Document:

Exhibit 10.42

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”) is made this 12th day of March, 2014 by and between KaloBios Pharmaceuticals, Inc., a Delaware corporation with an address of 260 E. Grand Avenue, South San Francisco, California 94080 (the “Company”) and Geoffrey Yarranton, Ph.D. (“you”), having an address of 1148 Balboa Drive, Burlingame, California 94010 with such Agreement to be effective as of the date written above.

 

Recitals

 

A.                                    The Company is in the business of research, development and commercialization of biopharmaceutical products.  The Company desires to employ you or continue your employment with the Company, and you desire to provide the Company with the benefit of your services in accordance with the terms of this Agreement.

 

B.                                    The services you will render to the Company under this Agreement are of a special, unique, extraordinary and intellectual character and your position with the Company places you in a position of confidence and trust.  Further, the rendering of services by you to the Company necessarily requires the Company to disclose to you confidential and proprietary information as more fully set forth in Section 9, below.

 

C.                                    You agree that it is reasonable and necessary for the protection of the goodwill and legitimate business interests of the Company that you make the covenants contained herein, that the covenants are a material inducement for the Company to employ you or continue your employment and that the covenants are given as an integral part of and incident to this Agreement.

 

D.                                    You acknowledge that the restrictions contained in this Agreement on your employment are reasonable and necessary to protect the Company from unfair competition and the improper use of its confidential information.

 

Terms of Agreement

 

In consideration of the foregoing Recitals (which are incorporated herein), the mutual covenants contained herein, and for other good and valuable consideration, including employment, continued employment, a relationship with the Company, certain monies, benefits, bonus opportunities, incentive bonus plan, training and/or trade secrets and confidential information of the Company to which you would not have access nor been supplied but for your relationship with the Company in exchange for your agreeing to the terms of this Agreement;  the receipt and sufficiency of which are hereby acknowledged, you and the Company agree as follows:

 

1.                                      Employment.

 

(a)                                 Term.  This Agreement shall become effective as of the date written above (the “Effective Date”) and shall terminate three (3) years from the Effective Date of this Agreement; provided, however, that this Agreement shall remain in effect for successive one-year periods thereafter unless, not less than ninety (90) days prior to the scheduled expiration of

 

 

KaloBios Pharmaceuticals, Inc.

 

the term of this Agreement, either you or the Company shall deliver to the other written notice of his, her or its intention not to continue in effect this Agreement, in which case this Agreement shall terminate as of the scheduled expiration date of the year in which such notice is given; and provided further, that the Agreement is not otherwise terminated as provided below (the “Term”).  Notwithstanding the foregoing, you shall at all times until your termination of employment with the Company be an at-will employee of the Company, and this Agreement establishes the terms by which such at-will employment is governed. Further, this Agreement is subject to you timely providing all required documentation to the Company necessary to substantiate your eligibility to accept employment with the Company, including but not limited to sufficient proof of your identity and a properly executed Form I-9.  Any failure to provide such documentation or your inability to otherwise substantiate your eligibility to provide employment services to the Company under the laws of the United States, the State of California and the state of your residency shall render this Agreement null and void retroactive to the date of its execution.

 

(b)                                 Duties.  The Company hereby agrees to employ you and you hereby accept employment as Chief Scientific Officer.  The duties and services required to be performed are described in the job description previously provided to you and shall be consistent with your position and as are assigned by the Board or, as applicable, the President and Chief Executive Officer or any other senior management of the Company to whom you then report.  In connection with your employment by the Company, you shall be based at the Company’s offices in South San Francisco, California, except for required travel on the Company’s business.  You agree to devote substantially all of your working time, attention and energies to the business of the Company, and its affiliated entities.  You may make and manage your personal investments (provided such investments in other activities do not violate, in any material respect, the provisions of Section 9 of this Agreement), be involved in charitable and professional activities, and, with the prior written consent of the Compensation Committee of the Board, serve on boards of other for-profit and not-for-profit entities, provided such activities do not materially interfere with the performance of your duties hereunder (however, the Board may decide not to allow officers to serve on more than one public company board at a time).  You agree that during your employment with the Company, you will not engage in any competitive outside business activities other than with the Company’s prior written approval. You will devote your best efforts to the performance of your duties and the advancement of the Company and shall not engage in any other employment, profitable activities, or other pursuits which would cause you to disclose or utilize the Company’s confidential information, or reflect adversely on the Company.  This obligation shall include, but is not limited to your compliance with all Company employment policies.

 

2.                                      Truthfulness of Hiring Documents.  You represent and warrant that the information on your resume, application and other documents provided by you to the Company are complete and accurate in all respects.

 

3.                                      Compensation and Benefits.

 

(a)                                 Initial Consideration.  [Intentionally Omitted].

 

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(b)                                 Base Salary.  The Company shall pay you a base salary of Three Hundred Thousand Dollars ($300,000) per year, or such other rate as may be determined from time to time by the Company (“Base Salary”).  Such Base Salary shall be paid in accordance with the Company’s standard payroll practice for its management. The Company reserves the right to modify your Base Salary, depending on your performance and the performance and business needs of the Company.

 

(c)                                  Bonus.  During the Term of this Agreement, you will be entitled to participate in an annual incentive compensation plan of the Company, as established and revised by the Compensation Committee of the Board from time to time.  Your target annual bonus will be forty percent (40%) of your Base Salary in effect for such year (the “Target Bonus”), and your actual annual bonus may be more or less as determined by the Compensation Committee of the Board, and will be determined based primarily upon (i) the achievement of certain corporate performance goals, as may be established and approved by from time to time by the Compensation Committee or the Board, (ii) the achievement of personal performance goals as may be established by your immediate supervisor, and (iii) the overall business needs of the Company.  The annual bonus will only be paid at such time and in such manner as set forth in the annual incentive compensation plan document and subject in all events to action of the Compensation Committee of the Board in its sole discretion.

 

(d)                                 Equity Grants.  You may receive equity awards under an equity incentive compensation plan of the Company then in effect (if any), subject to the discretion of the Compensation Committee or the Board.

 

(e)                                  Benefits.  Subject to the terms of such plans, you will be eligible to participate in or receive benefits under any retirement plan, incentive plan, salary deferral plan, medical and dental benefits plan, life insurance plan, short-term and long-term disability plans, or any other health, welfare or fringe benefit plan, generally made available by the Company to similarly-situated employees. The Company shall not be obligated to institute, maintain, or refrain from changing, amending, or discontinuing any benefit plan, or other benefit or perquisite, so long as such changes are similarly applicable to similarly situated employees generally.

 

(f)                                   Vacation.  During the Term, you will be entitled to vacation each year in accordance with the Company’s policies in effect from time to time, but in no event less than fifteen (15) days of paid vacation per calendar year in addition to company holidays.

 

(g)                                  Expense Reimbursement.  The Company shall promptly reimburse you for the ordinary and necessary business expenses you incur in the performance of your duties in accordance with the Company’s expense reimbursement policy.  The reimbursement of expenses during a year will not affect the expenses eligible for reimbursement in any other year.  In no event shall such an expense be reimbursed after the last day of the year following the year in which the expense was incurred.

 

Employment Agreement-3

 

4.                                      Termination.  Upon any termination of your employment for any reason, you shall immediately resign from all your KaloBios Board and Committee memberships and other positions with the Company or any of its subsidiaries held at such time.  Your employment may be terminated under this Agreement in the following events:

 

(a)                                 Death.  Your employment hereunder will terminate upon your death.

 

(b)                                 Total Disability.  Your employment hereunder will terminate upon your becoming “Totally Disabled.”  For purposes of this Agreement, you shall be considered “Totally Disabled” if you are determined to be disabled under the Company’s long-term disability plan.

 

(c)                                  Termination for Cause by the Company.  The Company may terminate your employment hereunder for “Cause” at any time after providing a written notice of termination for Cause to you.  For purposes of this Agreement, you shall be treated as having been terminated for Cause if and only if you are terminated as a result of the occurrence of one or more of the following events:

 

(i)                                any willful and wrongful conduct or omission by you that demonstrably and materially injures the Company or its affiliates;

 

(ii)                             any act by you of fraud, dishonesty, gross negligence, or intentional misrepresentation or embezzlement, misappropriation or conversion of assets of the Company or any affiliate;

 

(iii)                          you being convicted of, confessing to, pleading nolo contendere to, or becoming the subject of proceedings that provide a reasonable basis for the Company to believe that you have engaged in a felony or any crime involving dishonesty or moral turpitude;

 

(iv)                         your willful and material violation of any written policies or procedures of the Company, including but not limited to the Company’s code of business conduct, code of ethics and insider trading policy;

 

(v)                            your willful and continuous failure to substantially perform your duties or responsibilities hereunder (other than as a result of physical or mental illness), including, but not limited to: (A) significant and/or repeated gross underperformance of the overall area of aggregate responsibilities then under your supervision; or (B) the failure to follow the lawful directions of the Company’s Chief Executive Officer, or if you do not report directly to the Chief Executive Officer, of your supervising officer, in a manner consistent with this Agreement; or

 

(vi)                         your material, and intentional or willful, violation of any restrictive covenant provided for under this Agreement or any other agreement with the Company to which you are a party.

 

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For purposes of this Agreement an act or failure to act shall be considered “willful” only if done or omitted to be done without your good faith reasonable belief that such act or failure to act was in the best interests of the Company.  Notwithstanding the foregoing, you shall not be treated as having been terminated as a result of an event described in subsection (i), (iv), (v) or (vi) unless the Company notifies you in writing of the event not more than ninety (90) days after the Company knows, or with the exercise of reasonable diligence would have known, of the occurrence of such event, and you fail within thirty (30) days after receipt of such notice to cure such event to the Company’s reasonable satisfaction; provided, however, that in no event shall the Company’s failure to notify you of the occurrence of any event constituting Cause, or to terminate you as a result of such event, be construed as a consent to the occurrence of future events, whether or not similar to the initial occurrence, or a waiver of the Company’s right to terminate you for Cause as a result thereof.

 

(d)                                 Termination by the Company without Cause.  The Company may terminate your employment hereunder without Cause at any time upon written notice to you.

 

(e)                                  Voluntary Termination by You.  You may terminate your employment hereunder with or without Good Reason at any time upon written notice to the Company.  For purposes of this Agreement, you shall be treated as having resigned for Good Reason if and only if you resign as a result of the occurrence of one or more of the following events during a Change in Control Period:

 

(i)                                a diminution in your Base Salary of ten percent (10%) or more, except in connection with a comprehensive reduction of the Company’s executive officers’ Base Salary;

 

(ii)                             a material diminution in your authority, duties, or responsibilities, which by way of illustration may include revised reporting relationships, reduced budget, direct or indirect reports to you, or reduced scope of authority in comparison to any of those factors as they existed immediately prior to the relevant Change in Control;

 

(iii)                          a material adverse change in the geographic location of the facility at which you are based for the performance of services under this Agreement of more than 20 miles from the facility where you were based immediately before such change, unless such new location is 50 miles or less from your principal place of residence as of the date of such change; or

 

(iv)                         any other action or inaction that constitutes a material breach by the Company of this Agreement.

 

Notwithstanding the foregoing, you shall not be treated as having resigned for Good Reason unless you notify the Company in writing of the event constituting Good Reason not more than thirty (30) days after you know, or with the exercise or reasonable diligence would have known, of the occurrence of such event, the Company fails within thirty (30) days after receipt of such notice to cure such event and return you to the position you would have been in

 

Employment Agreement-5

 

had the event not occurred, and you resign after the end of such thirty (30) days period, but in no event more than five (5) days after the expiration of the Company’s cure period; provided, however, that in no event shall your failure to notify the Company of the occurrence of any event constituting Good Reason, or to resign as a result of such event, be construed as a consent to the occurrence of future events, whether or not similar to the initial occurrence, or a waiver of your right to resign for Good Reason as a result thereof.

 

5.                                      Compensation Following Termination of Employment or Non-Renewal of Agreement.

 

In the event that your employment hereunder is terminated in a manner as set forth above, you shall be entitled to the compensation and benefits provided under this Section, in each case subject to potential reduction as may be required by Paragraph (g) below and Section 12.

 

(a)                                 Non-Renewal of Agreement.  In the event this Agreement is terminated due to the expiration of the Term, there shall be no amount owed to you hereunder.  For clarification, (i) expiration or non-renewal of this Agreement by the Company or by you shall not be considered a termination of your employment, for Good Reason or otherwise; and (ii) expiration and non-renewal of this Agreement by you shall not entitle you to any compensation whatsoever; but (iii) expiration and non-renewal of this Agreement by the Company will nevertheless entitle you to receive the benefit described in Section 5(f) below, subject to your execution and non-revocation of the Release (as described below), if the following conditions are satisfied:

 

(i)                                you notify the Company in writing of your intent to resign from the Company not more than thirty (30) days after the non-renewal of the Agreement;

 

(ii)                             the Company, within thirty (30) days after receipt of such notice in subparagraph (i), fails to renew the Agreement on the same or substantially similar terms or provides to you written notice of its intent not to renew the Agreement; and

 

(iii)                          you terminate your employment in writing within five (5) calendar days after the earlier of (A) the end of the thirty (30) day cure period in subparagraph (ii), or (B) you receive written notice of the Company’s intent not to renew the Agreement.

 

(b)                                 Termination by Reason of Death.  In the event that your employment is terminated by reason of your death, the Company shall pay the following amounts to your beneficiary or estate:

 

(i)                                Any accrued but unpaid Base Salary for services rendered to the date of death, any incurred but unpaid expenses required to be reimbursed under this Agreement, any vacation accrued to the date of termination, any earned but unpaid bonuses for any prior calendar year (“Accrued Compensation”);

 

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(ii)                             To the extent not otherwise paid, a pro-rata bonus or incentive compensation payment for the then current calendar year to the extent payments are awarded to senior executives of the Company based on corporate performance but deeming any personal objectives to be fully met, and paid at the same time as senior executives are paid.  Such bonus shall be pro-rated based on the number of days employed during the calendar year divided by a 365 day year (“Pro-Rata Annual Bonus”); and

 

(iii)                          Any vested benefits accrued through the date of termination to which you may be entitled pursuant to the Company’s plans, policies and arrangements, as determined and paid in accordance with the terms of such plans, policies and arrangements in effect at the time (“Plan Benefits”).

 

(c)                                  Termination by Reason of Total Disability.  In the event that your employment is terminated by reason of your Total Disability, the Company shall pay the following amounts to you:

 

(i)                                Accrued Compensation;

 

(ii)                             Pro-Rata Annual Bonus; and

 

(iii)                          Plan Benefits.

 

(d)                                 Termination for Cause.  In the event that your employment is terminated by the Company for Cause, the Company shall pay the following amounts to you:

 

(i)                                Accrued Compensation; and

 

(ii)                             Plan Benefits.

 

(e)                                  Voluntary Termination by You.  In the event that you voluntarily terminate employment other than for Good Reason, the Company shall pay the following amounts to you:

 

(i)                                Accrued Compensation; and

 

(ii)                             Plan Benefits.

 

(f)                                   Termination by the Company Without Cause.  In the event that your employment is terminated by the Company for reasons other than death, Total Disability or Cause, the Company shall pay the following amounts to you:

 

(i)                                Accrued Compensation;

 

(ii)                             Plan Benefits;

 

Employment Agreement-7

 

(iii)                          Subject to your execution and non-revocation of the Release (as defined below), accelerated vesting of your unvested equity awards that would vest by the normal passage of time during the period which is nine (9) months from the date of termination of your employment;

 

(iv)                         Subject to your execution and non-revocation of the Release (as defined below), the Pro-Rated Annual Bonus; provided, however, that in no event shall the Pro-Rated Annual Bonus be prorated at less than nine (9) months; and

 

(v)                            Subject to your execution and non-revocation of the Release (as defined below), an amount equal to seventy-five percent (75%) times your Base Salary, which shall be paid during the nine (9) month period which begins on the first administratively feasible payroll date following the date the Release becomes effective, with the first payment totaling the amount of individual payments that would have been made from the termination date through the date of the payment, and subsequent payments continuing at the same time and in the same manner as Base Salary would have been paid if you had remained in active employment until the end of such period.  Additionally, you shall receive an amount equal to the monthly cost of COBRA continuation coverage for the medical plan at the date of termination at the level of coverage then in effect for you, less the active rate for such coverage, times nine (9) months to be payable in a single, lump sum payment on the first administratively feasible payroll date following the date the Release becomes effective. Notwithstanding the foregoing, in the event that the period for consideration of the Release and the revocation period crosses two calendar years, the first administratively feasible payroll date shall be deemed to be the first payroll date in the second calendar year that occurs on or after the date the Release becomes effective, regardless of the date the Release is signed.  Further notwithstanding the foregoing, the Company may in its discretion change the timing of the payment of any amounts to the extent such amounts are not subject to Section 409A of the Internal Revenue Code (the “Code”).

 

(vi)                         Each of the payments of severance benefits above are designated as separate payments for purposes of the short-term deferral rules under Treasury Regulation Section 1.409A-1(b)(4)(i)(F), the exemption for involuntary terminations under separation pay plans under Treasury Regulation Section 1.409A-1(b)(9)(iii), and the exemption for medical expense reimbursements under Treasury Regulation Section 1.409A-1(b)(9)(v)(B).  As a result, (A) payments that are made on or before the 15th day of the third month of the calendar year following the applicable year of termination,

 

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and (B) any additional payments that are made on or before the last day of the second calendar year following the year of your termination and do not exceed the lesser of two times Base Salary or two times the limit under Code Section 401(a)(17) then in effect, are exempt from the requirements of Code Section 409A.  If you are designated as a “specified employee” within the meaning of Code Section 409A, to the extent the payments to be made during the first six month period following your termination of employment exceed such exempt amounts, the payments shall be withheld and the amount of the payments withheld will be paid in a lump sum, without interest, during the seventh month after your termination.

 

(g)                                  Cancellation and Refund of Termination Benefits for Subsequently Discovered Cause.  Notwithstanding any provision of this Agreement to the contrary, if after and within one (1) year of your termination of employment, the Company becomes aware of facts that would have allowed the Company to terminate your employment for Cause under Section 4(c), then without regard to any notice or cure periods in Section 4(c), to the extent permitted by law:

 

(i)                                the Company may elect to cancel any and all payments of any benefits otherwise due you, but not yet paid, under this Agreement or otherwise; and

 

(ii)                             you will refund to the Company any amounts, plus interest, previously paid by Company to you in excess of your Accrued Compensation and Plan Benefits.

 

(h)                                 Release.  For purposes of this Agreement, “Release” means that specific document which the Company shall present to you for consideration and execution after any termination of employment pursuant to Section 5(f) or Section 6, wherein if you agree to such, you will irrevocably and unconditionally release and forever discharge the Company, its subsidiaries, affiliates and related parties from any and all causes of action which you at that time had or may have had against the Company (excluding any claim for indemnity under this Agreement, any claim under state workers’ compensation or unemployment laws, or any claim under COBRA).  The Release will be provided to you as soon as practical after your termination date, but in any event in sufficient time so that you will have adequate time to review the Release as provided by applicable law.

 

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6.                                      Certain Terminations During a Change in Control Period.  Subject to reduction required by Section 5(g) or Section 7 or Section 12, in the event a Change in Control occurs and you terminate your employment for Good Reason during a Change in Control Period, or the Company (including any successor entity) terminates your employment without Cause (and for reason other than Death or Total Disability) during a Change in Control Period, the Company shall, subject to your execution of the Release (as defined in this Section 6), pay the following amounts to you:

 

(i)                                Accrued Compensation;

 

(ii)                             Plan Benefits;

 

(iii)                          Subject to your execution and non-revocation of the Release, full vesting of all unvested equity awards;

 

(iv)                         Subject to your execution and non-revocation of the Release, your Target Bonus times one hundred twenty-five percent (125%); and

 

(v)                            Subject to your execution and non-revocation of the Release, an amount equal to one hundred twenty-five percent (125%) times your Base Salary, which shall be paid during the fifteen (15) month period which begins on the first administratively feasible payroll date following the date the Release becomes effective, with the first payment totaling the amount of individual payments that would have been made from the termination date through the date of the payment, and subsequent payments continuing at the same time and in the same manner as Base Salary would have been paid if you had remained in active employment until the end of such period.  Additionally, you shall receive an amount equal to the monthly cost of COBRA continuation coverage for the medical plan at the date of termination at the level of coverage then in effect for you, less the active rate for such coverage, times fifteen (15) months to be payable as a single, lump sum payment on the first administratively feasible payroll date following the date the Release becomes effective. Notwithstanding the foregoing, in the event that the period for consideration of the Release and the revocation period crosses two calendar years, the first administratively feasible payroll date shall be deemed to be the first payroll date in the second calendar year that occurs on or after the date the Release becomes effective, regardless of the date the Release is signed.  Further notwithstanding the foregoing, the Company may in its discretion change the timing of the payment of any amounts to the extent such amounts are not subject to Section 409A of the Internal Revenue Code (the “Code”).

 

(vi)                         Each of the payments of severance benefits above are designated as separate payments for purposes of the short-term deferral rules

 

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under Treasury Regulation Section 1.409A-1(b)(4)(i)(F), the exemption for involuntary terminations under separation pay plans under Treasury Regulation Section 1.409A-1(b)(9)(iii), and the exemption for medical expense reimbursements under Treasury Regulation Section 1.409A-1(b)(9)(v)(B).  As a result, (A) payments that are made on or before the 15th day of the third month of the calendar year following the applicable year of termination, and (B) any additional payments that are made on or before the last day of the second calendar year following the year of your termination and do not exceed the lesser of two times Base Salary or two times the limit under Code Section 401(a)(17) then in effect, are exempt from the requirements of Code Section 409A.  If you are designated as a “specified employee” within the meaning of Code Section 409A, to the extent the payments to be made during the first six month period following your termination of employment exceed such exempt amounts, the payments shall be withheld and the amount of the payments withheld will be paid in a lump sum, without interest, during the seventh month after your termination.

 

(b)                                 Certain Definitions.

 

(i)                                          For purposes of this Agreement, “Change in Control” means:

 

(A)                               Any Person becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then-outstanding voting securities.

 

(B)                               The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;

 

(C)                               The consummation of a merger or consolidation of the Company with or into any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; or

 

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(D)                               Individuals who are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board over a period of twelve (12) months; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board

 

A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.  In addition, if a Change in Control constitutes a payment event with respect to any amount payable under this Agreement which provides for a deferral of compensation and is subject to Code Section 409A, then notwithstanding anything to the contrary in this Agreement the transaction with respect to such amount must also constitute a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) to the extent required by Code Section 409A.

 

(ii)                                       For purposes of this Agreement, “Change in Control Period” means the period commencing on the date on which a Change in Control occurs and ending on the first anniversary of the date on which a Change in Control occurs.

 

(iii)                                    For purposes of this Agreement, “Exchange Act” means the Securities and Exchange Act of 1934, as amended from time to time;

 

(iv)                                   For purposes of this Section 6, “Person” shall have the meaning set forth in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (1) the Company, (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, (3) an employee benefit plan of the Company, (4) an underwriter temporarily holding securities pursuant to an offering of such securities or (5) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of shares of Common Stock of the Company.

 

7.                                      Potential Limitation on Severance Benefits.

 

(a)                                 Notwithstanding any other provision of this Agreement to the contrary, if any portion of the payments under this Agreement or any other agreement with the Company or its Affiliates (in the aggregate, “Total Payments”), would constitute an “excess parachute payment” and would, but for this Section, result in the imposition on you of an excise tax under

 

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Code Section 4999 (the “Excise Tax”), then the Total Payments to be made to you under this Agreement shall either be (A) delivered in full, or (B) reduced by such amount so that no portion of such Total Payment would be subject to the Excise Tax, whichever of the foregoing results in the receipt by you of the greatest benefit on an after-tax basis (taking into account the applicable federal, state and local income taxes and the Excise Tax).

 

(b)                                 Within forty (40) days following notice by one party to the other of its belief that there is a payment or benefit due you that will result in an excess parachute payment, you and the Company, at the Company’s expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel (“National Tax Counsel”) selected by the Company’s independent auditors and reasonably acceptable to you (which may be regular outside counsel to the Company), which opinion sets forth (A) the amount of the Base Period Income (as defined below), (B) the amount and present value of the Total Payments, (C) the amount and present value of any excess parachute payments determined without regard to any reduction of Total Payments under this Section, and (D) the net after-tax proceeds to you, taking into account the tax imposed under Code Section 4999 if (x) the Total Payments were reduced in accordance with the first sentence of this Section and (y) the Total Payments were not so reduced.  The opinion of National Tax Counsel shall be addressed to the Company and you and shall be binding upon the Company and you.  If such National Tax Counsel opinion determines that clause (B) in subsection (a) above applies, then the payments hereunder or any other payment or benefit determined by such counsel to be includable in Total Payments shall be reduced or eliminated so that under the bases of calculations set forth in such opinion there will be no excess parachute payment.  In such event, payments or benefits included in the Total Payments shall be reduced or eliminated by applying the following principles, in order: (I) the payment or benefit with the higher ratio of the parachute payment value to present economic value (determined using reasonable actuarial assumptions) shall be reduced or eliminated before a payment or benefit with a lower ratio; (2) the payment or benefit with the later possible payment date shall be reduced or eliminated before a payment or benefit with an earlier payment date; and (3) cash payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Code Section 409A, then the reduction shall be made pro rata among the payments or benefits included in the Termination Payments (on the basis of the relative present value of the parachute payments).

 

(c)                                  For purposes of this Agreement: (A) the terms “excess parachute payment” and “parachute payments” shall have the meanings assigned to them in Code Section 280G and such “parachute payments” shall be valued as provided therein; (B) present value for purposes of this Agreement shall be calculated in accordance with Code Section 280G(d)(4); (C) the term “Base Period Income” means an amount equal to your “annualized includible compensation for the base period” as defined in Code Section 280G(d)(I ); (D) for purposes of the opinion of National Tax Counsel, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Code Sections 280G(d)(3) and (4), which determination shall be evidenced in a certificate of such auditors addressed to the Company and you; and (E) you shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment taxation, and state and local income taxes at the highest marginal rate of taxation in the state or locality of your domicile (determined in both cases in the calendar year in which your termination of employment or notice described in subsection (b) above is given, whichever is

 

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earlier), net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes.

 

(d)                                 If such National Tax Counsel so requests in connection with the opinion required by this Section, you and the Company shall obtain, at the Company’s expense, and the National Tax Counsel may rely on, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by you solely with respect to its status under Code Section 280G.

 

(e)                                  The Company agrees to bear all costs associated with, and to indemnify and hold harmless, the National Tax Counsel of and from any and all claims, damages, and expenses resulting from or relating to its determinations pursuant to this Section, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of such firm.

 

(f)                                   This Section shall be amended to comply with any amendment or successor provision to Sections 280G or 4999 of the Code.  If such provisions are repealed without successor, then this Section 7 shall be cancelled without further effect.

 

8.                                      No Restrictions on Employment.  You are being employed or continuing to be employed by the Company as an at-will employee with the understanding that (i) you are free to enter into employment or continued employment with the Company, (ii) your employment with the Company will not violate any agreement you may have with a third party (e.g., existing employment, non-compete, intellectual property ownership, and/or non-disclosure agreements) and (iii) only the Company is entitled to the benefit of your work.  If you have any agreements with a prior employer, you are required to provide such agreements to the Company prior to executing this Agreement.  The Company has no interest in using any other person’s patents, copyrights, trade secrets, or trademarks in an unlawful manner.  You should be careful not to disclose to the Company any intellectual property or confidential information of your prior employers or anyone else or misapply proprietary rights that the Company has no right to use.

 

9.                                      Agreements Incorporated by Reference.  Both the Indemnity Agreement and the Proprietary Information and Inventions Agreement between you and the Company are hereby incorporated by reference into the Agreement.  Notwithstanding the foregoing, and for avoidance of doubt, both the Indemnity Agreement and the Proprietary Information and Investment Agreement shall survive the termination of this Agreement.

 

10.                               Non-Solicitation.  You agree that during your employment with the Company and for a period of twelve (12) months thereafter, you will not, nor will you assist any third party to, directly or indirectly (i) raid, hire, solicit, encourage or attempt to persuade any employee or independent contractor of the Company, who possesses or had access to confidential information of the Company, to leave the employ of or terminate a relationship with the Company; (ii) interfere with the performance by any such persons of their duties for the Company; or (iii) communicate with any such persons for the purposes described in the Section above.

 

11.                               Non-Disparagement.  You agree that you shall not at any time engage in any form of conduct, or make any statement or representation, either oral or written, that disparages,

 

Employment Agreement-14

 

impugns or otherwise impairs the reputation, goodwill or interests of the Company, or any of its officers, directors, shareholders, managing members, representatives, and/or employees or agents in either the individual or representative capacities of any of the foregoing individuals (including, without limitation, the repetition or distribution of derogatory rumors, allegations, negative reports or comments). Nor shall you direct, arrange or encourage others to make any such derogatory or disparaging statements on your behalf.  Nothing in this Section, however, shall prevent you from providing truthful testimony or information in any proceeding or in response to any request from any governmental agency, or judicial, arbitral or self-regulatory forum, nor prevent the Company from assessing your performance and sharing such information with Company employees with a need to know such information.

 

12.                               Effect of Breach.

 

(a)                                 You acknowledge and agree that, in the event of any material breach by you of the terms and conditions of this Agreement, pursuant to the terms of certain benefit plans, your participation in any accrued benefits thereunder, may be discontinued or forfeited, in addition to any other rights and remedies the Company may have at law or in equity.

 

(b)                                 You acknowledge that irreparable damage would result to the Company if the provisions of this Agreement are not specifically enforced, and that, in addition to any other legal or equitable relief available, and notwithstanding any alternative dispute resolution provisions that have been or may be agreed to between the Company and you, the Company shall be entitled to injunctive relief in the event of any failure to comply with the provisions of this Agreement.

 

(c)                                  If either party violates any of the terms of this Agreement, the violating party will indemnify the other party for the expenses, including but not limited to reasonable attorneys’ fees, incurred by the other party in enforcing this Agreement against the violating party.

 

13.                               Miscellaneous.

 

(a)                                 You specifically acknowledge and agree that the purpose of the restrictions contained in this Agreement is to protect the Company from unfair competition, including improper use of the confidential information by you, and that the restrictions and covenants contained herein are reasonable with respect to both scope and duration of application.  Notwithstanding the foregoing, if any court determines that any of the terms herein are unreasonable, invalid or unenforceable, the court may interpret, alter, amend or modify any or all of the terms to include as much of the scope, time period and intent as will render the restrictions enforceable, and then as modified, enforce the terms.

 

(b)                                 Each covenant and restriction contained in this Agreement is independent of each other such covenant and restriction, and if any such covenant or restriction is held for any reason not to be capable of modification so as to cause it to be valid and enforceable, then the invalidity or unenforceability of such covenant or restriction shall not invalidate, affect or impair in any way the validity and enforceability of any other such covenant or restriction.

 

Employment Agreement-15

 

(c)                                  All written notices, requests and other communications provided pursuant to this Agreement shall be deemed to have been duly given, if delivered in person or by courier, or sent by express, registered or certified mail, postage prepaid, addressed as follows:

 

	
If   to you: 
    	
 
    	
If   to the Company: 
    
	
 
    	
 
    	
 
    
	
The   address provided in the preamble 
   of this Agreement
    	
 
    	
KaloBios   Pharmaceuticals, Inc.  
    Attention: Chief Legal Officer
    

 

By written notice to the other, either party may change the address to which notices to such party are to be delivered.

 

(d)                                 You acknowledge that the services to be rendered by you are unique and personal.  Accordingly, you may not assign, transfer or pledge any of your rights or delegate any of your duties or obligations under this Agreement.  If you become employed by an entity that is related to, affiliated with or a successor to the Company, then your obligations and covenants hereunder shall apply to the confidential information of such entity (in addition to those of the Company).  This Agreement shall be inure to the benefit of the Company, the related, affiliated or successor company, as the case may be, and their respective successors and assigns.

 

(e)                                  All payments provided under this Agreement, other than payments made pursuant to a plan which provides otherwise, shall be paid from the general funds of the Company, and no special or separate fund shall be established, and no other segregation of assets made, to assure payment.  You shall have no right, title or interest whatever in or to any investments which the Company may make to aid the Company in meeting its obligations hereunder.  To the extent that any person acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company.

 

(f)                                   The Company shall provide for the withholding of any taxes required to be withheld by federal, state, and local law with respect to any payment in cash and/or other property made by or on behalf of the Company to or for your benefit under this Agreement or otherwise.

 

(g)                                  It is the intention of the Company and you that this Agreement not result in an unfavorable tax consequences to you under Code Section 409A.  Accordingly, you consent to any amendment of this Agreement as the Company may reasonably make in furtherance of such intention, and the Company shall promptly provide, or make available to, you a copy of such amendment.  Any such amendments shall be made in a manner that preserves to the maximum extent possible the intended benefits to you. This paragraph does not create an obligation on the part of Company to modify this Agreement and does not guarantee that the amounts or benefits owed under the Agreement will not be subject to interest and penalties under Code Section 409A.

 

(h)                                 This Agreement contains the entire agreement and understanding of the parties with respect to the subject matter hereof, and no other representations, promises, agreements or understandings regarding the subject matter hereof shall be of any force or effect unless in writing, executed by the party to be bound and dated on or subsequent to the date

 

Employment Agreement-16

 

hereof.  Notwithstanding the foregoing, and for avoidance of doubt, the terms of any applicable company policies or benefit plans shall provide the governing terms and conditions for the compensation and benefits provided under Section 3 of this Agreement.  You agree that you have not and cannot rely on any representations or promises not expressly made herein in entering into this Agreement.  No change, modification or waiver of any provision of this Agreement shall be valid or binding unless it is in writing dated subsequent to the date hereof and signed by the parties intended to be bound.  No waiver of any breach, term or condition of this Agreement by either party shall constitute a subsequent waiver of the same or any other breach, term or condition.

 

(i)                                     The provisions of this Agreement are severable.  If any one or more of the provisions contained herein, or the application thereof in any circumstance, are held invalid, illegal or unenforceable in any respect and for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be affected or impaired in any way, it being intended that all of the parties’ rights and privileges arising hereunder shall be enforceable to the fullest extent permitted by law.

 

(j)                                    This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to conflict of laws principles.  This Agreement and all matters arising out of it shall be enforced and/or interpreted before a trier of fact in the County of San Mateo, State of California only, all parties agreeing to submit to such jurisdiction.

 

(k)                                 The headings used in this Agreement are for convenience only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

 

(l)                                     Any dispute (an “Arbitrable Dispute”) arising between the parties, including but not limited to those concerning the formation, validity, interpretation, effect, or alleged violations of this Agreement, the arbitrability of any dispute, any federal, state or local statutory claim (including discrimination or retaliation statutes), contract claims, tort claims, and claims of any other sort, must be submitted to arbitration before a retired judge or an experienced employment arbitrator selected in accordance with the then-current Employment Arbitration Rules of the American Arbitration Association (the “Rules”) (a copy of the procedures in effect at the time of this Agreement having been provided to you separately at the time the Agreement was executed) and the arbitrator shall administer the arbitration pursuant to the Rules.  The arbitrator may not modify or change this Agreement in any way except as provided in Paragraph (i) above.  The arbitration shall be held in or near the city in which your last place of work for the Company is located.  Each party will pay the fees of its respective attorneys, the expenses of its witnesses and any other expenses connected with the arbitration, but all other costs of the arbitration, including the fees of the arbitrator, cost of any record or transcript of the arbitration, administrative fees and other fees and costs will be paid by the Company.  The arbitrator may award prevailing party costs and fees to the prevailing party under the standards provided by law.  The arbitrator may resolve any dispute as to who is the prevailing party and as to the reasonableness of any fee or cost.  Arbitration in this manner will be the exclusive remedy for any Arbitrable Dispute.  The arbitrator’s decision or award will be fully enforceable and subject to an entry of judgment by a court of competent jurisdiction.  Should you or the Company, without the consent of the other party, attempt to resolve an Arbitrable Dispute by any method other than arbitration pursuant to this Paragraph (l), the responding party will be entitled to

 

Employment Agreement-17

 

recover from the initiating party all damages, costs, expenses and attorneys’ fees incurred as a result.

 

(m)                             Except as otherwise provided in this Agreement, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, representatives, successors and assigns.  This Agreement shall not be assignable by you (but any payments due hereunder which would be payable at a time after your death shall be paid to your designated beneficiary or, if none, his estate) and shall be assignable by the Company only to any financially solvent corporation or other entity resulting from the reorganization, merger or consolidation of the Company with any other corporation or entity or any corporation or entity to or with which the Company’s business or substantially all of its business or assets may be sold, exchanged or transferred, and it must be so assigned by the Company to, and accepted as binding upon it by, such other corporation or entity in connection with any such reorganization, merger, consolidation, sale, exchange or transfer in a writing delivered to you in a form reasonably acceptable to you (the provisions of this sentence also being applicable to any successive such transaction).

 

(n)                                 This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.

 

	
KaloBios   Pharmaceuticals, Inc.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
S/   David W. Pritchard
    	
 
    	
S/   Geoffrey Yarranton
    
	
Signature
    	
 
    	
Signature
    
	
 
    	
 
    	
 
    
	
David   W. Pritchard
    	
 
    	
Geoffrey   Yarranton, Ph.D.
    
	
Name
    	
 
    	
Print   Name
    
	
 
    	
 
    	
 
    
	
President   and CEO
    	
 
    	
 
    
	
Title
    	
 
    	
 
    

 

Employment Agreement-18Exhibit 10.43

 

LEASE

 

BRITANNIA LIFE SCIENCE CENTER

 

BAYSIDE ACQUISITION, LLC,,

 

a Delaware limited liability company

 

as Landlord,

 

and

 

KALOBIOS PHARMACEUTICALS, INC.,

 

a Delaware corporation,

 

as Tenant.

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
1.
    	
PREMISES, BUILDING, PROJECT, AND COMMON AREAS
    	
4
    
	
2.
    	
LEASE TERM; OPTION TERM
    	
5
    
	
3.
    	
BASE RENT
    	
8
    
	
4.
    	
ADDITIONAL RENT
    	
8
    
	
5.
    	
USE OF PREMISES
    	
14
    
	
6.
    	
SERVICES AND UTILITIES
    	
18
    
	
7.
    	
REPAIRS
    	
19
    
	
8.
    	
ADDITIONS AND ALTERATIONS
    	
20
    
	
9.
    	
COVENANT AGAINST LIENS
    	
21
    
	
10.
    	
INSURANCE
    	
22
    
	
11.
    	
DAMAGE AND DESTRUCTION
    	
23
    
	
12.
    	
NONWAIVER
    	
25
    
	
13.
    	
CONDEMNATION
    	
25
    
	
14.
    	
ASSIGNMENT AND SUBLETTING
    	
25
    
	
15.
    	
SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE   FIXTURES
    	
28
    
	
16.
    	
HOLDING OVER
    	
29
    
	
17.
    	
ESTOPPEL CERTIFICATES
    	
29
    
	
18.
    	
SUBORDINATION
    	
30
    
	
19.
    	
DEFAULTS; REMEDIES
    	
30
    
	
20.
    	
COVENANT OF QUIET ENJOYMENT
    	
32
    
	
21.
    	
SECURITY DEPOSIT
    	
33
    
	
22.
    	
COMMUNICATIONS AND COMPUTER LINE
    	
33
    
	
23.
    	
SIGNS
    	
33
    
	
24.
    	
COMPLIANCE WITH LAW
    	
34
    
	
25.
    	
LATE CHARGES
    	
34
    
	
26.
    	
LANDLORD’S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT
    	
35
    
	
27.
    	
ENTRY BY LANDLORD
    	
35
    
	
28.
    	
TENANT PARKING
    	
35
    
	
29.
    	
MISCELLANEOUS PROVISIONS
    	
36
    
	
 
    	
 
    	
 
    
	
EXHIBITS
    
	
 
    	
 
    
	
A
    	
OUTLINE   OF PREMISES
    
	
A-1
    	
PROJECT   SITE PLAN
    
	
B
    	
INTENTIONALLY   OMITTED
    
	
C
    	
FORM OF   NOTICE OF LEASE TERM DATES
    
	
D
    	
FORM OF   TENANT’S ESTOPPEL CERTIFICATE
    
	
E
    	
ENVIRONMENTAL   QUESTIONNAIRE
    

 

i

 

INDEX

 

	
 
    	
Page(s)
    
	
 
    	
 
    
	
Abatement Event
    	
32
    
	
Advocate Arbitrators
    	
7
    
	
Alterations
    	
20
    
	
Applicable Laws
    	
34
    
	
Base Rent
    	
8
    
	
Brokers
    	
39
    
	
Building
    	
4
    
	
Common Areas
    	
4
    
	
Comparable Buildings
    	
6
    
	
Contemplated Effective Date
    	
27
    
	
Contemplated Transfer Space
    	
27
    
	
Direct Expenses
    	
8
    
	
Eligibility Period
    	
32
    
	
Estimate
    	
13
    
	
Estimate Statement
    	
13
    
	
Estimated Direct Expenses
    	
13
    
	
Expense Year
    	
8
    
	
Force Majeure
    	
37
    
	
Intention to Transfer Notice
    	
27
    
	
Landlord
    	
1
    
	
Landlord Parties
    	
22
    
	
Landlord Repair Notice
    	
24
    
	
L-C
    	
33
    
	
L-C Amount
    	
33
    
	
Lease
    	
1
    
	
Lease Expiration Date
    	
5
    
	
Lease Term
    	
5
    
	
Lease Year
    	
5
    
	
Lines
    	
33
    
	
Mail
    	
38
    
	
Net Worth
    	
28
    
	
Neutral Arbitrator
    	
7
    
	
New Improvements
    	
23
    
	
Notices
    	
38
    
	
Operating Expenses
    	
9
    
	
Option Conditions
    	
5
    
	
Option Rent
    	
6
    
	
Option Term
    	
5
    
	
Outside Agreement Date
    	
6
    
	
Premises
    	
4
    
	
Project,
    	
4
    
	
Rent Commencement Date
    	
5
    
	
Sign Specifications
    	
33
    
	
Statement
    	
12
    
	
Subject Space
    	
25
    
	
Summary
    	
1
    
	
Tax Expenses
    	
11
    
	
Tenant
    	
1
    
	
Tenant’s Share
    	
12
    
	
Tenant’s Subleasing Costs
    	
27
    

 

ii

 

	
 
    	
Page(s)
    
	
 
    	
 
    
	
Transfer Notice
    	
25
    
	
Transferee
    	
25
    

 

iii

 

BRITANNIA LIFE SCIENCE CENTER

 

LEASE

 

This Lease (the “Lease”), dated as of the date set forth in Section 1 of the Summary of Basic Lease Information (the “Summary”), below, is made by and between BAYSIDE ACQUISITION, LLC, a Delaware limited liability company (“Landlord”), and KALOBIOS PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”).

 

SUMMARY OF BASIC LEASE INFORMATION

 

	
TERMS   OF LEASE
    	
DESCRIPTION
    
	
 
    	
 
    
	
1.                                      Date:
    	
December 6,   2013
    
	
 
    	
 
    
	
2.                                      Premises
    	
 
    
	
(Article 1).
    	
 
    
	
 
    	
 
    
	
2.1                               Building:
    	
442   Littlefield Avenue
   South San Francisco, California
   Containing approximately 24,351 rentable square feet.
    
	
 
    	
 
    
	
2.2                               Premises:
    	
Approximately   24,351 rentable square feet of space consisting of the entire Building, which   includes 2,236 rentable square feet designated as flex-space (the “Flex Space”) as further set forth in Exhibit A to the Lease.
    
	
 
    	
 
    
	
3.                                      Lease Term
    	
 
    
	
(Article 2).
    	
 
    
	
 
    	
 
    
	
3.1                               Length of Term:
    	
Approximately   five (5) years.
    
	
 
    	
 
    
	
3.2                               Lease   Commencement Date:
    	
The   later to occur of (i) the date upon which Landlord delivers the Premises   to Tenant, with all Landlord Work completed per Exhibit B, and   (ii) July 1, 2014.
    
	
 
    	
 
    
	
3.3                               Lease   Expiration Date:
    	
If   the Lease Commencement Date shall be the first day of a calendar month, then   the day immediately preceding the fifth (5th) anniversary of the Lease   Commencement Date; or, if the Lease Commencement Date shall be other than the   first day of a calendar month, then the last day of the month in which the   fifth (5th) anniversary   of the Lease Commencement Date occurs.
    

 

	
 
    	
Bayside Acquisition, LLC
 [Britannia Life Science Center]
 [KaloBios Pharmaceuticals, Inc.]
    

 

 

	
4.                                      Base Rent (Article 3):
    	
 
    

 

	
 
    	
Lease Year
    	
 
    	
Monthly
   Installment
   of Base Rent
    	
 
    	
Monthly Base
   Rent per Rentable
   Square Foot
    	
 
    	
 
    
	
 
    	
1*+
    	
 
    	
$
    	
57,499.00
    	
*+
    	
$
    	
2.60
    	
 
    	
 
    
	
 
    	
2*
    	
 
    	
$
    	
59,268.20
    	
*
    	
$
    	
2.68
    	
 
    	
 
    
	
 
    	
3**
    	
 
    	
$
    	
67,168.34
    	
**
    	
$
    	
2.76
    	
 
    	
 
    
	
 
    	
4
    	
 
    	
$
    	
69,183.39
    	
 
    	
$
    	
2.84
    	
 
    	
 
    
	
 
    	
5
    	
 
    	
$
    	
71,258.89
    	
 
    	
$
    	
2.93
    	
 
    	
 
    

 

*Note:  During the first twenty-four (24) months of the Lease Term, Base Rent has been calculated as if the Premises contained only 22,115 rentable square feet of space (i.e., as if the Premises did not include the Flex Space); provided, however, in the event Tenant elects to use any portion of the “Improvement Allowance”, as set forth in Section 1.1.4 of this Lease, prior to the twenty-fifth (25th) month of the Lease Term, then Tenant shall commence paying Base Rent as if the Premises contained 24,351 rentable square feet of space effective as of the date of the first disbursement of the Improvement Allowance is made by Landlord.  Notwithstanding the method of Base Rent calculation, for all other purposes the Premises shall be deemed to contain 24,351 rentable square feet of space..  Such reduced Base Rent shall not affect Tenant’s rights to use the entire Premises under the Lease or Tenant’s obligation to pay Tenant’s Share of Direct Expenses as well as for all utilities and other services with respect to the entire Premises under the Lease.

 

**Note: In the event Tenant does not terminate this Lease pursuant to the terms of Section 2.3 of this Lease, then Tenant shall have no obligation to pay any Base Rent for the Premises attributable to the thirty-seventh (37th) and thirty-eighth (38th) full calendar months of the Lease Term

 

+Note:  Tenant shall have no obligation to pay any Base Rent for the Premises attributable to the first three (3) months of the Lease Term (the “Base Rent Abatement Period”); provided, however, Tenant shall be required to pay Tenant’s Share of Direct Expenses attributable to such period, as well as for all utilities and other services.

 

	
5.                                      Improvement   Allowance (Section 1.1.4):
    	
$160,000.00.
    
	
 
    	
 
    
	
FF&E   Allowance (Section 1.1.5):
    	
$100,000.00
    
	
 
    	
 
    
	
6.                                      Tenant’s   Share
    	
 
    
	
(Article 4):
    	
100%.  
    

 

2

 

	
7.                                      Permitted Use
    	
 
    
	
(Article 5):
    	
The   Premises shall be used only for general office, research and development,   engineering, laboratory, storage and/or warehouse uses, including, but not   limited to, administrative offices and other lawful uses reasonably related   to or incidental to such specified uses, all (i) consistent with first   class life sciences projects in the South San Francisco, California, area (“First Class Life Sciences Projects”),   and (ii) in compliance with, and subject to, applicable laws and the   terms of this Lease.  
    
	
 
    	
 
    
	
8.                                      Letter of   Credit
    	
 
    
	
(Article 21):   
    	
$142,517.78.
    
	
 
    	
 
    
	
9.                                      Parking
    	
 
    
	
(Article 28):
    	
3.0   unreserved parking spaces for every 1,000 rentable square feet of the   Premises, subject to the terms of Article 28 of the Lease.
    
	
 
    	
 
    
	
10.                               Address of   Tenant
   (Section 29.18):
    	
KaloBios Pharmaceuticals, Inc.
   442 Littlefield Avenue
   South San Francisco, CA 94080
   Attention: Chief Legal Officer
    
 with a copy to:
    
 Hopkins & Carley, ALC
   200 Page Mill Road, Suite 200
   Palo Alto, CA 94306
   Attention:  Garth E. Pickett, Esq.
    
	
 
    	
 
    
	
11.                               Address of   Landlord
    	
 
    
	
(Section 29.18):
    	
See   Section 29.18 of the Lease.
    
	
 
    	
 
    
	
12.                               Broker(s)
    	
CBRE, Inc.   and Jones Lang LaSalle
    
	
(Section 29.24):
    	
 
    

 

3

 

1.                                      PREMISES, BUILDING, PROJECT, AND COMMON AREAS

 

1.1                               Premises, Building, Project and Common Areas.

 

1.1.1                     The Premises.  Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 2.2 of the Summary (the “Premises”).  The outline of the Premises is set forth in Exhibit A attached hereto.  The outline of the “Building” and the “Project,” as those terms are defined in Section 1.1.2 below, are further depicted on the Site Plan attached hereto as Exhibit A-1.  The parties hereto agree that the lease of the Premises is upon and subject to the terms, covenants and conditions herein set forth, and Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of such terms, covenants and conditions by it to be kept and performed and that this Lease is made upon the condition of such performance.  The parties hereto hereby acknowledge that the purpose of Exhibit A is to show the approximate location of the Premises only, and such Exhibit is not meant to constitute an agreement, representation or warranty as to the construction of the Premises, the precise area thereof or the specific location of the “Common Areas,” as that term is defined in Section 1.1.3, below, or the elements thereof or of the accessways to the Premises or the “Project,” as that term is defined in Section 1.1.2, below.  Accordingly, as of the Lease Commencement Date, Tenant shall accept the Premises in its presently existing “as-is” condition and Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Premises except as otherwise expressly set forth in this Lease.

 

1.1.2                     The Building and The Project.  The Premises constitutes the entire building set forth in Section 2.1 of the Summary (the “Building”).  The Building is part of an office project currently known as “Britannia Life Science Center.”  The term “Project,” as used in this Lease, shall mean (i) the Building and the Common Areas, (ii) the land (which is improved with landscaping, parking facilities, commonly known as 100 Kimball and 180 Kimball, South San Francisco, California and other improvements) described on Exhibit A-1, (iii) the other office/laboratory buildings located in the project known as “Britannia Life Science Center”, and the land upon which such adjacent office/laboratory buildings are located, and (iv) at Landlord’s discretion, any additional real property, areas, land, buildings or other improvements added thereto outside of the Project.

 

1.1.3                     Common Areas.  Tenant shall have the non-exclusive right to use in common with other tenants in the Project, and subject to the rules and regulations referred to in Article 5 of this Lease, those portions of the Project which are provided, from time to time, for use in common by Landlord, Tenant and any other tenants of the Project (such areas, together with such other portions of the Project designated by Landlord, in its discretion, are collectively referred to herein as the “Common Areas”).  The manner in which the Common Areas are maintained and operated shall be at the sole discretion of Landlord and the use thereof shall be subject to such rules, regulations and restrictions as Landlord may make from time to time.  Landlord reserves the right to close temporarily, make alterations or additions to, or change the location of elements of the Project and the Common Areas, provided that, in connection therewith, Landlord shall perform such closures, alterations, additions or changes in a commercially reasonable manner and, in connection therewith, shall use commercially reasonable efforts to minimize any material interference with Tenant’s use of and access to the Premises.

 

1.1.4                     Improvement Allowance.  Tenant shall have the right, effective as of the Lease Commencement Date, to elect to cause Landlord to provide an improvement allowance in the amount set forth in Section 5 of the Summary (the “Improvement Allowance”) to be used by Tenant in connection with “Alterations”, as defined in Section 8.1, below, in the Flex Space only.  Tenant may elect to use the Improvement Allowance by written notice to Landlord (subject to the final sentence of this Section 1.1.4).  If Tenant so elects to use the Improvement Allowance, Landlord shall disburse the Improvement Allowance to Tenant following Tenant’s completion of Alterations in accordance with the terms of Article 8, below, to reimburse Tenant the actual costs incurred by Tenant in connection with such Alterations.  The Improvement Allowance shall not be made available to reimburse Tenant for any moving or relocation expenses, furniture or fixtures, telephone or data cabling, signage or personal property.  Landlord shall not charge Tenant any supervisory fee in connection with Alterations paid for by the Improvement Allowance, but, as provided in Section 8.4, below, Tenant shall reimburse Landlord for Landlord’s actual out-of-pocket fees incurred with respect to any third party consultants or service providers engaged by Landlord in connection with the review and approval of plans relating to such Alterations, not to exceed $3,000.00.  

 

 

The disbursement of the Improvement Allowance shall be in accordance with Landlord’s standard disbursement procedures, which may include the requirement that Tenant provide invoices or other reasonable evidence of the amounts expended by Tenant, and lien releases or waivers as applicable.  Any amount of the Improvement Allowance that is not disbursed or claimed as of the date that is thirty (30) months after the Lease Commencement Date shall revert to Landlord and Tenant shall have no further rights thereto.

 

1.1.5                     FF&E Allowance.  Landlord hereby grants Tenant an allowance in the amount set forth in Section 5 of the Summary (the “FF&E Allowance”) to reimburse Tenant for the costs of furniture, fixtures and equipment installed by Tenant in the Premises (collectively, the “Allowance Items”).  Landlord shall disburse the FF&E Allowance to Tenant within forth-five (45) days after Tenant’s delivery of invoices marked paid or other evidence of costs expended by Tenant for Allowance Items.  Any amount of the FF&E Allowance that remains unclaimed as of the later of December 31, 2014, or six (6) months after delivery of the Premises, shall revert to Landlord and Tenant shall have no further rights with respect thereto.

 

1.2                               Rentable Square Feet of Premises.  For purposes of this Lease, “rentable square feet” of the Premises shall be deemed as set forth in Section 2.2 of the Summary.

 

1.3                               Beneficial Occupancy.  Notwithstanding any provision to the contrary contained herein, but subject to the terms of this Section 1.3, below, in the event that Landlord’s delivery of the Premises occurs prior to July 1, 2014, Tenant shall have the right to occupy the Premises for the “Permitted Use,” as that term is defined in Section 7 of the Summary, commencing upon Landlord’s delivery of the Premises and continuing until the Lease Commencement Date (the “Beneficial Occupancy Period”), as though the Lease Commencement Date had occurred (although the Lease Commencement Date shall not actually occur until the occurrence of the same pursuant to Article 2, below), provided that (A) a temporary certificate of occupancy shall have been issued by the appropriate governmental authorities for the Premises, (B) Tenant shall have paid any and all amounts owing as of such date to Landlord under the terms of this Lease, (C) Tenant shall have obtained and provided Landlord with evidence of the insurance required to be carried by Tenant under the terms of this Lease, and (D) all of the terms and conditions of this Lease shall apply during Tenant’s occupancy of the Premises throughout the Beneficial Occupancy Period, other than Tenant’s obligation to pay “Base Rent,” as that term is defined in Article 3 below, and “Tenant’s Share” of the annual “Direct Expenses,” as those terms are defined in Sections 4.2.6 and 4.2.2 of this Lease, respectively.

 

2.LEASE TERM; OPTION TERM

 

2.1                               Lease Term.  The terms and provisions of this Lease shall be effective as of the date of this Lease (the “Lease Commencement Date”).  The term of this Lease (the “Lease Term”) shall be as set forth in Section 3.1 of the Summary, shall commence on the date set forth in Section 3.2 of the Summary (the “Lease Commencement Date”), and shall terminate on the date set forth in Section 3.3 of the Summary (the “Lease Expiration Date”) unless this Lease is sooner terminated as hereinafter provided.  For purposes of this Lease, the term “Lease Year” shall mean each consecutive twelve (12) month period during the Lease Term.  At any time during the Lease Term, Landlord may deliver to Tenant a notice in the form as set forth in Exhibit C, attached hereto, as a confirmation only of the information set forth therein, which Tenant shall execute and return to Landlord within ten (10) business days of receipt thereof.

 

2.2                               Option Term.

 

2.2.1                     Option Right.  Landlord hereby grants to Tenant one (1) option to extend the Lease Term for a period of five (5) years (the “Option Term”), which option shall be irrevocably exercised only by written notice delivered by Tenant to Landlord not more than twelve (12) months nor less than nine (9) months prior to the expiration of the initial Lease Term, provided that the following conditions (the “Option Conditions”) are satisfied:  (i) as of the date of delivery of such notice, Tenant is not in default under this Lease, after the expiration of any applicable notice and cure period; and (ii)  the Lease then remains in full force and effect and Tenant occupies more than fifty percent (50%) of the Premises at the time the option to extend is exercised and as of the commencement of the Option Term.  Landlord may, at Landlord’s option, exercised in Landlord’s sole and absolute discretion, waive any of the Option Conditions in which case the option, if otherwise properly exercised by Tenant, 

 

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shall remain in full force and effect.  Upon the proper exercise of such option to extend, and provided that Tenant satisfies all of the Option Conditions (except those, if any, which are waived by Landlord), the Lease Term, as it applies to the Premises, shall be extended for a period of five (5) years.  The rights contained in this Section 2.2 may be exercised by Tenant or an assignee of Tenant’s entire interest in this Lease as approved in accordance with the terms of Article 14, below, (and not by any sublessee or other “Transferee,” as that term is defined in Section 14.1 of this Lease).

 

2.2.2                     Option Rent.  The annual Rent payable by Tenant during the Option Term (the “Option Rent”) shall be equal to the “Fair Rental Value,” as that term is defined below, for the Premises as of the commencement date of the Option Term.  The “Fair Rental Value,” as used in this Lease, shall be equal to the annual rent per rentable square foot (including additional rent and considering any “base year” or “expense stop” applicable thereto), including all escalations, at which tenants (pursuant to leases consummated within the twelve (12) month period preceding the first day of the Option Term), are leasing non-sublease, non-encumbered, non-equity space which is not significantly greater or smaller in size than the subject space, for a comparable lease term, in an arm’s length transaction, which comparable space is located in the “Comparable Buildings,” as that term is defined in this Section 2.2.2, below (transactions satisfying the foregoing criteria shall be known as the “Comparable Transactions”), taking into consideration all relevant factors, including the following concessions (the “Concessions”):  (a) rental abatement concessions, if any, being granted such tenants in connection with such comparable space; (b) tenant improvements or allowances provided or to be provided for such comparable space, and taking into account the value, if any, of the existing improvements in the subject space, such value to be based upon the age, condition, design, quality of finishes and layout of the improvements and the extent to which the same can be utilized by a general office user other than Tenant; and (c) other reasonable monetary concessions being granted such tenants in connection with such comparable space; provided, however, that in calculating the Fair Rental Value, no consideration shall be given to (i) the fact that Landlord is or is not required to pay a real estate brokerage commission in connection with Tenant’s exercise of its right to extend the Lease Term, or the fact that landlords are or are not paying real estate brokerage commissions in connection with such comparable space, and (ii) any period of rental abatement, if any, granted to tenants in comparable transactions in connection with the design, permitting and construction of tenant improvements in such comparable spaces.  The Fair Rental Value shall additionally include a determination as to whether, and if so to what extent, Tenant must provide Landlord with financial security, such as a letter of credit or guaranty, for Tenant’s Rent obligations in connection with Tenant’s lease of the Premises during the Option Term.  Such determination shall be made by reviewing the extent of financial security then generally being imposed in Comparable Transactions from tenants of comparable financial condition and credit history to the then existing financial condition and credit history of Tenant (with appropriate adjustments to account for differences in the then-existing financial condition of Tenant and such other tenants).  The Concessions (A) shall be reflected in the effective rental rate (which effective rental rate shall take into consideration the total dollar value of such Concessions as amortized on a straight-line basis over the applicable term of the Comparable Transaction (in which case such Concessions evidenced in the effective rental rate shall not be granted to Tenant)) payable by Tenant, or (B) at Landlord’s election, all such Concessions shall be granted to Tenant in kind.  The term “Comparable Buildings” shall mean the Building and those other life sciences buildings which are comparable to the Building in terms of age (based upon the date of completion of construction or major renovation of to the building), quality of construction, level of services and amenities, size and appearance, and are located in South San Francisco, California and the surrounding commercial area.

 

2.2.3                     Determination of Option Rent.  In the event Tenant timely and appropriately exercises an option to extend the Lease Term, Landlord shall notify Tenant of Landlord’s determination of the Option Rent on within thirty (30) days after Tenant’s exercise of the option.  If Tenant, on or before the date which is ten (10) days following the date upon which Tenant receives Landlord’s determination of the Option Rent, in good faith objects to Landlord’s determination of the Option Rent, then Landlord and Tenant shall attempt to agree upon the Option Rent using their best good-faith efforts.  If Landlord and Tenant fail to reach agreement within ten (10) days following Tenant’s objection to the Option Rent (the “Outside Agreement Date”), then each party shall make a separate determination of the Option Rent, as the case may be, within five (5) days, and such determinations shall be submitted to arbitration in accordance with Sections 2.2.3.1 through 2.2.3.7, below.  If Tenant fails to object to Landlord’s determination of the Option Rent within the time period set forth herein, then Tenant shall be deemed to have objected to Landlord’s determination of Option Rent.

 

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2.2.3.1           Landlord and Tenant shall each appoint one arbitrator who shall be, at the option of the appointing party, a real estate broker, appraiser or attorney who shall have been active over the five (5) year period ending on the date of such appointment in the leasing or appraisal, as the case may be, of other class A life sciences buildings located in the South San Francisco market area.  The determination of the arbitrators shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted Option Rent is the closest to the actual Option Rent, taking into account the requirements of Section 2.2.2 of this Lease, as determined by the arbitrators.  Each such arbitrator shall be appointed within fifteen (15) days after the Outside Agreement Date.  Landlord and Tenant may consult with their selected arbitrators prior to appointment and may select an arbitrator who is favorable to their respective positions.  The arbitrators so selected by Landlord and Tenant shall be deemed “Advocate Arbitrators.”

 

2.2.3.2           The two (2) Advocate Arbitrators so appointed shall be specifically required pursuant to an engagement letter within ten (10) days of the date of the appointment of the last appointed Advocate Arbitrator to agree upon and appoint a third arbitrator (“Neutral Arbitrator”) who shall be qualified under the same criteria set forth hereinabove for qualification of the two Advocate Arbitrators, except that neither the Landlord or Tenant or either parties’ Advocate Arbitrator may, directly or indirectly, consult with the Neutral Arbitrator prior or subsequent to his or her appearance.  The Neutral Arbitrator shall be retained via an engagement letter jointly prepared by Landlord’s counsel and Tenant’s counsel.

 

2.2.3.3           The three arbitrators shall, within thirty (30) days of the appointment of the Neutral Arbitrator, reach a decision as to whether the parties shall use Landlord’s or Tenant’s submitted Option Rent, and shall notify Landlord and Tenant thereof.

 

2.2.3.4           The decision of the majority of the three arbitrators shall be binding upon Landlord and Tenant.

 

2.2.3.5           If either Landlord or Tenant fails to appoint an Advocate Arbitrator within fifteen (15) days after the Outside Agreement Date, then either party may petition the presiding judge of the Superior Court of San Mateo County to appoint such Advocate Arbitrator subject to the criteria in Section 2.2.3.1 of this Lease, or if he or she refuses to act, either party may petition any judge having jurisdiction over the parties to appoint such Advocate Arbitrator.

 

2.2.3.6           If the two (2) Advocate Arbitrators fail to agree upon and appoint the Neutral Arbitrator, then either party may petition the presiding judge of the Superior Court of San Mateo County to appoint the Neutral Arbitrator, subject to criteria in Section 2.2.3.1 2 of this Lease, or if he or she refuses to act, either party may petition any judge having jurisdiction over the parties to appoint such arbitrator.

 

2.2.3.7           The cost of the Neutral Arbitrator shall be paid by Landlord and Tenant equally, and each party will bear the cost of their Advocate Arbitrator.

 

2.2.3.8           In the event that the Option Rent shall not have been determined pursuant to the terms hereof prior to the commencement of the Option Term, Tenant shall be required to pay the Option Rent initially provided by Landlord to Tenant, and upon the final determination of the Option Rent, the payments made by Tenant shall be reconciled with the actual amounts of Option Rent due, and the appropriate party shall make any corresponding payment to the other party.

 

2.3                               Early Termination Right.  Provided that Tenant is not in default under the Lease, after expiration of any applicable notice and cure periods, as of the date of Tenant’s delivery of the “Termination Notice,” as that term is defined below, the Original Tenant and any Permitted Assignee only shall have the right to terminate this Lease effective as of the last day of the thirty-sixth (36th) full calendar month of the Lease Term (the “Termination Date”), provided that (i) Tenant delivers written notice (the “Termination Notice”) to Landlord on or before the the last day of the twenty-fourth (24th) full calendar month of the Lease Term, stating Tenant’s election to terminate the Lease pursuant to the terms and conditions of this Section 2.3, (ii) concurrent with Tenant’s delivery of the Termination Notice, Tenant delivers to Landlord the Termination Fee, as consideration for and as a condition precedent to such early termination.  Provided that Tenant property and timely delivers the Termination Notice and 

 

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Termination Fee, this Lease shall automatically terminate and be of no further force or effect and Landlord and Tenant shall be relieved of their respective obligations under the Lease as of the Termination Date, except for those obligations set forth in the Lease which relate to the period prior to the Termination Date and/or that specifically survive the expiration or earlier termination of the Lease.  The “Termination Fee” shall mean the unamortized amount (calculated with interest at a rate equal to 9% per annum), as of the Termination Date, of the Improvement Allowance and brokerage commissions paid or provided by Landlord in connection with this Lease.  In the event Tenant does not terminate this Lease pursuant to the terms of this Section 2.3, then Tenant shall have no obligation to pay any Base Rent for the Premises attributable to the thirty-seventh (37th) and thirty-eighth (38th) full calendar months of the Lease Term

 

3.                                      BASE RENT                       Tenant shall pay, without prior notice or demand, to Landlord or Landlord’s agent at the management office of the Project, or, at Landlord’s option, at such other place as Landlord may from time to time designate in writing, by a check for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, base rent (“Base Rent”) as set forth in Section 4 of the Summary, payable in equal monthly installments as set forth in Section 4 of the Summary in advance on or before the first day of each and every calendar month during the Lease Term, commencing on the Lease Commencement Date, without any setoff or deduction whatsoever.  The Base Rent for the first full month of the Lease Term following the expiration of the Base Rent Abatement Period and any Beneficial Occupancy Period shall be paid at the time of Tenant’s execution of this Lease.  If any Rent payment date (including the Lease Commencement Date) falls on a day of the month other than the first day of such month or if any payment of Rent is for a period which is shorter than one month, the Rent for any fractional month shall accrue on a daily basis for the period from the date such payment is due to the end of such calendar month or to the end of the Lease Term at a rate per day which is equal to 1/365 of the applicable annual Rent.  All other payments or adjustments required to be made under the terms of this Lease that require proration on a time basis shall be prorated on the same basis.

 

4.                                      ADDITIONAL RENT

 

4.1                               General Terms.

 

4.1.1                     Direct Expenses; Additional Rent.  In addition to paying the Base Rent specified in Article 3 of this Lease, Tenant shall pay Tenant’s Share of the annual Direct Expenses.  Such payments by Tenant, together with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease, are hereinafter collectively referred to as the “Additional Rent”, and the Base Rent and the Additional Rent are herein collectively referred to as “Rent.”  All amounts due under this Article 4 as Additional Rent shall be payable for the same periods and in the same manner as the Base Rent.  Without limitation on other obligations of Tenant which survive the expiration of the Lease Term, the obligations of Tenant to pay the Additional Rent provided for in this Article 4 shall survive the expiration of the Lease Term.

 

4.1.2                     Triple Net Lease.  Landlord and Tenant acknowledge that, except as otherwise provided to the contrary in this Lease, it is their intent and agreement that this Lease be a “TRIPLE NET” lease and that as such, the provisions contained in this Lease are intended to pass on to Tenant or reimburse Landlord for the costs and expenses reasonably associated with this Lease, the Building and the Project, and Tenant’s operation therefrom.  To the extent such costs and expenses payable by Tenant cannot be charged directly to, and paid by, Tenant, such costs and expenses shall be paid by Landlord but reimbursed by Tenant as Additional Rent.

 

4.2                               Definitions of Key Terms Relating to Additional Rent.  As used in this Article 4, the following terms shall have the meanings hereinafter set forth:

 

4.2.1                     Intentionally Deleted.

 

4.2.2                     “Direct Expenses” shall mean “Operating Expenses” and “Tax Expenses.”

 

4.2.3                     “Expense Year” shall mean each calendar year in which any portion of the Lease Term falls, through and including the calendar year in which the Lease Term expires, provided that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive month period, and, 

 

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in the event of any such change, Tenant’s Share of Direct Expenses shall be equitably adjusted for any Expense Year involved in any such change.

 

4.2.4                     “Operating Expenses” shall mean all expenses, costs and amounts of every kind and nature which Landlord pays or accrues during any Expense Year because of or in connection with the ownership, management, maintenance, security, repair, replacement, restoration or operation of the Project, or any portion thereof.  Without limiting the generality of the foregoing, Operating Expenses shall specifically include any and all of the following:  (i) the cost of supplying all utilities, the cost of operating, repairing, maintaining, and renovating the utility, telephone, mechanical, sanitary, storm drainage, and elevator systems, and the cost of maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections, and the costs incurred in connection with a governmentally mandated transportation system management program or similar program; (iii) the cost insurance premiums for all insurance carried by Landlord in connection with the Project and Premises as reasonably determined by Landlord; (iv) the cost of landscaping, relamping, and all supplies, tools, equipment and materials used in the operation, repair and maintenance of the Project, or any portion thereof; (v) the cost of parking area operation, repair, restoration, and maintenance; (vi) fees and other costs, including management fees to the extent allowed in (v), below, of all contractors and consultants in connection with the management, operation, maintenance and repair of the Project; (vii) payments under any equipment rental agreements and the fair rental value of any management office space; (viii) subject to item (f), below, wages, salaries and other compensation and benefits, including taxes levied thereon, of all persons engaged in the operation, maintenance and security of the Project; (ix) costs under any instrument pertaining to the sharing of costs by the Project; (x) operation, repair, maintenance and replacement of all systems and equipment and components thereof of the Project; (xi) the cost of janitorial, alarm, security and other services, replacement of wall and floor coverings, ceiling tiles and fixtures in common areas, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (xii) amortization (including reasonable interest on the unamortized cost) over such period of time as Landlord shall reasonably determine, of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Project, or any portion thereof; (xiii) the cost of capital improvements or other costs incurred in connection with the Project (A) which are intended to reduce expenses in the operation or maintenance of the Project, or any portion thereof, or to reduce current or future Operating Expenses or to enhance the safety or security of the Project or its occupants, (B) that are required to comply with present or anticipated mandatory conservation programs, (C) which are replacements or modifications of nonstructural items located in the Common Areas required to keep the Common Areas in the same good order or condition as on the Lease Commencement Date, (D) that are required under any governmental law or regulation that was not in force or effect as of the Lease Commencement Date, or (E) any replacements or repairs of a capital nature set forth in (x), above, provided, however, that any capital expenditure shall be amortized (including reasonable interest on the amortized cost as reasonably determined by Landlord) over the reasonable useful life of such capital item; and (xiv) costs, fees, charges or assessments imposed by, or resulting from any mandate imposed on Landlord by, any federal, state or local government for fire and police protection, trash removal, community services, or other services which do not constitute “Tax Expenses” as that term is defined in Section 4.2.5, below, and (xv) payments under any easement, license, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs by the Building, including, without limitation, any covenants, conditions and restrictions affecting the property, and reciprocal easement agreements affecting the property, any parking licenses, and any agreements with transit agencies affecting the Property, including any costs under Section 29.31, below (collectively, “Underlying Documents”).  Costs incurred as a result of insurance deductible amounts shall be included in Operating Expenses only in the manner provided in this Section 4.2.4, and only to the extent otherwise allowed to be included in Operating Expenses by this Section 4.2.4.  Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses shall not, however, include:

 

(a)                                 costs, including legal fees, space planners’ fees, advertising and promotional expenses, and brokerage fees incurred in connection with the original construction or development, or original or future leasing of the Project, and costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements made for new tenants initially occupying space in the Project after the Lease Commencement Date or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Project (excluding, however, such costs relating to any common areas of the Project or parking facilities);

 

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(b)                                 except as set forth in items (xii), (xiii), and (xiv) above, depreciation, interest and principal payments on mortgages and other debt costs, if any, penalties and interest, costs of capital repairs and alterations, and costs of capital improvements and equipment;

 

(c)                                  costs for which the Landlord is reimbursed by any tenant or occupant of the Project or by insurance by its carrier or any tenant’s carrier or by anyone else, and electric power costs for which any tenant directly contracts with the local public service company;

 

(d)                                 any bad debt loss, rent loss, or reserves for bad debts or rent loss;

 

(e)                                  costs associated with the operation of the business of the partnership or entity which constitutes the Landlord, as the same are distinguished from the costs of operation of the Project (which shall specifically include, but not be limited to, accounting costs associated with the operation of the Project).  Costs associated with the operation of the business of the partnership or entity which constitutes the Landlord include costs of partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of the Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of the Landlord’s interest in the Project, and costs incurred in connection with any disputes between Landlord and its employees, between Landlord and Project management, or between Landlord and other tenants or occupants;

 

(f)                                   the wages and benefits of any employee who does not devote substantially all of his or her employed time to the Project unless such wages and benefits are prorated to reflect time spent on operating and managing the Project vis-a-vis time spent on matters unrelated to operating and managing the Project; provided, that in no event shall Operating Expenses for purposes of this Lease include wages and/or benefits attributable to personnel above the level of Project manager;

 

(g)                                  amount paid as ground rental for the Project by the Landlord;

 

(h)                                 except for a Project management fee to the extent allowed pursuant to item (l) below, overhead and profit increment paid to the Landlord or to subsidiaries or affiliates of the Landlord for services in the Project to the extent the same exceeds the costs of such services rendered by qualified, first-class unaffiliated third parties on a competitive basis;

 

(i)                                     any compensation paid to clerks, attendants or other persons in commercial concessions operated by the Landlord, provided that any compensation paid to any concierge at the Project shall be includable as an Operating Expense;

 

(j)                                    rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment which if purchased the cost of which would be excluded from Operating Expenses as a capital cost, except equipment not affixed to the Project which is used in providing janitorial or similar services and, further excepting from this exclusion such equipment rented or leased to remedy or ameliorate an emergency condition in the Project ;

 

(k)                                 all items and services for which Tenant or any other tenant in the Project reimburses Landlord or which Landlord provides selectively to one or more tenants (other than Tenant) without reimbursement;

 

(l)                                     any costs expressly excluded from Operating Expenses elsewhere in this Lease;

 

(m)                             rent for any office space occupied by Project management personnel to the extent the size or rental rate of such office space exceeds the size or fair market rental value of office space occupied by management personnel of the comparable buildings in the vicinity of the Building, with adjustment where appropriate for the size of the applicable project;

 

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(n)                                 costs arising from the gross negligence or willful misconduct of Landlord or its agents, employees, vendors, contractors, or providers of materials or services; and

 

(o)                                 costs incurred to comply with laws relating to the investigation, testing and/or removal of hazardous material (as defined under applicable law) which was in existence in the Building or on the Project prior to the Lease Commencement Date, and was of such a nature that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions that it then existed in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto; and costs incurred to remove, remedy, contain, or treat hazardous material, which hazardous material is brought into the Building or onto the Project after the date hereof by Landlord or any other tenant of the Project and is of such a nature, at that time, that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions, that it then exists in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto;

 

(p)                                 the cost of special services, goods or materials provided to any other tenant of the Project, and not provided to Tenant;

 

(q)                                 repairs, alterations, additions, improvements or replacements needed to rectify or correct any defects in the original design, materials or workmanship of the Project or common areas;

 

(r)                                    Landlord’s general overhead expenses;

 

(s)                                   legal fees, accountants’ fees (other than normal bookkeeping expenses) and other expenses incurred in connection with disputes of tenants or other occupants of the Project or associated with the enforcement of the terms of any leases with tenants or the defense of Landlord’s title to or interest in the Project or any part thereof;

 

(t)                                    costs incurred due to a violation by Landlord or any other tenant of the Project of the terms and conditions of a lease;

 

(u)                                 self-insurance retentions;

 

(v)                                 Project management fees in excess of three percent (3%) of gross revenues for the Project;

 

(w)                               any reserve funds.

 

4.2.5                     Taxes.

 

4.2.5.1           “Tax Expenses” shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary (including, without limitation, real estate taxes, general and special assessments, transit taxes, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, unless required to be paid by Tenant, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with the Project, or any portion thereof), which shall be paid or accrued during any Expense Year (without regard to any different fiscal year used by such governmental or municipal authority) because of or in connection with the ownership, leasing and operation of the Project, or any portion thereof.

 

4.2.5.2           Tax Expenses shall include, without limitation:  (i) Any tax on the rent, right to rent or other income from the Project, or any portion thereof, or as against the business of leasing the Project, or any portion thereof; (ii) Any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax; (iii) Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the Rent payable

 

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hereunder, including, without limitation, any business or gross income tax or excise tax with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; and (iv) Any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises or the improvements thereon.

 

4.2.5.3           Any costs and expenses (including, without limitation, reasonable attorneys’ and consultants’ fees) incurred in attempting to protest, reduce or minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such expenses are incurred.  Tax refunds shall be credited against Tax Expenses and refunded to Tenant regardless of when received, based on the Expense Year to which the refund is applicable, provided that in no event shall the amount to be refunded to Tenant for any such Expense Year exceed the total amount paid by Tenant as Additional Rent under this Article 4 for such Expense Year.  The foregoing sentence shall survive the expiration or earlier termination of this Lease.  If Tax Expenses for any period during the Lease Term or any extension thereof are increased after payment thereof for any reason, including, without limitation, error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord upon demand Tenant’s Share of any such increased Tax Expenses.  Notwithstanding anything to the contrary contained in this Section 4.2.5, there shall be excluded from Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, transfer tax or fee, federal and state income taxes, and other taxes to the extent applicable to Landlord’s general or net income (as opposed to rents, receipts or income attributable to operations at the Project), (ii) any items included as Operating Expenses, (iii) any items paid by Tenant under Section 4.5 of this Lease, and (iv) any items in excess of the amount which would be payable if such tax or assessment expense were paid in installments over the longest permitted term.

 

4.2.6                     “Tenant’s Share” shall mean the percentage set forth in Section 6 of the Summary.

 

4.3                               Allocation of Direct Expenses.  The parties acknowledge that the Building is a part of a multi-building project and that the costs and expenses incurred in connection with the Project (i.e., the Direct Expenses) should be shared between the Building and the other buildings in the Project.  Accordingly, as set forth in Section 4.2 above, Direct Expenses (which consist of Operating Expenses and tax Expenses) are determined annually for the Project as a whole, and a portion of the Direct Expenses, which portion shall be determined by Landlord on an equitable basis, shall be allocated to the Building (as opposed to other buildings in the Project).  Such portion of Direct Expenses allocated to the Building shall include all Direct Expenses attributable solely to the Building and an equitable portion of the Direct Expenses attributable to the Project as a whole, and shall not include Direct Expenses attributable solely to other buildings in the Project.

 

4.4                               Calculation and Payment of Additional Rent.  Tenant shall pay to Landlord, in the manner set forth in Section 4.4.1, below, and as Additional Rent, Tenant’s Share of Direct Expenses for each Expense Year.

 

4.4.1                     Statement of Actual Direct Expenses and Payment by Tenant.  Landlord shall endeavor to give to Tenant within six (6) months following the end of each Expense Year, a statement (the “Statement”) which shall state the Direct Expenses incurred or accrued for such preceding Expense Year, and which shall indicate the amount of Tenant’s Share of Direct Expenses.  Upon receipt of the Statement for each Expense Year commencing or ending during the Lease Term, Tenant shall pay, within thirty (30) days after invoice, the full amount of Tenant’s Share of Direct Expenses for such Expense Year, less the amounts, if any, paid during such Expense Year as “Estimated Direct Expenses,” as that term is defined in Section 4.4.2, below, and if Tenant paid more as Estimated Direct Expenses than the actual Tenant’s Share of Direct Expenses, Tenant shall receive a credit in the amount of Tenant’s overpayment against Rent next due under this Lease.  The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord or Tenant from enforcing its rights under this Article 4.  Even though the Lease Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant’s Share of Direct Expenses for the Expense Year in which this Lease terminates, Tenant shall pay to Landlord such amount within thirty (30) days, and if Tenant paid more as Estimated Direct Expenses than the actual Tenant’s Share of Direct Expenses, Landlord shall, within thirty (30) days, deliver a check payable to Tenant in the amount of the overpayment.  The provisions of this Section 4.4.1 shall survive the expiration or earlier termination of the Lease Term.  Notwithstanding the immediately preceding sentence, Tenant shall not be responsible for Tenant’s Share of any Direct Expenses attributable to any Expense Year which are first

 

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billed to Tenant more than two (2) calendar years after the earlier of the expiration of the applicable Expense Year or the Lease Expiration Date, provided that in any event Tenant shall be responsible for Tenant’s Share of Direct Expenses levied by any governmental authority or by any public utility companies at any time following the Lease Expiration Date which are attributable to any Expense Year (provided that Landlord delivers Tenant a bill for such amounts within two (2) years following Landlord’s receipt of the bill therefor).

 

4.4.2                     Statement of Estimated Direct Expenses.  In addition, Landlord shall endeavor to give Tenant a yearly expense estimate statement (the “Estimate Statement”) which shall set forth Landlord’s reasonable estimate (the “Estimate”) of what the total amount of Direct Expenses for the then-current Expense Year shall be and the estimated Tenant’s Share of Direct Expenses (the “Estimated Direct Expenses”).  The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Estimated Direct Expenses under this Article 4, nor shall Landlord be prohibited from revising any Estimate Statement or Estimated Direct Expenses theretofore delivered to the extent necessary.  Thereafter, Tenant shall pay, with its next installment of Base Rent due, a fraction of the Estimated Direct Expenses for the then-current Expense Year (reduced by any amounts paid pursuant to the last sentence of this Section 4.4.2).  Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year, including the month of such payment, and twelve (12) as its denominator.  Until a new Estimate Statement is furnished (which Landlord shall have the right to deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated Direct Expenses set forth in the previous Estimate Statement delivered by Landlord to Tenant.

 

4.5                               Taxes and Other Charges for Which Tenant Is Directly Responsible.  Tenant shall be liable for and shall pay ten (10) days before delinquency, taxes levied against Tenant’s equipment, furniture, fixtures and any other personal property located in or about the Premises.  If any such taxes on Tenant’s equipment, furniture, fixtures and any other personal property are levied against Landlord or Landlord’s property or if the assessed value of Landlord’s property is increased by the inclusion therein of a value placed upon such equipment, furniture, fixtures or any other personal property and if Landlord pays the taxes based upon such increased assessment, which Landlord shall have the right to do regardless of the validity thereof but only under proper protest if requested by Tenant, Tenant shall upon demand repay to Landlord the taxes so levied against Landlord or the proportion of such taxes resulting from such increase in the assessment, as the case may be.

 

4.6                               Landlord’s Books and Records.  Within one hundred twenty (120) days after receipt of a Statement by Tenant, if Tenant disputes the amount of Additional Rent set forth in the Statement, an independent certified public accountant (which accountant is a member of a nationally recognized accounting firm and is not working on a contingency fee basis), designated and paid for by Tenant and reasonably approved by Landlord, may, after reasonable notice to Landlord and at reasonable times, inspect Landlord’s records with respect to the Statement at Landlord’s offices in the San Francisco Bay Area, provided that Tenant is not then in default under this Lease and Tenant has paid all amounts required to be paid under the applicable Estimate Statement and Statement, as the case may be.  In connection with such inspection, Tenant and Tenant’s agents must agree in advance to follow Landlord’s reasonable rules and procedures regarding inspections of Landlord’s records, and shall execute a commercially reasonable confidentiality agreement regarding such inspection.  Tenant’s failure to dispute the amount of Additional Rent set forth in any Statement within one hundred twenty (120) days of Tenant’s receipt of such Statement shall be deemed to be Tenant’s approval of such Statement and Tenant, thereafter, waives the right or ability to dispute the amounts set forth in such Statement.  If after such inspection, Tenant still disputes such Additional Rent, a determination as to the proper amount shall be made, at Tenant’s expense, by an independent certified public accountant (the “Accountant”) selected by Landlord and subject to Tenant’s reasonable approval; provided that if such determination by the Accountant proves that Direct Expenses were overstated by more than five percent (5%), then the cost of the Accountant and the cost of such determination shall be paid for by Landlord. Tenant hereby acknowledges that Tenant’s sole right to inspect Landlord’s books and records and to contest the amount of Direct Expenses payable by Tenant shall be as set forth in this Section 4.6, and Tenant hereby waives any and all other rights pursuant to applicable law to inspect such books and records and/or to contest the amount of Direct Expenses payable by Tenant.

 

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5.                                      USE OF PREMISES

 

5.1                               Permitted Use.  Tenant shall use the Premises solely for the Permitted Use set forth in Section 7 of the Summary and Tenant shall not use or permit the Premises or the Project to be used for any other purpose or purposes whatsoever without the prior written consent of Landlord, which may be withheld in Landlord’s sole discretion.

 

5.2                               Prohibited Uses.  Tenant further covenants and agrees that Tenant shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary to the provisions of the Rules and Regulations set forth in Exhibit D, attached hereto, or in violation of the laws of the United States of America, the State of California, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Project) including, without limitation, any such laws, ordinances, regulations or requirements relating to hazardous materials or substances, as those terms are defined by applicable laws now or hereafter in effect.  Tenant shall not do or permit anything to be done in or about the Premises which will in any way damage the reputation of the Project or obstruct or interfere with the rights of other tenants or occupants of the Building, or injure or annoy them or use or allow the Premises to be used for any unlawful purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises.  Tenant shall comply with, and Tenant’s rights and obligations under the Lease and Tenant’s use of the Premises shall be subject and subordinate to, all recorded easements, covenants, conditions, and restrictions now or hereafter affecting the Project.

 

5.3                               Hazardous Materials.

 

5.3.1                     Tenant’s Obligations.

 

5.3.1.1           Prohibitions.  As a material inducement to Landlord to enter into this Lease with Tenant, Tenant has fully and accurately completed Landlord’s Pre-Leasing Environmental Exposure Questionnaire (the “Environmental Questionnaire”), which is attached as Exhibit E.  Tenant hereby represents, warrants and covenants that except for those chemicals or materials, and their respective quantities, specifically listed on the Environmental Questionnaire, neither Tenant nor Tenant’s employees, contractors and subcontractors of any tier, entities with a contractual relationship with Tenant (other than Landlord), or any entity acting as an agent or sub-agent of Tenant (collectively, “Tenant’s Agents”) will produce, use, store or generate any “Hazardous Materials,” as that term is defined below, on, under or about the Premises, nor cause or permit any Hazardous Material to be brought upon, placed, stored, manufactured, generated, blended, handled, recycled, used or “Released,” as that term is defined below, on, in, under or about the Premises.  If any information provided to Landlord by Tenant on the Environmental Questionnaire, or otherwise relating to information concerning Hazardous Materials is false, incomplete, or misleading in any material respect, the same shall be deemed a default by Tenant under this Lease.  Upon Landlord’s request, or in the event of any material change in Tenant’s use of Hazardous Materials at the Premises, Tenant shall deliver to Landlord an updated Environmental Questionnaire at least once a year.  Landlord’s prior written consent shall be required to any Hazardous Materials use for the Premises not described on the initial Environmental Questionnaire, such consent not to be unreasonably withheld.  Tenant shall not install or permit any underground storage tank on the Premises.  In addition, Tenant agrees that it shall not cause or suffer to occur, the Release of any Hazardous Materials at, upon, under or within the Premises or any contiguous or adjacent premises.  For purposes of this Lease, “Hazardous Materials” means all flammable explosives, petroleum and petroleum products, waste oil, radon, radioactive materials, toxic pollutants, asbestos, polychlorinated biphenyls (“PCBs”), medical waste, chemicals known to cause cancer or reproductive toxicity, pollutants, contaminants, hazardous wastes, toxic substances or related materials, including without limitation any chemical, element, compound, mixture, solution, substance, object, waste or any combination thereof, which is or may be hazardous to human health, safety or to the environment due to its radioactivity, ignitability, corrosiveness, reactivity, explosiveness, toxicity, carcinogenicity, infectiousness or other harmful or potentially harmful properties or effects, or defined as, regulated as or included in, the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” or “toxic substances” under any Environmental Laws.  The term “Hazardous Materials” for purposes of this Lease shall also include any mold, fungus or spores, whether or not the same is defined, listed, or otherwise classified as a “hazardous material” under any Environmental Laws, if such mold, fungus or spores may pose a risk to human health or the environment or negatively impact the value of the Premises.  For purposes of this

 

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Lease, “Release” or “Released” or “Releases” shall mean any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing, or other movement of Hazardous Materials into the environment.

 

5.3.1.2           Notices to Landlord.  Unless Tenant is required by applicable laws to give earlier notice to Landlord, Tenant shall notify Landlord in writing as soon as possible but in no event later than five (5) days after (i) the occurrence of any actual, alleged or threatened Release of any Hazardous Material in, on, under, from, about or in the vicinity of the Premises (whether past or present), regardless of the source or quantity of any such Release, or (ii) Tenant becomes aware of any regulatory actions, inquiries, inspections, investigations, directives, or any cleanup, compliance, enforcement or abatement proceedings (including any threatened or contemplated investigations or proceedings) relating to or potentially affecting the Premises, or (iii) Tenant becomes aware of any claims by any person or entity relating to any Hazardous Materials in, on, under, from, about or in the vicinity of the Premises, whether relating to damage, contribution, cost recovery, compensation, loss or injury.  Collectively, the matters set forth in clauses (i), (ii) and (iii) above are hereinafter referred to as “Hazardous Materials Claims”.  Tenant shall promptly forward to Landlord copies of all orders, notices, permits, applications and other communications and reports in connection with any Hazardous Materials Claims.  Additionally, Tenant shall promptly advise Landlord in writing of Tenant’s discovery of any occurrence or condition on, in, under or about the Premises that could subject Tenant or Landlord to any liability, or restrictions on ownership, occupancy, transferability or use of the Premises under any “Environmental Laws,” as that term is defined below.  Tenant shall not enter into any legal proceeding or other action, settlement, consent decree or other compromise with respect to any Hazardous Materials Claims without first notifying Landlord of Tenant’s intention to do so and affording Landlord the opportunity to join and participate, as a party if Landlord so elects, in such proceedings and in no event shall Tenant enter into any agreements which are binding on Landlord or the Premises without Landlord’s prior written consent.  Landlord shall have the right to appear at and participate in, any and all legal or other administrative proceedings concerning any Hazardous Materials Claim.  For purposes of this Lease, “Environmental Laws” means all applicable present and future laws relating to the protection of human health, safety, wildlife or the environment, including, without limitation, (i) all requirements pertaining to reporting, licensing, permitting, investigation and/or remediation of emissions, discharges, Releases, or threatened Releases of Hazardous Materials, whether solid, liquid, or gaseous in nature, into the air, surface water, groundwater, or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of Hazardous Materials; and (ii) all requirements pertaining to the health and safety of employees or the public.  Environmental Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 USC § 9601, et seq., the Hazardous Materials Transportation Authorization Act of 1994, 49 USC § 5101, et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, and Hazardous and Solid Waste Amendments of 1984, 42 USC § 6901, et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 USC § 1251, et seq., the Clean Air Act of 1966, 42 USC § 7401, et seq., the Toxic Substances Control Act of 1976, 15 USC § 2601, et seq., the Safe Drinking Water Act of 1974, 42 USC §§ 300f through 300j, the Occupational Safety and Health Act of 1970, as amended, 29 USC § 651 et seq., the Oil Pollution Act of 1990, 33 USC § 2701 et seq., the Emergency Planning and Community Right-To-Know Act of 1986, 42 USC § 11001 et seq., the National Environmental Policy Act of 1969, 42 USC § 4321 et seq., the Federal Insecticide, Fungicide and Rodenticide Act of 1947, 7 USC § 136 et seq., California Carpenter-Presley-Tanner Hazardous Substance Account Act, California Health & Safety Code §§ 25300 et seq., Hazardous Materials Release Response Plans and Inventory Act, California Health & Safety Code, §§ 25500 et seq., Underground Storage of Hazardous Substances provisions, California Health & Safety Code, §§ 25280 et seq., California Hazardous Waste Control Law, California Health & Safety Code, §§ 25100 et seq., and any other state or local law counterparts, as amended, as such applicable laws, are in effect as of the Lease Commencement Date, or thereafter adopted, published, or promulgated.

 

5.3.1.3           Releases of Hazardous Materials.  If any Release by Tenant or Tenant Agents of any Hazardous Material in, on, under, from or about the Premises shall occur at any time during the Lease and/or if any other Hazardous Material condition exists at the Premises caused by Tenant or Tenant Agents that requires response actions of any kind, in addition to notifying Landlord as specified above, Tenant, at its own sole cost and expense, shall (i) immediately comply with any and all reporting requirements imposed pursuant to any and all Environmental Laws, (ii) provide a written certification to Landlord indicating that Tenant has complied with all applicable reporting requirements, (iii) take any and all necessary investigation, corrective and remedial action in

 

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accordance with any and all applicable Environmental Laws, utilizing an environmental consultant approved by Landlord, all in accordance with the provisions and requirements of this Section 5.4, including, without limitation, Section 5.4.4, and (iv) take any such additional investigative, remedial and corrective actions as Landlord shall in its reasonable discretion deem necessary such that the Premises are remediated to the condition existing prior to such Release.

 

5.3.1.4           Indemnification.

 

5.3.1.4.1              In General.  Without limiting in any way Tenant’s obligations under any other provision of this Lease, Tenant shall be solely responsible for and shall protect, defend, indemnify and hold the Landlord Parties harmless from and against any and all claims, judgments, losses, damages, costs, expenses, penalties, enforcement actions, taxes, fines, remedial actions, liabilities (including, without limitation, actual attorneys’ fees, litigation, arbitration and administrative proceeding costs, expert and consultant fees and laboratory costs) including, without limitation, consequential damages and sums paid in settlement of claims (collectively, “Claims”), which arise during or after the Lease Term, whether foreseeable or unforeseeable, that arise during or after the Lease Term in whole or in part, foreseeable or unforeseeable, directly or indirectly arising out of or attributable to the presence, use, generation, manufacture, treatment, handling, refining, production, processing, storage, Release or presence of Hazardous Materials in, on, under or about the Premises by Tenant or Tenant’s Agents, except to the extent such liabilities result from the gross negligence or willful misconduct of Landlord following the Lease Commencement Date.

 

5.3.1.4.2              Limitations.  Notwithstanding anything in Section 5.4.1.4, above, to the contrary, Tenant’s indemnity of Landlord as set forth in Section 5.4.1.4, above, shall not be applicable to claims based upon any Hazardous Materials existing in on or under at the Premises, Building or Project as of the date of this Lease (the “Existing Hazardous Materials”), except to the extent that Tenant’s construction activities and/or Tenant’s other acts or omissions (including Tenant’s failure to remove, remediate or otherwise treat or “Clean-up,” as that term is defined in Section 5.3.4, below, the subject Existing Hazardous Materials during the tenancy of the Premises) caused or exacerbated the subject claim.  Landlord shall indemnify, defend, protect and hold harmless Tenant and Tenant’s Agents from and against any and all Claims to the extent arising out of any Existing Hazardous Materials, other than as made Tenant’s responsibility by the preceding sentence.

 

5.3.1.5           Compliance with Environmental Laws.  Without limiting the generality of Tenant’s obligation to comply with applicable laws as otherwise provided in this Lease, Tenant shall, at its sole cost and expense, comply with all Environmental Laws; provided, however, that Tenant’s obligation to perform remediation shall be limited to Releases of Hazardous Materials by Tenant or Tenant’s Agents only.  Tenant shall obtain and maintain any and all necessary permits, licenses, certifications and approvals appropriate or required for the use, handling, storage, and disposal of any Hazardous Materials used, stored, generated, transported, handled, blended, or recycled by Tenant on the Premises.  Landlord shall have a continuing right, without obligation, to require Tenant to obtain, and to review and inspect any and all such permits, licenses, certifications and approvals, together with copies of any and all Hazardous Materials management plans and programs, any and all Hazardous Materials risk management and pollution prevention programs, and any and all Hazardous Materials emergency response and employee training programs respecting Tenant’s use of Hazardous Materials.  Upon request of Landlord,  Tenant shall deliver to Landlord a narrative description explaining the nature and scope of Tenant’s activities involving Hazardous Materials and showing to Landlord’s satisfaction compliance with all Environmental Laws and the terms of this Lease.

 

5.3.2                     Assurance of Performance.

 

5.3.2.1           Environmental Assessments In General.  Landlord may, but shall not be required to, engage from time to time such contractors as Landlord determines to be appropriate to perform environmental assessments of a scope reasonably determined by Landlord (an “Environmental Assessment”) to ensure Tenant’s compliance with the requirements of this Lease with respect to Hazardous Materials.  .

 

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5.3.2.2           Costs of Environmental Assessments.  All costs and expenses incurred by Landlord in connection with any such Environmental Assessment initially shall be paid by Landlord; provided that if any such Environmental Assessment shows that Tenant has failed to comply with the provisions of this Section 5.4, then all of the costs and expenses of such Environmental Assessment shall be reimbursed by Tenant as Additional Rent within thirty (30) days after receipt of written demand therefor.

 

5.3.3                     Tenant’s Obligations upon Surrender.  At the expiration or earlier termination of the Lease Term, Tenant, at Tenant’s sole cost and expense, shall:  (i) if Tenant has used Hazardous Materials in the Premises, or if any Release by Tenant or a Tenant Agent occurred during the Lease Term, cause an Environmental Assessment of the Premises to be conducted in accordance with Section 15.3; (ii) cause all Hazardous Materials Released by Tenant or a Tenant Agent to be removed from the Premises and disposed of in accordance with all Environmental Laws and as necessary to allow the Premises to be used for any purpose permitted as of the Lease Commencement Date, subject to applicable changes in applicable land use regulations; and (iii) cause to be removed all containers installed or used by Tenant or Tenant’s Agents to store any Hazardous Materials on the Premises, and cause to be repaired any damage to the Premises caused by such removal.

 

5.3.4                     Clean-up.

 

5.3.4.1           Environmental Reports; Clean-Up.  If any written report, including any report containing results of any Environmental Assessment (an “Environmental Report”) shall indicate (i) the presence of any Hazardous Materials as to which Tenant has a removal or remediation obligation under this Section 5.3, and (ii) that as a result of same, the investigation, characterization, monitoring, assessment, repair, closure, remediation, removal, or other clean-up (the “Clean-up”) of any Hazardous Materials is required, Tenant shall immediately prepare and submit to Landlord within thirty (30) days after receipt of the Environmental Report a comprehensive plan, subject to Landlord’s written approval, specifying the actions to be taken by Tenant to perform the Clean-up so that the Premises are restored to the conditions required by this Lease.  Upon Landlord’s approval of the Clean-up plan, Tenant shall, at Tenant’s sole cost and expense, without limitation on any rights and remedies of Landlord under this Lease, immediately implement such plan with a consultant reasonably acceptable to Landlord and proceed to Clean-Up Hazardous Materials in accordance with all applicable laws and as required by such plan and this Lease.  If, within thirty (30) days after receiving a copy of such Environmental Report, Tenant fails either (a) to complete such Clean-up, or (b) with respect to any Clean-up that cannot be completed within such thirty-day period, fails to proceed with diligence to prepare the Clean-up plan and complete the Clean-up as promptly as practicable, then Landlord shall have the right, but not the obligation, and without waiving any other rights under this Lease, to carry out any Clean-up recommended by the Environmental Report or required by any governmental authority having jurisdiction over the Premises, and recover all of the costs and expenses thereof from Tenant as Additional Rent, payable within ten (10) days after receipt of written demand therefor.

 

5.3.4.2           No Rent Abatement.  Tenant shall continue to pay all Rent due or accruing under this Lease during any Clean-up, and shall not be entitled to any reduction, offset or deferral of any Base Rent or Additional Rent due or accruing under this Lease during any such Clean-up.

 

5.3.4.3           Surrender of Premises.  Tenant shall complete any required Clean-up prior to surrender of the Premises upon the expiration or earlier termination of this Lease.  In connection therewith, Tenant shall obtain a report provided to the appropriate governmental authority noting the Premises is ready for closure and deliver to Landlord a letter or other written determination from the overseeing governmental authority within ten (10) days after surrender confirming that the Clean-up has been completed in accordance with all requirements of such governmental authority and that no further response action of any kind is required for the unrestricted use of the Premises (“Closure Letter”).  Upon the expiration or earlier termination of this Lease, Tenant shall also be obligated to close all permits it obtains in connection with its use of Hazardous Materials at the Premises in accordance with applicable laws and to obtain such Closure Letters within ten (10) days after expiration or earlier termination of this Lease.

 

5.3.4.4           Failure to Timely Clean-Up.  Should any Clean-up for which Tenant is responsible not be completed, or should Tenant not receive the Closure Letter and any governmental approvals required under Environmental Laws in conjunction with such Clean-up prior to the expiration or earlier termination

 

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of this Lease, then Tenant shall be liable to Landlord as a holdover tenant (as more particularly provided in Article 16) until Tenant has fully complied with its obligations under this Section 5.3.

 

5.3.5                     Confidentiality.  Unless compelled to do so by applicable law, Tenant agrees that Tenant shall not disclose, discuss, disseminate or copy any information, data, findings, communications, conclusions and reports regarding the environmental condition of the Premises to any Person (other than Tenant’s consultants, attorneys, property managers and employees that have a need to know such information), including any governmental authority, without the prior written consent of Landlord.  In the event Tenant reasonably believes that disclosure is compelled by applicable law, it shall provide Landlord ten (10) days’ advance notice of disclosure of confidential information so that Landlord may attempt to obtain a protective order.  Tenant may additionally release such information to bona fide prospective purchasers or lenders, subject to any such parties’ written agreement to be bound by the terms of this Section 5.3.

 

5.3.6                     Copies of Environmental Reports.  Within thirty (30) days of receipt thereof, Tenant shall provide Landlord with a copy of any and all environmental assessments, audits, studies and reports regarding Tenant’s activities with respect to the Premises, or ground water beneath the Land, or the environmental condition or Clean-up thereof.  Tenant shall be obligated to provide Landlord with a copy of such materials without regard to whether such materials are generated by Tenant or prepared for Tenant, or how Tenant comes into possession of such materials.

 

5.3.7                     Signs, Response Plans, Etc.  Tenant shall be responsible for posting on the Premises any signs required under applicable Environmental Laws.  Tenant shall also complete and file any business response plans or inventories required by any applicable laws.  Tenant shall concurrently file a copy of any such business response plan or inventory with Landlord.

 

5.3.8                     Survival.  Each covenant, agreement, representation, warranty and indemnification made by Tenant set forth in this Section 5.3 shall survive the expiration or earlier termination of this Lease and shall remain effective until all of Tenant’s obligations under this Section 5.3 have been completely performed and satisfied.

 

6.                                      SERVICES AND UTILITIES

 

6.1                               In General.  Tenant will be responsible, at its sole cost and expense, for the furnishing of all services and utilities to the Premises, including, but not limited to heating, ventilation and air-conditioning, electricity, water, telephone, janitorial and interior Building security services.

 

6.1.1                     All utilities (including without limitation, electricity, gas, sewer and water) to the Building are separately metered at the Premises and shall be paid directly by Tenant to the applicable utility provider.

 

6.1.2                     Landlord shall not provide janitorial services for the Premises.  Tenant shall be solely responsible for performing all janitorial services and other cleaning of the Premises, all in compliance with applicable laws.  The janitorial and cleaning of the Premises shall be adequate to maintain the Premises in a manner consistent with First Class Life Sciences Projects.

 

Tenant shall cooperate fully with Landlord at all times and abide by all regulations and requirements that Landlord may reasonably prescribe for the proper functioning and protection of the HVAC, electrical, mechanical and plumbing systems.  Provided that Landlord agrees to provide and maintain and keep in continuous service utility connections to the Project, including electricity, water and sewage connections, Landlord shall have no obligation to provide any services or utilities to the Building, including, but not limited to heating, ventilation and air-conditioning, electricity, water, telephone, janitorial and interior Building security services.  In the event that any of the systems or utilities serving the Premises are not separately metered from the systems serving the remainder of the Building, Landlord and Tenant shall mutually agree upon a reasonable allocation of costs between the Premises and the remainder of the Building, using reasonable industry standard methodologies, and shall reasonably cooperate with one another to ensure the prompt payment of any related costs.

 

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6.2                               Interruption of Use.  Tenant agrees that Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by breakage, repairs, replacements, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building or Project after reasonable effort to do so, by any riot or other dangerous condition, emergency, accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant’s use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease.  Furthermore, Landlord shall not be liable under any circumstances for a loss of, or injury to, property or for injury to, or interference with, Tenant’s business, including, without limitation, loss of profits, however occurring, through or in connection with or incidental to a failure to furnish any of the services or utilities as set forth in this Article 6.

 

6.3                               Access.  Subject to applicable laws and the other provisions of this Lease (including, without limitation, the Rules and Regulations, and except in the event of an emergency, Tenant shall have access to the Building, and the Premises, other than areas requiring access with a Building engineer, twenty-four (24) hours per day, seven (7) days per week, every day of the year; provided, however, that Tenant shall only be permitted to have access to and use of the limited-access areas of the Building during the normal operating hours of such portions of the Building.

 

7.                                      REPAIRS

 

7.1                               Tenant Repair Obligations.  Tenant shall, throughout the Term, at its sole cost and expense, maintain, repair, replace and improve as required, the Premises and Building and every part thereof in a good standard of maintenance, repair and replacement as required, and in good and sanitary condition, all in accordance with the standards of First Class Life Sciences Projects, except for Landlord Repair Obligations, whether or not such maintenance, repair, replacement or improvement is required in order to comply with applicable Laws (“Tenant’s Repair Obligations”), including, without limitation, the following: (1) glass, windows, window frames, window casements (including the repairing, resealing, cleaning and replacing of both interior and exterior windows) and skylights; (2) interior and exterior doors, door frames and door closers; (3) interior lighting (including, without limitation, light bulbs and ballasts); (4) the plumbing, sewer, drainage, electrical, fire protection, elevator, escalator, life safety and security systems and equipment, existing heating, ventilation and air-conditioning systems, and all other mechanical, electrical and communications systems and equipment (the foregoing items under this subsection (4), collectively, the “Building Systems”), including without limitation (i) any specialty or supplemental Building Systems installed by or for Tenant and (ii) all electrical facilities and equipment, including lighting fixtures, lamps, fans and any exhaust equipment and systems, electrical motors and all other appliances and equipment of every kind and nature located in, upon or about the Premises; (5) all communications systems serving the Premises; (6) all of Tenant’s security systems in or about or serving the Premises; (7) Tenant’s signage; and (8) interior demising walls and partitions (including painting and wall coverings), equipment, floors, and any roll-up doors, ramps and dock equipment.  Tenant’s Repair Obligations also includes the routine maintenance of the load bearing and exterior walls of the Building, including, without limitation, any painting, sealing, patching and waterproofing of such walls.  Tenant shall additionally be responsible, at Tenant’s sole cost and expense, to furnish all expendables, including light bulbs, paper goods and soaps, used in the Premises, and, to the extent that Landlord notifies Tenant in writing of its intention to no longer arrange for such monitoring, cause the fire alarm systems serving the Premises to be monitored by a monitoring or protective services firm approved by Landlord in writing.  Tenant shall have the benefit of all contract warranties available to Landlord regarding the HVAC systems and equipment.  Tenant shall not be responsible for any structural changes required by law or changes of a capital nature, and instead those repairs/replacements or charges will be the responsibility of Landlord as an Operating Expense under Section 4.2.4 above.

 

7.2                               Service Contracts.  All Building Systems, including HVAC, elevators, main electrical, plumbing and fire/life-safety systems, shall be maintained, repaired and replaced by Tenant (i) in a commercially reasonable first-class condition, (ii) in accordance with any applicable manufacturer specifications relating to any particular component of such Building Systems, (iii) in accordance with applicable Laws.  Tenant shall contract with a qualified, experienced professional third party service companies (a “Service Contract”).  Tenant shall regularly, in

 

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accordance with commercially reasonable standards, generate and maintain preventive maintenance records relating to each Building’s mechanical and main electrical systems, including life safety, elevators and the central plant (“Preventative Maintenance Records”).  In addition, upon Landlord’s request, Tenant shall deliver a copy of all current Service Contracts to Landlord and/or a copy of the Preventative Maintenance Records.

 

7.3                               Landlord’s Right to Perform Tenant’s Repair Obligations.  Tenant shall notify Landlord in writing at least thirty (30) days prior to performing any material Tenant’s Repair Obligations, including without limitation, any Tenant’s Repair Obligation which affect the Building Systems or which is reasonably anticipated to cost more than $35,000.00.  Upon receipt of such notice from Tenant, Landlord shall have the right to either (i) perform such material Tenant’s Repair Obligation by delivering notice of such election to Tenant within thirty (30) days following receipt of Tenant’s notice, and Tenant shall pay Landlord the cost thereof (including Landlord’s reasonable supervision fee) within thirty (30) days after receipt of an invoice therefor, or (ii) require Tenant to perform such Tenant’s Repair Obligation at Tenant’s sole cost and expense.  If Tenant fails to perform any Tenant’s Repair Obligation within a reasonable time period, as reasonably determined by Landlord, then Landlord may, but need not, following delivery of notice to Tenant of such election, make such Tenant Repair Obligation, and Tenant shall pay Landlord the cost thereof, (including Landlord’s reasonable supervision fee) within thirty (30) days after receipt of an invoice therefor.

 

7.4                               Landlord Repair Obligations.  Landlord shall be responsible for repairs to the exterior walls, foundation and roof of the Building, the structural portions of the floors of the Building, except to the extent that such repairs are required due to the negligence or willful misconduct of Tenant (the “Landlord Repair Obligation”); provided, however, that if such repairs are due to the negligence or willful misconduct of Tenant, Landlord shall nevertheless make such repairs at Tenant’s expense except to the extent covered by Landlord’s insurance, Tenant shall only be obligated to pay any deductible in connection therewith.  In addition, Landlord shall be responsible to maintain and repair the non-structural portions of the roof, including the roof membrane, provided that the costs of such repair and maintenance shall be included in Operating Expenses.

 

7.5                               Capital Replacement.  In the event that during the Lease Term (i) the roof membrane requires replacement as reasonably determined by Landlord, (ii) any major component of any Building System servicing the Premises requires replacement, as reasonably determined by Landlord, and the cost of such replacement is in excess of $35,000, or (iii) any major component of any Building System servicing the Premises requires replacement during the last twelve (12) months of the Lease Term, as reasonably determined by Landlord (any such replacement under item (i), (ii), or (iii), above, a “Capital Replacement”), and provided that such Capital Replacement is not required because of any damage caused by Tenant or any failure of Tenant to properly maintain and repair such item in accordance with the terms of this Article 7, then Landlord shall make such Capital Replacement at Landlord’s expense, provided that Landlord shall have the right to include the cost of such Capital Replacement in Operating Expenses on an amortized basis in the manner provided in Section 4.2.4(xiii).

 

8.ADDITIONS AND ALTERATIONS

 

8.1                               Landlord’s Consent to Alterations.  Tenant may not make any improvements, alterations, additions or changes to the Premises or any mechanical, plumbing or HVAC facilities or systems pertaining to the Premises (collectively, the “Alterations”) without first procuring the prior written consent of Landlord to such Alterations, which consent shall be requested by Tenant not less than fifteen (15) business days prior to the commencement thereof, and which consent shall not be unreasonably withheld, conditioned or delayed by Landlord, provided it shall be deemed reasonable for Landlord to withhold its consent to any Alteration which adversely affects the structural portions or the systems or equipment of the Building or is visible from the exterior of the Building.  Notwithstanding the foregoing, Tenant shall be permitted to make Alterations following ten (10) business days notice to Landlord, but without Landlord’s prior consent, to the extent that such Alterations (i) do not affect the Building systems or equipment, (ii) are not visible from the exterior of the Building, and (iii) cost less than $35,000.00 for a particular job of work.

 

8.2                               Manner of Construction.  Landlord may impose, as a condition of its consent to any and all Alterations or repairs of the Premises or about the Premises, such requirements as Landlord in its reasonable discretion may deem desirable, including, but not limited to, the requirement that upon Landlord’s request, Tenant

 

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shall, at Tenant’s expense, remove such Alterations upon the expiration or any early termination of the Lease Term.  All Tenant Improvements to the Flex Space shall remain and not be required to be removed by Tenant (unless Landlord specifically required their removal as a condition to Landlord’s consent to such improvements).  Tenant shall construct such Alterations and perform such repairs in a good and workmanlike manner, in conformance with any and all applicable federal, state, county or municipal laws, rules and regulations and pursuant to a valid building permit, issued by the city in which the Building is located (or other applicable governmental authority).  Tenant shall not use (and upon notice from Landlord shall cease using) contractors, services, workmen, labor, materials or equipment that, in Landlord’s reasonable judgment, would disturb labor harmony with the workforce or trades engaged in performing other work, labor or services in or about the Building or the Common Areas.  Upon completion of any Alterations (or repairs), Tenant shall deliver to Landlord final lien waivers from all contractors, subcontractors and materialmen who performed such work.  In addition to Tenant’s obligations under Article 9 of this Lease, upon completion of any Alterations, Tenant agrees to cause a Notice of Completion to be recorded in the office of the Recorder of the County in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and Tenant shall deliver to the Project construction manager a reproducible copy of the “as built” drawings of the Alterations as well as all permits, approvals and other documents issued by any governmental agency in connection with the Alterations.

 

8.3                               Construction Insurance.  In addition to the requirements of Article 10 of this Lease, in the event that Tenant makes any Alterations, prior to the commencement of such Alterations, Tenant, or its contractor, shall provide Landlord with evidence that Tenant carries “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may reasonably require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease immediately upon completion thereof and such general liability insurance shall name the Landlord Parties as additional insureds.  In addition, Tenant’s contractors and subcontractors shall be required to carry Commercial General Liability Insurance in an amount reasonably approved by Landlord and otherwise in accordance with the requirements of Article 10 of this Lease.

 

8.4                               Payment for Improvements.  Tenant shall reimburse Landlord for Landlord’s reasonable, actual, out-of-pocket costs and expenses actually incurred in connection with Landlord’s review of any Alterations.

 

8.5                               Landlord’s Property.  All Alterations, improvements, fixtures, equipment and/or appurtenances which may be installed or placed in or about the Premises, from time to time, shall be at the sole cost of Tenant and shall be and become the property of Landlord and remain in place at the Premises following the expiration or earlier termination of this Lease.  Notwithstanding the foregoing, Landlord may, by written notice to Tenant at least ninety (90) days prior to the end of the Lease Term, or given following any earlier termination of this Lease, require Tenant, at Tenant’s expense, to remove any Alterations and/or improvements and/or systems and equipment within the Premises and to repair any damage to the Premises and Building caused by such removal and return the affected portion of the Premises to a building standard tenant improved condition as determined by Landlord; provided, however, that notwithstanding the foregoing, upon Landlord’s consent to any Alteration or improvement or Tenant’s request for a determination of removal requirements, Landlord shall notify Tenant whether the applicable Alteration or improvement will be required to be removed pursuant to the terms of this Section 8.5.  If Tenant fails to complete such removal and/or to repair any damage caused by the removal of any Alterations and/or improvements and/or systems and equipment in the Premises and return the affected portion of the Premises to a building standard tenant improved condition as reasonably determined by Landlord, Landlord may do so and may charge the cost thereof to Tenant.  Tenant hereby protects, defends, indemnifies and holds Landlord harmless from any liability, cost, obligation, expense or claim of lien in any manner relating to the installation, placement, removal or financing of any such Alterations, improvements, fixtures and/or equipment in, on or about the Premises, which obligations of Tenant shall survive the expiration or earlier termination of this Lease.

 

9.                                      COVENANT AGAINST LIENS                Tenant shall keep the Project and Premises free from any liens or encumbrances arising out of the work performed, materials furnished or obligations incurred by or on behalf of Tenant, and shall protect, defend, indemnify and hold Landlord harmless from and against any claims, liabilities, judgments or costs (including, without limitation, reasonable attorneys’ fees and costs) arising out of same or in connection therewith.  Tenant shall give Landlord notice at least twenty (20) days prior to the commencement of any such work on the Premises (or such additional time as may be necessary under applicable laws) to afford Landlord

 

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the opportunity of posting and recording appropriate notices of non-responsibility (to the extent applicable pursuant to then applicable laws).  Tenant shall remove any such lien or encumbrance by bond or otherwise within ten (10) business days after notice by Landlord, and if Tenant shall fail to do so, Landlord may pay the amount necessary to remove such lien or encumbrance, without being responsible for investigating the validity thereof.

 

10.                               INSURANCE

 

10.1                        Indemnification and Waiver.  Tenant hereby assumes all risk of damage to Tenant’s property, property of third parties, or injury to persons in or upon the Premises from any cause whatsoever (including, but not limited to, any personal injuries resulting from a slip and fall in, upon or about the Premises) and agrees that Landlord, its lenders, partners, subpartners and their respective officers, agents, servants, employees, and independent contractors (collectively, “Landlord Parties”) shall not be liable for, and are hereby released from any responsibility for, any damage either to person or property or resulting from the loss of use thereof, which damage is sustained by Tenant or by other persons claiming through Tenant.  Tenant shall indemnify, defend, protect, and hold harmless the Landlord Parties from any and all loss, cost, damage, injury, expense and liability (including without limitation court costs and reasonable attorneys’ fees) during the Lease Term, or any period of Tenant’s occupancy of the Premises prior to the commencement or after the expiration of the Lease Term, incurred in connection with or arising from any cause in, on or about the Premises (including, but not limited to, a slip and fall), any acts, omissions or negligence of Tenant or of any person claiming by, through or under Tenant, or of the contractors, agents, servants, employees, invitees, guests or licensees of Tenant or any such person, in, on or about the Project or any breach of the terms of this Lease, either prior to, during, or after the expiration of the Lease Term, provided that the terms of the foregoing indemnity and release shall not apply to the gross negligence or willful misconduct of Landlord.  Should Landlord be named as a defendant in any suit brought against Tenant in connection with or arising out of any matters covered by the foregoing indemnity, Tenant shall pay to Landlord its reasonable costs and expenses incurred in such suit, including without limitation, its actual professional fees such as reasonable appraisers’, accountants’ and attorneys’ fees.  The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease with respect to any claims or liability arising in connection with any event occurring prior to such expiration or termination.

 

10.2                        Landlord’s Property Insurance.  Landlord shall insure the Building and the Project during the Lease Term (for the full replacement value to the extent consistent with the practices of landlords of the Comparable Buildings) against loss or damage due to fire and other casualties covered within the classification of fire and extended coverage.  Such coverage shall be in such amounts, from such companies, and on such other terms and conditions, as Landlord may from time to time reasonably determine.  Additionally, at the option of Landlord, such insurance coverage may include the risks of earthquakes and/or flood damage, terrorist acts and additional hazards, and one or more loss payee endorsements in favor of the holders of any mortgages or deeds of trust encumbering the interest of Landlord in the Building or the ground or underlying lessors of the Building, or any portion thereof.  Tenant shall, at Tenant’s expense, comply with all insurance company requirements pertaining to the use of the Premises.  If Tenant’s conduct or use of the Premises for any purpose other than customary, general office and life science use causes any increase in the premium for such insurance policies then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant’s expense, shall comply with all rules, orders, regulations or requirements of the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body.

 

10.3                        Tenant’s Insurance.  Tenant shall maintain the following coverages in the following amounts.

 

10.3.1              Commercial General Liability Insurance on an occurrence form covering the insured against claims of bodily injury, personal injury and property damage (including loss of use thereof) arising out of Tenant’s operations, products/completed operations and contractual liability including a Broad Form endorsement covering the insuring provisions of this Lease and the performance by Tenant of the indemnity agreements set forth in Section 10.1 of this Lease, and including products and completed operations coverage, for limits of liability of not less than:

 

	
Bodily   Injury and
   Property Damage Liability
    	
 
    	
$2,000,000   each occurrence
   $2,000,000 annual aggregate
    

 

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Personal   Injury Liability
    	
 
    	
$2,000,000   each occurrence
   $2,000,000 annual aggregate
   0% Insured’s participation
    

 

10.3.2              Property Insurance covering (i) all office furniture, business and trade fixtures, office equipment, free-standing cabinet work, movable partitions, merchandise and all other items of Tenant’s property on the Premises installed by, for, or at the expense of Tenant, and (ii) any other improvements which exist in the Premises as of the Lease Commencement Date (excluding the Base Building) (the “New Improvements”).  Such insurance shall be written on an “all risks” of physical loss or damage basis, for the full replacement cost value (subject to reasonable deductible amounts) new without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance and shall include coverage for damage or other loss caused by fire or other peril including, but not limited to, vandalism and malicious mischief, theft, water damage of any type, including sprinkler leakage, bursting or stoppage of pipes, and explosion.

 

10.3.3              Business Income Interruption for one (1) year plus Extra Expense insurance in such amounts as will reimburse Tenant for actual direct or indirect loss of earnings attributable to the risks outlined in Section 10.3.2 above.

 

10.3.4              Worker’s Compensation and Employer’s Liability or other similar insurance pursuant to all applicable state and local statutes and regulations.  The policy will include a waiver of subrogation in favor of the Landlord Parties.

 

10.4                        Form of Policies.  The minimum limits of policies of insurance required of Tenant under this Lease shall in no event limit the liability of Tenant under this Lease.  Such insurance shall (i) name Landlord, its subsidiaries and affiliates and any other party the Landlord so specifies, as an additional insured or loss payee, as applicable, including Landlord’s managing agent, if any; (ii) cover the liability assumed by Tenant under this Lease; (iii) be issued by an insurance company having a rating of not less than A-:VIII in Best’s Insurance Guide or which is otherwise acceptable to Landlord and licensed to do business in the State of California; (iv) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and is non-contributing with any insurance required of Tenant; (v) be in form and content reasonably acceptable to Landlord; and (vi) provide that said insurer shall endeavor to provide written notice to Landlord and any mortgagee of Landlord, to the extent such names are furnished to Tenant prior to the cancellation of such policy.  Tenant shall deliver said policy or policies or certificates thereof to Landlord on or before the earlier to occur of (A) the Lease Commencement Date, and (B) the date upon which Tenant is first provided access to the Premises, and at least ten (10) days before the expiration dates thereof.  In the event Tenant shall fail to procure such insurance, or to deliver such policies or certificate within ten (10) days after written notice from Landlord, Landlord may, at its option, procure such policies for the account of Tenant, and the cost thereof shall be paid to Landlord within five (5) days after delivery to Tenant of bills therefor.

 

10.5                        Subrogation.  Landlord and Tenant intend that their respective property loss risks shall be borne by reasonable insurance carriers to the extent above provided, and Landlord and Tenant hereby agree to look solely to, and seek recovery only from, their respective insurance carriers in the event of a property loss to the extent that such coverage is agreed to be provided hereunder, notwithstanding the negligence of either party.  The parties each hereby waive all rights and claims against each other for such losses, and waive all rights of subrogation of their respective insurers and shall obtain an endorsement to their policy for such waiver of subrogation.  The parties agree that their respective insurance policies are now, or shall specify that the waiver of subrogation shall not affect the right of the insured to recover thereunder.

 

11.                               DAMAGE AND DESTRUCTION

 

11.1                        Repair of Damage to Premises by Landlord.  Tenant shall promptly notify Landlord of any damage to the Premises resulting from fire or any other casualty.  If the Premises or any Common Areas serving or providing access to the Premises shall be damaged by fire or other casualty, Landlord shall promptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlord’s reasonable control, and

 

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subject to all other terms of this Article 11, restore the Base Building, such Common Areas and the Premises to the condition existing as of the Lease Commencement Date.  Such restoration shall be to substantially the same condition of the Base Building and the Common Areas prior to the casualty and the Premises to the condition as of the Lease Commencement Date, except for modifications required by zoning and building codes and other laws, which are consistent with the character of the Project, provided that access to the Premises shall not be materially impaired.  Upon the occurrence of any damage to the Premises, upon notice (the “Landlord Repair Notice”) to Tenant from Landlord, Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Tenant’s insurance required under Section 10.3.2(ii) of this Lease (provided that Tenant shall not have any obligation to assign or pay to Landlord any insurance proceeds relating to Tenant’s personal property located in the Premises, which proceeds Tenant shall use to restore such items itself).  Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant’s business resulting in any way from such damage or the repair thereof; provided however, that if such fire or other casualty shall have damaged the Premises or Common Areas necessary to Tenant’s occupancy, and the Premises are not occupied by Tenant as a result thereof, then during the time and to the extent the Premises are unfit for occupancy or use, the Rent shall be abated in proportion to the ratio that the amount of rentable square feet of the Premises which is unfit for occupancy or use for the purposes permitted under this Lease bears to the total rentable square feet of the Premises.

 

11.2                        Landlord’s Option to Repair.  Notwithstanding the terms of Section 11.1 of this Lease, Landlord may elect not to rebuild and/or restore the Premises, Building and/or Project, and instead terminate this Lease, by notifying Tenant in writing of such termination within sixty (60) days after the date of discovery of the damage, such notice to include a termination date giving Tenant sixty (60) days to vacate the Premises, but Landlord may so elect only if the Building or Project shall be damaged by fire or other casualty or cause, whether or not the Premises are affected, and one or more of the following conditions is present: (i) in Landlord’s reasonable judgment, repairs cannot reasonably be completed within one hundred eighty (180) days after the date of discovery of the damage (when such repairs are made without the payment of overtime or other premiums); (ii) at least One Hundred Thousand Dollars ($100,000.00) of damage is not covered by Landlord’s insurance policies; or (iv) the damage occurs during the last twelve (12) months of the Lease Term; provided, however, that if Landlord does not elect to terminate this Lease pursuant to Landlord’s termination right as provided above, and the repairs cannot, in the reasonable opinion of Landlord, be completed within one hundred eighty (180) days after being commenced, Tenant may elect, no earlier than sixty (60) days after the date of the damage and not later than ninety (90) days after the date of such damage, to terminate this Lease by written notice to Landlord effective as of the date specified in the notice, which date shall not be less than thirty (30) days nor more than sixty (60) days after the date such notice is given by Tenant.  In addition to the foregoing, if Landlord elects to make restoration following such casualty and does not complete such restoration within one hundred eighty (180) days (or such longer period as initially estimated for such repair), Tenant may terminate this lease upon not less than thirty (30) days prior written notice to Landlord, provided however, this Lease shall not terminate in the event Landlord so completes such restoration within thirty (30) days after the date of Tenant’s termination notice.  Notwithstanding the provisions of this Section 11.2, Tenant shall have the right to terminate this Lease under this Section 11.2 only if each of the following conditions is satisfied:  (a) the damage to the Project by fire or other casualty was not caused by the gross negligence or intentional act of Tenant or its partners or subpartners and their respective officers, agents, servants, employees, and independent contractors; (b) as a result of the damage, Tenant cannot reasonably conduct business from the Premises; and, (c) as a result of the damage to the Project, Tenant does not occupy or use the Premises at all.  In addition, Tenant may terminate this Lease if the damage to the Premises occurs during the last twelve (12) months of the Lease Term, and, as a result of such damage, Tenant cannot reasonably conduct business from the Premises for a period of thirty (30) days or more.

 

11.3                        Waiver of Statutory Provisions.  The provisions of this Lease, including this Article 11, 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, the Building or the Project, and any statute or regulation of the State of California, including, without limitation, Sections 1932(2) and 1933(4) of the California Civil Code, with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any other statute or regulation, now or hereafter in effect, shall have no application to this Lease or any damage or destruction to all or any part of the Premises, the Building or the Project.

 

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12.                               NONWAIVER              No provision of this Lease shall be deemed waived by either party hereto unless expressly waived in a writing signed thereby.  The waiver by either party hereto of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of any subsequent breach of same or any other term, covenant or condition herein contained.  The subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular Rent so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of acceptance of such Rent.  No acceptance of a lesser amount than the Rent herein stipulated shall be deemed a waiver of Landlord’s right to receive the full amount due, nor shall any endorsement or statement on any check or payment or any letter accompanying such check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the full amount due.  No receipt of monies by Landlord from Tenant after the termination of this Lease shall in any way alter the length of the Lease Term or of Tenant’s right of possession hereunder, or after the giving of any notice shall reinstate, continue or extend the Lease Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit, or after final judgment for possession of the Premises, Landlord may receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment.

 

13.                               CONDEMNATION                                   If the whole or any part of the Premises, Building or Project shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi-public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require the use, reconstruction or remodeling of any part of the Premises, Building or Project, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation, Landlord shall have the option to terminate this Lease effective as of the date possession is required to be surrendered to the authority.  Tenant shall not because of such taking assert any claim against Landlord or the authority for any compensation because of such taking and Landlord shall be entitled to the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenant’s personal property and fixtures belonging to Tenant and removable by Tenant upon expiration of the Lease Term pursuant to the terms of this Lease, and for moving expenses, so long as such claims do not diminish the award available to Landlord, its ground lessor with respect to the Building or Project or its mortgagee, and such claim is payable separately to Tenant.  All Rent shall be apportioned as of the date of such termination.  If any part of the Premises shall be taken, and this Lease shall not be so terminated, the Rent shall be proportionately abated.  Tenant hereby waives any and all rights it might otherwise have pursuant to Section 1265.130 of The California Code of Civil Procedure.  Notwithstanding anything to the contrary contained in this Article 13, in the event of a temporary taking of all or any portion of the Premises for a period of one hundred and eighty (180) days or less, and provided that such temporary taking does not materially preclude or unreasonably diminish Tenant’s ability to conduct business from the Premises, then this Lease shall not terminate but the Base Rent and the Additional Rent shall be abated for the period of such taking in proportion to the ratio that the amount of rentable square feet of the Premises taken bears to the total rentable square feet of the Premises.  Landlord shall be entitled to receive the entire award made in connection with any such temporary taking, provided, however, that Tenant shall be entitled to a share of the award for any loss of fixtures and improvements and for moving and other reasonable expenses that do not otherwise reduce Landlord’s recovery.

 

14.                               ASSIGNMENT AND SUBLETTING

 

14.1                        Transfers.  Tenant shall not, without the prior written consent of Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise transfer, this Lease or any interest hereunder, permit any assignment, or other transfer of this Lease or any interest hereunder by operation of law, sublet the Premises or any part thereof, or enter into any license or concession agreements or otherwise permit the occupancy or use of the Premises or any part thereof by any persons other than Tenant and its employees and contractors (all of the foregoing are hereinafter sometimes referred to collectively as “Transfers” and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a “Transferee”).  If Tenant desires Landlord’s consent to any Transfer, Tenant shall notify Landlord in writing, which notice (the “Transfer Notice”) shall include (i) the proposed effective date of the Transfer, which shall not be less than twenty (20) days nor more than one hundred eighty (180) days after the date of delivery of the Transfer Notice, (ii) a description of the portion of the Premises to be transferred (the “Subject Space”), (iii) all of the terms of the proposed Transfer

 

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and the consideration therefor, including calculation of the “Transfer Premium”, as that term is defined in Section 14.3 below, in connection with such Transfer, the name and address of the proposed Transferee, and a copy of all existing executed and/or proposed documentation pertaining to the proposed Transfer, and (iv) current financial statements of the proposed Transferee certified by an officer, partner or owner thereof, business credit and personal references and history of the proposed Transferee and any other information reasonably required by Landlord which will enable Landlord to determine the financial responsibility, character, and reputation of the proposed Transferee, nature of such Transferee’s business and proposed use of the Subject Space.  Any Transfer made without Landlord’s prior written consent shall, at Landlord’s option, be null, void and of no effect, and shall, at Landlord’s option, constitute a default by Tenant under this Lease.  Whether or not Landlord consents to any proposed Transfer, Tenant shall pay Landlord’s reasonable review and processing fees, as well as any reasonable professional fees (including, without limitation, attorneys’, accountants’, architects’, engineers’ and consultants’ fees) incurred by Landlord, within thirty (30) days after written request by Landlord.  Such fees shall not exceed $3,000 per request.

 

14.2                        Landlord’s Consent.  Landlord shall not unreasonably withhold, condition or delay its consent to any proposed Transfer of the Subject Space to the Transferee on the terms specified in the Transfer Notice.  Without limitation as to other reasonable grounds for withholding consent, the parties hereby agree that it shall be reasonable under this Lease and under any applicable law for Landlord to withhold consent to any proposed Transfer where one or more of the following apply:

 

14.2.1              The Transferee is of a character or reputation or engaged in a business which is not consistent with the quality of the Building or the Project;

 

14.2.2              The Transferee is either a governmental agency or instrumentality thereof;

 

14.2.3              The Transferee is not a party of reasonable financial worth and/or financial stability in light of the responsibilities to be undertaken in connection with the Transfer on the date consent is requested; or

 

14.2.4              The proposed Transfer would cause a violation of another lease for space in the Project, or would give an occupant of the Project a right to cancel its lease.

 

If Landlord consents to any Transfer pursuant to the terms of this Section 14.2 (and does not exercise any recapture rights Landlord may have under Section 14.4 of this Lease), Tenant may within six (6) months after Landlord’s consent, but not later than the expiration of said six-month period, enter into such Transfer of the Premises or portion thereof, upon substantially the same terms and conditions as are set forth in the Transfer Notice furnished by Tenant to Landlord pursuant to Section 14.1 of this Lease, provided that if there are any changes in the terms and conditions from those specified in the Transfer Notice such that Landlord would initially have been entitled to refuse its consent to such Transfer under this Section 14.2, Tenant shall again submit the Transfer to Landlord for its approval and other action under this Article 14 (including Landlord’s right of recapture, if any, under Section 14.4 of this Lease).  Notwithstanding anything to the contrary in this Lease, if Tenant or any proposed Transferee claims that Landlord has unreasonably withheld or delayed its consent under Section 14.2 or otherwise has breached or acted unreasonably under this Article 14, their sole remedies shall be a suit for contract damages (other than damages for injury to, or interference with, Tenant’s business including, without limitation, loss of profits, however occurring) or declaratory judgment and an injunction for the relief sought, and Tenant hereby waives all other remedies, including, without limitation, any right at law or equity to terminate this Lease, on its own behalf and, to the extent permitted under all applicable laws, on behalf of the proposed Transferee.

 

14.3                        Transfer Premium.  If Landlord consents to a Transfer, as a condition thereto which the parties hereby agree is reasonable, Tenant shall pay to Landlord fifty percent (50%) of any “Transfer Premium,” as that term is defined in this Section 14.3, received by Tenant from such Transferee.  “Transfer Premium” shall mean all rent, additional rent or other consideration payable by such Transferee for the Transfer in excess of the Rent and Additional Rent payable by Tenant under this Lease during the term of the Transfer on a per rentable square foot basis if less than all of the Premises is transferred, after deducting the reasonable expenses incurred by Tenant for (i) any changes, alterations and improvements to the Premises in connection with the Transfer, (ii) any free base rent reasonably provided to the Transferee in connection with the Transfer (provided that such free rent shall be deducted

 

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only to the extent the same is included in the calculation of total consideration payable by such Transferee), and (iii) any brokerage commissions in connection with the Transfer and (iv) legal fees reasonably incurred in connection with the Transfer (collectively, “Tenant’s Subleasing Costs”).  “Transfer Premium” shall also include, but not be limited to, key money, bonus money or other cash consideration paid by Transferee to Tenant in connection with such Transfer, and any payment in excess of fair market value for services rendered by Tenant to Transferee or for assets, fixtures, inventory, equipment, or furniture transferred by Tenant to Transferee in connection with such Transfer.  The determination of the amount of Landlord’s applicable share of the Transfer Premium shall be made on a monthly basis as rent or other consideration is received by Tenant under the Transfer.

 

14.4                        Landlord’s Option as to Subject Space.  Notwithstanding anything to the contrary contained in this Article 14, in the event Tenant contemplates a Transfer which, together with all prior Transfers then remaining in effect, would cause fifty percent (50%) or more of the Premises to be Transferred for more than fifty percent (50%) of the then remaining Lease Term (assuming all sublease renewal or extension rights are exercised), Tenant shall give Landlord notice (the “Intention to Transfer Notice”) of such contemplated Transfer (whether or not the contemplated Transferee or the terms of such contemplated Transfer have been determined).  The Intention to Transfer Notice shall specify the portion of and amount of rentable square feet of the Premises which Tenant intends to Transfer (the “Contemplated Transfer Space”), the contemplated date of commencement of the Contemplated Transfer (the “Contemplated Effective Date”), and the contemplated length of the term of such contemplated Transfer, and shall specify that such Intention to Transfer Notice is delivered to Landlord pursuant to this Section 14.4 in order to allow Landlord to elect to recapture the Contemplated Transfer Space.  Thereafter, Landlord shall have the option, by giving written notice to Tenant within twenty (20) days after receipt of any Intention to Transfer Notice, to recapture the Contemplated Transfer Space.  Such recapture shall cancel and terminate this Lease with respect to such Contemplated Transfer Space as of the Contemplated Effective Date.  In the event of a recapture by Landlord, if this Lease shall be canceled with respect to less than the entire Premises, the Rent reserved herein shall be prorated on the basis of the number of rentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, and this Lease as so amended shall continue thereafter in full force and effect, and upon request of either party, the parties shall execute written confirmation of the same.

 

14.5                        Effect of Transfer.  If Landlord consents to a Transfer, (i) the terms and conditions of this Lease shall in no way be deemed to have been waived or modified, (ii) such consent shall not be deemed consent to any further Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord, promptly after execution, an original executed copy of all documentation pertaining to the Transfer in form reasonably acceptable to Landlord, (iv) Tenant shall furnish upon Landlord’s request a complete statement, certified by an independent certified public accountant, or Tenant’s chief financial officer, setting forth in detail the computation of any Transfer Premium Tenant has derived and shall derive from such Transfer, and (v) no Transfer relating to this Lease or agreement entered into with respect thereto, whether with or without Landlord’s consent, shall relieve Tenant or any guarantor of the Lease from any liability under this Lease, including, without limitation, in connection with the Subject Space.  Landlord or its authorized representatives shall have the right at all reasonable times to audit the books, records and papers of Tenant relating to any Transfer, and shall have the right to make copies thereof.  If the Transfer Premium respecting any Transfer shall be found understated, Tenant shall, within thirty (30) days after demand, pay the deficiency, and if understated by more than two percent (2%), Tenant shall pay Landlord’s costs of such audit.

 

14.6                        Intentionally Omitted.

 

14.7                        Occurrence of Default.  Any Transfer hereunder shall be subordinate and subject to the provisions of this Lease, and if this Lease shall be terminated during the term of any Transfer, Landlord shall have the right to:  (i) treat such Transfer as cancelled and repossess the Subject Space by any lawful means, or (ii) require that such Transferee attorn to and recognize Landlord as its landlord under any such Transfer.  If Tenant shall be in default under this Lease, Landlord is hereby irrevocably authorized to direct any Transferee to make all payments under or in connection with the Transfer directly to Landlord (which Landlord shall apply towards Tenant’s obligations under this Lease) until such default is cured.  Such Transferee shall rely on any representation by Landlord that Tenant is in default hereunder, without any need for confirmation thereof by Tenant.  Upon any assignment, the assignee shall assume in writing all obligations and covenants of Tenant thereafter to be performed or observed under this Lease.  No collection or acceptance of rent by Landlord from any Transferee shall be deemed a waiver of any provision of this Article 14 or the approval of any Transferee or a release of Tenant from any

 

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obligation under this Lease, whether theretofore or thereafter accruing.  In no event shall Landlord’s enforcement of any provision of this Lease against any Transferee be deemed a waiver of Landlord’s right to enforce any term of this Lease against Tenant or any other person.  If Tenant’s obligations hereunder have been guaranteed, Landlord’s consent to any Transfer shall not be effective unless the guarantor also consents to such Transfer.

 

14.8                        Non-Transfers.  Notwithstanding anything to the contrary contained in this Article 14, and without effect of the profit sharing and recapture provisions of Section 14.3 and 14.4 hereof, (i) an assignment or subletting of all or a portion of the Premises to an affiliate of Tenant (an entity which is controlled by, controls, or is under common control with, Tenant), (ii) an assignment of the Premises to an entity which acquires all or substantially all of the assets or interests (partnership, stock or other) of Tenant, (iii) an assignment of the Premises to an entity which is the resulting entity of a merger or consolidation of Tenant, or (iv) a sale of corporate shares of capital stock in Tenant in connection with an initial public offering of Tenant’s stock on a nationally-recognized stock exchange (collectively, a “Permitted Transferee”), shall not be deemed a Transfer under this Article 14, provided that (A) Tenant notifies Landlord of any such assignment or sublease and promptly supplies Landlord with any documents or information requested by Landlord regarding such assignment or sublease or such affiliate, (B) such assignment or sublease is not a subterfuge by Tenant to avoid its obligations under this Lease, (C) such Permitted Transferee shall be of a character and reputation consistent with the quality of the Building, and (D) such Permitted Transferee shall have a tangible net worth (not including goodwill as an asset) computed in accordance with generally accepted accounting principles (“Net Worth”) at least equal to the Net Worth of Tenant on the day immediately preceding the effective date of such assignment or sublease.  An assignee of Tenant’s entire interest that is also a Permitted Transferee may also be known as a “Permitted Assignee”.  “Control,” as used in this Section 14.8, shall mean the ownership, directly or indirectly, of at least fifty-one percent (51%) of the voting securities of, or possession of the right to vote, in the ordinary direction of its affairs, of at least fifty-one percent (51%) of the voting interest in, any person or entity.  No such permitted assignment or subletting shall serve to release Tenant from any of its obligations under this Lease.

 

15.                               SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES

 

15.1                        Surrender of Premises.  No act or thing done by Landlord or any agent or employee of Landlord during the Lease Term shall be deemed to constitute an acceptance by Landlord of a surrender of the Premises unless such intent is specifically acknowledged in writing by Landlord.  The delivery of keys to the Premises to Landlord or any agent or employee of Landlord shall not constitute a surrender of the Premises or effect a termination of this Lease, whether or not the keys are thereafter retained by Landlord, and notwithstanding such delivery Tenant shall be entitled to the return of such keys at any reasonable time upon request until this Lease shall have been properly terminated.  The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof, shall not work a merger, and at the option of Landlord shall operate as an assignment to Landlord of all subleases or subtenancies affecting the Premises or terminate any or all such sublessees or subtenancies.

 

15.2                        Removal of Tenant Property by Tenant.  Upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject to the provisions of this Article 15, quit and surrender possession of the Premises to Landlord in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and tear and repairs which are specifically made the responsibility of Landlord hereunder excepted.  Upon such expiration or termination, Tenant shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, and such items of furniture, equipment, free-standing cabinet work, movable partitions and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises, and such similar articles of any other persons claiming under Tenant, as Landlord may, in its sole discretion, require to be removed, and Tenant shall repair at its own expense all damage to the Premises and Building resulting from such removal.

 

15.3                        Environmental Assessment.  In the event that, during the Lease Term, Tenant elects to use any portion of the Premises for research and development, engineering, and/or laboratory purposes, then, in connection with its surrender of the Premises, Tenant shall submit to Landlord, at least thirty (30) days prior to the expiration date of this Lease (or in the event of an earlier termination of this Lease, as soon as reasonably possible following such termination), an environmental Assessment of the Premises by a competent and experienced environmental 

 

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engineer or engineering firm reasonably satisfactory to Landlord (pursuant to a contract approved by Landlord and providing that Landlord can rely on the Environmental Assessment), which (i) evidences that the Premises are in a clean and safe condition and free and clear of any Hazardous Materials; and (ii) includes a review of the Premises by an environmental consultant for asbestos, mold, fungus, spores, and other moisture conditions, on-site chemical use, and lead-based paint.  If such Environmental Assessment reveals that remediation or Clean-up is required under any Environmental Laws, Tenant shall submit a remediation plan prepared by a recognized environmental consultant and shall be responsible for all costs of remediation and Clean-up, as more particularly provided in Section 5.3, above.

 

15.4                        Condition of the Building and Premises Upon Surrender.  In addition to the above requirements of this Article 15, upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall, surrender the Premises and Building such that the same are in compliance with all Applicable Laws and with Tenant having complied with all of Tenant’s obligations under this Lease, including those relating to improvement, repair, maintenance, compliance with law, testing and other related obligations of Tenant set forth in Article 7 of this Lease.  In the event that the Building and Premises shall be surrendered in a condition which does not comply with the terms of this Section 15.4, because Tenant failed to comply with its obligations set forth in Lease, then following thirty (30) days notice to Tenant, during which thirty (30) day period Tenant shall have the right to cure such noncompliance, Landlord shall be entitled to expend all reasonable costs in order to cause the same to comply with the required condition upon surrender and Tenant shall immediately reimburse Landlord for all such costs upon notice.

 

16.                               HOLDING OVER                                          If Tenant holds over after the expiration of the Lease Term or earlier termination thereof, with the express or implied consent of Landlord, such tenancy shall be from month-to-month only, and shall not constitute a renewal hereof or an extension for any further term.  If Tenant holds over after the expiration of the Lease Term of earlier termination thereof, without the express or implied consent of Landlord, such tenancy shall be deemed to be a tenancy by sufferance only, and shall not constitute a renewal hereof or an extension for any further term.  In either case, Base Rent shall be payable at a monthly rate equal to one hundred fifty percent (150%) of the Base Rent applicable during the last rental period of the Lease Term under this Lease.  Such month-to-month tenancy or tenancy by sufferance, as the case may be, shall be subject to every other applicable term, covenant and agreement contained herein.  Nothing contained in this Article 16 shall be construed as consent by Landlord to any holding over by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or other termination of this Lease.  The provisions of this Article 16 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law.  If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys’ fees) and liability resulting from such failure, including, without limiting the generality of the foregoing, any claims made by any succeeding tenant founded upon such failure to surrender and any lost profits to Landlord resulting therefrom.

 

17.                               ESTOPPEL CERTIFICATES                       Within ten (10) business days following a request in writing by Landlord, Tenant shall execute, acknowledge and deliver to Landlord an estoppel certificate, which, as submitted by Landlord, shall be substantially in the form of Exhibit D, attached hereto (or such other form as may be required by any prospective mortgagee or purchaser of the Project, or any portion thereof), indicating therein any exceptions thereto that may exist at that time, and shall also contain any other information reasonably requested by Landlord or Landlord’s mortgagee or prospective mortgagee.  Any such certificate may be relied upon by any prospective mortgagee or purchaser of all or any portion of the Project.  Tenant shall execute and deliver whatever other instruments may be reasonably required for such purposes.  At any time during the Lease Term, Landlord may require Tenant to provide Landlord with a current financial statement and financial statements of the two (2) years prior to the current financial statement year.  Such statements shall be prepared in accordance with generally accepted accounting principles and, if such is the normal practice of Tenant, shall be audited by an independent certified public accountant.  Failure of Tenant to timely execute, acknowledge and deliver such estoppel certificate or other instruments shall constitute an acceptance of the Premises and an acknowledgment by Tenant that statements included in the estoppel certificate are true and correct, without exception.

 

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18.                               SUBORDINATION                                   This Lease shall be subject and subordinate to all present and future ground or underlying leases of the Building or Project and to the lien of any mortgage, trust deed or other encumbrances now or hereafter in force against the Building or Project or any part thereof, if any, and to all renewals, extensions, modifications, consolidations and replacements thereof, and to all advances made or hereafter to be made upon the security of such mortgages or trust deeds, unless the holders of such mortgages, trust deeds or other encumbrances, or the lessors under such ground lease or underlying leases, require in writing that this Lease be superior thereto.  Tenant covenants and agrees in the event any proceedings are brought for the foreclosure of any such mortgage or deed in lieu thereof (or if any ground lease is terminated), to attorn, without any deductions or set-offs whatsoever, to the lienholder or purchaser or any successors thereto upon any such foreclosure sale or deed in lieu thereof (or to the ground lessor), if so requested to do so by such purchaser or lienholder or ground lessor, and to recognize such purchaser or lienholder or ground lessor as the lessor under this Lease, provided such lienholder or purchaser or ground lessor shall agree to accept this Lease and not disturb Tenant’s occupancy, so long as Tenant timely pays the rent and observes and performs the terms, covenants and conditions of this Lease to be observed and performed by Tenant.  Landlord’s interest herein may be assigned as security at any time to any lienholder.  Landlord’s delivery to Tenant of commercially reasonable non-disturbance agreement(s) in favor of Tenant from any ground lessors, mortgage holders or lien holders of Landlord who come into existence following the date hereof but prior to the expiration of the Lease Term shall be in consideration of, and a condition precedent to, Tenant’s agreement to subordinate this Lease to any such ground lease, mortgage or lien.  Landlord’s interest herein may be assigned as security at any time to any lienholder.  Tenant shall, within ten (10) business days of request by Landlord, execute such further instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm the subordination or superiority of this Lease to any such mortgages, trust deeds, ground leases or underlying leases.  Tenant waives the provisions of any current or future statute, rule or law which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease and the obligations of the Tenant hereunder in the event of any foreclosure proceeding or sale.  Landlord represents that, as of the date of this Lease, there are no ground or underlying leases or liens of any mortgage or trust deed encumbering the Building or Project.

 

19.                               DEFAULTS; REMEDIES

 

19.1                        Events of Default.  The occurrence of any of the following shall constitute a default of this Lease by Tenant:

 

19.1.1              Any failure by Tenant to pay any Rent or any other charge required to be paid under this Lease, or any part thereof, when due unless such failure is cured within five (5) business days after notice; or

 

19.1.2              Except where a specific time period is otherwise set forth for Tenant’s performance in this Lease, in which event the failure to perform by Tenant within such time period shall be a default by Tenant under this Section 19.1.2, any failure by Tenant to observe or perform any other provision, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant; provided that if the nature of such default is such that the same cannot reasonably be cured within a thirty (30) day period, Tenant shall not be deemed to be in default if it diligently commences such cure within such period and thereafter diligently proceeds to rectify and cure such default; or

 

19.1.3              Abandonment of the Premises by Tenant; or

 

19.1.4              The failure by Tenant to observe or perform according to the provisions of Articles 5, 14, 17 or 18 of this Lease where such failure continues for more than five (5) business days after notice from Landlord.

 

The notice periods provided herein are in lieu of, and not in addition to, any notice periods provided by law.

 

19.2                        Remedies Upon Default.  Upon the occurrence of any event of default by Tenant, Landlord shall have, in addition to any other remedies available to Landlord at law or in equity (all of which remedies shall be distinct, separate and cumulative), 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.

 

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19.2.1              Terminate this Lease, 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; and Landlord may recover from Tenant the following:

 

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

 

(ii)                                  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

 

(iii)                               The worth at the time of award of the amount by which the unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus

 

(iv)                              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

 

(v)                                 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 19.2 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 19.2.1(i) and (ii), above, the “worth at the time of award” shall be computed by allowing interest at the rate set forth in Article 25 of this Lease, but in no case greater than the maximum amount of such interest permitted by law.  As used in Section 19.2.1(iii) 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 one percent (1%).

 

19.2.2              Landlord shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee’s breach and abandonment and recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations).  Accordingly, if Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due.

 

19.2.3              Landlord shall at all times have the rights and remedies (which shall be cumulative with each other and cumulative and in addition to those rights and remedies available under Sections 19.2.1 and 19.2.2, above, or any law or other provision of this Lease), without prior demand or notice except as required by applicable law, to seek any declaratory, injunctive or other equitable relief, and specifically enforce this Lease, or restrain or enjoin a violation or breach of any provision hereof.

 

19.3                        Subleases of Tenant.  If Landlord elects to terminate this Lease on account of any default by Tenant, as set forth in this Article 19, 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.  In the event of 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.

 

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19.4                        Efforts to Relet.  No re-entry or repossession, repairs, maintenance, changes, alterations and additions, reletting, appointment of a receiver to protect Landlord’s interests hereunder, or any other action or omission by Landlord shall be construed as an election by Landlord to terminate this Lease or Tenant’s right to possession, or to accept a surrender of the Premises, nor shall same operate to release Tenant in whole or in part from any of Tenant’s obligations hereunder, unless express written notice of such intention is sent by Landlord to Tenant.  Tenant hereby irrevocably waives any right otherwise available under any law to redeem or reinstate this Lease.

 

19.5                        Landlord Default.

 

19.5.1              General.  Notwithstanding anything to the contrary set forth in this Lease, Landlord shall not be in default in the performance of any obligation required to be performed by Landlord pursuant to this Lease unless Landlord fails to perform such obligation within thirty (30) days after the receipt of notice from Tenant specifying in detail Landlord’s failure to perform; provided, however, if the nature of Landlord’s obligation is such that more than thirty (30) days are required for its performance, then Landlord shall not be in default under this Lease if it shall commence such performance within such thirty (30) day period and thereafter diligently pursue the same to completion.  Upon any such default by Landlord under this Lease, Tenant may, except as otherwise specifically provided in this Lease to the contrary, exercise any of its rights provided at law or in equity.

 

19.5.2              Abatement of Rent.  In the event that Tenant is prevented from using, and does not use, the Premises or any portion thereof, as a result of (i) any repair, maintenance or alteration performed by Landlord, or which Landlord failed to perform, after the Lease Commencement Date and required by this Lease, which substantially interferes with Tenant’s use of the Premises, or (ii) any failure to provide services, utilities or access to the Premises as required by this Lease (either such set of circumstances as set forth in items (i) or (ii), above, to be known as an “Abatement Event”), then Tenant shall give Landlord notice of such Abatement Event, and if such Abatement Event continues for five (5) consecutive business days after Landlord’s receipt of any such notice (the “Eligibility Period”) and either (A) Landlord does not diligently commence and pursue to completion the remedy of such Abatement Event or (B) Landlord receives proceeds from its rental interruption insurance which covers such Abatement Event, then the Base Rent, Tenant’s Share of Direct Expenses, and Tenant’s obligation to pay for parking (to the extent not utilized by Tenant) shall be abated or reduced, as the case may be, after expiration of the Eligibility Period for such time that Tenant continues to be so prevented from using, and does not use for the normal conduct of Tenant’s business, the Premises or a portion thereof, in the proportion that the rentable area of the portion of the Premises that Tenant is prevented from using, and does not use, bears to the total rentable area of the Premises; provided, however, in the event that Tenant is prevented from using, and does not use, a portion of the Premises for a period of time in excess of the Eligibility Period and the remaining portion of the Premises is not sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, the Base Rent and Tenant’s Share of Direct Expenses for the entire Premises and Tenant’s obligation to pay for parking shall be abated for such time as Tenant continues to be so prevented from using, and does not use, the Premises.  If, however, Tenant reoccupies any portion of the Premises during such period, the Rent allocable to such reoccupied portion, based on the proportion that the rentable area of such reoccupied portion of the Premises bears to the total rentable area of the Premises, shall be payable by Tenant from the date Tenant reoccupies such portion of the Premises.  To the extent an Abatement Event is caused by an event covered by Articles 11 or 13 of this Lease, then Tenant’s right to abate rent shall be governed by the terms of such Article 11 or 13, as applicable, and the Eligibility Period shall not be applicable thereto.  Such right to abate Base Rent and Tenant’s Share of Direct Expenses shall be Tenant’s sole and exclusive remedy for rent abatement at law or in equity for an Abatement Event.  Except as provided in this Section 19.5.2, nothing contained herein shall be interpreted to mean that Tenant is excused from paying Rent due hereunder.

 

20.COVENANT OF QUIET ENJOYMENT                                              Landlord covenants that Tenant, on paying the Rent, charges for services and other payments herein reserved and on keeping, observing and performing all the other terms, covenants, conditions, provisions and agreements herein contained on the part of Tenant to be kept, observed and performed, shall, during the Lease Term, peaceably and quietly have, hold and enjoy the Premises subject to the terms, covenants, conditions, provisions and agreements hereof without interference by any persons lawfully 

 

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claiming by or through Landlord.  The foregoing covenant is in lieu of any other covenant of quiet enjoyment express or implied.

 

21.                               LETTER OF CREDIT

 

21.1                        Concurrently with Tenant’s execution of this Lease, Tenant shall deliver to Landlord an unconditional, clean, irrevocable letter of credit (the “L-C”) in the amount set forth in Section 8 of the Summary (the “L-C Amount”), which L-C shall be issued by a money-center, solvent and nationally recognized bank (a bank which accepts deposits, maintains accounts, has a local San Francisco Bay Area office which will negotiate a letter of credit, and whose deposits are insured by the FDIC) reasonably acceptable to Landlord (such approved, issuing bank being referred to herein as the “Bank”).  Tenant shall pay all expenses, points and/or fees incurred by Tenant in obtaining the L-C.  The L-C shall (i) be “callable” at sight, irrevocable and unconditional, (ii) be maintained in effect, whether through renewal or extension, for the period commencing on the date of this Lease and continuing until the date (the “L-C Expiration Date”) that is no less than one hundred twenty (120) days after the expiration of the Lease Term, and Tenant shall deliver a new L-C or certificate of renewal or extension to Landlord at least sixty (60) days prior to the expiration of the L-C then held by Landlord, without any action whatsoever on the part of Landlord, (iii) be fully assignable by Landlord, its successors and assigns, (iv) permit partial draws and multiple presentations and drawings, and (v) be otherwise subject to the International Standby Practices-ISP 98, International Chamber of Commerce Publication #590.  Landlord, or its then managing agent, shall have the right to draw down an amount up to the face amount of the L-C if any of the following shall have occurred or be applicable:  (A) such amount is due to Landlord under the terms and conditions of this Lease, or (B) Tenant has filed a voluntary petition under the U. S. Bankruptcy Code or any state bankruptcy code (collectively, “Bankruptcy Code”), or (C) an involuntary petition has been filed against Tenant under the Bankruptcy Code, or (D) the Bank has notified Landlord that the L-C will not be renewed or extended through the L-C Expiration Date, or (E) Tenant is placed into receivership or conservatorship, or becomes subject to similar proceedings under Federal or State law, or (F) Tenant executes an assignment for the benefit of creditors.  Upon any such draw of the L-C, Landlord may use the proceeds of the L-C to cure any default of Tenant under the Lease, or to compensate Landlord for any and all damages arising out of, or incurred in connection with, the termination of this Lease, including, without limitation, those specifically identified in Section 1951.2 of the California Civil Code.

 

22.                               COMMUNICATIONS AND COMPUTER LINE                     Tenant may install, maintain, replace, remove or use any communications or computer wires and cables serving the Premises (collectively, the “Lines”), provided that Tenant shall obtain Landlord’s prior written consent, use an experienced and qualified contractor approved in writing by Landlord, and comply with all of the other provisions of Articles 7 and 8 of this Lease.  Tenant shall pay all costs in connection therewith.  Landlord reserves the right, upon notice to Tenant prior to the expiration or earlier termination of this Lease, to require that Tenant, at Tenant’s sole cost and expense, remove any Lines located in or serving the Premises prior to the expiration or earlier termination of this Lease.

 

23.                               SIGNS

 

23.1                        Exterior Signage.  Subject to Landlord’s prior written approval, which shall not be unreasonably withheld, conditioned or delayed, and provided all signs are in keeping with the quality, design and style of the Building and Project, Tenant, at its sole cost and expense, may install (i) identification signage on the existing monument sign located in the front of the Building, and (ii) at the entrance to the Building (collectively, “Tenant Signage”).  All such signage shall be subject to Tenant’s obtaining all required governmental approvals.  All permitted signs shall be maintained by Tenant at its expense in a first-class and safe condition and appearance.  Upon the expiration or earlier termination of this Lease, Tenant shall remove all of its signs at Tenant’s sole cost and expense.  The graphics, materials, color, design, lettering, lighting, size, illumination, specifications and exact location of Tenant’s Signage (collectively, the “Sign Specifications”) shall be subject to the prior written approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed, and shall be consistent and compatible with the quality and nature of the Project.  Tenant hereby acknowledges that, notwithstanding Landlord’s approval of Tenant’s Signage, Landlord has made no representation or warranty to Tenant with respect to the probability of obtaining all necessary governmental approvals and permits for Tenant’s Signage.  In the event Tenant does not receive the necessary governmental approvals and permits for Tenant’s Signage, Tenant’s and Landlord’s rights and obligations under the remaining TCCs of this Lease shall be unaffected.

 

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23.2                        Prohibited Signage and Other Items.  Any signs, notices, logos, pictures, names or advertisements which are installed and that have not been separately approved by Landlord may be removed without notice by Landlord at the sole expense of Tenant.  Any signs, window coverings, or blinds (even if the same are located behind the Landlord-approved window coverings for the Building), or other items visible from the exterior of the Premises or Building, shall be subject to the prior approval of Landlord, in its sole discretion.

 

23.3                        Termination of Right to Tenant’s Signage.  The rights contained in this Article 23 shall be personal to Original Tenant and its Permitted Assignee, and may only be exercised and maintained by such parties (and not any other assignee, sublessee or other transferee of the Original Tenant’s interest in this Lease) to the extent they are not in default under this Lease (beyond any applicable notice and cure period).

 

24.                               COMPLIANCE WITH LAW                             Tenant shall not do anything or suffer anything to be done in or about the Premises or the Project which will in any way conflict with any law, statute, ordinance or other governmental rule, regulation or requirement now in force or which may hereafter be enacted or promulgated (collectively, “Applicable Laws”).  At its sole cost and expense, Tenant shall promptly comply with all such Applicable Laws which relate to (i) Tenant’s particular use of the Premises, (ii) any Alterations made by Tenant to the Premises, or (iii) the Base Building, but as to the Base Building, only to the extent such obligations are triggered by Alterations made by Tenant to the Premises to the extent such Alterations are not normal and customary business office improvements, or Tenant’s use of the Premises for non-general office or non-life-science use.  Tenant shall be responsible, at its sole cost and expense, to make all alterations to the Premises as are required to comply with the Applicable Laws to the extent required in this Article 24.  Notwithstanding the foregoing terms of this Article 24 to the contrary, Tenant may defer such compliance with Applicable Laws while Tenant contests, in a court of proper jurisdiction, in good faith, the applicability of such Applicable Laws to the Premises or Tenant’s specific use or occupancy of the Premises; provided, however, Tenant may only defer such compliance if such deferral shall not (a) prohibit Tenant from obtaining or maintaining a certificate of occupancy for the Premises, (b) prohibit Landlord from obtaining or maintaining a certificate of occupancy for the Building or any portion thereof, (c) unreasonably and materially affect the safety of the employees and/or invitees of Landlord or of any tenant in the Building (including Tenant), (d) create a significant health hazard for the employees and/or invitees of Landlord or of any tenant in the Building (including Tenant), (e) otherwise materially and adversely affect Tenant’s use of or access to the Buildings or the Premises, or (f) impose material obligations, liability, fines, or penalties upon Landlord or any other tenant of the Building, or would materially and adversely affect the use of or access to the Building by Landlord or other tenants or invitees of the Building.  The judgment of any court of competent jurisdiction or the admission of Tenant in any judicial action, regardless of whether Landlord is a party thereto, that Tenant has violated any of said governmental measures, shall be conclusive of that fact as between Landlord and Tenant.  Landlord shall comply with all Applicable Laws relating to the Base Building, provided that compliance with such Applicable Laws is not the responsibility of Tenant under this Lease, and provided further that Landlord’s failure to comply therewith would prohibit Tenant from obtaining or maintaining a certificate of occupancy for the Premises, or would unreasonably and materially affect the safety of Tenant’s employees or create a significant health hazard for Tenant’s employees, or would otherwise materially and adversely affect Tenant’s use of or access to the Premises.  Landlord shall be permitted to include in Operating Expenses any costs or expenses incurred by Landlord under this Article 24 to the extent not prohibited by the terms of Section 4.2.7 above.

 

25.                               LATE CHARGES                                          If any installment of Rent or any other sum due from Tenant shall not be received by Landlord or Landlord’s designee within five (5) business days after Tenant’s receipt of written notice from Landlord that said amount is due, then Tenant shall pay to Landlord a late charge equal to five percent (5%) of the overdue amount plus any reasonable attorneys’ fees incurred by Landlord by reason of Tenant’s failure to pay Rent and/or other charges when due hereunder.  Notwithstanding the foregoing, Landlord shall not charge Tenant a late charge for the first (1st) late payment in any twelve (12) month period (but in no event with respect to any subsequent late payment in any twelve (12) month period) during the Lease Term that Tenant fails to timely pay Rent or another sum due under this Lease, provided that such late payment is made within three (3) days following the expiration of the five (5) business day period following written notice.  The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlord’s other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord’s remedies in any manner.  In addition to the late charge described above, any Rent or other amounts owing hereunder which are not paid within ten (10) days after the date they are due shall bear interest from the date when due until paid at a rate per 

 

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annum equal to the lesser of (i) the annual “Bank Prime Loan” rate cited in the Federal Reserve Statistical Release Publication G.13(415), published on the first Tuesday of each calendar month (or such other comparable index as Landlord and Tenant shall reasonably agree upon if such rate ceases to be published) plus four (4) percentage points, and (ii) the highest rate permitted by applicable law.

 

26.                               LANDLORD’S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

 

26.1                        Landlord’s Cure.  All covenants and agreements to be kept or performed by Tenant under this Lease shall be performed by Tenant at Tenant’s sole cost and expense and without any reduction of Rent, except to the extent, if any, otherwise expressly provided herein.  If Tenant shall fail to perform any obligation under this Lease, and such failure shall continue in excess of the time allowed under Section 19.1.2, above, unless a specific time period is otherwise stated in this Lease, Landlord may, but shall not be obligated to, make any such payment or perform any such act on Tenant’s part without waiving its rights based upon any default of Tenant and without releasing Tenant from any obligations hereunder.

 

26.2                        Tenant’s Reimbursement.  Except as may be specifically provided to the contrary in this Lease, Tenant shall pay to Landlord, upon delivery by Landlord to Tenant of statements therefor:  (i) sums equal to expenditures reasonably made and obligations incurred by Landlord in connection with the remedying by Landlord of Tenant’s defaults pursuant to the provisions of Section 26.1; (ii) sums equal to all losses, costs, liabilities, damages and expenses referred to in Article 10 of this Lease; and (iii) sums equal to all expenditures made and obligations incurred by Landlord in collecting or attempting to collect the Rent or in enforcing or attempting to enforce any rights of Landlord under this Lease or pursuant to law, including, without limitation, all reasonable legal fees and other amounts so expended.  Tenant’s obligations under this Section 26.2 shall survive the expiration or sooner termination of the Lease Term.

 

27.                               ENTRY BY LANDLORD  Landlord reserves the right at all reasonable times and upon not less than one (1) day prior notice to Tenant (except in the case of an emergency) to enter the Premises to (i) inspect them; (ii) show the Premises to prospective purchasers, or to current or prospective mortgagees, ground or underlying lessors or insurers or, during the last nine (9) months of the Lease Term, to prospective tenants; (iii) post notices of nonresponsibility (to the extent applicable pursuant to then applicable law); or (iv) alter, improve or repair the Premises or the Building, or for structural alterations, repairs or improvements to the Building or the Building’s systems and equipment. Landlord may make any such entries without the abatement of Rent, except as otherwise provided in this Lease, and may take such reasonable steps as required to accomplish the stated purposes.  In an emergency, Landlord shall have the right to use any means that Landlord may deem proper to open the doors in and to the Premises.  Landlord shall use commercially reasonable efforts to minimize interference with the conduct of Tenant’s business in connection with entries into the Premises.  Any entry into the Premises by Landlord in the manner hereinbefore described shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an actual or constructive eviction of Tenant from any portion of the Premises.

 

28.                               TENANT PARKING                           Tenant shall have the right, without the payment of any parking charge or fee (other than as a reimbursement of operating expenses to the extent allowed pursuant to the terms or Article 4 of this Lease, above), commencing on the Lease Commencement Date, to use the amount of unreserved parking spaces set forth in Section 9 of the Summary, on a monthly basis throughout the Lease Term, which parking spaces shall pertain to the on-site and/or off-site, as the case may be, parking facility (or facilities) which serve the Project.  Notwithstanding the foregoing, Tenant shall be responsible for the full amount of any taxes imposed by any governmental authority in connection with the renting of such parking spaces by Tenant or the use of the parking facility by Tenant.  Tenant’s continued right to use the parking spaces is conditioned upon Tenant abiding by all rules and regulations which are prescribed from time to time for the orderly operation and use of the parking facility where the parking spaces are located (including any sticker or other identification system established by Landlord and the prohibition of vehicle repair and maintenance activities in the parking facilities), and shall cooperate in seeing that Tenant’s employees and visitors also comply with such rules and regulations.  Tenant’s use of the Project parking facility shall be at Tenant’s sole risk and Tenant acknowledges and agrees that Landlord shall have no liability whatsoever for damage to the vehicles of Tenant, its employees and/or visitors, or for other personal injury or property damage or theft relating to or connected with the parking rights granted herein or any of Tenant’s, its employees’ and/or visitors’ use of the parking facilities.

 

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29.                               MISCELLANEOUS PROVISIONS

 

29.1                        Terms; Captions.  The words “Landlord” and “Tenant” as used herein shall include the plural as well as the singular.  The necessary grammatical changes required to make the provisions hereof apply either to corporations or partnerships or individuals, men or women, as the case may require, shall in all cases be assumed as though in each case fully expressed.  The captions of Articles and Sections are for convenience only and shall not be deemed to limit, construe, affect or alter the meaning of such Articles and Sections.

 

29.2                        Binding Effect.  Subject to all other provisions of this Lease, each of the covenants, conditions and provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective heirs, personal representatives, successors or assigns, provided this clause shall not permit any assignment by Tenant contrary to the provisions of Article 14 of this Lease.

 

29.3                        No Air Rights. ` No rights to any view or to light or air over any property, whether belonging to Landlord or any other person, are granted to Tenant by this Lease.  If at any time any windows of the Premises are temporarily darkened or the light or view therefrom is obstructed by reason of any repairs, improvements, maintenance or cleaning in or about the Project, the same shall be without liability to Landlord and without any reduction or diminution of Tenant’s obligations under this Lease.

 

29.4                        Modification of Lease.  Should any current or prospective mortgagee or ground lessor for the Building or Project require a modification of this Lease, which modification will not cause an increased cost or expense to Tenant or in any other way materially and adversely change the rights and obligations of Tenant hereunder, then and in such event, Tenant agrees that this Lease may be so modified and agrees to execute whatever documents are reasonably required therefor and to deliver the same to Landlord within ten (10) business days following a request therefor.  At the request of Landlord or any mortgagee or ground lessor, Tenant agrees to execute a short form of Lease and deliver the same to Landlord within ten (10) business days following the request therefor.

 

29.5                        Transfer of Landlord’s Interest.  Tenant acknowledges that Landlord has the right to transfer all or any portion of its interest in the Project or Building and in this Lease, and Tenant agrees that in the event of any such transfer, Landlord shall automatically be released from all liability thereafter arising under this Lease and Tenant agrees to look solely to such transferee for the performance of Landlord’s obligations hereunder after the date of transfer and such transferee shall be deemed to have fully assumed and be liable for all obligations of this Lease to be performed by Landlord, including the return of any Security Deposit, and Tenant shall attorn to such transferee.

 

29.6                        Prohibition Against Recording.  Except as provided in Section 29.4 of this Lease, neither this Lease, nor any memorandum, affidavit or other writing with respect thereto, shall be recorded by Tenant or by anyone acting through, under or on behalf of Tenant.

 

29.7                        Landlord’s Title.  Landlord’s title is and always shall be paramount to the title of Tenant.  Nothing herein contained shall empower Tenant to do any act which can, shall or may encumber the title of Landlord.

 

29.8                        Relationship of Parties.  Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venturer or any association between Landlord and Tenant.

 

29.9                        Application of Payments.  Landlord shall have the right to apply payments received from Tenant pursuant to this Lease, regardless of Tenant’s designation of such payments, to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord, in its sole discretion, may elect.

 

29.10                 Time of Essence.  Time is of the essence with respect to the performance of every provision of this Lease in which time of performance is a factor.

 

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29.11                 Partial Invalidity.  If any term, provision or condition contained in this Lease shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, provision or condition to persons or circumstances other than those with respect to which it is invalid or unenforceable, shall not be affected thereby, and each and every other term, provision and condition of this Lease shall be valid and enforceable to the fullest extent possible permitted by law.

 

29.12                 No Warranty.  In executing and delivering this Lease, Tenant has not relied on any representations, including, but not limited to, any representation as to the amount of any item comprising Additional Rent or the amount of the Additional Rent in the aggregate or that Landlord is furnishing the same services to other tenants, at all, on the same level or on the same basis, or any warranty or any statement of Landlord which is not set forth herein or in one or more of the exhibits attached hereto.

 

29.13                 Landlord Exculpation.  The liability of Landlord or the Landlord Parties to Tenant for any default by Landlord under this Lease or arising in connection herewith or with Landlord’s operation, management, leasing, repair, renovation, alteration or any other matter relating to the Project or the Premises shall be limited solely and exclusively to an amount which is equal to the interest of Landlord in the Project, including any rents, profits or proceeds derived therefrom.  Neither Landlord, nor any of the Landlord Parties shall have any personal liability therefor, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant.  The limitations of liability contained in this Section 29.13 shall inure to the benefit of Landlord’s and the Landlord Parties’ present and future partners, beneficiaries, officers, directors, trustees, shareholders, agents and employees, and their respective partners, heirs, successors and assigns.  Under no circumstances shall any present or future partner of Landlord (if Landlord is a partnership), or trustee or beneficiary (if Landlord or any partner of Landlord is a trust), have any liability for the performance of Landlord’s obligations under this Lease.  Notwithstanding any contrary provision herein, neither Landlord nor the Landlord Parties shall be liable under any circumstances for injury or damage to, or interference with, Tenant’s business, including but not limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, in each case, however occurring, or loss to inventory, scientific research, scientific experiments, laboratory animals, products, 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.

 

29.14                 Entire Agreement.  It is understood and acknowledged that there are no oral agreements between the parties hereto affecting this Lease and this Lease constitutes the parties’ entire agreement with respect to the leasing of the Premises and supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto or displayed by Landlord to Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Lease.  None of the terms, covenants, conditions or provisions of this Lease can be modified, deleted or added to except in writing signed by the parties hereto.

 

29.15                 Right to Lease.  Landlord reserves the absolute right to effect such other tenancies in the Project as Landlord in the exercise of its sole business judgment shall determine to best promote the interests of the Building or Project.  Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or type or number of tenants shall, during the Lease Term, occupy any space in the Building or Project.

 

29.16                 Force Majeure.  Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, acts of war, terrorist acts, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil commotions, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, except with respect to the obligations imposed with regard to Rent and other charges to be paid by Tenant pursuant to this Lease (collectively, a “Force Majeure”), notwithstanding anything to the contrary contained in this Lease, shall excuse the performance of such party for a period equal to any such prevention, delay or stoppage and, therefore, if this Lease specifies a time period for performance of an obligation of either party, that time period shall be extended by the period of any delay in such party’s performance caused by a Force Majeure; provided, however, that Force Majeure shall not affect Tenant’s rights to terminate this lease as provided in Articles 11 or 13, above.

 

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29.17                 Waiver of Redemption by Tenant.  Tenant hereby waives, for Tenant and for all those claiming under Tenant, any and all rights now or hereafter existing to redeem by order or judgment of any court or by any legal process or writ, Tenant’s right of occupancy of the Premises after any termination of this Lease.

 

29.18                 Notices.  All notices, demands, statements, designations, approvals or other communications (collectively, “Notices”) given or required to be given by either party to the other hereunder or by law shall be in writing, shall be (A) sent by United States certified or registered mail, postage prepaid, return receipt requested (“Mail”), (B) delivered by a nationally recognized overnight courier, or (D) delivered personally.  Any Notice shall be sent, transmitted, or delivered, as the case may be, to Tenant at the appropriate address set forth in Section 11 of the Summary, or to such other place as Tenant may from time to time designate in a Notice to Landlord, or to Landlord at the addresses set forth below, or to such other places as Landlord may from time to time designate in a Notice to Tenant.  Any Notice will be deemed given (i) three (3) days after the date it is posted if sent by Mail, (ii) the date the overnight courier delivery is made, or (iii) the date personal delivery is made.  As of the date of this Lease, any Notices to Landlord must be sent, transmitted, or delivered, as the case may be, to the following addresses:

 

Bayside Acquisition, LLC
 c/o HCP, Inc.
 3760 Kilroy Airport Way, Suite 300
 Long Beach, CA 90806
 Attention:  Legal Department

 

and:

 

HCP Life Science Estates
 400 Oyster Point Boulevard, Suite 409
 South San Francisco, CA 94080
 Attention:  Jon Bergschneider

 

and

 

Allen Matkins Leck Gamble Mallory & Natsis LLP
 1901 Avenue of the Stars
 Suite 1800
 Los Angeles, California 90067

Attention:  Anton N. Natsis, Esq.

 

29.19                 Joint and Several.  If there is more than one Tenant, the obligations imposed upon Tenant under this Lease shall be joint and several.

 

29.20                 Authority.  If Tenant is a corporation, trust or partnership, Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in the State of California and that Tenant has full right and authority to execute and deliver this Lease and that each person signing on behalf of Tenant is authorized to do so.  In such event, Tenant shall, within ten (10) days after execution of this Lease, deliver to Landlord satisfactory evidence of such authority and, if a corporation, upon demand by Landlord, also deliver to Landlord satisfactory evidence of (i) good standing in Tenant’s state of incorporation and (ii) qualification to do business in the State of California.

 

29.21                 Attorneys’ Fees.  In the event that either Landlord or Tenant should bring suit for the possession of the Premises, for the recovery of any sum due under this Lease, or because of the breach of any provision of this Lease or for any other relief against the other, then all costs and expenses, including reasonable attorneys’ fees, incurred by the prevailing party therein shall be paid by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgment.

 

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29.22                 Governing Law; WAIVER OF TRIAL BY JURY.  This Lease shall be construed and enforced in accordance with the laws of the State of California.  IN ANY ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT TO (I) THE JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA, (II) SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN THE INTEREST OF SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT’S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY.  IN THE EVENT LANDLORD COMMENCES ANY SUMMARY PROCEEDINGS OR ACTION FOR NONPAYMENT OF BASE RENT OR ADDITIONAL RENT, TENANT SHALL NOT INTERPOSE ANY COUNTERCLAIM OF ANY NATURE OR DESCRIPTION (UNLESS SUCH COUNTERCLAIM SHALL BE MANDATORY) IN ANY SUCH PROCEEDING OR ACTION, BUT SHALL BE RELEGATED TO AN INDEPENDENT ACTION AT LAW.

 

29.23                 Submission of Lease.  Submission of this instrument for examination or signature by Tenant does not constitute a reservation of, option for or option to lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant.

 

29.24                 Brokers.  Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, excepting only the real estate brokers or agents specified in Section 12 of the Summary (the “Brokers”), and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Lease.  Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses (including without limitation reasonable attorneys’ fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings with any real estate broker or agent, other than the Brokers, occurring by, through, or under the indemnifying party.  Landlord shall pay any commissions due with respect to this Lease pursuant to a separate written agreement with the Brokers.  The terms of this Section 29.24 shall survive the expiration or earlier termination of the Lease Term.

 

29.25                 Independent Covenants.  This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not dependent and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that if Landlord fails to perform its obligations set forth herein, Tenant shall not be entitled to make any repairs or perform any acts hereunder at Landlord’s expense or to any setoff of the Rent or other amounts owing hereunder against Landlord.

 

29.26                 Project or Building Name, Address and Signage.  Landlord shall have the right at any time to change the name and/or address of the Project or Building and to install, affix and maintain any and all signs on the exterior and on the interior of the Project or Building as Landlord may, in Landlord’s sole discretion, desire.  Tenant shall not use the name of the Project or Building or use pictures or illustrations of the Project or Building in advertising or other publicity or for any purpose other than as the address of the business to be conducted by Tenant in the Premises, without the prior written consent of Landlord.

 

29.27                 Counterparts.  This Lease may be executed in counterparts with the same effect as if both parties hereto had executed the same document.  Both counterparts shall be construed together and shall constitute a single lease.

 

29.28                 Intentionally Omitted.

 

29.29                 Development of the Project.

 

29.29.1       Subdivision.  Landlord reserves the right to subdivide all or a portion of the buildings and Common Areas.  Tenant agrees to execute and deliver, upon demand by Landlord and in the form requested by Landlord, any additional documents needed to conform this Lease to the circumstances resulting from a subdivision and any all maps in connection therewith.  Notwithstanding anything to the contrary set forth in this Lease, the

 

39

 

separate ownership of any buildings and/or Common Areas by an entity other than Landlord shall not affect the calculation of Direct Expenses or Tenant’s payment of Tenant’s Share of Direct Expenses.

 

29.29.2       Construction of Property and Other Improvements.  Tenant acknowledges that portions of the Project may be under construction following Tenant’s occupancy of the Premises, and that such construction may result in levels of noise, dust, obstruction of access, etc. which are in excess of that present in a fully constructed project.  Tenant hereby waives any and all rent offsets or claims of constructive eviction which may arise in connection with such construction.

 

29.30                 No Violation.  Tenant hereby warrants and represents that neither its execution of nor performance under this Lease shall cause Tenant to be in violation of any agreement, instrument, contract, law, rule or regulation by which Tenant is bound, and Tenant shall protect, defend, indemnify and hold Landlord harmless against any claims, demands, losses, damages, liabilities, costs and expenses, including, without limitation, reasonable attorneys’ fees and costs, arising from Tenant’s breach of this warranty and representation.

 

29.31                 Transportation Management.  Tenant shall fully comply with all present or future programs intended to manage parking, transportation or traffic in and around the Project and/or the Building, and in connection therewith, Tenant shall take responsible action for the transportation planning and management of all employees located at the Premises by working directly with Landlord, any governmental transportation management organization or any other transportation-related committees or entities, and shall complete all surveys as requested by Landlord or the city in connection therewith.  Such programs may include, without limitation: (i) restrictions on the number of peak-hour vehicle trips generated by Tenant; (ii) increased vehicle occupancy; (iii) implementation of an in-house ridesharing program and an employee transportation coordinator; (iv) working with employees and any Project, Building or area-wide ridesharing program manager; (v) instituting employer-sponsored incentives (financial or in-kind) to encourage employees to rideshare; and (vi) utilizing flexible work shifts for employees.

 

29.32                 Existing Lease.  If Landlord fails to deliver the Premises to Tenant prior to July 1, 2014, then (i) Tenant’s existing lease with an affiliate of Landlord, located at 260 East Grand Avenue, South San Francisco, California (the “Existing Lease”) shall be automatically extended, on all of its existing terms and conditions, to expire on the date that is two (2) weeks after the Lease Commencement Date under this Lease (the Existing Lease Extended Expiration Date”), and (ii) Tenant’s obligation to pay rent under this Lease shall not commence until the Existing Lease Extended Expiration Date.

 

40

 

IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the day and date first above written.

 

	
LANDLORD:
    	
 
    	
TENANT:
    
	
 
    	
 
    	
 
    
	
BAYSIDE ACQUISITION, LLC,,
    	
 
    	
KALOBIOS   PHARMACEUTICALS, INC.,
    
	
a   Delaware limited liability company
    	
 
    	
a   Delaware corporation
    
	
 
    	
 
    	
 
    
	
By:   
    	
/s/   Jonathan M. Bergschneider
    	
 
    	
By:   
    	
/s/   David W. Pritchard
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Name:   
    	
Jonathan   M. Bergschneider
    	
 
    	
 
    	
Name:   
    	
David   W. Pritchard
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Its:   
    	
Executive   Vice President
    	
 
    	
 
    	
Its:   
    	
Chief   Executive Officer
   KeloBios Pharmaceuticals, Inc.
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:   
    	
/s/   Herb Cross
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    	
 
    	
 
    	
Name:   
    	
Herb   Cross
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Its:
    	
 
    	
 
    	
 
    	
Its:   
    	
CFO
    
								

 

41

 

EXHIBIT A

 

BRITANNIA LIFE SCIENCE CENTER

 

OUTLINE OF PREMISES

 

 

1

 

EXHIBIT A-1

 

BRITANNIA LIFE SCIENCE CENTER

 

PROJECT SITE PLAN

 

 

1

 

EXHIBIT B

 

BRITANNIA LIFE SCIENCE CENTER

 

TENANT WORK LETTER

 

1.                                      Defined Terms. As used in this Tenant Work Letter, the following capitalized terms have the following meanings:

 

(a)                                 Approved Plans: Plans and specifications prepared by the applicable Architect for the respective Tenant Improvements and approved by Landlord and Tenant in accordance with Paragraph 2 of this Tenant Work Letter, subject to further modification from time to time to the extent provided in and in accordance with such Paragraph 2.

 

(b)                                 Architect: DES Architects/Engineers, or any other architect selected by Landlord in its reasonable discretion, with respect to any Tenant Improvements which Landlord is to cause to be constructed pursuant to this Tenant Work Letter.

 

(c)                                  Tenant Change Request: See definition in Paragraph 2(c)(ii) hereof.

 

(d)                                 Landlord’s Final Working Drawings: See definition in Paragraph 2(a) hereof.

 

(e)                                  General Contractor:  Landmark Builders, or any other general contractor reasonably selected by Landlord with respect to Landlord’s TI Work. Tenant shall have no right to direct or control such General Contractor.

 

(f)                                   Landlord’s TI Work: Any Tenant Improvements which Landlord is to construct or install pursuant to this Tenant Work Letter or by mutual agreement of Landlord and Tenant from time to time.

 

(g)                                  Project Manager. Project Management Advisors, Inc., or any other project manager designated by Landlord in its reasonable  discretion from time to time to act in a supervisory, oversight, project management or other similar capacity on behalf of Landlord in connection with the design and/or construction of the Tenant Improvements.

 

(h)                                 Punch List Work: Minor corrections of construction or decoration details, and minor mechanical adjustments, that are required in order to cause any applicable portion of the Tenant Improvements as constructed to conform to the Approved Plans in all material respects and that do not materially interfere with Tenant’s use or occupancy of the Building and the Premises.

 

(i)                                     Substantial Completion Certificate: See definition in Paragraph 3(a) hereof.

 

(j)                                    Tenant Delay: Any of the following types of delay in the completion of construction of Landlord’s TI Work (but in each instance, only to the extent that any of the following has actually and proximately caused substantial completion of Landlord’s TI Work to be delayed):

 

(i)                                     Any delay resulting from Tenant’s failure to furnish, in a timely manner, information reasonably requested by Landlord or by Landlord’s Project Manager in connection with the design or construction of Landlord’s TI Work, or from Tenant’s failure to approve in a timely manner any matters requiring approval by Tenant;

 

(ii)                                  Any delay resulting from Tenant Change Requests initiated by Tenant, including any delay resulting from the need to revise any drawings or obtain further governmental approvals as a result of any such Tenant Change Request; or

 

1

 

(iii)                               Any delay caused by Tenant (or Tenant’s contractors, agents or employees) materially interfering with the performance of Landlord’s TI Work, provided that Landlord shall have given Tenant prompt notice of such material interference.

 

(k)                                 Tenant Improvements: The improvements to or within the Building shown on the Approved Plans from time to time and to be constructed by Landlord pursuant to the Lease and this Tenant Work Letter. The term “Tenant Improvements” does not include the improvements existing in the Building and Premises at the date of execution of the Lease.

 

(l)                                     Unavoidable Delays: Delays due to acts of God, acts of public agencies, labor disputes, strikes, fires, freight embargoes, inability (despite the exercise of due diligence) to obtain supplies, materials, fuels or permits, or other causes or contingencies (excluding financial inability) beyond the reasonable control of Landlord or Tenant, as applicable.

 

(m)                             Capitalized terms not otherwise defined in this Tenant Work Letter shall have the definitions set forth in the Lease.

 

2.                                      Plans and Construction. Landlord and Tenant shall comply with the procedures set forth in this Paragraph 2 in preparing, delivering and approving matters relating to the Tenant Improvements.

 

(a)                                 Approved Plans and Working Drawings for Landlord’s TI Work. Landlord’s Architect and project manager has prepared, and Landlord and Tenant have approved, preliminary plans and specifications and a scope of work for the Premises. The most recent mutually approved version of such preliminary plans and specifications and scope of work (the “Landlord’s Preliminary Plan”) is attached hereto as Schedule 1 and incorporated herein by this reference.  Any items listed on the Landlord’s Preliminary Plan as being “alternates” or “tenant items”, or “tenant furnished” or “tenant installed” shall be provided, if at all, by Tenant at Tenant’s sole cost and expense, and Landlord shall have no obligations with respect thereto. Landlord shall prepare or cause to be prepared (assuming timely delivery by Tenant of all information and decisions reasonably required to be furnished or made by Tenant in order to permit preparation of Landlord’s Final Working Drawings, and subject to Tenant Delays and Unavoidable Delays), final detailed working drawings and specifications for the Tenant Improvements constituting Landlord’s TI Work, including (as applicable) structural, fire protection, life safety, mechanical and electrical working drawings and final architectural drawings (collectively, “Landlord’s Final Working Drawings”). Landlord’s Final Working Drawings shall be based on and consistent with the Landlord’s Preliminary Plan in all material respects (except as otherwise mutually approved by the parties in their respective discretion). Landlord shall deliver copies of Landlord’s Final Working Drawings to Tenant for Tenant’s approval and information, and to assist Tenant in preparing plans, specifications and drawings for Tenant’s Work as hereinafter set forth.  Tenant shall promptly and diligently either approve the proposed Landlord’s Final Working Drawings, or set forth in writing with particularity any changes necessary to bring the aspects of such proposed plans and specifications or proposed Landlord’s Final Working Drawings into a form which will be reasonably acceptable to Tenant.  Notwithstanding any other provisions of this paragraph, in no event shall Tenant have the right to object to any aspect of the Landlord’s Final Working Drawings (including, but not limited to, any subsequently proposed changes therein from time to time) that is (i) materially consistent with the Landlord’s Preliminary Plan, (ii) necessitated by applicable law or as a condition of any governmental or other third-party approvals or consents that are required to be obtained in connection with Landlord’s TI Work, or (iii) that is required as a result of unanticipated conditions encountered in the course of construction of Landlord’s TI Work, but to the extent Tenant identifies to Landlord any concerns arising out of any such requirements or conditions described in this sentence, Landlord and Tenant shall cooperate reasonably, diligently and in good faith to discuss possible changes in the nature or scope of the Tenant Improvements that might minimize or avoid the effects of such requirements or conditions. Failure of Tenant to deliver to Landlord written notice of disapproval and specification of required changes on or before any deadline reasonably specified by Landlord (which shall not be less than three (3) days after delivery thereof to Tenant) in delivering an applicable set of plans, specifications and/or drawings to Tenant shall constitute and be deemed to be approval of Landlord’s proposed plans and specifications or proposed Landlord’s Final Working Drawings, as applicable.

 

(b)                                 Construction of Landlord’s TI Work. Following completion of Landlord’s Final Working Drawings, Landlord shall apply for and use reasonable efforts to obtain the necessary permits and 

 

2

 

approvals to allow construction of all Tenant Improvements constituting Landlord’s TI Work. Upon receipt of such permits and approvals, Landlord shall, at Landlord’s expense (subject to Tenant’s obligations to pay for the cost of any Tenant required changes to the Landlord’s Preliminary Plan or Landlord’s Final Working Drawings), construct and complete the Tenant Improvements constituting Landlord’s TI Work substantially in accordance with the Landlord’s Approved Plans, subject to Unavoidable Delays and Tenant Delays (if any). Such construction shall be performed in a neat, good and workmanlike manner and shall materially conform to all applicable laws, rules, regulations, codes, ordinances, requirements, covenants, conditions and restrictions applicable thereto in force at the time such work is completed.

 

(c)                                  Changes.

 

(i)                                     If Landlord determines at any time that changes in Landlord’s Final Working Drawings or in any other aspect of the Landlord’s Approved Plans relating to any item of Landlord’s TI Work are required as a result of applicable law or governmental requirements,, or are required at the insistence of any other third party whose approval may be required with respect to the Tenant Improvements, or are required as a result of unanticipated conditions encountered in the course of construction, then Landlord shall promptly (A) advise Tenant of such circumstances and (B) at Landlord’s sole cost and expense, cause revised Landlord’s Final Working Drawings to be prepared by Landlord’s Architect and submitted to Tenant, for Tenant’s information.

 

(ii)                               If Tenant at any time desires any changes, alterations or additions to the Landlord’s Final Working Drawings or material changes to the Landlord’s Preliminary Plan with respect to any of Landlord’s TI Work, Tenant shall submit a detailed written request to Landlord specifying such changes, alterations or additions (a “Tenant Change Request”). Upon receipt of any such request, Landlord shall promptly notify Tenant of (A) whether the matters proposed in the Tenant Change Request are approved by Landlord (which approval shall not be unreasonably withheld, conditioned or delayed by Landlord), (B) Landlord’s estimate of the number of days of delay, if any, which shall be caused in Landlord’s TI Work by such Tenant Change Request if implemented (including, without limitation, delays due to the need to obtain any revised plans or drawings and any governmental approvals), and (C) Landlord’s estimate of the increase, if any, which shall occur in the cost of construction of the Landlord’s TI Work affected by such Tenant Change Request if such Tenant Change Request is implemented (including, but not limited to, any costs of compliance with laws or governmental regulations that become applicable because of the implementation of the Tenant Change Request). If Landlord approves the Tenant Change Request and Tenant notifies Landlord in writing, within three (3) business days after receipt of such notice from Landlord, of Tenant’s approval of the Tenant Change Request (including the estimated delays and cost increases, if any, described in Landlord’s notice), then Landlord shall cause such Tenant Change Request to be implemented and Tenant shall be responsible for all actual costs or cost increases resulting from or attributable to the implementation of the Tenant Change Request, and any delays resulting therefrom shall be deemed to be a Tenant Delay. If Tenant fails to notify Landlord in writing of Tenant’s approval of such Tenant Change Request within said three (3) business day period, then such Tenant Change Request shall be deemed to be withdrawn and shall be of no further effect.

 

(d)                                 Project Management. Unless and until revoked by Landlord by written notice delivered to Tenant, Landlord hereby (i) delegates to Project Manager the authority to exercise all approval rights, supervisory rights and other rights or powers of Landlord under this Tenant Work Letter with respect to the design and construction of the Tenant Improvements, and (ii) requests that Tenant work with Project Manager with respect to any logistical or other coordination matters arising in the course of construction of the Tenant Improvements, including monitoring Tenant’s compliance with its obligations under this Tenant Work Letter and under the Lease with respect to the design and construction of the Tenant Improvements. Tenant acknowledges the foregoing delegation and request, and agrees to cooperate reasonably with Project Manager as Landlord’s representative pursuant to such delegation and request.  Fees and charges of Project Manager for such services shall be at Landlord’s sole expense except to the extent otherwise expressly provided in this Tenant Work Letter.

 

3

 

3.                                      Completion.

 

(a)                                 When Landlord receives written certification from Architect that construction of the Tenant Improvements constituting Landlord’s TI Work in the Building has been completed in accordance with the Landlord’s Approved Plans (except for Punch List Work), Landlord shall prepare and deliver to Tenant a certificate signed by both Landlord and Architect (the “Substantial Completion Certificate”) (i) certifying that the construction of the Tenant Improvements constituting Landlord’s TI Work in the Building has been substantially completed in a good and workmanlike manner in accordance with the Landlord’s Approved Plans in all material respects, subject only to completion of Punch List Work, and specifying the date of that completion, and (ii) certifying that Landlord’s TI Work complies in all material respects with all laws, rules, regulations, codes, ordinances, requirements, covenants, conditions and restrictions applicable thereto at the time of such delivery. Upon receipt by Tenant of the Substantial Completion Certificate and tender of possession of the Premises by Landlord to Tenant, and receipt of any certificate of occupancy or its legal equivalent, or other required sign-offs from any applicable governmental authority, allowing the legal occupancy of the Premises, the Tenant Improvements constituting Landlord’s TI Work in the Building will be deemed delivered to Tenant and “Ready for Occupancy” for all purposes of the Lease (subject to Landlord’s continuing obligations with respect to any Punch List Work, and to any other express obligations of Landlord under the Lease or this Tenant Work Letter with respect to such Tenant Improvements).

 

(b)                                 Promptly following delivery of the Substantial Completion Certificate for Landlord’s TI Work in the Building, Project Manager or other representatives of Landlord shall conduct one or more “walkthroughs” of the Building with Tenant and Tenant’s representatives, to identify any items of Punch List Work that may require correction and to prepare a joint punch list reflecting any such items, following which Landlord shall diligently complete the Punch List Work reflected in such joint punch list. At any time within thirty (30) days after delivery of such Substantial Completion Certificate, Tenant shall be entitled to submit one or more lists to Landlord supplementing such joint punch list by specifying any additional items of Punch List Work to be performed on the applicable Tenant Improvements constituting Landlord’s TI Work in the Building, and upon receipt of such list(s), Landlord shall diligently complete such additional Punch List Work. Promptly after Landlord provides Tenant with the Substantial Completion Certificate and completes all applicable Punch List Work for the Building, Landlord shall cause the recordation of a Notice of Completion (as defined in Section 3093 of the California Civil Code or applicable successor statute) with respect to Landlord’s TI Work in the Building.

 

(c)                                  All construction, product and equipment warranties and guaranties obtained by Landlord with respect to Landlord’s TI Work shall, to the extent reasonably obtainable, include a provision that such warranties and guaranties shall also run to the benefit of Tenant, and Landlord shall cooperate with Tenant in a commercially reasonable manner to assist in enforcing all such warranties and guaranties for the benefit of Tenant.

 

(d)                                 Notwithstanding any other provisions of this Tenant Work Letter or of the Lease, if Landlord is delayed in substantially completing any of Landlord’s TI Work as a result of any Tenant Delay, and if the Lease Commencement Date is being determined under clause (ii) of Section 3.2 of the Lease Summary, then notwithstanding any other provisions of the Lease to the contrary, the Premises shall be deemed to have been Ready for Occupancy on the date the Premises would have been Ready for Occupancy absent such Tenant Delay.

 

4.                                      Payment of Costs.  Except as otherwise expressly provided in this Tenant Work Letter or in the Lease or by mutual written agreement of Landlord and Tenant, the cost of construction of the Tenant Improvements shall be paid by Landlord.

 

5.                                      No Agency. Nothing contained in this Tenant Work Letter shall make or constitute Tenant as the agent of Landlord.

 

6.                                      Tenant Access.  Provided that Tenant and its agents do not interfere with Contractor’s work in the Building and the Premises, Contractor shall allow Tenant access to the Premises for the purpose of Tenant installing equipment or fixtures (including Tenant’s data and telephone equipment) in the Premises and doing business.  Prior to Tenant’s entry into the Premises as permitted by the terms of this Section 6, Tenant shall submit a schedule to Landlord and Contractor, for their approval, which schedule shall detail the timing and purpose of Tenant’s entry.  Tenant shall be responsible for the costs of any utilities associated with Tenant’s access to the Premises prior to the 

 

4

 

Lease Commencement Date.  Tenant shall hold Landlord and Landlord Parties harmless from and indemnify, protect and defend Landlord and Landlord Parties against any loss or damage to the Building or Premises and against injury to any persons caused by Tenant’s actions pursuant to this Section 6.

 

7.                                      Miscellaneous. All references in this Tenant Work Letter to a number of days shall be construed to refer to calendar days, unless otherwise specified herein. In all instances where Landlord’s or Tenant’s approval is required, if no written notice of disapproval is given within the applicable time period, at the end of that period Landlord or Tenant shall be deemed to have given approval (unless the provision requiring Landlord’s or Tenant’s approval expressly states that non-response is deemed to be a disapproval or withdrawal of the pending action or request, in which event such express statement shall be controlling over the general statement set forth in this sentence) and the next succeeding time period shall commence. If any item requiring approval is disapproved by Landlord or Tenant (as applicable) in a timely manner, the procedure for preparation of that item and approval shall be repeated.

 

5

 

SCHEDULE 1 TO EXHIBIT B

 

BRITANNIA LIFE SCIENCE CENTER

 

LANDLORD’S PRELIMINARY PLAN

 

 

1

 

442 Littlefield - KaloBios TI Scope List 

Based on DES floor plan dated 12/2/13 for Office & Lab space

Office Area Includes:

 

1.              Lobby/Reception, Open Office Area, (32) Private Offices, Board Room, (3) Conference Rooms, CEO Office, Shared Office, IT Room, Server Room, (2) Copy Stations, Supply Area, File Storage, Break Room, All Hands Room, Men’s & Women’s Restrooms and Janitor’s Closet.

 

2.              (13) 4x8 skylights with flared sheetrock wells

 

3.              Lobby/Reception with new glass double doors, carpet tiles, 2x4 ‘second look’ ceilings (furniture by Tenant).

 

4.              Open Office Area with carpet tiles, 2x4 ‘second look’ ceiling tile, 2x4 direct/indirect light fixtures. Ceiling drops for power to cubicles.  Power connection to cubicles, IT cabling and furniture by Tenant.

 

5.              Window coverings at exterior windows throughout.

 

6.              File Storage Room with dry suppression system and clerestory windows along lab hallway.

 

7.              Private Offices include one glass wall with sidelight privacy glazing, solid doors, (2) power outlets per office and (1) rough-in for tel/data per office.

 

8.              (1) Private Office at Lab with solid wall and door with vision glass with privacy glazing.

 

9.              Conference Rooms & Board Room: carpet tiles, 2x4 ‘second look’ ceilings, butt glazed walls with film, 2x4 direct/indirect light fixtures w/ supplemental down lights. Power and rough-in for data provided in the floor at all Conference Rooms and Board Room.

 

10.       Mecho shade for Conference Rooms and Board Room.

 

11.       Power for surface mounted electrical projection screens in all Conference Rooms.  Screens to be provided by Tenant.

 

12.       CFCI recessed projection screen in Board Room.

 

13.       Break Room: VCT multi-color tile flooring w/ moisture barrier, 2x4 ‘second look’ ceiling tile, 2x4 direct/indirect light fixtures, plastic laminate cabinets/counter, sink w/ disposal(LL provides), dishwasher(LL provides).  Refrigerators by Tenant.

 

14.       Break Room with pantry, (1) sink with disposal, power and water connection for dishwasher, upper and lower cabinetry and (4) above-counter outlets.

 

15.       (2) Copy Stations with built in cabinetry.

 

16.       Supply area with upper and lower cabinetry.

 

17.       Men’s and Women’s Restrooms with (1) shower each, ceramic tile floors and wet walls (tile and grout lines sealed), solid surface countertops, metal partitions, lockers, down lights and (Exhaust fans on light switch), standard plumbing fixtures (request power assisted commodes-all ADA height).

 

18.       Janitor’s closet with sink (tile floor and up wall to chair rail height).

 

19.       11 foot ceilings in Open Office Area, 9 foot ceilings at Private Offices, 12’ ceilings in File Storage Room and 10’ ceilings in Lab Areas.

 

20.       Minimum 800 amp electrical service, including 400 amp emergency generator panel (designate Epower plugs with color red).

 

21.       (2) new exterior doors including one at west wall and one at east wall.

 

2

 

 

22.       Card readers for (4) exterior doors and Server Room; Interior lobby double door as depicted on floor plan.

 

23.       New HVAC units (labs w/ 100% OA), New exhaust fans, (1) split system at IT & Server Rooms for 24/7 HVAC, Restroom exhaust

 

Lab Areas Including:

 

24.       Development Lab, Autoclave Room, Shipping/Receiving, (2) TC Labs, Glass Storage Room (Photo room), Lab Storage(FACS Canto II Room), Flex Space and Electrical Room.

 

25.       Development Lab with VCT flooring, 2x4 vinyl rock ceiling tile, (4) epoxy sinks, mobile casework, (3) 2x8 clerestory windows at hallway, HVAC connection and power for (1) tenant furnished 6’ fume hood (with sprinkler), (1) VAC connection at each island and wire mold along walls. Equipment by Tenant.

 

26.       TC #1 with sheet vinyl flooring, 2x4 vinyl rock ceiling tile, (1) sink, mobile benches, (1) 4’ biosafety cabinet, wire mold along walls. (2) CO2 outlet. Equipment by Tenant.

 

27.       TC #2 with sheet vinyl flooring, 2x4 vinyl rock ceiling tile, (1) sink, mobile benches, (1) 6’biosafety cabinet, wire mold along walls.  (2) CO2 outlet. Equipment by Tenant.

 

28.       Glass Storage (Photo Room with vct tile flooring.

 

29.       Autoclave Lab with epoxy flooring, floor drains and water connection as required

 

30.       Lab Storage(FACS Canto II Room) with access from hallway and TC #2.

 

31.       Shipping and Receiving with double doors, tank racks for (4) CO2 tanks, space for LN2 tank, power for freezers. Process piping for CO2 to (1) location at TC Lab #1 and TC Lab #2. Wire mold along back wall. Equipment and tanks by Tenant.

 

32.       View panels at all lab block doors as depicted on floor plan including hallway doors along bathroom block leading to open office area and s/r double doors to lab hallway.

 

33.       Epoxy sinks w/ ICW and IHW as depicted on floor plan

 

34.       Emergency shower/eyewash combination in at each lab

 

35.       2x4 lighting with acrylic lens at all lab areas.

 

36.       10 foot ceilings in lab areas.

 

37.       Flex space includes VCT flooring 11’ ceiling height with standard 2x4 ceiling tile and grid, code minimum electrical outlets, drywall and tape, no paint.

 

EXCLUDES:

 

1.              IT Cabling

 

2.              Furniture

 

3.              Ceiling service panels, specialty gas piping/outlets/gas manifolds, free-standing lab equipment (freezers, etc.) depicted on floor plan, unless otherwise noted above.  (PraxAir-CO2 manifold in S/R)

 

4.              CDA not required

 

5.              Signage, other than code required

 

6.              Security System

 

3

 

EXHIBIT C

 

BRITANNIA LIFE SCIENCE CENTER

 

NOTICE OF LEASE TERM DATES

 

To:                             
                                               
                                               

Re:                             Lease dated                         , 200    between                                         , a                                            (“Landlord”), and                                               , a                                                (“Tenant”) concerning Suite              on floor(s)                      of the office building located at                                                        , California.

 

Gentlemen:

 

In accordance with the Lease (the “Lease”), we wish to advise you and/or confirm as follows:

 

1.                                      The Lease Term shall commence on or has commenced on                            for a term of                                ending on                               .

 

2.                                      Rent commenced to accrue on                         , in the amount of                         .

 

3.                                      If the Lease Commencement Date is other than the first day of the month, the first billing will contain a pro rata adjustment.  Each billing thereafter, with the exception of the final billing, shall be for the full amount of the monthly installment as provided for in the Lease.

 

4.                                      Your rent checks should be made payable to                      at                             .

 

5.                                      The exact number of rentable/usable square feet within the Premises is                    square feet.

 

6.                                      Tenant’s Share as adjusted based upon the exact number of usable square feet within the Premises is                         %.

 

	
 
    	
“Landlord”:
    
	
 
    	
 
    
	
 
    	
                                                                                                         ,
    
	
 
    	
a                                              
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Its:
    	
 
    

 

1

 

	
Agreed   to and Accepted as
    	
 
    
	
of           ,   20   .
    	
 
    
	
 
    	
 
    
	
“Tenant”:
    	
 
    
	
 
    	
 
    
	
                                       
    	
 
    
	
a                                   
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Its:
    	
 
    	
 
    
				

 

2

 

EXHIBIT D

 

BRITANNIA LIFE SCIENCE CENTER

 

FORM OF TENANT’S ESTOPPEL CERTIFICATE

 

The undersigned as Tenant under that certain Lease (the “Lease”) made and entered into as of                       , 200    by and between                                as Landlord, and the undersigned as Tenant, for Premises in the building located at                                                             , California, certifies as follows:

 

1.             Attached hereto as Exhibit A is a true and correct copy of the Lease and all amendments and modifications thereto.  The documents contained in Exhibit A represent the entire agreement between the parties as to the Premises.

 

2.             The undersigned currently occupies the Premises described in the Lease, the Lease Term commenced on                     , and the Lease Term expires on                       , and the undersigned has no option to terminate or cancel the Lease or to purchase all or any part of the Premises, the Building and/or the Project.

 

3.             Base Rent became payable on                         .

 

4.             The Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in Exhibit A.

 

5.             Tenant has not transferred, assigned, or sublet any portion of the Premises nor entered into any license or concession agreements with respect thereto except as follows:

 

6.             Intentionally Omitted.

 

7.             All monthly installments of Base Rent, all Additional Rent and all monthly installments of estimated Additional Rent have been paid when due through                       .  The current monthly installment of Base Rent is $                                          .

 

8.             All conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in default thereunder.  In addition, the undersigned has not delivered any notice to Landlord regarding a default by Landlord thereunder.  The Lease does not require Landlord to provide any rental concessions or to pay any leasing brokerage commissions.

 

9.             No rental has been paid more than thirty (30) days in advance and no security has been deposited with Landlord except as provided in the Lease.

 

10.          As of the date hereof, there are no existing defenses or offsets, or, to the undersigned’s knowledge, claims or any basis for a claim, that the undersigned has against Landlord.

 

11.          If Tenant is a corporation or partnership, each individual executing this Estoppel Certificate on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in California and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf of Tenant is authorized to do so.

 

12.          There are no actions pending against the undersigned under the bankruptcy or similar laws of the United States or any state.

 

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13.          To the best of Tenant’s knowledge, Tenant is in full compliance with all federal, state and local laws, ordinances, rules and regulations affecting its use of the Premises, including, but not limited to, those laws, ordinances, rules or regulations relating to hazardous or toxic materials.  Tenant has never permitted or suffered, nor does Tenant have any knowledge of, the generation, manufacture, treatment, use, storage, disposal or discharge of any hazardous, toxic or dangerous waste, substance or material in, on, under or about the Project or the Premises or any adjacent premises or property in violation of any federal, state or local law, ordinance, rule or regulation.

 

14.          To the undersigned’s knowledge, all tenant improvement work to be performed by Landlord under the Lease has been completed in accordance with the Lease and has been accepted by the undersigned and all reimbursements and allowances due to the undersigned under the Lease in connection with any tenant improvement work have been paid in full.  All work (if any) in the common areas required by the Lease to be completed by Landlord has been completed and all parking spaces required by the Lease have been furnished and/or all parking ratios required by the Lease have been met.

 

The undersigned acknowledges that this Estoppel Certificate may be delivered to Landlord or to a prospective mortgagee or prospective purchaser, and acknowledges that said prospective mortgagee or prospective purchaser will be relying upon the statements contained herein in making the loan or acquiring the property of which the Premises are a part and that receipt by it of this certificate is a condition of making such loan or acquiring such property.

 

Executed at                              on the          day of                       , 20    .

 

	
 
    	
“Tenant”:
    
	
 
    	
 
    
	
 
    	
                                                                                                         ,
    
	
 
    	
a
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Its:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Its:
    	
 
    

 

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EXHIBIT E

 

BRITANNIA LIFE SCIENCE CENTER

 

ENVIRONMENTAL QUESTIONNAIRE

 

ENVIRONMENTAL QUESTIONNAIRE
 FOR COMMERCIAL AND INDUSTRIAL PROPERTIES

 

	
Property   Name:                                   
    	
 
    	
Property   Address:                    
    

 

Instructions:  The following questionnaire is to be completed by the Lessee representative with knowledge of the planned operations for the specified building/location.  Please print clearly and attach additional sheets as necessary.

 

1.0          PROCESS INFORMATION

 

Describe planned use, and include brief description of manufacturing processes employed.

 

 

 

2.0          HAZARDOUS MATERIALS

 

Are hazardous materials used or stored?  If so, continue with the next question.  If not, go to Section 3.0.

 

	
2.1
    	
 
    	
Are   any of the following materials handled on the Property?
    	
 
    	
Yes o No o
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
(A   material is handled if it is used, generated, processed, produced, packaged,   treated, stored, emitted, discharged, or disposed.)  If so, complete this section.  If this question is not applicable, skip   this section and go on to Section 5.0.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
o Explosives
    	
o Fuels
    	
o Oils
    
	
 
    	
 
    	
o Solvents
    	
o Oxidizers
    	
o   Organics/Inorganics
    
	
 
    	
 
    	
o Acids
    	
o Bases
    	
o Pesticides
    
	
 
    	
 
    	
o Gases
    	
o PCBs
    	
o Radioactive   Materials
    
	
 
    	
 
    	
o Other   (please specify)
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
							

2-2.                           If any of the groups of materials checked in Section 2.1, please list the specific material(s), use(s), and quantity of each chemical used or stored on the site in the Table below.  If convenient, you may substitute a chemical inventory and list the uses of each of the chemicals in each category separately.

 

	
Material
    	
 
    	
Physical State (Solid, Liquid, or Gas)
    	
 
    	
Usage
    	
 
    	
Container Size
    	
 
    	
Number of Containers
    	
 
    	
Total Quantity
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

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2-3.                           Describe the planned storage area location(s) for these materials.  Please include site maps and drawings as appropriate.

 

 

 

3.0          HAZARDOUS WASTES

 

	
Are hazardous wastes generated?
    	
 
    	
Yes o No o
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
If yes, continue with the next question.  If not, skip this section and go to   section 4.0.
    
	
 
    	
 
    	
 
    
	
3.1
    	
 
    	
Are   any of the following wastes generated, handled, or disposed of (where   applicable) on the Property?
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
o Hazardous   wastes
    	
o Industrial   Wastewater
    	
 
    
	
 
    	
 
    	
o Waste oils
    	
o PCBs
    	
 
    
	
 
    	
 
    	
o Air   emissions
    	
oSludges
    	
 
    
	
 
    	
 
    	
o Regulated   Wastes
    	
o Other   (please specify)
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3-2.
    	
 
    	
List   and quantify the materials identified in Question 3-1 of this section.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
WASTE
   GENERATED
    	
 
    	
RCRA listed
   Waste?
    	
 
    	
SOURCE
    	
 
    	
APPROXIMATE MONTHLY
   QUANTITY
    	
 
    	
WASTE
   CHARACTERIZATION
    	
 
    	
DISPOSITION
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
																		

 

3-3.                           Please include name, location, and permit number (e.g. EPA ID No.) for transporter and disposal facility, if applicable).  Attach separate pages as necessary.

 

	
Transporter/Disposal Facility Name
    	
 
    	
Facility Location
    	
 
    	
Transporter (T) or Disposal (D) Facility
    	
 
    	
Permit Number
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

	
3-4.
    	
 
    	
Are  pollution  controls  or  monitoring  employed  in  the  process  to  prevent  or  minimize  the  release  of  wastes  into  the  environment?
    	
Yes o No o
    
	
 
    	
 
    	
 
    
	
3-5.
    	
 
    	
If   so, please describe.
    

 

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4.0                               USTS/ASTS

 

4.1                               Are underground storage tanks (USTs), aboveground storage tanks (ASTs), or associated pipelines used for the storage of petroleum products, chemicals, or liquid wastes present on site (lease renewals) or required for planned operations (new tenants)?                                                Yes o  No o

 

If not, continue with section 5.0.  If yes, please describe capacity, contents, age, type of the USTs or ASTs, as well any associated leak detection/spill prevention measures.  Please attach additional pages if necessary.

 

	
Capacity
    	
 
    	
Contents
    	
 
    	
Year
   Installed
    	
 
    	
Type (Steel, Fiberglass,
   etc)
    	
 
    	
Associated Leak Detection / Spill Prevention
   Measures*
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

	
*Note:
    	
The   following are examples of leak detection / spill prevention measures:
    
	
 
    	
 
    
	
 
    	
Integrity   testing
    	
Inventory   reconciliation
    	
Leak   detection system
    
	
 
    	
Overfill   spill protection
    	
Secondary   containment
    	
Cathodic   protection
    
	
 
    	
 
    	
 
    
	
4-2.
    	
Please   provide copies of written tank integrity test results and/or monitoring   documentation, if available.
    
	
 
    	
 
    	
 
    	
 
    
	
4-3.
    	
Is   the UST/AST registered and permitted with the appropriate regulatory   agencies?
    	
Yes o No o
    
	
 
    	
If   so, please attach a copy of the required permits.
    	
 
    
	
 
    	
 
    	
 
    
	
4-4.
    	
If   this Questionnaire is being completed for a lease renewal, and if any of the   USTs/ASTs have leaked, please state the substance released, the   media(s) impacted (e.g., soil, water, asphalt, etc.), the actions   taken, and all remedial responses to the incident.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
4-5.
    	
If  this  Questionnaire  is  being  completed  for  a  lease  renewal,  have  USTs/ASTs  been  removed  from  the Property?
    	
Yes o No o
    
	
 
    	
 
    	
 
    
	
 
    	
If  yes,  please  provide  any  official  closure  letters  or  reports  and  supporting  documentation  (e.g.,  analytical  test  results,  remediation  report  results,  etc.).
    
	
 
    	
 
    	
 
    
	
4-6.
    	
For  Lease  renewals,  are  there  any  above  or  below  ground  pipelines  on  site  used  to  transfer  chemicals  or wastes?
    	
Yes o No o
    
	
 
    	
 
    	
 
    
	
 
    	
For   new tenants, are installations of this type required for the planned   operations?
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Yes o No o
    
						

 

If yes to either question, please describe.

 

 

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5.0                               ASBESTOS CONTAINING BUILDING MATERIALS

 

Please be advised that an asbestos survey may have been performed at the Property.  If provided, please review the information that identifies the locations of known asbestos containing material or presumed asbestos containing material.  All personnel and appropriate subcontractors should be notified of the presence of these materials, and informed not to disturb these materials.  Any activity that involves the disturbance or removal of these materials must be done by an appropriately trained individual/contractor.

 

	
6.0
    	
REGULATORY
    	
 
    
	
 
    	
 
    	
 
    
	
6-1.
    	
Does  the  operation  have  or  require  a  National  Pollutant  Discharge  Elimination  System  (NPDES)  or  equivalent  permit?
    	
Yes o No o
    
	
 
    	
If   so, please attach a copy of this permit.
    	
 
    
	
 
    	
 
    	
 
    
	
6-2.
    	
Has   a Hazardous Materials Business Plan been developed for the site?
    	
Yes o No o
    
	
 
    	
If   so, please attach a copy.
    	
 
    

 

CERTIFICATION

 

I am familiar with the real property described in this questionnaire.  By signing below, I represent and warrant that the answers to the above questions are complete and accurate to the best of my knowledge.  I also understand that Lessor will rely on the completeness and accuracy of my answers in assessing any environmental liability risks associated with the property.

 

	
Signature:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    
	
Telephone:
    	
 
    	
 
    

 

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