Document:

rdvt-ex102_85.htm

 

Exhibit 10.2

 

 

FORM

 

RESTRICTED STOCK UNIT AGREEMENT

PURSUANT TO THE

RED VIOLET, INC.
2018 STOCK INCENTIVE PLAN

 

THIS AGREEMENT is made as of the ____ day of ________, 2018, between Red Violet, Inc. (“Company”), a Delaware corporation, and ___________ (“Participant”).  Capitalized terms not defined herein shall have the meaning ascribed thereto in the Red Violet, Inc. 2018 Stock Incentive Plan (as amended from time to time, the “Plan”). This Agreement shall be effective as of the date hereof (“Effective Date”).

 

1.Award.

 

(a)Shares. Pursuant to the Plan, the Company hereby grants to the Participant the right to receive ____________ (___,000) shares of the Company’s Common Stock upon the satisfaction of certain conditions (the “Restricted Stock Units”).   Shares of the Company’s Common Stock shall be issued only upon vesting of the Restricted Stock Units and only upon the satisfaction of the terms and conditions set forth herein and in the Plan (such shares shall be referred to hereafter as the “Award Stock”).  

 

(b)Plan Incorporated.  Participant acknowledges receipt of a copy of the Plan, and agrees that this Award of Restricted Stock Units shall be subject to all of the terms and conditions set forth in the Plan, including future amendments thereto, if any, pursuant to the terms thereof, which Plan is incorporated herein by reference as a part of this Agreement.

 

2.Restricted Stock Units.  Participant hereby accepts the Restricted Stock Units when issued and agrees as follows:

 

(a)Vesting.  No Award Stock shall be issued pursuant to the unvested Restricted Stock Units.  Except as otherwise provided for in the Plan and this Agreement, the Restricted Stock Units shall vest upon the satisfaction of the time-based vesting requirements set forth below (each, a “Time-Based Vesting Requirement”) provided that the Performance Criteria (as defined in Section 2(b)) is met:

 

		
	
Date

 
	
Total Percentage Vested

 

	
July 1, 2019 (“First Time Vesting Date”)
	
33-1/3%

 

 

	
July 1, 2020 (“Second Time Vesting Date”)
	
66-2/3%

 

 

	
July 1, 2021 (“Third Time Vesting Date”)
	
100%

 

 

There shall be no proportionate or partial vesting in the periods between the vesting dates and all vesting shall occur only on the aforementioned vesting dates.  

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(b)Performance Goal.  Except as otherwise provided for in the Plan, the Employment Agreement (as hereinafter defined), and this Agreement, the Restricted Stock Units shall not vest unless and until the Company has, for any fiscal quarter in which the Restricted Stock Units are outstanding, (i) gross revenue determined in accordance with the Company’s reviewed and or audited financial statements in excess of $7.0 million for such fiscal quarter, (ii) positive adjusted EBITDA, also as determined based on the Company’s reviewed or audited financial statements for such fiscal quarter and reported on Company’s Quarterly Reports on Form 10-Q or Annual Reports of Form 10-K and (iii) the Participant continues to provide services to the Company either as an employee, director or consultant on the last date of the quarter that the Performance Criteria is met (collectively, (i-iii), the “Performance Criteria”).  Revenue and expenses from acquisitions made after the Effective Date and prior to the achievement of the Performance Criteria shall not be included in the determination of whether the Company has achieved the Performance Criteria.

  

(c)Termination of Employment or Other Service; Change in Control.  

 

(i)General.  Except as otherwise provided in this Agreement, if Participant’s employment or other service with the Company terminates, all Restricted Stock Units unvested at the time of termination shall expire and be forfeited immediately and returned to the Company.

 

(ii)Death. In the event that the Participant dies while in the employment or other service of the Company, all Restricted Stock Units which have not vested on the date of death shall immediately vest.

 

(iii)Disability. In the event that the Participant’s employment or other service with the Company is terminated by reason of Disability, the Committee may, in its sole discretion, provide that Restricted Stock Units which have not vested on the date of such termination shall immediately vest.

 

(iv)Change in Control.  In the event of a Change in Control, all Restricted Stock Units which have not vested on the date of such Change in Control shall immediately vest.

 

(d)Transferability.  The Restricted Stock Units may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of unless the Plan so provides.  

 

(e)Distribution.  Within 10 business days of the Company satisfying the Performance Criteria, the Company’s CFO shall provide a certification to the Company’s Compensation Committee (the “CFO Certification) that the Performance Criteria have been met for the prior fiscal quarter and the name of each employee, director or consultant as of the last day of the prior fiscal quarter who have equity awards subject to the Performance Criteria.  Unless otherwise provided in the Restricted Stock Unit Deferral Election Form attached hereto as Appendix A, the Company shall, subject to the Time-Based Vesting Requirements, deliver a certificate evidencing shares of Award Stock to the Participant, direct its transfer agent to register such shares in book entry form or directly to the Participant consistent with applicable laws: (i) if the Performance Criteria is achieved for the first time and the First Time Vesting Date has passed, within 10 days of the CFO Certification for the first, second, third and fourth fiscal quarters in a calendar year and no event later than seventy-five (75) days following the quarter ended; or (ii) if the Performance Criteria was previously achieved, within thirty (30) days following the satisfaction of the Time-Based Vesting Requirements.  For purposes of clarification, if the Performance Criteria have been met for the first time after the Second Time Vesting Date and on or before the quarter ending associated with the Third Time Vesting Date, then Participant shall receive the number of Restricted Stock Units associated with all prior Time Vesting Dates. Notwithstanding the foregoing, if the Restricted Stock Units vest due to: (i) a Change in Control, the certificate evidencing shares of Award Stock shall be delivered immediately upon the Change in Control, or (ii) a termination of employment due to death or Disability, the certificate evidencing shares of Award Stock shall be delivered within thirty (30) days following such termination of employment.  For the Restricted Stock Unit Deferral Election Form to be effective, it must be received by the Company on the Effective Date, or to the extent that none of the Restricted Stock Units vest within 12 months of the Effective Date, no later than 30 days following the Effective Date.  The Company must achieve the Performance Criteria no later than the quarter ending during the Third Time Vesting Date to receive any distributions under this Restricted Stock Unit Agreement.

 

3.Withholding.  To the extent that this Award or the delivery of any Award Stock causes the Participant to be subject to any tax withholding obligations, the Participant shall meet such obligations as provided for in the Plan. 

 

4.Status as a Shareholder.  Unless otherwise provided in the Plan, Participant shall have no rights of a shareholder with respect to the Restricted Stock Units until the Award Stock is issued to him or her pursuant to Section 2 above.

 

5.Committee’s Powers.  No provision contained in this Agreement shall in any way terminate, modify or alter, or be construed or interpreted as terminating, modifying or altering any of the powers, rights or authority vested in the Committee or, to the 

 

 

 
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extent delegated, in its delegate pursuant to the terms of the Plan or resolutions adopted in furtherance of the Plan, including, without limitation, the right to make certain determinations and elections with respect to the Restricted Stock Units.

 

6.Binding Effect.  This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under Participant.

 

7.Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware.

 

8.Miscellaneous.

 

(a)Provisions of Plan and Other Agreements Control.  This Agreement is subject to all the terms, conditions and provisions of the Plan, including, without limitation, the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted by the Board and as may be in effect from time to time.  The Plan is incorporated herein by reference.  If and to the extent that this Agreement conflicts or is inconsistent with the terms, conditions and provisions of the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly.  [Notwithstanding the foregoing, in the event of any conflict between the terms of this Agreement and the terms of the Employment Agreement between the Company and the Participant dated March 26, 2018 (the “Employment Agreement”), the terms of the Employment Agreement shall prevail.]1

(b)No Third‐Party Beneficiaries.  This Agreement shall not confer any rights or remedies upon any person other than the parties and their respective successors and permitted assigns.

(c)Section 409A Compliance.  It is intended that all compensation payable pursuant to this Agreement are exempt from or, alternatively, comply with Section 409A of the Code (and any legally binding guidance promulgated under Section 409A of the Code, including, without limitation, the Final Treasury Regulations) ("Code Section 409A"), and this Agreement will be interpreted, administered and operated accordingly. In the event that any provision of this Agreement is inconsistent with Code Section 409A or such guidance, then the applicable provisions of Code Section 409A shall supersede such inconsistent provision.  Notwithstanding the foregoing, in no event will any of Company, its parent, or their respective subsidiaries, affiliates, or officers, directors, employees, or agents have any liability for failure of the form of this Agreement to be exempt from or comply with Code Section 409A and none of the foregoing guarantees that the form of this Agreement is exempt from or complies with Code Section 409A.  For all purposes under Code Section 409A, Executive’s right to receive any payments pursuant to this Agreement shall be treated as a right to receive a separate and distinct payment, and any payments to be made in installments shall be deemed to be a series of separate payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of Company. A termination of employment under this Agreement shall mean a “separation from service” under Code Section 409A.  Notwithstanding any provisions of the Agreement to the contrary, to the extent the that Code Section 409A would cause an adverse tax consequence to the Participant, a Change in Control shall not be deemed to occur for purposes of this Agreement unless the Change in Control meets the definition ascribed to the phrase “Change in the Ownership or Effective Control of a Corporation or in the Ownership of a Substantial Portion of the Assets of a Corporation” under Treasury Department Regulation 1.409A-3(i)(5), as revised from time to time in either subsequent regulations or other guidance.

(d)Entire Agreement; Amendments.  This Agreement (including the documents and exhibits referred to herein) and the Plan constitutes the entire agreement among the parties and supersedes any prior understandings, agreements, or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof.  This Agreement may not be amended, supplemented, or modified in whole or in part except by an instrument in writing signed by the party or parties against whom enforcement of any such amendment, supplement, or modification is sought.

(e)Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed an original and all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by an officer thereunto duly authorized, and the Participant has executed this Agreement, all as of the date first above written.

	
	 

	
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 Add applicable employment/service agreement reference, if recipient is party to an employment/service agreement.  Delete sentence otherwise.

 

 

 
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RED VIOLET, INC.

 

 

By:

Name:

Title:

Date: 

 

 

PARTICIPANT

 

[INSERT]

 

____________________________________

Date: 

 

 

 

 
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APPENDIX A:

RED VIOLET, INC. 2018 STOCK INCENTIVE PLAN

RESTRICTED STOCK UNIT

DEFERRAL ELECTION FORM2

FOR THIS DEFERRAL ELECTION TO BE EFFECTIVE, IT MUST BE RECEIVED BY THE COMPANY ON THE EFFECTIVE DATE, OR TO THE EXTENT THAT NONE OF THE RESTRICTED STOCK UNITS VEST WITHIN 12 MONTHS OF THE EFFECTIVE DATE, NO LATER THAN 30 DAYS FOLLOWING THE EFFECTIVE DATE.

 

	
A.
	
PARTICIPANT INFORMATION

 

Name: [INSERT]

Address:

 

	
B.
	
DEFERRAL ELECTION

For each share of Common Stock to be issued to me pursuant to the Restricted Stock Unit Agreement effective __________, I hereby irrevocably elect to defer the receipt of such Common Stock as set forth below.

	
C.
	
STOCK ISSUANCE DATE 

As Restricted Stock Units vest under your Award, the Company will issue you shares of Common Stock with respect to such vested Restricted Stock Units following the satisfaction of such vesting requirements, in accordance with Section 2(e) of the Restricted Stock Unit Agreement, unless you timely elect to receive the shares at a different time.  If you elect a different date, Common Stock will generally be issued to you on such date but only to the extent your Restricted Stock Units are vested and additional shares of Common Stock (if any) will be issued to you when any remaining Restricted Stock Units vest.

I hereby elect to receive my shares of Common Stock on the earlier of (check all that apply):

1.  ☐_________________________________ , 20____ ; (enter date)

2.  ☐  my death;

3.  ☐  my Disability (as defined in Code Section 409A); 

4.  ☐  a Change in Control (as defined in the Plan); and/or

5.  ☐  my “separation from service” (as defined in Code Section 409A) with the Company.

To the extent you are a “specified employee” for purposes of Code Section 409A and to the extent Code Section 409A is applicable to deferral of receipt of Common Stock pursuant to this Deferral Election Form (the “Form”), notwithstanding any contrary provision which exists in the Plan or the Agreement, your distribution will be delayed for a period of 6 months as required by Code Section 409A

This Form is subject to all the terms, conditions and provisions of the Plan and the Agreement including, without limitation, the amendment provisions thereof.  The Plan and the Agreement are incorporated herein by reference.  If and to the extent that this Form conflicts or is inconsistent with the terms, conditions and provisions of the Plan or the Agreement, the Plan and the Agreement shall control, and this Form shall be deemed to be modified accordingly.  

SIGNATURE:

_______________________________________/_____/_____

INSERT           Date

 

	
	 

	
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 Capitalized terms not defined herein shall have the meaning ascribed thereto in the Red Violet, Inc. 2018 Stock Incentive Plan (as amended to date, the “Plan”).

 

 

 

INSTRUCTIONS FOR

RED VIOLET, INC. 2018 STOCK INCENTIVE PLAN

DEFERRAL ELECTION FORM

 

This Form is to be used to defer receipt of shares of Common Stock that are issuable under the Plan in connection with Restricted Stock Units.  The following instructions provide more information about the Form.

A.PARTICIPANT INFORMATION

Please complete all items.

B.DEFERRAL ELECTION

Please identify the Restricted Stock Units subject to this Form.

C.STOCK ISSUANCE DATE 

You may elect the timing of the issuance of your Common Stock to be issued pursuant to the Restricted Stock Units by checking the first box and inserting a specific date in the future that you want such Common Stock issued to you.  If you make such an election, you shall be issued Common Stock with respect to any Restricted Stock Units that are vested on the date you elect and shall receive any remaining shares of Common Stock with respect to any other Restricted Stock Units when they vest.   Notwithstanding the date you elect to receive your shares of Common Stock, you may choose by checking the corresponding boxes to receive shares of Common Stock corresponding to any vested Restricted Stock Units earlier if and upon occurrence of any of the following events to the extent selected:  (1) your death; (2) your Disability; (3) a Change in Control; or (4) a separation from service.  If you make no election, the Company will issue you shares of Common Stock with respect to Restricted Stock Units following the satisfaction of such vesting requirements, in accordance with Section 2(e) of the Restricted Stock Unit Agreement.bold-ex101_70.htm

Exhibit 10.1

 

NET COMMERCIAL LEASE

This Net Commercial Lease (this “Lease”) dated August 15, 2018, for reference purposes only, is by and between JCN PARTNERS, a California limited partnership (“Lessor”), and AUDENTES THERAPEUTICS, INC., a Delaware corporation (“Lessee”).

IT IS HEREBY AGREED:

Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the premises described in Paragraph 1 below for the term and subject to the covenants, agreements and conditions hereinafter set forth. Lessee covenants, as a material part of the consideration for this Lease, to keep and perform all said covenants and conditions by it to be kept and performed and that this Lease is made upon the condition of such performance.  Prior to the executon of the Lease, Lessee and Lessor have entered into those certain NET COMMERCIAL LEASE Agreements, one dated January 7, 2017 for that certain commercial real property commonly known as 550-3 Eccles Avenue, South San Francisco, California (the “550-3 Eccles Lease”), and the second lease agreement, dated January 7, 2017 for that certain commercial real property commonly known as 528 B, Eccles Avenue, South San Francisco, California (the “528 B Eccles Lease”).  The 550-3 Eccles Lease and the 528 B Eccles Lease are collectively referred to as the “Existing Leases”.   This Lease shall be effective upon its mutual execution and delivery; however, if prior to the Commencment Date, as defined below, an Event of Default exists as to the Existing Leases, then this Lease shall terminate and be of no futher force or effect. 

1.Definitions. Unless the context otherwise specifies or requires, the following terms shall have the following meanings:

A.Building. The term “Building” shall mean the land and other real property and improvements located in 528-534 Eccles Avenue, South San Francisco, California, the surrounding grounds and parking and driveway areas, including the common easement roadway (the “Common Roadway”) adjacent to the Building, which location is shown on Exhibit C attached hereto and incorporated herein by this reference.

B.Premises. The term “Premises” shall mean those sections of the Building outlined by dark diagonal lines on the floor plan attached hereto as Exhibit A, and incorporated herein by this reference, commonly referred to as 534 Eccles Avenue, South San Francisco, CA, consisting of approximately 37,071 rentable square feet and the exclusive use of forty-one (41)  parking spaces marked on Exhibit B, attached hereto and incorporated herein by this reference, or as designated from time to time by Lessor. For purposes of Lessee’s responsibilities under this Lease, the Premises also includes the grounds surrounding the Premises particularly the two exterior concrete blocks and the walkway located adjacent to the East and North exterior walls of the Premises.  Lessee shall have access to the Premises twenty-four (24) hours per day, seven (7) days per week.

C.Lessee's Percentage Share. The term “Lessee's Percentage Share,” except when said term refers to the cost of maintaining the Common Roadway, shall mean thirty-three and ninety-nine hundredths percent (33.99%). Lessor and Lessee acknowledge that Lessee's Percentage Share, except when said term refers to the cost of maintaining the Common Roadway, 

 

 

has been obtained by dividing the net rental area of the Premises, which Lessor and Lessee agree is 37,071 square feet, by the total net rental area of the Building, which Lessor and Lessee agree is 109,056 square feet, and multiplying such quotient by 100.  Lessee’s Percentage Share shall not be subject to change, except for physical additions or deletions to the Premises or Building, or caused by condemnation or destruction.

D.Lessee's Percentage Share of Common Roadway. The term “Lessee's Percentage Share” when said term refers to the cost of maintaining the Common Roadway shall mean nineteen and seventy-four one hundredths percent (19.74%). Lessor and Lessee acknowledge that Lessee's Percentage Share, when said term refers to the cost of maintaining the Common Roadway, has been obtained by dividing the net rental area of the Premises, which Lessor and Lessee agree is 37,071 square feet, by the total square footage of the two buildings which use the Common Roadway which Lessor and Lessee agree is 187,770 square feet, and multiplying such quotient by 100. 

E.Common Area Maintenance and Repair Costs. The term “Common Area Maintenance and Repair Costs” shall include, but not be limited to, all commercially reasonable costs of maintaining and repairing, including the cost of any maintenance or service contract, the Building's water, sewer, ventilating and air-conditioning systems (unless such system only serves the Premises, or any part thereof, in which event Lessee shall maintain said system), common entryways, doors and passage ways, the plumbing and sewer system and sewer lines which extend from the Premises and the Building, the grounds surrounding the Building (including landscaping whether located adjacent to the Building or elsewhere on the parcel on which the Building is located), the parking areas and driveways and the Common Roadway (including but not limited to the resealing, re-striping and re-paving of all such areas and filling in pot holes), fences, the drain and gutter pipes at the roof level, and all other common areas.  Such term shall also include the cost of washing the exterior walls or painting or repairing such walls for the purpose of removing any graffiti which may appear thereon and Lessee’s Percentage Share of a management fee of four and one-half percent (4.5%) of the Base Monthly Rent each month during the term of this Lease.  Such term shall also include the cost of any needed replacements of such equipment or systems or any other replacements or capital improvements.  With regard to items which are capital improvements, Lessor shall determine what replacements shall constitute a capital improvement and any such costs shall be amortized over the useful life of the improvement, which Lessor shall determine in its discretion, together with interest on the unamortized balance at the rate of 10% per annum if Lessor has used its own funds or the interest rate as may have been paid by Lessor on funds borrowed for the purpose of constructing or installing such replacements or improvements. Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease, or any extension thereof, on the date on which Rent is due, an amount equal to Lessee’s Percentage Share for the amortization period of the useful life of such improvement.

(1)Common Area Maintenance and Repair Costs shall not include the following:

(a)The cost of installing, operating and maintaining any specialty service, such as daycare, cafeteria, athletic or recreational club;

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(b)The cost of any work or service performed for any tenant of the Building (other than Lessee) to a materially greater extent or in a materially more favorable manner than that furnished generally to the tenants and other occupants (including Lessee);

(c)The cost of any repairs, alterations, additions, changes, replacements and other items which are made in order to prepare for a new tenant’s occupancy unless any such cost is required because of Alterations undertaken to the Premises by Lessee;

(d)The cost of any repair in accordance with the casualty and condemnation sections of this Lease, except for deductibles under any insurance policy carried by Lessor;

(e)Any costs representing an amount paid to a corporation related to Lessor which is in excess of the amount which would have been paid in the absence of such relationship;

(f)Interest and penalties due to late payment of any amounts owed by Lessor, except such as may be incurred as a result of Lessee’s failure to timely pay Lessee’s Percentage Share of Real Property Taxes, Insurance premiums or Common Area Maintenance and Repair Costs;

(g)Costs related to the existence and maintenance of Lessor as a legal entity, except to the extent attributable to the operation and management of the Premises or Building; 

(h)Legal costs, auditing fees, leasing commissions, advertising costs or fees incurred by Lessor with respect to the Premises, the Building or the Common Roadway;

(i)Costs incurred by Lessor to correct any existing violations of any applicable law, rule, governmental regulation, ordinance or restriction of record (“Applicable Laws”) with respect to the Premises, the Building or the Common Roadway; or

(j)Any expense or cost reserves of Lessor.

(2)Lessee, at its sole cost and expense shall have the right during business hours upon not less than five (5) business day advance notice to examine and/or audit the books and documents evidencing the Common Area Maintenance and Repair Costs for both the Building and the Common Roadway once every calendar year.  Lessee at Lessee’s sole cost may also have the records maintained by Lessor for the Common Area Maintenance and Repair Costs audited by a reputable certified public accountant once every calendar year.  If any such audit should disclose that Lessee has been overcharged by Lessor for Lessee’s Percentage Share of Common Area Maintenance and Repair Costs for the Building or Lessee’s Percentage Share for the Common Roadway for any year, Lessee shall be credited for such overpayment, plus interest at the rate of ten percent (10%) per annum. If such audit should disclose that Lessee has been undercharged by Lessor for any year, then Lessee shall pay to Lessor all such undercharged amounts within thirty (30) days with interest thereon at ten percent (10%) per annum. If the amount of any overcharge for the combined total of Lessee’s Percentage Share of Common Area 

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Maintenance and Repair Costs and maintaining the Common Roadway exceeds ten percent (10%) of Lessee’s Percentage Share of Common Area Maintenance Costs and the cost of maintaining the Common Roadway for that year, Lessor shall promptly reimburse Lessee for the reasonable costs of such audit. The provisions of this Paragraph 1E(2) shall survive the expiration or earlier termination of this Lease.

2.Term; Delivery of Possession

A.The term of this Lease shall begin on May 1, 2019 (“Commencement Date”),  and shall end, unless sooner terminated as hereinafter provided, on May 31, 2027.  

B.Lessor shall deliver possesson of the Premises broom clean and free of debris on the Commencement Date and warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems (“HVAC”), loading doors, sump pumps, if any, and all other such elements in the Premises, shall be in good operating condition on said date, that the structural elements of the roof, bearing walls and foundation of the Property shall be free of material defects, and that, to the best of Lessor’s actual knowledge, without duty of investigation, the Premises does not contain hazardous levels of any mold or fungi defined as toxic under applicable state or federal law.   

Lessor expressly disclaims any representation or warranty, express or implied that the improvements existing in or on the Premises comply with building codes, applicable laws, covenants or restrictions of record, regulations and ordinances, including but not limited to the Americans With Disabilty Act and Title 24 of California Code of Regulations. 

C.Lessor shall use its best commercially reasonable efforts to deliver possession of the Premises to Lessee by the Commencement Date.  If, despite such efforts, Lessor is unable to deliver possession by such date, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease. Lessee shall not, however, be obligated to pay Rent or perform any other obligation of Lessee under the terms of this Lease until Lessor delivers possession of the Premises to Lessee. 

D.Lessor represents to Lessee that as of the Commencement Date it is not in default under any deed of trust encumbering the Building, that the Premises are not subject to any pending litigation, and there is no right of first refusal to lease or purchase the Building.  

3.Rent and General Provisions Regarding Payments.

A.Lessee shall pay the following rent (“Base Monthly Rent”) to Lessor in advance no later than the first day of each month during the term of this Lease, commencing on the Commencement Date, for the rental of the Premises (except as provided in Subparagraph 2C above):

From May 1, 2019, through April 30. 2020$70,435.00 per month

From May 1, 2020, through April 30, 2021$72,548.00 per month

From May 1, 2021, through April 30, 2022 $74,724.00 per month 

From May 1, 2022,  through April 30, 2023$76,966.00 per month

From May 1, 2023, through April 30, 2024 $79,275.00per month

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From May 1, 2024  through April 30, 2025 $81,653.00 per month

From May 1, 2025  through April 30, 2026 $84,103.00 per month

From May 1, 2026 through April 30, 2027 $86,626.00 per month

B.All payments of Base Monthly Rent and all other sums due to be paid by Lessee to Lessor under this Lease, all of which are sometimes collectively referred to as “Rent”, shall be paid to Lessor, without prior demand,  prior notice, deduction or offset (except as may be otherwise provided in this Lease), in lawful money of the United States of America at Lessor’s address for notices hereunder (or to such other person or at such other place as Lessor may from time to time designate in writing).  Lessee may also pay Rent by automatic clearing house (“ACH”) transfer. All Rent, if not received by Lessor at said address or by ACH transfer within five (5) calendar days of the date the payment is due (such five (5) day period to include the due date), shall bear interest, from the due date until so received, at the rate of ten percent (10%) per annum.  Lessee shall pay to Lessor the sum of Thirty and no/100 Dollars ($30.00) for each check tendered by Lessee which is not honored for payment by Lessee's bank for whatever reason and the statutory penalties if Lessor elects to pursue said remedy.  In addition, Lessee shall pay to Lessor a late charge of five percent (5%) of the total amount of the payment due for each payment of Base Monthly Rent or other sum due pursuant to this Lease if said sum is not received by Lessor within five (5) calendar days of the date the payment is due (such five (5) day period to include the due date). Lessor and Lessee agree that Lessor will incur damages and expenses on account of any such late payment, including but not limited to added staff time to collect the sums due, accounting and legal expenses and interest or other charges, and that the amount of such damages and expenses will be extremely difficult and impractical to ascertain. Accordingly, the parties agree that the five percent (5%) late charge is a reasonable estimate of said expenses and damages.   

C.All sums received by Lessor from Lessee shall be applied first to the oldest outstanding monetary obligation owed by Lessee to Lessor and any other designation of the manner in which said payment is to be applied by Lessee shall be void and of no effect.

D.If the term of this Lease commences on a day other than the first day of a calendar month or ends on a day other than the last day of a calendar month, all Rent due for such fractional month or months shall be prorated based on the actual number of days in that month.

E.Lessee shall pay to Lessor Lessee’s Percentage Share of Common Area Maintenance and Repair Costs and Lessee’s Percentage Share of the cost of maintaining and repairing the Common Roadway,  computed and billed quarterly in arrears. 

4.Use. 

A.The Premises may only be used for warehouse and office functions (the “Permitted Use”), and for no other purpose without Lessor’s prior written consent, which consent may be withheld in Lessor's sole discretion.  Prior to the Commencement Date, and as condition of Lessor’s obligation of delivery of the Premises, Lessee shall submit an application to the appropriate governmental agency and/or department a separate Business License applicable to the Premises stating that the use is “warehousing, distribution, and office” and Lessee shall deliver a copy of such application to Lessor.  The inability to obtain such license shall not invalidate this Lease Agreement.  Pursuant to Lessee’s current overall space plan for the Premises attached hereto 

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as Exhibit D and made a part hereof, Lessee intends to use approximately 16,071 square feet of the Premises for warehouse use and approximately 21,000 square feet of the Premises for office use.  Lessor has made no warranty or representation that the Premises may be used for the use Lessee intends to make of the Premises and further makes no representation or warranty regarding the legality of the improvements made by the prior tenant of the Premises.  Lessee understands that following the expiration or early termination of this Lease, Lessor may convert the use of the Premises to other industrial uses including wholesale, warehouse and distribution uses regardless of the nature of Lessee’s use of the Premises at the time of such termination in accordance with the City of South San Francisco Resolution No. 84-97 (as amended) adopted by the City Council of the City of South San Francisco on July 9, 1997 (a copy of which is attached hereto and made a part hereof as Exhibit E-1,) and further confirmed by Senior Planner Tony Rozzi of the City of South San Francisco Planning Division in his email dated May 17, 2018, a copy of which is attached hereto as Exhibit E-2.

B.Not more than twelve (12) months or less than nine (9) months prior to the expiration of the initial Term, as such initial Term may be extended by an Extension Period, Lessee, at its sole cost and expense, shall apply for a letter of determination, applicability, or approval, or similar written assurance (each, a “Zoning Verification Letter”) from the appropriate governmental entity.  If such Zoning Verification Letter confirms that the Premises may be used for its originally designated use: wholesale, warehouse and distribution purposes, and does not contain unreasonable conditions, in Lessor’s commercially reasonable discretion, to the proposed reconversion of use, then it shall be deemed a “Favorable Letter of Determination”. 

C.Lessee agrees to submit such application for a Zoning Verification Letter to Lessor for its review and approval (which shall not be unreasonably withheld) at least fifteen (15) business days prior to the proposed submission to the governmental entity, including without limitation all documents, studies and reports related to such application.  If Lessor does not disapprove or amend such application for a Zoning Verification Letter within such fifteen (15) business day period, then such applications shall be deemed approved by Lessor. A proposed application letter seeking the Zoning Verification Letter is attached hereto as Exhibit E-3 and is hereby approved by Lessor. In no event shall the Zoning Verification Letter be subject to Lessor’s prior approval, it being understood that the content and direction of the Zoning Verification Letter shall be written by and subject to the City of South San Francisco Planning Division’s (or the appropriate governmental entity) sole discretion. Lessor acknowledges that if the Zoning Verification Letter does not contain the language in the attached application letter, the Zoning Verification Letter may still be a Favorable Zoning Verification Letter.

D.In the event that a favorable Zoning Verification Letter is not obtained and finalized through the applicable appeal period, or conditions to the proposed reconversion of use are imposed by the governmental entity that are not acceptable to Lessor, in its reasonable commercial discretion, then Lessee shall forfeit to Lessor Three Million and no/100 Dollars ($3,000,000.00) of the Security Deposit.  In the event that a Favorable Letter of Determination is obtained and finalized, Lessor shall return the Three Million Dollars ($3,000,000.00) portion of the Security Deposit within thirty (30)  days of receipt of such letter.

E.In the event that Lessee, without the prior written consent of Lessor, which consent may be withheld in Lessor’s sole and absolute discretion, or upon such conditions as Lessor shall 

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deem appropriate in its sole and absolute discretion, changes the use from warehouse and office to labs or manufacturing, or to any degree includes lab and/or manufacturing operations in the Premises, Lessee shall execute and deliver to Lessor an “Agreement for Restoration of Premises” in a form similar to that certain Agreement for Restoration of Premises, dated December 10, 2015, by and between Lessor and Solstice Neuroscience, LLC, US WorldMeds, LLC, and Lessee, and Lessee shall deliver to Lessor a letter of credit, in the amount of Five Hundred Thousand and no/100 Dollars ($500,000.00) in association with such Agreement for Restoration of Premises.

F.In addition, immediately upon such change in use pursuant to the immediately preceding paragraph of this Paragraph 4, Base Monthly Rent shall increase by fifty percent (50%) of the then current Base Monthly Rent, and the Base Monthly Rent applicable during any Extension Period (defined below) shall similarly increase.  

G.The parties acknowledge that a change in use and the loss of the current recognized use of the Property under the applicable zoning and use codes and regulations of the City of South San Francisco shall cause substantial damage and loss to Lessor, and Lessee and Lessor agree that Lessor’s actual damages would be impracticable or extremely difficult to fix.  The parties therefore agree that in the event that the current zoned “use” designation is changed by the City of South San Francisco from warehousing, distribution and office to lab and/or manufacturing due to Lessee’s actions and/or use of the Premises for lab and/or manufacturing purposes (“Lessee’s Caused Change in Use”), Lessee shall pay to Lessor the sum of Three Million and no/100 Dollars ($3,000,000.00) if such event occurs during the initial term of the Lease, Four Million and no/100 Dollars ($4,000,000.00), if such event occurs during the first Extension Period, and Five Million and no/100 Dollars ($5,000,000.00) if such event occurs during the second Extension Period.  Such payment shall occur by Lessor’s partial application of the Security Deposit in the amount of Three Million and no/100 Dollars ($3,000,000.00) and if such partial application is insufficient due to such event occurring in the first or second Extension Period, Lessee shall pay to Lessor the difference within thirty (30) days following written demand therefor.

H.Lessor acknowledges and agrees that if, at any time during the Term, including any Extension Periods, a Lessee Caused Change in Use shall occur and a Favorable Letter of Determination is not obtained, the maximum amount Lessee would pay or forfeit to Lessor pursuant to the terms of this Section 4 shall not exceed (i) Three Million and 00/100 Dollars ($3,000,000.00) during the initial Term of the Lease, (ii) Four Million and 00/100 Dollars ($4,000,000.00) during the first Extension Period, and (iii) Five Million and 00/100 Dollars ($5,000,000.00) during the second Extension Period.

________________________

Lessee’s InitialsLessor’s Initials 

 

	
 
	
5.
	
Security Deposit and Reporting Requirements. 

A.Upon the mutual execution and delivery of this Lease Agreement, Lessee shall deposit with Lessor the sum of Three Million Two Hundred Fifty Nine Thousand Eight Hundred Seventy Eight and no/100 Dollars ($3,259,878.00) (the “Security Deposit”).  The 

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Security Deposit shall be held by Lessor as security for the faithful performance by Lessee of all of the provisions of this Lease to be performed or observed by Lessee.  No portion of the Security Deposit may be used by Lessee for any monetary obligation owed by Lessee during the term of this Lease and any extension thereof, particularly the Rent due for the last month of the term of this Lease or any extension thereof.  If Lessee fails to pay Rent or other charges hereunder, or otherwise defaults with respect to any provision of this Lease, Lessor may use, apply or retain all or any portion of the Security Deposit for the payment of said obligation or of any other sum to which Lessor may become obligated by reason of Lessee's default, or to compensate Lessor for any loss or damage which Lessor may suffer thereby. 

B.If Lessor so uses or applies all or any portion of the Security Deposit during the term of this Lease or any extension thereof, Lessee shall within fifteen (15) business days after demand therefor deposit cash with Lessor in an amount sufficient to restore the Security Deposit to the full amount thereof. Lessee's failure to do so shall be deemed a failure to pay Rent and shall constitute a material breach of this Lease. Lessor shall not be required to keep the Security Deposit separate from its general accounts; however on a quarterly basis Lessor shall provide information to Lessee regarding the account(s) in which the Security Deposit is held. No part of the Security Deposit shall be considered to be held in trust, or bear interest.

C.If Lessee performs all of Lessee's obligations hereunder, the Security Deposit, or so much thereof as has not theretofore been applied by Lessor, shall be returned, without payment of interest or other increment for its use, to Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's interest hereunder) no later than sixty (60) days after the expiration of the term hereof and after Lessee has vacated the Premises and they are returned to Lessor in the condition in which they are obliged to be returned to Lessor.  

D.If Lessee ceases being a publicly traded company or if its financial statements are not readily available to Lessor, on the internet,   Lessee will provide Lessor with one mid-fiscal year interim complete financial statement and one audited annual financial statement, within ten (10) days of their preparation, each year throughout the term of the Lease including any option periods, which statements shall be kept confidential by Lessor and Lessor’s consultants. 

6.Limitations on Use. Lessee's use of the Premises shall be in accordance with the following:

A.Cancellation of insurance; increase in insurance rates.  Lessee shall not do, bring, or keep anything in or about the Premises that will cause a cancellation of any insurance covering the Premises and the Building.  If the rate of any insurance carried by Lessor is increased as a result of any activity of Lessee at the Premises, or if any lender of Lessor shall require Lessor to carry additional insurance as a result of any activity of Lessee at the Premises, Lessor shall notify Lessee of said event at least fifteen (15) days prior to the date on which such premium is due and Lessee shall pay a sum equal to the total difference between the original premium and the increased premium to Lessor within five (5) days before the date Lessor is obligated to pay said premium on the insurance. If Lessee should so request, Lessor shall deliver to Lessee a statement from Lessor’s insurance carrier or lender stating that the rate increase or requirement of additional insurance was caused primarily by an activity of Lessee on the Premises.

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B.Compliance with Laws. Lessee shall, at Lessee’s sole cost and expense, comply with all Applicable Laws concerning the Premises or Lessee’s use of and activities in the Premises, including without limitation, the obligation at Lessee’s cost to alter, maintain, or restore the Premises, in compliance and conformity with all Applicable Laws relating to the condition, use, or occupancy of the Premises during the term of this Lease or any extension thereof, whether foreseen or unforeseen, regardless of the cost, and regardless of when during the term the work is required, including, without limitation the United States Americans With Disabilities Act, California Title 24 of the California Code of Regulations, and all laws regulating the production of pharmaceuticals or drugs and regulations issued by the Food and Drug Administration of the United States Government or any other state, federal or local governmental agency with jurisdiction with respect thereto.  

C.Limits on Hazardous Materials. Lessee shall not store, or permit the storage, or use, or permit the use, of Hazardous Materials in such a manner which would result in contamination, in violation of any Environmental Laws (as defined below), of the Building, the Premises, or the surrounding soil or air, or cause a substantial risk of fire, explosion, or release of hazardous, noxious or corrosive fumes in or about the Premises or the Building or the Common Roadway or within fifty (50) feet thereof, or conduct, or permit to be conducted, any hazardous activities which would involve contamination of the Building, Premises or surrounding soil or air in violation of any law or regulation described in Paragraph 6.C.(1) below, or cause a substantial risk of fire, explosion, flood or noxious, hazardous,  or corrosive fumes in or about the Premises or Building or the Common Roadway or within fifty (50) feet thereof or endanger the good health of any occupant or invitee to the Building or Premises or user of the Common Roadway.  In addition to, and not by way of limitation of, Lessee’s obligations set forth in this Lease, Lessee shall at all times comply with all local, state and national laws regarding the manufacture, transportation, storage, use and disposal of all Hazardous Materials.

(1)As used in this Lease, the term “Hazardous Materials” shall include the following: any substance or material defined as “hazardous” or “toxic” by the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), as amended from time to time; the Hazardous Materials Transportation Act (42 U.S.C. Section 1801 et seq.), as amended from time to time; the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), as amended from time to time; the Hazardous Waste Control Law, California Health & Safety Code Section 25100 et seq., as amended from time to time; the Safe Drinking Water and Toxic Enforcement Act of 1986, as amended from time to time; any rules and regulations promulgated under the foregoing statutes; rules and regulations of the Environmental Protection Agency, the California Water Quality Control Board, the Department of Labor, the California Department of Industrial Relations, the Department of Transportation, the Department of Agriculture, the Consumer Product Safety Commission, the Department of Health and Human Services, the Food and Drug Administration any other governmental agency now or hereafter authorized to regulate or protect the environment or human health or safety; and any other federal, state, or local law, statute, ordinance, or regulation now in effect or later enacted to protect the environment or human health or safety (collectively, “Environmental Laws”).  

(2)Lessee shall keep adequate records to demonstrate that all Hazardous Materials are being properly handled, used, stored, transported and disposed of in 

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accordance with all applicable laws and regulations and shall make said records available to Lessor promptly after receiving a request therefor from Lessor.  No more than once per year, Lessor shall have the right to appoint a consultant, at Lessee's expense, whose fee shall not exceed $5,000.00, upon no less than thirty (30) days’ written notice to Lessee, to conduct an investigation to determine whether Hazardous Materials are located in or about the Premises or whether Hazardous Materials have been released in such a manner as would violate applicable laws and regulations, and determine the corrective measures, if any, required to remove such Hazardous Materials. Lessee, at its expense, shall comply with all recommendations of such consultant.  If and to the extent Lessee is not in violation of applicable laws. Lessor and Lessor’s consultant shall use good faith efforts not to unreasonably disturb Lessee’s use and enjoyment of the Premises during any such investigation.

(3)Without limiting the applicability of any other indemnity provision of this Lease, Lessee shall indemnify, defend and hold Lessor harmless from all costs, expenses and liabilities, including reasonable attorneys’ fees as incurred by Lessor, arising from any violation by Lessee of the provisions of this Paragraph 6.C.

(4)Without limiting the foregoing, in the event Hazardous Materials brought onto the Premises by, or with the knowledge of, Lessee result in contamination of the Building, the Premises or any air, water or soil in or about the Bullding or the Premises in violation of any law or regulation described in Paragraph 6.C.(1) (except for Hazardous Materials that pre-existed before June 30, 2015), Lessee shall, at its sole cost, promptly take all actions necessary to return the Premises and/or the Building to the condition existing prior to the contamination and into compliance with Environmental Laws.  Any remedial action or disposal shall be undertaken in accordance with all Environmental Laws.

(5)Lessee shall promptly notify Lessor in writing of any discovery by Lessee, its agents or employees, of the release of any Hazardous Material onto the Premises or the Building and transmit to Lessor copies of all non-routine reports from any governmental agency having jurisdiction over any activity of Lessee in the Premises regarding any violations or suspected violations of any laws or regulations governing Lessee’s use of and activities within the Premises. Lessee shall furthermore promptly notify in writing Lessor of any non-routine inquiry, test, investigation or enforcement proceeding by or against Lessee or the Premises concerning a Hazardous Material (each, a “Proceeding”). Lessee shall transmit to Lessor copies of any reports from any governmental agency having jurisdiction in connection with any such Proceeding.  Lessee agrees that Lessor, as owner of the Building, shall have the right to take such actions as Lessor reasonably believes are necessary to protect its interest in the Building with respect to any such Proceeding.  Lessee acknowledges that Lessor, as the owner of the Building, at its election shall have the sole right, at Lessee’s expense, to negotiate, defend, approve and appeal any action taken or order issued in connection with any Proceeding, or with regard to Hazardous Materials by an applicable governmental authority.

(6)In no event shall Lessee’s oligations under this Paragraph 6.C apply to or with respect to any Hazardous Materials that were present or existed in the Building, the Premises or the Common Roadway on or prior to June 30, 2015, including, without limitation, any of Lessee’s obligations under Paragraph 6.C.(3) and Paragraph 6.C.(4) above.  

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D.Waste; Nuisance. Lessee shall not use the Premises in any manner that will constitute waste or nuisance (including, without limitation, the use of loudspeakers or sound or light apparatus that can be heard or seen outside the Premises, or the emission of noxious odors from the Premises) or interference with use or access of other tenants in the Building or of owners or occupants of adjacent properties. In the event any use of the Premises by Lessee attracts the attention of the public and the public enters or attempts to enter the Premises, the Building or the grounds surrounding the Building in a manner that would, if done by Lessee or any of Lessee's invitees, violate the provisions of Paragraph 6.E below, Lessee shall take all reasonable steps to abate such activities which shall be deemed to be a nuisance and Lessor shall allow Lessee a reasonable time to address such issues and take corrective measures.

E.Compliance with Rules Issued by Lessor. Lessee shall use the driveway(s) and Common Roadway so as not to impede any ingress or egress by other vehicles, and shall park all vehicles only in areas designated for such vehicles. Lessee shall also comply with all reasonable rules which have been or which may hereinafter be promulgated by Lessor regarding the use of the Common Roadway, driveways and parking areas, which rules will apply equally to all who have rights to use the Common Roadway. Lessee hereby consents to Lessor towing any such vehicles which do not comply with this subparagraph or the above described rules.  Lessee shall also refrain from storing any property on the grounds surrounding the Premises or on driveways or parking areas or allowing the use of any such grounds except as means for ingress and egress from the Premises or the Building. 

F.No Retail Sales. Lessee shall not conduct any retail sales of any goods or products from the Premises.

7.Personal Property Taxes. Lessee shall pay before delinquency all taxes, assessments, license fees and other charges that are levied and assessed against Lessee's personal property installed or located in or on the Premises, and that become payable during the term. Within thirty (30) days after written request by Lessor, Lessee shall furnish Lessor with satisfactory evidence of these payments.

8.Real Property Taxes Payable by Lessee.

A.Lessee shall pay to Lessor as additional Rent, Lessee’s Percentage Share of all Real Property Taxes. As used herein, the term “Real Property Taxes” shall include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax (other than: (i) any penalties or interest on taxes except to the extent caused by Lessee’s failure to pay any part thereof; (ii) documentary transfer taxes imposed on the sale or exchange of the Building; and (iii) franchise, inheritance, death, gift, income or estate taxes) imposed upon the Building by any authority having the direct or indirect power to tax, including any city, county, state, or federal government, any school, agricultural, sanitary, fire, street, drainage, or other improvement district thereof, levied against any legal or equitable interest of Lessor in the Building or any portion thereof, Lessor's right to Rent or other income therefrom , and/or Lessor's business of leasing the Premises or Building.  The term “Real Property Taxes” shall also include any tax, fee, levy, assessment or charge, or any increase therein, imposed by reason of events occurring, or changes in applicable law taking effect during the term of this Lease, including but not limited to a change in the 

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ownership of the Building or the improvements therein, the execution of this Lease, or any modification, amendment or transfer thereof, and whether or not contemplated by the parties to this Lease.

B.Lessee’s liability hereunder to pay any tax shall be prorated on a daily basis to account for any fractional portion of a tax period included in the term of this Lease or any extension thereof at its commencement and expiration.

C.Lessor shall notify Lessee, at least twenty-five (25) days before any taxes must be paid before incurring a penalty, of Lessee’s Percentage Share of the Real Property Taxes and whether Lessor has elected to pay said taxes in the permitted installments or in one lump sum prior to the date on which the first installment is due. Lessee shall pay Lessee’s Percentage Share of said taxes as shown in Lessor's notice at least ten (10) days prior to the date said taxes must be paid before incurring a penalty.  If Lessee is given at least twenty-five (25) days’ notice prior to the date on which said taxes must be paid before incurring a penalty and Lessee fails to pay the sums required within ten (10) days of the date of the written notice, Lessee shall pay to Lessor, as additional Rent, all interest and penalties assessed by the taxing authority if Lessor has failed to make the timely payment of said taxes, in addition to the late charge provided for in Paragraph 3.

D.Lessee shall also reimburse Lessor for all of any increases in Real Property Taxes caused by an increase in the valuation of the Building due to the construction by Lessee of improvements to the Premises and measured by the value of such increased valuation.  

9.Repairs.

A.Lessee's Responsibilities.

(1)On the Commencement Date, Lessee shall accept the Premises in their “as is” condition and in the condition in which Lessor is obligated to deliver them.  Lessee shall, at all times during the term hereof, and at Lessee’s sole cost and expense, keep the Premises and every part thereof in good condition and repair, ordinary wear and tear, damage by fire, earthquake, or act of God excepted,  Lessee hereby waives all rights to make repairs at the expense of Lessor or in lieu thereof to vacate the Premises as provided by California Civil Code Section 1942 or any other law, statute or ordinance now or hereafter in effect.  Said obligation on the part of Lessee includes, but is not limited to, maintaining, repairing and/or replacing internal columns, windows, fixtures, ballasts, lamps and light bulbs, roll-up doors, and the plumbing, electrical, and heating, ventilating and air-conditioning systems serving exclusively the Premises (whether or not the damaged portion of the Premises or the means of repairing the same are reasonably or readily accessible to Lessee and whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the Premises).  

(2)Unless otherwise directed by Lessor in accordance with the terms of Paragraph 10, Lessee shall, at the end of the term of this Lease or any extension thereof, surrender to Lessor the Premises and all alterations, additions and improvements thereto in good condition which condition includes, without limitation, replacement of burnt-out lamps and ballasts, all roll up doors and dock levelers serviced and in good repair, the concrete floor in smooth condition and all interior walls in good condition and repair. Notwithstanding the 

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foregoing, Lessee may remove Lessee’s trade fixtures upon termination of the Lease, so long as Lessee repairs any damage caused by the installation, maintenance and removal from the Premises.  Lessor has no obligation and has made no promise to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof. No representations respecting the condition of the Premises or the Building have been made by Lessor to Lessee, except as specifically herein set forth.

(3)Commencing on the Commencement Date,  Lessee shall pay to Lessor Lessee's Percentage Share of Common Area Maintenance and Repair Costs as additional Rent hereunder within fifteen (15) days of receiving a written notification from Lessor of Lessee’s Percentage Share of said costs delivered to Lessee in accordance with Paragraph 3.E above.

B.Lessor's Responsibilities.

(1)Lessor shall at Lessor's expense (which shall not be included in Common Area Maintenance and Repair Costs unless expressly permitted pursuant to Paragraph 1.E above) maintain the roof (including the roof membrane), the foundation, the structural portions of the Building excluding internal support columns, and the exterior walls of the Building.  Lessor’s financial responsibility for the roof is for the structure and membrane alone and does not include the costs of the maintenance of the drain pipes from the roof or other structures appurtenant thereto.  Lessor’s financial responsibility for the exterior walls does not include maintenance, repair or replacement of the interior portion of the exterior walls, the interior partition walls, studs, sheet rock, or any windows, window frames, or plate glass or doors or any damage directly caused by the act or omission of Lessee or the costs of repairing any vandalism to the exterior walls or roof - all of which remain the responsibility of Lessee. Except in cases of an emergency posing a danger to persons or property or which materially interfere with the conduct of Lessee’s business, Lessor shall have no obligation to make repairs under this subparagraph until twenty (20) days after receipt of written notice of the need for such repairs from Lessee.  If the repairs cannot be completed within twenty (20) days after receipt of such notice, Lessor shall not be in default hereunder if Lessor commences the repairs within the twenty (20) days and continues thereafter to complete the repairs or if said repairs cannot be completed timely due to factors beyond the reasonable control of Lessor.  

(2)Lessor, subject to reimbursement as provided elsewhere herein, shall maintain and repair all common areas (including lobbies and passage ways), grounds (including landscaping, parking areas, the Common Roadway, driveways and fences), drain pipes from the roof or other structures appurtenant thereto, any utility systems or services or portions thereof which serve the Building as well as the Premises and any damage caused by vandalism to the roof or exterior walls.  If Lessee damages the internal columns in the Premises and fails within thirty (30) days after written notice from Lessor to commence the repair or replacement of said columns, Lessor at Lessor's option may enter the Premises and cause said repairs to be made. Lessee shall reimburse Lessor for the full cost of said repairs within thirty (30) days of being given written notice by Lessor of the amount of the cost of said repairs.

(3)If Lessor (or its employees, agents or contractors) undertakes work to the Building and that work directly causes damage to utility lines serving the Premises resulting in a termination of such utilities serving the Premises which causes Lessee to cease its operations 

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in the Premises, if said interruption lasts longer than two (2) business days,  Lessee shall be entitled to a rebate of Base Monthly Rent for each additional business day it does not have utility services and it cannot operate its business in the Premises.  

10.Alterations.

A.Except for the installation of unattached, movable trade fixtures which may be installed without drilling, cutting or otherwise defacing the Premises (“Movable Fixtures”) and except for Cosmetic Alterations (as hereinafter defined), Lessee shall not make any alterations, additions or improvements to the Premises (collectively, “Alterations”) without Lessor’s prior written consent, not to be unreasonably withheld, conditioned or delayed.  As used herein, “Cosmetic Alterations” shall mean an alteration, addition or improvement that: (i) is limited to the interior of the Premises; (ii) does not affect the exterior (including the appearance) of the Building;  (iii) is non-structural or does not affect the structural integrity of the Building;  (iv) does not affect the usage or the proper functioning of the mechanical, electrical, sanitary, HVAC or other service systems of the Building; and (v) does not exceed One Hundred Thousand and no/100 Dollars ($100,000.00) in each instance.  Lessee shall provide Lessor written notice of all Cosmetic Alterations to the space fifteen (15) business days prior to undertaking any such Cosmetic Alterations.  

(1)Alterations. If Lessee desires to construct and install Alterations (“Alterations”) to the Premises during the Lease term, Lessee shall submit a space plan therefor (“Alterations Space Plan”) that includes a scope of work prepared by Lessee’s architect for Lessor’s approval in accordance with the terms of this Paragraph 10.A(1) and in accordance with the Approval Standards (defined below). Lessor shall approve or disapprove of the Alterations Space Plan by delivering written notice to Lessee within fifteen (15) business days of its receipt of the Alterations Space Plan, and if Lessor shall fail to approve or disapprove of the Alterations Space Plan within such fifteen (15) business day period, Lessor shall be deemed to have approved of the Alterations Space Plan. If Lessor approves of the Alterations Space Plan (or is deemed to have approved of the Alterations Space Plan), Lessee shall prepare final construction drawings (the “Alterations Construction Drawings”) for the Alterations (if deemed necessary by Lessee and Lessor).  Lessor shall have the right to object to the Alterations Construction Drawings based upon the following two (2) criteria only:  (i) the scope of the Alterations has materially changed from the scope of the Alterations depicted in the Alterations Space Plan or (ii) the Alterations fail to satisfy the Approval Standards.   The Alterations Construction Drawings shall be delivered to Lessor for its approval based upon the above-mentioned criteria only, which shall not be unreasonably withheld, conditioned or delayed. Lessor shall deliver its approval or disapproval to Lessee in writing within ten (10) business days following its receipt of the Alterations Construction Drawings, and if Lessor shall fail to approve or disapprove of the Alterations Construction Drawings within such ten (10) business day period, Lessor shall be deemed to have approved of the Alterations Construction Drawings.  In the event Lessor shall disapprove of the Alterations Construction Drawings, Lessor shall provide Lessee with Lessor's written objections thereto in reasonable detail and Lessee shall promptly revise the Alterations Construction Drawings to address Lessor's objections. The foregoing procedure shall be repeated until Lessor approves of (or is deemed to have approved of) the Alterations Construction Drawings.  Upon completion of the Alterations, Lessee shall deliver to Lessor one set of the as-built drawings for the Alterations in both hard copy and electronic format.

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(3)Approval Standards. Lessor shall not be deemed to have acted unreasonably if it withholds its approval of the Alterations depicted in any construction drawings in the Alterations Space Plan submitted to it pursuant to Paragraph 10.A(1) above because, in Lessor’s reasonable opinion, such Alterations (i) would materially and adversely affect Building systems, the structure of the Building, the exterior of the Building or the safety of the Building or its occupants, (ii) would substantially increase the cost of operating the Building, (iii) would result in a change of the use of the Premises from the use approved in Paragraph 4, (iv) would violate any Applicable Laws, (v) contain or use Hazardous Materials in violation of any Applicable Laws, rules, regulations or ordinances, or (vi) would materially and adversely affect another tenant’s premises in the Building (the “Approval Standards”).

B.Any Cosmetic Alterations or other Alterations shall remain on and be surrendered by Lessee with the Premises on expiration or termination of the term or any extension thereof, except that Lessor may elect, upon written notice to Lessee delivered at least six (6)  months prior to the expiration of the then-current term, to require that Lessee remove any Cosmetic Alterations and/or other Alterations that Lessee has made to the Premises.  If Lessor so elects, Lessee at its sole cost shall restore the Premises to the condition existing before such installation of such Cosmetic Alteration and/or other Alteration before the last day of the term.  If Lessee fails to remove any of its Cosmetic Alterations and/or other Alterations designated by Lessor and to so restore the Premises and Lessor incurs costs to restore the Premises or to remove such Cosmetic Alterations and/or other Alterations made by Lessee, Lessee shall reimburse Lessor for all reasonable costs incurred by Lessor and shall also pay Lessor the current amount of Base Monthly Rent prorated for each day after the expiration of the term that Lessor must occupy the Premises for the purpose of removing Lessee’s Cosmetic Alterations or other Alterations or making repairs..

C.If Lessee makes any Alterations to the Premises as provided in this Paragraph 10, the Alterations shall not be commenced until five (5) business days after Lessor has received written notice from Lessee stating the date the installation of the Alterations is to commence so that Lessor may post and record appropriate notice(s) of non-responsibility.

D.Lessee's right to make Alterations, and the consent of Lessor given as required by this Paragraph 10, shall be deemed conditioned upon Lessee complying in the making of such Alterations with all requirements of state and local laws and ordinances governing the manner in which such Alterations are made.  Lessee shall complete any such work according to applicable building codes and other applicable governmental regulations in a worker-like and expeditious manner.  Upon completion of any Alterations which require the issuance of a building permit, Lessee shall: (i) cause a Notice of Completion to be recorded in the office of the Recorder of San Mateo County in accordance with Section 8182 of the Civil Code of the State of California or any successor statute;  (ii) deliver to Lessor a reproducible copy of the “as built” drawings of the Alterations; and (iii) deliver to Lessor evidence of payment, contractors' affidavits and full and final waivers of all liens for labor, services or materials.

E.Lessee shall pay all costs for any and all Alterations done by it or caused to be done by it on the Premises as permitted by this Lease. Lessor shall have no obligation or responsibility to make any alterations to the Premises except as specifically provided in this Lease. Lessee shall keep the Premises free and clear of all mechanics liens resulting from any Alterations done by or for Lessee.  Lessee shall have the right to contest the correctness or the validity of any 

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such lien if, on written demand by Lessor, Lessee procures and records a lien release bond issued by a corporation authorized to issue surety bonds in California (in no event later than thirty (30) days from the recordation of the lien) in an amount equal to one and one-half times the amount of the claim of lien. The bond shall meet the requirements of California Civil Code Section 3143 and shall provide for the payment of any sum that the claimant may recover on the claim (together with costs of suit, if it recovers in the action).

F.If at any time a mechanic’s or materialman’s lien is recorded against the Building and Lessee fails to procure and record a lien release bond issued by a corporation authorized to issue surety bonds in California in an amount equal to one and one-half times the amount of the claim of lien which bond meets the requirements set forth in Paragraph 10.E above,  Lessee may not make any further non-cosmetic Alterations to the Premises, or purchase any additional equipment which purchase would expose the Building to a lien resulting from the purchase and installation of equipment in an amount in excess of Fifty Thousand and no/100 Dollars ($50,000.00) in any twelve (12) month period without first obtaining the prior approval of Lessor.  Lessor may,  as a condition for giving its approval, require that Lessee meet the conditions set forth in Paragraph 10.E above (i.e., obtaining a completion bond).

11.Utilities and Services. Lessee shall make all arrangements for and pay for all utilities and services furnished to or used by it at or about the Premises, including, without limitation, gas, electricity, water, telephone service, meter fees, and trash collection, and for all connection charges.  The foregoing includes the requirement that Lessee install a water meter or sub-meter to monitor all of Lessee’s use of water in the Premises.  Lessor shall not be responsible for or have any liability whatsoever to Lessee arising in any way from any interruption of any utility or service furnished to the Premises regardless of duration and regardless of whether the interruption in any way affects Lessee’s ability to conduct its business within the Premises, unless the interruption was directly caused by some work directly undertaken by Lessor (or its employees, agents or contractors) at the Premises or at the Building, in which event the remedy stated in Paragraph 9.B.(3) above shall apply.  

12.Exculpation of Lessor. Except to the extent caused by the gross negligence or willful misconduct of Lessor, its employees, agents or contractors, Lessor shall not be liable to Lessee for any damage to Lessee or Lessee’s property from any cause.  Lessee waives all claims against Lessor for damage to person or property arising in any manner and for any reason, except that Lessor shall be liable to Lessee for damage to Lessee resulting from the willful neglect or gross negligence of Lessor or its employees, agents or contractors.  

13.Indemnity. Lessee shall be liable to Lessor for damage resulting from the negligence or misconduct of Lessee or its employees agents or contractors.  Lessee shall indemnify, defend and hold Lessor, its agents, assigns, employees and contractors, harmless from all damages arising out of any damage to any person or property occurring in or about the Premises during the term of this Lease of any extension thereof and from all claims arising from Lessee’s use and occupancy of the Premises. Lessor shall indemnify, defend and hold Lessee, its agents, assigns, employees and contractors, harmless from and against any and all damages arising from any damage to any person or property occuring in or about the common areas of the Building or the Common Roadway during the term of this Lease and any extension thereof arising from the gross negligence or willful misconduct of Lessor or its employees, agents or contractors. 

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14.Insurance. 

A.Lessee’s Liability Insurance. Throughout the term of this Lease and any extension thereof,  Lessee shall, at its sole expense, maintain primary commercial public liability insurance, including coverage for bodily injury, property damage, emotional distress, wrongful death and personal injury, with a combined single combined liability limit of not less than Five Million and no/100 Dollars ($5,000,000.00), insuring Lessor and Lessee against all liability of Lessee and its employees, agents and authorized representatives arising out of and in connection with Lessee's use or occupancy of the Premises.  Lessor and, at Lessor’s request its lender, shall be named as an additional insured under all policies used to meet this requirement.  Lessee shall deliver to Lessor on or before the Commencement Date and annually thereafter Certificates of Insurance evidencing that all insurance required to be mained by Lessee under this Lease has been obtained and is in full force and effect. 

B.Lessee’s Personal Property, Fire and Plate Glass Insurance. Lessee, at its sole expense, shall maintain on all its personal property, Lessee's improvements, and alterations, in, on, or about the Premises, a policy of standard fire insurance, providing “all risk” or “special form” coverage (including coverage for vandalism and malicious mischief), to the extent of at least one hundred percent (100%) of their full replacement value.  The proceeds from any such policy shall be used by Lessee for the replacement of its personal property and for the restoration of its ímprovements or alterations.  Lessor shall be named as an additional insured on all insurance maintained pursuant to this Subparagraph on Lessee’s leasehold improvements and any alterations made to the Premises.

C.Fire, Multi-Peril Insurance on Premises. Lessor shall maintain on the Building with a combination of primary and excess liability coverage a Commercial Package Policy, including but not limited to standard fire, multi-peril, income replacement and rental loss,  and excess liability insurance, to the extent of at least full replacement value of the Building and commercial general Liability coverage in an amount of not less than $5,000,000.  Lessor may also obtain earthquake insurance for damage to the Building and Lessee shall be required to pay Lessee's Percentage Share of any such premium. The insurance policy or policies shall be issued in the name of Lessor, and Lessor's lender, if required. 

D.Payment of Premiums. Lessee shall pay to Lessor Lessee's Percentage Share of all premiums paid by Lessor for maintaining the insurance described in Paragraph 14.C above. Reimbursement shall be made by Lessee within fifteen (15) days after Lessor notifies Lessee in writing of Lessee's Percentage Share of such costs, which notice shall include a copy of the invoice for the premium.  Lessee's obligation to pay the insurance premium costs shall be prorated for any partial year at the commencement and expiration of the term. 

E.Waiver of Subrogation. The parties release each other, and their respective authorized representatives, from any claims for damage to the Premises and to the fixtures, personal property, Lessee’s improvements, and alterations of either Lessor or Lessee in or on the Premises that are caused by or result from risks insured against under any insurance policies carried by the parties at the time of such damage.  Each party shall cause each insurance policy obtained by it to provide that the insurance company waives all right of recovery by way of subrogation against either party in connection with any damage covered by any policy.  Neither 

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party shall be liable to the other for any damage caused by fire or any of the risks insured against under any insurance policy required by this Lease.   

F.General Terms of Lessee's insurance. All insurance obtained by Lessee pursuant to this Lease shall be primary and non-contributory with respect to any other insurance that may be available to Lessor. All public liability insurance and property damage insurance required to be carried by Lessee shall insure performance by Lessee of the indemnity provisions of Paragraph 13 of this Lease. Lessor (and Lessor's lenders, if required by any such lender holding a security interest in the Building at any time during the term of this Lease or any extension thereof) shall be named as additional insureds under such policy or policies, and every policy shall contain cross-liability endorsements.

G.Other Insurance Matters. All the insurance required of Lessee under this Lease shall:

(1)Be issued by insurance companies authorized to do business in the State of California, with a Best’s rating of not less than A- VII; and

(2)Be issued as a primary policy.

In addition, Lessee will endeavor to obtain from its carrier an endorsement in which the carrier agrees to provide thirty (30) days’ written notice [ten (10) days notice if cancellation due to non-payment of premium] to Lessor and Lessor's lender if required by Lessor, before cancellation or change in the coverage, scope, or amount of any policy.  If Lessee’s carrier refuses to provide such endorsement,  Lessee shall provide to Lessor notice of any cancellation of the insurance required by this Paragraph 14 to be carried by Lessee to Lessor within ten (10) business days of its receipt of such notice of cancellation or its failure to pay any premium for any such required insurance.

15.Destruction.

A.If, during the term of this Lease or any extension thereof, the Premises are totally or partially destroyed from a risk covered by the insurance described in Paragraph14.C. above, rendering the Premises totally or partially inaccessible or unusable, Lessor shall restore the Premises, but not Lessee’s Alterations or any tenant improvements present in the Premises on the Commencement Date. The restoration work will commence as soon as reasonably practical after the destruction given the time constraints arising from the need for Lessor to collect proceeds for the reconstruction from its insurance carrier, obtain engineering studies and acceptable building plans and apply for and obtain permits.  

(1)Such destruction shall not terminate this Lease provided, however, that: (a) the work, if there is a total destruction must be completed within one (1) year from the date of the event causing the destruction; or (b) if a partial destruction, the work must be completed within nine (9) months from the date of the event causing the destruction.  If Lessor cannot complete the rebuilding within the foregoing time limits or if laws in effect at the time of destruction do not permit such restoration, either party may terminate this Lease immediately by giving notice to the other party.  If a partial destruction occurs during the last twelve (12) months of the term of this Lease and the work cannot be completed within sixty (60) days from the date 

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of the event causing the destruction, Lessee may terminate this Lease immediately by giving notice to Lessor. If Lessor intends to rebuild the Premises, Lessor shall give written notice of such fact to Lessee within forty-five (45) days of the event of destruction, including in said notice an estimate of when the rebuilding will be completed.  If Lessee does not object in writing to the time estimates given by Lessor within fifteen (15) business days of the notice from Lessor, this Lease may not be terminated if, in fact, the work is substantially completed within thirty (30) days of the estimated date of completion and Lessor delivers possession of the damaged portion of the Premises or the Premises, as applicable, to Lessee. 

(2)If the cost of the restoration exceeds the amount of proceeds anticipated to be received from the insurance required under Paragraph 14 by an amount greater than an amount equal to twenty percent (20%) of the cost of restoration (excluding from such calculations any deductible (which shall be paid by Lessor)), Lessor may elect to terminate this Lease by giving notice to Lessee within fifteen (15) days after determining that the restoration cost will exceed the insurance proceeds by such amount. In the case of destruction to the Premises only, if Lessor elects to terminate this Lease, Lessee, within fifteen (15) days after receiving Lessor's notice to terminate, may elect to pay to Lessor in cash, at the time Lessee notifies Lessor of its election, the difference between the amount of insurance proceeds and the cost of restoration, in which case Lessor shall restore the Premises. Lessor shall give Lessee satisfactory evidence that all sums contributed by Lessee as provided in this subparagraph have been expended by Lessor in paying the cost of restoration and the Base Monthly Rent thereafter shall be reduced by amounts so paid by Lessee.  If Lessor elects to terminate this Lease and Lessee does not elect to contribute toward the cost of restoration as provided in this subparagraph, this Lease shall terminate.

B.If, during the term, the Premises are totally or partially destroyed from a risk not covered by the insurance described in Paragraph 14, rendering the Premises totally or partially inaccessible or unusable, Lessor shall have the option of restoring the Premises or terminating this Lease.  In the case of uninsured destruction to the Premises only, if Lessor elects to terminate this Lease, which election shall be made by Lessor within forty-five (45) days following the date of destruction, Lessee, within thirty (30) days after receiving Lessor’s written notice to terminate, may elect to pay to Lessor in cash or immediately available funds, at the time Lessee notifies Lessor of its election, the difference between an amount equal to ten percent (10%) of the then replacement cost of the Premises and the actual cost of restoration, in which case Lessor shall restore the Premíses upon receipt of the required funds from Lessee. Lessor shall give Lessee satisfactory evidence that all sums contributed by Lessee as provided in this subparagraph have been expended by Lessor in paying the cost of restoration.

If Lessor elects to terminate this Lease and Lessee does not elect to contribute toward the cost of restoration as provided in this subparagraph, this Lease shall terminate.

C.If Lessor is required or elects to restore the Premises as provided in this Paragraph 15, Lessor shall not be required to restore Alterations made by Lessee or Lessee’s predecessor in interest, Lessee’s trade fixtures and equipment whether installed or not within the Premises, and Lessee's personal property, such excluded items being the sole responsibility of Lessee to restore.

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D.In case of destruction and Lessor elects or is required to restore the Premises, there shall be an abatement of Base Monthly Rent, Common Area Maintenance and Repair Costs and other Rent on the unusable portion of the Premises from the date of destruction to the date on which there is substantial completion of the work.  

E.Notwithstanding anything to the contrary in this Paragraph, Lessee may elect to terminate the Lease if either: (1) there is a total destruction and the work cannot be completed within one (1) year from the date of the event causing the destruction; (2) if there is a partial destruction and the work cannot be completed within nine (9) months from the date of the event causing the destruction; or (3) if there is a partial destruction during the last twelve (12) months of the term and the work cannot be completed within sixty (60) days from the date of the event causing the destruction.

F.Lessee waives the provisions of Civil Code Section 1932(2) and Civil Code Section 1933(4) with respect to any destruction of the Premises.

16.Condemnation - Definitions.

A.Definitions.

(1)“Condemnation” means: (a) the exercise of any governmental power, whether by legal proceedings or otherwíse, by a Condemnor (as defíned below) ; and (b) a voluntary sale or transfer by Lessor to any Condemnor, either under threat of Condemnation or while legal proceedings for Condemnation are pending.

(2)“Date of Taking” means the date the Condemnor has the right to possession of the property being condemned.

(3)“Award” means all compensation, sums, or anything of value awarded, paid, or received on a total or partial condemnation. 

(4)“Condemnor” means any public or quasi-public authority, or private corporation or individual, having the power of condemnation.

B.If, during the term or during the period of time between the execution of this Lease and the date the term commences, there is any taking of all or any part of the Premises or any interest in this Lease by Condemnation the rights and obligations of the parties shall be determined pursuant to this Paragraph 16.

If the Premises are totally taken by condemnation, this Lease shall terminate on the Date of taking. If any portion of the Premises is taken by Condemnation this Lease shall remain in effect, except that Lessee can elect to terminate this Lease if the remaining portion of the Premises, the Building or other improvements or the parking areas on the land on which the Building is located is rendered unsuitable for Lessee’s continued use of the Premises, as determined by Lessee in its sole discretion. If Lessee elects to terminate this Lease, Lessee must exercise its right to terminate pursuant to this Paragraph 16.B. by giving notice to Lessor within thirty (30) days after the nature and the extent of taking have been finally determined which determination shall have been made by written notice to Lessee.  If Lessee elects to terminate this Lease as provided in this 

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Paragraph, Lessee shall notify Lessor of the termination, which date shall not be earlier than thirty (30) days nor later than ninety (90) days after Lessee has notified Lessor of its election to terminate; except that this Lease shall terminate on the Date of Taking if the Date of Taking falls on a date before the date of termination as designated by Lessee.  If Lessee does not terminate this Lease within the thirty (30) day to ninety (90) day period, this Lease shall continue in full force and effect except that Base Monthly Rent and the Common Area Maintenance and Repair Costs shall be reduced per Paragraph 16.C below.

C.If any portion of the Premises is taken by condemnation and this Lease remains in full force and effect, on the Date of Taking the Base Monthly Rent and the Common Area Maintenance and Repair Costs shall be reduced by an amount that is in the same ratio to Base Monthly Rent and the Common Area Maintenance and Repair Costs as the value of the area of portion of the Premises taken bears to the total value of the Premises immediately before the Date of Taking.

D.Each party waives the provisions of Code of Civil Procedure Section 1265.130 allowing either party to petition the Superior Court to terminate this Lease in the event of a partial taking of the Premises.

E.If there is a partial taking of the Premises and this Lease remains in full force and effect, Lessor at its cost shall accomplish all necessary restoration. Base Monthly Rent and the Common Area Maintenance and Repair Costs shall be abated or reduced during the period from the Date of Taking until the completion of restoration, but all other obligations of Lessee under this Lease shall remain in full force and effect. The abatement or reduction of Base Monthly Rent and the Common Area Maintenance and Repair Costs shall be based on the extent to which the restoration interferes with Lessee’s use of the Premises.

F.The award shall belong to and be paid to Lessor, except that Lessee shall receive from the award a sum attributable to: (i) Lessee’s relocation expenses; (ii) loss of business goodwill; (iii) Lessee’s equipment and trade fixtures; and (iv) Lessee's improvements or alterations made to the Premises by Lessee in accordance with this Lease, which Lessee’s improvements or alterations Lessee has the right to remove from the Premises pursuant to the provisions of this Lease but elects not to remove; or, if Lessee elects to remove any such Lessee’s improvements or alterations, a sum for reasonable removal and relocation costs not to exceed the market value of such improvements or alterations.

G.The taking of the Premises or any part of the Premises by military or other public authority shall constitute a taking of the Premises by condemnation only when the use and occupancy by the taking authority continues for longer than one hundred eighty (180) consecutive days. During the one hundred eighty (180) day period all the provisions of this Lease shall remain in full force and effect, except that Base Monthly Rent and the Common Area Maintenance and Repair Costs shall be abated or reduced during such period of taking based on the extent to which the taking interferes with Lessee’s use of the Premises, and Lessor shall be entitled to whatever award may be paid for the use and occupation of the Premises for the period involved.

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17.Assignment and Subletting.

A.Definitions. The occurrence of any of the following, whether voluntarily or involuntarily, because of death, divorce or disability, or by operation of law or otherwise, shall constitute a “Transfer” of this Lease:   (i) any direct or indirect sale, assignment, conveyance, alienation, sublease, hypothecation, encumbrance, mortgaging or other transfer of Lessee's interest in this Lease or in the Premises, or any part thereof or interest therein, including but not limited to any parking spaces assigned to Lessee; (ii) if Lessee is a Legal Entity (as defined below), the direct or indirect sale, assignment, conveyance, alienation, encumbrance, mortgaging or other Transfer of any of the Ownership Interests (as defined below) in such Legal Entity, (iii) if Lessee is a Legal Entity, some or all of whose Ownership Interests are owned by another Legal Entity, the occurrence of any of the events described in the preceding phrase (ii) with respect to such constituent Legal Entity, or (iv) if any other person or entity (except Lessee’s authorized representatives, agents, contractors, employees, invitees or guests) occupies or uses all or any part of the Premises.   Notwithstanding the foregoing, no Transfer shall be deemed to have occurred solely by reason of the Ownership Interests of Lessee being traded on any public securities exchange.

(1)As used herein, the term “Legal Entity” means any corporation, partnership, limited liability company, trust, association or other legal entity, and the term “Ownership Interest” means any share of stock, general or limited partnership interest, membership interest, beneficial interest or other ownership interest therein, as the case may be.  A “Transfer” includes a transfer of any interest in this Lease held by an subtenant, assignee, transferee or other person claiming an interest in Lessee’s interest in this Lease. The provisions of this Paragraph 17 apply fully to any Transfer by any subtenant, assignee or other holder of any interest in Lessee's interest in this Lease.  

B.An assignment or subletting by Lessee of all or any portion of this Lease or the Premises to (i) any present or future parent or subsidiary of Lessee, or (ii) any person or entity which controls, is controlled by or under the common control with Lessee, or (iii) any entity which purchases all or substantially all of the stock or assets of Lessee, or (iv) any entity into or with which Lessee is merged, reorganized or consolidated (all such persons or entities described in clauses (i), (ii), (iii) and (iv) being sometimes herein referred to as "Affiliates") shall not be subject to obtaining Lessor's prior consent, Paragraph 17.C below shall not be applicable, and such assignments or subleases or any transaction described in clauses (iii) or (iv) shall not be deemed a Transfer, provided in all instances that:

(a)any such Affiliate was not formed as a subterfuge to avoid the obligations of Lessee;

(b)Lessee gives Lessor prior notice of any such assignment or sublease to an Affiliate, except solely for those assignments or subleases in connection with which any Applicable Law precludes Lessee's delivery to Lessor of prior notice of said assignment or sublease then, in all such instances, Lessee shall deliver to Lessor subsequent notice of said assignment or sublease within ten (10) days following the first (1st) day on which Lessee is permitted by law to deliver notice of such assignment or sublease to Lessor;

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(c)the successor of Lessee shall possess a net worth prior to the completion of the contemplated transfer of this Lease equal to or greater than the net worth of Lessee on the Commencement Date.  The term "net worth" shall mean a tangible net worth (not including goodwill as an asset) computed in accordance with generally accepted accounting principles (excluding goodwill as an asset);

(d)any such assignment or sublease shall be subject to all of the applicable terms and provisions of this Lease, and such assignee or sublessee (i.e. any such Affiliate), other than in the case of an Affiliate resulting from a merger, reorganization or consolidation, shall assume, in a written document reasonably satisfactory to Lessor and delivered to Lessor upon or prior to the effective date of such assignment or sublease, all the obligations of Lessee under this Lease; 

(e)the successor of Lessee shall use the Premises for the use approved in Paragraph 4 above; and

(f) the successor of Lessee shall not allow a use that has a greater danger of releasing any Hazardous Materials in or about the Premises or the Building than that done by Lessee. 

Lessor agrees to execute a commercially reasonable non-disclosure agreement if required in connection with a Transfer.

C.Lessee shall not engage in or permit any Transfer of this Lease absent full compliance with all of the terms and provisions of this Paragraph 17. Any Transfer of this Lease occurring without full compliance with all of the terms and conditions of this Paragraph 17 shall be voidable at the option of the Lessor, and shall constitute a material and incurable default on the part of Lessee under this Lease

D.Prior to engaging in or permitting any Transfer other than to an Affiliate, Lessee shall give notice of any intended Transfer to Lessor and shall provide Lessor with the following information in writing: (i) the name, address and ownership of the proposed transferee, (ii) the current balance sheet, statement of cash flows, report of any litigation in which the proposed Transferee is a party or is a judgment debtor, aged schedule of accounts receivable and payable, profit and loss statements, statement that all taxes payable by the proposed transferee are current, and all notes, if any, to all financial and profit and loss statements for the proposed transferee or any other person to be liable for the Lessee's obligations under this Lease covering the prior three (3) years (or for such shorter period as the proposed transferee or other person may have been in existence), all certified as true and correct by the proposed transferee, other person or an authorized officer thereof, (iii) a full description of the terms and conditions of the proposed Transfer, including copies of any and all documents and instruments, any purchase and sale agreements, sublease agreements, assignment agreements and all other writings concerning the proposed Transfer, (iv) a description of the proposed use of the Premises by the proposed transferee, including any required or desired alterations or improvements to the Premises that may be undertaken by such transferee in order to facilitate its proposed use, and (v) any other information, documentation or evidence that may be reasonably requested by Lessor.  Lessor agrees that it shall hold all such information in confidence if requested to do so by Lessee and 

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shall execute any reasonable confidentiality agreement presented on behalf of and for the benefit of any proposed transferee. 

E. In connection with any proposed or requested consent to Transfer, other than to an Affiliate, Lessee shall pay to Lessor a transfer fee of $1,000.00 (payment of which shall accompany Lessee's request for Transfer), plus all of Lessor's reasonable attorneys fees expended in connection with the proposed Transfer not to exceed $5,000.00.  

F.For Transfers to non-Affiliates, within ten (10) business days after the submission of all required information described in Paragraph 17.D above,  Lessor shall give notice to Lessee of its election under Paragraph 17.G.

G.Upon receiving a request for Transfer of this Lease (except in the case of a Transfer to an Affiliate) that must be approved by Lessor, and compliance by Lessee with all the requirements of this Paragraph 17,  Lessor shall have the right to do any of the following:

(1)Lessor may consent to the proposed Transfer, subject to any reasonable conditions on such Transfer, which reasonable conditions may include without limitation: (a) that the proposed transferee assume in writing all of Lessee's obligations under the Lease first arising or accruing after the date of Transfer (without, however, releasing Lessee therefrom); (b) in the case of a proposed sublease, that the subtenant agree that Lessor shall have the right to enforce any and all of the terms of the sublease directly against such subtenant, and if this Lease is terminated prior to the expiration of the sublease, that at the election of Lessor, the sublease shall not terminate and the subtenant will attorn to the Lessor; (c) that one-half (1/2) of all sums or other consideration received by Lessee from the Transferee for the right to use and occupy the Premises in excess of the Rent paid to Lessor be paid as additional Rent by Lessee to Lessor at the same time that Lessee pays Base Monthly Rent to Lessor;    (d)  that any existing Events of Defaults under this Lease be cured prior to the effective date of the Transfer; and (e) that the Transferee provide additional security deposits or other collateral or guarantees reasonably acceptable to Lessor.

(2)Lessor may deny its consent to the proposed Transfer, except with respect to a Transfer to an Affiliate, on any reasonable ground. Such grounds shall include, without limitation, any one or more of the following, and shall be conclusively deemed to be reasonable as to Lessee: (a) that the proposed transferee's financial condition is insufficient to support all of the financial and other obligations of Lessee with respect to the Lease; (b)  that the use to which the Premises will be put by the proposed transferee is inconsistent with the terms of the Lease or otherwise will materially and adversely affect any interest of Lessor; (c) that the nature of the proposed transferee's proposed or likely use of the Premises would involve any increased risk of the use, release or mishandling of Hazardous Materials; or (d)  that Lessor has not received assurances acceptable to Lessor in its sole discretion that all past due amounts owing from Lessee to Lessor (if any) will be paid and all other Events of Default on the part of Lessee (if any) will be cured prior to the effective date of the proposed Transfer. 

H.Lessee acknowledges and agrees that each of the rights of Lessor set forth in Paragraph 17  in the event of a proposed Transfer is a reasonable restriction on Transfer for purposes of California Civil Code Section 1951.4.

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I.Any consent to any proposed Transfer, whether conditional or unconditional, shall not be deemed to be a consent to any other or further Transfer of this Lease, or any other Transfer of this Lease on the same or other conditions (if any).  No Transfer of this Lease shall in any way diminish, impair or release any of the liabilities and obligations of Lessee, any guarantor or any other person liable for all or any portion of the Lessee's obligations under this Lease.

18.Lessee’s Default. The occurrence of any one of the following events (each an “Event of Default”) shall constitute a material breach of this Lease by Lessee:

A.Lessee’s failure to pay Base Monthly Rent when due.

B.If Lessee shall fail to pay any other sum (all of which sums shall be deemed to be additional Rent hereunder) to Lessor.

C.Lessee’s failure to perform any other provisions of this Lease if the failure to perform is not cured within thirty (30) days’ after written notice has been given to Lessee. If the default cannot reasonably be cured within such thirty (30) day period, Lessee shall not be in default of this Lease if Lessee commences to cure the default within the thirty (30) day period and diligently and in good faith continues to cure the default thereafter.

D.If this Lease or any estate of Lessee hereunder shall be levied upon under any attachment or execution and such attachment or execution is not vacated within fifteen (15) days.

If within thirty (30) days after the commencement of any proceeding against Lessee seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such proceeding shall not have been dismissed, or if, within thirty (30) days after the appointment of a receiver or liquidator of Lessee or of any material part of its properties such appointment shall not have been vacated.

E.An event of Default under the Exising Leases or this Lease shall be deemed to be an event of Default under all such leases.   

19.Lessor’s Remedies.  If an Event of Default shall occur, Lessor shall have the following remedies. These remedies are not exclusive; they are cumulative in addition to any remedies now or later allowed by law.

A.Lessor may continue this Lease in full force and effect, and this Lease will continue in effect as long as Lessor does not terminate Lessee’s right to possession, and Lessor shall have the right to collect Rent when due. During an Event of Default, Lessor may enter the Premises and relet them, or any part of them, to third parties for Lessee’s account. Lessee shall be liable immediately to Lessor for all costs Lessor incurs in reletting the Premises, including, without limitation, broker’s commissions, expenses of remodeling the Premises required by the reletting, and like costs.  Reletting can be for a period shorter or longer than the remaining term of this Lease or any extension thereof, except that Lessee shall only be responsible for brokers commission up until the remaining term of this Lease has expired.  Lessee shall pay to Lessor the Rent due under this Lease on the dates the Rent is due, less the Rent Lessor received from any reletting.  No act 

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by Lessor allowed under this subparagraph shall terminate this Lease unless Lessor notifies Lessee that Lessor elects to terminate this Lease.

B.Lessor may terminate Lessee’s right to possession of the Premises at any time by giving a written termination notice to Lessee, and on the date specified in such notice (which shall be not less than five (5) days after the giving of such notice) Lessee’s right to possession shall terminate and this Lease shall terminate, unless on or before such date all arrears of Rent and all other sums payable by Lessee under this Lease and all costs and expenses incurred by or on behalf of Lessor hereunder shall have been paid by Lessee and all other breaches of this Lease by Lessee at the time existing shall have been fully remedied to the satisfaction of Lessor. No act by Lessor other than giving notice to Lessee shall terminate this Lease. Acts of maintenance, efforts to relet the Premises, or the appointment of a receiver on Lessor’s initiative to protect Lessor’s interest under this Lease shall not constitute a termination of Lessee’s right to possession. On termination, Lessor has the right to recover from Lessee:

(1)The worth, at the time of the award, of the unpaid Rent that had been earned at the time of termination of this Lease;

(2)The worth, at the time of the award, of the amount by which the unpaid Rent that would have been earned after the date of termination of this Lease until the time of award exceeds the amount of the loss of Rent that Lessee proves could have been reasonably avoided;

(3)The worth, at the time of the award, of the amount by which the unpaid Rent for the balance of the term after the time of award exceeds the amount of the loss of Rent that Lessee proves could have been reasonably avoided; and

(4)Any other amount, and court costs, necessary to compensate Lessor for all detriment proximately caused by Lessee’s default. “The worth, at the time of the award” as used in (1) and (2) of this subparagraph is to be computed by allowing interest at the rate of ten percent (10%) per annum. “The worth, at the time of award,” as referred to in (3) of this subparagraph is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus one percent (1%).

C.Lessor, at any time after an Event of Default, may cure said default at Lessee’s cost.  If Lessor at any time, by reason of Lessee’s default, pays any sum or does any act that requires the payment of any sum, the sum paid by Lessor shall be due following five (5) business days’ written notice, and if paid at a later date shall bear interest at the rate of ten percent (10%) per annum from the date of such written notice until Lessor is reimbursed by Lessee. The sum, together with interest on it, shall be deemed to be additional Rent.

D.Lessor shall have the following additional remedies:

(1)In the event that a late charge is payable hereunder, whether or not collected, for three (3) installments of Base Monthly Rent or if Lessee fails to pay any other monetary obligation of Lessee under this Lease within the applicable cure or grace period, Lessee shall pay to Lessor, if Lessor shall so request in writing, in addition to any other payments required under this Lease, a monthly advance installment, payable at the same time as the Base Monthly 

26

 

Rent, as reasonably estimated by Lessor, for Lessee’s Percentage Share of Real Property Tax and insurance premium expenses which are payable by Lessee under the terms of this Lease. Such fund shall be established to insure payment when due, before delinquency, of Lessee's Percentage Share of Real Property Tax and insurance premiums. All moneys paid to Lessor under this subparagraph may be intermingled with other moneys of Lessor and shall not bear interest. In the event of a default in the obligations of Lessee under this Lease, then any balance remaining from funds paid to Lessor under the provisions of this subparagraph may, at the option of Lessor, be applied to the payment of any monetary default of Lessee in lieu of being applied to the payment of real property taxes and insurance premiums.

(2)In the event that a late charge is payable hereunder, whether or not collected, for three (3) installments of Base Monthly Rent in any twelve (12) month period, Lessor may demand and Lessee shall pay to Lessor an amount equal to two (2) months of Base Monthly Rent, in the amount of the Base Monthly Rent then due, as an addition to the Security Deposit to be held pursuant to the terms of Paragraph 5 of this Lease.

E.To the extent permitted by law, Lessee hereby waives its rights to demand a trial by jury in any action for unlawful detainer filed by Lessor.

F.Any monetary judgment or award against Lessee under this Lease shall bear interest at the rate of ten percent (10%) per annum regardless of the Court entering or enforcing such judgment or award.

20.Lessor’s Default. Lessor shall be in default of this Lease if it fails or refuses to perform any provision of this Lease that it is obligated to perform if the failure to perform is not cured within thirty (30) days after notice of the default has been given by Lessee to Lessor. If the default cannot reasonably be cured within thirty (30) days, Lessor shall not be in default of this Lease if Lessor commences to cure the default within the thirty (30) day period and diligently and in good faith continues to cure the default; provided, in the event of an emergency, Lessor shall commence the performance of any cure within seven (7) business days following receipt of written notice from Lessee.

21.Limitation of Lessor’s Liability.  If Lessor is in default of this Lease, and as a consequence Lessee recovers a money judgment against Lessor, the judgment shall be satisfied only out of the proceeds of sale received on execution of the judgment and levy against the right, title and interest of Lessor in the Building or out of Rent or other income from the Building receivable by Lessor or out of the consideration received by Lessor from the sale or other disposition of all or any part of Lessor’s right, title and interest in the Building. Lessor shall not be personally liable for any deficiency.

22.Lessor’s Entry on Premises. Lessor and its authorized representatives shall have the right to enter the Premises at all reasonable times, after reasonable written notice to Lessee, but in no event less than one (1) business day, except in the case of an emergency when no notice will be required, for any of the following purposes:

A.To determine whether the Premises are in good condition and whether Lessee is complying with its obligations under this Lease.

27

 

B.To do any necessary maintenance, repair, replacement or alteration to the Premises or the Building. 

C.To serve, post, or keep posted any notices required or allowed under the provisions of this Lease.

D.To post “for sale” signs and “for rent” or “for lease” signs on the exterior of the Building at any time during the term (except that “for rent” and “for lease” signs may only be posted in the last twelve (12) months of the term unless there has been an Event of Default).

E.To place signs on the exterior of the Building identifying the owner or manager or managing agent of the Building or complex.

F.To show the Premises to prospective brokers, agents, buyers, tenants or persons interested in an exchange, at any time during the term (except that Lessor may not show the Premises to potential tenants or their brokers until the last twelve (12) months of the term unless there has been an Event of Default).  Lessor shall not be liable in any manner for any inconvenience, disturbance, loss of business, nuisance, or other damage arising out of Lessor’s entry on the Premises as provided in this Paragraph 22. Lessee shall not be entitled to an abatement or reduction of Rent if Lessor exercises any rights reserved in this Paragraph 22, unless occasioned by Lessor’s gross negligence or intentional wrongful conduct or that of Lessor’s employees, agents or contractors. Notwihstanding the foregoing, Lessor shall use good faith efforts to ensure all such entries do not unreasonably disturb Lessee’s use and enjoyment of the Premises.

23.Subordination.  This Lease is and shall be subordinate to any encumbrance now of record or recorded after the date of this Lease affecting the Building, other improvements and land of which the Premises are a part. Such subordination is effective without any further act on the part of Lessee. Within ten (10) business days after the Commencement Date,  Lessor must obtain and deliver to Lessee a non-disturbance and attornment agreement, executed by Lessor’s lender providing in substance that this Lease shall not be terminated by Lessor’s lender so long as Lessee has not committed an Event of Default which Event of Default has not been cured after the giving of the appropriate notice required by Paragraph 19 hereof and that if any lender instructs Lessee to pay any Rent to said lender said payment will be deemed to be the payment of such rental obligation under this Lease.  Lessee shall from time to time on written request from Lessor execute and deliver any commercially reasonable documents or instruments that may be required by a lender to effectuate any subordination of this Lease to any encumbrance now of record or recorded after the date of this Lease on the condition that any such instrument contain a quiet enjoyment clause guaranteeing Lessee’s rights hereunder so long as Lessee does not commit an Event of Default which is not cured after the giving of the appropriate notice required by Paragraph 19 hereof.  Lessee’s failure to so execute any such document after ten (10) business days’ written notice to Lessee requesting such execution shall be deemed to be an Event of Default under this Lease. 

24.Right to Estoppel Certificates. Within ten (10) business days after written notice from Lessor, Lessee shall execute and deliver to Lessor, a certificate stating that there are no defaults under the Lease, or itemizing any defaults Lessee contends exists, that the Lease is unmodified and in full force and effect, or in full force and effect as modified, and state the 

28

 

modifications and any other information reasonably required by a lender or purchaser, including but not limited to the amount of Base Monthly Rent, the date to which Base Monthly Rent has been paid in advance, and the amount of the Security Deposit or any prepaid Rent. Failure to deliver the certificate within the ten (10) business days shall be conclusive as to Lessee that this Lease is in full force and effect and has not been modified except as may be represented by Lessor. If Lessee fails to deliver the certificate within the ten (10) business days, Lessee irrevocably constitutes and appoints Lessor as its special attorney in fact to execute and deliver the certificate to any third party. 

25.Notice. Any notice demand, request, consent, approval, or communication that either party desires or is required to give to the other party or any other person shall be in writing and either served personally or by overnight delivery with a recognized delivery service.  Any notice demand, request, consent, approval, or communication that either party desires or is required to give to the other party shall be addressed to the other party at the address set forth at the end of this Lease. Either party may change its address by notifying the other party of the change of address. 

26.Waiver. The waiver by either party of any breach of any term, covenant, or condition herein contained shall not be deemed to be a waiver of such term, covenant or condition or any subsequent breach of the same or any other term, covenant, or condition herein contained, nor shall any custom or practice which may grow up between the parties in the administration of the terms hereof be construed to waive or to lessen the right of either party to insist upon performance by the other in strict accordance with said terms. The subsequent acceptance of Rent hereunder by Lessor shall not be deemed to be a waiver of any preceding breach by Lessee of any term, covenant or condition of this Lease, regardless of Lessor’s knowledge of such preceding breach the time of acceptance of such Rent.

27.Sale of Premises. If Lessor sells or transfers its interest in the Premises, upon the consummation of the sale or transfer, Lessor shall be released from any liability thereafter accruing under this Lease if Lessor’s successor has assumed in writing, for the benefit of Lessee, Lessor’s obligations under this Lease. If any letter of credit or prepaid Rent has been paid by Lessee, Lessor shall transfer the letter of credit or prepaid Rent to Lessor’s successor and on such transfer Lessor shall be discharged from any further liability in reference to the Security Deposit or prepaid Rent, if any.

28.Attorneys’ Fees. If either party commences an action against the other party arising out of or in connection with this Lease, the prevailing party shall be entitled to have and recover from the non-prevailing party reasonable attorneys’ fees and costs of suit.  In any proceedings initiated by or against Lessee under the United States Bankruptcy Code, Lessor shall be entitled to recover any and all reasonable attorneys fees and expenses arising from or in connection with proceedings for the assumption, rejection, or assignment of this Lease, stay relief, or other protection of Lessor’s interests, regardless of any default under the Lease. 

29.Surrender of Premises. On expiration of the term of this Lease or any extension thereof or upon any earlier termination of this Lease, Lessee shall surrender to Lessor the Premises and all Lessee's Alterations in good condition (except for ordinary wear and tear) unless Lessor has required Lessee to remove its Alterations.  The surrender of the Premises will only be deemed 

29

 

to have occurred when Lessee delivers all keys to the Premises to Lessor, or reimburses Lessor a reasonable amount for any lost or stolen keys. Lessee shall remove all of its personal property, equipment and trade fixtures prior to the expiration of the term of this Lease or any extension thereof or upon the earlier termination of this Lease. Lessee shall perform at its expense all restoration and repairs made necessary by the removal of any Alterations and equipment as required by this Lease and any other agreements between Lessor and Lessee.  

In the event Lessee fails to remove all of its equipment and personal property following the expiration or earlier termination of this Lease, in addition to any other remedies Lessor may have, Lessor may elect to retain or dispose of said personal property and equipment in any manner Lessor in its sole discretion may decide.  Without waiving any other remedy,  Lessor shall if it so elects to by written notice to Lessee (and if permitted by Applicable Laws) obtain title to any or all of Lessee’s equipment and personal property and retain or dispose of the same.  Lessee waives all claims against Lessor for any damage to Lessee resulting from Lessor’s retention or disposition of any such personal property. Lessee shall also be liable to Lessor for Lessor’s costs for storing, removing, and disposing of any such personal property.

If Lessee fails to surrender the Premises to Lessor on the expiration of the term of this Lease or any extension thereof as required by this Paragraph 29, Lessee shall hold Lessor harmless from all damages resulting from Lessee’s failure to surrender the Premises, including without limitation, lost rental value and any claims made by a new tenant resulting from Lessee’s failure to surrender the Premises.

30.Holding Over. If Lessee, with Lessor’s consent, remains in possession of the Premises after expiration or termination of the term of this Lease, or after the date in any notice given by Lessor to Lessee terminating this Lease, such possession by Lessee shall be deemed to be a month-to-month tenancy terminable on ninety (90) days notice given at any time by either party.  All provisions of this Lease except those pertaining to term shall apply to the month-to-month tenancy, and except that Base Monthly Rent shall be equal to one hundred and fifty percent (150%) of the Base Monthly Rent payable immediately prior to the expiration or termination of this Lease.  If Lessee holds over without Lessor’s consent, Lessor’s damages shall also include the per diem rental value of the Premises measured by one hundred and fifty percent (150%) of the Base Monthly Rent due in the last month of prior to the expiration or termination of this Lease divided by 30 plus the daily cost of Lessee’s Percentage Share of Common Area Maintenance and Repair Costs, Real Property Taxes and insurance premiums.

31.Option to Extend Term.  Lessor hereby grants to Lessee options (the “Options” or “Option”) to extend the term of this Lease for two (2) five (5) year terms (the “Extension Periods” or “Extension Period”).  The first Extension Period shall commence upon the expiration of the initial term hereof and the second Extension Period shall commence upon the expiration of the first Extension Period.  The terms and conditions of the Option are as follows.

A.Exercise of Option.  The Options shall be exercised by Lessee giving to Lessor written notice of such exercise at least one hundred eighty (180) days prior to the expiration of the original term of this Lease for the first Extension Period and, for the second Extension Period, at least one hundred eighty (180) days prior to the expiration of the first Extension Period.  Lessee shall have no right to exercise the Option for the second Extension Period if Lessee has not 

30

 

exercised the Option for the first Extension Period. If proper notification of the exercise of an option is not timely given, such option shall automatically expire.

B.Terms and Conditions.  All terms and conditions of this Lease shall continue to be binding upon Lessor and Lessee during the Extension Periods except that the Base Monthly Rent during the first Extension Period shall be as follows: 

Months 1-12:$89,225.00 per month

Months 13-24: $91,902.00 per month

Months 25-36: $94,659.00 per month

Months 37-48: $97,499.00 per month

Months 49-60: $100,424.00 per month

Base Monthly Rent for the second Extension Period shall be as follows:

Months 1-12: $103,436.00 per month

Months 13-24:$106,540.00 per month

Months 25-36:$109,735.00 per month

Months 37-48:$113,028.00 per month

Months 49-60:$116,419.00 per month

C.Option Not Assignable Separate From Lease.  The Option herein granted to Lessee may be assigned by Lessee to Affiliates as described in Paragraph 17 above. Except as otherwise provided in this Paragraph 31.C, the Option herein granted to Lessee is not assignable separate and apart from this Lease and may not be exercised by anyone other than the successors or permitted assigns of Lessee.

D.Assumption of Restoration Obligations.  Lessee’s exercise of either Option shall be deemed to include Lessee’s assumption of all obligations to restore the Premises pursuant to Paragraph 10 above and to continue to securitize said obligation to the full amount of the cost of both decommissioning any laboratory or manufacturing facility and removal of all Alterations and other improvements, if required by Lessor pursuant to Paragraph 10, in a manner reasonably acceptable to Lessor.  Lessee’s failure to provide such security shall make the Option voidable at Lessor’s option even if Lessee has exercised the Option. 

E.Effect of Default on Option.

(1)Lessee shall have no right to exercise the Option, notwithstanding any provision in the grant of option to the contrary during the time that an Event of Default exists or if Lessor in the twelve (12) months prior to the day on which Lessee exercises the Option, Lessor has given to Lessee two (2) or more notices to cure an Event of Default or if during the last twenty-four (24) months of the original term Lessee has incurred a late charge on account of the late payment of Base Monthly Rent on three (3) or more separate occasions.     

(2)The period of time within which the Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise such Option because of the provisions of the above paragraph.

31

 

(3)All rights of Lessee under the provisions of the grant of option shall terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and during the term of this Lease, an Event of Default occurs and Lessee fails to cure the default within the period of time required by Paragraph 18 above. 

32.Consent of Parties. Whenever consent or approval of either party is required, that party shall not unreasonably withhold or delay such consent or approval.

33.Time of Essence. Time is of the essence of each provision of this Lease.

34.Successors. This Lease shall be binding on and inure to the benefit of the parties and their successors and assigns.

35.Covenants and Conditions. All provisions, whether covenants or conditions, on the part of the Lessee shall be deemed to be both covenants and conditions.

36.California Law. This Lease shall be construed and interpreted in accordance with the laws of the State of California.

37.Entire Agreement. This Lease cannot be amended or modified except by a written agreement.

38.Captions. The captions of this Lease shall have no effect on its interpretation.

39.Number. When required by the context of this Lease, the singular shall include the plural, and vice versa.

40.Joint and Several Obligations. “Party” shall mean Lessor or Lessee; and if more than one person or entity is Lessor or Lessee, the obligations imposed on that party shall be joint and several.

41.Authority. If either party signs as a corporation, partnership, trust, limited liability company or similar entity each of the persons executing this Lease on behalf of such party does hereby covenant and warrant that the company is qualified to do business in the State of California and is in good standing in the State of California, that the company has full right and authority to enter into this Lease, and that the parties signing this Lease and that every person signing on behalf of the company is authorized to do so. 

42.Complete Agreement. There are no oral agreements between Lessor and Lessee affecting this Lease, and this Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, and understandings, if any, between Lessor and Lessee or displayed by Lessor to Lessee, except for those relating to the nature of the materials to be tested and manufactured within the Premises,  with respect to the subject matter of this Lease. There are no other representations between Lessor and Lessee other than those contained in this Lease, and all reliance with respect to any representations is solely upon the representations contained in this Lease. 

32

 

43.Real Estate Brokers. Lessor and Lessee acknowledge that the only real estate brokers involved in this transaction are Jon Faller, Faller Real Estate, representing Lessee, and Marshall Hydorn, CBRE, representing Lessor (the “Brokers”).  Lessor shall be solely responsible for any brokerage due the Brokers, which shall be paid pursuant to a separate written agreement between Lessor and Brokers.  Said commission shall be paid one-half (1/2) upon the mutual execution of this Lease, and the remaining one-half (1/2) upon the Lease Commencement Date.  Each party agrees that should any claim be made for a brokerage commission or finder’s fee by any broker or finder other than the Brokers, by, though or on account of any acts of said party or its representatives, said party will indemnify and hold the other party free and harmless from and against any and all loss, liability, cost, damage and expense in connection therewith.  No commissions shall be due or payable should Lessee exercise any option(s) granted under this Lease. 

44.Addresses for Notices. Any notices required to be sent pursuant to this Lease shall be sent to the parties al the following addresses unless changed pursuant to the notification provisions of this Lease.

		
	
TO LESSOR: 
	
JCN Partners, a California limited partnership

c/o John C. Nickel Properties

1 Camino Sobrante, Suite 205

Orinda, CA 94563

Attn:  John C. Nickel 

 

 

	
With a copy to:

 
	
Joseph G. Tursi 

SSL Law Firm, llp 

515 Market Street, Suite 2700

San Francisco, CA 94105

 

	
TO LESSEE:

 

 

 

 

With a copy to:
	
Audentes Therapeutics, Inc.

600 California Street, Suite 1700

San Francisco, CA 94108

Attn:  Natalie Holles 

Real Estate Law Group, LLP

2330 Marinship Way, Suite 211

Sausalito, California 94965

Attn:  Jeffrey D. Ebstein, Esq. 

45.Counterparts. This Lease may be signed in multiple counterparts which, when signed by all parties, shall constitute a binding agreement.

46.Access Disclosure.  Pursuant to California Civil Code Section 1938, Lessor hereby notifies Lessee that as of the date of this Lease, the Premises have not undergone inspection by a Certified Access Specialist (“CASp”) to determine whether the Premises meet all applicable 

33

 

construction-related accessibility standards under California Civil Code Section 55.53.  Lessor hereby discloses pursuant to California Civil Code Section 1938 as follows: “A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the Lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the Lessee or tenant, if requested by the Lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises.”  Lessor and Lessee hereby acknowledge and agree that in the event that Lessee elects to perform a CASp inspection of the Premises hereunder, such CASp inspection shall be performed at Lessee's sole cost and expense and Lessee shall be solely responsible for the cost of any repairs, upgrades, alterations and/or modifications to the Premises or the Building necessary to correct any such violations of construction-related accessibility standards identified by such CASp inspection as required by Regulation, which repairs, upgrades, alterations and/or modifications may, at Lessor’s option, be performed by Lessor at Lessee’s expense, payable as Additional Rent within ten (10) days following Lessor’s demand. 

47.Quiet Possession. Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions and provisions on Lessee’s part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof.

48.Lease Memorandum.  The parties agree that they will execute and record a memorandum of lease substantially in the form annexed hereto as Exhibit F.  

[SIGNATURE PAGE FOLLOWS]

34

 

IN W1TNESS W HEREOF, the parties have executed this Lease as of the date first set forth above.

		
	
Dated:August __, 2018 
	
JCN PARTNERS, 

a California limited partnership

 

By:JCN Properties, LLC, 

a California limited liability company, 

Its General Partner

 

By: 
Name:John C. Nickel
Title:Managing Member

 

	
Dated:August 15, 2018 
	
AUDENTES THERAPEUTICS, INC., 

a Delaware corporation

 

 

By:/s/ Matthew Patterson
Name:Matthew Patterson
Title:CEO

 

 

By:
Name:
Title:

 

35

 

EXHIBIT A

FLOOR PLAN

 

 

A-1

: 6/25/18

 

EXHIBIT B

PARKING SPACES

 

 

B-1

: 6/25/18

 

EXHIBIT C

COMMON ROADWAY

 

 

C-1

: 6/25/18

 

EXHIBIT D

LESSEE’S CURRENT SPACE PLAN

 

 

D-1

: 6/25/18

 

EXHIBIT E-1

 

RESOLUTION NO. 84-97

 

 

E-1-1

: 6/25/18

 

 

E-1-2

: 6/25/18

 

 

 

E-1-3

: 6/25/18

 

EXHIBIT E-2

CITY OF SOUTH SAN FRANCISCO EMAIL

 

 

E-2-1

: 6/25/18

 

EXHIBIT E- 3

 

Eccles Lease – Audentes - Proposed Language for Zoning Verification Letter 

City of South San Francisco Planning Division

[Address]

Attention: Chief Planner [or Director of Economic and Community Development]

 

	
RE:
	
534 Eccles Avenue, City of South San Francisco (the “Property”) – Request for Zoning Verification Letter

Dear _______,

Pursuant to Section 4.B of the lease (the “Lease”) for the premises (the “Premises”) at the Property, between JCN Partners (“Lessor”) and Audentes Therapeutics (“Audentes”), as tenant, dated August _, 2018, Audentes must request a written determination by the City of South San Francisco Planning Division regarding the zoning of the Property (a “Zoning Verification Letter”) not more than twelve (12) months or less than nine (9) months prior to the expiration of the term of the Lease.  As such, Audentes hereby requests that a Zoning Verification Letter (or its equivalent) be issued that confirms that the Premises can be reconverted to its originally designated use of Industrial Use (as defined below), including, wholesale, warehouse and distribution under the City’s current zoning ordinance following the termination of the Lease. Below is a background summary that should assist you in issuing the Zoning Verification Letter:

	
 
	
1.
	
The Property is located within an Employment District and zoned as a Business Technology Park (BTP) (SSF Zoning Ordinance §§ 20.110.001, et seq.).  The Property was rezoned as BTP from its previous zoning of “Planned Industrial.” At the time of the rezoning, the Property use was an industrial use, including wholesale, warehouse and distribution uses (individually and collectively, an “Industrial Use”).  
	
 

	
 
	
2.
	
Audentes obtained written advice from Senior Planner Tony Rozzi of the South San Francisco Planning Division to determine whether (1) Audentes could use the Premises for life sciences for the term of the Lease (anticipated to be through May 31, 2027, with options), and (2) whether the Premises could be converted back to an Industrial Use upon expiration of the Lease.  On May 17, 2018, Mr. Rozzi confirmed that the Premises could convert back to Industrial Use regardless of the nature of Audentes’ use of the Premises during the term of the Lease, pursuant to City of South San Francisco Resolution No. 84-97 (as amended), and adopted on July 9, 1997.  A copy of Mr. Rozzi’s email, which includes a copy of Resolution No. 84-97, is enclosed herein.  Indeed, Resolution No. 84-97 specifically was adopted to address the concerns of property owners within the BTP zone that previously were zoned as “Planned Industrial,” including the Premises, “to resolve this particular issue.”
	
 

F-1 

: 

 

	
 
	
3.
	
Audentes has used the Premises for office and warehouse uses.  The Lease will expire on [fill in date - not more than 12 months or less than 9 months before expiration of the Lease].  
	
 

Consistent with the above, Audentes now seeks a Zoning Verification Letter to confirm that the Premises may be re-used for the Industrial Use, consistent with Senior Planner Rozzi’s May 17, 2018 email and Resolution No. 84-97.

Sincerely,

 

[Audentes signatory]

 

 

 

F-1 

: 

 

 

EXHIBIT F

 

MEMORANDUM OF LEASE

 

RECORDING REQUESTED BY:

 

AND WHEN RECORDED RETURN TO:

 

(Space above line for Recorder's use)

______________________________________________________________________________

MEMORANDUM OF LEASE

JCN PARTNERS, a California limited partnership (“Lessor”), and AUDENTES THERAPEUTICS, INC., a Delaware corporation (“Lessee”), executed that Lease dated as of ____________________, 2018 (the “Lease”) for premises commonly known as: 534 Eccles Avenue, South San Francisco, California.

Lessor and Lessee agree as follows:

1.The Commencement Date of the Lease is __________________________.

2.The end of the Initial Lease term and the date on which this Lease will expire is ______________________.  

3.Lessee has two (2) five (5)-year options to extend the term of the Lease.

Dated: 

		
	
LESSOR:

 

JCN PARTNERS, 

a California limited partnership

 

By:JCN Properties, LLC, 

a California limited liability company, 
Its General Partner

 

 

By:

Name: 

Title: 
	
LESSEE:

 

AUDENTES THERAPEUTICS, INC.,

a Delaware corporation

 

 

By:________________________________

Name:______________________________

Its: _________________________________

F-1 

: 

 

F-1 

: 

 

 

	
	
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

 

 

State of California) 

)

County of ________ ) 

 

On ______________________________________ before me, _____________________________, notary public (here insert name and title of the officer), personally appeared _______________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 

 

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. 

 

WITNESS my hand and official seal. 

 

 

 

Signature _______________________________ (Seal) 

 

F-1 

: 

 

 

	
	
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

 

 

State of California) 

)

County of ________ ) 

 

On ______________________________________ before me, _____________________________, notary public (here insert name and title of the officer), personally appeared _______________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 

 

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. 

 

WITNESS my hand and official seal. 

 

 

 

Signature _______________________________ (Seal) 

 

 

 

F-1 

:

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