Exhibit
10.2


 


LEASE AGREEMENT


 


THIS
LEASE AGREEMENT is made as of this 30th day of December, 2003, between ARE-Nancy
Ridge No. 3, LLC, a Delaware limited liability company (“Landlord”),
and Arena
Pharmaceuticals, Inc., a Delaware corporation, (“Tenant”).


 


BASIC LEASE PROVISIONS


 


Address:                       6138 – 6150 Nancy Ridge
Drive, San Diego, California  92121


 


Premises:                The entirety of the
Project.


 


Project:    The real property and the
buildings (referred to individually and collectively as the “Building”) together with all improvements thereon (collectively, the
“Improvements”) and appurtenances
thereto as described on Exhibit A.


 


Base Rent:            $110,561.10 per month


 


Security Deposit: 6 months’ Base
Rent     Commencement Date:  December 30, 2003


 


Term:              A
term beginning on the Commencement Date and ending December 30, 2018,
unless extended pursuant to Section 41 of this Lease.


 


Permitted Use:               Research
and development laboratory, related office and other related uses consistent
with the character of the Project and otherwise in compliance with the
provisions of Section 7 hereof.


 


	
  Address for Rent
  Payment:

  	
  Landlord’s Notice
  Address:

  
	
  135
  N. Los Robles Avenue, Suite 250

  Pasadena, CA 91101

  Attention: Accounts Receivable

  	
  135
  N. Los Robles Avenue, Suite 250

  Pasadena, CA 91101

  Attention: Corporate Secretary

  
	
   

  	
   

  
	
  Tenant’s Notice
  Address:

  	
   

  
	
  Arena
  Pharmaceuticals, Inc.

  6166 Nancy Ridge Drive

  San Diego, California 92121

  Attention:  Chief Financial Officer

  	
   

  



 


The
following Exhibits and Addenda are attached hereto and incorporated herein by this
reference:


 


EXHIBIT A –  DESCRIPTION
OF PROJECT


 


EXHIBIT B – INCLUDED
INSTALLATIONS


 


1.                                       Lease of Premises.  Upon and subject to all of the terms and
conditions hereof,  Landlord hereby
leases the Premises to Tenant and Tenant hereby leases the Premises from
Landlord.


 


2.                                       Delivery; Acceptance of Premises;
Commencement Date. Tenant has been in occupancy and possession of the Premises since,
with respect to 6138 Nancy Ridge Drive, August 31, 2001 and with respect
to 6150 Nancy Ridge Drive, May 4, 2000. 
Tenant 


 


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acknowledges receipt and delivery of possession of
the Premises and that Tenant has examined title to, and the condition of, the
Premises prior to the execution and delivery of this Lease and has found the
same to be in good order and repair and satisfactory for all purposes
hereunder.  Tenant is renting the
Premises “as is” in its present condition. 
LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PREMISES OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO
COMPLIANCE WITH LEGAL REQUIREMENTS, AS TO QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT, OR AS TO LANDLORD’S TITLE THERETO OR
OTHERWISE, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.  TENANT ACKNOWLEDGES THAT THE PREMISES
(INCLUDING, WITHOUT LIMITATION, THE ENVIRONMENTAL CONDITION THEREOF) HAS BEEN
INSPECTED BY TENANT AND IS SATISFACTORY TO IT. 
TENANT SHALL ACCEPT THE PREMISES IN THEIR CONDITION AS OF THE
COMMENCEMENT DATE, SUBJECT TO ALL APPLICABLE LEGAL REQUIREMENTS (AS DEFINED IN SECTION 7
HEREOF); (II) LANDLORD SHALL HAVE NO OBLIGATION FOR ANY DEFECTS IN THE
PREMISES; AND (III) TENANT’S TAKING POSSESSION OF THE PREMISES SHALL BE
CONCLUSIVE EVIDENCE THAT TENANT ACCEPTS THE PREMISES AND THAT THE PREMISES WERE
IN GOOD CONDITION AT THE TIME POSSESSION WAS TAKEN.


 


3.                                       Rent.


 


(a)                                  Base Rent.  The first month’s Base Rent and the Security
Deposit shall be due and payable on the day immediately prior to the
Commencement Date.  Tenant shall pay to
Landlord in advance, without demand, abatement, deduction or set-off, monthly
installments of Base Rent on or before the first day of each calendar month
during the Term hereof in lawful money of the United States of America, at the
office of Landlord for payment of Rent set forth above, or to such other person
or at such other place as Landlord may from time to time designate in writing.  Payments of Base Rent for any fractional
calendar month shall be prorated.  The
obligation of Tenant to pay Base Rent and other sums to Landlord and the
obligations of Landlord under this Lease are independent obligations.  Tenant shall have no right at any time to
abate, reduce, or set-off any Rent (as defined below) due hereunder except for
any abatement as may be expressly provided in this Lease.


 


(b)                                 Additional Rent.  In addition to Base Rent, Tenant
agrees to pay to Landlord as additional rent (“Additional Rent”):  (i) Operating Expenses (as defined in Section 5),
and (ii) any and all other amounts payable by Tenant under the provisions of
this Lease, including, without limitation, any and all other sums that may
become due by reason of any default of Tenant or failure to comply with the
agreements, terms, covenants and conditions of this Lease to be performed by
Tenant, after any applicable notice and cure period.  Base Rent, Additional
Rent and all other amounts payable by Tenant to Landlord hereunder are
collectively referred to herein as “Rent.”


 


4.                                       Base Rent Adjustments.  Base Rent shall be increased  on each annual anniversary of the first day
of the first full month during the Term of this Lease (each an “Adjustment
Date”) by multiplying the Base Rent payable immediately before such
Adjustment Date by 2.5% and adding the resulting amount to the Base Rent
payable immediately before such Adjustment Date.  Base Rent, as so adjusted, shall thereafter be due as provided
herein.  Base Rent adjustments for any
fractional calendar month shall be prorated.


 


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5.                                       Operating Expense Payments.  Landlord shall deliver to
Tenant a written estimate of Operating Expenses for each calendar year during
the Term (the “Annual Estimate”),
which may be revised by Landlord from time to time during such calendar
year.  During each month of the Term, on
the same date that Base Rent is due, Tenant shall pay Landlord an amount equal
to 1/12th of the Annual Estimate. 
Payments for any fractional calendar month shall be prorated.


 


(c)                                                                                  The
term “Operating
Expenses” means the following costs and expenses incurred or accrued
each calendar year by Landlord: assessments payable pursuant to the CC&R’s
affecting the Premises, insurance costs (including deductibles) for the
insurance carried pursuant to Section 17 and administration rent in
the amount of 2.0% of Base Rent).


 


Within 90 days after the end of each calendar year
(or such longer period as may be reasonably required), Landlord shall furnish
to Tenant a statement (an “Annual Statement”) showing in reasonable detail:  (a) the actual Operating Expenses for the
previous calendar year, and (b) the total of Tenant’s payments in respect of
Operating Expenses for such year.  If
actual Operating Expenses for such year exceeds Tenant’s payments of Operating
Expenses for such year, the excess shall be due and payable by Tenant as Rent
within 30 days after delivery of such Annual Statement to Tenant.  If Tenant’s payments of Operating Expenses
for such year exceed actual Operating Expenses for such year Landlord shall pay
the excess to Tenant within 30 days after delivery of such Annual Statement,
except that after the expiration, or earlier termination of the Term or if
Tenant is delinquent in its obligation to pay Rent, Landlord shall pay the
excess to Tenant after deducting all other amounts due Landlord.


 


The Annual Statement shall be final and binding
upon Tenant unless Tenant, within 30 days after Tenant’s receipt thereof, shall
contest any item therein by giving written notice to Landlord, specifying each
item contested and the reason therefor.


 


6.                                       Security
Deposit.  Tenant
shall deposit with Landlord, upon delivery of an executed copy of this Lease to
Landlord, a security deposit (the “Security Deposit”) for the performance of all of Tenant’s
obligations hereunder in the amount set forth in the Basic Lease Provisions,
which Security Deposit shall be in the form of an unconditional and irrevocable
letter of credit (the “Letter of Credit”): 
(i) in form and substance reasonably satisfactory to Landlord, (ii)
naming Landlord as beneficiary, (iii) expressly allowing Landlord to draw upon
it at any time from time to time by delivering to the issuer a certification
that Landlord is entitled to draw thereunder, (iv) issued by an FDIC-insured
financial institution reasonably satisfactory to Landlord, (v) redeemable by
presentation of a sight draft together with the certification described in
subsection (iii) above,and (vi) with an expiration
date no earlier than 1 year from the date of issue (as extended from time to
time, the “Expiration Date”); provided, however, that the Letter of
Credit shall be automatically extended each year for successive terms of 1 year
each until 60 days after the expiration of the Term unless the issuer notifies
Landlord by certified mail, return receipt requested, at least 60 days before
the then scheduled Expiration Date that issuer has elected not to extend the
Expiration Date.  If Tenant does not
provide Landlord with a substitute Letter of Credit complying with all of the
requirements hereof at least 10 days before the stated expiration date of any
then current Letter of Credit, Landlord shall have the right to draw the full
amount of the current Letter of Credit and hold the funds drawn in cash without
obligation for interest thereon as the Security Deposit.  Tenant shall have the right to substitute a
replacement Letter of Credit that meets the requirements of this Section 6 from time to time, in which case the Letter of Credit then held by
Landlord shall be returned to Tenant or as designated by Tenant in exchange for
such replacement Letter of Credit.  The
Security Deposit shall be held 


 


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by Landlord as security for
the performance of Tenant’s obligations under this Lease.  The Security Deposit is not an advance
rental deposit or a measure of Landlord’s damages in case of Tenant’s
default.  Upon each occurrence of a Default
(as defined in Section 20), Landlord may use all or any part of the
Security Deposit to pay delinquent payments due under this Lease, and the cost
of any damage, injury, expense or liability caused by such Default, without
prejudice to any other remedy provided herein or provided by law.  Upon any such use of all or any portion of
the Security Deposit, Tenant shall pay Landlord on demand the amount that will
restore the Security Deposit to the amount set forth in the Basic Lease
Provisions.  Tenant hereby waives the
provisions of any law, now or hereafter in force, which provide that Landlord
may claim from a security deposit only those sums reasonably necessary to
remedy defaults in the payment of Rent, to repair damage caused by Tenant or to
clean the Premises, it being agreed that Landlord may, in addition, claim those
sums reasonably necessary to compensate Landlord for any other loss or damage,
foreseeable or unforeseeable, caused by the act or omission of Tenant or any
officer, employee, agent or invitee of Tenant. 
Upon bankruptcy or other debtor-creditor proceedings against Tenant, the
Security Deposit shall be deemed to be applied first to the payment of Rent and
other charges due Landlord for periods prior to the filing of such
proceedings.  Upon any such use of all
or any portion of the Security Deposit, Tenant shall, within 5 days after
demand from Landlord, restore the Security Deposit to its original amount.  If Tenant shall fully perform every
provision of this Lease to be performed by Tenant, the Security Deposit, or any
balance thereof (i.e., after deducting therefrom all amounts to which Landlord
is entitled under the provisions of this Lease), shall be returned to Tenant
(or, at Landlord’s option, to the last assignee of Tenant’s interest hereunder)
within 60 days after the expiration or earlier termination of this Lease.


 


If Landlord transfers
its interest in the Project or this Lease, Landlord shall either (a) transfer
any Security Deposit then held by Landlord to a person or entity assuming
Landlord’s obligations under this Section 6, or (b) return to
Tenant any Security Deposit then held by Landlord and remaining after the
deductions permitted herein.  Upon such
transfer to such transferee or the return of the Security Deposit to Tenant,
Landlord shall have no further obligation with respect to the Security Deposit,
and Tenant’s right to the return of the Security Deposit shall apply solely
against Landlord’s transferee.  The
Security Deposit is not an advance rental deposit or a measure of Landlord’s
damages in case of Tenant’s default. 
Landlord’s obligation respecting the Security Deposit is that of a
debtor, not a trustee, and no interest shall accrue thereon.


 


7.                                       Use.  The Premises shall be used solely for the
Permitted Use set forth in the Basic Lease Provisions, and in compliance with
all laws, orders, judgments, ordinances, regulations, codes, directives,
permits, licenses, covenants and restrictions now or hereafter applicable to
the Premises, and to the use and occupancy thereof, including, without
limitation, the Americans With Disabilities Act, 42 U.S.C. § 12101, et
seq. (together with the regulations promulgated pursuant thereto, “ADA”)
(collectively, “Legal Requirements” and each, a “Legal Requirement”). 
Tenant shall, upon 5 business days’ written notice from Landlord,
discontinue any use of the Premises which is declared by any federal, state,
regional, municipal, local or other governmental authority or agency,
including, without limitation, quasi-public agencies (collectively, “Governmental
Authority”) having jurisdiction to be a violation of a Legal
Requirement unless Tenant is contesting such determination by a Governmental
Authority as provided in Section 40(n).  Tenant will not use or permit the Premises to be used for any
purpose or in any manner that would void Tenant’s or Landlord’s insurance,
increase the insurance risk, or cause the disallowance of any sprinkler or
other credits unless Tenant pays any increased cost therefor.  Tenant shall not permit any part of the
Premises to be used as a


 


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“place
of public accommodation”, as defined in the ADA or any similar legal
requirement.  Tenant shall reimburse
Landlord promptly upon demand for any additional premium charged for any such
insurance policy by reason of Tenant’s failure to comply with the provisions of
this Section or otherwise caused by Tenant’s use and/or occupancy of the
Premises.  Subject to Tenant’s
obligations under Section 28, Tenant will use the Premises in a
careful, safe and proper manner and will not commit or permit waste, overload
the floor or structure of the Premises, subject the Premises to use that would
materially damage the Premises or obstruct or use or allow the Premises to be
used for any unlawful purpose.  Tenant
shall not place any machinery or equipment in the Premises that would damage
the structure of the Building.


 


Tenant,
at its sole expense, as soon as reasonably practical, shall make any
alterations or modifications to the Premises that are required by Legal
Requirements (including, without limitation, compliance of the Premises with
the ADA).  Notwithstanding any other
provision herein to the contrary, Tenant shall be responsible for any and all
demands, claims, liabilities, losses, costs, expenses, actions, causes of action,
damages or judgments, and all reasonable expenses incurred in investigating or
resisting the same (including, without limitation, reasonable attorneys’ fees,
charges and disbursements and costs of suit) (collectively, “Claims”)
arising out of or in connection with Legal Requirements, and Tenant shall
indemnify, defend, hold and save Landlord harmless from and against any and all
Claims arising out of or in connection with any failure of the Premises to
comply with any Legal Requirement.


 


8.                                       Holding Over.  If, with Landlord’s express written consent,
Tenant retains possession of the Premises after the termination of the Term,
(i) unless otherwise agreed in such written consent, such possession shall be
subject to immediate termination by Landlord at any time, (ii) all of the other
terms and provisions of this Lease (including, without limitation, the
adjustment of Base Rent pursuant to Section 3 hereof) shall remain
in full force and effect (excluding any expansion or renewal option, purchase
option or other similar right or option) during such holdover period, (iii)
Tenant shall continue to pay Base Rent in the amount payable upon the date of
the expiration or earlier termination of this Lease or such other amount as
Landlord may indicate, in Landlord’s sole and absolute discretion, in such written
consent, and (iv) all other payments shall continue under the terms of this
Lease.  If Tenant remains in possession
of the Premises after the expiration or earlier termination of the Term without
the express written consent of Landlord, (A) Tenant shall become a tenant at
sufferance upon the terms of this Lease except that the monthly rental shall be
equal to 125% of Rent in effect during the last 30 days of the Term for the
first 30 days of holdover, and then 150% thereafter, and (B) Tenant shall be responsible
for all damages suffered by Landlord resulting from or occasioned by Tenant’s
holding over, including consequential damages. 
No holding over by Tenant, whether with or without consent of Landlord,
shall operate to extend this Lease except as otherwise expressly provided, and
this Section 8 shall not be construed as consent for Tenant to
retain possession of the Premises. 
Acceptance by Landlord of Rent after the expiration of the Term or
earlier termination of this Lease shall not result in a renewal or
reinstatement of this Lease.


 


9.                                       Taxes.


 


Tenant shall pay, before any fine, penalty,
interest or cost may be added for non-payment, all taxes, levies, assessments
and governmental charges of any kind (collectively referred to as “Taxes”)
imposed by any federal, state, regional, municipal, local or other governmental
authority or agency, including, without limitation, quasi-public agencies
(collectively, “Governmental Authority”) during the Term, including, without
limitation, all 


 


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Taxes:  (i)
imposed on or measured by or based, in whole or in part, on rent payable to
Landlord under this Lease and/or from the rental by Landlord of the Project or
any portion thereof, or (ii) based on the square footage, assessed value or
other measure or evaluation of any kind of the Premises or the Project, or
(iii) assessed or imposed by or on the operation or maintenance of any portion
of the Premises or the Project, including parking, or (iv) assessed or imposed
by, or at the direction of, or resulting from statutes or regulations, or
interpretations thereof, promulgated by, any Governmental Authority, or (v)
imposed as a license or other fee on Landlord’s business of leasing space in
the Project and will promptly, upon request, furnish to Landlord copies of
official receipts or other satisfactory proof evidencing such payment.  Landlord, upon Tenant’s request, may contest
by appropriate legal proceedings the amount, validity, or application of any
Taxes or liens securing Taxes.  Taxes
shall not include any franchise taxes (however determined) or net income taxes
imposed on Landlord unless such net income taxes are in substitution for any
Taxes payable hereunder.  If any such
Tax is levied or assessed directly against Tenant, then Tenant shall be
responsible for and shall pay the same at such times and in such manner as the
taxing authority shall require.  Tenant
shall pay, prior to delinquency, any and all Taxes levied or assessed against
any personal property or trade fixtures placed by Tenant in the Premises,
whether levied or assessed against Landlord or Tenant.  If any Taxes on Tenant’s personal property
or trade fixtures are levied against Landlord or Landlord’s property, or if the
assessed valuation of the Project is increased by a value attributable to
improvements in or alterations to the Premises, whether owned by Landlord or
Tenant and whether or not affixed to the real property so as to become a part
thereof, Landlord shall have the right, but not the obligation, to pay such
Taxes.  The amount of any such payment
by Landlord shall constitute Additional Rent due from Tenant to Landlord
immediately upon demand.


 


Tenant shall have the right, after 15 days’ prior
written notice to Landlord, to contest the amount or validity of any Taxes
payable with respect to the Premises, in whole or in part, by appropriate
administrative and legal proceedings, either in its own name, Landlord’s name
or jointly with Landlord (but Landlord shall have no obligation under this Section 9
except to reasonably cooperate with Tenant as hereinafter provided), without
any cost or expense to Landlord, provided that if Landlord reasonably objects to
Tenant’s contest, Tenant shall not have the right to so contest Taxes.  Tenant may postpone payment of any such
contested Taxes pending the prosecution of such proceedings and any appeals so
long as such proceedings shall operate to prevent the collection of such Taxes
(and any fines or penalties) and the sale of the Premises to satisfy any lien
arising out of the nonpayment of the same. 
Tenant, upon the request of Landlord, shall furnish a bond to Landlord
sufficient to secure the payment of all contested Taxes, costs and expenses in
connection therewith as a pre-condition to undertaking any such contest.  In lieu of such bond, Tenant may elect to
pay such Taxes under protest.  Landlord,
at no cost to Landlord, will reasonably cooperate with Tenant in providing relevant
documentation or information pertaining to such contest, such as appraisals or
tax records.


 


10.                                 Parking.  Tenant shall have the exclusive use of all
parking areas of the Project during the Term, subject in all respects to all
covenants, conditions, easements and restrictions now or hereafter affecting
the Project (the “CC&R’s”) which include, without
limitation, easements for parking purposes.


 


11.                                 Utilities,
Services.  Tenant shall provide, and pay all charges for, water, electricity, heat, light,
power, telephone, sewer, and other utilities (including gas and fire sprinklers
to the extent the Project is plumbed for such services), refuse and trash
collection and 


 


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janitorial
services (collectively, “Utilities”) as needed for Tenant’s
operation of the Premises.  Landlord
shall have no obligation to provide any Utilities to the Premises.


 


12.                                 Alterations and Tenant’s Property.  Any alterations, additions, or improvements
made to the Premises by or on behalf of Tenant, including additional locks or
bolts of any kind or nature upon any doors or windows in the Premises, but
excluding installation, removal or realignment of furniture systems (other than
removal of furniture systems owned or paid for by Landlord) not involving any
modifications to the structure or connections (other then by ordinary plugs or
jacks) to Building Systems (as defined in Section 14) (“Alterations”)
shall be subject to Landlord’s prior written consent, which may be given or
withheld in Landlord’s sole discretion if any such Alteration affects the
structure of the Building or Building Systems, but which shall otherwise not be
unreasonably withheld or delayed.  Tenant
may construct nonstructural Alterations in the Premises without Landlord’s
prior approval if the cost of any single Alteration does not exceed $25,000.00
and the aggregate cost of all such work in any 12 month period does not exceed
$150,000.00 (a “Notice-Only Alteration”), provided Tenant notifies Landlord in
writing of such intended Notice-Only Alteration, and such notice shall be
accompanied by plans, specifications, work contracts and such other information
concerning the nature and cost of the Notice-Only Alteration as may be
reasonably requested by Landlord, which notice and accompanying materials shall
be delivered to Landlord not less than 15 business days in advance of any
proposed construction.  Notwithstanding
the foregoing, Tenant shall not be required to notify Landlord in writing of
any Notice-Only Alteration where the cost is equal to or less than
$5,000.00.  If Landlord approves any Alterations,
Landlord may impose such conditions on Tenant in connection with the
commencement, performance and completion of such Alterations as Landlord may
deem appropriate in Landlord’s reasonable discretion.  Any request for approval shall be in writing, delivered not less
than 15 business days in advance of any proposed construction, and accompanied
by plans, specifications, bid proposals, work contracts and such other
information concerning the nature and cost of the alterations as may be
reasonably requested by Landlord, including the identities and mailing
addresses of all persons performing work or supplying materials.  Landlord’s right to review plans and
specifications and to monitor construction shall be solely for its own benefit,
and Landlord shall have no duty to ensure that such plans and specifications or
construction comply with applicable Legal Requirements.  Tenant shall cause, at its sole cost and
expense, all Alterations to comply with insurance requirements and with Legal
Requirements and shall implement at its sole cost and expense any alteration or
modification required by Legal Requirements as a result of any
Alterations.  Tenant shall pay to
Landlord, as Additional Rent, on demand an amount equal to 3% of all charges
incurred by Tenant or its contractors or agents in connection with any
Alteration to cover Landlord’s overhead and expenses for plan review,
coordination, scheduling and supervision. 
Before Tenant begins any Alteration, Landlord may post on and about the
Premises notices of non-responsibility pursuant to applicable law.  Tenant shall reimburse Landlord for, and
indemnify and hold Landlord harmless from, any expense incurred by Landlord by
reason of faulty work done by Tenant or its contractors, delays caused by such
work, or inadequate cleanup.


 


Tenant
shall provide (and cause each contractor or subcontractor to provide)
certificates of insurance for workers’ compensation and other coverage in
amounts and from an insurance company satisfactory to Landlord protecting
Landlord against liability for personal injury or property damage during
construction.  Upon completion of any
Alterations, Tenant shall deliver to Landlord: 
(i) sworn statements setting forth the names of all contractors and
subcontractors who did the work and final lien waivers from all such
contractors and subcontractors; and (ii) “as 


 


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built”
plans for any such Alteration (except that for Notice–Only Alterations “as
built” plans are required only if already prepared by Tenant).


 


All real property
fixtures, built-in machinery and equipment, built-in casework and cabinets and
other similar additions and improvements built into the Premises so as to
become an integral part of the Premises, including without limitation, the
items described on Exhibit B attached hereto, now or hereafter located on or about the Premises or attached thereto (collectively, “Installations”), excluding the power generator, security
system, the waste storage building located west of the buildings on the Land
and Tenant’s personal property (“Tenant’s Personal Property”) (provided that
none of the items on Exhibit B shall be deemed Tenant’s Personal
Property), shall be and shall remain the property of Landlord during the Term
and following the expiration or earlier termination of the Term, shall not be
removed by Tenant at any time during the Term (unless replaced with an equal or
better Installation of the same type) and shall remain upon and be surrendered
with the Premises as a part thereof in accordance with Section 28
following the expiration or earlier termination of this Lease; provided,
however, that Landlord shall, at the time its approval of such
Installation is requested  notify Tenant if it has elected to cause
Tenant to remove such Installation upon the expiration or earlier termination
of this Lease.  If Landlord so elects,
Tenant shall remove such Installation upon the expiration or earlier
termination of this Lease and restore any damage caused by or occasioned as a
result of such removal, including, when removing any of Tenant’s Personal
Property which was plumbed, wired or otherwise connected to any of the Building
Systems, capping off all such connections behind the walls of the Premises and
repairing any holes.  During any such
restoration period, Tenant shall pay Rent to Landlord as provided herein as if
said space were otherwise occupied by Tenant. 
Notwithstanding the foregoing, none of Tenant’s Personal Property shall
be deemed “built-in” if the only method of attachment to the Premises is
bolting or bracing for safety purposes.


 


13.                                 Landlord’s Repairs.  Except as expressly set forth herein,
Landlord shall not under any circumstances be required to build any
improvements on the Premises, or to make any repairs, replacements, alterations
or renewals of any nature or description to the Premises, whether ordinary or
extraordinary, structural or non-structural, foreseen or unforeseen, or to make
any expenditure whatsoever in connection with this Lease, or to maintain the
Premises in any way.  Tenant hereby
waives the right to make repairs at the expense of Landlord pursuant to any law
in effect at the time of the execution this Lease or hereafter enacted.


 


14.                                 Tenant’s Repairs.  Tenant, at its expense, shall repair,
replace and maintain in good condition all portions of the Premises, including,
without limitation, all outside and parking areas, walls, foundation, roof, and
HVAC, plumbing, electrical, fire sprinklers, elevators and all other building
systems serving the Premises (“Building Systems”).  Such repair and replacement may include
capital expenditures and repairs whose benefit may extend beyond the Term.  Should Tenant fail to make any such repair
or replacement or fail to maintain the Premises, Landlord shall give Tenant notice
of such failure.  If Tenant fails to
commence cure of such failure within 30 days of Landlord’s notice, and
thereafter diligently prosecute such cure to completion, Landlord may perform
such work and shall be reimbursed by Tenant within 10 business days after
demand therefor; provided, however, that if such failure by Tenant creates or
could create an emergency, Landlord may immediately commence cure of such
failure and shall thereafter be entitled to recover the costs of such cure from
Tenant.  Subject to Section 18,
Tenant shall bear the full uninsured cost of any repair or replacement to any
part of the Project that results from damage caused by Tenant or any Tenant
Party.


 


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15.                                 Mechanic’s Liens.  Tenant shall discharge, by bond or
otherwise, any mechanic’s lien filed against the Premises or against the
Project for work claimed to have been done for, or materials claimed to have
been furnished to, Tenant within 10 days after the filing thereof, at Tenant’s
sole cost and shall otherwise keep the Premises and the Project free from any
liens arising out of work performed, materials furnished or obligations
incurred by Tenant.  Should Tenant fail
to discharge any lien described herein, Landlord shall have the right, but not
the obligation, to pay such claim or post a bond or otherwise provide security
to eliminate the lien as a claim against title to the Project and the cost
thereof shall be immediately due from Tenant as Additional Rent.


 


If Tenant shall lease or finance the
acquisition of any of Tenant’s Personal Property of a removable nature utilized
by Tenant in the operation of Tenant’s business, Tenant warrants that any
Uniform Commercial Code Financing Statement filed as a matter of public record by
any lessor or creditor of Tenant will upon its face or by exhibit thereto
indicate that such Financing Statement is applicable only to removable personal
property of Tenant located within the Premises.  In no event shall the address of the Project be furnished on the
statement without qualifying language as to applicability of the lien only to
removable personal property, located in an identified suite held by
Tenant.  Landlord agrees to execute consent and waiver
forms reasonably acceptable to Landlord, consenting to the foregoing and
releasing any liens against specifically enumerated collateral in favor of any
purchase money seller, lessor or lender. 
Tenant acknowledges and agrees that it shall be reasonable for Landlord
to refuse to execute any consent and waiver form that (a) is blanket in nature
(i.e., fails to specifically enumerate the individual items of the subject
personal property), (b) provides for the potential continued presence of
Tenant’s Personal Property in the Premises following the expiration or earlier
termination of this Lease or (c) fails to permit Landlord to dispose of
Tenant’s personal Property if not removed by Tenant or such purchase money
seller, lessor or lender prior to the expiration or termination of this Lease.


 


16.                                 Indemnification.  Tenant hereby indemnifies and agrees to
defend, save and hold Landlord harmless from and against any and all Claims for
injury or death to persons or damage to property occurring within or about the
Premises, arising directly or indirectly out of use or occupancy of the
Premises or a breach or default by Tenant in the performance of any of its
obligations hereunder, unless caused solely by the willful misconduct or gross
negligence of Landlord.  Landlord shall
not be liable to Tenant for, and Tenant assumes all risk of damage to, personal
property (including, without limitation, loss of records kept within the
Premises).  Tenant further waives any
and all Claims for injury to Tenant’s business or loss of income relating to
any such damage or destruction of personal property (including, without
limitation, any loss of records). 
Landlord shall not be liable for any damages arising from any act,
omission or neglect of any tenant in the Project (if any) or of any other third
party.


 


17.                                 Insurance.  Landlord shall maintain all risk property
and, if applicable, sprinkler damage insurance covering the full replacement
cost of the Project or such lesser coverage amount as Landlord may elect provided
such coverage amount is not less than 90% of such full replacement cost.  Landlord shall further procure and maintain
commercial general liability insurance with a single loss limit of not less
than $2,000,000 for bodily injury and property damage with respect to the Project.  Landlord may, but is not obligated to,
maintain such other insurance and additional coverages as it may deem necessary
(provided Landlord has a reasonable basis for maintaining such insurance),
including, but not limited to, flood, environmental hazard and earthquake, loss
or failure of building equipment, errors and omissions, rental loss during the
period of repair or rebuilding, workers’ compensation insurance 


 


9

















 


and
fidelity bonds for employees employed to perform services and insurance for any
improvements installed by Tenant or which are in addition to the standard
improvements customarily furnished by Landlord without regard to whether or not
such are made a part of the Project. 
All such insurance shall be included as part of the Operating
Expenses.  The Project may be included
in a blanket policy (in which case the cost of such insurance allocable to the
Project will be determined by Landlord based upon the insurer’s cost
calculations).  Tenant shall also
reimburse Landlord for any increased premiums or additional insurance which
Landlord reasonably deems necessary as a result of Tenant’s use of the
Premises.  Upon Tenant’s request,
Landlord shall provide information on the amounts and deductibles of the
insurance carried by Landlord pursuant to this Section 17.


 


Tenant,
at its sole cost and expense, shall maintain during the Term:  all risk property insurance with business
interruption and extra expense coverage of no less than 24 months, covering the
full replacement cost of all property and improvements owned by Tenant at
Tenant’s expense; workers’ compensation insurance with no less than the minimum
limits required by law; employer’s liability insurance with such limits as
required by law; commercial general liability insurance, with a minimum limit
of not less than $2,000,000 per occurrence for bodily injury and property
damage with respect to the Premises and
pollution legal liability insurance with a minimum limit of not less than
$2,000,000 per occurrence.  The
commercial general liability insurance policy shall name Landlord, its
officers, directors, employees, managers, agents, invitees and contractors
(collectively, “Landlord Parties”), as additional insureds.  The commercial general liability and
pollution legal liability insurance policies shall insure on an occurrence and
not a claims-made basis; shall be issued by insurance companies which have a
rating of not less than policyholder rating of A and financial category rating
of at least Class X in “Best’s Insurance Guide”; shall not be cancelable for
nonpayment of premium unless 30 days prior written notice shall have been given
to Landlord from the insurer; contain a hostile fire endorsement and a
contractual liability endorsement; and provide primary coverage to Landlord (any
policy issued to Landlord providing duplicate or similar coverage shall be
deemed excess over Tenant’s policies). 
Copies of such policies (if requested by Landlord), or certificates of
insurance showing the limits of coverage required hereunder and showing
Landlord as an additional insured, along with reasonable evidence of the
payment of premiums for the applicable period, shall be delivered to Landlord
by Tenant upon commencement of the Term and upon each renewal of said
insurance.  Tenant’s policy may be a
“blanket policy” with an aggregate per location endorsement which specifically
provides that the amount of insurance shall not be prejudiced by other losses
covered by the policy.  Tenant shall,
prior to the expiration of such policies, furnish Landlord with renewal
certificates.


 


In
each instance where insurance is to name Landlord as an additional insured,
Tenant shall upon written request of Landlord also designate and furnish
certificates so evidencing Landlord as additional insured to:  (i) any lender of Landlord holding a
security interest in the Project or any portion thereof, (ii) the landlord
under any lease wherein Landlord is tenant of the real property on which the
Project is located, if the interest of Landlord is or shall become that of a tenant
under a ground or other underlying lease rather than that of a fee owner,
and/or (iii) any management company retained by Landlord to manage the Project.


 


The
property insurance obtained by Landlord and Tenant shall include a waiver of
subrogation by the insurers and all rights based upon an assignment from its
insured, against Landlord or Tenant, and their respective officers, directors,
employees, managers, agents, invitees and contractors (“Related Parties”), in
connection with any loss or damage thereby insured against.  Neither party nor its respective Related
Parties shall be liable to the other for 


 


10

















 


loss
or damage caused by any risk insured against under property insurance required
to be maintained hereunder, and each party waives any claims against the other
party, and its respective Related Parties, for such loss or damage.  The failure of a party to insure its
property shall not void this waiver. 
Landlord and its respective Related Parties shall not be liable for, and
Tenant hereby waives all claims against such parties for, business interruption
and losses occasioned thereby sustained by Tenant or any person claiming
through Tenant resulting from any accident or occurrence in or upon the Premises
or the Project from any cause whatsoever. 
If the foregoing waivers shall contravene any law with respect to
exculpatory agreements, the liability of Landlord or Tenant shall be deemed not
released but shall be secondary to the other’s insurer.


 


Landlord
may require insurance policy limits to be raised to conform with requirements
of Landlord’s lender.


 


18.                                 Restoration.  If, at any time during the Term, either Building is
damaged or destroyed by a fire or other insured casualty, Landlord shall notify
Tenant within 60 days after discovery of such damage as to the amount of time
Landlord reasonably estimates it will take to restore the Project or the
Premises, as applicable (the “Restoration Period”).  If the Restoration Period is estimated to
exceed 12 months (the “Maximum Restoration Period”), either
Landlord or Tenant may, by written notice to the other party within 10 days
after Landlord’s notice, elect to terminate this Lease as of the date that is
75 days after the date of discovery of such damage or destruction, subject to Section 39
of this Lease.  Unless  either
party so elects to terminate this Lease, Landlord shall, subject to receipt of
sufficient insurance proceeds (with any deductible to be treated as a current
Operating Expense), promptly restore the Premises (excluding any property or
improvements owned by Tenant), subject to delays arising from the collection of
insurance proceeds, from Force Majeure events or as needed to obtain any
license, clearance or other authorization of any kind required to enter into
and restore the Premises issued by any Governmental Authority having
jurisdiction over the use, storage, handling, treatment, generation, release,
disposal, removal or remediation of Hazardous Materials (as defined in Section 30)
in, on or about the Premises (collectively referred to herein as “Hazardous
Materials Clearances”); provided, however, (A)
that if repair or restoration of the Premises is not substantially complete as
of the end of the Maximum Restoration Period or, if longer, the Restoration
Period in each case due to circumstances outside of Landlord’s control,
Landlord may, in its sole and absolute discretion, elect not to proceed with
such repair and restoration, in which event Landlord shall be relieved of its
obligation to make such repairs or restoration and, subject to Section 39
below, this Lease shall terminate as of the date that is 75 days after the
later of:  (i) discovery of such damage
or destruction, or (ii) the date all required Hazardous Materials Clearances are
obtained, but Landlord shall retain any Rent paid and the right to any Rent
payable by Tenant prior to such election by Landlord, and (B) that if repair or
restoration of the Premises is not substantially complete as of the end of the
Maximum Restoration Period or, if longer, the Restoration Period, Tenant may
elect to terminate this Lease by written notice to Landlord given within 30
days after the end of the Maximum Restoration Period or the Restoration Period,
as the case may be, in which event Landlord shall be relieved of its obligation
to make such repairs or restoration and this Lease shall terminate as of the
date that is 75 days after the later of: 
(i) discovery of such damage or destruction, or (ii) the date all
required Hazardous Materials Clearances are obtained, but Landlord shall retain
any Rent paid and the right to any Rent payable by Tenant prior to such
election by Tenant.


 


11

















 


Tenant, at its expense, shall promptly perform,
subject to delays arising from the collection of insurance proceeds, from Force
Majeure (as defined in Section 34) events or to obtain Hazardous
Material Clearances, all repairs or restoration not required to be done by
Landlord and shall promptly re-enter the Premises and commence doing business
in accordance with this Lease.


 


Notwithstanding
the first sentence of this Section 18, within the 60 days after the
occurrence of any damage to a Building where the cost to repair such damage is
equal to or less than $5,000.00, Tenant may elect by written notice to Landlord
to repair such damage, in which case Tenant shall be entitled to the insurance
proceeds therefore if disbursed by Landlord’s lender.


 


(a)                                  Abatement of Rent.  Rent due and payable hereunder
shall equitably abate for the portion of the Building which is unusable or
inaccessible by Tenant for the period commencing with the date all
required Hazardous Material Clearances are obtained until the Premises are
repaired and restored.


 


(b)                                 Uninsured Casualty.  Notwithstanding anything contained herein to
the contrary, in the event the damage or destruction of all or any portion of
either Building is not fully covered by the insurance proceeds, then subject to
Tenant’s right under Section 39, Landlord may within thirty (30)
days of such casualty, terminate this Lease by written notice to Tenant,
effective as of the date of such casualty; provided, however, that if
Landlord’s lender has made insurance proceeds available to Landlord to rebuild
the Premises, Tenant may prevent Landlord from terminating this Lease as set
forth herein by agreeing in writing with Landlord, in form reasonably
satisfactory to Landlord, to provide such shortfall.


 


(c)                                  Damage Near End of Term.  If the entirety of the Building or so much
thereof as to render the balance unusable by Tenant is destroyed or damaged
during the last twelve (12) months of the Term, then subject to Tenant’s right
under Section 39, either Landlord or Tenant may terminate this
Lease as of the date of such casualty and receipt of all Hazardous Materials
Clearances by giving written notice thereof to the other party within thirty
(30) days after the date of the casualty.


 


The
provisions of this Lease, including this Section 18, constitute an
express agreement between Landlord and Tenant with respect to any and all
damage to, or destruction of, all or any part of the Premises, or any other
portion of the Project, and any statute or regulation which is now or may
hereafter be in effect shall have no application to this Lease or any damage or
destruction to all or any part of the Premises or any other portion of the
Project, the parties hereto expressly agreeing that this Section 18
sets forth their entire understanding and agreement with respect to such
matters.


 


19.                                 Condemnation.  If the whole or any material part of the
Premises or the Project is taken for any public or quasi-public use under
governmental law, ordinance, or regulation, or by right of eminent domain, or
by private purchase in lieu thereof (a “Taking” or “Taken”), and the Taking
would either prevent or materially interfere with Tenant’s use of the Premises
or materially interfere with or impair Landlord’s ownership or operation of the
Project (as determined in accordance with Section 40(m) below),
then upon written notice by Landlord this Lease shall terminate and Rent shall
be apportioned as of said date.  In the
event of such termination, Tenant’s rights under Section 39 shall
apply.  If part of the Premises shall be
Taken, and this Lease is not terminated as provided above, Landlord shall
promptly restore the Premises and the Project as nearly as is commercially
reasonable under the circumstances to their condition prior to such partial
Taking and the rentable square footage of the Building, the rentable square
footage of the Premises, Operating Expenses and the Rent payable hereunder 


 


12

















 


during the unexpired Term
shall be reduced to such extent as may be fair and reasonable under the
circumstances.  Upon any such Taking,
Landlord shall be entitled to receive the entire price or award from any such
Taking without any payment to Tenant, and Tenant hereby assigns to Landlord
Tenant’s interest, if any, in such award. 
Tenant shall have the right, to the extent that same shall not diminish
Landlord’s award, to make a separate claim against the condemning authority
(but not Landlord) for such compensation as may be separately awarded or
recoverable by Tenant for relocation and moving expenses and damage to Tenant’s
trade fixtures and personal property, if a separate award for such items is
made to Tenant.  Tenant hereby waives
any and all rights it might otherwise have pursuant to any provision of state
law to terminate this Lease upon a partial Taking of the Premises or the Project.


 


20.                                 Events of Default.  Each of the following events shall be a
default (“Default”)
by Tenant under this Lease:


 


(a)                                  Payment Defaults.  Tenant shall fail to pay any installment of
Rent or any other payment hereunder within five (5) days after receipt of
written notice from Landlord (sent on or after the first day of the applicable
month); provided
that for purposes of giving notice to Tenant under California Code
of Civil Procedure (“CCP”) Section 1161, Tenant shall be in
“default” upon Tenant’s failure to pay on the date due, and any such notice
under the first clause of this Section 20(a) will be in lieu of and
not in addition to any notice required under the provisions of California CCP
Section 1161.


 


(b)                                 Insurance.  Any insurance required to be maintained by
Tenant pursuant to this Lease shall be canceled or terminated or shall expire
or shall be reduced or materially changed, so as not to conform to the
insurance requirements under this Lease, or Landlord shall receive a notice of
nonrenewal of any such insurance and in each case Tenant shall fail to obtain
replacement insurance before the expiration of the current coverage.


 


(c)                                  Abandonment.  Tenant shall abandon the Premises and shall
not have reclaimed the Premises within 5 days after written notice from
Landlord.


 


(d)                                 Improper Transfer.  Tenant shall assign, sublease or otherwise
transfer or attempt to transfer all or any portion of Tenant’s interest in this
Lease or the Premises except as expressly permitted herein, and Tenant shall
not have corrected such action or reversed such transfer within 10 days after
written notice from Landlord, or Tenant’s interest in this Lease shall be
attached, executed upon, or otherwise judicially seized and such action is not
released within 90 days of the action.


 


(e)                                  Liens.  Tenant shall fail to discharge or otherwise
obtain the release by bonding or otherwise of any lien placed upon the Premises
in violation of this Lease within 30 days after any such lien is filed against
the Premises.


 


(f)                                    Insolvency
Events.  Tenant or any
guarantor or surety of Tenant’s obligations hereunder shall:  (A) make a general assignment for the
benefit of creditors; (B) commence any case, proceeding or other action seeking
to have an order for relief entered on its behalf as a debtor or to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or of any substantial part of its property (collectively a “Proceeding
for Relief”); (C) become the subject of any Proceeding for Relief
which is not dismissed within 120 days of its filing or entry; or (D) die or
suffer a legal disability (if Tenant, guarantor, or surety is an individual) or
be dissolved or otherwise fail to 


 


13

















 


maintain its
legal existence (if Tenant, guarantor or surety is a corporation, partnership
or other entity).


 


(g)                                 Estoppel Certificate or Subordination
Agreement.  Tenant fails to
execute any document required from Tenant under Sections 23 or 27
within 5 business days after a second notice requesting such document.


 


(h)                                 Other Defaults.  Tenant shall fail to comply with any provision
of this Lease other than those specifically referred to in this Section 20,
and, except as otherwise expressly provided herein, such failure shall continue
for a period of 30 days after written notice thereof from Landlord to Tenant.


 


Any
notice given under Section 20(h) hereof shall:  (i) specify the alleged default, (ii) demand
that Tenant cure such default, (iii) be in lieu of, and not in addition to, or
shall be deemed to be, any notice required under any provision of applicable
law, and (iv) not be deemed a forfeiture or a termination of this Lease unless
Landlord elects otherwise in such notice; provided that if the nature of
Tenant’s default pursuant to Section 20(h) is such that it cannot
be cured by the payment of money and reasonably requires more than 30 days to
cure, then Tenant shall not be deemed to be in default if Tenant commences such
cure within said 30 day period and thereafter diligently prosecutes the same to
completion; provided, however, that such cure shall be completed
no later than 120 days from the date of Landlord’s notice unless Tenant is
proceeding in strict compliance with Section 40(n) below.


 


21.                                 Landlord’s Remedies.


 


(a)                                  Payment By Landlord; Interest.  Upon a Default by Tenant hereunder, Landlord
may, without waiving or releasing any obligation of Tenant hereunder, make such
payment or perform such act.  All sums
so paid or incurred by Landlord, together with interest thereon, from the date
such sums were paid or incurred, at the annual rate equal to 12% per annum or
the highest rate permitted by law (the “Default Rate”), whichever is less, shall be
payable to Landlord on demand as Additional Rent.  Nothing herein shall be construed to create or impose a duty on
Landlord to mitigate any damages resulting from Tenant’s Default hereunder.


 


(b)                                 Late Payment Rent.  Late payment by Tenant to Landlord of Rent
and other sums due will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult and impracticable
to ascertain.  Such costs include, but
are not limited to, processing and accounting charges and late charges which
may be imposed on Landlord under any Mortgage covering the Premises.  Therefore, if any installment of Rent due
from Tenant is not received by Landlord within 3 days after the date such
payment is due, then on the second such occasion during any 12 month period
during the Term, Tenant shall pay to Landlord an additional sum equal to 6% of
the overdue Rent as a late charge.  The
parties agree that this late charge represents a fair and reasonable estimate
of the costs Landlord will incur by reason of late payment by Tenant.  In addition to the late charge, Rent not
paid when due shall bear interest at the Default Rate from the 5th day after
the date due until paid.


 


(c)                                  Remedies.  Upon the occurrence of a Default, Landlord,
at its option, without further notice or demand to Tenant, shall have in
addition to all other rights and remedies provided in this Lease, at law or in
equity, the option to pursue any one or more of the following remedies, each
and all of which shall be cumulative and nonexclusive, without any notice or
demand whatsoever.


 


14

















 


(i)                                     Terminate
this Lease, or at Landlord’s option, Tenant’s right to possession only, in
which event Tenant shall immediately surrender the Premises to Landlord, and if
Tenant fails to do so, Landlord may, without prejudice to any other remedy
which it may have for possession or arrearages in rent, enter upon and take possession
of the Premises and expel or remove Tenant and any other person who may be
occupying the Premises or any part thereof, without being liable for
prosecution or any claim or damages therefor;


 


(ii)                                  Upon
any termination of this Lease, whether pursuant to the foregoing Section 20(c)(i)
or otherwise, Landlord may recover from Tenant the following:


 


(A)                              The
worth at the time of award of any unpaid rent which has been earned at the time
of such termination; plus


 


(B)                                The
worth at the time of award of the amount by which the unpaid rent which would
have been earned after termination until the time of award exceeds the amount
of such rental loss that Tenant proves could have been reasonably avoided; plus


 


(C)                                Subject
to subdivision (c) of the California Civil Code Section 1951.2, the worth
at the time of award of the amount by which the unpaid rent for the balance of
the Term after the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus


 


(D)                               Any
other amount necessary to compensate Landlord for all the detriment proximately
caused by Tenant’s failure to perform its obligations under this Lease or which
in the ordinary course of things would be likely to result therefrom,
specifically including, but not limited to, brokerage commissions and
advertising expenses incurred, expenses of remodeling the Premises or any
portion thereof for a new tenant, whether for the same or a different use, and
any special concessions made to obtain a new tenant; and


 


(E)                                 At
Landlord’s election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable law.


 


The
term “rent”
as used in this Section 21 shall be deemed to be and to mean all
sums of every nature required to be paid by Tenant pursuant to the terms of
this Lease, whether to Landlord or to others. 
As used in Sections 21(c)(ii) (A) and (B), above, the “worth at the
time of award” shall be computed by allowing interest at the Default
Rate.  As used in Section 21(c)(ii)(C)
above, the “worth at the time of award” shall be computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San Francisco
at the time of award plus 1%.


 


(iii)                               Landlord
may continue this Lease in effect after Tenant’s Default and recover rent as it
becomes due (Landlord and Tenant hereby agreeing that Tenant has the right to
sublet or assign hereunder, subject only to reasonable limitations).  Accordingly, if Landlord does not elect to
terminate this Lease following a Default by Tenant, Landlord may, from time to
time, without terminating this Lease, enforce all of its rights and remedies
hereunder, including the right to recover all Rent as it becomes due.


 


15

















 


(iv)                              Whether
or not Landlord elects to terminate this Lease following a Default by Tenant,
Landlord shall have the right to terminate any and all subleases, licenses,
concessions or other consensual arrangements for possession entered into by
Tenant and affecting the Premises or may, in Landlord’s sole discretion,
succeed to Tenant’s interest in such subleases, licenses, concessions or
arrangements.  Upon Landlord’s election
to succeed to Tenant’s interest in any such subleases, licenses, concessions or
arrangements, Tenant shall, as of the date of notice by Landlord of such
election, have no further right to or interest in the rent or other
consideration receivable thereunder.


 


(v)                                 Independent
of the exercise of any other remedy of Landlord hereunder or under applicable
law, Landlord may conduct an environmental test of the Premises as generally
described in Section 30(d)  hereof, at Tenant’s expense.


 


(d)                                 Effect of Exercise.  Exercise by Landlord of any remedies
hereunder or otherwise available shall not be deemed to be an acceptance of
surrender of the Premises and/or a termination of this Lease by Landlord, it
being understood that such surrender and/or termination can be effected only by
the express written agreement of Landlord and Tenant.  Any law, usage, or custom to the contrary notwithstanding,
Landlord shall have the right at all times to enforce the provisions of this
Lease in strict accordance with the terms hereof; and the failure of Landlord
at any time to enforce its rights under this Lease strictly in accordance with
same shall not be construed as having created a custom in any way or manner
contrary to the specific terms, provisions, and covenants of this Lease or as
having modified the same and shall not be deemed a waiver of Landlord’s right
to enforce one or more of its rights in connection with any subsequent
default.  A receipt by Landlord of Rent
or other payment with knowledge of the breach of any covenant hereof shall not
be deemed a waiver of such breach, and no waiver by Landlord of any provision of
this Lease shall be deemed to have been made unless expressed in writing and
signed by Landlord.  To the greatest
extent permitted by law, Tenant waives the service of notice of Landlord’s
intention to re-enter, re-take or otherwise obtain possession of the Premises
as provided in any statute, or to institute legal proceedings to that end, and
also waives all right of redemption in case Tenant shall be dispossessed by a
judgment or by warrant of any court or judge. 
Any reletting of the Premises or any portion thereof shall be on such
terms and conditions as Landlord in its sole discretion may determine.  Landlord shall not be liable for, nor shall
Tenant’s obligations hereunder be diminished because of, Landlord’s failure to
relet the Premises or collect rent due in respect of such reletting or
otherwise to mitigate any damages arising by reason of Tenant’s Default.


 


22.                                 Assignment
and Subletting.


 


(a)                                  General Prohibition.  Without Landlord’s prior written consent
subject to and on the conditions described in this Section 22,
Tenant shall not, directly or indirectly, voluntarily or by operation of law,
assign this Lease or sublease the Premises or any part thereof or mortgage,
pledge, or hypothecate its leasehold interest or grant any concession or
license within the Premises, and any attempt to do any of the foregoing shall
be void and of no effect.  If Tenant is
a corporation, partnership or limited liability company, the shares or other
ownership interests thereof which are not actively traded upon a stock exchange
or in the over-the-counter market, a transfer or series of transfers whereby
25% or more of the issued and outstanding shares or other ownership interests
of such corporation are, or voting control is, transferred (but excepting
transfers upon deaths of individual owners) from a person or persons or entity
or entities which were owners thereof at time of execution of this Lease to
persons or entities who were not owners of shares or other ownership interests
of the corporation, partnership or limited 


 


16

















 


liability
company at time of execution of this Lease, shall be deemed an assignment of
this Lease requiring the consent of Landlord as provided in this Section 22.  Notwithstanding the foregoing, any public
offering of shares or other ownership interest in Tenant shall not be deemed an
assignment.


 


(b)                                 Permitted Transfers.  If Tenant desires to assign, sublease,
hypothecate or otherwise transfer this Lease or sublet the Premises other than
pursuant to a Permitted Assignment (as defined below), then at least 15 business
days, but not more than 45 business days, before the date Tenant desires the
assignment or sublease to be effective (the “Assignment Date”), Tenant
shall give Landlord a notice (the “Assignment Notice”) containing such
information about the proposed assignee or sublessee, including the proposed
use of the Premises and any Hazardous Materials proposed to be used, stored
handled, treated, generated in or released or disposed of from the Premises,
the Assignment Date, any relationship between Tenant and the proposed assignee
or sublessee, and all material terms and conditions of the proposed assignment
or sublease, including a copy of any proposed assignment or sublease in its
final form, and such other information as Landlord may deem reasonably
necessary or appropriate to its consideration whether to grant its
consent.  Landlord may, by giving
written notice to Tenant within 15 business days after receipt of the
Assignment Notice:  (i) grant such
consent, (ii) refuse such consent, in its sole and absolute discretion, if the
proposed assignment, hypothecation or other transfer or subletting concerns
more than (together with all other then effective subleases) 50% of the
Premises, (iii) refuse such consent, in its reasonable discretion, if the
proposed subletting concerns (together with all other then effective subleases)
50% or less of the Premises (provided that Landlord shall further have the
right to review and approve or disapprove the proposed form of sublease prior
to the effective date of any such subletting), or (iv) terminate this Lease
with respect to the space described in the Assignment Notice as of the
Assignment Date (an “Assignment Termination”).  If Landlord delivers notice of its election
to exercise an Assignment Termination, Tenant shall have the right to withdraw
such Assignment Notice by written notice to Landlord of such election within 5
business days after Landlord’s notice electing to exercise the Assignment
Termination.  If Tenant withdraws such
Assignment Notice, this Lease shall continue in full force and effect.  If Tenant does not withdraw such Assignment
Notice, this Lease, and the term and estate herein granted, shall terminate as
of the Assignment Date with respect to the space described in such Assignment
Notice.  No failure of Landlord to
exercise any such option to terminate this Lease, or to deliver a timely notice
in response to the Assignment Notice, shall be deemed to be Landlord’s consent
to the proposed assignment, sublease or other transfer.  Tenant shall reimburse Landlord for all of
Landlord’s reasonable out-of-pocket expenses in connection with its
consideration of any Assignment Notice, not to exceed $3,000.


 


Notwithstanding the foregoing, Tenant shall have
the right to assign this Lease or sublet all or any part of the Premises, upon
30 days prior written notice to Landlord but without obtaining Landlord’s prior
written consent, to a corporation or other entity which is a
successor-in-interest to Tenant, by way of merger, consolidation or corporate
reorganization, or by the purchase of all or substantially all of the assets or
the controlling ownership interests of Tenant provided that (i) such merger or
consolidation, or such acquisition or assumption, as the case may be, is for a
good business purpose and not principally for the purpose of transferring the
Lease, and (ii) the net worth (as determined in accordance with generally
accepted accounting principles (“GAAP”)) of the assignee is not less than
the net worth (as determined in accordance with GAAP) of Tenant as of the date
of Tenant’s most current quarterly or annual financial statements, and (iii)
such assignee shall agree in writing to assume all of the terms, 


 


17

















 


covenants and conditions of this Lease arising
after the effective date of the assignment (a “Permitted Assignment or Subletting”).


 


In addition, Tenant shall have the right to allow
collaborators in Tenant’s business to use portions of the Premises on a
periodic, non-tenancy basis and such use shall not be deemed an assignment or
subletting hereunder which requires Landlord’s consent.


 


(c)                                  Additional Conditions.  As a condition to any such assignment or
subletting, whether or not Landlord’s consent is required, Landlord may
require:


 


(i)                                     that
any assignee or subtenant agree, in writing at the time of such assignment or
subletting, that if Landlord gives such party notice that Tenant is in default
under this Lease, such party shall thereafter make all payments otherwise due
Tenant directly to Landlord, which payments will be received by Landlord
without any liability except to credit such payment against those due under the
Lease, and any such third party shall agree to attorn to Landlord or its
successors and assigns should this Lease be terminated for any reason; provided,
however, in no event shall Landlord or its successors or assigns be
obligated to accept such attornment; and


 


(ii)                                  A
list of Hazardous Materials, certified by the proposed assignee or sublessee to
be true and correct, which the proposed assignee or sublessee intends to use,
store, handle, treat, generate in or release or dispose of from the Premises,
together with copies of all documents relating to such use, storage, handling,
treatment, generation, release or disposal of Hazardous Materials by the
proposed assignee or subtenant in the Premises or on the Project, prior to the
proposed assignment or subletting, including, without limitation:  permits; approvals; reports and
correspondence; storage and management plans; plans relating to the
installation of any storage tanks to be installed in or under the Project
(provided, said installation of tanks shall only be permitted after Landlord
has given its written consent to do so, which consent may be withheld in
Landlord’s sole and absolute discretion); and all closure plans or any other
documents required by any and all federal, state and local Governmental
Authorities for any storage tanks installed in, on or under the Project for the
closure of any such tanks.  Neither
Tenant nor any such proposed assignee or subtenant is required, however, to
provide Landlord with any portion(s) of the such documents containing
information of a proprietary nature which, in and of themselves, do not contain
a reference to any Hazardous Materials or hazardous activities.


 


(iii)                               An
increase in the amount of the Security Deposit.


 


(d)                                 No Release of Tenant, Sharing of Excess
Rents.  Notwithstanding any
assignment or subletting, Tenant shall at all times remain fully and primarily
responsible and liable for the payment of Rent and for compliance with all of
Tenant’s other obligations under this Lease. 
Except in connection with a Permitted Assignment or Subletting, if the
Rent due and payable by a sublessee or assignee (or a combination of the rental
payable under such sublease or assignment plus any bonus or other consideration
therefor or incident thereto in any form) exceeds the sum of  the
rental payable under this Lease, (excluding however, any Rent payable under
this Section) and actual and reasonable brokerage fees, legal costs and any
design or construction fees directly related to and required pursuant to the
terms of any such sublease) (“Excess Rent”), then Tenant shall be bound
and obligated to pay Landlord as Additional Rent hereunder 50% of such Excess
Rent within 10 days following receipt thereof by Tenant.  If Tenant shall sublet the Premises or any
part thereof, Tenant hereby immediately and 


 


18

















 


irrevocably
assigns to Landlord, as security for Tenant’s obligations under this Lease, all
rent from any such subletting, and Landlord as assignee and as attorney-in-fact
for Tenant, or a receiver for Tenant appointed on Landlord’s application, may
collect such rent and apply it toward Tenant’s obligations under this Lease;
except that, until the occurrence of a Default, Tenant shall have the right to
collect such rent.


 


(e)                                  No Waiver.  The consent by Landlord to an assignment or
subletting shall not relieve Tenant or any assignees of this Lease or any
sublessees of the Premises from obtaining the consent of Landlord to any
further assignment or subletting nor shall it release Tenant or any assignee or
sublessee of Tenant from full and primary liability under the Lease.  The acceptance of Rent hereunder, or the
acceptance of performance of any other term, covenant, or condition thereof,
from any other person or entity shall not be deemed to be a waiver of any of
the provisions of this Lease or a consent to any subletting, assignment or
other transfer of the Premises.


 


(f)                                    Prior
Environmental History. 
Notwithstanding any other provision of this Section 22, if
(i) the proposed assignee or sublessee of Tenant has been required by any prior
landlord, lender or Governmental Authority to take remedial action in
connection with Hazardous Materials contaminating a property, where the
contamination resulted from such party’s action or use of the property in
question, (ii) the proposed assignee or sublessee is subject to an enforcement
order issued by any Governmental Authority in connection with the use, storage,
handling, treatment, generation, release or disposal of Hazardous Materials
(including, without limitation, any order related to the failure to make a
required reporting to any Governmental Authority), or (iii) because of the
existence of a pre-existing environmental condition in the vicinity of or
underlying the Project, the risk that Landlord would be targeted as a
responsible party in connection with the remediation of such pre-existing
environmental condition would be materially increased or exacerbated by the
proposed use of Hazardous Materials by such proposed assignee or sublessee,
Landlord shall have the absolute right to refuse to consent to any assignment
or subletting to any such party.


 


23.                                 Estoppel Certificate.  Tenant shall, within 10 business days of
written notice from Landlord, execute, acknowledge and deliver a statement in
writing in any form reasonably requested by a proposed lender or purchaser and
reasonably acceptable to Tenant, (i) certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease as so modified is in full force and
effect) and the dates to which the rental and other charges are paid in
advance, if any, (ii) acknowledging that there are not any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if any are claimed,
and (iii) setting forth such further information with respect to the status of
this Lease or the Premises as may be reasonably requested thereon.  Any such statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of the real
property of which the Premises are a part. 
Tenant’s failure to deliver such statement within such time shall, at
the option of Landlord, be conclusive upon Tenant that the Lease is in full
force and effect and without modification except as may be represented by
Landlord in any certificate prepared by Landlord and delivered to Tenant for
execution.


 


24.                                 Quiet Enjoyment.  So long as Tenant shall perform all of the
covenants and agreements herein required to be performed by Tenant, Tenant
shall, subject to the terms of this Lease, at all times during the Term, have
peaceful and quiet enjoyment of the Premises against any person claiming by,
through or under Landlord.


 


19

















 


25.                                 Prorations.  All prorations required or permitted to be
made hereunder shall be made on the basis of a 360 day year and 30 day months.


 


26.                                 Intentionally Deleted.


 


27.                                 Subordination.  Provided that such mortgagee, beneficiary,
purchaser or ground lessor provides Tenant with a non-disturbance agreement
reasonably acceptable to Tenant which recognizes each of Tenant’s rights under
this Lease, at the election of any mortgagee, beneficiary, purchaser or ground
lessor, the rights of Tenant hereunder shall be subject and subordinate to any
mortgage, deed of trust or ground lease now or hereafter in existence, to all
advances made or hereafter to be made upon the security thereof, and to all
modifications and renewals thereof, including, without limitation, any
construction loans obtained by Landlord to finance construction of the Building
and tenant improvements; provided, however, that notwithstanding such
subordination, so long as there is no Default by Tenant under this Lease,
Tenant’s possession under this Lease shall not be disturbed and neither this
Lease nor any of the rights of Tenant hereunder shall be terminated or subject
to termination by any action to enforce the security or by any foreclosure
action or termination of the ground lease. 
Tenant agrees, at the election of the Holder of any such Mortgage, to attorn
to any such Holder.  Tenant agrees upon
demand to execute, acknowledge and deliver such instruments, confirming such
subordination, and such instruments of attornment as shall be requested by any
such Holder, provided any such instruments contain appropriate non-disturbance
provisions assuring Tenant’s quiet enjoyment of the Premises as set forth in Section 24
hereof.  Tenant hereby appoints Landlord
attorney-in-fact for Tenant irrevocably (such power of attorney being coupled
with an interest) to execute, acknowledge and deliver any such instrument and
instruments for and in the name of Tenant and to cause any such instrument to
be recorded.  Notwithstanding the
foregoing, any such Holder may at any time subordinate its Mortgage to this
Lease, without Tenant’s consent, by notice in writing to Tenant, and thereupon
this Lease shall be deemed prior to such Mortgage without regard to their
respective dates of execution, delivery or recording and in that event such
Holder shall have the same rights with respect to this Lease as though this
Lease had been executed prior to the execution, delivery and recording of such
Mortgage and had been assigned to such Holder. 
The term “Mortgage” whenever used in this Lease shall be deemed to
include deeds of trust, security assignments and any other encumbrances, and
any reference to the “Holder” of a Mortgage shall be deemed to
include the beneficiary under a deed of trust.


 


28.                                 Surrender.  Upon the expiration of the Term or earlier
termination of Tenant’s right of possession, Tenant shall surrender the
Premises to Landlord in the same condition as existing on the Commencement Date
(including, without limitation, the structural integrity of the Building),
subject to any Alterations or Installations permitted or required by Landlord
to remain in the Premises, free of Hazardous Materials brought upon, kept,
used, stored, handled, treated, generated in, or released or disposed of from,
the Premises by any person other than a Landlord Party (collectively, “Tenant
HazMat Operations”) and released of all Hazardous Materials
Clearances, broom clean, ordinary wear and tear and casualty loss and
condemnation covered by Sections 17 and 18 excepted.  At least 3 months prior to the surrender of
the Premises, Tenant shall deliver to Landlord a narrative description of the
actions proposed (or required by any Governmental Authority) to be taken by
Tenant in order to surrender the Premises (including any Installations
permitted by Landlord to remain in the Premises) at the expiration or earlier
termination of the Term, free from any residual impact from the Tenant HazMat
Operations and otherwise released for unrestricted use and occupancy (the “Surrender
Plan”).  Such Surrender Plan
shall be accompanied by a current listing of (i) all Hazardous 


 


20

















 


Materials
licenses and permits held by or on behalf of any Tenant Party with respect to
the Premises, and (ii) all Hazardous Materials used, stored, handled, treated,
generated, released or disposed of from the Premises, and shall be subject to
the review and reasonable approval of Landlord’s environmental consultant.  In connection with the review and approval
of the Surrender Plan, upon the request of Landlord, Tenant shall deliver to
Landlord or its consultant such additional non-proprietary information
concerning Tenant HazMat Operations as Landlord shall request.  On or before such surrender, Tenant shall
deliver to Landlord evidence that the approved Surrender Plan shall have been
satisfactorily completed and Landlord shall have the right, subject to
reimbursement at Tenant’s expense as set forth below, to cause Landlord’s
environmental consultant to inspect the Premises and perform such additional
procedures as may be deemed reasonably necessary to confirm that the Premises
are, as of the effective date of such surrender or early termination of the
Lease, free from any residual impact from Tenant HazMat Operations.  Tenant shall reimburse Landlord, as Additional
Rent, for the actual out-of pocket expense incurred by Landlord for Landlord’s
environmental consultant to review and approve the Surrender Plan and to visit
the Premises and verify satisfactory completion of the same, which cost shall
not exceed $5,000.  Landlord shall have
the unrestricted right to deliver such Surrender Plan and any report by
Landlord’s environmental consultant with respect to the surrender of the
Premises to third parties.


 


If
Tenant shall fail to prepare or submit a Surrender Plan approved by Landlord,
or if Tenant shall fail to complete the approved Surrender Plan, or if such
Surrender Plan, whether or not approved by Landlord, shall fail to adequately
address any residual effect of Tenant HazMat Operations in, on or about the
Premises, Landlord shall have the right to take such actions as Landlord may
deem reasonable or appropriate to assure that the Premises and the Project are
surrendered free from any residual impact from Tenant HazMat Operations, the
cost of which actions shall be reimbursed by Tenant as Additional Rent, without
regard to the limitation set forth in the first paragraph of this Section 28.


 


Tenant
shall immediately return to Landlord all keys and/or access cards to parking,
the Project, restrooms or all or any portion of the Premises furnished to or
otherwise procured by Tenant, other than access cards for the security system
which is the property of Tenant.  Any
Tenant’s Property, Alterations and property not so removed by Tenant as
permitted or required herein shall be deemed abandoned and may be stored,
removed, and disposed of by Landlord at Tenant’s expense, and Tenant waives all
claims against Landlord for any damages resulting from Landlord’s retention
and/or disposition of such property. 
All obligations of Tenant hereunder not fully performed as of the
termination of the Term, including the obligations of Tenant under Sections
28 and 30 hereof, shall survive the expiration or earlier termination of
the Term, including, without limitation, indemnity obligations, payment
obligations with respect to Rent and obligations concerning the condition and
repair of the Premises.


 


29.                                 Waiver of Jury Trial.  TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL
BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING
OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.


 


30.                                 Environmental
Requirements.


 


(a)                                  Prohibition/Compliance/Indemnity.  Tenant shall not cause or permit any
Hazardous Materials (as hereinafter defined) to be brought upon, kept, used,
stored, handled, 


 


21

















 


treated,
generated in or about, or released or disposed of from, the Premises or the
Project in violation of applicable Environmental Requirements (as hereinafter
defined) by Tenant or any Tenant Party. 
If Tenant breaches the obligation stated in the preceding sentence, or
if the presence of Hazardous Materials in the Premises during the Term or any
holding over results in contamination of the Premises, the Project or any
adjacent property or if contamination of the Premises, the Project or any
adjacent property by Hazardous Materials brought into, kept, used, stored,
handled, treated, generated in or about, or released or disposed of from, the
Premises by anyone other than Landlord and Landlord’s employees, agents and
contractors otherwise occurs during the Term or any holding over, Tenant hereby
indemnifies and shall defend and hold Landlord, its officers, directors,
employees, agents and contractors harmless from any and all actions (including,
without limitation, remedial or enforcement actions of any kind, administrative
or judicial proceedings, and orders or judgments arising out of or resulting
therefrom), costs, claims, damages (including, without limitation, punitive
damages and damages based upon diminution in value of the Premises or the
Project, or the loss of, or restriction on, use of the Premises or any portion
of the Project), expenses (including, without limitation, attorneys’,
consultants’ and experts’ fees, court costs and amounts paid in settlement of
any claims or actions), fines, forfeitures or other civil, administrative or
criminal penalties, injunctive or other relief (whether or not based upon
personal injury, property damage, or contamination of, or adverse effects upon,
the environment, water tables or natural resources), liabilities or losses
(collectively, “Environmental Claims”) which arise during or after the Term as
a result of such contamination.  This
indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any
cleanup, treatment, remedial, removal, or restoration work required by any
federal, state or local Governmental Authority because of Hazardous Materials
present in the air, soil or ground water above, on, or under the Premises.  Without limiting the foregoing, if the
presence of any Hazardous Materials on the Premises, the Project or any
adjacent property caused or permitted by Tenant or any Tenant Party results in
any contamination of the Premises, the Project or any adjacent property, Tenant
shall promptly take all actions at its sole expense and in accordance with
applicable Environmental Requirements as are necessary to return the Premises,
the Project or any adjacent property to the condition existing prior to the
time of such contamination, provided that Tenant shall promptly notify Landlord
of such action and upon Landlord’s request shall cooperate with Landlord in
such remediation actions if they could potentially have any material adverse
effect on the Premises or the Project.


 


(b)                                 Business.  Landlord acknowledges that it is not the
intent of this Section 30 to prohibit Tenant from using the
Premises for the Permitted Use.  Tenant
may operate its business according to prudent industry practices so long as the
use or presence of Hazardous Materials is strictly and properly monitored
according to all then applicable Environmental Requirements.  As a material inducement to Landlord to
allow Tenant to use Hazardous Materials in connection with its business, Tenant
agrees to deliver to Landlord prior to the Commencement Date a list identifying
each type of Hazardous Materials to be brought upon, kept, used, stored,
handled, treated, generated on, or released or disposed of from, the Premises
and setting forth any and all governmental approvals or permits required in
connection with the presence, use, storage, handling, treatment, generation,
release or disposal of such Hazardous Materials on or from the Premises (“Hazardous
Materials List”).  Tenant
shall deliver to Landlord an updated Hazardous Materials List at least once a
year and otherwise within fifteen (15) days of Landlord’s request (no more than
3 times per calendar year).  Tenant
shall deliver to Landlord true and correct copies of the following documents
(the “Haz
Mat Documents”) relating to the use, storage, handling, treatment,
generation, release or disposal of Hazardous Materials prior to the
Commencement Date, or if unavailable at that time, 


 


22

















 


concurrent
with the receipt from or submission to a Governmental Authority:  permits; approvals; reports and
correspondence; storage and management plans, notice of violations of any Legal
Requirements; plans relating to the installation of any storage tanks to be
installed in or under the Project (provided, said installation of tanks shall only
be permitted after Landlord has given Tenant its written consent to do so,
which consent may be withheld in Landlord’s sole and absolute discretion); all
closure plans or any other documents required by any and all federal, state and
local Governmental Authorities for any storage tanks installed in, on or under
the Project for the closure of any such tanks; and a Surrender Plan (to the
extent surrender in accordance with Section 28 cannot be
accomplished in 3 months).  Tenant is
not required, however, to provide Landlord with any portion(s) of the Haz Mat
Documents containing information of a proprietary nature which, in and of
themselves, do not contain a reference to any Hazardous Materials or hazardous
activities.  It is not the intent of
this Section to provide Landlord with information which could be
detrimental to Tenant’s business should such information become possessed by
Tenant’s competitors.


 


(c)                                  Tenant Representation and Warranty.  Tenant hereby represents and warrants to
Landlord that other than as previously disclosed to Landlord in writing (i)
neither Tenant nor any of its legal predecessors has been required by any prior
landlord, lender or Governmental Authority at any time to take remedial action
in connection with Hazardous Materials contaminating a property which
contamination was permitted by Tenant or such predecessor or resulted from
Tenant’s or such predecessor’s action or use of the property in question, and
(ii) Tenant is not presently subject to any enforcement order issued by any Governmental
Authority in connection with the use, storage, handling, treatment, generation,
release or disposal of Hazardous Materials (including, without limitation, any
order related to the failure to make a required reporting to any Governmental
Authority).


 


(d)                                 Testing.  Landlord shall have the right, at Tenant’s
expense, from time to time, to conduct tests of the Premises to determine
whether any contamination of the Premises or the Project has occurred as a
result of Tenant’s use if Landlord has a reasonable basis to believe such
contamination exists.  In addition, at
any time, and from time to time, prior to the expiration or earlier termination
of the Term, Landlord shall have the right to conduct tests of the Premises and
the Project at Landlord’s sole cost and expense.  In connection with any such testing, upon the request of
Landlord, Tenant shall deliver to Landlord or its consultant such
non-proprietary information concerning the use of Hazardous Materials in or
about the Premises by Tenant or any Tenant Party.  If contamination has occurred for which Tenant is liable under
this Section 30, Tenant shall pay all costs to conduct such
tests.  If no such contamination is
found, Landlord shall pay the costs of such tests (which shall not constitute
an Operating Expense).  Landlord shall
provide Tenant with a copy of all third party, non-confidential reports and
tests of the Premises made by or on behalf of Landlord during the Term without
representation or warranty and subject to a confidentiality agreement.  Tenant shall, at its sole cost and expense,
promptly and satisfactorily remediate any environmental conditions identified
by such testing in accordance with all Environmental Requirements.  Landlord’s receipt of or satisfaction with
any environmental assessment in no way waives any rights which Landlord may
have against Tenant.


 


(e)                                  Underground Tanks.  If underground or other storage tanks
storing Hazardous Materials located on the Premises or the Project are used by
Tenant or are hereafter placed on the Premises or the Project by Tenant, Tenant
shall install, use, monitor, operate, maintain, upgrade and manage such storage
tanks, maintain appropriate records, obtain and maintain appropriate insurance,
implement reporting procedures, properly close any underground 


 


23

















 


storage tanks,
and take or cause to be taken all other actions necessary or required under
applicable state and federal Legal Requirements, as such now exists or may
hereafter be adopted or amended in connection with the installation, use,
maintenance, management, operation, upgrading and closure of such storage
tanks.


 


(f)                                    Tenant’s
Obligations.  Tenant’s
obligations under this Section 27 shall survive the expiration or
earlier termination of the Lease. 
During any period of time after the expiration or earlier termination of
this Lease required by Tenant or Landlord to complete the removal from the
Premises of any Hazardous Materials (including, without limitation, the release
and termination of any licenses or permits restricting the use of the Premises
and the completion of the approved Surrender Plan), Tenant shall continue to
pay the full Rent in accordance with this Lease for any portion of the Premises
not relet by Landlord in Landlord’s sole discretion, which Rent shall be
prorated daily.


 


(g)                                 Definitions.  As used herein, the term “Environmental
Requirements” means all applicable present and future statutes,
regulations, ordinances, rules, codes, judgments, orders or other similar enactments
of any Governmental Authority regulating or relating to health, safety, or
environmental conditions on, under, or about the Premises or the Project, or
the environment, including without limitation, the following:  the Comprehensive Environmental Response,
Compensation and Liability Act; the Resource Conservation and Recovery Act; and
all state and local counterparts thereto, and any regulations or policies
promulgated or issued thereunder.  As
used herein, the term “Hazardous Materials” means and includes any
substance, material, waste, pollutant, or contaminant listed or defined as
hazardous or toxic, or regulated by reason of its impact or potential impact on
humans, animals and/or the environment under any Environmental Requirements,
asbestos and petroleum, including crude oil or any fraction thereof, natural
gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or
mixtures of natural gas and such synthetic gas).  As defined in Environmental Requirements, Tenant is and shall be
deemed to be the “operator” of Tenant’s “facility” and the “owner”
of all Hazardous Materials brought on the Premises by Tenant or any Tenant
Party, and the wastes, by-products, or residues generated, resulting, or
produced therefrom.


 


31.                                 Tenant’s Remedies/Limitation of
Liability.  Landlord shall not be in
default hereunder unless Landlord fails to perform any of its obligations
hereunder within 30 days after written notice from Tenant specifying such
failure (unless such performance will, due to the nature of the obligation,
require a period of time in excess of 30 days, then after such period of time
as is reasonably necessary).  Upon any
default by Landlord, Tenant shall give notice by registered or certified mail to
any Holder of a Mortgage covering the Premises and to any landlord of any lease
of property in or on which the Premises are located and Tenant shall offer such
Holder and/or landlord a reasonable opportunity to cure the default, including
time to obtain possession of the Project by power of sale or a judicial action
if such should prove necessary to effect a cure but no longer than 90 days; provided
Landlord shall have furnished to Tenant in writing the names and addresses of
all such persons who are to receive such notices.  All obligations of Landlord hereunder shall be construed as
covenants, not conditions; and, except as may be otherwise expressly provided
in this Lease, Tenant may not terminate this Lease for breach of Landlord’s
obligations hereunder.


 


Notwithstanding the foregoing, if any claimed
Landlord default hereunder will immediately, materially and adversely affect
Tenant’s ability to conduct its business in the Premises (a “Material
Landlord Default”), Tenant shall, as soon as reasonably possible,
but in any event within 2 business days of obtaining knowledge of such claimed
Material Landlord 


 


24

















 


Default, give Landlord written notice of such claim and telephonic
notice to Tenant’s principal contact with Landlord.  Landlord shall then have 2 business days to commence cure of such
claimed Material Landlord Default and shall diligently prosecute such cure to
completion.  If such claimed Material
Landlord Default is not a default by Landlord hereunder, or if Tenant failed to
give Landlord the notice required hereunder within 2 business days of learning
of the conditions giving rise to the claimed Material Landlord Default,
Landlord shall be entitled to recover from Tenant, as Additional Rent, any
costs incurred by Landlord in connection with such cure in excess of the costs,
if any, that Landlord would otherwise have been liable to pay hereunder.  If Landlord fails to commence cure of any
claimed Material Landlord Default as provided above, Tenant may commence and
prosecute such cure to completion, and shall be entitled to recover the costs
of such cure (but not any consequential or other damages) from Landlord, to the
extent of Landlord’s obligation to cure such claimed Material Landlord Default
hereunder, subject to the limitations set forth in the immediately preceding
sentence of this paragraph and the other provisions of this Lease.


 


All
obligations of Landlord under this Lease will be binding upon Landlord only
during the period of its ownership of the Premises and not thereafter.  The term “Landlord” in this Lease shall
mean only the owner for the time being of the Premises.  Upon the transfer by such owner of its
interest in the Premises, such owner shall thereupon be released and discharged
from all obligations of Landlord thereafter accruing, but such obligations
shall be binding during the Term upon each new owner for the duration of such
owner’s ownership.


 


32.                                 Inspection and Access.  Landlord and its agents, representatives,
and contractors may enter the Premises during business hours on not less than
48 hours advance written notice (except in the case of emergencies in which
case no such notice shall be required and such entry may be at any time) for
the purpose of effecting any repairs required or permitted pursuant to this Lease,
inspecting the Premises, showing the Premises to prospective purchasers and,
during the last year of the Term, to prospective tenants or for any other
business purpose, provided that Tenant shall have the right to have an employee
accompany Landlord, its agents, representatives, and contractors at all times
and to impose reasonable security measures (provided that such security
measures shall not prohibit Landlord from having access to all areas of the
Premises).  Landlord shall use
commercially reasonable efforts to coordinate its access to the Premises
pursuant to this Section 32 with Tenant to avoid interference with
Tenant’s business operations in the Premises. 
Tenant shall not be liable to Landlord for injuries sustained as a
result of Landlord’s or its agents’, representatives’, and contractors’ entry
onto the Premises.  Landlord may erect a
suitable sign on the Premises stating the Premises are available to let or that
the Project is available for sale. 
Landlord may grant easements, make public dedications, designate common
areas and create restrictions on or about the Premises, provided that no
such easement, dedication, designation or restriction materially, adversely
affects Tenant’s use or occupancy of the Premises for the Permitted Use.  At Landlord’s request, Tenant shall execute
such instruments as may be necessary for such easements, dedications or
restrictions.  Tenant shall at all
times, except in the case of emergencies, have the right to escort Landlord or
its agents, representatives, contractors or guests while the same are in the
Premises, provided such escort does not materially and adversely affect
Landlord’s access rights hereunder.


 


33.                                 Security.  Tenant acknowledges and agrees that security
devices and services, if any, while intended to deter crime may not in given
instances prevent theft or other criminal acts and that Landlord is not
providing any security services with respect to the Premises.  Tenant agrees that Landlord shall not be liable
to Tenant for, and Tenant waives any claim against Landlord with respect to,
any loss by theft or any other damage suffered or incurred by 


 


25

















 


Tenant
in connection with any unauthorized entry into the Premises or any other breach
of security with respect to the Premises. 
Tenant shall be solely responsible for the personal safety of Tenant’s
officers, employees, agents, contractors, guests and invitees while any such
person is in, on or about the Premises and/or the Project.  Tenant shall at Tenant’s cost obtain
insurance coverage to the extent Tenant desires protection against such
criminal acts.


 


34.                                 Force Majeure.  Neither Landlord nor Tenant shall be held
responsible for delays in the performance of its obligations hereunder when
caused by strikes, lockouts, labor disputes, weather, natural disasters,
inability to obtain labor or materials or reasonable substitutes therefor,
governmental restrictions, governmental regulations, governmental controls,
delay in issuance of permits, enemy or hostile governmental action, civil
commotion, fire or other casualty, and other causes beyond the reasonable
control of such party (“Force Majeure”).  The foregoing shall not apply to any payment of money or monetary
defaults under this Lease.


 


35.                                 Brokers, Entire Agreement,
Amendment.  Landlord and Tenant each
represents and warrants that it has not dealt with any broker, agent or other
person (collectively, “Broker) in connection with this transaction
and that no Broker brought about this transaction, other than Cushman &
Wakefield (“C&W”).  Tenant
shall be solely responsible for payment to C&W of any commission claimed by
C&W in connection with this Lease, and agrees to indemnify and hold
Landlord harmless from any claims for such commission or other compensation by
C&W.  Landlord and Tenant each
hereby agree to indemnify and hold the other harmless from and against any
claims by any Broker, other than the broker, if any named in this Section 35,
claiming a commission or other form of compensation by virtue of having dealt
with Tenant or Landlord, as applicable, with regard to this leasing
transaction.


 


36.                                 Limitation on Landlord’s
Liability.  NOTWITHSTANDING ANYTHING SET
FORTH HEREIN OR IN ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT TO THE
CONTRARY:  (A) LANDLORD SHALL NOT BE
LIABLE TO TENANT OR ANY OTHER PERSON FOR (AND TENANT AND EACH SUCH OTHER PERSON
ASSUME ALL RISK OF) LOSS, DAMAGE OR INJURY, WHETHER ACTUAL OR CONSEQUENTIAL
TO:  TENANT’S PERSONAL PROPERTY OF EVERY
KIND AND DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADE FIXTURES, EQUIPMENT,
INVENTORY, SCIENTIFIC RESEARCH, SCIENTIFIC EXPERIMENTS, LABORATORY ANIMALS,
PRODUCT, SPECIMENS, SAMPLES, AND/OR SCIENTIFIC, BUSINESS, ACCOUNTING AND OTHER
RECORDS OF EVERY KIND AND DESCRIPTION KEPT AT THE PREMISES AND ANY AND ALL
INCOME DERIVED OR DERIVABLE THEREFROM; (B) THERE SHALL BE NO PERSONAL RECOURSE
TO LANDLORD FOR ANY ACT OR OCCURRENCE IN, ON OR ABOUT THE PREMISES OR ARISING
IN ANY WAY UNDER THIS LEASE OR ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT
WITH RESPECT TO THE SUBJECT MATTER HEREOF AND ANY LIABILITY OF LANDLORD
HEREUNDER SHALL BE STRICTLY LIMITED SOLELY TO LANDLORD’S INTEREST IN THE
PROJECT OR ANY PROCEEDS FROM SALE OR CONDEMNATION THEREOF AND ANY INSURANCE
PROCEEDS PAYABLE IN RESPECT OF LANDLORD’S INTEREST IN THE PROJECT OR IN
CONNECTION WITH ANY SUCH LOSS; AND (C) IN NO EVENT SHALL ANY PERSONAL LIABILITY
BE ASSERTED AGAINST ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
CONTRACTORS.  UNDER NO CIRCUMSTANCES
SHALL LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
CONTRACTORS BE LIABLE FOR INJURY TO TENANT’S BUSINESS OR FOR ANY LOSS OF INCOME
OR PROFIT THEREFROM.


 


26

















 


37.                                 Severability.  If any clause or provision of this
Lease is illegal, invalid or unenforceable under present or future laws, then
and in that event, it is the intention of the parties hereto that the remainder
of this Lease shall not be affected thereby. 
It is also the intention of the parties to this Lease that in lieu of
each clause or provision of this Lease that is illegal, invalid or
unenforceable, there be added, as a part of this Lease, a clause or provision
as similar in effect to such illegal, invalid or unenforceable clause or
provision as shall be legal, valid and enforceable, unless the absence
of the illegal, invalid or unenforceable clauses or provision(s) adversely
affects the substantive rights of one or both of the parties.


 


38.                                 No Termination, Abatement, etc.  Except as otherwise specifically provided
herein, Tenant shall remain bound by this Lease in accordance with its terms
and shall neither take any action to modify, surrender or terminate the same,
nor seek nor be entitled to any abatement, deduction, deferment or reduction of
Rent, or set-off against the Rent, nor shall the respective obligations of
Landlord and Tenant be otherwise affected by reason of (a) any damage to, or
destruction of, the Premises or any portion thereof from whatever cause, or any
Taking of the Premises or any portion thereof, (b) any claim which Tenant has
or might have against Landlord or by reason of any default or breach of any
warranty by Landlord under this Lease or any other agreement between Landlord
and Tenant, or to which Landlord and Tenant are parties, (c) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Landlord or any assignee
or transferee of Landlord, or any action with respect to this Lease that may be
taken by a trustee or receiver of Landlord or any assignee of Landlord or by
any court in any such proceeding, or (d) for any other cause whether similar or
dissimilar to any of the foregoing. 
Tenant hereby specifically waives all rights, arising from any occurrence
whatsoever, which may now or hereafter be available to Tenant by law or in
equity to (i) modify, surrender or terminate this Lease or quit or surrender
the Premises or any portion thereof, or (ii) entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder, except as otherwise specifically provided in this Lease.  The obligations of Landlord and Tenant
hereunder shall be separate and independent covenants and agreements and the
Base Rent and Additional Rent and all other sums payable by Tenant hereunder
shall continue to be payable in all events unless the obligations to pay the
same shall be terminated pursuant to the express provisions of this Lease.


 


39.                                 Purchase Option


 


(a)                                  Grant of Option.  Landlord hereby grants to Tenant an option
(the “Option”)
to purchase the Premises for the Purchase Price (as defined below) upon all the
terms and conditions to be set forth in the Purchase Agreement (as defined
below).


 


(b)                                 Option Exercise Date.  The Option must be exercised by Tenant, if at
all, between the Commencement Date and the last day of the 14th year
of the initial Term (the “Term Expiration Option Period”).  Notwithstanding the foregoing, in the event
that: (1) Tenant receives a copy of a Notice of Sale (as described in Section 39(e)
below), or (2) Landlord elects to terminate the Lease or elects not to proceed
with the repair and restoration of the Premises pursuant to Sections 18 or
19 of this Lease, the Option shall be accelerated to expire 30 days after
receipt of such Notice of Sale or Landlord’s election to terminate this Lease
or Landlord’s election not to repair or restore, as the case may be, (“Accelerated
Option Period”), and the Purchase Price shall be adjusted as set
forth in Section 39(e).


 


(c)                                  Exercise of Option.  Tenant shall notify Landlord of Tenant’s
election to exercise the Option by giving Landlord written notice (the “Notice of
Exercise”) at the 


 


27

















 


addresses and
in the manner set forth in this Lease, and within the time frames required by Section 39(b).


 


(d)                                 Purchase and Sale.  Upon exercise of the Option by Tenant,
Landlord agrees to sell the Premises to Tenant, and Tenant agrees to purchase
the Premises from Landlord, on all of the terms, covenants and conditions to be
set forth in a purchase agreement to be negotiated and entered into by Landlord
and Tenant within 30 days after Tenant’s exercise of the Option, which purchase
agreement shall be consistent with the terms of this Section 39
(the “Purchase
Agreement”).  Tenant agrees
that its purchase of the Premises shall be “as-is” (except as expressly
provided herein), without any representation, warranties or indemnities from
Landlord, with no due diligence or inspection rights.  The Purchase Agreement shall provide that (1) Landlord shall
convey the Premises to Tenant by grant deed and shall remove any deeds of trust
and mortgages granted by Landlord, and any mechanic’s liens or monetary
judgment liens caused or suffered by Landlord (provided the same are not the
result of Tenant’s or its subtenants’ actions or Tenant’s or its subtenants’
failure to pay any amounts owed by Tenant or its subtenants) and terminate any
service contracts entered into by Landlord for the Premises upon the sale of
the Premises to Tenant in accordance with the foregoing, subject to Tenant’s
payment of the Purchase Price as provided below, and (2) closing costs shall be
apportioned in the manner customary for San Diego County.  In addition, the Purchase Agreement shall
provide that (A) Landlord shall not have conveyed any air rights which are part
of the Premises to any third party, (B) Landlord shall not have sold any
parking rights to a third party (except in connection with CC&R’s or easements
for the business park of which the Premises is a part) and (C) Landlord shall
not have entered into any leases or other occupancy agreements or purchase
options with any third party which would be binding on Tenant or the Premises
following the closing.  In the event
Landlord and Tenant are unable to agree on the form of Purchase Agreement
within such 30 day period, the purchase transaction shall be consummated
pursuant to the terms of this Section 39 without a Purchase Agreement.  The escrow for the purchase shall be handled
by Chicago Title Company, provided if Chicago Title Company is no longer in
existence, the title company shall be mutually agreeable to Landlord and
Tenant).


 


(e)                                  Purchase Price.  The Purchase Price for the Property shall be
an amount equal to the calculation of (a) the amount of the annual Base Rent
for the last year of the Term, divided by (b) 9% (the “Purchase Price”).  Notwithstanding the foregoing, (i) in the
event Tenant exercises the Option as a result of a Notice of Sale, the Purchase
Price shall be adjusted to the amount the Holder of the Mortgage would declare
as its “full
credit bid” in a non-judicial foreclosure of its lien pursuant to
the Notice of Sale, and (ii) in the event Tenant exercises the Option as a
result of Landlord’s election to terminate the Lease or election not to proceed
with the repair or restoration of the Premises pursuant to Sections 18 or 19,
the Purchase Price shall be adjusted to be the greater of (x) the calculation
of (a) the amount of the Base Rent for the 12 months after the date the Option
is exercised, divided by (b) 9.5%, less the amount of any insurance and
condemnation proceeds received by Landlord or (y) the amount required to
discharge all deeds of trust or mortgages granted by Landlord which encumber
the Premises after application of any insurance and condemnation proceeds
received by Landlord to payment thereof. 
Landlord covenants that during the Term any deeds of trust or mortgages
granted by Landlord shall not secure liens in amounts in excess of the Purchase
Price (as calculated pursuant to the first sentence of this Section 39(e)
as of the date such mortgages or deeds of trust are recorded against the
Premises as if Tenant were exercising the Purchase Option on such date).


 


28

















 


(f)                                    Foreclosure.  Tenant shall be entitled to receive a copy
of any Notice of Default and any Notice of Sale recorded by a Holder of a
Mortgage encumbering the Property or by the trustee named therein.  Notwithstanding anything to the contrary
contained in the Section 36, in the event a Holder of a Mortgage
forecloses its lien (judicially or non-judicially), or accepts a deed in lieu
of foreclosure from Landlord, after expiration of the Accelerated Option Period,
then the Option shall terminate and the provisions of this Section 36
shall be null and void, and of no further force and effect.


 


(g)                                 Rights Personal.  The Purchase Option is personal to Tenant
and is not assignable without Landlord’s consent, which may be granted or
withheld in Landlord’s sole discretion separate and apart from any consent by
Landlord to an assignment of Tenant’s interest in the Lease.


 


(h)                                 Exceptions.  Notwithstanding anything set forth above to
the contrary, the Purchase Option shall not be in effect and Tenant may not
exercise the Purchase Option during any period of time that Tenant is in
Default under any provision of this Lease.


 


(i)                                     No
Extensions.  The period of
time within which any Purchase Option may be exercised shall not be extended or
enlarged by reason of Tenant’s inability to exercise the Purchase Option.


 


40.                                 Miscellaneous.


 


(a)                                  Notices.  All notices or other communications between
the parties shall be in writing and shall be deemed duly given upon delivery or
refusal to accept delivery by the addressee thereof if delivered in person, or
upon actual receipt if delivered by reputable overnight guaranty courier,
addressed and sent to the parties at their addresses set forth above.  Landlord and Tenant may from time to time by
written notice to the other designate another address for receipt of future
notices.


 


(b)                                 Joint and Several Liability.  If and when included within the term “Tenant,”
as used in this instrument, there is more than one person or entity, each shall
be jointly and severally liable for the obligations of Tenant.


 


(c)                                  Recordation.  Upon the Commencement Date, Landlord and
Tenant will execute a memorandum of lease and cause the same to be recorded in
the public records of San Diego County. 
At the expiration or earlier termination of this Lease, Tenant agrees to
execute a quitclaim deed or other required document necessary to remove such
memorandum from the public records.


 


(d)                                 Interpretation.  The normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Lease or any exhibits or
amendments hereto.  Words of any gender
used in this Lease shall be held and construed to include any other gender, and
words in the singular number shall be held to include the plural, unless the
context otherwise requires.  The
captions inserted in this Lease are for convenience only and in no way define,
limit or otherwise describe the scope or intent of this Lease, or any provision
hereof, or in any way affect the interpretation of this Lease.


 


(e)                                  Not Binding Until Executed.  The submission by Landlord to Tenant of this
Lease shall have no binding force or effect, shall not constitute an option for
the leasing of the 


 


29

















 


Premises, nor
confer any right or impose any obligations upon either party until execution of
this Lease by both parties.


 


(f)                                    Limitations
on Interest.  It is expressly
the intent of Landlord and Tenant at all times to comply with applicable law
governing the maximum rate or amount of any interest payable on or in
connection with this Lease.  If
applicable law is ever judicially interpreted so as to render usurious any
interest called for under this Lease, or contracted for, charged, taken,
reserved, or received with respect to this Lease, then it is Landlord’s and
Tenant’s express intent that all excess amounts theretofore collected by
Landlord be credited on the applicable obligation (or, if the obligation has
been or would thereby be paid in full, refunded to Tenant), and the provisions
of this Lease immediately shall be deemed reformed and the amounts thereafter
collectible hereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder.


 


(g)                                 Choice of Law.  Construction and interpretation of this
Lease shall be governed by the internal laws of the state in which the Premises
are located, excluding any principles of conflicts of laws.


 


(h)                                 Time.  Time is of the essence as to the performance
of Tenant’s obligations under this Lease.


 


(i)                                     Incorporation
by Reference.  All exhibits
and addenda attached hereto are hereby incorporated into this Lease and made a
part hereof.  If there is any conflict
between such exhibits or addenda and the terms of this Lease, such exhibits or
addenda shall control.


 


(j)                                     Hazardous Activities.  Notwithstanding any other provision of this
Lease, Landlord, for itself and its employees, agents and contractors, reserves
the right to refuse to perform any repairs or services in any portion of the
Premises which, pursuant to Tenant’s routine safety guidelines, practices or
custom or prudent industry practices, require any form of protective clothing
or equipment other than safety glasses. 
In any such case, Tenant shall contract with parties who are acceptable
to Landlord, in Landlord’s reasonable discretion, for all such repairs and
services.


 


(k)                                  Signage.  Tenant shall have the right to install
identification signage on the Premises, including without limitation the
exterior of the Building. without Landlord’s consent provided Tenant first
obtains all approvals required pursuant to all Legal Requirements and the CC&R’s.


 


(l)                                     Owners’
Associations.  Tenant, at its
option, may notify Landlord of its position and concerns regarding any issue
coming before an owners’ association established pursuant to the
CC&R’s.  Landlord agrees to take
into consideration Tenant’s position and concerns in voting on such issues as a
member of such owners’ association.


 


(m)                               Arbitration.


 


(i)                                     Within 10 days of Tenant’s notice to
Landlord of its election to arbitrate Landlord’s decision to terminate this
Lease pursuant to Section 19 hereof, Landlord and Tenant shall meet
and make a good faith attempt to mutually appoint a single Arbitrator (as
defined below) to determine whether the applicable Taking shall either
prevent or materially interfere with Tenant’s use of the Premises or materially
interfere with or 


 


30

















 


impair
Landlord’s ownership or operation of the Project.  If Landlord and Tenant are
unable to agree upon a single Arbitrator, then each shall, by written notice
delivered to the other within 10 days after the meeting, select an
Arbitrator.  If either party fails to
timely give notice of its selection for an Arbitrator, the other party’s
decision as to termination of this Lease shall be binding.  The 2 Arbitrators so appointed shall, within
5 business days after their appointment, appoint a third Arbitrator.  If the 2 Arbitrators so selected cannot
agree on the selection of the third Arbitrator within the time above specified,
then either party, on behalf of both parties, may request such appointment of
such third Arbitrator by application to any state court of general jurisdiction
in the jurisdiction in which the Premises are located, upon 10 days prior
written notice to the other party of such intent.


 


(ii)                                  The
decision of the Arbitrator(s) shall be made within 30 days after the
appointment of a single Arbitrator or the third Arbitrator, as applicable.  The decision of the single Arbitrator shall
be final and binding upon the parties. 
Each party shall pay the fees and expenses of the Arbitrator appointed
by or on behalf of such party and the fees and expenses of the third Arbitrator
shall be borne equally by both parties.


 


(iii)                               An
“Arbitrator”
shall be any person appointed by or on behalf of either party or appointed
pursuant to the provisions hereof and: 
(i) shall be (A) a member of the American Institute of Real Estate
Appraisers with not less than 10 years of experience in the appraisal of
improved office and high tech industrial real estate in the greater San Diego
metropolitan area, or (B) a licensed commercial real estate broker with not
less than 15 years experience representing landlords and/or tenants in the
leasing of high tech or life sciences space in the greater San Diego
metropolitan area, (ii) devoting substantially all of their time to
professional appraisal or brokerage work, as applicable, at the time of
appointment and (iii) be in all respects impartial and disinterested.


 


(n)                                 Right to Contest.  Notwithstanding any other provision of this
Lease, Tenant shall not be required to comply with a determination by a
Government Authority as required by Section 7 (such non-compliance
referred to collectively as “Permitted Violations”), so long as Tenant
shall contest, in good faith, the existence, amount or validity thereof, the amount
of the damages caused thereby, or the extent of its or Landlord’s liability
therefor by appropriate proceedings which shall operate during the pendency
thereof to prevent or stay (i) the collection of, or other realization
upon, the Permitted Violation so contested, (ii) the sale, forfeiture or
loss of any of the Premises or any Rent to satisfy or to pay any damages caused
by any Permitted Violation, (iii) any interference with the use or
occupancy of any of the Premises, (iv) any interference with the payment
of any Rent, or (v) the cancellation or increase in the rate of any
insurance policy or a statement by the carrier that coverage will be
denied.  Each such contest shall be
promptly and diligently prosecuted by Tenant to a final conclusion, except that
Tenant, so long as the conditions of this Section 40(n) are at all
times complied with, has the right to attempt to settle or compromise such
contest through negotiations.  Tenant
shall pay any and all losses, judgments, decrees and costs reasonably incurred
in connection with any such contest and shall, promptly after the final
determination of such contest, fully pay and discharge the amounts which shall
be levied, assessed, charged or imposed or be determined to be payable therein
or in connection therewith, together with all penalties, fines, interest and
costs thereof or in connection therewith, and perform all acts the performance
of which shall be ordered or decreed as a result thereof.  No such contest shall (1) subject Landlord
to the risk of any civil or 


 


31

















 


criminal
liability or (2) result in the imposition of any liens against the Property or
(3) impose any fines, charges or other fees or costs on Landlord.


 


41.                                 Right to Extend Term.  Tenant shall have the right to extend the
Term of the Lease upon the following terms and conditions:


 


(a)                                  Extension Rights.  Tenant shall have 2 consecutive rights
(each, an “Extension Right”) to extend the term of this Lease for 5 years
each (each, an “Extension Term”) on the same terms and conditions as this
Lease (other than Base Rent) by giving Landlord written notice of its election
to exercise each Extension Right at least 12 months prior, and no earlier than
18 months prior, to the expiration of the Base Term of the Lease or the
expiration of any prior Extension Term.


 


Upon the commencement of any Extension Term, Base
Rent shall be payable at the greater of (1) the Market Rate (as defined below)
or (2) 102.5% of the Base Rent in effect for the last year of the Initial
Term.  Base Rent shall thereafter be
adjusted on each annual anniversary of the commencement of such Extension Term
by a percentage as determined by Landlord and agreed to by Tenant at the time
the Market Rate is determined.  As used
herein, “Market
Rate” shall mean the then market rental rate for comparable, fully
improved office/wet laboratory space in the Sorrento Valley and Sorrento Mesa
submarkets of San Diego County as determined by Landlord and agreed to by
Tenant.


 


If, on or before the date which is 270 days prior
to the expiration of the Base Term of this Lease, or the expiration of any
prior Extension Term, Tenant has not agreed with Landlord’s determination of
the Market Rate and the rent escalations during such subsequent Extension Term
after negotiating in good faith, Tenant may by written notice to Landlord not
later than 120 days prior to the expiration of the Base Term of this Lease, or
the expiration of any then effective Extension Term, elect arbitration as
described in Section  41(b) below. 
If Tenant does not elect such arbitration, Tenant shall be deemed to
have waived any right to extend, or further extend, the Term of the Lease and
all of the remaining Extension Rights shall terminate.


 


(b)                                 Arbitration.


 


(i)                                     Within 10 days of Tenant’s notice to
Landlord of its election to arbitrate Market Rate and escalations, each party
shall deliver to the other a proposal containing the Market Rate and
escalations that the submitting party believes to be correct (“Extension
Proposal”).  If either party
fails to timely submit an Extension Proposal, the other party’s submitted
proposal shall determine the Base Rent and escalations for the Extension
Term.  If both parties submit Extension
Proposals, then Landlord and Tenant shall meet within 7 days after delivery of
the last Extension Proposal and make a good faith attempt to mutually appoint a
single Arbitrator (and defined below) to determine the Market Rate and
escalations.  If Landlord and Tenant are
unable to agree upon a single Arbitrator, then each shall, by written notice
delivered to the other within 10 days after the meeting, select an
Arbitrator.  If either party fails to
timely give notice of its selection for an Arbitrator, the other party’s submitted
proposal shall determine the Base Rent for the Extension Term.  The 2 Arbitrators so appointed shall, within
5 business days after their appointment, appoint a third Arbitrator.  If the 2 Arbitrators so selected cannot
agree on the selection of the third Arbitrator within the time above specified,
then either party, on behalf of both parties, may request such appointment of
such third Arbitrator by application to any state court of general jurisdiction
in the jurisdiction in which the Premises are located, upon 10 days prior
written notice to the other party of such intent.


 


32

















 


(ii)                                  The decision of the Arbitrator(s) shall be
made within 30 days after the appointment of a single Arbitrator or the third
Arbitrator, as applicable.  The decision
of the single Arbitrator shall be final and binding upon the parties.  The average of the two closest Arbitrators
in a three Arbitrator panel shall be final and binding upon the parties.  Each party shall pay the fees and expenses
of the Arbitrator appointed by or on behalf of such party and the fees and
expenses of the third Arbitrator shall be borne equally by both parties.  If the Market Rate and escalations are not
determined by the first day of the Extension Term, then Tenant shall pay
Landlord Base Rent in an amount equal to the Base Rent in effect immediately
prior to the Extension Term and increased by the Rent Adjustment Percentage
until such determination is made.  After
the determination of the Market Rate and escalations, the parties shall make
any necessary adjustments to such payments made by Tenant.  Landlord and Tenant shall then execute an
amendment recognizing the Market Rate and escalations for the Extension Term.


 


(iii)                               An “Arbitrator” shall be any person appointed
by or on behalf of either party or appointed pursuant to the provisions hereof
and:  (i) shall be (A) a member of the
American Institute of Real Estate Appraisers with not less than 10 years of
experience in the appraisal of improved office, high tech and wet laboratory
industrial real estate in the greater San Diego metropolitan area, or (B) a
licensed commercial real estate broker with not less than 15 years experience
representing landlords and/or tenants in the leasing of high tech or life
sciences space in the greater San Diego metropolitan area, (ii) devoting
substantially all of their time to professional appraisal or brokerage work, as
applicable, at the time of appointment and (iii) be in all respects impartial
and disinterested.


 


(c)                                  Rights Personal.  Extension Rights are personal to Tenant and
are not assignable without Landlord’s consent, which may be granted or withheld
in Landlord’s sole discretion separate and apart from any consent by Landlord
to an assignment of Tenant’s interest in the Lease.


 


(d)                                 Exceptions.  Notwithstanding anything set forth above to
the contrary, Extension Rights shall not be in effect and Tenant may not
exercise any of the Extension Rights:


 


(i)                                     during
any period of time that Tenant is in Default under any provision of this Lease;
or


 


(ii)                                  if
Tenant has been in Default under any provision of this Lease 3 or more times,
whether or not the Defaults are cured, during the 12 month period immediately
prior to the date that Tenant intends to exercise an Extension Right, whether
or not the Defaults are cured.


 


(e)                                  No Extensions.  The period of time within which any
Extension Rights may be exercised shall not be extended or enlarged by reason
of Tenant’s inability to exercise the Extension Rights.


 


(f)                                    Termination.  The Extension Rights shall terminate and be
of no further force or effect even after Tenant’s due and timely exercise of an
Extension Right, if, after such exercise, but prior to the commencement date of
an Extension Term, (i) Tenant fails to timely cure any default by Tenant under
this Lease; or (ii) Tenant has Defaulted 3 or more times during the period from
the date of the exercise of an Extension Right to the date of the commencement
of the Extension Term, whether or not such Defaults are cured.


 


33

















 


IN
WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and
year first above written.


 


	
  LANDLORD:

  	
  ARE – NANCY RIDGE NO. 3, LLC,

  
	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Alexandria Real Estate
  Equities, L.P.,

  
	
   

  	
   

  	
  a Delaware limited
  partnership,

  
	
   

  	
   

  	
  its managing member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  ARE-QRS Corp.,

  
	
   

  	
   

  	
   

  	
  a Maryland corporation,

  
	
   

  	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
  Execution Date:
  December 30, 2003

  	
   

  	
   

  	
  By:

  	
  /s/ Peter J. Nelson

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Peter J. Nelson

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
  Senior VP & Chief Financial
  Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TENANT:

  	
  ARENA PHARMACEUTICALS, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
  Execution Date: December
  30, 2003

  	
   

  	
  By:

  	
   /s/ Jack Lief

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jack Lief

  	
   

  
	
   

  	
   

  	
  Its:

  	
  President and Chief
  Executive Officer

  	
   

  
									



 


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EXHIBIT A TO LEASE


 


DESCRIPTION OF PROJECT


 


PARCEL A:


 


PARCEL 9 OF PARCEL MAP NO.
17347, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA,
ACCORDING TO MAP THEREOF FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN
DIEGO COUNTY APRIL 13, 1994 AS DOCUMENT NO. 94-242762 OFFICIAL RECORDS.


 


PARCEL B:


 


A NONEXCLUSIVE EASEMENT FOR
INGRESS AND EGRESS BY VEHICULAR AND PEDESTRIAN TRAFFIC AND VEHICLE PARKING
UPON, OVER AND ACROSS THE “COMMON AREA” FOR THE BENEFIT OF THE OWNERS, PRESENT
AND FUTURE, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, TENANTS, CUSTOMERS AND
INVITEES, TOGETHER WITH A NONEXCLUSIVE EASEMENT UNDER AND THROUGH THE “COMMON
AREA” FOR THE INSTALLATION, MAINTENANCE, REMOVAL AND REPLACEMENT OF WATER
DRAINAGE SYSTEMS OR STRUCTURES, WATER MAINS, SEWERS, WATER SPRINKLER SYSTEM
LINES, TELEPHONE OR ELECTRICAL CONDUITS OR SYSTEMS, GAS MAINS AND ANY OTHER
PUBLIC UTILITIES AND/OR SERVICE EASEMENTS, AS CREATED, SET FORTH, DEFINED,
DESCRIBED AND GRANTED IN THAT CERTAIN “DECLARATION OF RECIPROCAL EASEMENTS OF
THE SORRENTO RIDGE BUSINESS PARK PLANNED INDUSTRIAL DEVELOPMENT” RECORDED APRIL
13, 1994 AS DOCUMENT NO. 94-242763 OFFICIAL RECORDS.


 


(APN:  343-350-26)


 


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EXHIBIT B TO LEASE


 


INCLUDED INSTALLATIONS


 


fume hoods, built-in cold
rooms, built-in warm rooms, walk-in cold rooms, walk-in warm rooms, deionized
water systems, glass washing equipment, cage washers, built-in autoclaves,
chillers, built-in plumbing, and electrical systems, HVAC systems and
equipment, vacuum
pumps, air compressors, and transfer switches.


 


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