThisAddendum to Lease (“Addendum”) is made by and between The Childs FamilyPartnership, L.P. and The A. J. Gardner Family Trust u/t/a 3/5/81, generalpartners doing business as “Darwin Court” but holding title astenants-in-common (collectively, “Lessor”) and The Immune Response Corporation,a Delaware corporation (“Lessee”) and shall supplement that certain StandardIndustrial/Commercial Single-Tenant Lease Net between Lessor and Lessee datedas of December 15, 1997 and Exhibits thereto (collectively, the “Lease”).  Where appropriate the numbering used in theAddendum shall refer to the same numbered paragraphs in the Lease.  Notwithstanding anything contained in theLease to the contrary, the provisions set forth below will be deemed to be partof the Lease and if there is any inconsistency between this Addendum and theLease, the terms of this Addendum shall supersede and control.  All references in the Lease and in thisAddendum shall be construed to mean the Lease and the Exhibits thereto, asamended and supplemented by this Addendum. All defined terms used in this Addendum, unless specifically defined inthis Addendum, shall have the same meaning as such terms have in theLease.  References to “Paragraph” shallrefer to the pre-printed Lease form and references to “Section” shall refer tothis Addendum.

 

1.1           **Parties.** The phrase “, general partners doingbusiness as “Darwin Court” but holding title as tenants-in-common” is insertedafter the names of the entities comprising Lessor.

 

1.2           **Premises.** Lessor at its expense shall construct aBuilding Shell of approximately 31,200 square feet. The phrase “Building Shell”means the Building improvements and related site improvements as shown on thosecertain plans and specifications (collectively, “Lessor’s Plans”) prepared by SmithConsulting Architects (“Lessor’s Architect”), dated on the various sheetsbetween April 3, 1997 and April 18, 1997 an entire set of which hasbeen delivered to Lessee by Lessor’s contractor, Riggins Construction &Management, Inc. as listed on the attached Schedule 1.2. Lessee has theright to expand the second floor office space at its cost in which case thetotal leasable area will be correspondingly increased. Lessor shall not amendor modify Lessor’s Plans in any material respect without the prior consent ofLessee.

 

Lessor represents and warrants that no part of theBuilding Shell will contain asbestos, asbestos-containing material or otherHazardous Substances (collectively “ACHM”). If Lessor does employ ACHM, the ACHM will be promptly removed in amanner required by the appropriate government agency and in accordance withApplicable Requirements.

 

Lessor will be fully responsible for making allalterations and repairs to the Premises and the Building Shell at its costrequired to remove any and all ACHM discovered at any time to have existed inthe Premises or Building Shell as of the Start Date, or resulting from ornecessitated by the failure by Lessor and/or Lessor’s contractor to comply withApplicable Requirements regarding ACHM, or from Lessor’s and/or Lessor’scontractor’s utilization of Hazardous Substances as defined by ApplicableRequirements at the time the Lease is executed, in violation of such ApplicableRequirements or which could pose a health risk to occupants of the Premises.

 

1.3           **Term.** The Commencement Date shall be the earliestof the completion of Lessee’s completion of Lessee’s Tenant Improvements (asdefined in Addendum Section 50.1 below) or April 1, 1998. Lessor willconfirm in writing the exact Commencement Date and Lease expiration date bothof which will be acknowledged in writing by Lessee upon Lessee’s confirmationof the accuracy thereof. For purposes of this Section 1.3, completion ofLessee’s Tenant Improvements shall be deemed to have occurred on the date on which(i) Lessee’s architect, with no undue delay, issues a certificate to Lesseestating that all Tenant Improvements have, in all material respects, beencompleted in accordance with drawings approved by Lessee therefor and areoperable, (ii) all Utility Installations which are identified as part ofLessee’s Tenant Improvements are operational at the Premises, (iii) adequateaccess to the Premises for Lessee’s uses under the Lease has been completed,and (iv) the government agency having appropriate jurisdiction thereover issuesa “right to occupy” designation (or such similar designation) in the inspectionrecord for Lessee’s Tenant Improvements.

 

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1.4           **Early Possession.** Early Possession will start when the Lessor has completed the BuildingShell in accordance with Lessor’s Plans and shall end at the earliest ofLessee’s completion of the Tenant Improvements as described in Section 1.3above or April 1, 1998. In the event of the imposition of a watermoratorium by local governmental agencies with authority thereover such thatestablishment of exterior landscaping to be installed by Lessor would beadversely affected, Lessor may delay completion of such landscaping withoutaffecting the Start Date otherwise applicable, provided such landscaping iscompleted as soon as practicable thereafter, and in all events not later thanthe Commencement Date.

 

1.5           **Base Rent. **Base Rent is calculated on the basis of $.59 per square foot of thePremises per month on a “triple net” basis. The Base Rent shall be subject toadjustment during the ninety (90) day period following the Commencement Date by$.59/ft. if Lessor’s Architect determines the Building is more or less than31,200 sq. ft. based on Building “as-builts” filed with the City of Carlsbad.  All square footage measurements shall befrom the roof “drip line” and in accordance with the Building Owners andManagers Association International standards for industrial/commercial projects(the “BOMA Standard”).  Lessor’sArchitect shall complete such calculations within said 90-day period atLessor’s expense. Lessee shall have the right, exercisable within ninety (90)days after the later of (a) the date Lessor gives Lessee written notice of thefinal calculation of the Premises and the Building as contemplated above, or(b) the date Lessee commences business operations from the Premises (or, whenappropriate, any additional space leased by Lessee pursuant to the Lease), toremeasure the Premises and the Building within such ninety (90) day period.  In the event that subsequent remeasurementof the Premises and/or the Building by Lessee, within the time period specifiedabove, indicates that the square footage measurement prepared by Lessorproduces a square footage number in excess of or lower than the square footagenumber which would have resulted had the BOMA Standard been properly utilized,any payments due to Lessor from Lessee based upon the amount of square feetcontained in the Premises shall be proportionally, retroactively andprospectively reduced or increased, as appropriate, to reflect the actualnumber of square feet as properly remeasured under the BOMA Standard.  If Lessor disagrees with Lessee’sremeasurement and if a dispute occurs regarding the final accuracy of themeasurement of the Premises and the Building in accordance with the BOMAStandard, such dispute will be resolved pursuant to binding arbitrationpursuant to this Addendum.  OperatingExpenses (defined below) other than the Administration Fee (defined below) shallcommence on the Start Date.  Base Rent andthe Administration Fee shall not commence prior to the Commencement Date; provided,however, to the extent Lessee commences business operations on, andutilizes therefor, any portion of the Premises from and after the Start Date,Lessee shall be responsible for payment of Base Rent and the Administration Feeprorated with respect to the portion of the Premises so used.  In no event shall use of the Premises forLessee’s construction activities prior to the Commencement Date be deemed toconstitute a use of the Premises for Lessee’s business operations.

 

1.8            **Agreed Use.** Lessee will use the Premises for generalmedical, office use and biopharmaceutical use, research and development,product production, manufacture and distribution and any other like use inkeeping with the class and character of the building and permitted uses withinthe Carlsbad Research Center.

 

1.9            **Insuring Party.** Lessee may opt to be the Insuring Party for all leasehold improvementswhich are for biopharmaceutical uses as opposed to industrial/office uses uponthirty (30) days prior written notice to Lessor.  Lessee shall also have the option of insuring the Building Shellin the event Lessee can obtain the insurance coverages required under the Leasewith respect thereto at a premium cost of at least ten percent (10%) less thanthe premium cost obtained by Lessor provided Lessee’s carriers for suchinsurance are substantially comparable in all material respects toLessor’s.  Notwithstanding the foregoing,Lessor may opt to remain the Insuring Party and retain its insurance carrier ifit pays the amounts in excess of such ten percent (10%) premium differential atits sole cost and expense.

 

2.2           **Conditio**n. Lessor’s delivery of the Premises shall include the Building Shell fullycompleted in accordance with the Plans and ready for Lessee’s construction ofits Tenant Improvements. There shall be no requirement that service contractsunder Paragraph 7.1(b) of the Lease be obtained by Lessee as a condition toLessor’s warranty regarding the HVAC as the HVAC systems are the responsibilityof Lessee as part of the Tenant Improvements

 

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(definedbelow). Written notices to be given to Lessor regarding non-compliance with thewarranties given under Paragraph 2.2 of the Lease shall be given withreasonable promptness by Lessee following discovery of the condition givingrise to such notice and the period during which such notices may be given ismodified to one (1) year as to all systems and elements of the Building whichare part of the Building Shell, however, Lessee shall have the benefit of anylonger warranty periods otherwise accruing to Lessor from contractors andsuppliers providing services or materials to Lessor as part of the Building Shellconstruction. The acknowledgements set forth in Paragraph 2.4 of the Leaseshall not affect this Section.

 

2.3            **Compliance.** Lessor shall be responsible for thecompliance of the Building Shell with all Applicable Requirements in effect asof the Start Date throughout the Term of the Lease and shall effect suchcompliance promptly following notice from any party, including Lessee, thereofat any time during the Term or any extensions thereof.  Lessee shall not be required to comply withthe six month notification period stated in Paragraph 2.3 with respect to suchnon-compliance.  All costs incurred byLessor to comply with Applicable Requirements in effect on the Start Date shallbe born by Lessor solely and shall not be part of the Base Rent or otherwise payableby Lessee. The acknowledgements set forth in Paragraph 2.4 of the Lease shallnot affect this Section.

 

2.4            **Acknowledgements.**  Allreferences to Brokers are hereby deleted from Paragraph 2.4.

 

2.5            **Lessee as PriorOwner/Occupant.**  Paragraph 2.5 of the Lease is herebydeleted.

 

3.3            **Delay in Possessio**n. In the event possession of the Premises isnot delivered by Lessor to Lessee by April 1, 1998, Lessee shall have theright to terminate the Lease.

 

3.4            **Lessee Compliance.** The last sentence of Paragraph 3.4 is herebydeleted.

 

5.             **Security Deposit.**  Inthe event Lessor utilizes the Security Deposit as permitted under the Lease,Lessee shall have thirty (30) days after request therefore to replenish theamount of the Security Deposit with the required amount under the Lease.  Lessee shall have no obligation to increasethe amount of the Security Deposit, for any reason, so long as the L/C (asdefined below) is in place.  Any applicationby Lessor of the Security Deposit shall cure the default to which such portionof the Security Deposit is applied, to the extent thereof.  As additional security for monetarydefaults, Lessee shall deliver to Lessor no later than the Start Date anirrevocable Letter of Credit for $600,000 from Union Bank of California orother comparable financial institution having substantially the same net worth,substantially in the form attached as Schedule 5 (excluding any termswhich are found to be commercially unreasonable by the issuer thereof), orotherwise on terms and conditions mutually acceptable to Lessor, Lessee andsuch issuer (“L/C”).  If Lessee fails totimely deliver the L/C, and such failure continues for a period of thirty (30)days following the Start Date, Lessor shall have the right to immediatelyterminate the Lease by giving Lessee written notice of such election, and suchtermination shall be effective immediately upon Lessor’s delivery of suchnotice. Lessee shall also have the option of maintaining the L/C amount as acash deposit with Lessor as contemplated under Section 5.2(i) below.

 

5.1           Lessor shall not resort to the L/C withoutfirst exhausting the proceeds of the monetary portion of the Security Deposit.Fifteen (15) days before each anniversary of the issuance of the L/C, Lesseeshall obtain a commitment of renewal and if the L/C is not renewed within ten(10) days, the failure to renew will permit Lessor to draw down the L/C in fulland maintain it in lieu of the L/C as contemplated under Section 5.2(i)below.

 

5.2           Notwithstanding any other provision of the Leaseand so long as no uncured material Breach exists, Lessor agrees to release theL/C under any one of the following independent conditions:

 

(i)            Lessee substitutes cash with Lessor whichLessor agrees to keep in interest bearing accounts in the name of Lessor withLessee entitled to an offset against rental obligations for the amount ofinterest income earned (the financial institutions with which such deposit, orportions thereof, is maintained, and the rate of interest accruing thereon,shall be reasonably acceptable to Lessee), or

 

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(ii)           Lessee reports net income of at least$50,000,000 for three years in a row, or 

 

(iii)          Lessee’s audited Balance Sheet indicates aNet Worth of at least $100,000,000.

 

6.2           **Hazardous Substances. **The word “potentially” is hereby deleted from Paragraph 6.2(a)(i).  Paragraph 6.2(b) is hereby modified toprovide that such notice from Lessee to Lessor regarding the presence ofHazardous Substances with respect to the Premises shall only be required ifsuch presence of Hazardous Substances is in violation of ApplicableRequirements. Paragraph 6.2(c) is modified to require that Lessee shall not beresponsible for any Hazardous Substances brought on to the Premises by Lessor,its employees, agents or representatives. Paragraph 6.2(d) is modified to provide that Lessee shall not berequired to indemnify Lessor or its employees, agents or representativesagainst such party’s own actions, negligence or omissions. Without limiting Lessee’sobligations under this section regarding reporting requirements withrespect to Hazardous Substances, Lessee shall, within ten (10) business daysfollowing Lessee’s first use of a Hazardous Substance required to be reportedthereon, complete and deliver to applicable government authorities a HazardousMaterials Questionnaire in the form as set forth in Schedule 6.2 annexedto this Addendum, with a copy to Lessor.

 

6.3           **Lessee’s****ComplianceWith Applicable Requirements. **Lesseeshall be entitled to satisfy its requirements regarding evidencing itscompliance with Applicable Requirements by providing Lessor with copies ofpermits filed with applicable government authorities by Lessee on an annualbasis other than building permits, copies of which shall be provided to Lessorby Lessee as soon as practicable following Lessee’s receipt of same.  Lessee shall only be required to comply withreasonable recommendations of Lessor’s engineers and/or consultants.

 

7.1           **Lessee’s****Obligations. **Lessor shall assign all warrantiesand guarantees in connection with the Building Shell and the Premises for workcompleted by or on behalf of Lessor, to Lessee and shall extend all reasonableassistance to Lessee in the enforcement thereof. Lessor shall also provide alist of all subcontractors and vendors supplying services or materials inconnection with the construction and completion of the Building Shell and thePremises to Lessee promptly following the Commencement Date.

 

7.3           **Alterations; TradeFixtures. **Lessee is granted the right to makenon-structural alterations and improvements to the Premises costing less than$100,000 per year without any consent required of Lessor, as long as (a) Lesseepays for the entire cost of such alterations and improvements, (b) Lessee agreesto remove said alterations and improvements upon the expiration or terminationof the Lease, if requested by Lessor, and (c) such alterations and improvementswill not adversely affect the structural integrity of the Premises and/or theBuilding.  Any time Lessee proposes tomake such alterations and/or improvements for which Lessor has a right ofapproval hereunder, Lessee shall provide Lessor with ten (10) business days’notice of such proposed alterations and/or improvements, together with theplans and specifications therefor and a list of all vendors and subcontractorssupplying services or materials with respect to such alterations, and Lessorshall grant its approval within such ten (10) day period, unless Lessorreasonably determines that such alterations and/or improvements would adverselyaffect the structural integrity of the Premises and/or the Building or wouldadversely affect the exterior appearance of the Building.  Lessee shall not be required to provide anycompletion bonds with respect to alterations installed by Lessee. Lessee shallprovide “as-builts” for all alterations.

 

Notwithstandinganything to the contrary in the Lease, all articles of personal property andall Trade Fixtures, machinery and equipment, furniture and movable partitionsowned by Lessee or installed by or on behalf of Lessee in the Premises shallremain the property of Lessee, and may be removed by Lessee at any time duringthe Term of the Lease as long as Lessee is not in Breach hereunder with anyapplicable cure period having expired. If Lessee fails to remove all of its effects from the Premises upon theexpiration or earlier termination of the Lease for any cause whatsoever, Lessormay, at its option, any time after five (5) days’ written notice to Lessee ofits intention to remove such effects, remove same in any manner that Lessorshall choose and store such effects without liability to Lessee for lossthereof, and Lessee shall pay Lessor upon demand any and all reasonableexpenses incurred in connection with such removal, including court costs,attorneys’ fees, and reasonable storage charges

 

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incurredwhile such effects were in Lessor’s possession. The term “Trade Fixtures” shallmean Lessee’s machinery and equipment that has been installed withoutpenetrating the roof membrane and can be removed without doing material damageto the Premises (unless repaired by Lessee) whether or not the item is pluggedinto an electrical outlet or hot wired.

 

7.4(b)      **Removal. **Lessee shall receive not less than onehundred twenty (120) days prior written notice from Lessor to removealterations required by Lessor to be removed due to the expiration of the LeaseTerm, such removal to be completed within said 120-day period or as soon aspracticable thereafter with due and diligent effort.  Such 120-day notice from Lessor may be given at any time duringthe period commencing on the date which is six (6) months prior to theexpiration of the Term of the Lease and ending on the date which is six (6)months after the expiration of the Term of the Lease.

 

8.1**           ****Payment for Insurance. **To the extent Lessor is the Insuring Party, payments for premiums shallbe made by Lessee to Lessor annually not less than fifteen (15) business daysfollowing Lessee’s receipt of notification from Lessor of such premium amountbased on the actual due date for Lessor’s annual payment of such premiums.

 

8.3(a)      **Property Insurance-Building and Improvements. **Notwithstanding language to the contrary, deductibles for policies ofinsurance required to be maintained hereunder may be $25,000 per occurrence.

 

8.3(b)      **Rental Value.**  Rental Value insurancerequired to be maintained under the Lease shall not extend beyond the date ofcompletion of repairs or replacements with respect to any such loss giving riseto a claim thereunder, or beyond the date of any termination of the Lease.

 

8.3(c)      **Adjacent Premises. **Paragraph 8.3(c) ishereby deleted.

 

8.4            **Lessee’s****Property/BusinessInterruption Insurance. **Paragraph8.4 is hereby deleted from the Lease.

 

8.5            **Insurance Policies. **Lessor shall not do or permit to be done anything which invalidatesrequired insurance policies under the Lease.

 

8.8           **Exemption of Lessor fromLiability. **Lessor shall not be exempted from liabilityfor Lessor’s (or anyone acting through or on behalf of Lessor) intentionalmisconduct.

 

9.2            **Partial Damage - InsuredLoss.** The reference to atotal cost of repair of $10,000 shall be replaced with a reference to$100,000,  Lessee shall have the rightto effect any repairs to the Premises which Lessor elects not to effect. To theextent any amounts contributed by Lessee to repair damage or destruction are inexcess of the actual cost thereof, or cost savings are realized with respectthereto, the full amount of such excess proceeds or cost savings shall be paidto Lessee.

 

9.4           **Total Destruction. **Lessee shall not be liable for payment of any rent under the Leaseafter the date of Lease termination (subject to any abatement occurring fromthe date of Premises Total Destruction).

 

9.5           **Damage Near End of****Term. **Lessee shall be entitled to areciprocal right to terminate the Lease in the event of such damage.  Lessee is also granted the followingadditional rights to terminate.

 

A.            Notwithstanding anything in the Lease to thecontrary, and except as expressly set forth in Subsection (B) below, inthe event that Lessee is notified or becomes aware of the occurrence of thefollowing:

 

(i)            damage or destruction to the Premises, and/orthe Building or any part thereof so as to interfere substantially with Lessee’suse of the Premises, Premises parking, and/or the Building;

 

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(ii)           a taking by eminent domain or exercise of other governmental authorityof the Premises, and/or the Building or any part thereof so as to interferesubstantially with Lessee’s use of the Premises, Premises parking, and/or theBuilding; or

 

(iii)          any discovery of Hazardous Substances in, on or around the Premises,the Building and/or the Building site not placed in, on or around the Premises,the Building and/or the site by Lessee, that, considering the nature and amountof the substances involved, interferes with Lessee’s use of the Premises orwhich presents a health risk to any occupants of the Premises (each of theitems set forth in provision (A)(i), (ii) and (iii) being referred to herein asa “Trigger Event”); and

 

Lesseecannot, within nine (9) months (“Non-Use Period”) of the occurrence of theTrigger Event, be given reasonable use of, and access to, a fully repaired,restored, safe and healthful Premises, Premises parking and Building (exceptfor minor “punch-list” items which will be repaired promptly thereafter), andthe utilities and services pertaining to the Premises, the Premises parking andthe Building, all suitable for the efficient conduct of Lessee’s businesstherefrom, then Lessee may elect to exercise a right to terminate the Leaseupon thirty (30) days’ written notice sent to Lessor upon the expiration of theNon-Use Period.

 

B.            In the event of any Trigger Event occurringduring the last year of the Lease Term or, if an applicable renewal option hasbeen exercised, during the last year of any renewal term, should the Non-UsePeriod continue for ninety (90) days, Lessee may elect to exercise a right toterminate the Lease upon thirty (30) days’ written notice sent to Lessor at anytime following the expiration of the Non-Use Period.

 

9.6           **Abatement of Rent; Lessee’sRemedies.**  Paragraph 9.6 of the Lease is hereby deletedand replaced with the following:

 

In the event that Lessee is prevented from using, and does not use, thePremises or any portion thereof, for five (5) consecutive business days or ten(10) business days in any twelve (12) month period (the “Eligibility Period”)as a result of (a) any damage or destruction to the Premises, the Premisesparking and/or the Building (other than due to Premises Total Destruction whenabatement of Lessee’s rent shall commence as of the date of such destruction,(b) any repair, maintenance or alteration performed by Lessor after theCommencement Date and required or permitted by the Lease, which substantiallyinterferes with Lessee’s use of the Premises, the Premises parking and/or theBuilding, (c) any failure by Lessor to provide Lessee with services or accessto the Premises, the Premises parking and/or the Building, (d) because of aneminent domain proceeding, or (e) because of the presence of HazardousSubstances in, on or around the Premises, the Building or the Site which couldpose a health risk to occupants of the Premises, then Lessee’s Base Rent shallbe abated or reduced, as the case may be, after expiration of the EligibilityPeriod for such time that Lessee continues to be so prevented from using, anddoes not use, the Premises or a portion thereof, in the proportion that therentable area of the portion of the Premises that Lessee is prevented fromusing, and does not use, bears to the total rentable area of the Premises.  However, in the event that any portion ofthe Premises comprising seventy-five percent (75%) of the rentable area of thePremises is rendered unusable as described hereinabove, then for such timeafter expiration of the Eligibility Period during which such portion of thePremises is so rendered unusable, the Base Rent for the entire Premises shallbe abated; provided, however, if Lessee reoccupies and conducts its businessfrom any portion of the Premises during such period, the rent allocable to suchreoccupied portion, based on the proportion that the rentable area of suchreoccupied portion of the Premises bears to the total rentable area of thePremises, shall be payable by Lessee from the date such business operationscommence. If Lessee’s right to abatement occurs because of an eminent domaintaking and/or because of damage or destruction to the Premises, the Premisesparking, the Building, or Lessee’s property, provided rental value insuranceproceeds are available to

 

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Lessor therefor, Lessee’s abatement period shall continue until Lesseehas been given sufficient time and sufficient access to the Premises, thePremises parking facility and/or the Building, to rebuild such portion it isrequired to rebuild, to install its property, furniture, fixtures, and equipmentto the extent the same shall have been removed and/or damaged as a result ofsuch damage or destruction and/or eminent domain taking and to move in over one(1) weekend. To the extent Lessee is entitled to abatement without regard tothe Eligibility Period, because of an event covered by Lease Articles 9 or 14,then the Eligibility Period shall not be applicable.

 

10.1          **Definition of “Real PropertyTaxes”.**  Real Property Taxes shall not include anytax based on any net income of Lessor with respect to the Building for state orfederal income tax purposes and shall not include any tax penalties incurred asa result of Lessor’s negligence or failure to file any tax or informationalreturns when due.

 

10.2          **Payment of Taxes. **Paragraph 10.2 is hereby deleted.  Lessee shall pay all Real Property Taxes to Lessor who shall paysuch amounts directly to the taxing authorities prior to delinquencythereof.  Such payment shall be madeonly at such time as payment of Real Property Taxes is actually due to thetaxing authorities to prevent imposition of penalties for delinquent payment.Real Property Taxes shall also include reimbursement to Lessor for itsprepayment of amounts assessed against the Premises under City of CarlsbadCommunity Facilities District #1, provided such reimbursement is made in suchamounts and at such times as such assessment would have been payable by Lessorin the ordinary course absent such prepayment.

 

10.3          **Joint Assessment.** Paragraph 10.3 of the Lease is herebydeleted.

 

10.4          **Personal PropertyTaxes. **All of Paragraph 10.4 of the Lease except forthe first sentence thereof is hereby deleted.

 

12.1         **Assignment and Subletting.**Lessor’s Consent required.  All of Paragraph 12.1 of the Lease is herebydeleted and replaced with the following:

 

Lessee shall not voluntarily or by operation of law assign, transfer,mortgage or encumber (collectively, “assign or assignment”) or sublet all orany part of Lessee’s interest in this Lease or in the Premises without Lessor’sprior written consent. Notwithstanding the foregoing, Lessee may assign theLease or may sublet the Premises or any part thereof without Lessor’s consentto any subsidiary, parent, affiliate or control corporation or to anycorporation which acquires all of Lessee’s assets or with which it may mergeproviding Lessee remains liable and the use does not substantially change.

 

Notwithstanding any other provision in Paragraph 12 of the Lease,Lessor’s consent to a sublease shall not be required and Lessor shall not havethe right to adjust the rental so long as all of the following conditions areand remain satisfied: (a) the sublease is for a portion of the Premisesconstituting less than fifty percent (50%) of the total rentable square feet ofthe Premises; (b) Lessee continues to occupy the remaining portions of thePremises; (c) the sublessee does not employ on the Premises HazardousSubstances in violation of Applicable Requirements and its use is not otherwisein violation of the Lease; and (d) Lessee is not otherwise in Breach of thisLease.

 

For any other assignment or subletting, Lessor agrees it will notunreasonably withhold, condition or delay its consent to any such assignment orsubletting.  Rental amounts in excess ofthe Base Rent payable to Lessor by Lessee under the Lease (the “Excess Rental”)on account of such assignment or subletting will be shared between the Lessorand Lessee. Lessor shall be entitled to that portion of the Excess Rentalarising by virtue of the value of the Premises as a warehouse (offices,distribution of electrical, bathrooms etc.) and Lessee shall be entitled tothat portion of the Excess Rental arising by virtue of the improvementsinstalled by Lessee having a biopharmaceutical use and character as opposed toan industrial/office use and character; provided, however, ExcessRental shall be calculated net of all expenses incurred by Lessee in anyassignment or subleasing of the Premises, including, without limitation, anyamounts paid to Lessor by Lessee during periods where the assigned or subleasedportion of the Premises was vacant; any improvement allowance or other

 

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economicconcession paid by Lessee to any sublessee or assignee; broker’s commissions;attorneys’ fees; lease take-over payments; costs of advertising the space forsublease or assignment; and any other costs actually paid in assigning orsubletting the Premises.  Lessor shallnot be paid any Excess Rental amounts until Lessee has recovered all such costsincurred in connection with such subleasing or assignment.

 

12.2(e)    The amount which Lessor may receive for consideration of any requestfor assignment or subletting shall not exceed $500 in any instance.

 

12.3(c)    Paragraph 12.3(c) is hereby modified to provide that for any action bya sublessee with respect to the Premises that would trigger a requirement forLessor’s consent under the Lease if such action were taken by Lessee under theLease, such subtenant shall be required to seek Lessor’s consent to suchaction.

 

12.3(e)    The last sentence of Paragraph 12.3(e) is hereby deleted.

 

13.1(b)    Paragraph 13.1(b) is hereby deleted and replaced with the following:

 

The failure to pay any installment of base rent, or any other monetarypayment required to be made by Lessee under the Lease, when due and payablehereunder, upon the date when payment is due, such failure continuing for aperiod of five (5) business days after written notice of such failure; or

 

13.1(c)    Paragraph 13.1(c) is hereby modified to replace the reference to “ten(10) days” with a reference to “thirty (30) days.”

 

13.l(f)      Paragraph 13.1(f) is hereby deleted and replaced with thefollowing:   “All notices to be givenpursuant to this Section 13.1 shall be in addition to, and not in lieu of,the notice requirements of California Code of Civil ProcedureSection 1161.”

 

13.1(g)    Paragraph 13.1(g) is hereby deleted from the Lease.

 

13.4         **Late Charges.**The late charge of 10% is deleted andreplaced with a late charge of six percent (6%).

 

13.5         **Interest. **The reference to 4% for purposes of calculating Interest on the Leaseis deleted and replaced with two percent (2%).

 

15.           **Brokers’ Fees.** Lessor shall be responsible for payment of all fees owed to the Brokerswith respect to the Lease.

 

16.2         Lessee shall have no obligation to deliver any financial statements toLessor so long as Lessee is required to report to the United States Securitiesand Exchange Commission with respect to its financial status and such filingsare publicly available.

 

26.           **No****Right toHoldover. **The amount of 150%as an increase in the Base Rent for a holdover by Lessee shall not apply ifLessee has notified Lessor not less than three (3) months prior to theexpiration of the Term of the Lease that Lessee intends to hold over in thePremises, subject to Lessor’s written consent, not to be unreasonably withheld,conditioned or delayed, in which event such holdover by Lessee shall be on allthe terms and provisions of the Lease, at a Base Rent adjusted pursuant toSection 55 below. The duration of such holdover shall be specified byLessee at the time notice of such holdover is given to Lessor and shall notexceed three (3) months.

 

30.2         **Attornment. **As a condition to any requirement of attornment hereunder, thebeneficiary of a Security Device shall have elected that this Lease shall beprior and superior to such Security Device prior to any event of foreclosurethereunder.

 

31.           **Attorneys’ Fees. **The provisions of Paragraph 31 of the Lease shall apply to arbitration.

 

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32.           **Lessor’s Access.** Lessor shall only enter the Premises to the extent reasonably requiredby Lessor and not “as Lessor may deem necessary.”

 

37.           **Guarantor. **Paragraph 37 is hereby deleted from the Lease.

 

39.2         **Options Personal to OriginalLessee.**  Notwithstanding the provisions of Paragraph39.2, Lessee may assign its Options under the Lease to any permitted assigneeunder the Lease provided Lessee remains liable for full performance of theLease by such assignee.

 

40.           **Multiple Buildings. **Paragraph 40 is hereby deleted from the Lease.

 

50.           **Tenant Improvements. **Lessee at its sole cost shall be responsible for the TenantImprovements including space plans, building plans, and for all costs ofconstruction including, but not by way of limitation, permit fees for itsTenant Improvements.  Officeimprovements shall be constructed of a quality comparable to the qualityexisting at 5935 Darwin Court or otherwise reasonably acceptable to Lessor andconsist of a minimum of 5,100 square feet on the second floor and 5,100 squarefeet directly below on the first floor. A minimum of 5,100 square feet of suchoffice improvements shall be completed within twelve (12) months of theCommencement Date, with the remainder to be completed not later than eighteen(18) months from the Commencement Date. Lessee’s plans for construction of the Tenant Improvements (“Lessee’sPlans”) and its general contractor for such construction shall be subject tothe Lessor’s prior approval to be given not later than ten (10) business daysafter submittal to Lessor, with Lessor’s approval not to be unreasonablywithheld, conditioned or delayed.  Inthe event Lessor disapproves Lessee’s Plans, Lessor shall specify the reasonsfor such disapproval and Lessee shall have ten (10) business days to revise andre-submit Lessee’s Plans for Lessor’s approval.  Lessor shall respond thereto within five (5) business days and ifthe revised Lessee’s Plans are again disapproved by Lessor, the foregoingprocedure shall be re-instituted until Lessor’s approval is obtained. Lesseewarrants that the Tenant Improvements will comply with all ApplicableRequirements in effect at the time of such construction.  Lessee shall construct as part of the TenantImprovements, screening of the HVAC units on the roof of the Building inaccordance with the requirements of the covenants, conditions and restrictions(“CC&Rs”) applicable to the project of which the Building is a part.  Lessee acknowledges that Lessor has notifiedthose individuals responsible for administering the CC&Rs that suchscreening will be completed in accordance with the attachedSchedule 50.  Unless Lessee issuccessful in obtaining such individual’s consent to a deviation from thescreening requirements set forth in the attached Schedule 50, Lessee shallcomplete such screening to the satisfaction of such individuals in accordancewith the attached Schedule 50.

 

50.1         The phrase “Tenant Improvements” means all interior and exterior(including HVAC systems) improvements which will not be part of the BuildingShell constructed by Lessor and shall include but not by way of limitation (a)partitions, walls, doors, (b) all surface finishes, including wall coverings,paint, floor coverings, suspended ceilings and other similar items, (c) ductwork, heat pumps, vents filters, diffusers, terminal boxes and accessories forcompletion of heating, ventilation and air conditioning systems within thePremises, (d) electrical distribution systems (including panels, subpanels,wires and outlets), lighting fixtures, outlets, switches and other electricalwork to be installed in the Premises, (e) plumbing lines, fixtures andaccessories, and all fire and life safety control systems such as fire wallsand fire alarms (including piping, wiring and accessories) to be located in thePremises , (f) improvements required for compliance with Title 24, and othergovernmental agencies, and (g) all the construction specific for Lessee’sbiopharmaceutical needs, to the extent the foregoing are included in the Plans.

 

Lessee represents and warrants that no part of its Tenant Improvementswill contain ACHM in violation of Applicable Requirements in effect at the timeof such construction.  If Lessee doesemploy ACHM, the ACHM will be promptly removed in a manner required by theappropriate government agency in accordance with Applicable Requirements.

 

Lessee shall be fullyresponsible for making all alterations and repairs to the Tenant Improvementsat its cost to remove any and all ACHM resulting from or necessitated by thefailure of Lessee and/or Lessee’s contractor to comply with ApplicableRequirements

 

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regarding ACHM’s in effect at the time of such construction, or fromLessee’s and/or Lessee’s contractor’s utilization of Hazardous Substances asdefined by Applicable Requirements, in violation of such ApplicableRequirements or which could pose a health risk to occupants of the Premises.

 

51            **Operating Expenses. **In addition to payment of the Base Rent, Lessee shall, fromand after the Start Date, be responsible for payment of all “OperatingExpenses.”  The term “OperatingExpenses” means all direct expenses and costs attributable to Lessee’s use,occupancy and operation of the Premises which are customary in a “triple net”lease.  Other than payments of RealProperty Taxes, the Administration Fee and premiums for insurance policiesmaintained by Lessor as the Insuring Party, all Operating Expenses shall bepaid directly by Lessee to the appropriate third party provider of services,utilities or items of operating expense prior to delinquency.  Lessor shall promptly forward to Lessee anyand all invoices received by Lessor with respect to Operating Expenses, and inall events in sufficient time to permit timely payment thereof by Lessee.  Operating Expenses shall also include a feepayable to Lessor (the “Administration Fee”) for the due and punctual performanceof all administrative responsibilities of Lessor under the Lease. TheAdministration Fee shall be payable concurrently with Base Rent in an amountequal to two percent (2%) of the monthly Base Rent then payable with respect tothe Premises.  In the event of anyabatement of rent permitted Lessee pursuant to the provisions of the Lease, theAdministration Fee shall also be abated in the same proportion as the BaseRent.

 

52.           **Services.**  At the time of completion of the BuildingShell, Lessor and its contractors shall, at no cost to Lessee, provide“as-builts” for the Building Shell and shall conduct a thorough inspection ofthe Building’s systems in order to certify that the equipment and systems arein full working order.  At the sametime, Lessor will supply a written certification of the results of itsmechanical contractor’s inspection. Lessee will be given all certifications that Lessor receives from itscontractors, subcontractors and vendors for construction of the Building Shell.

 

53.           **Non-Disturbance. **Lessor warrants and representsthat in the event Lessor introduces any lien or mortgage holder to thePremises, then Lessor will obtain nondisturbance agreements in a formreasonably acceptable to Lessee from any and all of such mortgage or lien holders,ground lessors, etc., which agreements shall provide that as long as Lessee isnot in default of the Lease beyond any applicable grace period, Lessee’soccupancy of the Premises shall not be disturbed, its rights under the Leasewill continue to be recognized and all of the Lessor’s future obligations underthe Lease will continue to be performed.

 

54.           **RealEstate Licenses. **Californialaw requires that Lessee be informed that Roland A. Childs, a general partnerof the Childs Family Investment Partnership, L.P. and Allan J. Gardner, atrustee of the A. J. Gardner Family Trust are each State of California RealEstate Licensees.

 

55.           **RentAdjustments.**The monthly rent for each month of the adjustmentperiods specified below shall be increased using the cost of living adjustment.

 

(a)            On the month of thefirst anniversary of the Commencement Date and each twelve months thereafter,the monthly rent payable under paragraph 1.5 (“Base Rent”) of the Lease shallbe adjusted by the change, if any, from the Base Month specified below, in theConsumer Price Index of the Bureau of Labor Statistics of the US Department ofLabor for CPI U (All Urban Consumers), for Los Angeles-Anaheim-Riverside, AllItems (1982- 1984=100), herein referred to as “CPI.”

 

(b)           The monthly rentpayable in accordance with subparagraph (a) of this Section 55 shall becalculated as follows:  the Base Rentset forth in Paragraph 1.5 of the Lease, shall be multiplied by a fraction thenumerator of which shall be the CPI of the calendar month 2 (two) months priorto the month specified in (a) during which the adjustment is to take effect,and the denominator of which shall be the CPI of the calendar month which istwo (2) months prior to the month containing the Commencement Date. The sum socalculated shall constitute the new monthly rent hereunder, but in no event,shall any such new monthly rent be less than the rent payable for the monthimmediately preceding the date for rent adjustment nor shall it be less thanthree (3) percent or more than six (6) percent during the

 

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first five (5) years unless the CPI exceeds twelve (12) percent inwhich case the overage over twelve (12) percent will be added to the maximumsix (6) percent as additional rent. Thereafter, during the remainder of theinitial term and any extension if one or both of the two options to extend areexercised, the Base Rent will be adjusted utilizing the same CPI in the samemanner with an annual minimum of three (3) percent increase and a maximum seven(7) percent increase unless the CPI exceeds thirteen (13) percent in which casethe overage over thirteen (13) percent will be added to the maximum seven (7)percent as additional rent.

 

56.           **Options to Extend. **Lessor hereby grants to Lessee two (2) options (each, an“Option”) to extend the Term of this Lease for an additional sixty (60) monthperiod for each Option, commencing when the prior term expires upon each andall of the following terms and conditions:

 

(i)            Lessee gives to Lessor and Lessor actuallyreceives (which receipt may be independently confirmed by Lessee) on a datewhich is prior to the date that the option period would commence (if exercised)by at least six (6) and not more than nine (9) months, a written notice inaccordance with the Lease of the exercise of the options to extend this Leasefor said additional terms, time being of the essence. If said notification ofthe exercise of said Options are not so given and received, the Options shallautomatically expire; said Options may only be exercised consecutively;

 

(ii)           The provisions of Paragraph 39, includingthe provision relating to default of Lessee set forth in Paragraph 39.4 of thisLease are conditions of the Options;

 

(iii)          All of the terms and conditions of this Leaseexcept where specifically modified by these Options shall apply;

 

(iv)          The monthly Base Rent for each month of theapplicable Option period shall be calculated as follows, using the methodsindicated below:

 

**Market Rental Value Adjustments (MRV)**

 

(a)           On the 10th anniversary of the CommencementDate if the first Option to extend is timely exercised and again five (5) yearslater if the second Option to extend is timely exercised, Base Rent shall beadjusted to the “Market Rental Value” of the Premises as follows:

 

1.             Four months prior tothe Market Rental Value (MRV) Adjustment Dates described above, Lessor andLessee shall meet to establish an agreed upon new MRV for comparable space inthe Carlsbad Research Center for the specified term. In determining MRV, thecomparable space will be limited to an industrial building with offices,electrical distribution and other typical warehouse space such as but notlimited to bath rooms but specifically excluding the peculiar attributesrequired by a biopharmaceutical firm such as refrigeration, and requiredplumbing and piping.  If agreementcannot be reached, then:

 

(i)            Lessor and Lessee shall immediately appointa mutually acceptable appraiser or broker to establish the new MRV within thenext thirty (30) days. Any associated costs will be split equally between theparties, or

 

(ii)           Both Lessor and Lessee shall eachimmediately select and pay the appraiser or broker of their choice to establisha MRV within the next thirty (30) days. If, for any reason, either one of theappraisals is not completed within the next thirty (30) days, as stipulated,then the appraisal that is completed at that time shall automatically becomethe new MRV.  If both appraisals are completedand the two appraisers/brokers cannot agree on a reasonable average MRV thenthey shall immediately select a third mutually acceptable appraiser/broker toestablish a third MRV within the next thirty (30) days.  The average of the two appraisals closest invalue shall then become the new MRV. The costs of the third appraisal will be split equally between theparties.

 

2.              If Lessee does notadd additional mezzanine to the existing 5,100 sq. ft., the minimum MRV will beOne and Five One-Hundredths Dollars ($1.05) per ft, for the

 

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eleventh (11th) year and One and Twenty-One One-Hundredths Dollars($1.21) for the sixteenth (16th) year. If Lessee adds additional mezzanineduring the Term of the Lease, the minimum MRV will be computed in the samemanner as the stated minimums were determined, the example of which is shown onthe attached Schedule 56. In any event, the new MRV shall not be less thanthe Base Rent payable for the month immediately preceding the date for rentadjustment.

 

(b)           Upon the establishment of each new MRV:

 

1.              The monthly BaseRent so calculated for each Term as specified in subsection (a) above willbecome the new “Base Rent” for the purpose of calculating any further CPIadjustments as specified in Section 55 above; and

 

2.              the first month ofeach Market Rental Value term as specified in subsection (a) above shallbecome the new “Base Month” for the purpose of calculating any further Cost ofLiving Adjustments as specified in Paragraph 55.

 

57.           **Arbitration. **ThisAddendum provision contains the sole and exclusive method, means and procedureto resolve any and all disputes or disagreements, including whether anyparticular matter constitutes, or with the passage of time would constitute, aDefault or Breach under the Lease.  Theparties hereby irrevocably waive any and all rights to the contrary and shallat all times conduct themselves in strict, full, complete and timely accordancewith the provisions of this Addendum provision.  Any and all attempts to circumvent the provisions of thisAddendum provision shall be absolutely null and void and of no force or effectwhatsoever.  As to any matter submittedto arbitration to determine whether it would, with the passage of time,constitute a Default or Breach, such passage of time shall not commence to rununtil any such affirmative determination, so long as it is simultaneouslydetermined that the challenge of such matter as a potential Default or Breachwas made in good faith, except with respect to the payment of money.  With respect to the payment of money, suchpassage of time shall not commence to run only if the party which is obligatedto make the payment does in fact make the payment to the other party. Suchpayment can be made “under protest,” which shall occur when such payment isaccompanied by a good-faith notice stating why the party has elected to make apayment under protest.  ThisSection shall not prevent Lessor’s recourse to the L/C or to cash held inlieu thereof for Breaches under the Lease, however, if Lessee disputes theexistence of such Breach any draw down of the L/C or cash held in lieu thereof,as the case may be, shall be deemed made “under protest” pending resolution ofsuch dispute hereunder.  Such protestwill be deemed waived unless the subject matter identified in the protest issubmitted to arbitration as set forth in the following:

 

(a)           Arbitration Panel.  Within ninety (90) days after delivery ofwritten notice (“Notice of Dispute”) of the existence and nature of any disputegiven by any party to the other party, and unless otherwise provided herein inany specific instance, the parties shall each: (i) appoint one (1) lawyeractively engaged in the licensed and full-time practice of law, specializing inreal estate, in the County of San Diego for a continuous period immediatelypreceding the date of delivery (“Dispute Date”) of the Notice of Dispute of notless than ten (10) years, but who has at no time ever represented or acted onbehalf of any of the parties, and (ii) deliver written notice of the identityof such lawyer and a copy of his or her written acceptance of such appointmentand acknowledgment of and agreement to be bound by the time constraints andother provisions of this Addendum provision (“Acceptance”) to the other partieshereto. The party who selects the lawyer may not consult with such lawyer,directly or indirectly, to determine the lawyer’s position on the issue whichis the subject of the dispute.  In theevent that any party fails to so act, such arbitrator shall be appointed pursuantto the same procedure that is followed when agreement cannot be reached as tothe third arbitrator.  Within ten (10)days after such appointment and notice, such lawyers shall appoint a thirdlawyer (together with the first two (2) lawyers, “Arbitration Panel”) of thesame qualification and background and shall deliver written notice of theidentity of such lawyer and a copy of his or her written Acceptance of suchappointment to each of the parties.  Inthe event that agreement cannot be reached on the appointment of a third lawyerwithin such period, such appointment and notification shall be made as quicklyas possible by any court of competent jurisdiction, by any licensing authority,agency or organization having jurisdiction over such lawyers, by anyprofessional association of lawyers in existence for not less than ten (10)years at the time of such dispute or disagreement and the geographical

 

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membership boundaries of which extend to the County of San Diego or byany arbitration association or organization in existence for not less than ten(10) years at the time of such dispute or disagreement and the geographicalboundaries of which extend to the County of San Diego, as determined by the partygiving such Notice of Dispute and simultaneously confirmed in writing deliveredby such party to the other party.  Anysuch court, authority, agency, association or organization shall be entitledeither to directly select such third lawyer or to designate in writing,delivered to each of the parties, an individual who shall do so.  In the event of any subsequent vacancies orinabilities to perform among the Arbitration Panel, the lawyer or lawyersinvolved shall be replaced in accordance with the provisions of this Addendumprovision as if such replacement was an initial appointment to be made underthis Addendum provision within the time constraints set forth in this Addendumprovision, measured from the date of notice of such vacancy or inability, to theperson or persons required to make such appointment, with all the attendantconsequences of failure to act timely if such appointed person is a partyhereto.

 

(b)            Duty.  Consistent with the provisions of thisAddendum provision, the members of the Arbitration Panel shall utilize theirutmost skill and shall apply themselves diligently so as to hear and decide, bymajority vote, the outcome and resolution of any dispute or disagreementsubmitted to the Arbitration Panel as promptly as possible, but in any event onor before the expiration of thirty (30) days after the appointment of themembers of the Arbitration Panel.  Noneof the members of the Arbitration Panel shall have any liability whatsoever forany acts or omissions performed or omitted in good faith pursuant to theprovisions of this Addendum provision.

 

(c)            Authority.  The Arbitration Panel shall (i) enforce andinterpret the rights and obligations set forth in the Lease to the extent notprohibited by law, (ii) fix and establish any and all rules as it shallconsider appropriate in its sole and absolute discretion to govern theproceedings before it, including any and all rules of discovery, procedureand/or evidence, and (iii) make and issue any and all orders, final orotherwise, and any and all awards, as a court of competent jurisdiction sittingat law or in equity could make and issue, and as it shall consider appropriatein its sole and absolute discretion, including the awarding of monetary damages(but shall not award consequential damages to either party and shall not awardpunitive damages except in situations involving knowing fraud or egregiousconduct condoned by, or performed by, the person who, in essence, occupies theposition which is the equivalent of the chief executive officer of the partyagainst whom damages are to be awarded), the awarding of reasonable attorneys’fees and costs to the prevailing party as determined by the Arbitration Paneland the issuance of injunctive relief. If the party against whom the award isissued complies with the award, within the time period established by theArbitration Panel, then no Default or Breach will be deemed to have occurred,unless the Default or Breach pertained to the non-payment of money by Lessee orLessor, and Lessee or Lessor failed to make such payment under protest.

 

(d)            Appeal. Thedecision of the Arbitration Panel shall be final and binding, may be confirmedand entered by any court of competent jurisdiction at the request of any partyand may not be appealed to any court of competent jurisdiction or otherwiseexcept upon a claim of fraud on the part of the Arbitration Panel, or on thebasis of a mistake as to the applicable law. The Arbitration Panel shall retain jurisdiction over any dispute untilits award has been implemented, and judgment on any such award may be enteredin any court having appropriate jurisdiction.

 

(e)            Compensation.Each member of the Arbitration Panel (i) shall be compensated for any and allservices rendered under this Addendum provision at a rate of compensation notto exceed the sum of (a) Two Hundred Fifty Dollars ($250.00) per hour and (b)the sum of Ten Dollars ($10.00) per hour multiplied by the number of full yearsof the expired Term under the Lease, plus reimbursement for any and allexpenses incurred in connection with the rendering of such services, payable infull promptly upon conclusion of the proceedings before the Arbitration Panel.Such compensation and reimbursement shall be borne by the nonprevailing partyas determined by the Arbitration Panel in its sole and absolute discretion

 

13

----

 

58.           **Access;****Parking. **Lessee shall have full and uninterrupted access to thePremises twenty-four (24) hours per day, seven (7) days per week, every day ofthe year. All parking allocated to the Building under Applicable Requirementsshall be for Lessee’s sole and exclusive use at no additional cost or rentduring the entire Lease Term or any extensions thereof.  Lessee’s parking privileges shall beavailable to Lessee twenty-four (24) hours per day, seven (7) days per week,every day of the year.

 

59.           **Entry byLessor.**Notwithstanding anything to the contrary set forth in theLease to the contrary, Lessor and/or those acting on Lessor’s behalf may onlyenter the Premises upon not less than two (2) business days prior notice toLessee acknowledged by Lessee, except in cases of emergency, in which case onlytelephone notice shall be required. In any event, any such entry shall beaccomplished as expeditiously as reasonably possible, in a manner so as tocause as little interference to Lessee as reasonably possible and in accordancewith Lessee’s security requirements. Lessor shall be accompanied by an employee of Lessee at all times.Lessee may designate certain areas of the Premises as “Secured Areas” shouldLessee require such areas for the purpose of securing certain valuable properlyor confidential information or operations. Lessor may not enter such Secured Areas except in the case of emergencyor in the event of a permitted Lessor inspection, in which case Lessor shallprovide Lessee with five (5) business days’ prior written notice of thespecific date and time of such Lessor inspection and be accompanied by anemployee of Lessee on all such inspections.

 

60.           **WhenPayment Is Due. **Other thanpayment of Base Rent, whenever in the Lease a payment is required to be made byone party to the other, but a specific date for payment is not set forth or aspecific number of days within which payment is to be made is not set forth, orthe words “immediately,” “promptly” and/or “on demand,” or their equivalent,are used to specify when such payment is due, then such payment shall be duethirty (30) days after the party which is entitled to such payment sendswritten notice to the other party demanding such payment.

 

61.**           Lessor BankruptcyProceeding.**In the event that the obligations of Lessor under the Lease arenot performed during the pendency of a bankruptcy or insolvency proceedinginvolving the Lessor as the debtor, or following the rejection of this Lease inaccordance with Section 365 of the United States Bankruptcy Code, thennotwithstanding any provision of this Lease to the contrary, Lessee shall havethe right to set off against rents next due and owing under this Lease (a) anyand all damages caused by such non-performance of Lessor’s obligations underthe Lease by Lessor, debtor-in-possession, or the bankruptcy trustee, and (b)any and all damages caused by the non-performance of Lessor’s obligations underthe Lease following any rejection of the Lease in accordance withSection 365 of the United States Bankruptcy Code.

 

62.           **Consent/Dutyto Act Reasonably. **Regardlessof any reference to the words “sole” or “absolute” (but except for matterswhich (a) would have an adverse effect on the structural integrity of theBuilding Shell, (b) could have an adverse effect on the Building HVAC systems,or (c) could have an effect on the exterior appearance of the Building,whereupon in each such case Lessor’s duty is to act in good faith and incompliance with the Lease), any time the consent of Lessor or Lessee isrequired, such consent shall not be unreasonably withheld, conditioned ordelayed. Whenever the Lease grants Lessor or Lessee the right to take action,exercise discretion, establish rules and regulations or make allocations orother determinations (other than decisions to exercise expansion, contraction,cancellation, termination or renewal options), Lessor and Lessee shall actreasonably and in good faith and take no action which might result in thefrustration of the reasonable expectations of a sophisticated lessee or lessorconcerning the benefits to be enjoyed under the Lease.

 

63.           **Covenantsand Agreements. **The failureof Lessor or Lessee to insist in any instance on the strict keeping, observanceor performance of any covenant or agreement contained in the Lease, or theexercise of any election contained in the Lease, shall not be construed as awaiver or relinquishment for the future of such covenant or agreement, but thesame shall continue and remain in full force and effect.

 

64.           **Days. **All references in the Lease to“days” involving less than “ten (10) days” shall mean business days, and allreferences to “notice” shall mean written notice.

 

14

----

 

65.           **Joint andSeveral Obligations. **Theobligations of Lessor under the Lease shall be joint and several obligations ofthe entities comprising Lessor.

 

66.           **Definitionof Applicable Requirements. **Theuse of the term “Applicable Requirements” in the Lease and this Addendum shallmean those laws, statutes, codes, ordinances, regulations, covenants andrestrictions applicable to the matter to which such Applicable Requirements arestated to apply in the Lease and this Addendum.

 

15

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SCHEDULE 1.2

 

LIST OFLESSOR’S PLANS

 

[ATTACHED]

 

----

 
| **RIGGINS**                       |
|-----------------------------------|
| **CONSTRUCTION &**            |
| **MANAGEMENT, INC.**              | **TRANSMITTAL** |
|                              |   |
|                              |   |
| TO:                               | IMMUNE RESPONSE CORPORATION |   | FROM: |  RIGGINS CONSTRUCTION &  MANAGEMENT, INC. |
|                              |   |   |   |   |
|                              | 5935 DARWIN COURT |   |   | 1816 N. OLD TUSTIN AVE., STE. A |
|                              |   |   |   |   |
|                              | CARLSBAD CA 92008 |   |   | SANTA ANA, CA 92705 |
|                              |   |   |   |   |
| DATE:  December 2, 1997 |   | JOB/EST.   #:  155 | RECORD NUMBER:  2249 |
|                              |   |   |   |   |
| ATTN:  PAULA ATKINS          |   | SENT BY: TOM RIGGINS |
|                                   |  |  |  |  |  |

 

REFERENCE:  Job #:  155 CARLSBAD RESEARCH CENTER LOT #58 TILT-UP

 

WE ARE SENDING HEREWITH 1 COPY EACH OF:

 

At your request, enclosed please find a full set of ConstructionDrawing sheets as follows:

 

Title sheets T1-T2, A5-A7 and A9 all dated 3/21/97 and sheets A1-A4,delta one version, dated 4/30/97 and AB, A10-A13 also delta one version, dated4/30/97, all as prepared by Smith Consulting Architects, and Civil sheets C1& C5. both undated, C3 and C4 both dated 2-20-97, and C2 and C6, delta oneversion, dated 4/30/97 as prepared by Spear & Associates, structural sheetsS1.0, S1.1, S1.2, S1.3, S3.0, S3.1, S4.0, S4.1, S4.2, S4.3 and S6.1, all deltaone versions, dated 4/30/97 and sheets S2.0, S3.2, S5.0 and S8.0, all delta 2versions, all dated 5/30/97 as prepared by Flores Consulting Group andLandscape plans L1 and L4-L6 all dated 4/2/97 and L2, L3 and L7, all delta oneversions, dated 5/9/97 as prepared by Steven Ahles Landscape Architect,Plumbing sheets P1-P2, both dated 3/13/97 as prepared by Custom Plumbing. Inc.,Electrical sheets E1 dated 4-18-97, E2 dated 1-31-97, both delta four versions,dated 6/13/97 as prepared by Shepherd Electric.

 

 
| PLEASE RETURN 0 COPY TO THIS OFFICE. |
|--------------------------------------|
|                                 |
| THESE ARE:  (checked below)     |
| ý FOR YOUR INFORMATION          | o APPROVED WITH  CORRECTIONS AS NOTED | o COPY PREVIOUSLY  FAXED |
| ý AS REQUESTED                  | o APPROVED FOR  FABRICATION AS NOTED | ý COPY HAND DELIVERED |
| o FOR APPROVAL OR  CORRECTIONS       | o FOR USE ON JOB | ý PLEASE REVIEW |
| o APPROVED                           | o FOR YOUR FILES |   |

 

 
| BY:    | /s/ Tom B. Riggins               |   |
|--------|----------------------------------|--------|
|   | Tom B. Riggins - Project Manager |   |

 

 

1616 N. OLD TUSTIN AVE. - SUITE A - SANTAANA, CA 92705 - PH (714) 953-6333 - FAX (714) 543-7601

 

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SCHEDULE 5

 

FORM OF LETTER OF CREDIT

 

[ATTACHED]

 

----

 

**EXHIBIT FOR STANDBY L/C APPLICATION:  THE IMMUNE RESPONSE CORPORATION**

**(SUPPORTING LEASE)**

 

**Irrevocable Standby Letter of Credit No.          **

 

SOUTHERN CALIFORNIA

INTERNATIONAL OPERATIONS CENTER

1980 [Saturn] Street,  VO1-519

Monterey Park,  California91755-7417

Attention:  Standby Letter ofCredit Section

 

Date:
| BENEFICIARY                                    | APPLICANT                        |
|------------------------------------------------|----------------------------------|
| Darwin Court, a California general partnership | The Immune Response Corporation, |
| [Insert Address]                               | a Delaware corporation           |
| [City, State, Zip Code]                        | [Insert Address]                 |
|                                           | [City, State, Zip Code]          |

 
| Currency          |   | USD                                                                                                                                                                                                                                                           |
|-------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Amount            |   | 600,000.00 [SIX HUNDRED THOUSAND AND NO/100 U.S.  DOLLARS]                                                                                                                                                                                               |
| Available by      |   | Payment at this office.                                                                                                                                                                                                                                       |
| Final Expiry Date |   |                 ,  1998 or any automatically extended date or any alternative date as herein set  forth at the close of business of this office in Monterey Park, California. |

 

 

Ladies/Gentlemen:

We hereby issue our Irrevocable Standby Letter of Credit (“Letter ofCredit”) in your favor.  This Letter ofCredit is available by sight payment with ourselves only against presentationat this office of the following documentation:

1.                                       Your sight draftdrawn on us marked:  “Drawn under UnionBank of California, N.A., Irrevocable Standby Letter of Credit No.              ,dated                            ,       .”

 

2.                                       A statementpurportedly signed by an authorized representative of Darwin Court, aCalifornia general partnership stating:

“The undersigned being a duly authorized representative or officer ofDarwin Court, a California general partnership hereby represents and warrantsthat the amount of the accompanying draft represents and covers moneys owing toDarwin Court, a California general partnership, (the “Lessor”) by The ImmuneResponse Corporation, a Delaware corporation (the “Lessee”) as a result ofdefault by Lessee with respect to any provision of that certain Lease datedOctober 27, 1997 (the “Lease”), by and between the Lessor and the Lessee.”

 

Partial Drawings are permitted.

This Letter of Credit shall be deemed automatically extended without anamendment for a one year period beginning on the present expiration date hereof           , 1998, andupon each anniversary of such date, unless at least fifteen (15) days prior toany such expiration date we

 
| EXHIBIT TO APPLICATION. |
|-------------------------|
|                    |
|                    | CLIENT’S SIGNATURE: |   |
|                    | DATE:  |   |
|                         |  |  |  |

 

1

----

 

have sent you written notice by courierservice or overnight mail (or by teletransmission through the Advising Bank)that we elect not to permit this Letter of Credit to be so extended beyond itsthen current expiration date.

 

The Letter of Credit shall finally expire on                     ,           if it has notpreviously expired in accordance with the preceding sentence.

 

This date this Letter of Credit expires inaccordance with the above provision is the “Final Expiry Date”. Upon theoccurrence of the Final Expiry Date this Letter of Credit shall fully andfinally expire and no presentations made under this Letter of Credit after suchdate will be honored.

 

This Letter of Credit sets forth in full theterms of our undertaking, and such terms shall not be modified, amended oramplified by any document, instrument or agreement referred to in this Letterof Credit, in which this Letter of Credit is referred to or to which thisLetter of Credit relates.

 

Except as stated herein, this Letter ofCredit is not subject to any condition or qualification and is our individualobligation which is in no way contingent upon reimbursement.

 

SPECIAL INSTRUCTIONS:

The original of this Letter of Credit must bepresented together with the above documents in order to endorse the amount ofeach drawing on the reverse side.

 

All banking charges under this Letter ofCredit, except as noted herein, are for the account of the Applicant.

 

An interbank transfer fee of USD20.00 will bededucted from the proceeds if settlement is to be remitted to an account at anotherbank.

 

We hereby agree with you that drafts drawnunder and in compliance with the terms of this credit will be duly honored uponpresentation and delivery to Union Bank of California, N.A., at the addressabove. Documents are to be sent in one lot by courier service, overnight mailor hand delivery.

 

This Letter of Credit is subject to the“Uniform Customs and Practice for Documentary Credits (1993 Revision)” -International Chamber of Commerce Publication No. 500.

 

 
| EXHIBIT TO APPLICATION. |
|-------------------------|
|                    |
|                    | CLIENT’S SIGNATURE: |   |
|                    | DATE:  |   |
|                         |  |  |  |

 

2

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SCHEDULE 6.2

 

FORM OF HAZARDOUS MATERIALSQUESTIONAIRE

 

[ATTACHED]

 

----

 
| [SEAL] | County of San Diego                    |   |
|--------|----------------------------------------|--------|
|   | Building Inspection Department         |   |
|   |                                   |   |
|   | **Hazardous  Materials Questionnaire** |   |

 

 
| Business Name   | Contact Person |   | Telephone |          |
|-----------------|----------------|--------|-----------|---------------|
|            |           |   |      |          |
| Mailing Address | City           | State  | Zip       | Plan File ### |
|            |           |   |      |          |
| Site Address    | City           | State  | Zip       | Permit ###    |

 

PART 1: COUNTY OF SAN DIEGO FIRE DEPARTMENT -HAZARDOUS MATERIALS MANAGEMENT DIVISION: OCCUPANCY CLASSIFIC

 

Indicate, by circling the Item, whether yourbusiness will use, process or store any of the following hazardous materials.If any of the Items are that applicant must contact the FireDepartment-Hazardous Materials Management Division, 525 B Street, Suite 705,San Diego, CA 92101. Telephone (618) 533-4400 prior to plan submittal.

 

1.                         Explosives or Blasting Agents

2.                         Compressed Gases

3.                         Flammable or Combustible Liquids

4.                         Flammable Solids

5.                         Organic Peroxides

6.                         Oxidizers

7.                         Pytophorics

8.                         Unstable (reactive) Materials

9.                         Water-Reactives

10.                   Cryogenics

11.                   Highly Toxic or Toxic Materials

12.                   Radioactives

13.                   Corrosives

14.                   Other Health Hazards

 

PART II: COUNTY OF SAN DIEGO HEALTHDEPARTMENT - HAZARDOUS MATERIALS MANAGEMENT DIVISION; CONTINGENCY PLAN F

 

If the answer to any of the question is Yes,applicant must contact the County of San Diego Health Department Hazardous Materials Management 1255 Imperial Avenue, 3rd floor, San Diego, CA 92138, Telephone (619)338-2222 prior to the Issuance of a building permit.

 

(FEE MAY BE REQUIRED)
|   | YES |   | NO |   |                                                                                                                                                  |
|--------|-----|--------|----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.     | o   |   | o  |   | Is your business type listed  on the reverse side of this form?                                                                                       |
| 2.     | o   |   | o  |   | Will your business dispose of  Hazardous Substances or Medical Wastes in any amount?                                                                  |
| 3.     | o   |   | o  |   | Will your business store, or  handle Hazardous Substances in quantities equal to or greater than 55  gallons, 500 pounds or 200 cubic compressed gas? |
| 4.     | o   |   | o  |   | Will your business use an  existing, or Install an underground storage tank?                                                                          |
| 5.     | o   |   | o  |   | Will your business store, use  or handle carcinogens, reproductive toxins, or Acutely Hazardous Materials?                                            |
| 6.     | o   |   | o  |   | Will your business be located  within 1,000 feet from the outer boundary of a school and handle Acutely  Hazardous Materials?                         |

 

 

PART III:SAN DIEGO AIR POLLUTION CONTROL DISTRICT

 

If the answer to any of the questions is yes,applicant must contact the Air Pollution Control District, 9150 ChesapeakeDrive, San Diego, CA Telephone (519) 694-3307 prior to the issuance of abuilding permit.

 
|   | YES |   | NO |   |                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|-----|--------|----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.     | o   |   | o  |   | Will the intended occupant  install or use any of the equipment listed on the Listing of Air Pollution  Control District Permit Categories reverse side of this form.                                                                                                                                                                                                                                 |
| 2.     | o   |   | o  |   | (ANSWER ONLY IF THE ANSWER TO  QUESTION 1 IS YES.) Will the subject facility be located within 1,000 feet of  the outer bound school (K thru 12) as listed in the current Directory of  School and Community College Districts, published by the San Diego County C  Education and the current California Private School Directory, compiled in  accordance with provisions of Education Code Section |

 

 
|                                                                                                                                                              |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Briefly Describe Nature of the  intended Business Activity:                                                                                                       |
|                                                                                                                                                              |
|                                                                                                                                                              |
| Name of Owner or Authorized  Agent:                                                                                                                               |
|                                                                                                                                                              |
|                                                                                                                                                              |
| Signature of Owner or  Authorized Agent: I declare under penalty of perjury that to the best of my  knowledge and belief the responses made herein ? and correct. |
|                                                                                                                                                              |   Date: |   |   |
|                                                                                                                                                              |
| DO NOT WRITE BELOW THIS LINE                                                                                                                                      |
|                                                                                                                                                              |
| FIRE DEPARTMENT OCCUPANCY  CLASSIFICATION:                                                                                                                        |
|                                                                                                                                                              |
| BY:                                                                                                                                                               |   |   Date: |   |   |
|                                                                                                                                                                   |  |  |  |  |

 
| **EXEMPT  FROM PERMIT REQUIREMENTS** |   | **APPROVED  FOR BUILDING PERMIT BUT NOT FOR OCCUPANCY** |   | **APPROVED  FOR OCCUPANCY** |   |
|--------------------------------------|--------|---------------------------------------------------------|--------|-----------------------------|--------|
| **COUNTY  HMMD**                     |   | **APCD**                                                |   | **COUNTY  HMMD**            |   | **APCD** |   | **COUNTY  HMMD** |   | **APCD** |   |
|                                 |   |                                                    |   |                        |   |   |   |   |   |   |   |
|                                 |   |                                                    |   |                        |   |   |   |   |   |   |   |
|                                 |   |                                                    |   |                        |   |   |   |   |   |   |   |
|                                 |   |                                                    |   |                        |   |   |   |   |   |   |   |
|                                 |   |                                                    |   |                        |   |   |   |   |   |   |   |

 

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LIST OF BUSINESSES WHICH REQUIRE REVIEW ANDAPPROVAL FROM COUNTY OF SAN DIEGO HEALTH DEPT - THE HAZARDOUS MATERIALSMANAGEMENT DIVISION

 

AUTOMOTIVE

 

Battery Manufacturing/Recycling

Boat Yard

Car Wash

Dealership Maintenance and Paint

Machine Shop

Painting

Radiator Shop

Rental Yard Equipment

Repair, Preventive Maintenance

Repair, Major Overhaul

Transportation Services

Wrecking and Recycling

 

METAL WORKING

 

Anodizing

Chemical Milling/Etching

Finish-Coating, Painting

Flame Spraying

Foundry

Machine Shop-Drilling, Lathes, Mills

Metal Plotting

Metal Prepping/Chemical Coating

Precious Metal Recovery

San Blasting, Grinding

Steel Fabricator

Wrought Iron Manufacturing

 

CHEMICAL HANDLING

 

Agricultural Suppliers/Distributors

Chemical Suppliers/Distributors

Chemical Manufacturer

Coatings/Adhesives

Compressed Gas Supplier/Distributor

Dry Cleaning

Fiberglass/Resin Applications

Gas Station

Industrial Laundry

Laboratories

Laboratory Supplies/Distributors

Oil and Fuel Bulk Supply

Pesticide Operator/Distributor

Photographic Processing

Pool Supplies/Maintenance

Printing/Blue Printing

Road Coatings

Swimming Pool (Gas Chlorination Systems Only)

Toxic Gas Handler

Toxic Gas Mfg.

 

ELECTRONICS

 

Electronics Components Mfg.

Electronics Assembly and Sub Assembly

Printed Circuit Board Mfg.

 

OTHER AND MISCELLANEOUS

 

Asphalt Plant

Co-Generation Plant

Dialysis Centers

Frozen Food Processing Facilities

Government Agencies (Using Hazardous Materials)

Hazardous Waste Haulers

Hospitals/Convalescent Homes

Laboratories, Biological Laboratories

Medical Clinics/Offices

Public Utilities

Rocky Quarry

Wood/Furniture Manufacturer/Refinishing

 

AEROSPACE

 

Aerospace Industry

Aircraft Manufacturing

Aircraft Maintenance

 

NOTE: THE ABOVE LIST INCLUDES BUSINESSES WHICH TYPICALLY USE, STORE,HANDLE, AND DISPOSE OF HAZARDOUS SUBSTANCE ANY BUSINESS NOT INCLUDED ON THISLIST WHICH HANDLES, USES OR DISPOSES OF HAZARDOUS SUBSTANCES MAY STILL REQUIREHAZARDOUS MATERIALS MANAGEMENT DIVISION (HMMD) REVIEW OF BUSINESS PLANS. FORMORE INFORMATION CALL (619) 338-222[ILLEGIBLE]

 

LISTING OF AIR POLLUTION CONTROL DISTRICTPERMIT CATEGORIES

 

Businesses which include any of the followingoperations or equipment will require clearance from the Air Pollution ControlDistrict.

 

CHEMICAL

 

47-Organic Gas Sterilizers

32-Acid Chemical Milling

33-Can & Coil Manufacturing

44-Evaporators, Dryers & Stills Processing Organic Materials

24-Dry Chemist Mixing & Detergent Spray Towers

35-Bulk Dry Chemical Storage

 

COATINGS & SURFACE PREPARATION

 

01-Abrasive Biasing Equipment

27-Coating & Painting

37-Plasma Arc & Ceramic Deposition Spray Booths

38-Paint, Stain & Ink Mfg.

 

METALS

 

18-Metal Melting Devices

19-Oil Quenching & Salt Baths

32-Hot Dip Galvanizing

39-Precious Metals Refining

 

ORGANIC COMPOUND MARKETING (GASOLINE, ETC.)

 

25-Gasoline & Alcohol Bulk Plants & Terminals

25-Intermediate Refuelers

26-Gasoline & Alcohol Fuel Dispensing

 

COMBUSTION

 

34-Piston Internal-Combustion Engines

13-Boilers & Heaters (1 Million Blu/Hr or Larger)

13-Gas Turbines, and Turbine Test Cells & Stands

14-Incinerators & Crematories

15-Burn Out Ovens

16-Core Ovens

 

ELECTRONICS

 

29-Solder Levelers

29-Hydrosqueegees

42-Electronic Component Manufacturing

 

FOOD

 

12-Fish Canneries

12-Smoke Houses

50-Coffee Roasters

35-Dulk Flour & Powdered Sugar Storage

 

ROCK AND MINERAL

 

04-Hot Asphalt Batch Plant

05-Rocky Drills

07-Sand Rock & Aggregate Plants

08-Concrete Batch, CTB, Concrete Mixers, Mixers & Sllos

10-Brick Manufacturing

 

SOLVENT USE

 

28-Vapor & Cold Decreasing

30-Solvent & Extract Driers

31-Dry Cleaning

 

OTHER

 

03-Asphalt Roofing kilties and Tankers

46-Reverse Osmosis Membrane Mfr.

51-Aqueous Waste Neutralization

11-Tire Buffers

17-Brake Debonders

23-Bulk Grain & Dry Chemical Transfer & Storage

45-Rubber Mixers

45-Landfill Gas Flare or Recovery Systems

21-Waste Disposal & Reclamation units

36-Grinding Booths & Rooms

40-Asphalt Pavement Heaters

43-Ceramic Slip Casting

41-Portfolio Processing

 

NOTE: OTHER EQUIPMENT NOT LISTED HERE THAT IS CAPABLE OF EMITTING AIRCONTAMINANTS MAY REQUIRE AN AIR POLLUTION CONTROL DISTRICT PERMIT, IF THERE AREANY QUESTIONS. CONTACT THE AIR POLLUTION CONTROL DISTRICT AT (619) 694-3307.

 

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SCHEDULE 50

 

PROPOSED ROOF SCREENING REQUIREMENTS

 

[ATTACHED]

 

----

 

LEASING AND NEW DEVELOPMENT CO.

 
| ROLAND A. CHILDS |   | ALLAN J. GARDNER |
|------------------|--------|------------------|

 

May 8, 1977

 

Mr Steve Erenyi

Union Pacific Realty Co

2945 Harding Street Suite 211

Carlsbad, CA 92008

 

re:  Lot 58 Carlsbad ResearchCenter / roof screens

 

Dear Steve:

 

I am one of the owners of lot 58. We are presently waiting for variousapprovals to start the construction of a tilt-up building.

 

We believe it will be in keeping with the first rate level of qualitythe Center represents and in that spirit, will do everything we can to maintainor exceed the quality level of buildings now in place.

 

Tom Lamore, of Smith Consulting Architects, has suggested roofscreening that we believe will effectively screen the roof located HVAC units.While the exact location is not known at this time, the 4 foot galv channelmetal with 4” rib steel panels, painted as our building, as more fully detailedon his drawings recently sent to you, will provide a tastful method ofscreening and will be used where needed.

 

In that regard, I do guarantee as an owner of the project, that we willprovide the screening as detailed so that the roof mounted HVAC units will bescreened from both the South and East elevations, as well as the North andWest.

 

Your consideration is appreciated.

 
|   | Sincerely,        |   |
|--------|-------------------|--------|
|   |              |   |
|   | /s/ Allan Gardner |   |
|   | Allan Gardner     |   |
|   |              |   |
|   | cc: Tom Lamore    |   |
|   |              |   |

 
| **10534 West Pico Boulevard** |   | **•** |   | **Los Angeles, California 90064** |   | **•** |   | **FAX (310) 839-2242 (213) 870-1188** |
|-------------------------------|--------|------------|--------|-----------------------------------|--------|------------|--------|---------------------------------------|

 

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[GRAPHIC]

 

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[GRAPHIC]

 

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[GRAPHIC]

 

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[GRAPHIC]

 

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SCHEDULE 56

 

MARKET RENTAL VALUE CALCULATION

 

[ATTACHED]

 

----

 

Determination of minimum rent for the eleventh (11th) year if the 1stOption to Extend is exercised and sixteenth (16th) year if the 2nd Option toExtend is exercised.  If Lessee addsadditional 2nd floor office space, the total area and total building area willchange.

 
|   | 5,100                                                             |   | SF 2nd Floor Office   |
|--------|-------------------------------------------------------------------|--------|-----------------------|
|   | 5,100                                                             |   | SF First Floor Office |
|   | 10,200                                                            |   |                  |
|   | X                                                                 | 30.00  |                  | SF |
|   | $306,000                                                          |   |                  |
|   |                                                              |   |                  |
|   | 21,000                                                            |   | SF Warehouse          |
|   | X                                                                 | 5.00   |                  | SF |
|   | $105,000                                                          |   |                  |
|   |                                                              |   |
|   | $411,000 @ 12% @ 120 months (constant 14.35) =$5,897.85 per month |
|   | $5,897.85 ÷ 31,200 SF = $.19/SF                              |
|   |                                                              |   |
|   | $                                                                 | .59    |                  | SF Shell |
|   | $                                                                 | .19    |                  | SF |   |
|   | $                                                                 | .78    |                  | SF NNN |
|   |                                                              |   |                  |   |
|   | **3% Annual Increases**                                           |
|        |                                                                   |        |                       |  |  |  |  |

 
|   | Year | 2:  |   | $0.80 |
|--------|------|-----|--------|-------|
|   | Year | 3:  |   | $0.82 |
|   | Year | 4:  |   | $0.84 |
|   | Year | 5:  |   | $0.87 |
|   | Year | 6:  |   | $0.90 |
|   | Year | 7:  |   | $0.93 |
|   | Year | 8:  |   | $0.96 |
|   | Year | 9:  |   | $0.99 |
|   | Year | 10: |   | $1.02 |
| *      | Year | 11: |   | $1.05 |
|   | Year | 12: |   | $1.08 |
|   | Year | 13: |   | $1.11 |
|   | Year | 14: |   | $1.14 |
|   | Year | 15: |   | $1.17 |
| *      | Year | 16: |   | $1.21 |

 

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