Document:

arct-ex46_882.htm

Exhibit 4.6

 

LEASE AGREEMENT

THIS LEASE AGREEMENT (this “Lease”) is made this 4th day of October, 2017, between ARE-SD REGION NO. 44, LLC, a Delaware limited liability company (“Landlord”), and ARCTURUS THERAPEUTICS, INC., a Delaware corporation (“Tenant”).

 

	
Building:
	
 
	
10628 Science Center Drive, San Diego, California

	
 
	
 
	
 

	
Premises:
	
 
	
That portion of the Project, containing approximately 24,705 rentable square feet, as determined by Landlord, as shown on Exhibit A.

	
 
	
 
	
 

	
Project:
	
 
	
The real property on which the Building in which the Premises are located, together with all improvements thereon and appurtenances thereto as described on Exhibit B.

	
 
	
 
	
 

	
Base Rent:
	
 
	
$4.07 per rentable square foot of the Premises per month, subject to adjustment pursuant to Section 4 hereof.

 

Rentable Area of Premises:  24,705 sq. ft.

Rentable Area of Building:  90,469 sq. ft.

Rentable Area of Project:  294,992 sq. ft.

Tenant’s Share of Operating Expenses of Building:  27.31%

Building’s Share of Project:  30.67%

Security Deposit:  $96,349.50

Rent Adjustment Percentage:  3%

Target Commencement Date:  March 19, 2018

 

	
Base Term:
	
 
	
Beginning on the Commencement Date and ending 84 months from the first day of the first full month after the Commencement Date (as defined in Section 2) hereof.  For clarity, if the Commencement Date occurs on the first day of a month, the Base Term shall be measured from that date.  If the Commencement Date occurs on a day other than the first day of a month, the Base Term shall be measured from the first day of the following month.

	
 
	
 
	
 

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

 

	
Address for Rent Payment:
	
 
	
Landlord’s Notice Address:

	
Alexandria Real Estate Equities, Inc.
	
 
	
385 E. Colorado Boulevard, Suite 299

	
Dept. LA 23447
	
 
	
Pasadena, CA 91101

	
Pasadena, CA 91185-3447
	
 
	
Attention: Corporate Secretary

 

Tenant’s Notice Address:

10628 Science Center Drive

San Diego, California 92121

Attention:  Lease Administrator

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

 

		
	
 
	

 

 

		
	
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[X]  EXHIBIT A - PREMISES DESCRIPTION
	
[X]  EXHIBIT B - DESCRIPTION OF PROJECT

	
[X]  EXHIBIT C - WORK LETTER
	
[X]  EXHIBIT D - COMMENCEMENT DATE

	
[X]  EXHIBIT E - RULES AND REGULATIONS
	
[X]  EXHIBIT F - TENANT’S PERSONAL PROPERTY

	
[X]  EXHIBIT G - LANDLORD’S FURNITURE
	
[X]  EXHIBIT H - TENANT MAINTENANCE OBLIGATIONS

1.Lease of Premises.  Upon and subject to all of the terms and conditions hereof, Landlord hereby leases the Premises to Tenant and Tenant hereby leases the Premises from Landlord.  The portions of the Project which are for the non-exclusive use of tenants of the Project are collectively referred to herein as the “Common Areas.”  Landlord reserves the right to modify Common Areas, provided that such modifications do not materially adversely affect Tenant’s use of the Premises for the Permitted Use. From and after the Commencement Date through the expiration of the Term, Tenant shall have access to the Building and the Premises 24 hours a day, 7 days a week, 365 days per year, except in the case of emergencies, as the result of Legal Requirements, the performance by Landlord of any installation, maintenance or repairs, or any other temporary interruptions, and otherwise subject to the terms of this Lease.

2.Delivery; Acceptance of Premises; Commencement Date.  Landlord shall use reasonable efforts to deliver the Premises to Tenant on or before the Target Commencement Date, with Landlord’s Work Substantially Completed (“Delivery” or “Deliver”).  If Landlord fails to timely Deliver the Premises, Landlord shall not be liable to Tenant for any loss or damage resulting therefrom, and this Lease shall not be void or voidable except as provided herein.  If Landlord does not Deliver the Premises within 90 days of the Target Commencement Date for any reason other than Force Majeure delays and Tenant Delays, this Lease may be terminated by Tenant by written notice to the Landlord, and if so terminated by Tenant:  (a) the Security Deposit, or any balance thereof (i.e., after deducting therefrom all amounts to which Landlord is entitled under the provisions of this Lease), shall be returned to Tenant, and (b) neither Landlord nor Tenant shall have any further rights, duties or obligations under this Lease, except with respect to provisions which expressly survive termination of this Lease.  As used herein, the terms “Landlord’s Work,” “Tenant Delays” and “Substantially Completed” shall have the meanings set forth for such terms in the Work Letter.  If Tenant does not elect to terminate this Lease within 10 business days of the lapse of such 90 day period, such right to void this Lease shall be waived and this Lease shall remain in full force and effect.

The “Commencement Date” shall be the earlier of:  (i) the date Landlord Delivers the Premises to Tenant; or (ii) the date Landlord could have Delivered the Premises but for Tenant Delays.  Upon request of Landlord, Tenant shall execute and deliver a written acknowledgment of the Commencement Date and the expiration date of the Term when such are established in the form of the “Acknowledgement of Commencement Date” attached to this Lease as Exhibit D; provided, however, Tenant’s failure to execute and deliver such acknowledgment shall neither affect Landlord’s rights hereunder nor constitute a default under this Lease by Tenant.  The “Term” of this Lease shall be the Base Term, as defined above on the first page of this Lease and the Extension Term which Tenant may elect pursuant to Section 40 hereof.

Subject to the provisions of Section 6 of the Work Letter, Landlord shall permit Tenant access to the Premises for a period of 30 days prior to the Commencement Date for Tenant’s installation and setup of cabling, furniture, fixtures and equipment (“FF&E Installation”), provided that such FF&E Installation is coordinated with Landlord, and Tenant complies with the Lease and all other reasonable restrictions and conditions Landlord may impose.  All such access shall be during normal business hours.  Any access to the Premises by Tenant before the Commencement Date shall be subject to all of the terms and conditions of this Lease, excluding the obligation to pay Base Rent or Operating Expenses.  

During the Term, Tenant shall have the right to use the furniture, fixtures and equipment belonging to Landlord described on Exhibit G attached to this Lease and located within the Premises on the Commencement Date ("Landlord's Furniture").  Notwithstanding the foregoing, Landlord and Tenant agree that Exhibit G may be amended prior to the Commencement Date if Landlord agrees, in its sole and absolute discretion to provide any additional furniture, fixtures or equipment for Tenant’s use in the Premises or if Tenant elects, in its sole and absolute discretion, not to use any of the items listed on 

 

		
	
 
	

 

 

		
	
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Exhibit G as of the date of this Lease.  Tenant shall have no right to remove any of Landlord's Furniture from the Premises without Landlord’s prior written consent and Landlord’s Furniture shall be returned to Landlord at the expiration or earlier termination of the Term in substantially the same condition as received by Tenant, except for ordinary wear and tear and casualty. Landlord represents to Tenant that Landlord owns the Landlord’s Furniture reflected on Exhibit G as of date of this Lease free and clear of any third party liens or claims.

Except as set forth in the Work Letter:  (i) Tenant shall accept the Premises and Landlord’s Furniture in their condition as of the Commencement Date, subject to applicable Legal Requirements (as defined in Section 7 hereof); (ii) Landlord shall have no obligation for any defects in the Premises or Landlord’s Furniture; and (iii) Tenant’s taking possession of the Premises and Landlord’s Furniture shall be conclusive evidence that Tenant accepts the Premises and Landlord’s Furniture and that the Premises and Landlord’s Furniture, respectively, were in good condition at the time possession was taken.  Notwithstanding anything to the contrary contained herein, nothing in this paragraph shall limit Landlord’s maintenance obligations under Section 13.

Except as otherwise expressly set forth in this Lease, Tenant agrees and acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the condition of all or any portion of the Premises or the Project, and/or the suitability of the Premises or the Project for the conduct of Tenant’s business, and Tenant waives any implied warranty that the Premises or the Project are suitable for the Permitted Use.  This Lease constitutes the complete agreement of Landlord and Tenant with respect to the subject matter hereof and supersedes any and all prior representations, inducements, promises, agreements, understandings and negotiations which are not contained herein.  Landlord in executing this Lease does so in reliance upon Tenant’s representations, warranties, acknowledgments and agreements contained herein.

3.Rent.

(a)Base Rent.  The first month’s Base Rent shall be due and payable on the Commencment Date. The Security Deposit shall be due on the date that is 10 business days after the mutual execution and delivery of this Lease by the parties.  Tenant shall pay to Landlord in advance, without demand, abatement, deduction or set-off, monthly installments of Base Rent on or before the first day of each calendar month during the Term hereof, in lawful money of the United States of America, at the office of Landlord for payment of Rent set forth above, or to such other person or at such other place as Landlord may from time to time designate in writing.  Payments of Base Rent for any fractional calendar month shall be prorated.  The obligation of Tenant to pay Base Rent and other sums to Landlord and the obligations of Landlord under this Lease are independent obligations.  Tenant shall have no right at any time to abate, reduce, or set-off any Rent (as defined in Section 5) due hereunder except for any abatement as may be expressly provided in this Lease. 

Notwithstanding anything to the contrary contained herein, so long as no Default (as defined in Section 20 below) has occurred and is outstanding under this Lease, Tenant shall not be required to pay Base Rent for the period commencing on the first day of the 2nd month after the Commencement Date through the last day of the 6th month after the Commencement Date (the “Abatement Period”).  Tenant shall commence paying full Base Rent on the first day of the 7th month after the Commencement Date.  Tenant shall be required to pay Operating Expenses and any and all other amounts payable under this Lease through the Abatement Period.

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

 

		
	
 
	

 

 

		
	
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4.Base Rent Adjustments.  

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

(b)Excess TI Costs Allowance.  Landlord shall, subject to the terms of the Work Letter, make available to Tenant the Excess TI Costs Allowance (as defined in the Work Letter). Commencing on the Commencement Date and continuing thereafter on the first day of each month during the Base Term, Tenant shall pay the amount necessary to fully amortize the portion of the Excess TI Costs Allowance actually funded by Landlord, if any, in equal monthly payments with interest at a rate of 8% per annum over the Base Term, which interest shall begin to accrue on the date that Landlord first disburses such Excess TI Costs Allowance or any portion(s) thereof. Any of the Excess TI Costs Allowance and applicable interest remaining unpaid as of the expiration or earlier termination of this Lease shall be paid to Landlord, except as otherwise provided in Section 41, in a lump sum at the expiration or earlier termination of this Lease.

5.Operating Expense Payments.  Landlord shall deliver to Tenant a written estimate of Operating Expenses for each calendar year during the Term (the “Annual Estimate”), which may be revised by Landlord from time to time (but not more than twice) during such calendar year.  Commencing on the Commencement Date and continuing thereafter on the first day of each month during the Term, Tenant shall pay Landlord an amount equal to 1/12th of Tenant’s Share of the Annual Estimate.  Payments for any fractional calendar month shall be prorated.

The term “Operating Expenses” means all costs and expenses of any kind or description whatsoever incurred or accrued each calendar year by Landlord with respect to the Building (including the Building’s Share of all costs and expenses of any kind or description incurred or accrued by Landlord with respect to the Project which are not specific to the Building or any other building located in the Project) (including, without duplication, Taxes (as defined in Section 9), capital repairs and improvements amortized over the useful life of such capital items (as reasonably determined by Landlord taking into account all relevant factors), the cost (including, without limitation, any subsidies which Landlord may provide in connection with the Amenities) of the common area amenities (the “Amenities”) now or hereafter located at the Project which Amenities may include, without limitation, the Common Area fitness center, cafe, conference center, bocce ball court, barbeque pits and ping pong, and the costs of Landlord’s third party property manager or, if there is no third party property manager, administration rent in the amount of 3% of Base Rent (provided that during the Abatement Period, Tenant shall nonetheless be required to pay administration rent each month equal to the amount of the administration rent that Tenant would have been required to pay in the absence of there being an Abatement Period)), excluding only:

(a)the original design and/or construction costs of the Project and renovation prior to the date of the Lease and costs of correcting defects in such original construction or renovation;

(b)capital expenditures for expansion of the Project;

(c)interest, principal payments of Mortgage (as defined in Section 27) debts of Landlord, financing costs and amortization of funds borrowed by Landlord, whether secured or unsecured;

(d)depreciation of the Project (except for capital improvements, the properly amortized portion of such cost of which is includable in Operating Expenses);

 

		
	
 
	

 

 

		
	
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(e)advertising, legal and space planning expenses and leasing commissions and other costs and expenses incurred in procuring and leasing space to tenants for the Project, including any leasing office maintained in the Project, free rent, construction allowances and signage costs for tenants;

(f)legal and other expenses incurred in the negotiation or enforcement of leases;

(g)completing, fixturing, improving, renovating, painting, redecorating or other work, which Landlord pays for or performs for other tenants within their premises, and costs of correcting defects in such work;

(h)costs to be reimbursed by other tenants of the Project or Taxes to be paid directly by Tenant or other tenants of the Project, whether or not actually paid;

(i)salaries, wages, benefits and other compensation paid to officers and employees of Landlord who are not assigned in whole or in part to the operation, management, maintenance or repair of the Project;

(j)general organizational, administrative and overhead costs relating to maintaining Landlord’s existence, either as a corporation, partnership, or other entity, including general corporate, legal and accounting expenses;

(k)costs (including attorneys’ fees and costs of settlement, judgments and payments in lieu thereof) incurred in connection with disputes with tenants, other occupants, or prospective tenants, and costs and expenses, including legal fees, incurred in connection with negotiations or disputes with employees, consultants, management agents, leasing agents, purchasers or mortgagees of the Building;

(l)costs (including attorney’s fees and costs of settlement, judgments and payments in lieu thereof) incurred by Landlord due to the violation by Landlord, its employees, agents or contractors or any tenant of the terms and conditions of any lease of space in the Project or any Legal Requirement (as defined in Section 7);

(m)penalties, fines or interest incurred as a result of Landlord’s inability or failure  to make payment of Taxes and/or to file any tax or informational returns when due, or from Landlord’s failure to make any payment of Taxes required to be made by Landlord hereunder before delinquency;

(n)overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for goods and/or services in or to the Project to the extent the same exceeds the costs of such goods and/or services rendered by unaffiliated third parties on a competitive basis;

(o)costs of Landlord’s charitable or political contributions, or of fine art maintained at the Project;

(p)costs in connection with services (including electricity), items or other benefits of a type which are not standard for the Project and which are not available to Tenant without specific charges therefor, but which are provided to another tenant or occupant of the Project, whether or not such other tenant or occupant is specifically charged therefor by Landlord;

(q)costs incurred in the sale or refinancing of the Project;

(r)net income taxes of Landlord or the owner of any interest in the Project, franchise, capital stock, gift, estate or inheritance taxes or any federal, state or local documentary taxes imposed against the Project or any portion thereof or interest therein; 

(s)any costs incurred to remove, study, test or remediate Hazardous Materials in or about the Premises, the Building or the Project for which Tenant is not responsible under Section 30 hereof; 

 

		
	
 
	

 

 

		
	
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(t)any expenses otherwise includable as Operating Expenses to the extent actually reimbursed by insurance (or, if Landlord fails to maintain the insurance required to be carried by Landlord pursuant to Section 17, would have been reimbursed by insurance required to be carried by Landlord pursuant to Section 17); and

(u)any expenses otherwise includable within Operating Expenses to the extent actually reimbursed by persons other than tenants of the Project under leases for space in the Project.

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

The Annual Statement shall be final and binding upon Tenant unless Tenant, within 60 days after Tenant’s receipt thereof, shall contest any item therein by giving written notice to Landlord, specifying each item contested and the reason therefor.  If, during such 60 day period, Tenant reasonably and in good faith questions or contests the accuracy of Landlord’s statement of Tenant’s Share of Operating Expenses, Landlord will provide Tenant with access to Landlord’s books and records relating to the operation of the Project and such information as Landlord reasonably determines to be responsive to Tenant’s questions (the “Expense Information”).  If after Tenant’s review of such Expense Information, Landlord and Tenant cannot agree upon the amount of Tenant’s Share of Operating Expenses, then Tenant shall have the right to have an independent public accounting firm selected by Tenant from among the 4 largest in the United States, working pursuant to a fee arrangement other than a contingent fee (at Tenant’s sole cost and expense) and approved by Landlord (which approval shall not be unreasonably withheld or delayed), audit and/or review the Expense Information for the year in question (the “Independent Review”).  The results of any such Independent Review shall be binding on Landlord and Tenant.  If the Independent Review shows that the payments actually made by Tenant with respect to Operating Expenses for the calendar year in question exceeded Tenant’s Share of Operating Expenses for such calendar year, Landlord shall at Landlord’s option either (i) credit the excess amount to the next succeeding installments of estimated Operating Expenses or (ii) pay the excess to Tenant within 30 days after delivery of such statement, except that after the expiration or earlier termination of this Lease or if Tenant is delinquent in its obligation to pay Rent, Landlord shall pay the excess to Tenant after deducting all other amounts due Landlord.  If the Independent Review shows that Tenant’s payments with respect to Operating Expenses for such calendar year were less than Tenant’s Share of Operating Expenses for the calendar year, Tenant shall pay the deficiency to Landlord within 30 days after delivery of such statement.  If the Independent Review shows that Tenant has overpaid with respect to Operating Expenses by more than 5% then Landlord shall reimburse Tenant for all costs incurred by Tenant for the Independent Review. Operating Expenses for the calendar years in which Tenant’s obligation to share therein begins and ends shall be prorated.  Notwithstanding anything set forth herein to the contrary, if the Building is not at least 95% occupied on average during any year of the Term, Tenant’s Share of Operating Expenses for such year shall be computed as though the Building had been 95% occupied on average during such year. 

“Tenant’s Share” shall be the percentage set forth on the first page of this Lease as Tenant’s Share as reasonably adjusted by Landlord for changes in the physical size of the Premises or the Project occurring thereafter.  Landlord may equitably increase Tenant’s Share for any item of expense or cost reimbursable by Tenant that relates to a repair, replacement, or service that benefits only the Premises or 

 

		
	
 
	

 

 

		
	
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only a portion of the Project that includes the Premises or that varies with occupancy or use.  Base Rent, Tenant’s Share of Operating Expenses and all other amounts payable by Tenant to Landlord hereunder are collectively referred to herein as “Rent.” 

6.Security Deposit.  Tenant shall deposit with Landlord, within 10 business days after the mutual execution and delivery of this Lease by the parties, a security deposit (the “Security Deposit”) for the performance of all of Tenant’s obligations hereunder in the amount set forth on page 1 of this Lease, which Security Deposit shall be in the form of an unconditional and irrevocable letter of credit (the “Letter of Credit”):  (i) in form and substance reasonably satisfactory to Landlord, (ii) naming Landlord as beneficiary, (iii) expressly allowing Landlord to draw upon it at any time from time to time by delivering to the issuer notice that Landlord is entitled to draw thereunder, (iv) issued by Silvergate Bank or another FDIC-insured financial institution reasonably satisfactory to Landlord, and (v) redeemable by presentation of a sight draft in the state of Landlord’s choice.  If Tenant does not provide Landlord with a substitute Letter of Credit complying with all of the requirements hereof at least 10 days before the stated expiration date of any then current Letter of Credit, Landlord shall have the right to draw the full amount of the current Letter of Credit and hold the funds drawn in cash without obligation for interest thereon as the Security Deposit.  The Security Deposit shall be held by Landlord as security for the performance of Tenant’s obligations under this Lease.  The Security Deposit is not an advance rental deposit or a measure of Landlord’s damages in case of Tenant’s default.  Upon each occurrence of a Default (as defined in Section 20), Landlord may use all or any part of the Security Deposit to pay delinquent payments due under this Lease, future rent damages under California Civil Code Section 1951.2, and the cost of any damage, injury, expense or liability caused by such Default, without prejudice to any other remedy provided herein or provided by law.  Landlord’s right to use the Security Deposit under this Section 6 includes the right to use the Security Deposit to pay future rent damages following the termination of this Lease pursuant to Section 21(c) below.  Upon any use of all or any portion of the Security Deposit, Tenant shall pay Landlord within 5 business days of written demand from Landlord  the amount that will restore the Security Deposit to the amount set forth on Page 1 of this Lease.  Tenant hereby waives the provisions of any law, now or hereafter in force, including, without limitation, California Civil Code Section 1950.7, which provide that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of Rent, to repair damage caused by Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums reasonably necessary to compensate Landlord for any other loss or damage, foreseeable or unforeseeable, caused by the act or omission of Tenant or any officer, employee, agent or invitee of Tenant.  Upon bankruptcy or other debtor-creditor proceedings against Tenant, the Security Deposit shall be deemed to be applied first to the payment of Rent and other charges due Landlord for periods prior to the filing of such proceedings.  If Tenant shall fully perform every provision of this Lease to be performed by Tenant, the Security Deposit, or any balance thereof (i.e., after deducting therefrom all amounts to which Landlord is entitled under the provisions of this Lease), shall be returned to Tenant (or, at Landlord’s option, to the last assignee of Tenant’s interest hereunder) within 60 days after the expiration or earlier termination of this Lease.

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

7.Use.  The Premises shall be used solely for the Permitted Use set forth in the basic lease provisions on page 1 of this Lease, and in compliance with all laws, orders, judgments, ordinances, regulations, codes, directives, permits, licenses, covenants and restrictions now or hereafter applicable to the Premises, and to the use and occupancy thereof, including, without limitation, the Americans With 

 

		
	
 
	

 

 

		
	
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Disabilities Act, 42 U.S.C. § 12101, et seq. (together with the regulations promulgated pursuant thereto, “ADA”) (collectively, “Legal Requirements” and each, a “Legal Requirement”).  Tenant shall, upon 5 days’ written notice from Landlord, discontinue any use of the Premises which is declared by any Governmental Authority (as defined in Section 9) having jurisdiction to be a violation of a Legal Requirement.  Tenant will not use or permit the Premises to be used for any purpose or in any manner that would void Tenant’s or Landlord’s insurance, increase the insurance risk, or cause the disallowance of any sprinkler or other credits.  Tenant shall not permit any part of the Premises to be used as a “place of public accommodation”, as defined in the ADA or any similar legal requirement.  Tenant shall reimburse Landlord upon 5 business days of written demand from Landlord for any additional premium charged for any such insurance policy by reason of Tenant’s failure to comply with the provisions of this Section or otherwise caused by Tenant’s use and/or occupancy of the Premises.  Tenant will use the Premises in a careful, safe and proper manner and will not commit or permit waste, overload the floor or structure of the Premises, subject the Premises to use that would damage the Premises or obstruct or interfere with the rights of Landlord or other tenants or occupants of the Project, including conducting or giving notice of any auction, liquidation, or going out of business sale on the Premises, or using or allowing the Premises to be used for any unlawful purpose.  Tenant shall cause any equipment or machinery to be installed in the Premises so as to reasonably prevent sounds or vibrations from the Premises from extending into Common Areas, or other space in the Project.  Tenant shall not place any machinery or equipment weighing 500 pounds or more in or upon the Premises or transport or move such items through the Common Areas of the Project or in the Project elevators without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed.  Except as may be provided under the Work Letter, Tenant shall not, without the prior written consent of Landlord, use the Premises in any manner which will require ventilation, air exchange, heating, gas, steam, electricity or water beyond the existing capacity of the Project as proportionately allocated to the Premises based upon Tenant’s Share as usually furnished for the Permitted Use.

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

8.Holding Over.  If, with Landlord’s express written consent, Tenant retains possession of the Premises after the termination of the Term, (i) unless otherwise agreed in such written consent, such possession shall be subject to termination by Landlord at any time upon 5 days notice, (ii) all of the other terms and provisions of this Lease (including, without limitation, the adjustment of Base Rent pursuant to Section 4 hereof) shall remain in full force and effect (excluding any expansion or renewal option or other similar right or option) during such holdover period, (iii) Tenant shall continue to pay Base Rent in the amount payable upon the date of the expiration or earlier termination of this Lease or such other amount as Landlord may indicate, in Landlord’s sole and absolute discretion, in such written consent, and (iv) all other payments shall continue under the terms of this Lease.  If Tenant remains in possession of the Premises after the expiration or earlier termination of the Term without the express written consent of Landlord, (A) Tenant shall become a tenant at sufferance upon  the terms of this Lease except that the monthly Base Rent amount shall be equal to 150% of Base Rent in effect during the last 30 days of the Term, and (B) Tenant shall be responsible for all damages suffered by Landlord resulting from or occasioned by Tenant’s holding over, including consequential damages.  No holding over by Tenant, whether with or without consent of Landlord, shall operate to extend this Lease except as otherwise expressly provided, and this Section 8 shall not be construed as consent for Tenant to retain possession 

 

		
	
 
	

 

 

		
	
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of the Premises.  Acceptance by Landlord of Rent after the expiration of the Term or earlier termination of this Lease shall not result in a renewal or reinstatement of this Lease.

9.Taxes.  Landlord shall pay, as part of Operating Expenses, all taxes, levies, fees, assessments and governmental charges of any kind, existing as of the Commencement Date or thereafter enacted (collectively referred to as “Taxes”), imposed by any federal, state, regional, municipal, local or other governmental authority or agency, including, without limitation, quasi-public agencies (collectively, “Governmental Authority”) during the Term, including, without limitation, all Taxes:  (i) imposed on or measured by or based, in whole or in part, on rent payable to (or gross receipts received by) Landlord under this Lease and/or from the rental by Landlord of the Project or any portion thereof, or (ii) based on the square footage, assessed value or other measure or evaluation of any kind of the Premises or the Project, or (iii) assessed or imposed by or on the operation or maintenance of any portion of the Premises or the Project, including parking, or (iv) assessed or imposed by, or at the direction of, or resulting from Legal Requirements, or interpretations thereof, promulgated by any Governmental Authority, or (v) imposed as a license or other fee, charge, tax, or assessment on Landlord’s business or occupation of leasing space in the Project.  Landlord may contest by appropriate legal proceedings the amount, validity, or application of any Taxes or liens securing Taxes.  Taxes shall not include any net income taxes imposed on Landlord except to the extent such net income taxes are in substitution for any Taxes payable hereunder.  If any such Tax is levied or assessed directly against Tenant, then Tenant shall be responsible for and shall pay the same at such times and in such manner as the taxing authority shall require.  Tenant shall pay, prior to delinquency, any and all Taxes levied or assessed against any personal property or trade fixtures placed by Tenant in the Premises, whether levied or assessed against Landlord or Tenant.  If any Taxes on Tenant’s personal property or trade fixtures are levied against Landlord or Landlord’s property, or if the assessed valuation of the Project is increased by a value attributable to improvements in or alterations to the Premises, whether owned by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, higher than the base valuation on which Landlord from time-to-time allocates Taxes to all tenants in the Project, Landlord shall have the right, but not the obligation, to pay such Taxes.  Landlord’s reasonable determination of any excess assessed valuation shall be binding and conclusive, absent manifest error.  The amount of any such payment by Landlord shall constitute Additional Rent due from Tenant to Landlord within 10 business days after written demand from Landlord.

10.Parking.  Subject to all matters of record, Force Majeure, a Taking (as defined in Section 19 below) and the exercise by Landlord of its rights hereunder, Tenant shall have the right, to use 62 parking spaces in those areas of the subterranean parking facility and the surface parking lot serving the Building designated for non-reserved parking, subject in each case to Landlord’s rules and regulations.  Five (5) of the parking spaces allocated to Tenant pursuant to this Section 10 may be marked by Landlord, at Tenant’s cost, as designated spaces for Tenant and/or Tenant’s guests, which designated spaces shall be located near the main entrance of the Building and otherwise in a location reasonably acceptable to Landlord and Tenant.  Landlord shall not be responsible for enforcing Tenant’s parking rights against any third parties, including other tenants of the Project or for enforcing any such reservation of parking spaces. 

11.Utilities, Services.  Landlord shall provide, subject to the terms of this Section 11, water, electricity, HVAC, light, power, sewer, and other utilities (including gas and fire sprinklers to the extent the Project is plumbed for such services), and, with respect to the Common Areas, refuse and trash collection and janitorial services (collectively, “Utilities”).  Landlord shall pay, as Operating Expenses or subject to Tenant’s reimbursement obligation, for all Utilities used on the Premises, all maintenance charges for Utilities, and any storm sewer charges or other similar charges for Utilities imposed by any Governmental Authority or Utility provider, and any taxes, penalties, surcharges or similar charges thereon.  Landlord may cause, at Landlord’s expense, any Utilities to be separately metered or charged directly to Tenant by the provider.  Tenant shall pay directly to the Utility provider, prior to delinquency, any separately metered Utilities and services which may be furnished to Tenant or the Premises during the Term.  Tenant shall pay, as part of Operating Expenses, its share of all charges for jointly metered Utilities based upon consumption, as reasonably determined by Landlord.  No interruption or failure of Utilities, from any cause whatsoever other than Landlord’s willful misconduct, shall result in eviction or constructive eviction 

 

		
	
 
	

 

 

		
	
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of Tenant, termination of this Lease or, except as otherwise provided in the immediately following paragraph, the abatement of Rent.  Tenant agrees to limit use of water and sewer with respect to Common Areas to normal restroom use.  Utilities shall be available to the Premises 24 hours per day, 7 days per week, except in the case of emergencies, as the result of Legal Requirements, the failure of any Utility provider to provide such Utilities, the performance by Landlord or any Utility provider of any installation, maintenance or repairs, or any other temporary interruptions.  Tenant shall be responsible for obtaining (from vendors reasonably acceptable to Landlord) and paying for its own janitorial services for the Premises.

Notwithstanding anything to the contrary set forth herein, if (i) a stoppage of an Essential Service (as defined below) to the Premises shall occur and such stoppage is due solely to the gross negligence or willful misconduct of Landlord and not due in any part to any act or omission on the part of Tenant or any Tenant Party or any matter beyond Landlord’s reasonable control (any such stoppage of an Essential Service being hereinafter referred to as a “Service Interruption”), and (ii) such Service Interruption continues for more than 5 consecutive days after Landlord shall have received written notice thereof from Tenant, and (iii) as a result of such Service Interruption, the conduct of Tenant’s normal operations in the Premises are materially and adversely affected, then, there shall be an abatement of one day’s Base Rent for each day during which such Service Interruption continues after such 5 day period; provided, however, that if any part of the Premises is reasonably useable for Tenant’s normal business operations or if Tenant conducts all or any part of its operations in any portion of the Premises notwithstanding such Service Interruption, then the amount of each daily abatement of Base Rent shall only be proportionate to the nature and extent of the interruption of Tenant’s normal operations or ability to use the Premises.  The rights granted to Tenant under this paragraph shall be Tenant’s sole and exclusive remedy resulting from a failure of Landlord to provide services, and Landlord shall not otherwise be liable for any loss or damage suffered or sustained by Tenant resulting from any failure or cessation of services.  For purposes hereof, the term “Essential Services” shall mean the following services:  HVAC service, water, sewer and electricity, but in each case only to the extent that Landlord has an obligation to provide same to Tenant under this Lease.  The provisions of this paragraph shall only apply as long as the original Tenant is the tenant occupying the Premises under this Lease and shall not apply to any assignee or sublessee.

Landlord’s sole obligation for either providing emergency generators or providing emergency back-up power to Tenant shall be: (i) to provide  emergency generators with not less than the capacity of the emergency generators serving the Building as of the Commencement Date, and (ii) to contract with a third party to maintain the emergency generators as per the manufacturer’s standard maintenance guidelines.  Landlord shall have no obligation to provide Tenant with operational emergency generators or back-up power or to supervise, oversee or confirm that the third party maintaining the emergency generators is maintaining the generators as per the manufacturer’s standard guidelines or otherwise.  During any period of replacement, repair or maintenance of the emergency generators when the emergency generators are not operational, including any delays thereto due to the inability to obtain parts or replacement equipment, Landlord shall have no obligation to provide Tenant with an alternative back-up generator or generators or alternative sources of back-up power.  Tenant expressly acknowledges and agrees that Landlord does not guaranty that such emergency generators will be operational at all times or that emergency power will be available to the Premises when needed.  

12.Alterations and Tenant’s Property.  Any alterations, additions, or improvements made to the Premises by or on behalf of Tenant, including additional locks or bolts of any kind or nature upon any doors or windows in the Premises, but excluding installation, removal or realignment of furniture systems (other than removal of furniture systems owned or paid for by Landlord) not involving any modifications to the structure or connections (other than by ordinary plugs or jacks) to Building Systems (as defined in Section 13) (“Alterations”) shall be subject to Landlord’s prior written consent, which may be given or withheld in Landlord’s sole discretion if any such Alteration affects the structure or Building Systems and shall not be otherwise unreasonably withheld, conditioned or delayed. Tenant may construct nonstructural, cosmetic  Alterations in the Premises without Landlord’s prior approval if the aggregate cost of all such work in any 12 month period does not exceed $25,000 (a “Notice-Only Alteration”), provided Tenant notifies Landlord in writing of such intended Notice-Only Alteration, and such notice shall be accompanied by plans, specifications, work contracts and such other information concerning the 

 

		
	
 
	

 

 

		
	
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nature and cost of the Notice-Only Alteration as may be reasonably requested by Landlord, which notice and accompanying materials shall be delivered to Landlord not less than 15 business days in advance of any proposed construction.  If Landlord approves any Alterations, Landlord may impose such conditions on Tenant in connection with the commencement, performance and completion of such Alterations as Landlord may deem appropriate in Landlord’s reasonable discretion.  Any request for approval shall be in writing, delivered not less than 15 business days in advance of any proposed construction, and accompanied by plans, specifications, bid proposals, work contracts and such other information concerning the nature and cost of the alterations as may be reasonably requested by Landlord, including the identities and mailing addresses of all contractors and first tier subcontractors performing work or supplying materials.  Landlord’s right to review plans and specifications and to monitor construction shall be solely for its own benefit, and Landlord shall have no duty to ensure that such plans and specifications or construction comply with applicable Legal Requirements.  Tenant shall cause, at its sole cost and expense, all Alterations to comply with insurance requirements and with Legal Requirements and shall implement at its sole cost and expense any alteration or modification required by Legal Requirements as a result of any Alterations.  Tenant shall pay to Landlord, as Additional Rent, on demand an amount equal to 3% of all charges incurred by Tenant or its contractors or agents in connection with any Alteration to cover Landlord’s overhead and expenses for plan review, coordination, scheduling and supervision; provided, however, that no fee shall be charged by Landlord in connection with a Notice-Only Alteration and/or if Landlord’s involvement is limited to the review and approval of Tenant’s plans.  Before Tenant begins any Alteration, Landlord may post on and about the Premises notices of non-responsibility pursuant to applicable law.  Tenant shall reimburse Landlord for, and indemnify and hold Landlord harmless from, any expense incurred by Landlord by reason of faulty work done by Tenant or its contractors, delays caused by such work, or inadequate cleanup.  

Tenant shall furnish security or make other arrangements reasonably satisfactory to Landlord to assure payment for the completion of all Alterations work free and clear of liens, and shall provide (and cause each contractor or subcontractor to provide) certificates of insurance for workers’ compensation and other coverage in amounts and from an insurance company satisfactory to Landlord, in its reasonable discretion, protecting Landlord against liability for personal injury or property damage during construction.  Upon completion of any Alterations, Tenant shall deliver to Landlord:  (i) sworn statements setting forth the names of all contractors and subcontractors who did the work and final lien waivers from all such contractors and subcontractors; and (ii) “as built” plans for any such Alteration, if the nature of such Alteration required such plans.

Except for Removable Installations (as hereinafter defined), all Installations (as hereinafter defined) shall be and shall remain the property of Landlord during the Term and following the expiration or earlier termination of the Term, shall not be removed by Tenant at any time during the Term, and shall remain upon and be surrendered with the Premises as a part thereof.  Notwithstanding the foregoing, Landlord shall, if requested in writing by Tenant at the time Landlord’s approval of any such Installation is requested, or at the time it receives notice of a Notice-Only Alteration, notify Tenant whether Landlord requires that Tenant remove such Installation upon the expiration or earlier termination of the Term, in which event Tenant shall remove such Installation in accordance with the immediately succeeding sentence.  Upon the expiration or earlier termination of the Term, Tenant shall remove (i) all wires, cables or similar equipment which Tenant has installed in the Premises or in the risers or plenums of the Building, (ii) any Installations for which Landlord has given Tenant notice of removal in accordance with the immediately preceding sentence, and (iii) all of Tenant’s Property (as hereinafter defined), and Tenant shall restore and repair any damage caused by or occasioned as a result of such removal, including, without limitation, capping off all such connections behind the walls of the Premises and repairing any holes.  During any restoration period beyond the expiration or earlier termination of the Term, Tenant shall pay Rent to Landlord as provided herein as if said space were otherwise occupied by Tenant.  

For purposes of this Lease, (x) “Removable Installations” means any items listed on Exhibit F attached hereto and any items agreed by Landlord in writing to be included on Exhibit F in the future, (y) ”Tenant’s Property” means Removable Installations and, other than Installations, any personal property or equipment of Tenant that may be removed without material damage to the Premises, and (z) ”Installations” means all property of any kind paid for as part of TI Costs or Excess TI Costs, all 

 

		
	
 
	

 

 

		
	
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Alterations, all fixtures, and all partitions, hardware, built-in machinery, built-in casework and cabinets and other similar additions, equipment, property and improvements built into the Premises so as to become an integral part of the Premises, including, without limitation, fume hoods which penetrate the roof or plenum area, built-in cold rooms, built-in warm rooms, walk-in cold rooms, walk-in warm rooms, deionized water systems, glass washing equipment, autoclaves, chillers, built-in plumbing, electrical and mechanical equipment and systems, and any power generator and transfer switch.

13.Landlord’s Repairs.  Landlord, as an Operating Expense, shall (except to the extent expressly excluded from Operating Expenses pursuant to Section 5) maintain all of the structural, exterior, parking and other Common Areas of the Project, and all Building systems serving the Premises and other portions of the Project including HVAC, electrical, mechanical, plumbing, elevators and life safety systems including fire sprinklers (collectively, “Building Systems”), in good repair, reasonable wear and tear and uninsured losses and damages caused by Tenant, or by any of Tenant’s agents, servants, employees, invitees and contractors (collectively, “Tenant Parties”) excluded.  Losses and damages caused by Tenant or any Tenant Party shall be repaired by Landlord, to the extent not covered by insurance, at Tenant’s sole cost and expense.  Landlord reserves the right to stop Building Systems services when necessary (i) by reason of accident or emergency, or (ii) for planned repairs, alterations or improvements, which are, in the reasonable judgment of Landlord, desirable or necessary to be made, until said repairs, alterations or improvements shall have been completed.  Landlord shall have no responsibility or liability for failure to supply Building Systems services during any such period of interruption; provided, however, that Landlord shall, except in case of emergency, give Tenant 24 hours advance notice of any planned stoppage of Building Systems services for routine maintenance, repairs, alterations or improvements.  Tenant shall promptly give Landlord written notice of any repair of which Tenant becomes aware required by Landlord pursuant to this Section, after which Landlord shall make a commercially reasonable effort to effect such repair within a reasonable period.  Landlord shall not be liable for any failure to make any repairs or to perform any maintenance unless such failure shall persist for an unreasonable time after Tenant’s written notice of the need for such repairs or maintenance.  Tenant waives its rights under any state or local law to terminate this Lease or to make such repairs at Landlord’s expense and agrees that the parties’ respective rights with respect to such matters shall be solely as set forth herein.  Repairs required as the result of fire, earthquake, flood, vandalism, war, or similar cause of damage or destruction shall be controlled by Section 18.

Notwithstanding anything to the contrary contained in this Lease, as of the Commencement Date, the maintenance and repair obligations for the Premises shall be allocated between Landlord and Tenant as set forth on Exhibit H attached hereto.  The maintenance obligations allocated to Tenant pursuant to Exhibit H (the “Tenant Maintenance Obligations”) shall be performed by Tenant at Tenant’s sole cost and expense.  The Tenant Maintenance Obligations shall include the procurement and maintenance of contracts, in form and substance reasonably satisfactory to Landlord, with copies to Landlord upon Landlord’s written request, for and with contractors reasonably acceptable to Landlord specializing and experienced in the respective Tenant Maintenance Obligations. Notwithstanding anything to the contrary contained herein, the scope of work of any such contracts entered into by Tenant pursuant to this paragraph shall, at a minimum, comply with manufacturer’s recommended maintenance procedures for the optimal performance of the applicable equipment.  Landlord shall, notwithstanding anything to the contrary contained in this Lease, have no obligation to perform any Tenant Maintenance Obligations. The Tenant Maintenance Obligations shall not include the right or obligation on the part of Tenant to make any structural and/or capital repairs or improvements to the Premises, and Landlord shall, during any period that Tenant is responsible for the Tenant Maintenance Obligations, continue, as part of Operating Expenses, to be responsible, as provided in the immediately preceding paragraph, for capital repairs and replacements required to be made to the Project.  If Tenant fails to maintain any portion of the Premises for which Tenant is responsible as part of the Tenant Maintenance Obligations in a manner reasonably acceptable to Landlord within the requirements of this Lease, Landlord shall have the right, but not the obligation, to provide Tenant with written notice thereof and to assume the Tenant Maintenance Obligations if Tenant does not cure Tenant’s failure within 15 days after receipt of such notice.

14.Tenant’s Repairs.  Subject to Section 13 hereof, Tenant, at its expense, shall repair, replace and maintain in good condition all interior portions of the Premises, including, without limitation, 

 

		
	
 
	

 

 

		
	
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entries, doors, ceilings, interior windows, interior walls, and the interior side of demising walls.  Should Tenant fail to make any such repair or replacement or fail to maintain the interior of the Premises, Landlord shall give Tenant written notice of such failure.  If Tenant fails to commence cure of such failure within 10 days of Landlord’s notice, and thereafter diligently prosecute such cure to completion, Landlord may perform such work and shall be reimbursed by Tenant within 10 days after demand therefor; provided, however, that if such failure by Tenant creates or could create an emergency, Landlord may immediately commence cure of such failure and shall thereafter be entitled to recover the costs of such cure from Tenant.  Subject to Sections 17 and 18, Tenant shall bear the full uninsured cost of any repair or replacement to any part of the Project that results from damage caused by Tenant or any Tenant Party and any repair that benefits only the Premises.

15.Mechanic’s Liens.  Tenant shall discharge, by bond or otherwise, any mechanic’s lien filed against the Premises or against the Project for work claimed to have been done for, or materials claimed to have been furnished to, Tenant within 15 days after Tenant receives notice of the filing thereof, at Tenant’s sole cost and shall otherwise keep the Premises and the Project free from any liens arising out of work performed, materials furnished or obligations incurred by Tenant.  Should Tenant fail to discharge any lien described herein within the time period set forth above, Landlord shall have the right, but not the obligation, to pay such claim or post a bond or otherwise provide security to eliminate the lien as a claim against title to the Project and the cost thereof shall be immediately due from Tenant as Additional Rent.  If Tenant shall lease or finance the acquisition of office equipment, furnishings, or other personal property of a removable nature utilized by Tenant in the operation of Tenant’s business, Tenant warrants that any Uniform Commercial Code Financing Statement filed as a matter of public record by any lessor or creditor of Tenant will upon its face or by exhibit thereto indicate that such Financing Statement is applicable only to removable personal property of Tenant located within the Premises.  In no event shall the address of the Project be furnished on the statement without qualifying language as to applicability of the lien only to removable personal property, located in an identified suite held by Tenant. 

16.Indemnification.  Tenant hereby indemnifies and agrees to defend, save and hold Landlord, its officers, directors, employees, managers, agents, sub-agents, constituent entities and lease signators (collectively, “Landlord Indemnified Parties”) harmless from and against any and all Claims for injury or death to persons or damage to property occurring within or about the Premises or the Project arising directly or indirectly out of use or occupancy of the Premises or the Project (including, without limitation, any act, omission or neglect by Tenant or any Tenant’s Parties in or about the Premises or at the Project) or the a breach or default by Tenant in the performance of any of its obligations hereunder, except to the extent caused by the willful misconduct or gross negligence of Landlord Indemnified Parties.  Landlord shall not be liable to Tenant for, and Tenant assumes all risk of damage to, personal property (including, without limitation, loss of records kept within the Premises).  Tenant further waives any and all Claims for injury to Tenant’s business or loss of income relating to any such damage or destruction of personal property (including, without limitation, any loss of records).  Landlord Indemnified Parties shall not be liable for any damages arising from any act, omission or neglect of any tenant in the Project or of any other third party or Tenant Parties.

17.Insurance.  Landlord shall maintain all risk property and, if applicable, sprinkler damage insurance covering the full replacement cost of the Project.  Landlord shall further procure and maintain commercial general liability insurance with a single loss limit of not less than $2,000,000 for bodily injury and property damage with respect to the Project.  Landlord may, but is not obligated to, maintain such other insurance and additional coverages as it may deem necessary, including, but not limited to, flood, environmental hazard and earthquake, loss or failure of building equipment, errors and omissions, rental loss during the period of repair or rebuilding, workers’ compensation insurance and fidelity bonds for employees employed to perform services and insurance for any improvements installed by Tenant or which are in addition to the standard improvements customarily furnished by Landlord without regard to whether or not such are made a part of the Project.  All such insurance shall be included as part of the Operating Expenses.  The Project may be included in a blanket policy (in which case the cost of such insurance allocable to the Project will be determined by Landlord based upon the insurer’s cost calculations).  Tenant shall also reimburse Landlord for any increased premiums or additional insurance which Landlord reasonably deems necessary as a result of Tenant’s use of the Premises.  

 

		
	
 
	

 

 

		
	
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Tenant, at its sole cost and expense, shall maintain during the Term:  all risk property insurance with business interruption and extra expense coverage, covering the full replacement cost of all property and improvements installed or placed in the Premises by Tenant at Tenant’s expense; workers’ compensation insurance with no less than the minimum limits required by law; employer’s liability insurance with employers liability limits of $1,000,000 bodily injury by accident – each accident, $1,000,000 bodily injury by disease – policy limit, and $1,000,000 bodily injury by disease – each employee; and commercial general liability insurance, with a minimum limit of not less than $2,000,000 per occurrence for bodily injury and property damage with respect to the Premises.  The commercial general liability insurance maintained by Tenant shall name Alexandria Real Estate Equities, Inc., and Landlord, its officers, directors, employees, managers, agents, sub-agents, constituent entities and lease signators (collectively, “Landlord Insured Parties”), as additional insureds; insure on an occurrence and not a claims-made basis; be issued by insurance companies which have a rating of not less than policyholder rating of A and financial category rating of at least Class X in “Best’s Insurance Guide”; shall not be cancelable for nonpayment of premium unless 30 days prior written notice shall have been given to Landlord from the insurer; not contain a hostile fire exclusion; contain a contractual liability endorsement; and provide primary coverage to Landlord Insured Parties (any policy issued to Landlord Insured Parties providing duplicate or similar coverage shall be deemed excess over Tenant’s policies, regardless of limits). Copies of such policies (if requested  by Landlord), or certificates of insurance showing the limits of coverage required hereunder and showing Landlord as an additional insured, along with reasonable evidence of the payment of premiums for the applicable period, shall be delivered to Landlord by Tenant prior to (i) the earlier to occur of  (x) the Commencement Date, or (y) the date that Tenant accesses the Premises under this Lease, and (ii) each renewal of said insurance.  Tenant’s policy may be a “blanket policy” with an aggregate per location endorsement which specifically provides that the amount of insurance shall not be prejudiced by other losses covered by the policy.  Tenant shall, at least 5 days prior to the expiration of such policies, furnish Landlord with renewal certificates.

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

The property insurance obtained by Landlord and Tenant shall include a waiver of subrogation by the insurers and all rights based upon an assignment from its insured, against Landlord or Tenant, and their respective officers, directors, employees, managers, agents, invitees and contractors (“Related Parties”), in connection with any loss or damage thereby insured against.  Neither party nor its respective Related Parties shall be liable to the other for loss or damage caused by any risk insured against under property insurance required to be maintained hereunder, and each party waives any claims against the other party, and its respective Related Parties, for such loss or damage.  The failure of a party to insure its property shall not void this waiver.  Landlord and its respective Related Parties shall not be liable for, and Tenant hereby waives all claims against such parties for, business interruption and losses occasioned thereby sustained by Tenant or any person claiming through Tenant resulting from any accident or occurrence in or upon the Premises or the Project from any cause whatsoever.  If the foregoing waivers shall contravene any law with respect to exculpatory agreements, the liability of Landlord or Tenant shall be deemed not released but shall be secondary to the other’s insurer.

Landlord may require insurance policy limits to be raised to conform with requirements of Landlord’s lender and/or to bring coverage limits to levels then being generally required of new tenants within the Project; provided, however, that the increased amount of coverage is consistent with coverage amounts then being required by institutional owners of similar projects with tenants occupying similar size premises in the geographical area in which the Project is located.

18.Restoration.  If, at any time during the Term, the Project or the Premises are damaged or destroyed by a fire or other insured casualty, Landlord shall notify Tenant within 60 days after 

 

		
	
 
	

 

 

		
	
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discovery of such damage as to the amount of time Landlord reasonably estimates it will take to restore the Project or the Premises, as applicable (the “Restoration Period”).  If the Restoration Period is estimated to exceed 12 months (the “Maximum Restoration Period”), Landlord may, in such notice, elect to terminate this Lease as of the date that is 75 days after the date of discovery of such damage or destruction; provided, however, that notwithstanding Landlord’s election to restore, Tenant may elect to terminate this Lease by written notice to Landlord delivered within 5 business days of receipt of a notice from Landlord estimating a Restoration Period for the Premises longer than the Maximum Restoration Period.  Unless either Landlord or Tenant so elects to terminate this Lease, Landlord shall, subject to receipt of sufficient insurance proceeds (with any deductible to be treated as a current Operating Expense), promptly restore the Premises (excluding the improvements installed by Tenant or by Landlord and paid for by Tenant), subject to delays arising from the collection of insurance proceeds, from Force Majeure events or as needed to obtain any license, clearance or other authorization of any kind required to enter into and restore the Premises issued by any Governmental Authority having jurisdiction over the use, storage, handling, treatment, generation, release, disposal, removal or remediation of Hazardous Materials (as defined in Section 30) in, on or about the Premises (collectively referred to herein as “Hazardous Materials Clearances”); provided, however, that if repair or restoration of the Premises is not substantially complete as of the end of the Maximum Restoration Period or, if longer, the Restoration Period, Landlord may, in its sole and absolute discretion, elect not to proceed with such repair and restoration, or Tenant may by written notice to Landlord delivered within 5 business days of the expiration of the Maximum Restoration Period or, if longer, the Restoration Period, elect to terminate this Lease, in which event Landlord shall be relieved of its obligation to make such repairs or restoration and this Lease shall terminate as of the date that is 75 days after the later of:  (i) discovery of such damage or destruction, or (ii) the date all required Hazardous Materials Clearances are obtained, but Landlord shall retain any Rent paid and the right to any Rent payable by Tenant prior to such election by Landlord or Tenant.

Tenant, at its expense, shall promptly perform, subject to delays arising from the collection of insurance proceeds, from Force Majeure (as defined in Section 34) events or to obtain Hazardous Material Clearances, all repairs or restoration not required to be done by Landlord.  Notwithstanding the foregoing, either Landlord or Tenant may terminate this Lease upon written notice to the other if the Premises are damaged during the last year of the Term and Landlord reasonably estimates that it will take more than 2 months to repair such damage; provided, however, that such notice is delivered within 10 business days after the date that Landlord provides Tenant with written notice of the estimated Restoration Period.  Notwithstanding anything to the contrary contained herein, Landlord shall also have the right to terminate this Lease if insurance proceeds are not available for such restoration (for any reason other than Landlord’s failure to maintain the insurance required to be maintained by Landlord pursuant to Section 17).  Rent shall be abated from the date all required Hazardous Material Clearances are obtained until the Premises are repaired and restored, in the proportion which the area of the Premises, if any, which is not usable by Tenant bears to the total area of the Premises, unless Landlord provides Tenant with other space during the period of repair that is suitable, in Tenant’s reasonable discretion, for the temporary conduct of Tenant’s business.  Such abatement shall be the sole remedy of Tenant, and except as provided in this Section 18, Tenant waives any right to terminate the Lease by reason of damage or casualty loss.

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

19.Condemnation.  If the whole or any material part of the Premises or the Project is taken for any public or quasi-public use under governmental law, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof (a “Taking” or “Taken”), and the Taking would in Landlord’s reasonable judgment, either prevent or materially interfere with Tenant’s use of the Premises or materially interfere with or impair Landlord’s ownership or operation of the Project, then upon written notice by 

 

		
	
 
	

 

 

		
	
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Landlord this Lease shall terminate and Rent shall be apportioned as of said date.  If part of the Premises shall be Taken, and this Lease is not terminated as provided above, Landlord shall promptly restore the Premises and the Project as nearly as is commercially reasonable under the circumstances to their condition prior to such partial Taking and the rentable square footage of the Building, the rentable square footage of the Premises, Tenant’s Share of Operating Expenses and the Rent payable hereunder during the unexpired Term shall be reduced to such extent as may be fair and reasonable under the circumstances.  Upon any such Taking, Landlord shall be entitled to receive the entire price or award from any such Taking without any payment to Tenant, and Tenant hereby assigns to Landlord Tenant’s interest, if any, in such award.  Tenant shall have the right, to the extent that same shall not diminish Landlord’s award, to make a separate claim against the condemning authority (but not Landlord) for such compensation as may be separately awarded or recoverable by Tenant for moving expenses and damage to Tenant’s trade fixtures, if a separate award for such items is made to Tenant.  Tenant hereby waives any and all rights it might otherwise have pursuant to any provision of state law to terminate this Lease upon a partial Taking of the Premises or the Project.

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

(a)Payment Defaults.  Tenant shall fail to pay any installment of Rent or any other payment hereunder when due; provided, however, that Landlord will give Tenant notice and an opportunity to cure any failure to pay Rent within 5 days of any such notice not more than once in any 12 month period and Tenant agrees that such notice shall be in lieu of and not in addition to, or shall be deemed to be, any notice required by law.

(b)Insurance.  Any insurance required to be maintained by Tenant pursuant to this Lease shall be canceled or terminated or shall expire or shall be reduced or materially changed, or Landlord shall receive a notice of nonrenewal of any such insurance and Tenant shall fail to obtain replacement insurance at least 20 days before the expiration of the current coverage.

(c)Abandonment.  Tenant shall abandon the Premises.  Tenant shall not be deemed to have abandoned the Premises if (i) Tenant provides Landlord with reasonable advance notice prior to vacating and, at the time of vacating the Premises, Tenant completes Tenant’s obligations with respect to the Surrender Plan in compliance with Section 28, (ii) Tenant has made reasonable arrangements with Landlord for the security of the Premises for the balance of the Term, and (iii) Tenant continues during the balance of the Term to satisfy all of its obligations under the Lease as they come due.

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

(e)Liens.  Tenant shall fail to discharge or otherwise obtain the release of any lien placed upon the Premises in violation of this Lease within 10 days after any such lien is filed against the Premises.

(f)Insolvency Events.  Tenant or any guarantor or surety of Tenant’s obligations hereunder shall:  (A) make a general assignment for the benefit of creditors; (B) commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or of any substantial part of its property (collectively a “Proceeding for Relief”); (C) become the subject of any Proceeding for Relief which is not dismissed within 90 days of its filing or entry; or (D) die or suffer a legal disability (if Tenant, guarantor, or surety is an individual) or be dissolved or otherwise fail to maintain its legal existence (if Tenant, guarantor or surety is a corporation, partnership or other entity).

 

		
	
 
	

 

 

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

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

Any notice given under Section 20(h) hereof shall:  (i) specify the alleged default, (ii) demand that Tenant cure such default, (iii) be in lieu of, and not in addition to, or shall be deemed to be, any notice required under any provision of applicable law, and (iv) not be deemed a forfeiture or a termination of this Lease unless Landlord elects otherwise in such notice; provided that if the nature of Tenant’s default pursuant to Section 20(h) is such that it cannot be cured by the payment of money and reasonably requires more than 30 days to cure, then Tenant shall not be deemed to be in default if Tenant commences such cure within said 30 day period and thereafter diligently prosecutes the same to completion; provided, however, that such cure shall be completed no later than 45 days from the date of Landlord’s notice.

21.Landlord’s Remedies.

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

(b)Late Payment Rent.  Late payment by Tenant to Landlord of Rent and other sums due will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult and impracticable to ascertain.  Such costs include, but are not limited to, processing and accounting charges and late charges which may be imposed on Landlord under any Mortgage covering the Premises.  Therefore, if any installment of Rent due from Tenant is not received by Landlord within 5 days after the date such payment is due, Tenant shall pay to Landlord an additional sum equal to 6% of the overdue Rent as a late charge.  Notwithstanding the foregoing, before assessing a late charge the first time in any calendar year, Landlord shall provide Tenant written notice of the delinquency and will waive the right if Tenant pays such delinquency within 5 days thereafter. Notwithstanding the foregoing, before assessing a late charge the first time in any calendar year, Landlord shall provide Tenant written notice of the delinquency and will waive the right if Tenant pays such delinquency within 5 days thereafter. The parties agree that this late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant.  In addition to the late charge, Rent not paid when due shall bear interest at the Default Rate from the 5th day after the date due until paid.

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

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

(ii)Upon any termination of this Lease, whether pursuant to the foregoing Section 21(c)(i) or otherwise, Landlord may recover from Tenant the following:

 

		
	
 
	

 

 

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

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

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

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

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

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

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

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

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

(d)Effect of Exercise.  Exercise by Landlord of any remedies hereunder or otherwise available shall not be deemed to be an acceptance of surrender of the Premises and/or a termination of this Lease by Landlord, it being understood that such surrender and/or termination can be effected only by the express written agreement of Landlord and Tenant.  Any law, usage, or custom to the contrary notwithstanding, Landlord shall have the right at all times to enforce the provisions of this Lease in strict accordance with the terms hereof; and the failure of Landlord at any time to enforce its rights under this 

 

		
	
 
	

 

 

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

22.Assignment and Subletting.

(a)General Prohibition.  Without Landlord’s prior written consent subject to and on the conditions described in this Section 22, Tenant shall not, directly or indirectly, voluntarily or by operation of law, assign this Lease or sublease the Premises or any part thereof or mortgage, pledge, or hypothecate its leasehold interest or grant any concession or license within the Premises, and any attempt to do any of the foregoing shall be void and of no effect.  If Tenant is a corporation, partnership or limited liability company, the shares or other ownership interests thereof which are not actively traded upon a stock exchange or in the over-the-counter market, a transfer or series of transfers whereby 50% or more of the issued and outstanding shares or other ownership interests of such corporation are, or voting control is, transferred (but excepting transfers upon deaths of individual owners) from a person or persons or entity or entities which were owners thereof at time of execution of this Lease to persons or entities who were not owners of shares or other ownership interests of the corporation, partnership or limited liability company at time of execution of this Lease, shall be deemed an assignment of this Lease requiring the consent of Landlord as provided in this Section 22.  

(b)Permitted Transfers.  If Tenant desires to assign, sublease, hypothecate or otherwise transfer this Lease or sublet the Premises other than pursuant to a Permitted Assignment (as defined below), then at least 15 days, but not more than 45 days, before the date Tenant desires the assignment or sublease to be effective (the “Assignment Date”), Tenant shall give Landlord a notice (the “Assignment Notice”) containing such information about the proposed assignee or sublessee, including the proposed use of the Premises and any Hazardous Materials proposed to be used, stored handled, treated, generated in or released or disposed of from the Premises, the Assignment Date, any relationship between Tenant and the proposed assignee or sublessee, and all material terms and conditions of the proposed assignment or sublease, including a copy of any proposed assignment or sublease in its final form, and such other information as Landlord may deem reasonably necessary or appropriate to its consideration whether to grant its consent.  Landlord may, by giving written notice to Tenant within 15 business days after receipt of the Assignment Notice:  (i) grant such consent (provided that Landlord shall further have the right to review and approve or disapprove the proposed form of sublease prior to the effective date of any such subletting), (ii) refuse such consent, in its reasonable discretion; or (iii) if the proposed sublease or assignment is for the remainder of the Term, terminate this Lease with respect to the space described in the Assignment Notice as of the Assignment Date (an “Assignment Termination”). Among other reasons, it shall be reasonable for Landlord to withhold its consent in any of these instances:  (1) the proposed assignee or subtenant is a governmental agency; (2) in Landlord’s reasonable judgment, the use of the Premises by the proposed assignee or subtenant would entail any alterations that would lessen the value of the leasehold improvements in the Premises, or would require increased services by Landlord; (3) in Landlord’s reasonable judgment, the proposed assignee or subtenant is engaged in areas of scientific research or other business concerns that are controversial; (4) in Landlord’s reasonable judgment, the proposed assignee or subtenant lacks the creditworthiness to support the financial obligations it will incur under the proposed assignment or sublease; (5) in Landlord’s reasonable judgment, the character, reputation, or business of the proposed 

 

		
	
 
	

 

 

		
	
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assignee or subtenant is inconsistent with the desired tenant-mix or the quality of other tenancies in the Project or is inconsistent with the type and quality of the nature of the Building; (6) Landlord has received from any prior landlord to the proposed assignee or subtenant a negative report concerning such prior landlord’s experience with the proposed assignee or subtenant; (7) Landlord has experienced previous defaults by or is in litigation with the proposed assignee or subtenant; (8) the use of the Premises by the proposed assignee or subtenant will violate any applicable Legal Requirement; (9) the proposed assignee or subtenant, or any entity that, directly or indirectly, controls, is controlled by, or is under common control with the proposed assignee or subtenant, is then an occupant of the Project; (10) the proposed assignee or subtenant is an entity with whom Landlord is negotiating to lease space in the Project; or (11) the assignment or sublease is prohibited by Landlord’s lender. If Landlord delivers notice of its election to exercise an Assignment Termination, Tenant shall have the right to withdraw such Assignment Notice by written notice to Landlord of such election within 5 business days after Landlord’s notice electing to exercise the Assignment Termination.  If Tenant withdraws such Assignment Notice, this Lease shall continue in full force and effect.  If Tenant does not withdraw such Assignment Notice, this Lease, and the term and estate herein granted, shall terminate as of the Assignment Date with respect to the space described in such Assignment Notice.  No failure of Landlord to exercise any such option to terminate this Lease, or to deliver a timely notice in response to the Assignment Notice, shall be deemed to be Landlord’s consent to the proposed assignment, sublease or other transfer.  Tenant shall pay to Landlord a fee equal to One Thousand Five Hundred Dollars ($1,500) in connection with its consideration of any Assignment Notice and/or its preparation or review of any consent documents.  Notwithstanding the foregoing, Landlord’s consent to an assignment of this Lease or a subletting of any portion of the Premises to any entity controlling, controlled by or under common control with Tenant (a “Control Permitted Assignment”) shall not be required, provided that Landlord shall have the right to approve the form of any such sublease or assignment, which approval shall not be unreasonably withheld, conditioned or delayed.  In addition, Tenant shall have the right to assign this Lease, upon 30 days prior written notice to Landlord but without obtaining Landlord’s prior written consent, to a corporation or other entity which is a successor-in-interest to Tenant, by way of merger, consolidation or corporate reorganization, or by the purchase of all or substantially all of the assets or the ownership interests of Tenant provided that (i) such merger or consolidation, or such acquisition or assumption, as the case may be, is for a good business purpose and not principally for the purpose of transferring the Lease, and (ii) the net worth (as determined in accordance with generally accepted accounting principles (“GAAP”)) of the assignee is not less than the greater of the net worth (as determined in accordance with GAAP) of Tenant as of (A) the Commencement Date, or (B) as of the date of Tenant’s most current quarterly or annual financial statements, and (iii) such assignee shall agree in writing to assume all of the terms, covenants and conditions of this Lease (a “Corporate Permitted Assignment”).  Control Permitted Assignments and Corporate Permitted Assignments are hereinafter referred to as “Permitted Assignments.”

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

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

(ii)A list of Hazardous Materials, certified by the proposed assignee or sublessee to be true and correct, which the proposed assignee or sublessee intends to use, store, handle, treat, generate in or release or dispose of from the Premises, together with copies of all documents relating to such use, storage, handling, treatment, generation, release or disposal of Hazardous Materials by the proposed assignee or subtenant in the Premises or on the Project, prior to the proposed assignment or subletting, including, without limitation:  permits; approvals; reports and correspondence; storage and management plans; plans relating to the installation of any storage tanks to be installed in or under the Project (provided, said installation of tanks shall 

 

		
	
 
	

 

 

		
	
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only be permitted after Landlord has given its written consent to do so, which consent may be withheld in Landlord’s sole and absolute discretion); and all closure plans or any other documents required by any and all federal, state and local Governmental Authorities for any storage tanks installed in, on or under the Project for the closure of any such tanks.  Neither Tenant nor any such proposed assignee or subtenant is required, however, to provide Landlord with any portion(s) of the such documents containing information of a proprietary nature which, in and of themselves, do not contain a reference to any Hazardous Materials or hazardous activities.

(d)No Release of Tenant, Sharing of Excess Rents.  Notwithstanding any assignment or subletting, Tenant and any guarantor or surety of Tenant’s obligations under this Lease shall at all times remain fully and primarily responsible and liable for the payment of Rent and for compliance with all of Tenant’s other obligations under this Lease.  If the Rent due and payable by a sublessee or assignee (or a combination of the rental payable under such sublease or assignment plus any bonus or other consideration therefor or incident thereto in any form) exceeds the sum of the rental payable under this Lease, (excluding however, any Rent payable under this Section) and actual and reasonable brokerage fees, legal costs and any design or construction fees directly related to and required pursuant to the terms of any such sublease (“Excess Rent”), then Tenant shall be bound and obligated to pay Landlord as Additional Rent hereunder 50% of such Excess Rent within 10 days following receipt thereof by Tenant.  If Tenant shall sublet the Premises or any part thereof, Tenant hereby immediately and irrevocably assigns to Landlord, as security for Tenant’s obligations under this Lease, all rent from any such subletting, and Landlord as assignee and as attorney-in-fact for Tenant, or a receiver for Tenant appointed on Landlord’s application, may collect such rent and apply it toward Tenant’s obligations under this Lease; except that, until the occurrence of a Default, Tenant shall have the right to collect such rent.

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

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

23.Estoppel Certificate.  Tenant shall, within 10 business days of written notice from Landlord, execute, acknowledge and deliver a statement in writing in any form reasonably requested by a proposed lender or purchaser, (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease as so modified is in full force and effect) and the dates to which the rental and other charges are paid in advance, if any, (ii) acknowledging that there are not any uncured defaults on the part of Landlord hereunder, or specifying such defaults if any are claimed, and (iii) setting forth such further information with respect to the status of this Lease or the Premises as may be reasonably requested thereon.  Any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the real property of which the Premises are a part.  Tenant’s failure to deliver such statement within 5 days after Tenant’s receipt of a 

 

		
	
 
	

 

 

		
	
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second written request from Landlord delivered after the expiration of the initial 10 business day period shall, at the option of Landlord, constitute a Default under this Lease, and, in any event, shall be conclusive upon Tenant that the Lease is in full force and effect and without modification except as may be represented by Landlord in any certificate prepared by Landlord and delivered to Tenant for execution.  

24.Quiet Enjoyment.  So long as Tenant is not in Default under this Lease, Tenant shall, subject to the terms of this Lease, at all times during the Term, have peaceful and quiet enjoyment of the Premises against any person claiming by, through or under Landlord.

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

26.Rules and Regulations.  Tenant shall, at all times during the Term and any extension thereof, comply with all reasonable rules and regulations at any time or from time to time established by Landlord covering use of the Premises and the Project.  The current rules and regulations are attached hereto as Exhibit E.  If there is any conflict between said rules and regulations and other provisions of this Lease, the terms and provisions of this Lease shall control.  Landlord shall not have any liability or obligation for the breach of any rules or regulations by other tenants in the Project and shall not enforce such rules and regulations in a discriminatory manner.

27.Subordination.  This Lease and Tenant’s interest and rights hereunder are hereby made and shall be subject and subordinate at all times to the lien of any Mortgage now existing or hereafter created on or against the Project or the Premises, and all amendments, restatements, renewals, modifications, consolidations, refinancing, assignments and extensions thereof, without the necessity of any further instrument or act on the part of Tenant; provided, however that so long as there is no Default hereunder, Tenant’s right to possession of the Premises shall not be disturbed by the Holder of any such Mortgage.  Tenant agrees, within 10 business days’ written notice from Landlord, at the election of the Holder of any such Mortgage, to attorn to any such Holder.  Tenant agrees upon written demand to execute, acknowledge and deliver such instruments, confirming such subordination, and such instruments of attornment as shall be requested by any such Holder, provided that any such instruments contain appropriate non-disturbance provisions assuring Tenant’s quiet enjoyment of the Premises as set forth in Section 24 hereof.  Notwithstanding the foregoing, any such Holder may at any time subordinate its Mortgage to this Lease, without Tenant’s consent, by notice in writing to Tenant, and thereupon this Lease shall be deemed prior to such Mortgage without regard to their respective dates of execution, delivery or recording and in that event such Holder shall have the same rights with respect to this Lease as though this Lease had been executed prior to the execution, delivery and recording of such Mortgage and had been assigned to such Holder.  The term “Mortgage” whenever used in this Lease shall be deemed to include deeds of trust, security assignments and any other encumbrances, and any reference to the “Holder” of a Mortgage shall be deemed to include the beneficiary under a deed of trust.  

28.Surrender.  Upon the expiration of the Term or earlier termination of Tenant’s right of possession, Tenant shall surrender the Premises to Landlord in substantially the same condition as received, subject to any Alterations or Installations permitted by Landlord to remain in the Premises, free of Hazardous Materials brought upon, kept, used, stored, handled, treated, generated in, or released or disposed of from, the Premises by any person other than a Landlord Party (collectively, “Tenant HazMat Operations”) and released of all Hazardous Materials Clearances, broom clean, ordinary wear and tear and casualty loss and condemnation covered by Sections 18 and 19 excepted.  At least 3 months prior to the surrender of the Premises, Tenant shall deliver to Landlord a narrative description of the actions proposed (or required by any Governmental Authority) to be taken by Tenant in order to surrender the Premises (including any Installations permitted by Landlord to remain in the Premises) at the expiration or earlier termination of the Term, free from any residual impact from the Tenant HazMat Operations and otherwise released for unrestricted use and occupancy (the “Surrender Plan”).  Such Surrender Plan shall be accompanied by a current listing of (i) all Hazardous Materials licenses and permits held by or on behalf of any Tenant Party with respect to the Premises, and (ii) all Hazardous Materials used, stored, handled, treated, generated, released or disposed of from the Premises during the Term and any holding over, and shall be subject to the review and approval of Landlord’s environmental consultant, which 

 

		
	
 
	

 

 

		
	
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approval shall not be unreasonably withheld, conditioned or delayed.  In connection with the review and approval of the Surrender Plan, upon the request of Landlord, Tenant shall deliver to Landlord or its consultant such additional non-proprietary information concerning Tenant HazMat Operations as Landlord shall request.  On or before such surrender, Tenant shall deliver to Landlord evidence that the approved Surrender Plan shall have been satisfactorily completed and Landlord shall have the right, subject to reimbursement at Tenant’s expense as set forth below, to cause Landlord’s environmental consultant to inspect the Premises and perform such additional procedures as may be deemed reasonably necessary to confirm that the Premises are, as of the effective date of such surrender or early termination of the Lease, free from any residual impact from Tenant HazMat Operations.  Tenant shall reimburse Landlord, as Additional Rent, for the actual out-of pocket expense incurred by Landlord for Landlord’s environmental consultant to review and approve the Surrender Plan and to visit the Premises and verify satisfactory completion of the same, which cost shall not exceed $2,500.  Landlord shall have the unrestricted right to deliver such Surrender Plan and any report by Landlord’s environmental consultant with respect to the surrender of the Premises to third parties. 

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

Tenant shall immediately return to Landlord all keys and/or access cards to parking, the Project, restrooms or all or any portion of the Premises furnished to or otherwise procured by Tenant.  If any such access card or key is lost, Tenant shall pay to Landlord, at Landlord’s election, either the reasonable cost of replacing such lost access card or key or the reasonable cost of reprogramming the access security system in which such access card was used or changing the lock or locks opened by such lost key.  Any Tenant’s Property, Alterations and property not so removed by Tenant as permitted or required herein shall be deemed abandoned and may be stored, removed, and disposed of by Landlord at Tenant’s expense, and Tenant waives all claims against Landlord for any damages resulting from Landlord’s retention and/or disposition of such property.  All obligations of Tenant hereunder not fully performed as of the termination of the Term, including the obligations of Tenant under Section 30 hereof, shall survive the expiration or earlier termination of the Term, including, without limitation, indemnity obligations, payment obligations with respect to Rent and obligations concerning the condition and repair of the Premises.

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

30.Environmental Requirements.

(a)Prohibition/Compliance/Indemnity.  Tenant shall not cause or permit any Hazardous Materials (as hereinafter defined) to be brought upon, kept, used, stored, handled, treated, generated  in or about, or released or disposed of from, the Premises or the Project in violation of applicable Environmental Requirements (as hereinafter defined) by Tenant or any Tenant Party.  If Tenant breaches the obligation stated in the preceding sentence, or if the presence of Hazardous Materials in the Premises during the Term, any holding over, or during any other period of occupancy of the Premises by Tenant results in contamination of the Premises, the Project or any adjacent property or if contamination of the Premises, the Project or any adjacent property by Hazardous Materials brought into, kept, used, stored, handled, treated, generated in or about, or released or disposed of from, the Premises by anyone other than Landlord and Landlord’s employees, agents and contractors otherwise occurs during the Term, any 

 

		
	
 
	

 

 

		
	
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holding over, or during any other period of occupancy of the Premises by Tenant, Tenant hereby indemnifies and shall defend and hold Landlord, its officers, directors, employees, agents and contractors harmless from any and all actions (including, without limitation, remedial or enforcement actions of any kind, administrative or judicial proceedings, and orders or judgments arising out of or resulting therefrom), costs, claims, damages (including, without limitation, punitive damages and damages based upon diminution in value of the Premises or the Project, or the loss of, or restriction on, use of the Premises or any portion of the Project), expenses (including, without limitation, attorneys’, consultants’ and experts’ fees, court costs and amounts paid in settlement of any claims or actions), fines, forfeitures or other civil, administrative or criminal penalties, injunctive or other relief (whether or not based upon personal injury, property damage, or contamination of, or adverse effects upon, the environment, water tables or natural resources), liabilities or losses (collectively, “Environmental Claims”) which arise during or after the Term as a result of such contamination.  This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, treatment, remedial, removal, or restoration work required by any federal, state or local Governmental Authority because of Hazardous Materials present in the air, soil or ground water above, on, or under the Premises.  Without limiting the foregoing, if the presence of any Hazardous Materials on the Premises, the Building, the Project or any adjacent property caused or permitted by Tenant or any Tenant Party results in any contamination of the Premises, the Building, the Project or any adjacent property, Tenant shall promptly take all actions at its sole expense and in accordance with applicable Environmental Requirements as are necessary to return the Premises, the Building, the Project or any adjacent property to the condition existing prior to the time of such contamination, provided that Landlord’s approval of such action shall first be obtained, which approval shall not unreasonably be withheld so long as such actions would not potentially have any material adverse long-term or short-term effect on the Premises, the Building or the Project. Notwithstanding anything to the contrary contained in Section 28 or this Section 30, Tenant shall not be responsible for, and the indemnification and hold harmless obligation set forth in this paragraph shall not apply to (i) contamination in the Premises which Tenant can prove to Landlord’s reasonably satisfaction existed in the Premises immediately prior to Tenant’s occupancy of the Premises, or (ii) the presence of any Hazardous Materials in the Premises which Tenant can prove to Landlord’s reasonably satisfaction migrated from outside of the Premises into the Premises, unless in either case, the presence of such Hazardous Materials (x) is the result of a breach by Tenant of any of its obligations under this Lease, or (y) was caused, contributed to or exacerbated by Tenant or any Tenant Party.

(b)Business.  Landlord acknowledges that it is not the intent of this Section 30 to prohibit Tenant from using the Premises for the Permitted Use.  Tenant may operate its business according to prudent industry practices so long as the use or presence of Hazardous Materials is strictly and properly monitored according to all then applicable Environmental Requirements.  As a material inducement to Landlord to allow Tenant to use Hazardous Materials in connection with its business, Tenant agrees to deliver to Landlord prior to the Commencement Date a list identifying each type of Hazardous Materials to be brought upon, kept, used, stored, handled, treated, generated on, or released or disposed of from, the Premises and setting forth any and all governmental approvals or permits required in connection with the presence, use, storage, handling, treatment, generation, release or disposal of such Hazardous Materials on or from the Premises (“Hazardous Materials List”).  Tenant shall deliver to Landlord an updated Hazardous Materials List at least once a year and shall also deliver an updated list before any new Hazardous Material is brought onto, kept, used, stored, handled, treated, generated on, or released or disposed of from, the Premises.  Tenant shall deliver to Landlord true and correct copies of the following documents (the “Haz Mat Documents”) relating to the use, storage, handling, treatment, generation, release or disposal of Hazardous Materials prior to the Commencement Date, or if unavailable at that time, concurrent with the receipt from or submission to a Governmental Authority:  permits; approvals; reports and correspondence; storage and management plans, notice of violations of any Legal Requirements; plans relating to the installation of any storage tanks to be installed in or under the Project (provided, said installation of tanks shall only be permitted after Landlord has given Tenant its written consent to do so, which consent may be withheld in Landlord’s sole and absolute discretion); all closure plans or any other documents required by any and all federal, state and local Governmental Authorities for any storage tanks installed in, on or under the Project for the closure of any such tanks; and a Surrender Plan (to the extent surrender in accordance with Section 28 cannot be accomplished in 3 months).  Tenant is not required, however, to provide Landlord with any portion(s) of the Haz Mat 

 

		
	
 
	

 

 

		
	
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Documents containing information of a proprietary nature which, in and of themselves, do not contain a reference to any Hazardous Materials or hazardous activities.  It is not the intent of this Section to provide Landlord with information which could be detrimental to Tenant’s business should such information become possessed by Tenant’s competitors.

(c)Tenant Representation and Warranty.  Tenant hereby represents and warrants to Landlord that (i) neither Tenant nor, to the best of Tenant’s knowledge, any of its legal predecessors has been required by any prior landlord, lender or Governmental Authority at any time to take remedial action in connection with Hazardous Materials contaminating a property which contamination was permitted by Tenant of such predecessor or resulted from Tenant’s or such predecessor’s action or use of the property in question, and (ii) Tenant is not subject to any enforcement order issued by any Governmental Authority in connection with the use, storage, handling, treatment, generation, release or disposal of Hazardous Materials (including, without limitation, any order related to the failure to make a required reporting to any Governmental Authority).  If Landlord determines that this representation and warranty was not true as of the date of this lease, Landlord shall have the right to terminate this Lease in Landlord’s sole and absolute discretion.

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

(e)Control Areas.  Tenant shall be allowed to utilize up to its pro rata share of the Hazardous Materials inventory within any control area or zone (located within the Premises), as designated by the applicable building code, for chemical use or storage.  As used in the preceding sentence, Tenant’s pro rata share of any control areas or zones located within the Premises shall be determined based on the rentable square footage that Tenant leases within the applicable control area or zone.  For purposes of example only, if a control area or zone contains 10,000 rentable square feet and 2,000 rentable square feet of a tenant’s premises are located within such control area or zone (while such premises as a whole contains 5,000 rentable square feet), the applicable tenant’s pro rata share of such control area would be 20%.

(f)Underground Tanks.  Tenant shall have no right to use or install any underground or other storage tanks at the Project.

(g)Tenant’s Obligations.  Tenant’s obligations under this Section 30 shall survive the expiration or earlier termination of the Lease.  During any period of time after the expiration or earlier termination of this Lease required by Tenant or Landlord to complete the removal from the Premises of any Hazardous Materials for which Tenant is responsible under the terms of this Lease (including, without 

 

		
	
 
	

 

 

		
	
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limitation, the release and termination of any licenses or permits restricting the use of the Premises and the completion of the approved Surrender Plan), Tenant shall continue to pay the full Rent in accordance with this Lease for any portion of the Premises not relet by Landlord in Landlord’s sole discretion, which Rent shall be prorated daily.

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

31.Tenant’s Remedies/Limitation of Liability.  Landlord shall not be in default hereunder unless Landlord fails to perform any of its obligations hereunder within 30 days after written notice from Tenant specifying such failure (unless such performance will, due to the nature of the obligation, require a period of time in excess of 30 days, then after such period of time as is reasonably necessary).  Upon any default by Landlord, Tenant shall give notice by registered or certified mail to any Holder of a Mortgage covering the Premises and to any landlord of any lease of property in or on which the Premises are located and Tenant shall offer such Holder and/or landlord a reasonable opportunity to cure the default, including time to obtain possession of the Project by power of sale or a judicial action if such should prove necessary to effect a cure; provided Landlord shall have furnished to Tenant in writing the names and addresses of all such persons who are to receive such notices.  All obligations of Landlord hereunder shall be construed as covenants, not conditions; and, except as may be otherwise expressly provided in this Lease, Tenant may not terminate this Lease for breach of Landlord’s obligations hereunder.

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

32.Inspection and Access.  Subject to the terms of this Section 32, Landlord and its agents, representatives, and contractors may enter the Premises at any reasonable time (upon not less than 48 hours advance written notice, except in the case of emergencies in which case no such notice shall be required and such entry may be at any time), to inspect the Premises and to make such repairs as may be required or permitted pursuant to this Lease and for any other business purpose.  Landlord and Landlord’s representatives may enter the Premises during business hours on not less than 48 hours advance written notice (except in the case of emergencies in which case no such notice shall be required and such entry may be at any time) for the purpose of effecting any such repairs, inspecting the Premises, showing the Premises to prospective purchasers and, during the last year of the Term, to prospective tenants or for any other business purpose.  Landlord shall use reasonable efforts to minimize interruption of Tenant’s operations in the Premises during any entry into the Premises pursuant to this Section 32.  Landlord may erect a suitable sign on the Premises stating the Premises are available to let or that the Project is available for sale.  Landlord may grant easements, make public dedications, designate Common Areas and create restrictions on or about the Premises, provided that no such easement, dedication, designation or restriction materially, adversely affects Tenant’s parking (other than 

 

		
	
 
	

 

 

		
	
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on a temporary basis) and Tenant’s use or occupancy of the Premises for the Permitted Use.  At Landlord’s request, Tenant shall execute such instruments as may be necessary for such easements, dedications or restrictions, provided that such items do not materially increase Tenant’s obligations under this Lease.  Tenant shall at all times, except in the case of emergencies, have the right to escort Landlord or its agents, representatives, contractors or guests while the same are in the Premises, provided such escort does not materially and adversely affect Landlord’s access rights hereunder.  

33.Security.  Tenant acknowledges and agrees that security devices and services, if any, while intended to deter crime may not in given instances prevent theft or other criminal acts and that Landlord is not providing any security services with respect to the Premises.  Tenant agrees that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any other breach of security with respect to the Premises.  Tenant shall be solely responsible for the personal safety of Tenant’s officers, employees, agents, contractors, guests and invitees while any such person is in, on or about the Premises and/or the Project.  Tenant shall at Tenant’s cost obtain insurance coverage to the extent Tenant desires protection against such criminal acts.

34.Force Majeure.  Landlord shall not be responsible or liable for delays in the performance of its obligations hereunder when caused by, related to, or arising out of acts of God, sinkholes or subsidence, strikes, lockouts, or other labor disputes, embargoes, quarantines, weather, national, regional, or local disasters, calamities, or catastrophes, inability to obtain labor or materials (or reasonable substitutes therefor) at reasonable costs or failure of, or inability to obtain, utilities necessary for performance, governmental restrictions, orders, limitations, regulations, or controls, national emergencies, delay in issuance or revocation of permits, enemy or hostile governmental action, terrorism, insurrection, riots, civil disturbance or commotion, fire or other casualty, and other causes or events beyond the reasonable control of Landlord (“Force Majeure”).  

35.Brokers.  Landlord and Tenant each represents and warrants that it has not dealt with any broker, agent or other person (collectively, “Broker”) in connection with this transaction and that no Broker brought about this transaction, other than Cushman & Wakefield.  Landlord and Tenant each hereby agree to indemnify and hold the other harmless from and against any claims by any Broker, other than the broker, if any named in this Section 35, claiming a commission or other form of compensation by virtue of having dealt with Tenant or Landlord, as applicable, with regard to this leasing transaction.  Landlord shall be responsible for all commissions due to Cushman & Wakefield arising out of the execution of this Lease in accordance with the terms of a separate written agreement between Cushman & Wakefield and Landlord.

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

 

		
	
 
	

 

 

		
	
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NOR SHALL ANY RECOURSE BE HAD TO ANY OTHER PROPERTY OR ASSETS OF LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS.  UNDER NO CIRCUMSTANCES SHALL LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS BE LIABLE FOR INJURY TO TENANT’S BUSINESS OR FOR ANY LOSS OF INCOME OR PROFIT THEREFROM.

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

38.Signs; Exterior Appearance.  Tenant shall not, without the prior written consent of Landlord, which may be granted or withheld in Landlord’s reasonable discretion:  (i) attach any awnings, exterior lights, decorations, balloons, flags, pennants, banners, painting or other projection to any outside wall of the Project, (ii) use any curtains, blinds, shades or screens other than Landlord’s standard window coverings, (iii) coat or otherwise sunscreen the interior or exterior of any windows, (iv) place any bottles, parcels, or other articles on the window sills, (v) place any equipment, furniture or other items of personal property on any exterior balcony, or (vi) paint, affix or exhibit on any part of the Premises or the Project any signs, notices, window or door lettering, placards, decorations, or advertising media of any type which can be viewed from the exterior of the Premises.  Interior signs on doors and the directory tablet shall be inscribed, painted or affixed for Tenant by Landlord at the sole cost and expense of Tenant, and shall be of a size, color and type acceptable to Landlord.  Nothing may be placed on the exterior of corridor walls or corridor doors other than Landlord’s standard lettering.  The directory tablet shall be provided exclusively for the display of the name and location of tenants.

Tenant shall have the non-exclusive right to display, at Tenant’s cost and expense, Tenant’s name on the monument sign serving the Building (“Monument Sign”).  Tenant acknowledges and agrees that Tenant’s signage on the Monument Sign including, without limitation, the location, size, color and type, shall be subject to Landlord’s prior written approval, which shall not be unreasonably withheld and shall be consistent with Landlord’s signage program at the Project and applicable Legal Requirements.  Tenant shall be entitled to Tenant’s pro rata share of the Monument Sign.  Tenant shall be responsible, at Tenant’s sole cost and expense, for the maintenance of Tenant’s signage on the Monument Sign, for the removal of Tenant’s signage from the Monument Sign at the expiration or earlier termination of this Lease and for the repair of all damage resulting from such removal.  For the avoidance of doubt, Landlord acknowledges that Tenant shall not be required to pay or reimburse Landlord any costs in connection with Tenant’s signage on the Monument Sign existing at the Project as of the date of this Lease and Landlord hereby approves such existing Tenant Signage on the Monument Sign.

Tenant shall have the non-exclusive right to display, at Tenant’s cost and expense, Tenant’s name on the top of the Building in a location designated by Landlord and reasonably acceptable to Tenant (“Building Sign”).  Tenant acknowledges and agrees that Tenant’s Building Sign including, without limitation, the location, size, color and type, shall be subject to Landlord’s prior written approval, which shall not be unreasonably withheld and shall be consistent with Landlord’s signage program at the Project and applicable Legal Requirements.  Tenant shall be responsible, at Tenant’s sole cost and expense, for the maintenance of Tenant’s Building Sign, for the removal of Tenant’s Building Sign at the expiration or earlier termination of this Lease and for the repair of all damage resulting from such removal.

39.Right to Expand.

(a)Right of First Refusal.  So long as Tenant is occupying 100% of the Premises, then, subject to the provisions of this Section 39, each time after the date of this Lease and prior to the expiration of the Term that Landlord intends to accept a written proposal (the “Pending Deal”) to lease all 

 

		
	
 
	

 

 

		
	
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or any portion the First Refusal Space (as hereinafter defined) to a third party, Landlord shall deliver to Tenant written notice (the “Pending Deal Notice”) of the existence of such Pending Deal and the material terms of such Pending Deal.  For purposes of this Section 39(a), “First Refusal Space” shall mean that certain portion of the Building commonly known as Suite 200, containing approximately 9,890 rentable square feet, to the extent such space is not occupied by a tenant or which is occupied by a then existing tenant whose lease is expiring within 9 months or less and such tenant does not wish to renew (whether or not such tenant has a right to renew) its occupancy of such space.  For the avoidance of doubt, Tenant shall be required to exercise its right under this Section 39(a) with respect to all of the space described in the Pending Deal Notice, including any space in addition to the First Refusal Space that is described in the Pending Deal Notice, which additional space shall be deemed to be included as part of the First Refusal Space.  Within 7 business days after Tenant’s receipt of the Pending Deal Notice, Tenant shall deliver to Landlord written notice (the “Space Acceptance Notice”) if Tenant elects to lease the First Refusal Space.  Tenant’s right to receive the Pending Deal Notice and election to lease or not lease the First Refusal Space pursuant to this Section 39(a) is hereinafter referred to as the “Right of First Refusal.”  If Tenant elects to lease the First Refusal Space described in the Pending Deal Notice by delivering the Space Acceptance Notice within the required 7 business day period, Tenant shall be deemed to agree to lease the First Refusal Space on the same general terms and conditions as this Lease except that the terms of this Lease shall be modified to reflect the terms of the Pending Deal Notice for the rental of the First Refusal Space.  Tenant acknowledges that the term of the Lease with respect to the First Refusal Space and the Term of the Lease with respect to the original Premises may not be co-terminous.  Notwithstanding anything to the contrary contained herein, in no event shall the Work Letter apply to the First Refusal Space.  If Tenant fails to deliver a Space Acceptance Notice to Landlord within the required 7 business day period, Landlord shall have the right to lease the First Refusal Space to the third party subject to the Pending Deal (or an affiliate of such third party) (“Pending Deal Party”) on substantially the same business terms and conditions set forth in the Pending Deal Notice.  Notwithstanding anything to the contrary contained in this Section 39(a), Tenant shall have no right to exercise the Right of First Refusal and the provisions of this Section 39(a) shall no longer apply (x) after the date that is 9 months prior to the expiration date of the Base Term if Tenant has not exercised its Extension Right pursuant to Section 40, or (y) after the date that is 9 months prior to the expiration of the Extension Term.  Notwithstanding anything to the contrary contained in this Lease, if Tenant exercises its Right of First Refusal pursuant to this Section 39(a), Tenant shall be deemed to have waived its Termination Right (as defined in Section 41 below), and Section 41 shall be null and void and of no further force or effect.

(b)Amended Lease.  If: (i) Tenant fails to timely deliver a Space Acceptance Notice, or (ii) after the expiration of a period of 15 days after Landlord’s delivery to Tenant of a lease amendment for Tenant’s lease of the First Refusal Space, no lease amendment for the First Refusal Space acceptable to both parties each in their sole and absolute discretion, has been executed, Tenant shall, notwithstanding anything to the contrary contained herein, be deemed to have forever waived its right to lease such First Refusal Space.

(c)Exceptions.  Notwithstanding the above, the Right of First Refusal shall, at Landlord’s option, not be in effect and may not be exercised by Tenant:

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

(ii)if Tenant has been in Default under any provision of the Lease 3 or more times, whether or not the Defaults are cured, during the 12 month period prior to the date on which Tenant seeks to exercise the Right of First Refusal.

(d)Termination.  The Right of First Refusal shall, at Landlord’s option, terminate and be of no further force or effect even after Tenant’s due and timely exercise of the Right of First Refusal if, after such exercise, but prior to the commencement date of the lease of such First Refusal Space, (i) Tenant fails to timely cure any default by Tenant under the Lease; or (ii) Tenant has Defaulted 3 or more times 

 

		
	
 
	

 

 

		
	
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during the period from the date of the exercise of the Right of First Refusal to the date of the commencement of the lease of the First Refusal Space, whether or not such Defaults are cured.

(e)Rights Personal.  The Right of First Refusal is personal to Tenant and is not assignable without Landlord’s consent, which may be granted or withheld in Landlord’s sole discretion separate and apart from any consent by Landlord to an assignment of Tenant’s interest in the Lease, except that it may be assigned in connection with any Permitted Assignment of this Lease.

(f)No Extensions.  The period of time within which the Right of First Refusal may be exercised shall not be extended or enlarged by reason of Tenant’s inability to exercise the Right of First Refusal.  

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

(a)Extension Rights.  Tenant shall have 1 right (the “Extension Right”) to extend the term of this Lease for 5 years (the “Extension Term”) on the same terms and conditions as this Lease (other than with respect to Base Rent and the Work Letter) by giving Landlord written notice of its election to exercise each Extension Right at least 9 months prior to the expiration of the Base Term of the Lease.

Upon the commencement of the Extension Term, Base Rent shall be payable at the Market Rate (as defined below).  Base Rent shall thereafter be adjusted on each annual anniversary of the commencement of such Extension Term by a percentage as determined by Landlord and agreed to by Tenant at the time the Market Rate is determined.  As used herein, “Market Rate” shall mean the rate that comparable landlords of comparable buildings have accepted in current transactions from non-equity (i.e., not being offered equity in the buildings) and nonaffiliated tenants of similar financial strength for space of comparable size, quality (including all Tenant Improvements, Alterations and other improvements) and floor height in comparable laboratory/office buildings in the Torrey Pines area of San Diego for a comparable term, with the determination of the Market Rate to take into account all relevant factors, including tenant inducements, available amenities (including, without limitation, the Amenities (as defined in Section 42 below)), age of the Building, age of mechanical systems serving the Premises, parking costs, leasing commissions, allowances or concessions, if any.  In addition, Landlord may impose a market rent for the parking rights provided hereunder.

If, on or before the date which is 270 days prior to the expiration of the Base Term of this Lease, Tenant has not agreed with Landlord’s determination of the Market Rate and the rent escalations during the Extension Term after negotiating in good faith, Tenant shall be deemed to have elected arbitration as described in Section 40(b).  Tenant acknowledges and agrees that, if Tenant has elected to exercise the Extension Right by delivering notice to Landlord as required in this Section 40(a), Tenant shall have no right thereafter to rescind or elect not to extend the term of the Lease for the Extension Term.  

(b)Arbitration.  

(i)Within 10 days of Tenant’s notice to Landlord of its election (or deemed election) to arbitrate Market Rate and escalations, each party shall deliver to the other a proposal containing the Market Rate and escalations that the submitting party believes to be correct (“Extension Proposal”).  If either party fails to timely submit an Extension Proposal, the other party’s submitted proposal shall determine the Base Rent and escalations for the Extension Term.  If both parties submit Extension Proposals, then Landlord and Tenant shall meet within 7 days after delivery of the last Extension Proposal and make a good faith attempt to mutually appoint a single Arbitrator (and defined below) to determine the Market Rate and escalations.  If Landlord and Tenant are unable to agree upon a single Arbitrator, then each shall, by written notice delivered to the other within 10 business days after the meeting, select an Arbitrator.  If either party fails to timely give notice of its selection for an Arbitrator, the other party’s submitted proposal shall determine the Base Rent for the Extension Term.  The 2 Arbitrators so appointed shall, within 5 business days after their appointment, appoint a third Arbitrator.  If the 2 Arbitrators 

 

		
	
 
	

 

 

		
	
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so selected cannot agree on the selection of the third Arbitrator within the time above specified, then either party, on behalf of both parties, may request such appointment of such third Arbitrator by application to any state court of general jurisdiction in the jurisdiction in which the Premises are located, upon 10 business days prior written notice to the other party of such intent.

(ii)The authority of the Arbitrator(s) shall be limited strictly to a selection of either Landlord’s Extension Proposal in its entirety or Tenant’s Extension Proposal in its entirety as the Extension Proposal which most closely approximates the Market Rate and escalations.  The Arbitrator(s) shall have no authority to create an independent structure of the Market Rate and escalations, combine elements of both Extension Proposals to create a third, or compromise or alter in any way any of the components of the Extension Proposals submitted by the parties. The sole decision to be made shall be which of the parties’ Extension Proposals in its entirety shall determine the Market Rate and escalations for the Extension Term.  The decision of the Arbitrator(s) shall be made within 30 days after the appointment of a single Arbitrator or the third Arbitrator, as applicable.  The decision of the single Arbitrator shall be final and binding upon the parties.  Each party shall pay the fees and expenses of the Arbitrator appointed by or on behalf of such party and the fees and expenses of the third Arbitrator shall be borne equally by both parties.  If the Market Rate and escalations are not determined by the first day of the Extension Term, then Tenant shall pay Landlord Base Rent in an amount equal to the Base Rent in effect immediately prior to the Extension Term and increased by the Rent Adjustment Percentage until such determination is made.  After the determination of the Market Rate and escalations, the parties shall make any necessary adjustments to such payments made by Tenant.  Landlord and Tenant shall then execute an amendment recognizing the Market Rate and escalations for the Extension Term.

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

(c)Rights Personal.  The Extension Right is personal to Tenant and is not assignable without Landlord’s consent, which may be granted or withheld in Landlord’s sole discretion separate and apart from any consent by Landlord to an assignment of Tenant’s interest in the Lease, except that it may be assigned in connection with any Permitted Assignment of this Lease.

(d)Exceptions.  Notwithstanding anything set forth above to the contrary, the Extension Right shall, at Landlord’s option, not be in effect and Tenant may not exercise the Extension Right:

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

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

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

(f)Termination.  The Extension Right shall, at Landlord’s option, terminate and be of no further force or effect even after Tenant’s due and timely exercise of the Extension Right, if, after such exercise, but prior to the commencement date of the Extension Term, (i) Tenant fails to timely cure any 

 

		
	
 
	

 

 

		
	
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default by Tenant under this Lease; or (ii) Tenant has Defaulted 3 or more times during the period from the date of the exercise of the Extension Right to the date of the commencement of the Extension Term, whether or not such Defaults are cured.

41.Early Termination Right.  Tenant shall have the right, subject to the provisions of this Section 41, to terminate this Lease (“Termination Right”) with respect to the entire Premises only on the last day of the 60th month after the Commencement Date (“Early Termination Date”), so long as Tenant delivers to Landlord (a) a written notice (“Termination Notice”), of its election to exercise its Termination Right no less than 9 months in advance of the Early Termination Date, and (b) concurrent with Tenant’s delivery of the Termination Notice to Landlord, an early termination payment equal to (i) the Base Rent that would have been payable for the 6 month period immediately following the Early Termination Date, plus (ii) the unamortized amount of the Excess TI Costs Allowance with interest as provided in Section 4(b) (collectively, the “Early Termination Payment”).  If Tenant timely and properly exercises the Termination Right and delivers the Early Termination Payment, Tenant shall vacate the Premises and deliver possession thereof to Landlord in the condition required by the terms of this Lease on or before the Early Termination Date and Tenant shall have no further obligations under this Lease after the Early Termination Date except for those accruing prior to the Early Termination Date and those which, pursuant to the terms of this Lease, survive the expiration or early termination of this Lease.  If Tenant (i) exercises its Right of First Refusal pursuant to Section 39(a), or (ii) does not deliver to Landlord the Termination Notice and the Early Termination Payment within the time period provided in this paragraph, Tenant shall be deemed to have waived its Termination Right and the provisions of this Section 41 shall have no further force or effect.

42.The Alexandria Amenities.

(a)Generally.  ARE-SD Region No. 17, LLC, a Delaware limited liability company (“The Alexandria Landlord”) has constructed certain amenities at the property owned by The Alexandria Landlord located at 10996 Torreyana Road, San Diego, California (“The Alexandria”), which include, without limitation, shared conference facilities (“Shared Conference Facilities”), a fitness center and restaurant (collectively, the “Amenities”) for non-exclusive use by (a) Tenant, (b) other tenants of the Project, (c) Landlord, (d) the tenants of The Alexandria Landlord, (e) The Alexandria Landlord, (f) other affiliates of Landlord, The Alexandria Landlord and Alexandria Real Estate Equities, Inc. (“ARE”), (g) the tenants of such other affiliates of Landlord, The Alexandria Landlord and ARE, and (h) any other parties permitted by The Alexandria Landlord (collectively, “Users”).  Landlord, The Alexandria Landlord, ARE, and all affiliates of Landlord, The Alexandria Landlord and ARE may be referred to collectively herein as the “ARE Parties.”  The Alexandria Landlord shall have the sole right to determine all matters related to the Amenities including, without limitation, relating to the reconfiguration, relocation, modification or removal of any of the Amenities at The Alexandria and/or to revise, expand or discontinue any of the services (if any) provided in connection with the Amenities.  

(b)License.  Commencing on the Commencement Date, and so long as The Alexandria and the Project continue to be owned by affiliates of ARE, Tenant shall have the non-exclusive right to the use of the available Amenities in common with other Users pursuant to the terms of this Section 42. Fitness center passes shall be issued to all employees of Tenant employed at the Premises.  Commencing on the Commencement Date, Tenant shall commence paying Landlord a fixed fee during the Base Term equal to $0.18 per rentable square foot of the Premises per month (“Amenities Fee”), which Amenities Fee shall by payable on the first day of each month during the Term whether or not Tenant elects to use any or all of the Amenities.  The Amenities Fee shall be increased annually on each anniversary of the Commencement Date by 3%, including during the Extension Term.  If all of the Amenities at The Alexandria become materially unavailable for use by Tenant (for any reason other than a Default by Tenant under this Lease or the default by Tenant of any agreement(s) relating to the use of the Amenities by Tenant) for a period in excess of 90 consecutive days, then, commencing on the date that the Amenities in their entirety become materially unavailable for use by Tenant and continuing for the period that the Amenities in their entirety remain materially unavailable for use by Tenant, the Amenities Fee then-currently payable by Tenant shall be abated.

 

		
	
 
	

 

 

		
	
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(c)Shared Conference Facilities.  Use by Tenant of the Shared Conference Facilities and restaurant at The Alexandria shall be in common with other Users with scheduling procedures reasonably determined by The Alexandria Landlord.  The Alexandria Landlord reserves the right to exercise its reasonable discretion in the event of conflicting scheduling requests among Users.  Tenant hereby acknowledges that (i) Biocom/San Diego, a California non-profit corporation (“Biocom”) has the right to reserve the Shared Conference Facilities and any reservable dining area(s) included within the Amenities for up to 50% of the time that such Shared Conference Facilities and reservable dining area(s) are available for use by Users each calendar month, and (ii) Illumina, Inc., a Delaware corporation, has the exclusive use of the main conference room within the Shared Conference Facilities for up to 4 days per calendar month.

Any vendors engaged by Tenant in connection with Tenant’s use of the Shared Conference Facilities shall be professional licensed vendors.  The Alexandria Landlord shall have the right to reasonably approve any vendors utilized by Tenant in connection with Tenant’s use of the Shared Conference Facilities.  Prior to any entry by any such vendor onto The Alexandria, Tenant shall deliver to Landlord a copy of the contract between Tenant and such vendor and certificates of insurance from such vendor evidencing industry standard commercial general liability, automotive liability, and workers’ compensation insurance.  Tenant shall cause all such vendors utilized by Tenant to provide a certificate of insurance naming Landlord, ARE, and The Alexandria Landlord as additional insureds under the vendor’s liability policies.  Notwithstanding the foregoing, Tenant shall be required to use the food service operator used by The Alexandria Landlord at The Alexandria for any food service or catered events held by Tenant in the Shared Conference Facilities.

Tenant shall, at Tenant’s sole cost and expense, (i) be responsible for the set-up of the Shared Conference Facilities in connection with Tenant’s use (including, without limitation ensuring that Tenant has a sufficient number of chairs and tables and the appropriate equipment), and (ii) surrender the Shared Conference Facilities after each time that Tenant uses the Shared Conference Facilities free of Tenant’s personal property, in substantially the same set up and same condition as received, and free of any debris and trash.  If Tenant fails to restore and surrender the Shared Conference Facilities as required by sub-section (ii) of the immediately preceding sentence, such failure shall constitute a “Shared Facilities Default.”  Each time that Landlord reasonably determines that Tenant has committed a Shared Facilities Default, Tenant shall be required to pay Landlord a penalty within 5 days after notice from Landlord of such Shared Facilities Default.  The penalty payable by Tenant in connection with the first Shared Facilities Default shall be $200.  The penalty payable shall increase by $50 for each subsequent Shared Facilities Default (for the avoidance of doubt, the penalty shall be $250 for the second Shared Facilities Default, shall be $300 for the third Shared Facilities Default, etc.).  In addition to the foregoing, Tenant shall be responsible for reimbursing The Alexandria Landlord or Landlord, as applicable, for all reasonable out-of-pocket costs expended by The Alexandria Landlord or Landlord, as applicable, in repairing any damage to the Shared Conference Facilities, the Amenities, or The Alexandria caused by Tenant or any Tenant Party.  The provisions of this Section 42(c) shall survive the expiration or earlier termination of this Lease.

(d)Rules and Regulations.  Tenant shall be solely responsible for paying for any and all ancillary services (e.g., audio visual equipment) provided to Tenant, all food services operators  and any other third party vendors providing services to Tenant at The Alexandria.  Tenant shall use the Amenities (including, without limitation, the Shared Conference Facilities) in compliance with all applicable Legal Requirements and any rules and regulations imposed by The Alexandria Landlord or Landlord from time to time (which rules shall not be enforced in a discriminatory manner) and in a manner that will not interfere with the rights of other Users.  The use of Amenities other than the Shared Conference Facilities by employees of Tenant shall be in accordance with the terms and conditions of the standard licenses, indemnification and waiver agreement required by The Alexandria Landlord or the operator of the Amenities to be executed by all persons wishing to use such Amenities.  Neither The Alexandria Landlord nor Landlord (nor, if applicable, any other affiliate of Landlord) shall have any liability or obligation for the breach of any rules or regulations by other Users with respect to the Amenities.  Tenant shall not make any alterations, additions, or improvements of any kind to the Shared Conference Facilities, the Amenities or The Alexandria.

 

		
	
 
	

 

 

		
	
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Tenant acknowledges and agrees that The Alexandria Landlord shall have the right at any time and from time to time to reconfigure, relocate, modify or remove any of the Amenities at The Alexandria and/or to revise, expand or discontinue any of the services (if any) provided in connection with the Amenities.

(e)Waiver of Liability and Indemnification.  Tenant warrants that it will use reasonable care to prevent damage to property and injury to persons while on The Alexandria.  To the extent permitted by applicable law, Tenant waives any claims it or any Tenant Parties may have against any ARE Parties relating to, arising out of or in connection with the Amenities and any entry by Tenant and/or any Tenant Parties onto The Alexandria, and Tenant releases and exculpates all ARE Parties from any liability relating to, arising out of or in connection with the Amenities and any entry by Tenant and/or any Tenant Parties onto The Alexandria.  Tenant hereby agrees to indemnify, defend, and hold harmless the ARE Parties from any claim of damage to property or injury to person relating to, arising out of or in connection with (i) the use of the Amenities by Tenant or any Tenant Parties, and (ii) any entry by Tenant and/or any Tenant Parties onto The Alexandria, except to the extent caused by the willful misconduct or negligence of any ARE Party.  The provisions of this Section 42 shall survive the expiration or earlier termination of this Lease.

(f)Insurance.  As of the Commencement Date, Tenant shall cause The Alexandria Landlord to be named as an additional insured under the commercial general liability policy of insurance that Tenant is required to maintain pursuant to Section 17 of this Lease.

43.Landlord’s Right to Relocate Tenant.  Landlord shall have no right to relocate Tenant to another premises during the Term of the Lease.  

44.Miscellaneous.

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

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

(c)Financial Information.  Upon Landlord’s reasonable request, Tenant shall furnish Landlord  with true and complete copies of (i) Tenant’s most recent audited annual financial statements within 90 days of the end of each of Tenant’s fiscal years during the Term, (ii) Tenant’s most recent unaudited quarterly financial statements within 45 days of the end of each of Tenant’s first three fiscal quarters of each of Tenant’s fiscal years during the Term, (iii) updated business plans, including cash flow projections and/or pro forma balance sheets and income statements, all of which shall be treated by Landlord as confidential information belonging to Tenant, (iv) corporate brochures prepared by Tenant for prospective investors, and (v) any other financial information or summaries that Tenant typically provides to its lenders or shareholders. Notwithstanding the foregoing, in no event shall Tenant be required to provide any financial information to Landlord which Tenant does not otherwise prepare (or cause to be prepared) for its own purposes.  So long as Tenant is a “public company” and its financial information is publicly available, then the foregoing delivery requirements of this Section 44(c) shall not apply.

(d)Recordation.  Neither this Lease nor a memorandum of lease shall be filed by or on behalf of Tenant in any public record.  Landlord may prepare and file, and upon request by Landlord Tenant will execute, a memorandum of lease.  

 

		
	
 
	

 

 

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

(f)Not Binding Until Executed.  The submission by Landlord to Tenant of this Lease shall have no binding force or effect, shall not constitute an option for the leasing of the Premises, nor confer any right or impose any obligations upon either party until execution of this Lease by both parties.

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

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

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

(j)OFAC.  Tenant and all beneficial owners of Tenant are currently (a) in compliance with and shall at all times during the Term of this Lease remain in compliance with the regulations of the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury and any statute, executive order, or regulation relating thereto (collectively, the “OFAC Rules”), (b) not listed on, and shall not during the term of this Lease be listed on, the Specially Designated Nationals and Blocked Persons List, Foreign Sanctions Evaders List, or the Sectoral Sanctions Identification List, which are all maintained by OFAC and/or on any other similar list maintained by OFAC or other governmental authority pursuant to any authorizing statute, executive order, or regulation, and (c) not a person or entity with whom a U.S. person is prohibited from conducting business under the OFAC Rules.

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

(l)Entire Agreement.  This Lease, including the exhibits attached hereto, constitutes the entire agreement between Landlord and Tenant pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, letters of intent, negotiations and discussions, whether oral or written, of the parties, and there are no warranties, representations or other agreements, express or implied, made to either party by the other party in connection with the subject matter hereof except as specifically set forth herein.

(m)No Accord and Satisfaction.  No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of Base Rent or any Additional Rent will be other than on account of the earliest stipulated Base Rent and Additional Rent, nor will any endorsement or statement on any check or letter accompanying a check for payment of any Base Rent or Additional Rent be an accord and satisfaction.  Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Rent or to pursue any other remedy provided in this Lease.

 

		
	
 
	

 

 

		
	
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(n)Hazardous Activities.  Notwithstanding any other provision of this Lease, Landlord, for itself and its employees, agents and contractors, reserves the right to refuse to perform any repairs or services in any portion of the Premises which, pursuant to Tenant’s routine safety guidelines, practices or custom or prudent industry practices, require any form of protective clothing or equipment other than safety glasses.  In any such case, Tenant shall contract with parties who are acceptable to Landlord, in Landlord’s reasonable discretion, for all such repairs and services, and Landlord shall, to the extent required, equitably adjust Tenant’s Share of Operating Expenses in respect of such repairs or services to reflect that Landlord is not providing such repairs or services to Tenant.

(o)Redevelopment of Project.  Tenant acknowledges that Landlord, in its sole discretion, may from time to time expand, renovate and/or reconfigure the Project as the same may exist from time to time and, in connection therewith or in addition thereto, as the case may be, from time to time without limitation:  (a) change the shape, size, location, number and/or extent of any improvements, buildings, structures, lobbies, hallways, entrances, exits, parking and/or parking areas relative to any portion of the Project; (b) modify, eliminate and/or add any buildings, improvements, and parking structure(s) either above or below grade, to the Project, the Common Areas and/or any other portion of the Project and/or make any other changes thereto affecting the same; and (c) make any other changes, additions and/or deletions in any way affecting the Project and/or any portion thereof as Landlord may elect from time to time, including without limitation, additions to and/or deletions from the land comprising the Project, the Common Areas and/or any other portion of the Project.  Notwithstanding anything to the contrary contained in this Lease, Tenant shall have no right to seek damages (including abatement of Rent) or to cancel or terminate this Lease because of any proposed changes, expansion, renovation or reconfiguration of the Project nor shall Tenant have the right to restrict, inhibit or prohibit any such changes, expansion, renovation or reconfiguration; provided, however, (i) Landlord shall not change the size, dimensions, location or Tenant’s Permitted Use of the Premises, (ii) Landlord shall not materially adversely impair Tenant’s use and access of the Premises (other than on a temporary basis), and (iii) Tenant’s financial obligations under this Lease shall not be materially increased as a result of such redevelopment.

(p)Intentionally Omitted.  

(q)EV Charging Stations.  Landlord shall not unreasonably withhold its consent to Tenant’s written request to install 1 or more electric vehicle car charging stations (“EV Stations”) in the parking area serving the Project; provided, however, that Tenant complies with all reasonable requirements, standards, rules and regulations which may be imposed by Landlord, at the time Landlord’s consent is granted, in connection with Tenant’s installation, maintenance, repair and operation of such EV Stations, which may include, without limitation, the charge to Tenant of a reasonable monthly rental amount for the parking spaces used by Tenant for such EV Stations, Landlord’s designation of the location of Tenant’s EV Stations, and Tenant’s payment of all costs whether incurred by Landlord or Tenant in connection with the installation, maintenance, repair and operation of each Tenant’s EV Station(s).  Nothing contained in this paragraph is intended to increase the number of parking spaces which Tenant is otherwise entitled to use at the Project under Section 10 of this Lease nor impose any additional obligations on Landlord with respect to Tenant’s parking rights at the Project.

(r)California Accessibility Disclosure.  For purposes of Section 1938(a) of the California Civil Code, Landlord hereby discloses to Tenant, and Tenant hereby acknowledges, that the Project has not undergone inspection by a Certified Access Specialist (CASp).  In addition, the following notice is hereby provided pursuant to Section 1938(e) of the California Civil Code:  "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."  In furtherance of and in connection with 

 

		
	
 
	

 

 

		
	
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such notice:  (i) Tenant, having read such notice and understanding Tenant's right to request and obtain a CASp inspection, hereby elects not to obtain such CASp inspection and forever waives its rights to obtain a CASp inspection with respect to the Premises, Building and/or Project to the extent permitted by Legal Requirements; and (ii) if the waiver set forth in clause (i) hereinabove is not enforceable pursuant to Legal Requirements, then Landlord and Tenant hereby agree as follows (which constitute the mutual agreement of the parties as to the matters described in the last sentence of the foregoing notice):  (A) Tenant shall have the one-time right to request for and obtain a CASp inspection, which request must be made, if at all, in a written notice delivered by Tenant to Landlord; (B) any CASp inspection timely requested by Tenant shall be conducted (1) at a time mutually agreed to by Landlord and Tenant, (2) in a professional manner by a CASp designated by Landlord and without any testing that would damage the Premises, Building or Project in any way, and (3) at Tenant's sole cost and expense, including, without limitation, Tenant's payment of the fee for such CASp inspection, the fee for any reports prepared by the CASp in connection with such CASp inspection (collectively, the "CASp Reports") and all other costs and expenses in connection therewith; (C) the CASp Reports shall be delivered by the CASp simultaneously to Landlord and Tenant; (D) Tenant, at its sole cost and expense, shall be responsible for making any improvements, alterations, modifications and/or repairs to or within the Premises to correct violations of construction-related accessibility standards including, without limitation, any violations disclosed by such CASp inspection; and (E) if such CASp inspection identifies any improvements, alterations, modifications and/or repairs necessary to correct violations of construction-related accessibility standards relating to those items of the Building and Project located outside the Premises that are Landlord's obligation to repair as set forth in this Lease, then Landlord shall perform such improvements, alterations, modifications and/or repairs as and to the extent required by Legal Requirements to correct such violations, and Tenant shall reimburse Landlord for the cost of such improvements, alterations, modifications and/or repairs within 10 business days after Tenant's receipt of an invoice therefor from Landlord.

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

 

	
TENANT:

	
 
	
 
	
 

	
ARCTURUS THERAPEUTICS, INC.,

	
a Delaware corporation

	
 
	
 
	
 

	
By:
	
 
	
/s/ Joseph E. Payne

	
Its:
	
 
	
President & CEO

 

	
LANDLORD:

	
ARE-SD REGION NO. 44, LLC,

	
 

	
a Delaware limited liability company

	
 
	
 
	
 

	
By:
	
 
	
ALEXANDRIA REAL ESTATE EQUITIES, L.P.,

	
 
	
 
	
a Delaware limited partnership,

	
 
	
 
	
managing member

	
 
	
 
	
 

 

	
By:
	
 
	
ARE-QRS CORP.,

	
 
	
 
	
a Maryland corporation,

	
 
	
 
	
general partner

 

	
By:
	
 
	
/s/ Gary Dean

	
Its:
	
 
	
Senior Vice President, RE Legal Affairs

	
 
	
 
	
 

 

 

 

 

 

		
	
 
	

 

 

		
	
 
	
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EXHIBIT A TO LEASE

DESCRIPTION OF PREMISES

 

 

		
	
 
	

 

 

		
	
 
	
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EXHIBIT B TO LEASE

DESCRIPTION OF PROJECT

The land is situated in the City of San Diego, County of San Diego, State of California, and is described as follows:

TRACT I:

PARCEL A:

PARCEL 1 OF PARCEL MAP NO. 19142 IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY JANUARY 24, 2003.

PARCEL B:

EASEMENT SET FORTH IN EASEMENT AGREEMENT (ACCESS) FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY ON DECEMBER 17, 2012, AS FILE NO. 2012- 0790636 OF OFFICIAL RECORDS.

PARCEL C:

EASEMENT SET FORTH IN EASEMENT AND ENCROACHMENT AGREEMENT (ACCESS AND UTILITY) FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY ON DECEMBER 17, 2012, AS FILE NO. 2012-0790637 OF OFFICIAL RECORDS.

PARCEL D:

EASEMENTS IN ARTICLE 8 OF DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS FOR TORREY PINES SCIENCE CENTER [UNIT 2], RECORDED JUNE 27, 1994 AS DOCUMENT NO. 1994-405385.

TRACT II:

PARCEL A:

PARCEL 1 OF PARCEL MAP NO. 19102, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, NOVEMBER 15, 2002 AS FILE NO. 2002-1027004.

PARCEL B:

AN EASEMENT FOR ACCESS, INGRESS AND EGRESS, AND UNDERGROUND UTILITIES, OVER, UNDER, ALONG AND ACROSS AND THROUGH THAT PORTION OF PARCEL 3 OF PARCEL MAP NO. 17448, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, AS GRANTED AND DESCRIBED IN THAT CERTAIN “GRANT OF EASEMENT” RECORDED DECEMBER 15, 1994 AS INSTRUMENT NO. 1994-0714126 OF OFFICIAL RECORDS, MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHEAST CORNER OF SAID PARCEL 3; THENCE ALONG THE BOUNDARY OF SAID PARCEL 3 SOUTH 09° 57’ 23” EAST 100.00.FEET; THENCE NORTH 52° 20’ 03” WEST 43.04 FEET; THENCE CONTINUING ALONG SAID BOUNDARY AND A PROLONGATION THEREOF NORTH 85° 10’ 39” WEST 226.16 FEET; THENCE NORTH 04° 49’ 21” EAST 50.00 FEET TO THE NORTH LINE OF SAID PARCEL 3; THENCE ALONG SAID NORTH LINE SOUTH 85° 10’ 39” EAST 212.97 FEET TO AN ANGLE POINT THEREIN; THENCE CONTINUING ALONG SAID NORTH LINE NORTH 50° 24’ 56” EAST 33.37 FEET TO THE POINT OF BEGINNING.

PARCEL C:

EASEMENTS IN ARTICLE 8 OF DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS FOR TORREY PINES SCIENCE CENTER [UNIT 2], RECORDED JUNE 27, 1994 AS DOCUMENT NO. 1994-405385.

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 2

 

TRACT III:

PARCEL A:

PARCEL 2 OF PARCEL MAP NO. 19142 IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY JANUARY 24, 2003.

PARCEL B:

EASEMENT SET FORTH IN EASEMENT AGREEMENT (STORM DRAINAGE), RECORDED AUGUST 16, 2012, AS INSTRUMENT NO. 2012-0488328 OF OFFICIAL RECORDS.

PARCEL C:

EASEMENT SET FORTH IN EASEMENT AND ENCROACHMENT AGREEMENT, RECORDED AUGUST 16, 2012, AS INSTRUMENT NO. 2012-0488330 OF OFFICIAL RECORDS.

PARCEL D:

EASEMENT SET FORTH IN EASEMENT AND ENCROACHMENT AGREEMENT (ACCESS AND UTILITY), RECORDED DECEMBER 17, 2012, AS INSTRUMENT NO. 2012-0790637 OF OFFICIAL RECORDS.

PARCEL E:

EASEMENTS IN ARTICLE 8 OF DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS FOR TORREY PINES SCIENCE CENTER [UNIT 2], RECORDED JUNE 27, 1994 AS DOCUMENT NO. 1994-0405385.

APN: 340-180-35-00 and 340-180-34-00 and 340-180-36-00

 

 

 

		
	
 
	

 

 

		
	
 
	
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EXHIBIT C TO LEASE

WORK LETTER

THIS WORK LETTER dated October 4, 2017 (this “Work Letter”) is made and entered into by and between ARE-SD REGION NO. 44, LLC, a Delaware limited liability company (“Landlord”), and ARCTURUS THERAPEUTICS, INC., a Delaware corporation (“Tenant”), and is attached to and made a part of the Lease Agreement dated October 4, 2017 (the “Lease”), by and between Landlord and Tenant.  Any initially capitalized terms used but not defined herein shall have the meanings given them in the Lease.

1.General Requirements.

(a)Tenant’s Authorized Representative.  Tenant designates Jennifer Perkins (“Tenant’s Representative”) as the only person authorized to act for Tenant pursuant to this Work Letter.  Landlord shall not be obligated to respond to or act upon any request, approval, inquiry or other communication (“Communication”) from or on behalf of Tenant in connection with this Work Letter unless such Communication is in writing from Tenant’s Representative.  Tenant may change Tenant’s Representative at any time upon not less than 5 business days advance written notice to Landlord.  Neither Tenant nor Tenant’s Representative shall be authorized to direct Landlord’s contractors in the performance of Landlord’s Work (as hereinafter defined).

(b)Landlord designates Michael Harrison and John Kavanagh (either such individual acting alone, “Landlord’s Representative”) as the only persons authorized to act for Landlord pursuant to this Work Letter.  Tenant shall not be obligated to respond to or act upon any request, approval, inquiry or other Communication from or on behalf of Landlord in connection with this Work Letter unless such Communication is in writing from Landlord’s Representative.  Landlord may change either Landlord’s Representative at any time upon not less than 5 business days advance written notice to Tenant. Landlord’s Representative shall be the sole persons authorized to direct Landlord’s contractors in the performance of Landlord’s Work.

(c)Architects, Consultants and Contractors.  Landlord and Tenant hereby acknowledge and agree that:  (i) the general contractor and any subcontractors for the Tenant Improvements shall be selected by Landlord, subject to Tenant’s approval, which approval shall not be unreasonably withheld, conditioned or delayed, and (ii) Dowler Gruman Architects shall be the architect (the “TI Architect”) for the Tenant Improvements.  

2.Tenant Improvements.

(a)Tenant Improvements Defined.  As used herein, “Tenant Improvements” shall mean all improvements to the Premises of a fixed and permanent nature as shown on the TI Construction Drawings, as defined in Section 2(c) below, which shall be constructed using finishes comparable to the finishes of the improvements in the premises occupied by Tenant at the Project as of the date of the Lease.  Other than Landlord’s Work (as defined in Section 3(a) below), Landlord shall not have any obligation whatsoever with respect to the finishing of the Premises for Tenant’s use and occupancy.

(b)Tenant’s Space Plans.  Landlord and Tenant acknowledge and agree that the plan prepared by the TI Architect attached hereto as Annex 1 (the “Space Plans”) and the scope of work attached hereto as Annex 2 (the “Scope of Work”) have been approved by both Landlord and Tenant.  Landlord and Tenant further acknowledge and agree that any changes to the Space Plans or the Scope of Work requested by Tenant constitute a Change Request the cost of which changes shall be paid for by Tenant. Tenant shall be solely responsible for all costs incurred by Landlord to alter the Building (or Landlord’s plans for the Building) as a result of Tenant’s requested changes.

 

		
	
 
	

 

 

		
	
 
	
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(c)Working Drawings.  Landlord shall cause the TI Architect to prepare and deliver to Tenant for review and comment construction plans, specifications and drawings for the Tenant Improvements (“TI Construction Drawings”), which TI Construction Drawings shall be prepared substantially in accordance with the Space Plans.  Tenant shall be solely responsible for ensuring that the TI Construction Drawings reflect Tenant’s requirements for the Tenant Improvements.  Tenant shall deliver its written comments on the TI Construction Drawings to Landlord not later than 10 business days after Tenant’s receipt of the same; provided, however, that Tenant may not disapprove any matter that is consistent with the Space Plans without submitting a Change Request.  Landlord and the TI Architect shall consider all such comments in good faith and shall, within 10 business days after receipt, notify Tenant how Landlord proposes to respond to such comments, but Tenant’s review rights pursuant to the foregoing sentence shall not delay the design or construction schedule for the Tenant Improvements.  Any disputes in connection with such comments shall be resolved in accordance with Section 2(d) hereof.  Provided that the design reflected in the TI Construction Drawings is consistent with the Space Plans, Tenant shall approve the TI Construction Drawings submitted by Landlord, unless Tenant submits a Change Request.  Once approved by Tenant, subject to the provisions of Section 4 below, Landlord shall not materially modify the TI Construction Drawings except as may be reasonably required in connection with the issuance of the TI Permit (as defined in Section 3(b) below).

(d)Approval and Completion.  It is hereby acknowledged by Landlord and Tenant that the TI Construction Drawings must be completed and approved not later than October 18, 2017, in order for the Landlord’s Work to be Substantially Complete by the Target Commencement Date (as defined in the Lease).  Upon any dispute regarding the design of the Tenant Improvements, which is not settled within 10 business days after notice of such dispute is delivered by one party to the other, Tenant may make the final decision regarding the design of the Tenant Improvements, provided (i) Tenant acts reasonably and such final decision is either consistent with or a compromise between Landlord’s and Tenant’s positions with respect to such dispute, (ii) that all costs and expenses resulting from any such decision by Tenant shall be payable by Tenant, and (iii) Tenant’s decision will not affect the base Building, structural components of the Building or any Building Systems.  Any changes to the TI Construction Drawings following Landlord’s and Tenant’s approval of same requested by Tenant shall be processed as provided in Section 4 hereof.

3.Performance of Landlord’s Work.

(a)Definition of Landlord’s Work.  As used herein, “Landlord’s Work” shall mean the work of constructing the Tenant Improvements.

Tenant shall be solely responsible for ensuring that the design and specifications for Landlord’s Work are consistent with Tenant’s requirements.  Landlord shall be responsible for obtaining all permits, approvals and entitlements necessary for Landlord’s Work, but shall have no obligation to, and shall not, secure any permits, approvals or entitlements related to Tenant’s specific use of the Premises or Tenant’s business operations therein.

(b)Commencement and Permitting.  Landlord shall commence construction of the Tenant Improvements upon obtaining a building permit (the “TI Permit”) authorizing the construction of the Tenant Improvements consistent with the TI Construction Drawings approved by Tenant.  The cost of obtaining the TI Permit shall be payable by Landlord.  Tenant shall, at no additional cost to Tenant, cooperate with Landlord in obtaining the TI Permit.  If any Governmental Authority having jurisdiction over the construction of Landlord’s Work or any portion thereof shall impose terms or conditions upon the construction thereof that:  (i) are inconsistent with Landlord’s obligations hereunder, (ii) increase the cost of constructing Landlord’s Work, or (iii) will materially delay the construction of Landlord’s Work, Landlord and Tenant shall reasonably and in good faith seek means by which to mitigate or eliminate any such adverse terms and conditions.

(c)Completion of Landlord’s Work.  Landlord shall substantially complete or cause to be substantially completed Landlord’s Work in a good and workmanlike manner, in accordance with the TI Permit subject, in each case, to Minor Variations and normal “punch list” items of a non-material nature 

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 3

 

that do not interfere with the use of the Premises (“Substantial Completion” or “Substantially Complete”).  Upon Substantial Completion of Landlord’s Work, Landlord shall require the TI Architect and the general contractor to execute and deliver, for the benefit of Tenant and Landlord, a Certificate of Substantial Completion in the form of the American Institute of Architects (“AIA”) document G704.  For purposes of this Work Letter, “Minor Variations” shall mean any modifications reasonably required:  (i) to comply with all applicable Legal Requirements and/or to obtain or to comply with any required permit (including the TI Permit); (ii) to comply with any request by Tenant for modifications to Landlord’s Work; (iii) to comport with good design, engineering, and construction practices that are not material; or (iv) to make reasonable adjustments for field deviations or conditions encountered during the construction of Landlord’s Work.  

(d)Selection of Materials.  Where more than one type of material or structure is indicated on the TI Construction Drawings approved by Landlord and Tenant, the option will be selected at Landlord’s reasonable discretion after reasonable consultation with Tenant.  As to all building materials and equipment that Landlord is obligated to supply under this Work Letter, Landlord shall select the manufacturer thereof in its reasonable discretion.

(e)Delivery of the Premises.  When Landlord’s Work is Substantially Complete, subject to the remaining terms and provisions of this Section 3(e), Tenant shall accept the Premises.  Tenant’s taking possession and acceptance of the Premises shall not constitute a waiver of:  (i) any warranty with respect to workmanship (including installation of equipment) or material (exclusive of equipment provided directly by manufacturers), (ii) any non-compliance of Landlord’s Work with applicable Legal Requirements, or (iii) any claim that Landlord’s Work was not completed substantially in accordance with the TI Construction Drawings (subject to Minor Variations and such other changes as are permitted hereunder) (collectively, a “Construction Defect”).  Tenant shall have one year after Substantial Completion within which to notify Landlord of any such Construction Defect discovered by Tenant, and Landlord shall use reasonable efforts to remedy or cause the responsible contractor to remedy any such Construction Defect within 30 days thereafter.  Notwithstanding the foregoing, Landlord shall not be in default under the Lease if the applicable contractor, despite Landlord’s reasonable efforts, fails to remedy such Construction Defect within such 30-day period.  If the contractor fails to remedy such Construction Defect within a reasonable time, Landlord shall use reasonable efforts to remedy the Construction Defect within 30 days unless such Construction Defect cannot reasonably be remedied in 30 days in which case Landlord shall thereafter continue to diligently pursue such remedy. 

Tenant shall be entitled to receive the benefit of all construction warranties and manufacturer’s equipment warranties relating to equipment installed in the Premises.  If requested by Tenant, Landlord shall attempt to obtain extended warranties from manufacturers and suppliers of such equipment, but the cost of any such extended warranties shall be borne solely by Tenant.  Landlord shall promptly undertake and complete, or cause to be completed, all punch list items, which Landlord shall endeavor to complete within 30 days of Substantial Completion.

(f)Commencement Date Delay.  Except as otherwise provided in the Lease, Delivery of the Premises shall occur when Landlord’s Work has been Substantially Completed, except to the extent that completion of Landlord’s Work shall have been actually delayed by any one or more of the following causes (“Tenant Delay”):

(i)Tenant’s Representative was not available within 2 business days following Landlord’s written notice to give or receive any Communication or to take any other action required to be taken by Tenant hereunder;

(ii)Tenant’s request for Change Requests (as defined in Section 4(a) below) whether or not any such Change Requests are actually performed;

(iii)Construction of any Change Requests;

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 4

 

(iv)Tenant’s request for materials, finishes or installations requiring unusually long lead times, provided that promptly after Landlord learns of such long lead times, Landlord informs Tenant that the requested items will required unusually long lead times;

(v)Tenant’s delay in reviewing, revising or approving plans and specifications beyond the periods set forth herein;

(vi)Tenant’s delay in providing information critical to the normal progression of the Project.  Tenant shall provide such information as soon as reasonably possible, but in no event longer than one week after receipt of any request for such information from Landlord;

(vii)Tenant’s delay in making payments to Landlord for Excess TI Costs (as defined in Section 5(d) below); or

(viii)Any other act or omission by Tenant or any Tenant Party (as defined in the Lease), or persons employed by any of such persons that continues for more than 1 business day after Landlord’s written notice thereof to Tenant.

If Delivery is delayed for any of the foregoing reasons, then Landlord shall cause the TI Architect to certify the date on which the Tenant Improvements would have been completed but for such Tenant Delay and such certified date shall be the date of Delivery.

4.Changes.  Any changes requested by Tenant to the Tenant Improvements after the approval by Landlord and Tenant of the Space Plans and Scope of Work shall be requested and instituted in accordance with the provisions of this Section 4 and shall be subject to the written approval of Landlord and the TI Architect, such approval not to be unreasonably withheld, conditioned or delayed.

(a)Tenant’s Request For Changes.  If Tenant shall request changes to the Tenant Improvements (“Changes”), Tenant shall request such Changes by notifying Landlord in writing in substantially the same form as the AIA standard change order form (a “Change Request”), which Change Request shall detail the nature and extent of any such Change.  Such Change Request must be signed by Tenant’s Representative.  Landlord shall, before proceeding with any Change, use commercially reasonable efforts to respond to Tenant as soon as is reasonably possible with an estimate of:  (i) the time it will take, and (ii) the architectural and engineering fees and costs that will be incurred, to analyze such Change Request (which costs shall be paid for by Tenant to the extent actually incurred, whether or not such change is implemented).  Landlord shall thereafter submit to Tenant in writing, within 5 business days of receipt of the Change Request (or such longer period of time as is reasonably required depending on the extent of the Change Request), an analysis of the additional cost or savings involved, including, without limitation, architectural and engineering costs and the period of time, if any, that the Change will extend the date on which Landlord’s Work will be Substantially Complete.  Any such delay in the completion of Landlord’s Work caused by a Change, including any suspension of Landlord’s Work while any such Change is being evaluated and/or designed, shall be Tenant Delay.

(b)Implementation of Changes.  If Tenant:  (i) approves in writing the cost or savings and the estimated extension in the time for completion of Landlord’s Work, if any, and (ii) deposits with Landlord any Excess TI Costs required in connection with such Change, Landlord shall cause the approved Change to be instituted.  Notwithstanding any approval or disapproval by Tenant of any estimate of the delay caused by such proposed Change, the TI Architect’s determination of the amount of Tenant Delay in connection with such Change shall be final and binding on Landlord and Tenant.

5.Costs.

(a)TI Costs.  Landlord shall be responsible for the payment of design, permits and construction costs in connection with the construction of the Tenant Improvements, including, without limitation, the cost of preparing the TI Construction Drawings and the Space Plans and Landlord’s out-of-

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 5

 

pocket expenses (collectively, “TI Costs”).  Notwithstanding anything to the contrary contained herein, except as otherwise expressly provided in the Lease, TI Costs shall not include (and Landlord shall not be responsible for the cost of) furniture, personal property or other non-Building system materials or equipment, including, but not limited to, Tenant’s voice or data cabling, non-ducted biological safety cabinets and other scientific equipment not incorporated into the Tenant Improvements.

(b)Excess TI Costs.  Notwithstanding anything to the contrary contained herein, Tenant acknowledges and agrees that Landlord shall have no responsibility for any costs arising from or related to Tenant’s changes to the Space Plans or TI Construction Drawings, Tenant Delays, the cost of Changes and Change Requests which would increase any of the costs anticipated by Landlord for Landlord’s Work (collectively, “Excess TI Costs”).  Landlord shall provide Tenant with the line-item amount of any Excess TI Costs incurred along with reasonable supporting evidence but, for the avoidance of any doubt, in no event shall Landlord be required to provide Tenant with its budget for Landlord’s Work.  Tenant shall deposit with Landlord, as a condition precedent to Landlord’s obligation to complete the Tenant Improvements, 100% of the Excess TI Costs with respect to which Tenant has not elected to apply the Excess TI Costs Allowance or that exceed the Excess TI Costs Allowance. If Tenant fails to deposit such Excess TI Costs with Landlord, Landlord shall have all of the rights and remedies set forth in the Lease for nonpayment of Rent (including, but not limited to, the right to interest at the Default Rate and the right to assess a late charge).  For purposes of any litigation instituted with regard to such amounts, those amounts will be deemed Rent under the Lease.

(c)Excess TI Costs Allowance.  Landlord shall provide to Tenant an “Excess TI Costs Allowance” in the maximum amount of $20.00 per rentable square foot of the Premises, or $494,100 in the aggregate, which shall, to the extent used, result in Additional Rent as set forth in Section 4(b) of the Lease.  The Excess Costs Allowance may be used only for the payment of Excess TI Costs.

(d)Allowance.  Landlord shall make available to Tenant an allowance of up to $3.00 per rentable square foot of the Premises, or $74,115.00 in the aggregate (the “Allowance”) for the costs of Tenant’s cabling, Tenant’s signage and the cost of other items reasonably acceptable to Landlord (“Acceptable Items”).  Landlord shall reimburse Tenant for the actual reasonable cost of Acceptable Items within 30 days after Tenant’s delivery to Landlord of invoices and other evidence reasonably requested by Landlord reflecting the actual reasonable costs incurred by Tenant for such Acceptable Items.  The Allowance shall only be available for use by Tenant for costs incurred by Tenant for Acceptable Items during the period commencing on the execution date of the Lease through the date that is 90 days after the Commencement Date (such period, the “Allowance Reimbursement Period”).  Any portion of the Allowance with respect to which Landlord has not received an invoice (and/or other evidence reasonably requested by Landlord) within 90 days after the Allowance Reimbursement Period for costs incurred during the Allowance Reimbursement Period shall be forfeited and shall not be available for use by Tenant.

6.Tenant Access.

(a)Tenant’s Access Rights.  Landlord hereby agrees to permit Tenant access, at Tenant’s sole risk and expense, to the Building (i) 30 days prior to the Commencement Date to perform any work (“Tenant’s Work”) required by Tenant other than Landlord’s Work, provided that such Tenant’s Work is coordinated with the TI Architect and the general contractor, and complies with the Lease and all other reasonable restrictions and conditions Landlord may impose, and (ii) prior to the completion of Landlord’s Work, to inspect and observe work in process; all such access shall be during normal business hours or at such other times as are reasonably designated by Landlord.  Notwithstanding the foregoing, Tenant shall have no right to enter onto the Premises or the Project unless and until Tenant shall deliver to Landlord evidence reasonably satisfactory to Landlord demonstrating that any insurance reasonably required by Landlord in connection with such pre-commencement access (including, but not limited to, any insurance that Landlord may require pursuant to the Lease) is in full force and effect.  Any entry by Tenant shall comply with all established safety practices of Landlord’s contractor and Landlord until completion of Landlord’s Work and acceptance thereof by Tenant.

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 6

 

(b)No Interference.  Neither Tenant nor any Tenant Party (as defined in the Lease) shall interfere with the performance of Landlord’s Work, nor with any inspections or issuance of final approvals by applicable Governmental Authorities, and upon any such interference, Landlord shall have the right to exclude Tenant and any Tenant Party from the portions of the Premises in which the Tenant Improvements are being constructed until Substantial Completion of Landlord’s Work.

(c)No Acceptance of Premises.  The fact that Tenant may, with Landlord’s consent, enter into the Project prior to the date Landlord’s Work is Substantially Complete for the purpose of performing Tenant’s Work shall not be deemed an acceptance by Tenant of possession of the Premises, but in such event Tenant shall defend with counsel reasonably acceptable by Landlord, indemnify and hold Landlord harmless from and against any loss of or damage to Tenant’s property, completed work, fixtures, equipment, materials or merchandise, and from liability for death of, or injury to, any person, caused by the act or omission of Tenant or any Tenant Party.

7.Miscellaneous.

(a)Consents.  Whenever consent or approval of either party is required under this Work Letter, that party shall not unreasonably withhold, condition or delay such consent or approval, unless expressly set forth herein to the contrary.

(b)Modification.  No modification, waiver or amendment of this Work Letter or of any of its conditions or provisions shall be binding upon Landlord or Tenant unless in writing signed by Landlord and Tenant.

(c)No Default Funding.  In no event shall Landlord have any obligation perform any Landlord’s Work during any period that Tenant is in Default under the Lease.

 

		
	
 
	

 

 

		
	
 
	
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Annex 1

Space Plans

 

		
	
 
	

 

 

		
	
 
	
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Annex 2

Scope of Work

GENERAL BASE BUILDING INFORMATION

 

			
	
1)
	
Project:
	
24,705 square feet

	
 
	
 
	
 

	
2)
	
Buildings / Stories:
	
One (1) Building:

	
 
	
 
	
10628 Science Center Drive, San Diego CA

Level 2 - 24,705 SF (Lab / Office)

Multi-Tenant Building

	
 
	
 
	
 

	
3)
	
Construction Type:
	
Type II B, Fully Sprinklered

	
 
	
 
	
 

	
4)
	
Parking:
	
Surface Parking and Two (2) Story Underground Parking.

	
 
	
 
	
 

	
5)
	
Applicable Codes:
	
California Building Code (CBC)

	
 
	
 
	
California Electrical Code (CEC)

	
 
	
 
	
California Mechanical Code (CMC)

	
 
	
 
	
California Plumbing Code (CPC)

	
 
	
 
	
California Fire Code (CFC)

	
 
	
 
	
California Energy Code (CEC)

	
 
	
 
	
California Green Building Standards Code (GBC) 

	
 
	
 
	
Accessibility Regulations as Prescribed by the 2013 California Building Code

	
 
	
 
	
Americans with Disabilities Act Guidelines (ADA)

	
 
	
 
	
All Codes and Ordinances Adopted by the City of San Diego

	
 
	
 
	
 

	
6)
	
Landlord shall be responsible for securing all applicable design, engineering, permits and approvals required for the tenant improvement scope of work.

 

	
7)
	
LANDLORD WORK PLANS for BASE SPEC SUITE

SITE WORK / BUILDING EXTERIOR / GENERAL

	
 
	
1.
	
Exterior building facade and or shaft work to support new elevator.

	
 
	
2.
	
New restroom finishes and accessibility modifications.

	
 
	
3.
	
Existing and New supply air and exhaust air distribution systems.

	
 
	
4.
	
Laboratory air compressor and vacuum pump systems are provided as part of the house systems.

	
 
	
5.
	
Electrical infrastructure and SDGE Meters to support multitenant lab/office/campus use

	
 
	
6.
	
Standby generator and transfer switches to support tenant improvements as identified in electrical scope.

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 9

 

STRUCTURAL SYSTEMS

	
 
	
1.
	
All structural supports required for base building equipment.

MOITURE AND THERMAL PROTECTION

	
 
	
1.
	
Kraft faced batt insulation at all non-glass exterior walls and rigid insulation at spandrel glass conditions.

STAIR / LOBBY / RESTROOMS / OTHER

	
 
	
1.
	
Existing Level Two restrooms to be removed and new restroom fixtures, finishes and accessibility installed within tenant improvement area. Toilet and urinal count per floor to meet TI intended occupancy requirements.

	
 
	
2.
	
New interior lobby finishes, mechanical, LED lighting and reception desk per spec suite. Reception to have power and data.

	
 
	
3.
	
New elevator lobby finishes on level two to match tenant improvement finishes.

	
 
	
4.
	
Updated stairwell finishes to match building standards defined by landlord.

	
 
	
5.
	
Security - (3) exterior suite openings prepared for security hardware for tenant’s security vendor to trim-out, cable and program into tenant's security system.

	
 
	
6.
	
Code compliant interior signage, all other by tenant.

FINISHES

Ceilings

	
 
	
1.
	
Acoustical (ACT) lab grade ceilings in laboratory areas.

	
 
	
2.
	
Drywall hard-lid paintable ceilings at break rooms.

	
 
	
3.
	
Drywall hard-lid soffit/ceiling allowance for lobby area.

	
 
	
4.
	
Acoustical office grade (ACT) ceilings at office and conference rooms.

	
 
	
5.
	
Exposed ceilings to structural at work station and common areas.

Walls Finish

	
 
	
1.
	
General latex wall paint in lobby, offices, conference rooms and laboratory areas.

	
 
	
2.
	
Vivarium area to included cleanable paint surfaces.

Flooring

	
 
	
1.
	
Laboratory areas have VCT tile with rubber base.

	
 
	
2.
	
Lunchroom to have premium LVT.

	
 
	
3.
	
Office and conference rooms to have carpet tile flooring.

	
 
	
4.
	
Lobby flooring to be upgraded, flooring to be finalized with finishes.

	
 
	
5.
	
Main circulation corridor to have polished exposed concrete.

Glazing

	
 
	
1.
	
Storefront glazing system at entry.

	
 
	
2.
	
Re-Use of Building 1 glazing system between lab and office area or equal.

	
 
	
3.
	
Glazed wall systems at office fronts.

Millwork

	
 
	
1.
	
Custom lobby desk.

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 10

 

	
 
	
2.
	
Plastic laminate cabinets and drawers at lobby and lunch room.

Lab casework

	
 
	
1.
	
Laboratory casework base cabinets, reagent shelving and trespa or equal tops relocated from Building 1.

 

CONVEYING SYSTEMS

	
 
	
1.
	
New 4,0001b lab service elevator (Machine Room and elevator), with door opening of 4’- 0” wide. 

Elevator cab finish to be brushed stainless steel walls and ceiling.

	
 
	
2.
	
Elevator and structural systems to be permitted and delivered under separate permit from general tenant improvement permit.

	
 
	
3.
	
Sound insulation at elevator hoistways.

 

SPECIALTY EQUIPMENT

	
 
	
1.
	
None

 

HVAC SYSTEMS

Laboratory

	
 
	
1.
	
Exiting laboratory air handling unit, 100% outside air for laboratory only.

	
 
	
2.
	
Re-use of existing duct risers and mains.

	
 
	
3.
	
Option for Re-use of existing laboratory exhaust fan system and new supplemental exhaust fan systems.

	
 
	
4.
	
Building Automation System connected to existing system.

 

Office

	
 
	
1.
	
Fan coils units to support office area.

	
 
	
2.
	
Building Automation System connected to existing system.

 

Other 

	
 
	
1.
	
Electrical and mechanical room ventilation as needed. 

	
 
	
2.
	
Lobby and general open collaborator areas to be conditioned with existing or new house system.

 

PLUMBING

	
 
	
1.
	
Water and sewer services of adequate size to support the building type.

	
 
	
2.
	
Sanitary sewer, waste and vent lines associated with toilet rooms and house mechanical systems included.

	
 
	
3.
	
Water systems (ICW, IHW, DCW, DHW,) distributed to associated equipment as needed.

	
 
	
4.
	
Laboratory air compressor and laboratory vacuum distributed.

	
 
	
5.
	
DI water system by tenant.

	
 
	
6.
	
Gases not identified will be fed from point of use cylinders maintained by tenant.

	
 
	
7.
	
Condensate drains for HVAC equipment and plumbing equipment runs to nearest indirect waste receptor.

 

 

		
	
 
	

 

 

		
	
 
	
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FIRE PROTECTION / FIRE PROOFING

	
 
	
1.
	
Full building fire sprinkler system sized to meet building type and density. System includes vertical and horizontal distribution per TI test fit and to allow for final modifications.

	
 
	
2.
	
Fully functional fire alarm system to support TI, elevator monitoring and fire protection flow switches.

	
 
	
3.
	
Fireproofing and horizontal fire separations to include structural fire proofing if needed and firesafing as required to comply with Building Type.
	
 

 

ELECTRICAL SYSTEMS

	
 
	
1.
	
Primary service 4,000A for overall building.

 

Distribution

	
 
	
1.
	
Existing electrical room to be relocated with new or relocated panelboards and transformers to support 277/480Volt service as needed for power devices, equipment and lighting.
	
 

	
 
	
2.
	
Power devices for laboratory, office, lobby and conference rooms.

	
 
	
3.
	
New elevator to be installed and fed from house metered panel boards (under separate permit).

	
 
	
4.
	
New IDF riser room located on Level 2. Tenant to extend existing or new service from the building MPOE to IDF room. IDF/Server room build-out, structured cabling, security & CCTV cabling by tenant.
	
 

	
 
	
5.
	
Tele/data ring and string for laboratory and office areas. Conduit pathway for Level Two and IDF access.

	
 
	
6.
	
Single gang box for tenant card access control system.

 

Lighting

	
 
	
7.
	
New LED lighting at laboratory, office, restrooms and conferencing areas. Upgraded recessed LED lighting at lobby and conference room.

	
 
	
8.
	
New Title 24 compliant lighting control system.

 

8)LANDLORD WORK PLANS for ARCTURUS ADJUSTED TENANT IMPROVEMENT

BUILDING INTERIOR / GENERAL WORK AREAS

	
 
	
1.
	
Current Spec Suite has shell space with proposed Tenant Improvements to include Vivarium, receiving areas and laboratory support rooms as further identified within this document.
	
 

	
 
	
2.
	
Tenant Improvements include (1) boardroom.

	
 
	
3.
	
Existing and New supply air and exhaust air distribution systems.

	
 
	
4.
	
Laboratory air compressor and vacuum pump systems are provided as part of the house systems and included with (3) additional fixed lab benches to be located within the laboratory.
	
 

	
 
	
5.
	
Electrical infrastructure and SDGE Meters to support multitenant lab/office/campus use.

 

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 12

 

STRUCTURAL SYSTEMS

	
 
	
1.
	
All structural supports required for base building equipment.

MOITURE AND THERMAL PROTECTION

1.Kraft faced batt insulation at all non-glass exterior walls and rigid insulation at spandrel glass conditions.

 

GENERAL / OTHER

	
 
	
1.
	
Security - (3) interior doors and openings prepared for security hardware for tenant’s security vendor to trim-out, cable and program into tenant’s security system.

	
 
	
2.
	
Code compliant interior signage, all other by tenant.
	
 

 

FINISHES

Ceilings

	
 
	
1.
	
Acoustical (ACT) lab grade ceilings in laboratory and lab support rooms.

2.Drywall hard-lid paintable ceilings in Vivarium rooms only.

 

Walls Finish

	
 
	
1.
	
General latex wall paint in conference rooms and laboratory support areas.

2.Vivarium area to included cleanable paint surfaces.

 

Flooring 

	
 
	
1.
	
Laboratory and Laboratory Support areas have VCT tile with rubber base.

2.Vivarium rooms have solid color epoxy coating with integral cove base.

	
 
	
3.
	
Boardroom room to have carpet tile flooring.

 

Glazing

	
 
	
1.
	
Storefront glazing at partial boardroom.

 

Millwork

	
 
	
1.
	
None, See Spec Suite for areas included.

 

Lab Casework

	
 
	
2.
	
Laboratory casework base cabinets, reagent shelving and trespa or equal tops relocated from Building 1.

	
 
	
3.
	
Stainless steel benches by tenant.

 

CONVEYING SYSTEMS

	
 
	
1.
	
None, See Spec Suite for areas included.

 

SPECIALTY EQUIPMENT

	
 
	
1.
	
Environmentally controlled cold room.

 

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 13

 

HVAC SYSTEMS

Laboratory

	
 
	
1.
	
Exiting laboratory air handling unit, 100% outside air for laboratory only.

	
 
	
2.
	
Re-use of existing duct risers and mains.

	
 
	
3.
	
Option for re-use of existing laboratory exhaust fan system and new supplemental in-line exhaust fan systems.

	
 
	
4.
	
Building Automation System connected to existing system.

 

PLUMBING

	
 
	
1.
	
Water and sewer services of adequate size to support the building type.

	
 
	
2.
	
Sanitary sewer, waste and vent lines associated with toilet rooms and house mechanical systems included.

	
 
	
3.
	
Water systems (ICW, IHW, DCW, DHW,) distributed to associated equipment as needed.

	
 
	
4.
	
Laboratory air compressor and laboratory vacuum distributed at lab benches.

	
 
	
5.
	
DI water system by tenant. (2) Point of use under counter water polishing units.

	
 
	
6.
	
(1) N2 manifold and piping distribution to three lab benches.

	
 
	
7.
	
O2 and other gases not identified will be fed from point of use cylinders maintained by tenant.

	
 
	
8.
	
Condensate drains for HVAC equipment and plumbing equipment runs to nearest indirect waste receptor.

 

FIRE PROTECTION / FIRE PROOFING

	
 
	
1.
	
Full building fire sprinkler system sized to meet building type and density. System includes vertical and horizontal distribution per TI test fit and to allow for final modifications.

	
 
	
2.
	
Fully functional fire alarm system to support TI, elevator monitoring and fire protection flow switches.

	
 
	
3.
	
Fireproofing and horizontal fire separations to include structural fire proofing if needed and firesafing as required to comply with Building Type.

 

ELECTRICAL SYSTEMS

	
 
	
1.
	
Primary service 4,000A for overall building.

 

Distribution

	
 
	
1.
	
Power devices for laboratory general and specified equipment, office, lobby and conference rooms.

	
 
	
2.
	
Standby power to cold room, -20 & -80 Freezers, Incubators.

	
 
	
3.
	
New IDF riser room located on Level 2. Tenant to extend existing or new service from the building MPOE to IDF room. IDF/Server room build-out, structured cabling, security & CCTV cabling by tenant.

	
 
	
4.
	
Tele/data ring and string for laboratory and office areas. Conduit pathway for Level Two and IDF access.

	
 
	
5.
	
Single gang box for tenant card access control system.

 

Lighting

	
 
	
1.
	
New LED lighting at laboratory, vivarium and conferencing areas.

	
 
	
2.
	
New Title 24 compliant lighting control system.

 

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 1

 

EXHIBIT D TO LEASE

ACKNOWLEDGMENT OF COMMENCEMENT DATE

This ACKNOWLEDGMENT OF COMMENCEMENT DATE is made this _____ day of ______________, ____, between ARE-SD REGION NO. 44, LLC, a Delaware limited liability company (“Landlord”), and ARCTURUS THERAPEUTICS, INC., a Delaware corporation (“Tenant”), and is attached to and made a part of the Lease dated ______________, _____ (the “Lease”), by and between Landlord and Tenant.  Any initially capitalized terms used but not defined herein shall have the meanings given them in the Lease.

Landlord and Tenant hereby acknowledge and agree, for all purposes of the Lease, that the Commencement Date of the Base Term of the Lease is ______________, _____, and the termination date of the Base Term of the Lease shall be midnight on ______________, _____.  In case of a conflict between the terms of the Lease and the terms of this Acknowledgment of Commencement Date, this Acknowledgment of Commencement Date shall control for all purposes.

IN WITNESS WHEREOF, Landlord and Tenant have executed this ACKNOWLEDGMENT OF COMMENCEMENT DATE to be effective on the date first above written.

 

	
TENANT:

	
 
	
 
	
 

	
ARCTURUS THERAPEUTICS, INC.,

	
a Delaware corporation

	
 
	
 
	
 

	
By:
	
 
	
 

	
Its:
	
 
	
 

	
 
	
 
	
 

	
LANDLORD:

	
 
	
 
	
 

	
ARE-SD REGION NO. 44, LLC,

	
a Delaware limited liability company

	
 
	
 
	
 

	
By:
	
 
	
ALEXANDRIA REAL ESTATE EQUITIES, L.P.,

	
 
	
 
	
a Delaware limited partnership,

	
 
	
 
	
managing member

 

	
By:
	
 
	
ARE-QRS CORP.,

	
 
	
 
	
a Maryland corporation,

general partner

 

	
By:
	
 
	
 

	
Its:
	
 
	
 

 

 

 

 

 

		
	
 
	

 

 

		
	
Rules and Regulations
	
10628 Science Center /Arcturus - Page 1

 

EXHIBIT E TO LEASE

Rules and Regulations

1.The sidewalk, entries, and driveways of the Project shall not be obstructed by Tenant, or any Tenant Party, or used by them for any purpose other than ingress and egress to and from the Premises.

2.Tenant shall not place any objects, including antennas, outdoor furniture, etc., in the parking areas, landscaped areas or other areas outside of its Premises, or on the roof of the Project.

3.Except for animals assisting the disabled, no animals shall be allowed in the offices, halls, or corridors in the Project.

4.Tenant shall not disturb the occupants of the Project or adjoining buildings by the use of any radio or musical instrument or by the making of loud or improper noises.

5.If Tenant desires telegraphic, telephonic or other electric connections in the Premises, Landlord or its agent will direct the electrician as to where and how the wires may be introduced; and, without such direction, no boring or cutting of wires will be permitted.  Any such installation or connection shall be made at Tenant’s expense.

6.Tenant shall not install or operate any steam or gas engine or boiler, or other mechanical apparatus in the Premises, except as specifically approved in the Lease.  The use of oil, gas or inflammable liquids for heating, lighting or any other purpose is expressly prohibited.  Explosives or other articles deemed extra hazardous shall not be brought into the Project.

7.Parking any type of recreational vehicles is specifically prohibited on or about the Project.  Except for the overnight parking of operative vehicles, no vehicle of any type shall be stored in the parking areas at any time.  In the event that a vehicle is disabled, it shall be removed within 48 hours.  There shall be no “For Sale” or other advertising signs on or about any parked vehicle.  All vehicles shall be parked in the designated parking areas in conformity with all signs and other markings.  All parking will be open parking, and no reserved parking, numbering or lettering of individual spaces will be permitted except as specified by Landlord.

8.Tenant shall maintain the Premises free from rodents, insects and other pests.

9.Landlord reserves the right to exclude or expel from the Project any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs or who shall in any manner do any act in violation of the Rules and Regulations of the Project.

10.Tenant shall not cause any unnecessary labor by reason of Tenant’s carelessness or indifference in the preservation of good order and cleanliness.  Landlord shall not be responsible to Tenant for any loss of property on the Premises, however occurring, or for any damage done to the effects of Tenant by the janitors or any other employee or person.

11.Tenant shall give Landlord prompt notice of any defects in the water, lawn sprinkler, sewage, gas pipes, electrical lights and fixtures, heating apparatus, or any other service equipment affecting the Premises.

12.Tenant shall not permit storage outside the Premises, including without limitation, outside storage of trucks and other vehicles, or dumping of waste or refuse or permit any harmful materials to be placed in any drainage system or sanitary system in or about the Premises.

 

		
	
 
	

 

 

		
	
Rules and Regulations
	
10628 Science Center /Arcturus - Page 2

 

13.All moveable trash receptacles provided by the trash disposal firm for the Premises must be kept in the trash enclosure areas, if any, provided for that purpose.

14.No auction, public or private, will be permitted on the Premises or the Project.

15.No awnings shall be placed over the windows in the Premises except with the prior written consent of Landlord.

16.The Premises shall not be used for lodging, sleeping or cooking or for any immoral or illegal purposes or for any purpose other than that specified in the Lease.  No gaming devices shall be operated in the Premises.

17.Tenant shall ascertain from Landlord the maximum amount of electrical current which can safely be used in the Premises, taking into account the capacity of the electrical wiring in the Project and the Premises and the needs of other tenants, and shall not use more than such safe capacity.  Landlord’s consent to the installation of electric equipment shall not relieve Tenant from the obligation not to use more electricity than such safe capacity.

18.Tenant assumes full responsibility for protecting the Premises from theft, robbery and pilferage.

19.Tenant shall not install or operate on the Premises any machinery or mechanical devices of a nature not directly related to Tenant’s ordinary use of the Premises and shall keep all such machinery free of vibration, noise and air waves which may be transmitted beyond the Premises.

 

 

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 1

 

EXHIBIT F TO LEASE

TENANT’S PERSONAL PROPERTY

None. 

 

 

 

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 1

 

EXHIBIT G TO LEASE

TENANT’S PERSONAL PROPERTY

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 2

 

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 3

 

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 4

 

 

 

		
	
 
	

 

 

		
	
 
	
10628 Science Center /Arcturus - Page 1

 

EXHIBIT H TO LEASE

TENANT MAINTENANCE OBLIGATIONS

 

	
Maintenance Responsibilities
	
ARCTURUS
	
ARE
	
Shared

	
RO/DI Lab Water
	
✓
	
 
	
 

	
Air Compressors
	
 
	
✓
	
 

	
Vacuum Pumps
	
 
	
✓
	
 

	
Domestic backflow preventor certification - Industrial
	
 
	
✓
	
 

	
Domestic backflow preventor certification - Fire
	
 
	
✓
	
 

	
Elevators
	
 
	
✓
	
 

	
Elevator Phone Lines
	
 
	
✓
	
 

	
Fire Sprinkler System
	
 
	
✓
	
 

	
Fire Alarm System (and phone lines)
	
 
	
✓
	
 

	
Building HVAC1
	
 
	
✓
	
 

	
Smoke Fire Dampers
	
 
	
✓
	
 

	
Security2
	
✓
	
 
	
 

	
Access Controls
	
✓
	
 
	
 

	
CCTV
	
✓
	
 
	
 

	
Underground parking lot sweeping
	
 
	
✓
	
 

	
l/R Testing of electrical systems3
	
 
	
 
	
✓

	
Building Management System and Controls
	
 
	
✓
	
 

	
Monthly and Annual Generator Testing4
	
 
	
✓
	
 

	
Type 2 Fuel Oil: Delivery
	
 
	
✓
	
 

	
Heating Hot Water
	
 
	
✓
	
 

	
Water Treatment
	
 
	
✓
	
 

	
External landscaping
	
 
	
✓
	
 

	
BMS for central plant, hot water and BTU Meters
	
 
	
✓
	
 

	
Pest Control - Exterior
	
 
	
✓
	
 

	
Pest Control - Interior
	
✓
	
 
	
 

	
External Parking lot sweeping, painting, maintenance
	
 
	
✓
	
 

	
Eternal Project Security
	
 
	
✓
	
 

	
Parking & Garage Lot Lighting
	
 
	
✓
	
 

	
Outside lights and inverters
	
 
	
✓
	
 

	
Storm Drain Maintenance
	
 
	
✓
	
 

	
Roof: Annual Inspections
	
 
	
✓
	
 

	
Fire Extinguishers
	
 
	
✓
	
 

	
Emergency Showers
	
✓
	
 
	
 

	
Parking Garage Roll-Up Doors
	
 
	
✓
	
 

 

 

Notes

	
1
	
Exhaust Fans, Chiller, Fan Coils, AHU

	
2
	
Arcturus responsible for interior premises

	
3
	
Coordinated

	
4
	
Coordinatedarct-ex47_880.htm

Exhibit 4.7

EXECUTION COPY

 

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4) and Rule 24b-2

RESEARCH COLLABORATION AND LICENSE AGREEMENT

Between

Arcturus Therapeutics, Inc.

And

Janssen Pharmaceuticals, Inc.

 

 

 

i

 

EXECUTION COPY

 

INDEX OF DEFINITIONS 

 

	
ADT
	
35
	
 
	
FTE Rate
	
39

	
Affiliate
	
34
	
 
	
GLP
	
40

	
After-Acquired Third Party IP
	
35
	
 
	
Government Body
	
40

	
Agreement
	
1
	
 
	
IND
	
40

	
Annual Budget
	
5
	
 
	
Indemnifiable Losses
	
31

	
API
	
35
	
 
	
Indemnitee
	
31

	
Arcturus
	
1
	
 
	
Joint Know-How
	
40

	
Arcturus Delivery Technologies
	
35
	
 
	
Joint Patent Right
	
40

	
Arcturus Indemnitee
	
31
	
 
	
Joint Research Plan
	
40

	
Arcturus Know-How
	
35
	
 
	
JPI
	
1

	
Arcturus Nonparty Claim
	
29
	
 
	
JPI Indemnitee
	
31

	
Arcturus Patent Right
	
35
	
 
	
JPI Licensed Technology
	
40

	
Arcturus Platform Technologies
	
35
	
 
	
JPI Nonparty Claim
	
29

	
Arcturus Product-Specific Patent
	
35
	
 
	
Know-How
	
40

	
Arcturus Technology
	
36
	
 
	
Licensed Compound
	
2

	
Arcturus-Controlled Affiliate
	
35
	
 
	
Licensed Product
	
2

	
Bankrupt Party
	
34
	
 
	
Litigation Expense
	
31

	
Bankruptcy Event
	
36
	
 
	
Loss
	
31

	
Bundled Product
	
37
	
 
	
Materials
	
41

	
Business Day
	
37
	
 
	
Milestone Amount
	
12

	
Calendar Quarter
	
37
	
 
	
NA Therapeutic
	
41

	
Change of Control
	
37
	
 
	
Net Sales
	
41

	
Combination Product
	
38
	
 
	
Nonparty Claim
	
31

	
Commercially Reasonable Efforts
	
38
	
 
	
Out-of-Pocket Expenses
	
43

	
Competitive Infringement
	
38
	
 
	
Party(ies)
	
1

	
Confidential Information
	
23
	
 
	
Patent Matters
	
44

	
Control
	
38
	
 
	
Patent Right
	
43

	
Controlled Affiliate
	
39
	
 
	
Person
	
43

	
Covering
	
39
	
 
	
Phase 1 Study
	
43

	
Covers
	
39
	
 
	
Phase 2 Study
	
43

	
Currency Hedge Rate
	
39
	
 
	
Phase 3 Study
	
43

	
Demonstration of In Vivo Efficacy and
Safety
	
2

 
	
 
	
Proceeding
	
31

	
Prosecute and Maintain
	
43

	
Derived Information
	
23
	
 
	
Prosecution and Maintenance
	
43

	
Development Candidates
	
2
	
 
	
Publishing Party
	
26

	
Disclosing Party
	
23
	
 
	
Recipient
	
23

	
Effective Date
	
1
	
 
	
Regulatory Approval
	
43

	
Excluded Information
	
23
	
 
	
Representative
	
31

	
Exploit
	
39
	
 
	
Research Costs
	
5

	
FDA
	
39
	
 
	
Research Program
	
1

	
Field
	
39
	
 
	
Research Term
	
44

	
First Commercial Sale
	
39
	
 
	
Selected NA Therapeutic
	
44

	
Force Majeure Event
	
50
	
 
	
Selected NA Therapeutic List
	
3

	
FTE
	
39
	
 
	
Tax(es)
	
44

ii

Exhibit 4.7

EXECUTION COPY

 

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4) and Rule 24b-2

	
Third Party
	
44
	
 
	
 
	
 

	
Total Budget
	
5
	
 
	
 
	
 

	
Valid Claim
	
44
	
 
	
 
	
 

 

 

iii

 

EXECUTION COPY

 

RESEARCH COLLABORATION AND LICENSE AGREEMENT

This research collaboration and license Agreement (this “Agreement”) is dated October 18, 2017 (the “Effective Date”), and is between Arcturus Therapeutics, Inc., a Delaware corporation (“Arcturus”), and Janssen Pharmaceuticals, Inc., a Delaware corporation (“JPI”).  Each of Arcturus and JPI may be referred to herein individually as a “Party” and collectively as the “Parties”.

Arcturus is a biopharmaceutical company engaged in the business of identifying and developing NA Therapeutics to prevent, treat, and diagnose diseases, including Hepatitis B, [...***...]* and respiratory disease viruses.

JPI is a pharmaceutical company engaged, in part, in the business of seeking regulatory approval of, manufacturing, and commercializing therapeutic agents around the world.  As part of that business, it develops and commercializes therapeutic agents to prevent, treat, and diagnose diseases, including Hepatitis B.

Arcturus and JPI want to collaborate to identify and develop NA Therapeutics that prevent, treat or ameliorate (“treat”) certain specified infectious diseases, including in any event Hepatitis B, with discovery, development, funding obligations, and ownership of related intellectual property being allocated among Arcturus and JPI, and JPI making milestone payments and royalty payments to Arcturus.

The Parties therefore agree as follows:

	
1
	
RESEArch 

	
1.1
	
NA Therapeutics.  During the Research Term, Arcturus shall use Commercially Reasonable Efforts (“CRE”) to create NA Therapeutics using Arcturus Technology that are intended to treat (a) Hepatitis B and, (b) at such time as either of the options set forth in Section 4.2 is exercised by JPI, [...***...] or the Respiratory Disease Viruses ([...***...] and Respiratory Disease Viruses, each a “Option Disease Area” collectively the “Option Disease Areas”).  Arcturus will further use CRE to develop NA Therapeutics that: (a) have In Vivo Efficacy and Safety; (b) target highly-conserved sequences of the known genomes of the target diseases; (c) have the least cross-reactivity with human genes (i.e., off-target effects); and (d) have the most potent potential therapeutic effect on the target genome.    

	
1.2
	
Joint Research Plans.  The research to be conducted during the Research Term (each, a “Research Program”) shall be conducted pursuant to the applicable Joint Research Plan.  During the Research Term, the Parties shall carry out the work assigned to them under the applicable Joint Research Plan.

 ***Confidential Treatment Requested

 

1

 

EXECUTION COPY

 

	
1.3
	
Amendments.  The JRC may amend the Joint Research Plan in writing in accordance with this Agreement (or recommend an amendment to the Parties), subject to Article 2.  Any such amendments will be deemed incorporated in the Joint Research Plan Exhibit.  The JRC must review the Joint Research Plan as necessary at each meeting of the JRC and at any other time at the reasonable request of either Party and modify it as appropriate to reflect scientific and other developments.  Each Party will promptly inform the other Party (via the JRC or the JRC chairpersons, including by email) upon becoming aware of any circumstances that such Party believes are likely to require an amendment to the Joint Research Plan or Annual Budget and the JRC will then promptly convene a meeting to decide the matter.

	
1.4
	
Demonstration of Efficacy.  Arcturus shall promptly deliver to the JRC data and information it generates pursuant to a Research Program demonstrating that an applicable NA Therapeutic has demonstrated In Vivo Efficacy and Safety (as defined in the applicable Joint Research Plan describing the Research Program related to such NA Therapeutic) (such demonstration a “Demonstration of In Vivo Efficacy and Safety”).  The data package delivered by Arcturus shall include the nucleotide sequence and nucleobase structure of each NA Therapeutic in the set of NA Therapeutics that have achieved a Demonstration of In Vivo Efficacy and Safety.  Arcturus shall provide JPI any additional information reasonably requested by JPI regarding NA Therapeutics created by Arcturus under a Research Program.  Within [...***...]* Business Days after receipt of such data or information, JPI’s JRC chairperson will inform Arcturus’ JRC chairperson in writing (which may be satisfied by e-mail) whether it considers such data a Demonstration of In Vivo Efficacy.  In the event JPI files an IND with respect to a NA Therapeutic provided by Arcturus, then the same shall be deemed a Demonstration of In Vivo Efficacy and Safety.

	
1.5
	
Development Candidate Selection.  JPI may select certain NA Therapeutics under a Joint Research Plan for further development (“Development Candidates”): (a) at a duly-convened JRC meeting; (b) by email from JPI’s JRC chairperson to Arcturus’ JRC chairperson; or (c) either during or after the Research Term by written notice to Arcturus in accordance with this Agreement.  Each compound that comprises a Development Candidate is a “Licensed Compound” and each pharmaceutical product containing a Licensed Compound is a “Licensed Product”.  Should JPI or its Affiliates conduct, or permit or cause to be conducted, any IND-enabling GLP study of, or any GLP manufacturing activity with respect to, any NA Therapeutics during the Research Term or any Selected NA Therapeutic after the Research Term, it shall be deemed to have designated such NA Therapeutic as a Development Candidate.  Arcturus shall not be obligated to perform, or have performed, any IND-enabling GLP study of, or any GLP manufacturing activity with respect to any NA Therapeutic unless such NA Therapeutic has been designated a Development Candidate.  JPI shall only select as Development Candidates those NA Therapeutics that JPI believes are potentially relevant to the treatment or diagnosis of the applicable infectious disease as set forth in the Joint Research Plan for the Research Program.  

 ***Confidential Treatment Requested

2

 

EXECUTION COPY

 

	
1.6
	
Selected NA Therapeutic List.  No later than [...***...]* days after completion of the Research Program (other than as a result of termination of this Agreement), JPI shall deliver to Arcturus a list of the NA Therapeutics (including, but not limited to, previously-designated Development Candidates) that JPI determines to be of potential relevance to the treatment or diagnosis of the applicable infectious disease as set forth in the Joint Research Plan for the Research Program (the “Selected NA Therapeutics List”). 

	
1.7
	
Exclusivity.  Arcturus shall use all Licensed Compounds only in accordance with this Agreement, and, until the [...***...] anniversary of (i) the Effective Date, in the case of HBV based Research Program, and (ii) the respective Option Exercise Date, in the case of an [...***...] or Respiratory Disease Viruses-based Research Program, as applicable, Arcturus and Arcturus-Controlled Affiliates will not: 

	
1.7.1
	
perform, participate in, or fund any work directed to the discovery, research or development of NA Therapeutics licensed under this Agreement, other than in activities conducted pursuant to this Agreement;

	
1.7.2
	
grant any non-Party any license or other rights under Arcturus Technology to develop or commercialize NA Therapeutics licensed under this Agreement, extend the duration or scope of any existing license under Arcturus Technology to develop or commercialize NA Therapeutics licensed under this Agreement, or reduce the aggregate payment obligations to Arcturus under any such existing license with respect to NA Therapeutics licensed under this Agreement to an extent that would be likely to have a material adverse effect on the competitiveness of one or more Licensed Products; or

	
1.7.3
	
propose to any non-Party or solicit any non-Party to enter into any contractual relationship for work (including fee-for-service work) directed to the discovery, research or development of NA Therapeutics, other than for activities conducted pursuant to this Agreement.

The obligations of Sections 1.7.1 and 1.7.3 will not apply to, have no effect and exclusivity shall not apply with respect to: (a) [...***...] being conducted by Arcturus with respect to NA Therapeutics [...***...], but Arcturus and its Affiliates shall not expand such activities beyond [...***...]; or (b) any activities to be conducted by Arcturus for the research, development, manufacturing, commercialization, use and sale of any [...***...] agents (including NA Therapeutics) for use in humans or farm or companion animals involving the use of [...***...] as [...***...] for the [...***...] of Hepatitis B, [...***...] or [...***...]; or (c) for pre‐existing or subsequently acquired or initiated programs of a non-Party acquirer of Arcturus, provided that Arcturus ensures that Arcturus Know-How is not accessible to personnel of such non-Party acquirer who are engaged in the conduct of such program and such non‐Party acquirer does not use Arcturus Technology in such programs.  Arcturus shall not attempt to circumvent this provision through the use of non-Arcturus-Controlled Affiliates.

 ***Confidential Treatment Requested

3

 

EXECUTION COPY

 

	
1.8
	
Transfer of Supplies and Data for NA Therapeutics.  At JPI’s reasonable request, Arcturus shall promptly transfer to JPI at no charge: (a) subject to availability, reasonable quantities of NA Therapeutics, Licensed Compounds or Licensed Products in Arcturus’ possession or control (Arcturus may retain such quantities of NA Therapeutics, Licensed Compounds and Licensed Products as are necessary for Arcturus to perform its Research Program obligations); (b) all existing data for Licensed Compounds; and (c) any additional Arcturus Know-How that is necessary or useful for JPI to research, develop, manufacture, commercialize or otherwise Exploit any Selected NA Therapeutics, Licensed Compound or Licensed Product.

	
1.9
	
Records.  Each Party shall maintain, consistent with its internal policies, accurate records of its activities under the Research Program that are suitable for all relevant scientific, patent, regulatory, and financial purposes.

	
1.10
	
Reports.  During the first Calendar Year, Arcturus shall deliver to the JRC a quarterly written, detailed summary of all research and development efforts with respect to the NA Therapeutics and Licensed Compounds conducted by Arcturus since the previous such report and shall respond promptly to any reasonable JPI inquiries regarding the NA Therapeutics and Licensed Compounds.  Until the JRC is disbanded, and in addition to any other reporting requirements under this Agreement, no later than [...***...]* days after the end of each Calendar Quarter, each Party shall submit to the JRC a written report that: (a) describes that Party’s progress under the Joint Research Plan during that Calendar Quarter; and (b) includes a summary of the results and data generated by that Party under the Joint Research Plan during that Calendar Quarter, in each case to the extent reasonably necessary to advance the Joint Research Plan and the Research Program.

	
1.11
	
Materials.  At the request of JPI, Arcturus shall, as necessary, provide JPI quantities of Materials in excess of the quantities provided under Section 1.8, or other Materials identified in the Joint Research Plan that are proprietary to Arcturus or otherwise not commercially available, provided that JPI will reimburse Arcturus for the reasonable and documented costs associated with the purchase or provision of such Materials.

	
1.12
	
Performance by Others.  Each Party may perform itself or through one or more Affiliates or permitted subcontractors that Party’s obligations under the Joint Research Plan, on condition that each such Affiliate or subcontractor enters into a confidentiality agreement with that Party that contains confidentiality obligations substantially the same as those set forth in this Agreement.  Each Party will remain liable for performance of any such Affiliate or subcontractor.  Arcturus shall obtain JPI’s prior written consent before engaging any subcontractor to perform its obligations hereunder (except to the extent that such subcontractor and the obligations to be subcontracted are identified in the Joint Research Plan).

	
1.13
	
Budget.  Arcturus shall fund those activities to be funded by Arcturus pursuant to the HBV Joint Research Plan and associated Budget.  Arcturus shall submit to the 

 ***Confidential Treatment Requested

4

 

EXECUTION COPY

 

JRC for approval, for those activities to be funded by Janssen pursuant to the HBV Joint Research Plan and associated Budget, a detailed budget of planned FTE and Out-of-Pocket Expenses for the ensuing 12 months (the “Annual Budget”) every 6 months beginning with the Effective Date, provided that Arcturus shall not be obligated to commence a particular Joint Research Program activity unless the JRC has approved an Annual Budget covering the budgeted costs for such activity.  JPI shall reimburse Arcturus as set forth in Section 1.14 for the actual costs incurred by Arcturus for conducting the Research Program up to $[...***...]*  (the “Total Budget”).  JPI will not reimburse amounts above [...***...]% of the Annual Budget except as approved by the JRC as provided in Section 2.4.  The Annual Budget may be amended by unanimous written agreement of the JRC.  Pursuant to Section 2.5, increase in the Total Budget will warrant an amendment to this Agreement.

	
1.14
	
Invoicing and Payment.  Arcturus shall provide an invoice to Johnson & Johnson Accounts Payable (J&J AP) via the web portal www.ap.jnj.com within [...***...] days of the end of each Calendar Month for all Research Program payments due for that month with a copy to the JRC/JPI and to [...***...], J&J Innovation, 99 El Camino Real, Menlo Park, CA 94025.  Arcturus may contact the Johnson & Johnson Accounts Payable Hotline at (877) 557-4487 with any questions related to the status of payments on invoices.  The invoice will specify the actual number of FTEs expended (including an FTE time report break down to substantiate FTE work performed), and the applicable FTE Costs (the product of the actual total FTEs used by Arcturus to perform the Research Program and the FTE Rate) and Arcturus Out-of-Pocket Expenses (collectively “Research Costs”) incurred by Arcturus during the Calendar Month.  Within [...***...] days of the date the invoice is submitted to the J&J AP portal, JPI shall pay Arcturus the Research Costs set forth in the invoice unless JPI disputes a portion of the invoice (in which event JPI shall pay the undisputed portion thereof).  All invoices must reference a valid Purchase Order (“PO”) Number which JPI shall provide to Arcturus within [...***...] days after the Effective Date and invoices shall include the nature and amount of research and development services rendered or deliverables provided.  JPI reserves the right to return to Arcturus unprocessed and unpaid those invoices that do not reference the applicable PO Number.  Janssen Research & Development, L.L.C may act as a paying agent for JPI under this Agreement.  Invoiced amounts not paid when due will bear interest in accordance with Section 5.18. 

	
2
	
Governance

	
2.1
	
Joint Research Committee.  Promptly after the Effective Date, the Parties shall establish a committee (the “Joint Research Committee” or “JRC”), as more fully described below.  The JRC shall review and oversee the Research Program.  The JRC shall have no authority to amend this Agreement.  The JRC’s responsibilities shall include:

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2.1.1
	
The review of the progress of the Research Program, and discussion and approval of any appropriate modifications to the Joint Research Plan in light of such progress, including applicable modifications to the Annual Budget; 

	
2.1.2
	
The formation of sub-committees as agreed to be appropriate, which sub-committees shall report their progress to the JRC at each regularly scheduled JRC meeting, with any dispute among the sub-committee members referred to the JRC for resolution; and

	
2.1.3
	
Any other responsibilities as may be assigned to the JRC pursuant to this Agreement or as may be mutually agreed upon by the Parties in writing from time to time. 

Where any decision of the JRC would alter or increase in a material manner Arcturus contractual obligations or Research Program commitments, or JPI’s financial obligations, under this Agreement, including the Joint Research Plan, then the JRC’s role shall be limited to making recommendations to the Parties as to the proposed decision.  Any such decision shall not take effect unless and until agreed by the Parties in writing in an amendment to this Agreement.

	
2.2
	
Membership of the JRC.  The JRC shall consist of an equal number of representatives from each of JPI and Arcturus.  The exact number of such representatives shall be up to [...***...]* for each Party, or such other number as the Parties may agree.  Each Party shall provide the other with a list of its initial members of the JRC within [...***...] days after the Effective Date.  Each Party may replace any or all of its representatives and/or appoint a proxy at any time by giving prior written notification to the other.  Each Party may, in its reasonable discretion, invite other employees of such Party to attend meetings of the JRC.  Each Party will provide advance notice of any additional attendees it will include at a meeting of the JRC.  Each Party shall designate 1 of its JRC members as co-chair.

	
2.3
	
Meetings.  The JRC shall meet at least on a calendar quarterly basis in a manner, time and at a place as the Parties shall agree.  Meetings of the JRC that are held in person shall alternate between the offices of the Parties, or such other place as the Parties may agree.  Each Party will be responsible for its members’ expenses incurred in attending all JRC meetings.  The chairpersons of the JRC shall be responsible for calling each meeting, setting and distributing agenda items in advance of the meeting and issuing appropriate minutes of each meeting of the JRC within [...***...] days of the date of such meeting and shall allocate such responsibilities between themselves.  The minutes of each JRC meeting will provide a description, in reasonable detail, of the discussions at the meeting and document all actions and determinations approved by the JRC at such meeting, including identification of any NA Therapeutics, Demonstration of In Vivo Efficacy and Safety, and the identification of any Development Candidates.  In addition, in the event of approval at any JRC meeting of any amendment to the Joint Research Plan or Annual Budget, such amendment will be attached to the minutes as an exhibit.  The chairperson responsible for drafting the minutes of a particular JRC meeting shall provide a draft of such minutes (including by email) to the other

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Party’s chairperson within [...***...]* Business Days after such meeting, and the chairpersons shall promptly discuss and address any comments the other Party’s chairperson may have on such minutes and finalize such draft minutes as promptly as practicable, whereupon the drafting chairperson shall provide such draft minutes to all JRC members (including by email).  The minutes shall be considered as accepted if, within [...***...] days from receipt, no recipient has objected in writing (including e-mail) to the chairpersons.

	
2.4
	
Quorum and Decision Making.  A meeting of the JRC shall be considered to have a quorum provided that the co-chairperson from each Party is in attendance and a majority of the JRC is present at such meeting.  A decision by the JRC requires approval of each Party’s co-chairperson.  In the event the JRC is unable to agree on a decision as to a particular matter within the JRC’s authority and requiring a decision, JPI shall have the final decision making authority on such matter, except as otherwise provided in Section 2.1 above.  Any decision required or permitted to be taken by the JRC may be taken in accordance with the above without a meeting taking place, if a consent in writing including electronic mail, setting forth the decision so taken, is approved in writing by each of the co-chairpersons.  

	
2.5
	
No Authority.  The JRC shall not have the authority to increase the Total Budget.

	
2.6
	
Dissolution of JRC.  The JRC shall be dissolved upon the completion of the Research Term.

	
3
	
DEVELOPMENT

	
3.1
	
Development of Licensed Products.  JPI, directly or through one or more of its Affiliates or sublicensees, shall use Commercially Reasonable Efforts to: (a) develop a Licensed Product; (b) obtain Regulatory Approval for a Licensed Product in [...***...]; and (c) where approved, commercialize a Licensed Product in [...***...].  In the event that, after delivery of the Selected NA Therapeutics List, JPI determines that a specific NA Therapeutic that was not on the Selected NA Therapeutics List but has potential utility to treat or diagnose an infection caused by HBV (or, if the Option is exercised, the applicable Option Disease Area), JPI may provide notice to Arcturus identifying the particular NA Therapeutic and requesting that it be deemed a “Selected NA Therapeutic.”  Arcturus shall notify JPI within [...***...] days of receipt of such request whether Arcturus accepts or denies such request, provided that Arcturus may deny such request only if, as of the date of such request: (i) such NA Therapeutic is [...***...] unless permitted pursuant to the provisions of Section 1.7) and has progressed to at least [...***...]; or (ii) Arcturus has [...***...]

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[...***...]*.  Upon Arcturus’ acceptance of such request, or, except under the circumstances described in clause (ii) above, Arcturus’ failure to respond in accordance with this Section 3.1, such NA Therapeutic shall be deemed a “Selected NA Therapeutic.”

	
3.2
	
Arcturus Development Support.  For up to [...***...] after the end of the Research Term (the “Development Support Period”), at JPI’s request, Arcturus shall provide reasonable technical assistance to JPI in the practice of the Arcturus Know-How transferred to JPI to Develop, formulate and manufacture Development Candidates and their constituent Licensed Compounds (the “Development Support”).  The Development Support will include making qualified Arcturus personnel reasonably available to JPI for scientific and technical explanations and advice reasonably requested by JPI; provided, however, that Arcturus will not be required to conduct any additional research, development or manufacturing activities, to generate or obtain new data or information, or to hire or engage additional personnel, or provide requested Development Support to the extent or at such a frequency that it would unduly impair the ability of Arcturus personnel to perform, or otherwise interferes with Arcturus’ personnel’s performance of, their regular duties for Arcturus.  JPI shall reimburse Arcturus for all reasonable and documented FTE Costs and Out-of-Pocket Expenses incurred by Arcturus in providing the Development Support requested by JPI (which FTE Costs and Out-of-Pocket Expenses are in addition to any Research Costs that JPI is obligated to reimburse under Section 1.14 and are not subject to the Annual Budget or the Total Budget).  Arcturus shall invoice JPI on a [...***...] basis for any such FTE Costs and Out-of-Pocket Expenses, and JPI shall pay such invoiced amounts, in each case, in accordance with Section 1.14.

	
3.3
	
Development Costs and Decision Making.  JPI will be responsible for all of the costs it incurs for development and commercialization of Licensed Products and will have decision-making authority for all development activities.

	
3.4
	
Regulatory Filings.  JPI, directly or through one or more of its Affiliates or sublicensees, shall make, in the name of one or more of JPI, its Affiliates, and its sublicensees, all regulatory filings anywhere in the world it desires for Licensed Products.  JPI will be responsible for communicating with Government Bodies regarding regulatory filings for Licensed Products and any Regulatory Approval for Licensed Products, once granted.  Arcturus will own no interest in any application submitted or approval granted in connection with Regulatory Approval for Licensed Products.  Arcturus shall cooperate with JPI as requested by JPI to support any regulatory filing for one or more Licensed Products.  JPI shall reimburse Arcturus all reasonable expenses (including employee time at the FTE Rate) that Arcturus incurs in so cooperating.

	
3.5
	
Commercialization.  JPI will be responsible for all matters relating to commercializing Licensed Products.

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3.6
	
Manufacturing.  JPI will have the exclusive right to manufacture Licensed Products itself or through Affiliates or Third Parties selected by JPI.

	
3.7
	
Reports; Updates.  Commencing no later than [...***...]* after the expiration of the Research Term, JPI shall once per Calendar Year provide a written progress report to Arcturus summarizing Product [...***...], [...***...] and [...***...] activities during the previous 12-month period, the results of such activities, and a summary of the planned Product [...***...], [...***...], and [...***...] activities for the upcoming 12-month period.  In addition, [...***...] per year between delivery of such progress reports, upon Arcturus’ request, JPI shall make available to Arcturus by teleconference or other means of telecommunication, for a reasonable period and at a reasonable time, appropriately qualified and sufficiently senior personnel of JPI or its Affiliates having responsibility over and specific knowledge of JPI’s and its Affiliates’ ongoing and planned Licensed Product [...***...], [...***...] and [...***...] activities, to discuss, and respond to Arcturus’ reasonable questions regarding, the status and progress of JPI’s and its Affiliates’ ongoing and planned Licensed Product [...***...], [...***...] and [...***...] activities. 

	
4
	
LICENSES

	
4.1
	
Compounds and Products.  Subject to the terms and conditions of this Agreement, Arcturus hereby grants to JPI an exclusive license under the Arcturus Technology and Arcturus’ interest in the Joint Patent Rights to Exploit NA Therapeutics, Licensed Compounds and Licensed Products in the Field worldwide as identified and selected and on the terms and conditions set forth in this Agreement.  The license granted under this Section 4.1 is exclusive even as to Arcturus, except as necessary for Arcturus to exercise its rights and perform its obligations under the Joint Research Plan.  The license granted under this Section 4.1 includes the right for JPI to sublicense to its Affiliates and to Third Parties.  This license includes the right to utilize NA Therapeutics, Licensed Products and Licensed Compounds in Combination Products that incorporate other active pharmaceutical ingredients that are not Licensed Compounds and in Bundled Products that incorporate other products that are neither Licensed Compounds nor Combination Products. For clarity, NA Therapeutics, Licensed Compounds and Licensed Products in the Option Disease Areas are not licensed pursuant to this Section 4.1 unless and until such time as an Option in an Option Disease Area is exercised by JPI pursuant to Section 4.2. For clarity, no license or Option rights are granted pursuant to this Article 4 with respect to NA Therapeutics that are not also subject to the Exclusivity obligations pursuant to Section 1.7 (i.e., with respect to NA Therapeutics for which the obligations under Sections 1.7.1 and 1.7.3 do not apply, no license rights are granted to JPI and no restrictions on exclusivity shall apply pursuant to this Agreement).

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4.2
	
Option.   

Arcturus grants to JPI an option, at JPI's sole election, to have developed and license (as set forth in Section 4.1) NA Therapeutics for each of [...***...]* and Respiratory Disease Viruses (each, an “Option”).  Each Option will remain in effect and expire [...***...] months from the Effective Date (“Option Period”) and, if not previously exercised for either or both, shall terminate and be of no further force and effect upon the expiration of the Option Period.  JPI may exercise this option by delivering an irrevocable written notice to Arcturus (“Option Exercise Date”) prior to the expiration of the Option Period and paying to Arcturus the Exercise Fee set forth in Section 5.10 within [...***...] business days of the Option Exercise Date.  Upon each exercise of an Option, an additional Joint Research Plan will be attached to this Agreement and made a part hereof, and the research specified to be conducted by the Parties under such Joint Research Plan will become a Research Program.  During the Option Period, but prior to any Option Exercise Date, Arcturus shall be free to collaborate with third parties and license any rights in the Option Disease Areas to third parties.  If licenses under the Arcturus Technology with respect to [...***...] or Respiratory Disease Viruses have been granted to third parties prior to the respective Option Exercise Date, then exercising of an Option by JPI would result in a non-exclusive license in the applicable Option Disease Area subject to rights granted by Arcturus to the then-existing Third Party licensee(s), provided that to the extent that the grant of rights to a Third Party licensee in the applicable Option Disease Area is less than worldwide or narrower than the Field, then the JPI license shall be exclusive in such unlicensed portion and nonexclusive in the otherwise licensed portion of the Option Disease Area.  

	
4.3
	
Nonexclusive Licenses.

	
4.3.1
	
JPI hereby grants to Arcturus a nonexclusive, royalty-free license to use JPI Patent Rights, and Know-How that JPI discloses to Arcturus during the Research Term, in performing Arcturus’s obligations under this Agreement during the Research Term on the terms and conditions set forth in this Agreement; provided that no license rights are granted in any Option Disease Area until such time as an exercise of by JPI of its Option in the applicable Option Disease Area pursuant to Section 4.2.

	
4.3.2
	
Arcturus hereby grants to JPI a nonexclusive, royalty-free license under the Arcturus Technology to make, use, sell, and import, products using Arcturus Delivery Technology provided that such products are Licensed Products licensed to JPI according to Section 4.1.

	
4.3.3
	
Arcturus hereby grants to JPI a nonexclusive, royalty-free license under the Arcturus Technology to use NA Therapeutics, Licensed Compounds and Licensed Products for its own internal research purposes on the terms and conditions set forth in this Agreement.

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4.4
	
No Other Licenses or Rights.  This Agreement creates no license or other right by implication, estoppel, or otherwise.  All licenses and rights are granted only under this Agreement.

	
4.5
	
Retained Rights.  Subject to Section 1.7, none of the rights granted to JPI under this Article 4 affect the rights of Arcturus to practice and grant licenses under the Arcturus Technology and Arcturus Confidential Information that are not expressly licensed to JPI pursuant to Section 4.1. 

	
4.6
	
Further Licenses.  

	
4.6.1
	
If, during the Research Term, JPI identifies any Third Party-owned or -controlled intellectual property rights not Controlled by Arcturus on the Effective Date that JPI believes may be necessary or useful for the Research Program or the Exploitation of Selected NA Therapeutics, Licensed Compounds or Licensed Products, then upon JPI’s written request, the Parties will confer regarding whether it is necessary or useful for Arcturus to obtain rights to such Third Party-owned or –controlled intellectual property rights.  If the Parties agree that it is necessary or useful for Arcturus to obtain such rights, Arcturus will use Commercially Reasonable Efforts to obtain such rights, provided that (i) [...***...] and (ii) the Parties agree in writing to [...***...]) and to the extent to which Section 5.6.3 will apply to royalties that become due by Arcturus to the Third Party as a result of JPI’s use of such intellectual property.  Notwithstanding clause (i) above, if any milestone payment becomes due by Arcturus as a result of both (A) JPI’s and its Affiliates’ and sublicensees’ Exploitation of Selected NA Therapeutics, Licensed Compounds or Licensed Products and (B) Arcturus’ and its Affiliates’ and licensees’ Exploitation of products other than Selected NA Therapeutics, Licensed Compounds or Licensed Products (e.g., a commercial milestone payment that becomes due as a result of combined sales of Licensed Products by JPI and sales by Arcturus of products other than Selected NA Therapeutics, Licensed Compounds or Licensed Products exceeding a specified amount), then responsibility for payment of such milestone payment shall [...***...].  JPI may obtain rights to independently pursue or obtain a license to any Third-Party rights, and JPI shall have no obligation to consult with Arcturus regarding the same.  

	
4.6.2
	
No After-Acquired Third-Party IP will be deemed to be within the Control of Arcturus unless, prior to using any such intellectual property in a Research Program activity: (a) Arcturus provides to JPI a true, complete and correct written description of Arcturus’ royalty or milestone payment obligations to the applicable intellectual property; (b) Arcturus obtains JPI’s written consent to use such intellectual property in the Research Program or that such intellectual property be used by JPI; and (c) [...***...]

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[...***...]*.  Should Arcturus obtain rights to After-Acquired Third-Party IP during the Research Term that Arcturus determines to be relevant to, and useful for the performance of, the Research Program or the Exploitation of Selected NA Therapeutics, Licensed Compounds and Licensed Products hereunder or that is requested by JPI for utilization hereunder, Arcturus shall promptly provide JPI with notice thereof and, should such After-Acquired Third-Party IP have relevant payment obligations, the written description described in subsection (a) of the preceding sentence of this Section 4.6.2, provided that such After-Acquired Third-Party IP will not be deemed to be within the Control of Arcturus until all of the conditions set forth in the preceding sentence (clauses (a)-(c)) are met.

	
4.7
	
Expiration of Royalty Payment Obligations.  When JPI owes Arcturus no more royalty payments on a given Licensed Product with respect to a given country under Article 5, all licenses that Arcturus has granted JPI under this Article 4 with respect to that Licensed Product and that country will become fully paid, perpetual, and irrevocable.  JPI shall continue to pay Arcturus any pass-through royalties or milestones (as applicable) due to any Third Party that JPI has agreed to pay with respect to any After-Acquired Third Party IP pursuant to Section 4.6.2, for so long as Arcturus continues to be obligated to make such payments to the Third Party.

	
4.8
	
Non-Circumvention.  Arcturus shall not attempt to circumscribe or limit the licenses granted hereunder by situating ownership or Control of intellectual property in an Arcturus Affiliate that is not an Arcturus-Controlled Affiliate. 

	
5
	
Payments, Milestones and Royalties

	
5.1
	
Up Front Payment. Within 10 days after the execution of this Agreement JPI shall pay to Arcturus a non-refundable, non-creditable fee of [...***...].

	
5.2
	
Milestones.  When a Milestone Event as set forth in Section 5.3 or 5.4 occurs with respect to a Licensed Product JPI will, within [...***...] days, inform Arcturus of the achievement of the Milestone Event and Arcturus may then submit to JPI an invoice for the payment due for that Milestone Event (each, a “Milestone Amount”).

	
5.3
	
Milestone Events and Payments.  On a Development Candidate-by-Development Candidate basis, JPI will pay Arcturus the following non-refundable, non-creditable milestone payments, upon first achievement of the specified milestone by the first two Licensed Products for each of (i) HBV, (ii) [...***...] and (iii) each of the Respiratory Disease Viruses-based Research Program added upon exercise of an Option pursuant to Section 4.2 to achieve that milestone, regardless of how many Licensed Products achieve such milestone.  Each milestone payment may be paid no more than twice for each of (i) HBV, (ii) [...***...] and (iii) each of the Respiratory Disease Viruses-based Research Program added upon exercise of an Option pursuant to Section 4.2, regardless of how many Licensed Products meet such milestone.  If development or other efforts to obtain

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Regulatory Approval of a Licensed Product are discontinued after JPI has paid the milestone payment(s) for achievement of one or more milestones (a “Dropped Licensed Product”), and JPI develops a Licensed Product containing a different Development Candidate (a “Replacement Licensed Product”) that is payable as a replacement for the Dropped Licensed Product, the milestone payment that would be payable for the achievement by such Replacement Licensed Product of any milestone previously achieved by the Dropped Licensed Product for which JPI paid a milestone payment to Arcturus would not be payable, but the milestone payment that would be payable for the achievement by such Replacement Licensed Product of any milestone that was not achieved by the Dropped Licensed Product would be payable at [...***...]*% of the relevant amount set forth below.  

	
Milestone Number
	
Milestone Event
	
Milestone Payment 

	
1
	
[...***...]
	
$[...***...]

	
2
	
[...***...]
	
$[...***...]

	
3
	
[...***...]
	
$[...***...]

	
4
	
[...***...]
	
$[...***...]

	
5
	
[...***...]
	
$[...***...]

	
6a
	
[...***...]
	
$[...***...]

	
6b
	
[...***...] 
	
$[...***...]

	
6c
	
[...***...]
	
$[...***...]

	
Total Milestones for each of the first two Licensed Products in HBV and, if the Option is exercised pursuant to Section 4.2, Milestones for each of the first two Licensed Products in each of the applicable Option Disease Areas as provided in Section 5.3
	
$56,500,000 

 

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5.4
	
Net Sales Payments.  JPI shall pay Arcturus each of the following one-time, non-refundable, non-creditable milestone payments upon the first achievement of the applicable milestone event.  Each such milestone payment shall be payable only one time for HBV and if the Option is exercised pursuant to Section 4.2, one time for each of the Option Disease Areas (as applicable), regardless of how many times the relevant milestone event may be achieved.

	
Milestone Event 
	
Payment

	
First Calendar Year in which annual aggregate Net Sales of all Licensed Products, on a Research Program-by-Research Program basis, equal or exceed $[...***...]
	
$[...***...]*

	
First Calendar Year in which annual aggregate Net Sales of all Licensed Products, on a Research Program-by-Research Program basis, equal or exceed $[...***...]
	
$[...***...]

 

	
5.5
	
Royalties.  During the Royalty Term, JPI will pay royalties on a product-by-product and country-by-country basis to Arcturus on aggregate annual Net Sales of Licensed Products by JPI, JPI’s Affiliates and sublicensees in each Calendar Year at the applicable rate(s) set forth below.  

	
Calendar Year Net Sales increment
	
Royalty Rate (%)

	
Portion of aggregate annual Net Sales of Licensed Products, on a Research Program-by-Research Program basis, less than or equal to $[...***...]
	
[...***...]%

	
Portion of aggregate annual Net Sales of Licensed Products, on a Research Program-by-Research Program basis, greater than $[...***...] but less than or equal to $[...***...]
	
[...***...]%

	
Portion of aggregate annual Net Sales of Licensed Products, on a Research Program-by-Research Program basis, greater than $[...***...]
	
[...***...]%

 

	
5.6
	
Royalty Reductions.  On a country-by-country and Licensed Product by Licensed Product basis, the royalty rates above shall be reduced during the royalty term as follows:

	
5.6.1
	
to [...***...]% of the amount otherwise payable from and after expiration of the last-to-expire Valid Claim of the Arcturus Patents covering the composition of the relevant Licensed Product in such country (if there is continued regulatory exclusivity for such Licensed Product in such country); and 

	
5.6.2
	
to [...***...]% of the amount otherwise payable from and after expiration of both: (a) the last-to-expire Valid Claim of the Arcturus Patents covering the 

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composition of such Licensed Product or all approved uses thereof in such country; and (b) expiration of regulatory exclusivity for such Licensed Product in such country.  For purposes of this Section 5.6, regulatory exclusivity will be deemed to have expired in a country on the date a Third Party could reference data provided by a Party relating to the relevant Licensed Product to a regulatory agency in that country.  

	
5.6.3
	
in the event JPI, at any time during the period it is obligated to pay royalties to Arcturus hereunder, is obligated to pay [...***...]* to any Third Party in connection with the Exploitation of a Licensed Compound or Licensed Product (including in connection with the settlement of a patent infringement claim) under patents, patent applications or know-how of a Third Party (other than [...***...] with respect to After-Acquired Third-Party IP under Section 4.6.2), JPI may deduct [...***...]% of the royalties actually paid by JPI to such Third Party with respect to sales of such Licensed Product in the relevant country from the royalties due Arcturus with respect to Net Sales of such Product in such country; provided, however, that: (a) if such license does not contain rights under one or more patents or patent applications, only [...***...]% of the royalties so paid would be deductible; and (b) in no event would the royalties payable to Arcturus with respect to Net Sales of such Licensed Product in such country be reduced by more than [...***...]%.

The reductions to the royalty rates in this Section 5.6 in the aggregate will not reduce the effective royalty rate below [...***...]%.

	
5.7
	
Compulsory License.  If a government grants or compels JPI to grant a compulsory license to a Licensed Product to a Third Party, then, insofar as JPI is compensated on a royalty basis, JPI will pay to Arcturus [...***...]% of the sum paid to it under the compulsory license instead of the royalties that would otherwise be due under this Agreement.  Any sales under such compulsory license will not be used in the calculation of aggregate Net Sales for the purpose of attaining sales milestones under Section 5.4 or adjusting royalty rates under Section 5.6.

	
5.8
	
Royalty Term.  Royalty payments will become payable upon the First Commercial Sale of a Licensed Product in a country and ending upon the latest of: (a) [...***...] years following the first commercial sale of such Licensed Product in such country; (b) expiration of regulatory exclusivity for such Licensed Product in such country; and (c) expiration of the last-to-expire Valid Claim of the Arcturus Patent Rights or Joint Patent Rights Covering the composition of such Licensed Product or all approved uses thereof in such country

	
5.9
	
Timing and Manner of Payment.  Except if this Agreement provides otherwise, JPI shall pay each invoice that Arcturus issues to JPI under this Agreement no later than [...***...] days after JPI receives it.  For a payment by JPI under this Agreement to be valid, JPI must make that payment by wire transfer to a bank account that Arcturus designates.

	
5.10
	
Option Exercise Fees.  The Exercise Fee payable for the exercise of each Option pursuant to Section 4.2 is (a) $[...***...] per Option exercise (i.e., for each of 

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[...***...]* or Respiratory Disease Viruses) if such Option is exercised before the end of [...***...] from the Effective Date, or (b) $[...***...] per per Option exercise (i.e., for each of [...***...] or Respiratory Disease Viruses) if such Option is exercised after [...***...] from the Effective Date and before the end of [...***...] from the Effective Date.

	
5.11
	
Reports.  For as long as JPI owes royalties under this Article 5, no later than [...***...] days after the end of each Calendar Quarter, JPI shall provide Arcturus a written report showing as of that Calendar Quarter the Net Sales of Licensed Product by country and the royalty owed for that Calendar Quarter.  That written report must include at least the following information for that Calendar Quarter, each listed by Licensed Product and by country of sale: (a) Net Sales; and (b) the royalty due on those Net Sales.

	
5.12
	
Records and Audits.  

	
5.12.1
	
Arcturus shall keep, and shall cause Arcturus-Controlled Affiliates to keep, such accounting records as are necessary to permit JPI to verify Research Costs invoiced by Arcturus under Section 1.14.  Such records shall be retained at the respective places of business of Arcturus and Arcturus-Controlled Affiliates for at least the [...***...] Calendar Years after the Calendar Year to which such records pertain.  Until expiration of such retention period, JPI shall have the right to cause an independent certified accountant selected by JPI and reasonably acceptable to Arcturus to audit such records covering not more than the preceding [...***...] full Calendar Years, subject to the terms of Section 5.13 below.  If any such audit determines that JPI overpaid Arcturus, JPI will be entitled to a credit for that overpayment, plus interest calculated in accordance with Section 5.18 no later than [...***...] days after being notified of the results of such audit, or, should insufficient further payments be due hereunder, a refund.

	
5.12.2
	
JPI shall keep, and shall instruct its Affiliates and sublicensees to keep, such accounting records as are necessary to permit Arcturus to verify determination of all royalties and other amounts paid or payable by JPI under this Agreement.  Such records shall be retained at the respective places of business of JPI, its Affiliates and sublicensees for at least the [...***...] Calendar Years after the Calendar Year to which such records pertain.  Until expiration of such retention period, Arcturus shall have the right to cause an independent certified accountant selected by Arcturus and reasonably acceptable to JPI to audit such records covering not more than the preceding [...***...] full Calendar Years, subject to the terms of Section 5.13 below.  If any such audit determines that JPI underpaid Arcturus, JPI shall pay Arcturus an amount equal to that underpayment, plus interest calculated in accordance with Section 5.18 no later than [...***...] days after being notified of the results of such audit, as requested by Arcturus.  If any such audit determines that JPI overpaid Arcturus, JPI will be entitled to a credit for that overpayment, or, should insufficient further payments be due hereunder, a refund.

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5.13
	
Conduct of Audits.  It is a condition to the conduct of any audit permitted by Section 5.12 that the accountant sign and deliver to the audited Party a confidentiality agreement as reasonably requested by the audited Party.  The Party engaging such accountant shall require such accountant to share the findings of any such audit with both Parties, and those findings will be binding on the Parties.  The auditing Party shall pay for any such audit under Section 5.12, unless: (a) in the case of an audit under Section 5.12.1, such audit determines that JPI overpaid Arcturus by more than [...***...]*% of the amount owed, in which case Arcturus shall reimburse JPI for the reasonable and documented fees and expenses of the auditor paid by JPI for such audit; and (b) in the case of an audit under Section 5.12.2, such audit determines that JPI underpaid Arcturus by more than [...***...]% of the amount owed, in which case JPI shall reimburse Arcturus for the reasonable and documented fees and expenses of the auditor paid by Arcturus for such audit.  Each Party shall have the right to inspect all such records no more frequently than once every [...***...] months, during normal business hours with at least [...***...] days prior written notice.

	
5.14
	
Royalty Payments.  No later than [...***...] days after the end of each Calendar Quarter in a given Calendar Year, JPI shall pay Arcturus royalties that JPI owes under Section 5.5 for that Calendar Quarter.

	
5.15
	
Currency Exchange.  All payments under this Agreement must be in U.S. dollars.  If Licensed Products are sold in a currency other than U.S. dollars, for purposes of calculating royalties, revenues from those sales must be expressed in U.S. dollars using the Currency Hedge Rates.  Not later than [...***...] Business Days after the Currency Hedge Rates for the next Calendar Year are available, JPI shall notify Arcturus of the Currency Hedge Rates for the local currency of each country in the Territory and all relevant details.  The Currency Hedge Rates for a Calendar Year will remain unchanged during that Calendar Year.

	
5.16
	
Indirect Taxes.  Amounts payable under this Agreement do not include any sales, use, excise, value added or other applicable taxes, tariffs or duties with respect to work or services to be performed pursuant to this Agreement.  If any taxing authority imposes a VAT, GST, sales, use, service, consumption, business or similar tax with respect to the work or services undertaken under this Agreement, then JPI agrees to pay that amount if specified in a valid invoice or supply exemption documentation.  For avoidance of doubt, Arcturus will not be entitled to pass on to JPI, and JPI will not be obligated to pay or bear, any tax that is based on Arcturus’ real, personal or intangible property (whether owned or leased), corporate structure, franchise, continuing business operations, income, gross receipts, capital stock, net worth or imposed with respect to Arcturus’ engagement of employees or independent contractors or that Arcturus incurs upon subcontracting any work hereunder, in whole or in part, to any affiliated or non-affiliated Third Party.  Arcturus is solely responsible, to the extent required by applicable law, for identifying, billing, and collecting the taxes payable by JPI in all relevant federal, state, county, municipal and other taxing jurisdictions and for filing all required tax returns in a timely manner.  To the extent that Arcturus does not 

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provide JPI a valid invoice (i.e., an invoice compliant with this Agreement setting forth the applicable work or services documentation required under the rules and regulations of the jurisdiction of both Arcturus and JPI, including separate identification of the tax where legally required), Arcturus shall be responsible for any penalty resulting directly from such noncompliance.  The Parties will cooperate in good faith to minimize taxes to the extent legally permissible.

	
5.17
	
Withholding Taxes.  JPI shall make all payments to Arcturus under this Agreement without any deduction or withholding for taxes except to the extent that any such deduction or withholding is required by law in effect at the time of payment.  Any Tax required to be withheld on amounts payable under this Agreement will be paid by JPI on behalf of Arcturus to the appropriate government authority and JPI will furnish Arcturus proof of payment of such Tax.  Any such tax required to be withheld will be an expense of and borne by Arcturus.  If any such Tax properly is assessed against and paid by JPI, then Arcturus will indemnify JPI from and against such Tax.  JPI and Arcturus will cooperate with respect to all documentation required by any taxing authority or reasonably requested by JPI to secure a reduction in the rate of withholding taxes.  On the date Arcturus signs this Agreement it shall deliver to JPI an accurate and complete Internal Revenue Service Form W-9.

	
5.18
	
Late Payments.  In the event that any payment due and undisputed under this Agreement is not made when due, the payment shall accrue interest at a rate per annum that is [...***...]* basis points (i.e., four percentage points) above the then-current prime rate quoted by Citibank in New York City for the period from the due date for payment until the date of actual payment; provided, however, that in no event shall such rate exceed the maximum legal annual interest rate.

	
6
	
Ownership of Inventions

	
6.1
	
Ownership of Inventions.  Each Party will own all Patent Rights Covering inventions that are made solely by its employees, agents, or subcontractors and not jointly with employees, agents, or subcontractors of the other Party.  The Parties will jointly own all Patent Rights Covering inventions that are made jointly by employees, agents, or subcontractors of both Parties.  Whether an invention is the sole invention of a Party or the joint invention of the Parties for purposes of this Section 6.1 will be determined in accordance with United States patent laws, regardless of where the related activity took place.

	
6.2
	
Exploitation of Inventions.  Except as expressly stated to the contrary in this Agreement (including in Section 1.7) and licenses granted under this Agreement, each Party may exploit (including sublicense) any Joint Patent Rights without obtaining the consent of, and without accounting to, the other Party.

	
6.3
	
Joint Research Agreement.  This Agreement is a joint research agreement in accordance with 35 U.S.C. section 103(c)(3).  Neither Party is required by this reference to have any Patent Right take advantage of or become subject to 

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35 U.S.C. section 103(c)(3) except in accordance with the provisions of Article 7 regarding Prosecution and Maintenance of Patent Rights.

	
6.4
	
Trademarks.  JPI will be responsible for the trademarks and trade dress used in connection with commercialization of any Licensed Products.  JPI will own all those trademarks and that trade dress and all associated goodwill.  Arcturus shall not use or seek to register, anywhere in the world, any trademarks that are confusingly similar to any trademarks, trade names, trade dress, or logos used by or on behalf of JPI, its Affiliates, or its sublicensees in connection with any Licensed Product.  Nothing in this Section 6.4 prevents Arcturus from enforcing its own trademark rights or house marks.

	
7
	
Patent Prosecution and Maintenance 

	
7.1
	
Generally.  Except as otherwise expressly provided herein, as between the Parties, only the Party that Controls a Patent Right (including any Patent Right assigned to that Party under the terms of this Agreement) may at its expense Prosecute and Maintain that Patent Right, except: (a) as expressly provided in Sections 7.2 and 7.4 below with respect to Arcturus Product-Specific Patents; and (b) that JPI shall Prosecute and Maintain Joint Patent Rights, subject to Section 7.4.  Arcturus will use counsel acceptable to JPI to Prosecute and Maintain Arcturus Product-Specific Patents.  JPI shall Prosecute and Maintain Joint Patent Rights using counsel acceptable to Arcturus.  

	
7.2
	
Arcturus Responsibilities.  Arcturus shall use reasonable efforts to obtain in commercially significant countries (as identified by JPI to Arcturus in writing) valid and enforceable Arcturus Product-Specific Patents, provided that JPI shall reimburse the reasonable costs and expenses incurred by Arcturus in Prosecuting and Maintaining Arcturus Product-Specific Patents in accordance with Section 5.9.  Arcturus shall timely apprise JPI of all pending prosecution and maintenance of Arcturus Product-Specific Patents and shall consider all of JPI’s recommendations regarding such prosecution and maintenance.  Prior to filing (a) any patent application during the Research Term that includes in its claims or description an NA Therapeutic or a method of making or using an NA Therapeutic, or (b) any patent application after the Research Term that includes in its claims or description a Selected NA Therapeutic or Licensed Compound or a method of making or using a Selected NA Therapeutic or Licensed Compound, Arcturus will, in each case, provide a copy of the proposed application to JPI.  The Parties shall proceed with the filing and prosecution actions they agree so that, to the extent practicable, the application can be appropriately characterized as an Arcturus Product-Specific Patent.  

	
7.3
	
JPI Responsibilities.  JPI shall provide Arcturus timely advice and recommendations regarding prosecution and maintenance issues of which it is made aware by Arcturus.  JPI shall timely apprise Arcturus of all pending prosecution and maintenance of Joint Patent Rights and shall consider all of Arcturus’ recommendations regarding such prosecution and maintenance.  

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7.4
	
Involvement in Prosecution and Maintenance.  If Arcturus decides not to Prosecute and Maintain any claim within any Arcturus Product-Specific Patent or decides to cease doing so, then: (a) Arcturus shall notify JPI promptly, but in any event not less than [...***...]* days prior to the next deadline for any action that must be taken with respect to such Arcturus Product-Specific Patent in the relevant patent office; and (b) Arcturus shall permit JPI, if it wishes, to continue Prosecution and Maintenance of that Arcturus Product-Specific Patent in that country.  If JPI decides not to Prosecute and Maintain any patent or patent application within any Joint Patent Right or decides to cease doing so, then (1) JPI shall notify Arcturus promptly, but in any event not less than [...***...] days prior to the next deadline for any action that must be taken with respect to such Joint Patent Right in the relevant patent office, and (2) JPI shall permit Arcturus, if it wishes, to continue Prosecution and Maintenance of that Joint Patent Right in that country at Arcturus’s expense.  

	
7.5
	
Solely-Controlled Arcturus Patents.  Arcturus will have the sole right, but not the obligation, to Prosecute and Maintain all Arcturus Patents that are not Arcturus Product-Specific Patents, at Arcturus sole cost and expense using counsel of its choice.  Arcturus will use reasonable efforts to Prosecute and Maintain such Patents in a manner that will not damage the scope, validity, or enforceability of Arcturus Product-Specific Patents or Joint Patents.  

	
7.6
	
Cooperation.  Each Party shall cooperate with the other Party in Prosecution and Maintenance of Arcturus Patent Rights, Joint Patent Rights and JPI Patent Rights in accordance with this Agreement, including by promptly signing any documents reasonably necessary for Prosecution and Maintenance of any such Patent Rights in any country and by asking inventors, subcontractors, employees, former employees (to the extent reasonably available), consultants, and agents to sign any such documents.

	
7.7
	
Patent Marking.  Consistent with it business practices, JPI may mark, and may instruct its Affiliates and sublicensees to mark, Licensed Products with applicable Arcturus Patent Rights.  Consistent with it business practices, Arcturus may mark, and may instruct its Affiliates and sublicensees to mark, all Licensed Products with applicable Patent Rights licensed by JPI to Arcturus under Section 12.5.  Each Party will be responsible for removing any patent markings from Licensed Products in accordance with applicable law and regulation after the applicable Patent Right expires.

	
8
	
Patent Enforcement

	
8.1
	
Generally.  Except as otherwise provided in this Article 8, each Party will be responsible for enforcing its respective Patent Rights as it sees fit.

	
8.2
	
Notice.  If either Party becomes aware of any infringement from the sale of a product, anywhere in the world, of any Valid Claim included in Arcturus Patent Rights, Joint Patent Rights or JPI Patent Rights in HBV and, if an Option is exercised, the applicable Option Disease Area, then that Party shall notify the other Party within [...***...] days of learning of such infringement.

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8.3
	
Infringement of Arcturus Patent Rights.  If any infringement by a non-Party of an Arcturus Product-Specific Patent or Joint Patent Right arises from registration, development, manufacture, use, sale, or importation of a compound or product in HBV and, if an Option is exercised, the applicable Option Disease Area, JPI may no later than [...***...]* months after JPI learns of that infringement take action to stop that infringement or commence a Proceeding against a non‐Party infringer.  If JPI does not do so, Arcturus may do so.  If any infringement by a non‐Party of an Arcturus Patent that covers the composition or an approved use of a Licensed Compound or Licensed Product and is not an Arcturus Product-Specific Patent, arises from Competitive Infringement, the Parties shall meet to discuss what action, if any, to take.  Arcturus shall consider any request by JPI that Arcturus commence a Proceeding against a Non‐Party infringer with respect to Competitive Infringement, but Arcturus shall have the final decision-making authority as to whether to commence any such Proceeding.  JPI shall not provide any communication or notice to any non‐Party claiming or alleging that the conduct of such non‐Party infringes, or may infringe, any Arcturus Patent Right that is not an Arcturus Product-Specific Patent.  A Party that commences a Proceeding under this Section 8.3 shall pay all expenses of that Proceeding.  The other Party shall cooperate with that Party in any such Proceeding, including by joining as a party plaintiff at that Party’s written request, and may consult with that Party and participate in and be represented by independent counsel in that Proceeding at its own expense.  That Party shall not, without the other Party’s prior written consent, enter into any settlement or consent decree that requires any payment by or admits or imparts any other liability to the other Party or admits the invalidity or unenforceability of any such Arcturus Patent Right.  

	
8.4
	
Information Rights.  A Party that commences a Proceeding shall keep the other Party reasonably informed of all material developments in that Proceeding. 

	
8.5
	
Recoveries in JPI Actions.  If either Party recovers anything in a Proceeding commenced by JPI, then, to the extent such recovery is attributable to Competitive Infringement or to infringement of any Joint Patent Right, that Party shall allocate such recovery as follows: first, to each Party for its out-of-pocket litigation expenses incurred in that Proceeding; then as follows:

	
8.5.1
	
if that recovery was based on lost sales of a Licensed Product, to Arcturus in an amount equal to the royalty that it would have been paid for those sales in the one or more countries where the infringement occurred, with JPI receiving any remaining portion of that recovery; and

	
8.5.2
	
in all other circumstances, [...***...]% of any remaining portion to JPI and [...***...]% to Arcturus.

	
8.6
	
Recoveries in Arcturus Actions.  If either Party recovers anything in a Proceeding commenced by Arcturus, then, to the extent such recovery is attributable to Competitive Infringement or to infringement of any Joint Patent Right, that Party shall allocate such recovery as follows: first, to each Party for its out-of-pocket litigation expenses incurred in that Proceeding; then as follows:

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8.6.1
	
to the extent the recovery is attributable to lost sales of a Licensed Product (or lost profits or a reasonable royalty with respect thereto, as applicable), [...***...]*% to Arcturus and [...***...]% to JPI; and 

	
8.6.2
	
[...***...]% of any remaining portion to Arcturus and [...***...]% to JPI.

	
8.7
	
Infringement by a Party of Third Party Patent Rights.  If a Party learns that a Third Party alleges that a Party’s use, development, manufacture, or commercialization of any Licensed Compound or Licensed Product infringes a Third Party’s Patent Right or other intellectual property rights, that Party shall promptly notify the other Party.  The Party that is alleged to infringe the Third Party’s Patent Right or intellectual property may take whatever action it deems appropriate in response to that allegation and will be responsible for all damages, costs, and expenses arising from that action.

	
8.8
	
Patent Certifications.  Each Party shall promptly notify the other if it becomes aware of any certification filed in accordance with 21 U.S.C. section 355(b)(2)(A) or 21 U.S.C. section 355(j)(2)(A)(vii) or any successor or equivalent law regarding biologic products in the U.S. or any other country claiming that an Arcturus Patent Right Covering any Licensed Product, or a Joint Patent Right, is invalid or that use, development, manufacture, or commercialization of a Licensed Product by a Non‐Party will not infringe any Arcturus Patent Right or Joint Patent Right.

	
8.9
	
Patent Term Restoration.  Arcturus shall obtain patent term restoration, supplemental protection certificates, or the equivalent in all countries (including under 35 U.S.C. § 156 or any successor or equivalent law in the U.S. or any other country) with respect to Arcturus Product-Specific Patents identified by JPI that Cover the chemical composition of matter and use of Licensed Products, provided that JPI shall have the first right to obtain patent term restoration, supplemental protection certificates, or the equivalent in all countries (including under 35 U.S.C. § 156 or any successor or equivalent law in the U.S. or any other country) if it decides to seek such restoration with respect to a JPI Patent Right or Joint Patent Right.  JPI shall cooperate with Arcturus in seeking such patent term restoration, supplemental protection certificates, or the equivalent, including by providing information and signing documents.  JPI may assume this responsibility at its expense and Arcturus will cooperate with such efforts.  Arcturus shall have no obligation to seek or obtain, or to permit JPI to seek or obtain, patent term restoration, supplemental protection certificates, or the equivalent in any country (including under 35 U.S.C. § 156 or any successor or equivalent law in the U.S. or any other country) with respect to any Arcturus Patent Right that is not an Arcturus Product-Specific Patent.  

	
8.10
	
Orange Book Information.  JPI will be responsible for all submissions of patent information pertaining to each Licensed Product in accordance with 21 U.S.C. § 355(b)(1)(G) (or any amendment or successor statute thereto), any similar statutory or regulatory requirement enacted in the future regarding biologic products, or any similar statutory or regulatory requirement in any non-U.S. country or other regulatory jurisdiction.

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8.11
	
Non-Party Licensor Rights.  If a non-Party licensor has retained any right to enforce or otherwise be involved in the activities specified in this Article 8 for any Arcturus Patent Rights, Arcturus shall use reasonable efforts to cause that non‐Party licensor to take the actions specified in this Article 8 in a manner consistent with the one or more agreements by which that non‐Party retains those rights, but Arcturus will not be deemed to be in breach of its obligations under this Article 8 if despite using reasonable efforts it is unable to comply with those obligations because of actions taken or not taken by that non‐Party licensor. 

	
9
	
Confidentiality

	
9.1
	
Maintaining Confidentiality.  During the term of this Agreement and for [...***...]* years thereafter, the Recipient shall not disclose Confidential Information except as contemplated in this Agreement or use Confidential Information other than for purposes of contemplated by this Agreement.

	
9.2
	
“Confidential Information” means information disclosed by one Party to the other Party (and Derived Information) that is not, in each case, Excluded Information.

	
9.3
	
“Derived Information” means information (including notes, analyses, compilations, and summaries) that is in writing or embodied in an electronic medium and that the Recipient or any of the Recipient’s Representatives derive, in whole or in part, from any information described in Section 9.2.

	
9.4
	
“Disclosing Party” means a Party that discloses Confidential Information to a Recipient.

	
9.5
	
“Excluded Information” means information that the Recipient can establish by competent evidence comes within any of the following categories:

	
9.5.1
	
information that is or becomes public other than as a result of the Recipient’s breach of any obligation under this Agreement;

	
9.5.2
	
information that, when it is disclosed to the Recipient, is already in the possession of the Recipient or any of the Recipient’s Representatives as the result of disclosure by a Person that was not then under an obligation to the Disclosing Party to keep that information confidential;

	
9.5.3
	
information that, after it is disclosed to the Recipient under this Agreement, is disclosed to the Recipient or any of the Recipient’s Representatives by a Person that was not then under an obligation to the Disclosing Party to keep that information confidential; and

	
9.5.4
	
information that the Recipient develops independently, as evidenced by contemporaneous written records, without any use of or reliance on Confidential Information disclosed by the Disclosing Party to the Recipient, whether before or after the Disclosing Party discloses such equivalent information to the Recipient.

	
9.6
	
“Recipient” means a Party that receives Confidential Information.

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9.7
	
Disclosure Procedures.  For information to constitute Confidential Information, the following conditions must be satisfied: (a) if that information is contained in a printed document, computer disc or other electronic storage device, or is disclosed by transmitting it in an electronic file (including by email), or is otherwise in a recorded form, it must be marked “Confidential”; and (b) if that information is disclosed orally or visually, or is otherwise not disclosed in recorded form, then no later than [...***...]* days after it is disclosed the Disclosing Party must confirm, in a notice to the Recipient describing the information, that that information is confidential.

	
9.8
	
Disclosure to Representatives.  Any individual to whom the Disclosing Party discloses Confidential Information in accordance with this Agreement may disclose that Confidential Information only to Representatives of the Recipient who require that Confidential Information for purposes contemplated in this Agreement, on condition that before Confidential Information is disclosed to any individual in accordance with this Section 9.8, the Recipient notifies that individual of the confidential nature of the Confidential Information and that individual is party to a written confidentiality agreement with the Recipient (and enforceable by the Disclosing Party) in which that individual promises not to disclose any Confidential Information or use any Confidential Information other than for purposes contemplated in this Agreement.

	
9.9
	
Precautions Against Unauthorized Disclosure or Use.  The Recipient shall take precautions to prevent disclosure or use of Confidential Information other than as authorized in this Agreement.  Those precautions must be at least as effective as those taken by the Recipient to protect its own Confidential Information or those that would be taken by a reasonable person in the position of the Recipient, whichever are greater.  If a non-Party misappropriates Confidential Information from the Recipient, the Recipient will be liable to the Disclosing Party for that misappropriation to the same extent that the Recipient would have been had the Recipient disclosed or used that Confidential Information other than as authorized in this Agreement.

	
9.10
	
Unauthorized Disclosure or Use by Representatives.  If any one or more Representatives of the Recipient disclose or use Confidential Information other than as authorized in this Agreement, the Recipient will be liable to the Disclosing Party for that disclosure or use to the same extent that the Recipient would have been had the Recipient disclosed or used that Confidential Information.

	
9.11
	
Notification of Unauthorized Disclosure or Use.  If the Recipient becomes aware of disclosure or use of Confidential Information other than as authorized in this Agreement, the Recipient shall promptly notify the Disclosing Party of that disclosure or use and shall cooperate with the Disclosing Party in mitigating any adverse consequences to the Disclosing Party of that disclosure or use.

	
9.12
	
Permitted Disclosure.  It will not constitute breach of the Recipient’s obligations under this Agreement for the Recipient or any of its Representatives to disclose Confidential Information as follows:

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9.12.1
	
as necessary for Prosecuting and Maintaining Patent Rights in accordance with this Agreement;

	
9.12.2
	
as necessary in connection with seeking Regulatory Approval of one or more Licensed Products in accordance with this Agreement; and

	
9.12.3
	
to actual or prospective lenders, acquirers, merger counterparties, or investors in equity, and to advisors to any of the foregoing, as necessary for evaluating a financing, acquisition, merger, or investment transaction involving one or more of the Recipient and any of its Affiliates, on condition that each such Person enters into a written confidentiality agreement with the Recipient in which that Person promises not to disclose that Confidential Information or use that Confidential Information other than as contemplated in this clause and that otherwise contains terms that are reasonable in the circumstances.

	
9.13
	
Disclosure in Connection with Clinical Trials.  It will not constitute breach of the Recipient’s obligations under this Agreement for the Recipient or any of its Representatives to disclose Confidential Information in connection with clinical trials of a Licensed Product as required by a Government Body or other Person or in accordance with the Recipient’s policies for transparency of clinical trial results with the public.

	
9.14
	
Disclosure Required by Law.  It will not constitute breach of the Recipient’s obligations under this Agreement for the Recipient or any of its Representatives to disclose Confidential Information as required by law provided that if any proceeding is brought to compel the Recipient or any of its Representatives to disclose Confidential Information or if the Recipient or any of its Representatives is otherwise required by law (including regulations promulgated by the Securities and Exchange Commission and the rules of a securities exchange or electronic quotation system) to disclose any Confidential Information, the Recipient shall do the following:

	
9.14.1
	
unless by doing so the Recipient would violate any law or an order of a Government Body, notify the Disclosing Party of that proceeding or that requirement, as the case may be, promptly after learning of it, taking into account for purposes of determining the Recipient’s promptness any time constraints that the Disclosing Party would face in bringing a proceeding to prevent that disclosure or to protect the confidentiality of any information that is disclosed; and

	
9.14.2
	
at the Recipient’s expense cooperate with the Disclosing Party in any proceeding the Disclosing Party brings to prevent that disclosure or to protect the confidentiality of any information that is disclosed.

	
9.15
	
Nondisclosure of Restricted Information.  The Disclosing Party shall not disclose to the Recipient or any of its Representatives any information if doing so would cause the Disclosing Party to breach a duty to any other Person to keep that information confidential or would cause the Disclosing Party to violate any law or any order of a Government Body.

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9.16
	
No License.  The Disclosing Party’s disclosure of Confidential Information will not constitute a grant to the Recipient or any of its Representatives of a license to, or any other interest in, any intellectual property of the Disclosing Party.

	
9.17
	
No Statement as to Accuracy.  Neither Party is making in this Agreement any statement as to accuracy of any Confidential Information.  The Recipient acknowledges that because the Recipient has not relied on, and will not be relying on, any statements made by the Disclosing Party to the Recipient as to accuracy of any Confidential Information, the Recipient will have no basis for bringing any claim for fraud in connection with any such statements.

	
9.18
	
Publications.  Either Party (that Party, the “Publishing Party”) may submit for publication in a journal or for presentation at a conference results of the Research Program if the following conditions have been satisfied:

	
9.18.1
	
the JRC (if it has not been disbanded) has reviewed that analysis;

	
9.18.2
	
the other Party has approved that analysis, with unreasonable withholding of approval being deemed approval;

	
9.18.3
	
the Publishing Party has provided a copy of the proposed publication or presentation to the other Party;

	
9.18.4
	
the other Party has by notice to the Publishing Party approved the proposed publication or presentation, with unreasonable withholding of approval being deemed approval, or in the [...***...]* days after receiving a copy of the proposed publication or presentation the other Party has not notified the Publishing Party of its approval or disapproval;

	
9.18.5
	
at least [...***...] days before submitting the proposed publication or presentation to a non-Party, the Publishing Party has submitted a copy to the other Party to allow the other Party to comment on the content and timing of the proposed publication or presentation; 

	
9.18.6
	
the Publishing Party has complied with any request of the other Party to delay publication for [...***...] days or more to allow the other Party to take steps to protect its or its Affiliates’ Know-How; 

	
9.18.7
	
the Publishing Party has at the request of the other Party deleted from the proposed publication or presentation any Confidential Information of the other Party; and

	
9.18.8
	
the Publishing Party has acknowledged in the proposed publication or presentation the other Party’s contributions, unless the other Party has instructed the Publishing Party in writing to omit any such acknowledgment.

After the conditions stated in this Section 9.18 have been approved with respect to a given analysis, the Publishing Party will not be required to satisfy those conditions again when resubmitting that analysis to a journal or a conference. 

	
9.19
	
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this Agreement, except to the extent expressly permitted in this Agreement, in which case that disclosure will not constitute a breach of the Party in question’s obligations under this Section 9.19.

	
9.20
	
Press Releases.  Except (a) with respect to the Arcturus Press Release attached hereto as the Arcturus Press Release Exhibit the time for release of which shall be agreed by the Parties, without the prior approval of JPI, (b) as expressly permitted by Article 9, or (c) as required by applicable law or the listing rules of any stock exchange on which securities issued by a Party or its Affiliates are traded, neither Party shall make any public statements, by press release or otherwise, concerning this Agreement.  The foregoing shall not prohibit or restrict JPI’s and its Affiliates’ and sublicensees’ Exploitation (and any communications regarding such Exploitation) of Licensed Compounds or Licensed Products, including, without limitation, any launch, marketing, advertising, promotional or other commercialization activities with respect to Licensed Compounds or Licensed Products.  If a Party is required by applicable law or the listing rules of any stock exchange on which securities issued by it or its Affiliates are traded to make any public statement, public filing or other public disclosure concerning this Agreement, it shall: (i) except where impracticable, give reasonable advance notice to the other Party of such required disclosure; (ii) disclose only the information that such Party or its Affiliate determines on advice of counsel is required to be disclosed; and (iii) to the extent confidential treatment may be obtained for the information required to be disclosed, use reasonable efforts to secure such confidential treatment.  Except as provided above in this Section 9.20, if Arcturus wishes to make a public statement disclosing achievement of a Milestone Event or payment of a Milestone Amount, Arcturus shall provide JPI with a copy of the proposed public statement.  Arcturus may issue the public statement once JPI has approved it in writing.  If JPI does not provide Arcturus with comments in the [...***...]* days after the day JPI received the proposed public statement, JPI will be deemed to have approved that public statement.  If JPI provides Arcturus with comments during that period, the Parties shall discuss them.  Arcturus or JPI may subsequently publicly disclose any information previously contained in a public statement approved in accordance with this Article 9. 

	
10
	
Statement of Facts; Disclaimers

	
10.1
	
By Each Party.  Each Party states that the following facts are accurate as of the Effective Date:

	
10.1.1
	
it is an entity duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, with all power and authority necessary to own or use its assets and conduct its business as it is now being conducted;

	
10.1.2
	
it is qualified to do business in all jurisdictions in which the nature of the business that it conducts makes qualification necessary and where failure to so qualify would have a material adverse effect on its ability to perform its obligations under this Agreement;

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10.1.3
	
it has full power and authority to enter into this Agreement and to perform its obligations under this Agreement;

	
10.1.4
	
its entry into this Agreement and performance by it of its obligations under this Agreement have been duly authorized by its governing body;

	
10.1.5
	
it has the consent or authorization of any Person, including any permit issued by any Government Body and the consent of any counterparty to any contract to which it is party, that it requires in connection with its entry into this Agreement and its performance of its obligations under this Agreement;

	
10.1.6
	
its entry into this Agreement and its performance of its obligations under this Agreement do not: (a) violate any provision of its organizational documents as currently in effect; (b) conflict with, result in a breach of, or constitute a default under any contract to which it is a party or by which any of its properties or assets are bound; or (c) conflict with or violate any law or order to which it is subject;

	
10.1.7
	
no Proceeding is pending or, to its knowledge, threatened against it, except for any Proceeding that would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on its ability to perform its obligations under this Agreement, and it is not aware of any facts that would be reasonably likely to result in any such Proceeding; and

	
10.1.8
	
it is not currently in violation of any law or order, except for any law or order the violation of which would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on its ability to perform its obligations under this Agreement.

	
10.2
	
By Arcturus.  Arcturus states that the following facts are accurate as of the Effective Date:

	
10.2.1
	
the Arcturus Patent Rights listed in the Arcturus Patent Rights Exhibit are existing, and the issued Patent Rights in the Arcturus Patent Rights Exhibit are not, to Arcturus’s knowledge, invalid or unenforceable, in whole or in part;

	
10.2.2
	
Arcturus is the sole and exclusive owner of, or has valid and enforceable rights to, Arcturus Patent Rights listed in the Arcturus Patent Rights Exhibit, and Arcturus has the right to grant JPI the license set forth in Section 4.1, free and clear of all encumbrances, security interests, options and licenses;

	
10.2.3
	
except as set forth in the Granted Rights Exhibit, no license granted by Arcturus to any non-Party conflicts with the license granted to JPI under this Agreement, and the Granted Rights Exhibit is a complete list of rights under Arcturus Technology granted to non‐Parties with respect to HBV NA Therapeutics, [...***...]* NA Therapeutics and Respiratory Disease Virus NA Therapeutics.  During the term of this Agreement, Arcturus shall not grant any non‐Party any license that conflicts with the license granted to JPI herein; 

	
10.2.4
	
to the knowledge of Arcturus, neither the practice of the Arcturus Technology by Arcturus as contemplated by this Agreement, nor the development, manufacture and commercialization of any NA Therapeutics Controlled by Arcturus as of the 

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Effective Date, infringes any Patent Right or misappropriates any Know-How owned or possessed by any Third Party; and

	
10.2.5
	
no Proceeding is pending or, to its knowledge, threatened against it relating to the Arcturus Technology, and it is not aware of any facts that would be reasonably likely to result in any Proceeding.

	
10.3
	
Disclaimers.  Each Party acknowledges:

	
10.3.1
	
that the Research Program and development and commercialization of products under this Agreement might fail and that any such failure will not in itself constitute a breach of this Agreement;

	
10.3.2
	
neither Party is making any warranty of merchantability or any other warranty with respect to any Arcturus Patent Rights, Arcturus Know-How, JPI Patent Rights, JPI Know-How, Joint Patent Rights, Joint Know-How, Licensed Compounds, Materials, or Licensed Products, other than the warranties expressly set forth in this Agreement; and

	
10.3.3
	
neither Party will be liable to the other for any indirect, punitive, special, or consequential damages, lost profits or other non-direct damages in connection with this Agreement even if that Party has been informed or should have known of the possibility of such damages, except that this Section 10.3.3 will not apply to either Party’s obligations under Article 11.

	
11
	
Indemnification

	
11.1
	
Indemnification by JPI.  With respect to any Proceeding brought by a Third Party (other than an Arcturus Indemnitee) against one or more Arcturus Indemnitees arising out of this Agreement or development or commercialization by JPI or any of its Affiliates or sublicensees of the Licensed Compounds or Licensed Products (each, an “Arcturus Nonparty Claim”), JPI shall indemnify those Arcturus Indemnitees against all Indemnifiable Losses arising out of that Proceeding, except to the extent that Arcturus or one of the Arcturus Indemnitees negligently or intentionally caused those Indemnifiable Losses.

	
11.2
	
Indemnification by Arcturus.  With respect to any Proceeding brought by a Third Party (other than a JPI Indemnitee) against one or more JPI Indemnitees arising out of this Agreement or development or commercialization by Arcturus or any of its Affiliates, JPIs, or sublicensees of the Terminated Compounds, Licensed Compounds, or Licensed Products (each, a “JPI Nonparty Claim”), Arcturus shall indemnify those JPI Indemnitees against all Indemnifiable Losses arising out of that Proceeding, except to the extent that JPI or one of the JPI Indemnitees negligently or intentionally caused those Indemnifiable Losses.

	
11.3
	
Procedures.  To be entitled to indemnification under Section 11.1 or 11.2, an Indemnitee subject to any Third Party Claim must promptly (and in any event no later than [...***...]* days after the Indemnitee first knew of that Proceeding) notify the Indemnifying Party of that Third Party Claim and deliver to the Indemnifying Party a copy of all legal pleadings with respect to the Third Party Claim.  If the 

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Indemnitee fails to timely notify the Indemnifying Party of a Third Party Claim, the Indemnifying Party will be relieved of its indemnification obligations with respect to that Third Party Claim to the extent that the Indemnifying Party was prejudiced by that failure and the Indemnifying Party will not be required to reimburse the Indemnitee for any Litigation Expenses the Indemnitee incurred during the period in which the Indemnitee failed to notify the Indemnifying Party.

	
11.3.1
	
To assume the defense of a Third Party Claim, the Indemnifying Party must notify the Indemnitee that it is doing so.  Promptly thereafter, the Indemnifying Party shall retain to represent it in the Third Party Claim independent legal counsel that is reasonably acceptable to the Indemnitee.

	
11.3.2
	
An Indemnitee is entitled to participate in the defense of a Third Party Claim.  An Indemnitee may defend a Third Party Claim with counsel of its own choosing and without the Indemnifying Party participating if: (a) the Indemnifying Party notifies the Indemnitee that it does not wish to defend the Third Party Claim; (b) by midnight at the end of the [...***...]* day after the Indemnitee notifies the Indemnifying Party of the Third Party Claim the Indemnifying Party fails to notify the Indemnitee that it wishes to defend the Third Party Claim; or (c) representation of the Indemnifying Party and the Indemnitee by the same counsel would, in the opinion of that counsel, constitute a conflict of interest.

	
11.3.3
	
The Indemnifying Party shall pay any Litigation Expenses that an Indemnitee incurs in connection with defense of the Third Party Claim before the Indemnifying Party assumes the defense of that Third Party Claim, except with respect to any period during which the Indemnitee fails to timely notify the Indemnifying Party of that Third Party Claim.  The Indemnifying Party will not be liable for any Litigation Expenses that a Indemnitee incurs in connection with defense of a Third Party Claim after the Indemnifying Party assumes the defense of that Third Party Claim, other than Litigation Expenses that the Indemnitee incurs in employing counsel in accordance with Section 11.3.2 which Litigation Expenses the Indemnifying Party shall pay promptly as they are incurred.

	
11.3.4
	
After the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnifying Party may contest, pay, or settle the Third Party Claim without the consent of the Indemnitee only if that settlement: (a) does not entail any admission on the part of the Indemnitee that it violated any law or infringed the rights of any Person; (b) has no effect on any other claim against the Indemnitee; (c) provides as the claimant’s sole relief monetary damages that are paid in full by the Indemnifying Party; and (d) requires that the claimant release the Indemnitee from all liability alleged in the Third Party Claim.  After the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnifying Party will have no further obligations under this Section 11.3 with respect to the Third Party Claim if the Indemnitee contests, pays, or settles the Third Party Claim without the consent of the Indemnifying Party.

	
11.4
	
Definitions.  In this Agreement, the following definitions apply:

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11.4.1
	
 “Arcturus Indemnitee” means Arcturus, any Affiliate of Arcturus, each Representative of any of the foregoing, and each of the heirs, executors, successors, and assignees of any of the foregoing.

	
11.4.2
	
“Indemnifiable Losses” means the aggregate of Losses and Litigation Expenses.

	
11.4.3
	
“Indemnitee” means an Arcturus Indemnitee or a JPI Indemnitee.

	
11.4.4
	
“JPI Indemnitee” means JPI, any Affiliate of JPI, each Representative of any of the foregoing, and each of the heirs, executors, successors, and assignees of any of the foregoing.

	
11.4.5
	
“Litigation Expense” means any reasonable out-of-pocket expense incurred in defending a Proceeding or in any related investigation or negotiation, including court filing fees, court costs, arbitration fees, witness fees, and attorneys’ and other professionals’ fees and disbursements.

	
11.4.6
	
“Loss” means any amount awarded in, or paid in settlement of, any Proceeding, including any interest but excluding any Litigation Expenses.

	
11.4.7
	
“Proceeding” means any judicial, administrative, or arbitration action, suit, claim, investigation, or proceeding.

	
11.4.8
	
“Representative” means, with respect to an entity, any of that entity’s directors, officers, employees, agents, actual or potential consultants, actual or potential advisors, and other representatives.

	
11.4.9
	
“Nonparty Claim” means an Arcturus Nonparty Claim or a JPI Nonparty Claim.

	
12
	
Term and Termination

	
12.1
	
Automatic Termination.  This Agreement will terminate when JPI owes Arcturus no more royalty payments on any Licensed Product.

	
12.2
	
Termination by Arcturus.  In the following circumstances, Arcturus may by notice to JPI terminate this Agreement:

	
12.2.1
	
JPI breaches any obligation under this Agreement to make an undisputed payment and fails to make that payment no later than 60 days after Arcturus notifies it of that breach; or

	
12.2.2
	
JPI materially breaches this Agreement and fails to cure such breach within 60 days after Arcturus notifies it of that breach, except that allegations of JPI’s breach of its obligation to use Commercially Reasonable Efforts to develop or commercialize Licensed Products will be solely subject to the conditions and procedures set out in Section 14.4.

	
12.3
	
Termination by JPI.  In the following circumstances, JPI may by notice to Arcturus terminate this Agreement:

	
12.3.1
	
On a Licensed Product-by-Licensed Product and country-by-country basis, or in its entirety, in each case upon 60 days’ written notice;

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12.3.2
	
If Arcturus materially breaches this Agreement and fails to cure such breach within 60 days after JPI notifies it of that breach; or

	
12.3.3
	
There occurs a Change of Control of Arcturus. 

	
12.4
	
Effects of Any Termination.  In the event of any termination of this Agreement in its entirety (other than automatic termination in accordance with Section 12.1), then in each case all rights and obligations of each party under this Agreement will terminate, including all rights, licenses, and sublicenses granted by a party to the other, except (a) that the license granted to JPI under Section 4.3.2 shall survive solely with respect to Arcturus Know-How (and shall terminate with respect to Arcturus Patents) and (b) as provided in Sections 12.5 and 12.6.  

	
12.5
	
Effects of Certain Terminations.  

	
12.5.1
	
In the event that JPI terminates this Agreement in its entirety prior to completion of all Research Programs, JPI [...***...]* during the [...***...]month period beginning on JPI’s delivery of notice of termination to Arcturus as specified in the Joint Research Plan and [...***...] (or, if less than [...***...] months [...***...], such [...***...] obligation being subject to [...***...].  Arcturus will use Commercially Reasonable Efforts to [...***...].  Notwithstanding the foregoing, in the event that JPI delivers Arcturus a written notice of termination of this Agreement prior to [...***...], JPI shall [...***...] pursuant to this Section 12.5.1. 

	
12.5.2
	
Solely in the event of any termination of this Agreement by JPI in its entirety or by Arcturus under Section 12.2, in each case prior to the First Commercial Sale of a Licensed Product: 

(a) JPI shall, and it hereby does, grant to Arcturus an exclusive, worldwide, royalty-free, perpetual license, with the right to sublicense through multiple tiers, under JPI Licensed Patent Rights and any JPI formulation, delivery or manufacturing technology actively utilized in a Licensed Compound or Licensed Product under active development by JPI, solely to Exploit Licensed Compounds and Licensed Products (other than any Combination Product or Bundled Product) in the Field on the terms and conditions of this Agreement; 

(b) JPI shall promptly transfer to Arcturus all available data, information, and regulatory filings relating to Licensed Compounds and Licensed Products and shall thereafter provide additional such available data, information, and regulatory filings at the reasonable written request of Arcturus, and JPI shall transfer to Arcturus all (or, as requested by Arcturus, a specified portion of) 

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available quantities of Licensed Compounds and Licensed Products at a price equal to JPI’s fully burdened cost of those supplies; 

(c) JPI shall for [...***...]* days after the effective date of termination, at Arcturus’s written request, reasonably assist at its own expense in the orderly and prompt transition of sponsorship and management of clinical trials then being conducted to Arcturus; and 

(d) if JPI was manufacturing, or having manufactured on its behalf, any Licensed Product, or the Licensed Compounds contained therein, prior to termination, then at Arcturus’s request and upon the pricing terms set forth below and other commercially reasonable terms, until the earlier of: (i) such time as Arcturus has secured another source of Licensed Compound or Licensed Product that is able to meet Arcturus’s Licensed Product quality and quantity requirements; and (ii) [...***...] months after such termination, JPI shall use commercially reasonable efforts to supply, or cause to be supplied, to Arcturus such quantities of Licensed Product (or Licensed Compound contained therein) as Arcturus may reasonably require for the Exploitation of Licensed Products in the Field, subject to payment by Arcturus of [...***...]% of JPI’s fully-burdened cost of such supplies; provided that Arcturus shall use commercially reasonable efforts to secure another source of supply as soon as reasonably practicable.  

In no event shall Arcturus as a result of this Section 12.5.2 have any right or license with respect to any active therapeutic ingredient that is not a Licensed Compound nor will Arcturus have any right to Exploit Combination Products that contain any materials Covered by any Patent Right or other proprietary right of a non-Party.  JPI reserves all rights under the JPI Licensed Patent Rights other than the rights exclusively granted to Arcturus under subsection (a) of this Section 12.5.2.  JPI will not be required to initiate or continue, any clinical trial as to any Licensed Compound or Licensed Product in the event of a termination of the Agreement.  If the Parties agree to transition any clinical trials to Arcturus, Arcturus shall reimburse JPI for any costs incurred by JPI in transitioning such clinical trials to Arcturus, and Arcturus shall be responsible for reimbursing JPI [...***...]% of the costs incurred by JPI prior to such transition in connection with the conduct of such clinical trials.  Should JPI be obligated to any Third Party to pay milestones or royalties with respect to any Licensed Compound or Licensed Product then, prior to JPI granting a license to the same to Arcturus hereunder, Arcturus shall agree in writing to pay to JPI all royalties and milestone payments that become due by JPI to the Third Party on account of use by Arcturus or its licensee.

	
12.6
	
Accrued Rights and Obligations; Survival.  Termination of this Agreement will not relieve either Party of any obligation or liability accruing prior to such termination, nor shall termination of this Agreement preclude either Party from pursuing all rights and remedies it may have under this Agreement, at law or in equity, with respect to breach of this Agreement.  In addition, the Parties’ rights and obligations under Sections 4.3.2 (solely with respect to Arcturus Know-How), 4.7, 5.12, 5.13, 5.16, 5.18, 6.1, 6.4, 10.3, 12.4, 12.5, 12.6 and 12.7 and Articles 9

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(excluding Section 9.18), 11, 14 and 15 of this Agreement shall survive termination of this Agreement. 

	
12.7
	
Rights in Bankruptcy.  The Parties intend that all rights and licenses granted under this Agreement by one Party to the other are for all purposes of section 365(n) of Title 11 of the U.S. Bankruptcy Code licenses of rights to “intellectual property” as defined in section 101 of Title 11.  During the term of this Agreement, each Party may create and maintain current copies to the extent practicable of all intellectual property licensed to it under this Agreement.  If there occurs a Bankruptcy Event with respect to either Party (that Party, the “Bankrupt Party”), the following will apply: each Party will retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy Code with respect to any intellectual property licensed to it under this Agreement, the other Party will have all rights stated in section 365(n) of Title 11, if in its capacity as licensor of intellectually property under this Agreement the Bankrupt Party rejects this Agreement in any proceeding under the U.S. Bankruptcy Code, the other Party will be entitled to a complete duplicate of (or complete access to, as appropriate) that intellectual property and all embodiments of that intellectual property and the Bankrupt Party shall deliver to the other Party a complete duplicate of that intellectual property if one is not already in the other Party’s possession, the Bankrupt Party shall not interfere with the other Party’s rights to intellectual property and all embodiments of intellectual property and shall assist and not interfere with the other Party in obtaining intellectual property and all embodiments of intellectual property (including all tangible, intangible, electronic or other embodiments of rights and licenses under this Agreement, including all compounds and products embodying intellectual property, Licensed Compounds, Licensed Products, regulatory filings and related rights and technology) from anyone else.  All rights of the Parties under this Section 12.7 and under section 365(n) of Title 11 are in addition to and not in substitution of any and all other rights, powers, and remedies that each Party might have under this Agreement, Title 11, and any other law, the right of access to any intellectual property (including all embodiments of that intellectual property, to the extent protected by non-bankruptcy law) of the Bankrupt Party under this Agreement, and the right to contract directly with any non-Party to complete the work contracted to the Bankrupt Party.  Any intellectual-property rights granted under this Section 12.7 are subject to the licenses granted elsewhere in this Agreement and the payment obligations stated in Sections 5.3, 5.4, 5.5 and 5.7. 

	
13
	
Definitions

In this Agreement, the following definitions apply:

	
13.1
	
“Affiliate” means, with respect to any given Person, any other Person at the time directly or indirectly controlling, controlled by or under common control with that Person.  For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and 

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policies of a Person, whether through ownership of voting securities, by contract or otherwise.

	
13.2
	
“After-Acquired Third-Party IP” means any Patent Right or Know-How of a Third Party with respect to which, in each case, Arcturus first obtains a right to grant access, or a license or sublicense, from such Third Party after the Effective Date, under an agreement that would obligate Arcturus to pay royalties and/or milestone payments to such Third Party with respect to JPI’s Exploitation of such Patent Right or Know-How were it to be licensed to JPI hereunder. 

	
13.3
	
“API” means, in the case of a Combination Product, any of the active pharmaceutical ingredients in such Combination Agreement, including the Licensed Compound.

	
13.4
	
“Arcturus-Controlled Affiliate” means a Person controlled by Arcturus where “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.  

	
13.5
	
“Arcturus Delivery Technologies” or “ADT” means any Arcturus proprietary technology that can be combined with NA Therapeutics to enable or improve delivery of such NA Therapeutics (including Arcturus’ proprietary LUNARTM lipid-enabled delivery system). 

	
13.6
	
“Arcturus Know-How” means Know-How that Arcturus and Arcturus-Controlled Affiliates Control (other than through grant of a license by an Affiliate of JPI) that is necessary or useful for the research, discovery, development, manufacture, commercialization or other Exploitation of a NA Therapeutic, Licensed Compound or Licensed Product but does not include Joint Know-How.

	
13.7
	
“Arcturus Patent Right” means any Patent Right (other than a Joint Patent Right) that Arcturus or any Arcturus-Controlled Affiliates Controls other than through the grant of a license by JPI and that is necessary or useful for the research, discovery, development, manufacture, commercialization or other Exploitation of a NA Therapeutic, Licensed Compound or Licensed Product.

	
13.8
	
“Arcturus Platform Technologies” means: (a) any Arcturus proprietary technology that can be combined with NA Therapeutics to deliver or distribute the NA Therapeutics to enable or improve delivery of such NA Therapeutics (including Arcturus’ proprietary LUNARTM lipid-enabled delivery system); and (b) any Arcturus proprietary chemistry that may be used to modify NA Therapeutics for improved or enhanced potency, safety, stability or other physicochemical properties (including, without limitation, Arcturus’ proprietary Unlocked Nucleic Acid (UNA) chemistry (“UNA Technology”)).  NA Therapeutics are not Arcturus Platform Technologies.

	
13.9
	
“Arcturus Product-Specific Patent” means Arcturus Patent Rights that claim: the composition or formulation of a Selected NA Therapeutic, Development Candidate, Licensed Compound or Licensed Product or, if filed during the 

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Research Term, an NA Therapeutic for the treatment of HBV (or Option Disease Area, as applicable); or any method of using or making a Selected NA Therapeutics for the treatment of HBV (or Option Disease Area, as applicable), Development Candidate, Licensed Compound or Licensed Product or, if filed during the Research Term, any method of using or making an NA Therapeutic for the treatment of HBV (or Option Disease Area, as applicable).  However, “Arcturus Product-Specific Patents” exclude any Arcturus Patent Right that does not claim an NA Therapeutic, Development Candidate, Licensed Compound, or Licensed Product, the manufacture or use of a NA Therapeutic, Development Candidate, Licensed Compound, or Licensed Product, or the treatment of HBV (or Option Disease Area, as applicable) and claims: 

	
13.9.1
	
subject matter broadly applicable to therapeutics that are not NA Therapeutics, Selected NA Therapeutics, Development Candidates, Licensed Compounds or Licensed Products for the treatment of HBV (or Option Disease Area, as applicable), provided that such Arcturus Patent Right does not specifically claim or describe the composition of matter or formulation of, or a method of making or using, an NA Therapeutic, Selected NA Therapeutic, Development Candidate, Licensed Compound or Licensed Product for the treatment of HBV (or Option Disease Area, as applicable); 

	
13.9.2
	
methods of use of therapeutics that are not NA Therapeutics, Selected NA Therapeutics, Development Candidates, Licensed Compounds or Licensed Products to treat or diagnose a disease, disorder or condition other than for the treatment of HBV (or Option Disease Area, as applicable); 

	
13.9.3
	
any therapeutic that is not an NA Therapeutic, Selected NA Therapeutics, Development Candidate, Licensed Compound or Licensed Product for the treatment of HBV (or Option Disease Area, as applicable), except that if: (i) such Arcturus Patent Right also claims the composition of matter or method of use of an NA Therapeutic (if filed during the Research Term), Selected NA Therapeutic, Development Candidate or Licensed Compound for the treatment of HBV (or Option Disease Area, as applicable); (ii) the earliest worldwide priority date to which such Arcturus Patent Right is entitled is after [...***...]*; and (iii) such Arcturus Patent Right does not claim any subject matter described in subsection 13.9.1, 13.9.2 or 13.9.4 of this definition, then such Arcturus Patent Right shall be deemed an “Arcturus Product-Specific Patent” for purposes of this Agreement; or 

	
13.9.4
	
Arcturus Platform Technologies.

	
13.10
	
“Arcturus Technology” means Arcturus Patent Rights and Arcturus Know-How.

	
13.11
	
“Bankruptcy Event” refers, with respect to any Person, to occurrence of one or more of the following:

	
13.11.1
	
that Person commences a voluntary case under Title 11 of the United States Code or the corresponding provisions of any successor laws;

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13.11.2
	
anyone commences an involuntary case against that Person under Title 11 of the United States Code or the corresponding provisions of any successor laws and either: (a) the case is not dismissed by midnight at the end of the [...***...]* day after commencement; or (b) the court before which the case is pending issues an order approving the case; and

	
13.11.3
	
a court of competent jurisdiction appoints, or that Person makes an assignment of all or substantially all its assets to, a custodian (as that term is defined in Title 11 of the United States Code or the corresponding provisions of any successor laws) for that Person or all or substantially all its assets.

	
13.12
	
“Bundled Product” means a Licensed Product that is sold by JPI, its Affiliates or sublicensees “bundled” with one or more other products that are not Licensed Products, each in finished dosage form, and not a fixed combination of a Licensed Product and one or more other products in a single finished product.

	
13.13
	
“Business Day” means any day that is not a Saturday, a Sunday, or a day on which banks are not open for business in the place where an obligation has to be performed under this Agreement or, in case of obligations for which a place of performance is not specified (or cannot be reasonably inferred from the contents of this Agreement), in San Diego, California.

	
13.14
	
“Calendar Month” means a financial month based on the Johnson & Johnson Universal Calendar (attached hereto as the Johnson & Johnson Universal Calendar Exhibit) for that year, except that the first Calendar Month for the first Calendar Year extends from the date of this Agreement to the end of that Calendar Month and the last Calendar Month extends from the first day of that Calendar Month until termination of this Agreement.

	
13.15
	
 “Calendar Quarter” means a financial quarter based on the Johnson & Johnson Universal Calendar for that year, except that the first Calendar Quarter for the first Calendar Year extends from the date of this Agreement to the end of that Calendar Quarter and the last Calendar Quarter extends from the first day of that Calendar Quarter until termination of this Agreement.

	
13.16
	
“Calendar Year” means one year based on the Johnson & Johnson Universal Calendar for that year, except that the first Calendar Year extends from the date of this Agreement to the end of that Calendar Year and the last Calendar Year extends from the first day of that Calendar Year until termination of this Agreement.

	
13.17
	
 “Change of Control” means, with respect to any Person other than an individual, occurrence of any of the following:

	
13.17.1
	
a Person who is not a shareholder of that Person on the date of this Agreement (or a group of such Persons acting in concert) acquires, during a period of 12 consecutive entire months, shares of that Person representing a majority of the voting power of all shares of that Person having the right to vote for the election of directors;

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13.17.2
	
a merger or consolidation of that Person with any other Person, other than the following: (a) a merger or consolidation that would result in the voting securities of that Person outstanding immediately before that merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than half of the combined voting power of the voting securities of that Person or the surviving entity, as applicable, outstanding immediately after that merger or consolidation; (b) a merger or consolidation effected to implement a recapitalization (other than a redomiciliation of that Person); or (c) sale or other disposition by that Person of all or substantially all of that Person’s assets or any transaction having a similar effect.

	
13.18
	
“Combination Product” means a product that is sold by JPI, its Affiliates or sublicensees in a finished dosage form containing a Licensed Product in combination with one or more other APIs.

	
13.19
	
“Commercially Reasonable Efforts” means, with respect to the efforts to be expended by a Party or its Affiliate in conducting any activity or achieving any objective in connection with an activity or objective under the Agreement, reasonable, good-faith efforts to conduct such activity or achieve such objective as such Party would normally devote to such activity or objective, based on all conditions then prevailing and taking into account all relevant commercial, scientific and technical factors, including: (a) issues of efficacy, safety, and expected and actual approved labeling; (b) the competitiveness of products sold by Third Parties in the marketplace; (c) the expected and actual product profile of a Licensed Product; (d) patent and other proprietary positions; (e) the likelihood of regulatory approval of a Licensed Product given the regulatory structure involved, including the likelihood of obtaining regulatory exclusivity; and (f) the expected and actual profitability and return on investment.  To the extent that the performance of a Party hereunder is adversely affected by failure by the other Party to perform its obligations hereunder, the impact of such performance failure will be taken into account in determining whether Commercially Reasonable Efforts have been used. 

	
13.20
	
“Competitive Infringement” means, with respect to an Arcturus Product-Specific Patent, another Arcturus Patent Right or a Joint Patent Right (as applicable), any infringement by a non-Party of such Patent Right that arises from registration, development, manufacture, use, sale, or importation of a compound or product that is, or is reasonably likely to  be, competitive with a Licensed Compound or Licensed Product. 

	
13.21
	
“Control” means, with respect to any Know-How, Patent Right, or other intellectual property right, the possession (whether by ownership or by exclusive or non‐exclusive license) by a Party or any of its Controlled Affiliates of the ability to grant to the other Party, in accordance with this Agreement, access, ownership, a license, or a sublicense to that Know-How, Patent Right, or other intellectual property right without violating the terms of any agreement with a Third Party.  If a Party has rights to any Know-How, Patent Right, or other intellectual property right 

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by virtue of a non‐exclusive license granted to such Party that includes the right to grant sublicenses, and this Agreement specifies that an exclusive license is granted to the other Party under such Know-How, Patent Right, or other intellectual property right, then such right shall be deemed “Controlled” hereunder, and the license granted by such Party to the other Party hereunder, while non-exclusive with respect to non-Parties, shall be exclusive as to such Party (i.e., such Party shall not have the right to practice such right for any purpose within the scope of the exclusive license granted by such Party to the other Party), subject to any rights expressly retained or reserved by such Party in this Agreement. 

	
13.22
	
“Controlled Affiliate” means, with respect to a Party, any corporation or other business entity that is controlled (as defined in Section 13.1) by such Party.  

	
13.23
	
“Covers” or “Covering” means, with respect to a Patent Right, that making, using, selling, offering for sale, or importing a composition of matter or other material or practice of a claimed method would infringe a Valid Claim (or, if a Valid Claim has not issued, if a Valid Claim were to issue), within that Patent Right in the country in which that activity occurs.

	
13.24
	
“Currency Hedge Rate” means the weighted-average hedge rate of the outstanding external foreign-currency forward hedge under arm’s-length contracts between Johnson & Johnson’s Global Treasury Services Center and its Affiliates and banks.

	
13.25
	
“Exploit” means manufacture, use, sell, offer for sale, import, or otherwise exploit including have manufactured, have used, have sold, and have imported.

	
13.26
	
“FDA” means the U.S. Food and Drug Administration and any successor agency.

	
13.27
	
“Field” means all uses.

	
13.28
	
“First Commercial Sale” means, with respect to a Licensed Product, first sale by JPI in an arms-length transaction to a Third Party (other than a sublicensee) for use or consumption by the general public of that Licensed Product in a country after all required Regulatory Approvals for commercial sale of that Licensed Product have been obtained in that country.  Licensed Product provided for: (a) clinical study purposes; (b) compassionate use; (c) similar uses by a limited number to support Licensed Product Regulatory Approvals (provided that the Licensed Product is not otherwise generally available for purchase in such country); and (d) early access programs; shall not constitute a First Commercial Sale.  In addition, sales of a Licensed Product by and between JPI, its Affiliates and/or sublicensees, or between the Parties (or their respective Affiliates or Sublicensees), shall not constitute a First Commercial Sale.

	
13.29
	
“FTE” means a full-time employee or consultant, or more than one employee or consultant working the equivalent of a full-time employee or consultant, with “full-time” meaning [...***...]* hours per Calendar Year.

	
13.30
	
“FTE Rate” means $[...***...] per FTE.

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13.31
	
 “GLP” means good laboratory practices in accordance with the then-current practices and procedures stated in Title 21, United States Code of Federal Regulations, Part 58, or any successor statute, any other regulations or guidelines relating to good laboratory practices, and any foreign equivalents in the country in which the studies or clinical trials in question are conducted.

	
13.32
	
“Government Body” means: (a) the government of a country or of a political subdivision of a country or supranational organization such as the EU; (b) an agency of any such government; (c) any other individual, entity, or organization authorized by law to perform any executive, legislative, judicial, regulatory, administrative, military, or police functions of any such government; or (d) an intergovernmental organization.

	
13.33
	
“HBV NA Therapeutic” means a NA Therapeutic targeting [...***...]* of the Hepatitis B virus (HBV) genome.

	
13.34
	
“[...***...] NA Therapeutic” means a NA Therapeutic targeting [...***...] of the [...***...].

	
13.35
	
“IND” means: (a) an investigational new drug application filed with the FDA for authorization to commence clinical studies; and (b) its equivalents in countries other than the United States.

	
13.36
	
“Joint Know-How” means Know-How that is conceived of or created jointly by employees, agents, or subcontractors of both Parties.

	
13.37
	
“Joint Patent Right” means any Patent Right that is conceived of or created jointly by employees, agents, or subcontractors of both Parties under this Agreement.

	
13.38
	
 “Joint Research Plan” means the written plan specifying the research to be conducted during the Research Term (a) for HBV, set forth on the HBV Joint Research Plan attached hereto; and (b) for any Option Disease Area, following agreement between the Parties on the Research Program work for such Option Disease Area.

	
13.39
	
“JPI Licensed Patent Rights” means: (a) all Patent Rights (other than Joint Patent Rights) that JPI or any of its Controlled Affiliates Controls, other than through the grant of a license by Arcturus, that Cover Licensed Compounds or Licensed Products; and (b) JPI’s interest in Joint Patent Rights. 

	
13.40
	
 “Know How” means all information not generally known to the public including screens, models, inventions, practices, methods, knowledge, know-how, skill, experience, test data including pharmacological, toxicological and clinical test data, analytical and quality control data, marketing, pricing, distribution, costs, sales, manufacturing data, manufacturing secrets and procedures, secret processes, reports, plans, designs, prototypes, test results, working drawings, methods including testing methods, formulas, recipes, material and performance specifications and current accumulated experience acquired as a result of 

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technical research or otherwise, and patent and legal data related to chemical, biological and other tangible materials.

	
13.41
	
“Materials” means any tangible chemical or biological materials, including any compounds, libraries, small molecules, DNA, RNA, clones, cells, and any expression product, progeny, derivative, or other improvement 

	
13.42
	
“NA Therapeutic” or “NA Therapeutics” means therapeutic agents based on nucleic acids such as [...***...]*.  The term ‘[...***...]’ used in this definition means the use of [...***...]. For clarity, references to NA Therapeutics are references only to an HBV NA Therapeutic, provided that if an Option is exercised, shall also mean an [...***...] NA Therapeutic or a Respiratory Disease Virus NA Therapeutic, as applicable following such Option exercise.

	
13.43
	
“Net Sales” means the gross amounts invoiced on sales of Licensed Products by JPI or any of its Affiliates or sublicensees to a Third Party purchaser in arm’s-length transaction, less the following deductions, determined in accordance United States generally accepted accounting principles consistently applied (“U.S. GAAP”) and its internal policies, and procedures and accounting standards, to the extent allocable to such Licensed Product under U.S. GAAP and actually taken, paid, accrued, allowed, included, or allocated based on estimates in the gross sales prices with respect to such sales: 

	
 
	
(a)
	
normal and customary trade, cash and quantity discounts, allowances, deductions, fees and credits, in the form of deductions actually allowed with respect to sales of such Licensed Product (to the extent not already reflected in the amount invoiced), excluding commissions for commercialization;

	
 
	
(b)
	
excise taxes, use taxes, tariffs, sales taxes, and customs duties, and other governmental charges imposed on the sale of such Licensed Product to the extent separately itemized on the invoice (but specifically excluding, for clarity, any income taxes assessed against the income arising from such sale); 

	
 
	
(c)
	
outbound freight, shipment and insurance costs to the extent separately itemized on the invoice; 

	
 
	
(d)
	
compulsory payments and cash rebates related to the sales of such Licensed Products paid to a governmental authority (or agent thereof) pursuant to governmental regulations, including government levied fees as a result of healthcare reform policies;

	
 
	
(e)
	
retroactive price reductions, credits or allowances for rejections or returns of such Licensed Products including for recalls, damaged goods and billing errors; and

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(f)
	
rebates, chargebacks, and discounts (or the equivalent thereof) to managed health care organizations, pharmacy benefit managers (or the equivalent thereof), federal, state, provincial, local or other governments, or their agencies or purchasers, reimbursers, or trade customers.

The foregoing deductions shall be based on the Johnson & Johnson group of companies’ sales reporting system to the extent the same complies with applicable law.  All such discounts, allowances, credits, rebates, and other deductions shall be fairly and equitably allocated between such Licensed Product and other products of JPI and its Affiliates and sublicensees such that such Product does not bear a disproportionate portion of such deductions.  Sales of a Licensed Product by and between JPI and its Affiliates and sublicensees are not sales to Third Parties and shall be excluded from Net Sales calculations for all purposes; provided that any resale by the purchaser to a Third Party distributor or to a Third Party for end use, shall be included in Net Sales.  Compassionate use, “named patient sales”, sales made in connection with clinical trials, and product donations shall be excluded from Net Sales calculations for all purposes. 

In the event a Licensed Product is sold in combination with other products by JPI, its Affiliates or sublicensees and the [...***...]*, the Net Sales of such Licensed Product, for the purposes of determining royalty and sales-based milestone payments, shall be determined on a country by country basis by [...***...].  In the event that [...***...], then, for purposes of determining the royalty payments due in respect of such Licensed Product, the [...***...].  ...***...For the purpose of determining royalty and sales-based milestone payments payable on a Combination Product, Net Sales for such Combination Product will be calculated by [...***...].  For clarity, the term “invoice price” on a unit basis refers to the Net Sales for a given Calendar Year divided by the total number of units of the Licensed Compound sold in that country during that same Calendar Year.  

 

[...***...] 

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[...***...]*.  

 

	
13.44
	
 “Out-of-Pocket Expenses” means expenses actually paid (with no mark-up) to any Third Party that is either: (a) not an Affiliate of a Party claiming such expenses; or (b) is an Affiliate of that Party where such payment is limited to reimbursing such Affiliate for expenses actually paid by such Affiliate to a Third Party that is not an Affiliate of the Party claiming such expenses.

	
13.45
	
“Patent Right” means:(a) a patent; (b) a pending patent application (including a provisional application, substitution, continuation, continuation-in-part, division, and renewal); (c) a patent-of-addition, reissue, reexamination, and extension or restoration by existing or future extension or restoration mechanisms (including supplementary protection certificate or the equivalent); (d) any other form of government-issued right substantially similar to any of the foregoing; and (e) all U.S. and foreign counterparts of any of the foregoing.

	
13.46
	
“Person” means an individual, an entity, and organization, or a Government Body.

	
13.47
	
“Phase 1 Study” means a human clinical trial which satisfies the requirements of 21 CFR §312.21(a). 

	
13.48
	
“Phase 2 Study” means a human clinical trial which satisfies the requirements of 21 CFR §312.21(b).  

	
13.49
	
“Phase 3 Study” means a human clinical trial which satisfies the requirements of 21 CFR §312.21(c).

	
13.50
	
“Prosecution and Maintenance” and “Prosecute and Maintain” refer to preparation, filing, prosecution, and maintenance of a Patent Right, as well as re-examinations, reissues, and the like with respect to that Patent Right, together with conduct of interferences, defense of oppositions, and other similar proceedings with respect to that Patent Right.

	
13.51
	
“Regulatory Approval” refers, with respect to a country or extranational territory, to obtaining all approvals (however referred to) necessary to distribute, sell, or market a product in that country or some or all of that extranational territory, 

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including all pricing and third-party reimbursement approvals, if any, required by one or more Government Bodies to receive governmental reimbursement in such country.

	
13.52
	
 “Research Term” means the period in which Arcturus conducts the Research Program under this Agreement. 

	
13.53
	
“Respiratory Disease Virus” means virus that causes one or more respiratory symptoms, including, without limitation, orthomyxo and paramyxo viruses.

	
13.54
	
“Respiratory Disease Virus NA Therapeutic” means NA Therapeutic targeting any region of the virus genome that causes one or more respiratory symptoms, including, without limitation, orthomyxo and paramyxo virus genomes.

	
13.55
	
“Selected NA Therapeutic” means (a) an NA Therapeutic that is on the Selected NA Therapeutics List delivered by JPI to Arcturus under Section 1.6 or (b) an NA Therapeutic that, after delivery of the Selected NA Therapeutics List, is deemed to be a “Selected NA Therapeutics” in accordance with Section 3.1 or 4.5. 

	
13.56
	
“Tax” or “Taxes” means any present or future taxes, levies, imposts, duties, charges, assessments or fees of any nature (including any interest thereon).

	
13.57
	
“Third Party” means any entity other than the Parties and their respective Affiliates. 

	
13.58
	
“Valid Claim” means the following with respect to a particular country:

	
13.58.1
	
a claim of an issued and unexpired patent in that country that: (a) has not been held permanently revoked, unenforceable, or invalid by a decision of a court or other Government Body of competent jurisdiction that is unappealable or has not been appealed within the time allowed for appeal; and (b) has not been abandoned, disclaimed, denied, or admitted to be invalid or unenforceable through reissue or disclaimer or otherwise in that country; and

	
13.58.2
	
a claim of a pending patent application that: (a) has been prosecuted and pending for [...***...]* years or less from the earliest worldwide priority date; or (b) after pending for more than [...***...] years from the priority date issues or grants as a patent within the scope of Section 13.58.1.

	
14
	
Dispute Resolution

	
14.1
	
Governing Law.  This Agreement, its interpretation, construction and performance, and the rights granted and obligations arising under it is governed by, and construed in accordance with, the laws of the state of New York, without giving effect to its principles of conflicts of law.  The interpretation and construction of any Patent Rights or other intellectual property rights, and any disputes pertaining to the interpretation, construction, validity, enforceability or infringement of Patent Rights or other intellectual property rights (collectively, “Patent Matters”), is governed by the laws of the jurisdiction in which such Patent Rights 

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were filed or granted or such other intellectual property rights exist or are alleged to exist, as the case may be. 

	
14.2
	
Discussion by Senior Executives.  Either Party may submit to the President of Arcturus and the President of JPI or a designee of one or both of them a written account of an ongoing disagreement (excluding a Patent Matter) between the Parties.  Those individuals or their designees must promptly meet and attempt to resolve the disagreement.  As part of that process, those individuals may consult anyone they wish.  If those individuals cannot resolve the disagreement in [...***...]* days either Party may refer the matter to arbitration as described below.

	
14.3
	
Arbitration.  Except as expressly provided in Section 14.6, in the event that resolution of a dispute (other than a Patent Matter) cannot be obtained through the process described in Section 14.2, as the exclusive means of initiating adversarial proceedings to resolve any dispute arising out of this Agreement, a party may demand that the dispute be resolved by arbitration administered by the International Institute for Conflict Prevention and Resolution for Non-Administered Arbitration in accordance with its rules, and each party hereby consents to any such dispute being so resolved.  Judgment on any award rendered in any such arbitration may be entered in any court having jurisdiction.  If Arcturus believes that JPI is in material breach of its obligations to use Commercially Reasonable Efforts, the matter will be exclusively resolved according to the procedure described in Section 14.4.

	
14.3.1
	
Any arbitration commenced in accordance with this Section 14.3 will be conducted by a single arbitrator agreed to by the Parties and selected within [...***...] days after commencement of any arbitration in accordance with this Section 14.3.  If they fail to do so, the Parties shall instruct the International Institute for Conflict Prevention and Resolution for Non-Administered Arbitration to select the arbitrator.

	
14.3.2
	
Any arbitration commenced in accordance with this Section 14.3 must be conducted in New York, New York.  The arbitrator will, in rendering his or her decision, apply the substantive law of the state of New York, excluding its conflicts of laws principles.  

	
14.3.3
	
The arbitrator’s authority to award damages shall be subject to the limitation set forth in Section 10.3.3. 

	
14.3.4
	
The award rendered by the arbitrator shall be confidential (except as necessary to enforce such award in a court of competent jurisdiction), final, binding and non-appealable. 

	
14.4
	
Procedures for a Dispute Involving JPI’s CRE.  If Arcturus believes that JPI is in material breach of its obligations to use Commercially Reasonable Efforts to develop or commercialize a Licensed Product, it will send a written notice to JPI stating the same.  Within [...***...] days thereafter, Arcturus and JPI will meet and discuss an appropriate solution.  Should the Parties be unable to agree on an appropriate solution within [...***...] days after Arcturus’ written notice to JPI, then, upon the written request of either Party, the matter will be referred to the Chief 

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Executive Officer of Arcturus and the head of infectious disease research, development, and/or commercialization (as relevant) of JPI or its Affiliates for attempted resolution.  If such executives are unable to resolve such matter within [...***...]* days of such matter being referred to them, then Arcturus, upon written notice to JPI and CPR Institute for Dispute Resolution (“CPR”), the matter shall be subject to binding arbitration conducted pursuant to the CPR Global Rules for Accelerated Commercial Arbitration (“CPR Accelerated Rules”), except to the extent the CPR Accelerated Rules conflict with this Section 14.4, in which case this Section 14.4 shall control.  The arbitration shall be conducted by a panel of three neutral, mutually agreed arbitrators with at least 10 years’ experience in the life sciences industry and with appropriate expertise in the area in which the subject dispute arose; provided that if the Parties are unable to agree as to appropriate arbitrators, such arbitrators shall be appointed by CPR from its Health Care & Life Sciences Panel of Distinguished Neutrals or other Panel provided such arbitrators have the credentials referenced above.  The expert arbitrators shall be impartial and independent of the Parties and shall abide by the Code of Ethics for Arbitrators in Commercial Disputes (available at http://www.adr.org/EthicsAndStandards).  Each Party shall provide the arbitrators and the other Party with a written report setting forth its position with respect to the substance of the dispute within [...***...] days after the Initial Conference (as defined by the CPR Accelerated Rules).  Each Party may submit a revised report and position to the arbitrators within [...***...] days of receiving the other Party’s report.  If so requested by the arbitrators, each Party shall make oral and/or other written submissions to the arbitrators in accordance with the CPR Accelerated Rules; provided that the other Party shall have the right to be present during any oral submissions.  In any arbitration under this Section 14.4 the arbitrators and the Parties shall use their diligent efforts to resolve such dispute within [...***...] days after the selection of the arbitrators.  The arbitrators’ ruling shall be final and binding upon the Parties.  If the arbitrators determine that JPI has not met its CRE obligations set forth in this Agreement, Arcturus may terminate this Agreement upon [...***...] days’ written notice to JPI, unless JPI either: (a) has cured such breach prior to the end of such [...***...]day period; or (b) prior to the end of such [...***...]day period, has presented a reasonable written plan setting forth the specific actions JPI commits to undertake to meet its obligations, in which case Arcturus shall notify JPI in writing within [...***...] days of Arcturus acceptance or non‐acceptance of such plan.  If Arcturus notifies JPI of its acceptance of such plan, JPI shall promptly undertake and diligently perform such plan.  If Arcturus notifies JPI that Arcturus does not accept the plan, the Parties will submit the plan to an independent Third Party expert in the field of drug development and commercialization who is acceptable to both Parties (or, failing such mutual agreement, designated by the International Centre for Dispute Resolution located in New York City, NY).  The sole authority of such expert will be to determine whether or not such plan is reasonable or shall propose changes so as to render it reasonable (i.e., if performance of such plan would cause JPI to meet its CRE obligations), and such expert’s determination shall be final and binding upon the Parties.  The independent Third Party expert shall be required to make his or her 

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determination within [...***...]* days after his or her selection as the independent Third Party expert.  If the independent Third Party expert determines that such plan is not reasonable and cannot be amended to be reasonable or JPI does not adopt the expert’s changes that would make the plan reasonable, Arcturus may terminate this Agreement upon [...***...] days’ written notice to JPI.  In the case of any arbitration or expert determination pursuant to this Section 14.4, the Parties shall bear the fees and expenses of the arbitrators or independent expert (as applicable) equally.

Any arbitration commenced in accordance with this Section 14.4 must be conducted in New York, New York.

	
14.5
	
No Implied Diligence Obligations.  Except as expressly provided in the Agreement, there shall be no obligations of diligence, either implied or construed, upon a Party.

	
14.6
	
Court Actions.  Each Party has the right to seek injunctive or other equitable relief from a court of competent jurisdiction in the context of a bona fide emergency or prospective irreparable harm, and such an action may be filed and maintained notwithstanding any ongoing discussions between the Parties or any ongoing arbitration proceeding.  In addition, either Party may bring an action in any court of competent jurisdiction to resolve Patent Matters, and no Patent Matter shall be subject to arbitration pursuant to Section 14.3.

	
15
	
Miscellaneous

	
15.1
	
Notices.  For a notice or other communication between the Parties under this Agreement to be valid, it must be in writing and delivered by hand or by a national transportation company (with all fees prepaid).  A valid notice or other communication under this Agreement will be effective when received by the Party to which it is addressed, with any such notice or other communication sent to any non-Party specified in Section 15.1 as a Party’s co-addressee constituting a courtesy copy that is not to be considered when determining when that Party received that notice.  It will be deemed to have been received as follows:

	
15.1.1
	
if it is delivered by hand or delivered by a national transportation company, with all fees prepaid, upon receipt as indicated by the date on the signed receipt;

	
15.1.2
	
if it is delivered by email, when the Party to which the email is addressed, by notice in accordance with this Section 15.1 (but without any need for further acknowledgement), acknowledges having received that email, with an automatic “read receipt” not constituting acknowledgment of an email for purposes of this Section 15.1.2; or

	
15.1.3
	
if the Party to which it is addressed rejects or otherwise refuses to accept it, or if it cannot be delivered because of a change in address for which no notice was given, then upon that rejection, refusal, or inability to deliver.

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For a notice or other communication to a Party under this Agreement to be valid, it must be addressed using the information specified below for that Party or any other information specified by that Party in a notice in accordance with this Section 15.1.

 

	
To Arcturus:
	
 
	
Arcturus Therapeutics, Inc.

10628 Science Center Drive, Suite 200

San Diego, CA 92121

Attn:  Chief Executive Officer

	
 
	
 
	
 

	
To JPI:
	
 
	
Janssen Pharmaceuticals, Inc.

1125 Trenton-Harbourton Road

Titusville, NJ 08560

	
 
	
 
	
 

	
With copies to:
	
 
	
Chief Intellectual Property Counsel

Office of General Counsel

Johnson & Johnson

One Johnson & Johnson Plaza

New Brunswick, New Jersey 08933

United States of America

	
 
	
 
	
 

	
 
	
 
	
Head

Johnson & Johnson Innovation Center, California

99 El Camino Real

Menlo Park, CA 94025

 

If a notice or other communication addressed to a Party is received after 5:00 p.m. on a business day at the location specified in the address for that Party, or on a day that is not a business day, then the notice will be deemed received at 9:00 a.m. on the next business day.

	
15.2
	
Entire Agreement.  This Agreement constitutes the entire understanding between the Parties as to the subject matter of this Agreement and supersedes all other agreements, whether written or oral, between the Parties.  For clarity, the Parties intend that the prior Research Collaboration and License Agreement dated May 29, 2015 be terminated in its entirety.

	
15.3
	
Amendments.  No amendment to this Agreement will be effective unless it is in writing and signed by both Parties.

	
15.4
	
No Assignment.  Neither Party may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other Party, other than: (a) to an Affiliate, provided that the assigning Party shall remain liable and responsible to the non‐assigning Party hereto for the performance and observance of all such duties and obligations by such Affiliate; or (b) in connection with the transfer or sale of all or substantially all of the business of such Party to which this Agreement relates to a Third Party (“Third Party Acquirer”), whether by merger, sale of stock, sale of assets or otherwise (each, a “Sale Transaction”), provided that in the event of a Sale Transaction (whether this Agreement is 

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actually assigned or is assumed by the Third Party Acquirer or the surviving corporation resulting from such Sale Transaction by operation of law (e.g., in the context of a reverse triangular merger)): (i) intellectual property rights of the Third Party Acquirer that existed prior to the Sale Transaction shall not be included in the technology licensed hereunder or otherwise subject to this Agreement, and (ii) in the case of a Sale Transaction involving Arcturus in which the Third Party Acquirer has, later acquires or initiates a program with respect to HBV NA Therapeutics (and to the extent that Janssen has exercised an Option pursuant to Section 4.2, [...***...]* NA Therapeutics or Respiratory Disease Virus NA Therapeutics, as applicable), the Third Party Acquiror (or the surviving corporation, as applicable) establishes reasonable internal safeguards designed to ensure that Arcturus Technology is not accessible to personnel of the Third Party Acquiror (or the surviving corporation, as applicable) who are engaged in the conduct of such program.  The rights and obligations of the Parties under this Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the Parties, and the name of a Party appearing herein shall be deemed to include the name of such Party’s successors and permitted assigns to the extent necessary to carry out the intent of this Section 15.4.  Any purported assignment not in accordance with this Section 15.4 will be void.

	
15.5
	
Relationship of the Parties.  Both Parties are acting as independent contractors under this Agreement.  The Parties do not intend that anything in this Agreement creates an employment, agency, joint venture, or partnership relationship between the Parties or any of their agents or employees.  Neither Party has authority to enter into any contracts or incur liabilities on behalf of the other Party.

	
15.6
	
No Non-Party Beneficiaries.  Except for the provisions of Article 11 with respect to Arcturus Indemnitees and JPI Indemnitees, and except as provided in Section 15.4 with respect to a Party’s successors and permitted assigns, no provision of this Agreement grant rights to any Person other than a Party to this Agreement.

	
15.7
	
Compliance with Laws.  In performing under this Agreement, each Party shall comply with all laws and generally recognized standards for good scientific conduct.

	
15.8
	
No Presumption Against Drafting Party.  Each Party has had the opportunity to consult with counsel in connection with reviewing, drafting, and negotiating this Agreement.  Accordingly, the Parties intend that the principle of construction that any ambiguity in a contract be construed against the drafting Party not apply.

	
15.9
	
Waiver.  No waiver of any provision of this Agreement will be effective unless it is in writing and signed by the Party granting the waiver.  No failure or delay in exercising any right or remedy under this Agreement operates as a waiver of that right or remedy.  A waiver granted on one occasion will not operate as a waiver on future occasions.

	
15.10
	
Severability.  The Parties intend as follows:

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15.10.1
	
that if any provision of this Agreement is held to be unenforceable, then that provision will be modified to the minimum extent necessary to make it enforceable, unless that modification is not permitted by law, in which case that provision will be disregarded;

	
15.10.2
	
that if modifying or disregarding the unenforceable provision would result in failure of an essential purpose of this Agreement, either Party may terminate this Agreement upon written notice to the other Party; and

	
15.10.3
	
that if an unenforceable provision is modified or disregarded in accordance with this Section 15.10, then the rest of the Agreement will remain in effect as written.

	
15.10.4
	
Force Majeure.  If a Force Majeure Event prevents a Party from complying with any one or more obligations under this Agreement, that inability to comply will not constitute breach if (a) that Party uses reasonable efforts to perform those obligations; and (b) that Party’s inability to perform those obligations is not due to its failure to: (i) take reasonable measures to protect itself against events or circumstances of the same type as that Force Majeure Event; or (ii) develop and maintain a reasonable contingency plan to respond to events or circumstances of the same type as that Force Majeure Event.  For purposes of this Agreement, “Force Majeure Event” means, with respect to a Party, any event or circumstance, whether or not foreseeable, that was not caused by that Party and any consequences of that event or circumstance.  If a Force Majeure Event occurs, the noncomplying Party shall promptly notify the other Party of occurrence of that Force Majeure Event, its effect on performance, and how long the noncomplying Party expects it to last.  Thereafter the noncomplying Party shall update that information as reasonably necessary.  During a Force Majeure Event, the noncomplying Party shall use reasonable efforts to limit damages to the other Party and to resume its performance under this Agreement.

	
15.10.5
	
Anti-Corruption Compliance.  Neither Party shall perform any actions that are prohibited by local and other anti-corruption laws (collectively “Anti-Corruption Laws”) that may be applicable to one or both Parties to this Agreement.  Without limiting the foregoing, neither Party shall make any payments, or offer or transfer anything of value, to any government official or government employee, to any political party official or candidate for political office or to any other third party related to the transaction in a manner that would violate Anti-Corruption Laws.

	
15.10.6
	
Further Actions.  Each Party shall take all actions reasonably necessary to carry out the intent of the Parties in entering into this Agreement.

[SIGNATURE PAGE FOLLOWS]

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The Parties are signing this Agreement on the Effective Date.

 

	
 
	
ARCTURUS THERAPEUTICS, INC.

	
 
	
 

	
 
	
By:
	
 
	
/s/ Joseph E. Payne

	
 
	
 
	
 
	
Name: Joseph E. Payne

	
 
	
 
	
 
	
Title: President

 

 

	
 
	
Janssen Pharmaceuticals, Inc.

	
 
	
 

	
 
	
By:
	
 
	
/s/ Vanessa Broadhurst

	
 
	
 
	
 
	
Name: Vanessa Broadhurst

	
 
	
 
	
 
	
Title: President

 

 

 

 

Exhibits:

Johnson & Johnson Universal Calendar

Arcturus Patent Rights 

Arcturus Press Release [NTD: ARCTURUS TO UPDATE]

Granted Rights 

HBV Joint Research Plan

 

 

 

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Exhibit

Johnson & Johnson Universal Calendar [...***...]*

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Exhibit

Arcturus Patent Rights [...***...]*

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[...***...]*

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[...***...]*

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[...***...]*

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[...***...]*

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[...***...]*

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Exhibit
Arcturus Press Release [TBD]

Arcturus Therapeutics Announces Strategic Collaboration with Johnson & Johnson Innovation to Discover and Develop RNA Medicines

Initial Focus on Hepatitis B, With Option to Expand to Additional Disease Areas

San Diego, Calif., October 19, 2017 – Arcturus Therapeutics, Inc., a leading RNA medicines company, announced today that it has entered into a research collaboration and worldwide license agreement with Janssen Pharmaceuticals, Inc. (Janssen), a Johnson & Johnson company. The two companies will work together to develop and commercialize nucleic acid-based drug products for the treatment of Hepatitis B, using Arcturus’ UNA Oligomer chemistry and LUNARTM lipid-mediated delivery platform. The agreement also includes an option to expand into other infectious and respiratory diseases. The deal was facilitated by the Johnson & Johnson California Innovation Center.

Under the agreement, facilitated by J&J Innovation, Arcturus will receive an upfront cash payment, R&D support, and pre-clinical, development, and sales milestone payments, as well as royalty payments on any future licensed product sales. Janssen will assume responsibility for development costs and all commercialization costs associated with the program.

“This new partnership signifies an expanded relationship between Arcturus and Janssen,” said Joseph Payne, President and CEO of Arcturus. “Arcturus’ expertise and intellectual property in the field of RNA medicines is complemented by Janssen’s broad capabilities in clinical development, regulatory affairs, and marketing. Together we aim to bring new treatments to patients who are suffering from Hepatitis B and potentially other infectious diseases.”

About Arcturus Therapeutics, Inc.

Founded in 2013 and based in San Diego, Arcturus Therapeutics, Inc. is an RNA medicines company with enabling technologies — UNA Oligomer chemistry and LUNARTM lipid-mediated delivery. Arcturus's versatile RNA therapeutics platforms can be applied toward multiple types of RNA medicines including small interfering RNA, messenger RNA, antisense RNA, microRNA and gene editing therapeutics. The company owns LUNAR nanoparticle delivery and Unlocked Nucleomonomer Agent (UNA) technology including UNA Oligomers, which are covered by its patent portfolio (>110 patents and patent applications, issued in the U.S., Europe, Japan, China and other countries). Arcturus' proprietary UNA technology can be used to target individual genes in the human genome, as well as viral genes, and other species for therapeutic purposes. The company's commitment to the development of novel RNA therapeutics has led to partnerships with Ultragenyx Pharmaceutical, Inc., Takeda Pharmaceutical Inc., and Cystic Fibrosis Foundation Therapeutics Inc. For more information, visit www.ArcturusRx.com, the content of which is not incorporated herein by reference. On September 27, 2017, Arcturus and Alcobra Ltd. (Alcobra) (NASDAQ: ADHD) entered into an agreement and plan of merger and reorganization pursuant to which a wholly-owned subsidiary of Alcobra will merge with and into Arcturus, with Arcturus becoming a wholly-owned subsidiary of Alcobra and the surviving corporation of the merger, and the holders of Arcturus 

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outstanding capital stock immediately prior to the merger will receive ordinary shares representing approximately 60% of the outstanding shares of Alcobra. Upon consummation of the transaction, Alcobra’s name will be changed to Arcturus Therapeutics, Ltd., and Alcobra will change its ticker symbol to ARCT on NASDAQ.

Forward-looking Statements

This press release contains “forward-looking statements” that involve substantial risks and uncertainties for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this press release regarding strategy, future operations, prospects, plans and objectives of management are forward-looking statements. Examples of such statements include, but are not limited to, statements relating to whether the agreement will result in a successful collaboration or potential products; the structure, timing and completion of the proposed merger transaction; and the combined company’s listing on NASDAQ after closing of the proposed merger. You should not place undue reliance on these forward-looking statements. Such statements are based on management’s current expectations and involve risks and uncertainties. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors. Except as otherwise required by law, all parties disclaim any intention or obligation to update or revise any forward-looking statements, which speak only as of the date they were made, whether as a result of new information, future events or circumstances or otherwise.

Additional Information about the Proposed Merger involving Alcobra and Arcturus and Where to Find It

In connection with the previously disclosed proposed merger involving Alcobra and Arcturus, a proxy statement and a proxy card [will be]1 furnished to the Securities and Exchange Commission (SEC) and [will be] mailed to Alcobra’s shareholders seeking any required shareholder approvals in connection with the proposed merger transactions. Before making any voting or investment decision, investors and shareholders are urged to read the proxy statement (including any amendments or supplements thereto) and any other relevant documents that Alcobra may furnish to or file with the SEC when they become available because they will contain important information about the proposed merger transactions.

This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

	
	 

	
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  NTD: May change to past tense depending on timing of the proxy filing.

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Contact

Arcturus Therapeutics

858-900-2660 

info@arcturusRx.com 

Andrew McDonald Ph.D. 

LifeSci Advisors LLC

646-597-6979

 

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Exhibit
Granted Rights
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Exhibit
HBV Joint Research Plan (and associated budget) 

HBV – Joint Research Plan

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[...***...]*

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