Document:

Exhibit 10.1

INDEMNITY AGREEMENT

THIS
INDEMNITY AGREEMENT (this
“Agreement”) dated as of ___________ _____,
200_, is made by and between ARYX
THERAPEUTICS, INC., a Delaware
corporation (the “Company”), and _________________ (“Indemnitee”).

RECITALS

A.            The Company
desires to attract and retain the services of highly qualified individuals as
directors, officers, employees and agents.

B.            The
Company’s bylaws (the “Bylaws”)
require that the Company indemnify its directors, and empowers the Company to
indemnify its  officers, employees and agents,
as authorized by the Delaware General Corporation Law, as amended (the “Code”), under which the Company is organized and such Bylaws
expressly provide that the indemnification provided therein is not exclusive
and contemplates that the Company may enter into separate agreements with its
directors, officers and other persons to set forth specific indemnification
provisions.

C.            Indemnitee
does not regard the protection currently provided by applicable law, the
Company’s governing documents and available insurance as adequate under the
present circumstances, and the Company has determined that Indemnitee and other
directors, officers, employees and agents of the Company may not be willing to
serve or continue to serve in such capacities without additional protection.

D.            The
Company desires and has requested Indemnitee to serve or continue to serve as a
director, officer, employee or agent of the Company, as the case may be, and
has proffered this Agreement to Indemnitee as an additional inducement to serve
in such capacity.

E.             Indemnitee
is willing to serve, or to continue to serve, as a director, officer, employee
or agent of the Company, as the case may be, if Indemnitee is furnished the
indemnity provided for herein by the Company.

AGREEMENT

NOW
THEREFORE, in
consideration of the mutual covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:

1.             Definitions.

(a)           Agent. 
For purposes of this Agreement, the term “agent” of the Company means
any person who:  (i) is or was a
director, officer, employee or other fiduciary
of the Company or a subsidiary of the Company; or (ii) is or was serving
at the request or for the convenience of, or representing the interests of, the
Company or a subsidiary of the Company, as a director, officer, employee or
other fiduciary of a foreign or domestic corporation, partnership,  joint venture, trust or other enterprise.

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(b)           Expenses. 
For purposes of this Agreement, the term “expenses” shall be broadly
construed and shall include, without limitation, all direct and indirect costs
of any type or nature whatsoever (including, without limitation, all attorneys’,
witness, or other professional fees and related disbursements, and other
out-of-pocket costs of whatever nature), actually and reasonably incurred by
Indemnitee in connection with the investigation, defense or appeal of a
proceeding or establishing or enforcing a right to indemnification under this
Agreement, the Code or otherwise, and amounts paid in settlement by or on
behalf of Indemnitee, but shall not include any judgments, fines or penalties
actually levied against Indemnitee for such individual’s violations of
law.  The term “expenses” shall also
include reasonable compensation for time spent by Indemnitee for which he is
not compensated by the Company or any subsidiary or third party (i) for any
period during which Indemnitee is not an agent, in the employment of, or
providing services for compensation to, the Company or any subsidiary; and (ii)
if the rate of compensation and estimated time involved is approved by the
directors of the Company who are not parties to any action with respect to
which expenses are incurred, for Indemnitee while an agent of, employed by, or
providing services for compensation to, the Company or any subsidiary.

(c)           Proceedings. 
For purposes of this Agreement, the term “proceeding” shall be broadly
construed and shall include, without limitation, any threatened, pending, or
completed action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought in the right of the Company or otherwise
and whether of a civil, criminal, administrative or investigative nature, and
whether formal or informal in any case, in which Indemnitee was, is or will be
involved as a party or otherwise by reason of: 
(i) the fact that Indemnitee is or was a director or officer of the
Company; (ii) the fact that any action taken by Indemnitee or of any action on
Indemnitee’s part while acting as director, officer, employee or agent of the
Company; or (iii) the fact that Indemnitee is or was serving at the request of
the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
and in any such case described above, whether or not serving in any such
capacity at the time any liability or expense is incurred for which
indemnification, reimbursement, or advancement of expenses may be provided
under this Agreement.

(d)           Subsidiary. 
For purposes of this Agreement, the term “subsidiary” means any
corporation or limited liability company of which more than 50% of the
outstanding voting securities or equity interests are owned, directly or
indirectly, by the Company and one or more of its subsidiaries, and any other
corporation, limited liability company, partnership, joint venture, trust,
employee benefit plan or other enterprise of which Indemnitee is or was serving
at the request of the Company as a director, officer, employee, agent or
fiduciary.

(e)           Independent
Counsel.  For purposes of this Agreement, the term “independent
counsel” means a law firm, or a partner (or, if applicable, member) of such a
law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five (5)  years has
been, retained to represent: (i) the Company or Indemnitee in any matter
material to either such party, or (ii) any other party to the proceeding giving
rise to a claim for indemnification hereunder. 
Notwithstanding the foregoing, the term “independent counsel” shall not
include any person who, under the applicable standards of professional conduct
then

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prevailing, would
have a conflict of interest in representing either the Company or Indemnitee in
an action to determine Indemnitee’s rights under this Agreement.

2.             Agreement
to Serve.  Indemnitee will serve, or continue to serve,
as a director, officer, employee or agent of the Company or any subsidiary, as
the case may be, faithfully and to the best of his or her ability, at the will
of such corporation (or under separate agreement, if such agreement exists), in
the capacity Indemnitee currently serves as an agent of such corporation, so
long as Indemnitee is duly appointed or elected and qualified in accordance
with the applicable provisions of the bylaws or other applicable charter
documents of such corporation, or until such time as Indemnitee tenders his or
her resignation in writing; provided, however, that nothing contained in this
Agreement is intended as an employment agreement between Indemnitee and the
Company or any of its subsidiaries or to create any right to continued
employment of Indemnitee with the Company or any of its subsidiaries in any
capacity.

The Company acknowledges
that it has entered into this Agreement and assumes the obligations imposed on
it hereby, in addition to and separate from its obligations to Indemnitee under
the Bylaws, to induce Indemnitee to serve, or continue to serve, as a director,  officer, employee or agent of the Company, and the Company
acknowledges that Indemnitee is relying upon this Agreement in serving as a
director, officer, employee or agent of the Company.

3.             Indemnification.

(a)           Indemnification
in Third Party Proceedings.  Subject to
Section 10 below, the Company shall indemnify Indemnitee to the fullest
extent permitted by the Code, as the same may be amended from time to time
(but, only to the extent that such amendment permits Indemnitee to broader
indemnification rights than the Code permitted prior to adoption of such
amendment), if Indemnitee is a party to or threatened to be made a party to or
otherwise involved in any proceeding, for any and all expenses, actually and
reasonably incurred by Indemnitee in connection with the investigation,
defense, settlement or appeal of such proceeding.

(b)           Indemnification
in Derivative Actions and Direct Actions by the Company. 
Subject to Section 10 below, the Company shall indemnify Indemnitee to
the fullest extent permitted by the Code, as the same may be amended from time
to time (but, only to the extent that such amendment permits Indemnitee to
broader indemnification rights than the Code permitted prior to adoption of
such amendment), if Indemnitee is a party to or threatened to be made a party
to or otherwise involved in any proceeding by or in the right of the Company to
procure a judgment in its favor, against any and all expenses actually and
reasonably incurred by Indemnitee in connection with the investigation,
defense, settlement, or appeal of such proceedings.

4.             Indemnification
of Expenses of Successful Party.  Notwithstanding
any other provision of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise in defense of any proceeding or in
defense of any claim, issue or matter therein, including the dismissal of any
action without prejudice, the Company shall indemnify

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Indemnitee against
all expenses actually and reasonably incurred in connection with the
investigation, defense or appeal of such proceeding.

5.             Partial
Indemnification.  If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
any expenses actually and reasonably incurred by Indemnitee in the
investigation, defense, settlement or appeal of a proceeding, but is precluded
by applicable law or the specific terms of this Agreement to indemnification
for the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled.

6.             Advancement
of Expenses.  To the extent not prohibited by law, the
Company shall advance  the expenses
incurred by Indemnitee in connection with any proceeding, and such advancement
shall be made within twenty (20) days after the receipt by the Company of a
statement or statements requesting such advances (which shall include invoices
received by Indemnitee in connection with such expenses but, in the case of
invoices in connection with legal services, any references to legal work
performed or to expenditures made that would cause Indemnitee to waive any
privilege accorded by applicable law shall not be included with the invoice)
and upon request of the Company, an undertaking to repay the advancement of
expenses if and to the extent that it is ultimately determined by a court of
competent jurisdiction in a final judgment, not subject to appeal, that
Indemnitee is not entitled to be indemnified by the Company.  Advances shall be unsecured, interest free
and without regard to Indemnitee’s ability to repay the expenses. Advances shall
include any and all expenses actually and reasonably incurred by Indemnitee
pursuing an action to enforce Indemnitee’s right to indemnification under this
Agreement, or otherwise and this right of advancement, including expenses
incurred preparing and forwarding statements to the Company to support the
advances claimed.  Indemnitee
acknowledges that the execution and delivery of this Agreement shall constitute
an undertaking providing that Indemnitee shall, to the fullest extent required
by law, repay the advance if and to the extent that it is ultimately determined
by a court of competent jurisdiction in a final judgment, not subject to
appeal, that Indemnitee is not entitled to be indemnified by the Company.  The right to advances under this Section shall
continue until final disposition of any proceeding, including any appeal
therein.  This Section 6 shall not apply
to any claim made by Indemnitee for which indemnity is excluded pursuant to
Section 10(b).

7.             Notice
and Other Indemnification Procedures.

(a)           Notification
of Proceeding.  Indemnitee will notify the Company in writing
promptly upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any proceeding or matter
which may be subject to indemnification or advancement of expenses covered
hereunder.  The failure of Indemnitee to
so notify the Company shall not relieve the Company of any obligation which it
may have to Indemnitee under this Agreement or otherwise.

(b)           Request
for Indemnification and Indemnification Payments.  Indemnitee
shall notify the Company promptly in writing upon receiving notice of any
demand, judgment or other requirement for payment that Indemnitee reasonably
believes to be subject to indemnification under the terms of this Agreement,
and shall request payment thereof by the Company.  Indemnification payments requested by
Indemnitee under Section 3 hereof shall be

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made by the
Company no later than sixty (60) days after receipt of the written request of
Indemnitee.  Claims for advancement of
expenses shall be made under the provisions of Section 6 herein.

(c)           Application
for Enforcement.  In the event the Company fails to make timely
payments as set forth in Sections 6 or 7(b) above, Indemnitee shall have the
right to apply to any court of competent jurisdiction for the purpose of
enforcing Indemnitee’s right to indemnification or advancement of expenses
pursuant to this Agreement.  In such an
enforcement hearing or proceeding, the burden of proof shall be on the Company
to prove that indemnification or advancement of expenses to Indemnitee is not
required under this Agreement or permitted by applicable law.  Any determination by the Company (including
its Board of Directors, stockholders or independent counsel) that Indemnitee is
not entitled to indemnification hereunder, shall not be a defense by the
Company to the action nor create any presumption that Indemnitee is not
entitled to indemnification or advancement of expenses hereunder.

(d)           Indemnification
of Certain Expenses.  The Company shall indemnify Indemnitee
against all expenses incurred in connection with any hearing or proceeding
under this Section 7 unless the Company prevails in such hearing or
proceeding on the merits in all material respects.

8.             Assumption
of Defense.  In the event the Company shall be requested
by Indemnitee to pay the expenses of any proceeding, the Company, if
appropriate, shall be entitled to assume the defense of such proceeding, or to
participate to the extent permissible in such proceeding, with counsel
reasonably acceptable to Indemnitee. 
Upon assumption of the defense by the Company and the retention of such
counsel by the Company, the Company shall not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that Indemnitee shall have the right
to employ separate counsel in such proceeding at Indemnitee’s sole cost and
expense.  Notwithstanding the foregoing,
if Indemnitee’s counsel delivers a written notice to the Company stating that
such counsel has reasonably concluded that there may be a conflict of interest
between the Company and Indemnitee in the conduct of any such defense or the
Company shall not, in fact, have employed counsel or otherwise actively pursued
the defense of such proceeding within a reasonable time, then in any such event
the fees and expenses of Indemnitee’s counsel to defend such proceeding shall
be subject to the indemnification and advancement of expenses provisions of
this Agreement.

9.             Insurance.
To the extent
that the Company maintains an insurance policy or policies providing liability
insurance for directors, officers, employees, or agents of the Company or of any
subsidiary (“D&O Insurance”), Indemnitee shall be covered by such policy or
policies in accordance with its or their terms to the maximum extent of the
coverage available for any such director, officer, employee or agent under such
policy or policies.  If, at the time of
the receipt of a notice of a claim pursuant to the terms hereof, the Company
has D&O Insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies.  The Company shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of
Indemnitee, all amounts payable as a result of such proceeding in accordance
with the terms of such policies.

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10.          Exceptions.

(a)           Certain
Matters.  Any provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement to indemnify Indemnitee on account of any proceeding with
respect to (i) remuneration paid to Indemnitee if it is determined by
final judgment or other final adjudication that such remuneration was in
violation of law (and, in this respect, both the Company and Indemnitee have
been advised that the Securities and Exchange Commission believes that
indemnification for liabilities arising under the federal securities laws is
against public policy and is, therefore, unenforceable and that claims for
indemnification should be submitted to appropriate courts for adjudication, as
indicated in Section 10(d) below); (ii) a final judgment rendered against
Indemnitee for an accounting, disgorgement or repayment of profits made from
the purchase or sale by Indemnitee of securities of the Company against Indemnitee
or in connection with a settlement by or on behalf of Indemnitee to the extent
it is acknowledged by Indemnitee and the Company that such amount paid in
settlement resulted from Indemnitee’s conduct from which Indemnitee received
monetary personal profit, pursuant to the provisions of Section 16(b) of
the Securities Exchange Act of 1934, as amended, or other provisions of any
federal, state or local statute or rules and regulations thereunder;
(iii) a final judgment or other final adjudication that Indemnitee’s
conduct was in bad faith, knowingly fraudulent or deliberately dishonest or
constituted willful misconduct (but only to the extent of such specific
determination); or (iv) on account of conduct that is established by a final
judgment as constituting a breach of Indemnitee’s duty of loyalty to the
Company or resulting in any personal profit or advantage to which Indemnitee is
not legally entitled.  For purposes of
the foregoing sentence, a final judgment or other adjudication may be reached
in either the underlying proceeding or action in connection with which
indemnification is sought or a separate proceeding or action to establish
rights and liabilities under this Agreement.

(b)           Claims
Initiated by Indemnitee.  Any provision herein to the
contrary notwithstanding, the Company shall not be obligated to indemnify or
advance expenses to Indemnitee with respect to proceedings or claims initiated
or brought by Indemnitee against the Company or its directors, officers,
employees or other agents and not by way of defense, except (i) with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or under any other agreement, provision in the Bylaws or Certificate  of Incorporation or applicable law, or (ii) with respect to
any other proceeding initiated by Indemnitee that is either approved by the
Board of Directors or Indemnitee’s participation is required by applicable
law.  However, indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors determines it to be appropriate.

(c)           Unauthorized
Settlements.  Any provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement to indemnify Indemnitee under this Agreement for any amounts
paid in settlement of a proceeding effected without the Company’s written
consent.  Neither the Company nor
Indemnitee shall unreasonably withhold consent to any proposed settlement;
provided, however, that the Company may in any event decline to consent to (or
to otherwise admit or agree to any liability for indemnification hereunder in
respect of) any proposed settlement if the Company is also a

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party in such
proceeding and determines in good faith that such settlement is not in the best
interests of the Company and its stockholders.

(d)           Securities
Act Liabilities.  Any provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement to indemnify Indemnitee or otherwise act in violation of any
undertaking appearing in and required by the rules and regulations promulgated
under the Securities Act of 1933, as amended (the “Act”), or in any
registration statement filed with the SEC under the Act.  Indemnitee acknowledges that paragraph
(h) of Item 512 of Regulation S-K currently generally requires the Company
to undertake in connection with any registration statement filed under the Act
to submit the issue of the enforceability of Indemnitee’s rights under this
Agreement in connection with any liability under the Act on public policy
grounds to a court of appropriate jurisdiction and to be governed by any final
adjudication of such issue.  Indemnitee
specifically agrees that any such undertaking shall supersede the provisions of
this Agreement and to be bound by any such undertaking.

11.          Nonexclusivity
and Survival of Rights.  The provisions for
indemnification and advancement of expenses set forth in this Agreement shall
not be deemed exclusive of any other rights which Indemnitee may at any time be
entitled under any provision of applicable law, the Company’s Certificate of
Incorporation, Bylaws or other agreements, both as to action in Indemnitee’s
official capacity and Indemnitee’s action as an agent of the Company, in any
court in which a proceeding is brought, and Indemnitee’s rights hereunder shall
continue after Indemnitee has ceased acting as an agent of the Company and
shall inure to the benefit of the heirs, executors, administrators and assigns
of Indemnitee.  The obligations and
duties of the Company to Indemnitee under this Agreement shall be binding on
the Company and its successors and assigns until terminated in accordance with
its terms.  The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the
Company, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place.

No amendment, alteration
or repeal of this Agreement or of any provision hereof shall limit or restrict
any right of Indemnitee under this Agreement in respect of any action taken or
omitted by such Indemnitee in his or her corporate status prior to such
amendment, alteration or repeal.  To the
extent that a change in the Code, whether by statute or judicial decision,
permits greater indemnification or advancement of expenses than would be
afforded currently under the Company’s Certificate of Incorporation, Bylaws and
this Agreement, it is the intent of the parties hereto that Indemnitee shall
enjoy by this Agreement the greater benefits so afforded by such change.  No right or remedy herein conferred is
intended to be exclusive of any other right or remedy, and every other right
and remedy shall be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or
otherwise.  The assertion or employment
of any right or remedy hereunder, or otherwise, by Indemnitee shall not prevent
the concurrent assertion or employment of any other right or remedy by
Indemnitee.

12.          Term. 
This Agreement shall continue until and terminate upon the later of: (a)
five (5) years after the date that Indemnitee shall have ceased to serve as a
director or and/or

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officer, employee
or agent of the Company; or (b) one (1) year after the final termination of any
proceeding, including any appeal then pending, in respect to which Indemnitee
was granted rights of indemnification or advancement of expenses hereunder.

No legal action shall be
brought and no cause of action shall be asserted by or in the right of the
Company against an Indemnitee or an Indemnitee’s estate, spouse, heirs,
executors or personal or legal representatives after the expiration of five (5)
years from the date of accrual of such cause of action, and any claim or cause
of action of the Company shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such five-year period;
provided, however, that if any shorter period of limitations is otherwise
applicable to such cause of action, such shorter period shall govern.

13.          Subrogation. 
In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who, at the request and expense of the Company, shall execute all
papers required and shall do everything that may be reasonably necessary to
secure such rights, including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such rights.

14.          Interpretation
of Agreement.  It is understood that the parties hereto
intend this Agreement to be interpreted and enforced so as to provide
indemnification to Indemnitee to the fullest extent now or hereafter permitted
by law.

15.          Severability. 
If any provision of this Agreement shall be held to be invalid, illegal
or unenforceable for any reason whatsoever, (a) the validity, legality and
enforceability of the remaining provisions of the Agreement (including without
limitation, all portions of any paragraphs of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall not in any way be affected
or impaired thereby; and (b) to the fullest extent possible, the provisions
of this Agreement (including, without limitation, all portions of any paragraph
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
be construed so as to give effect to the intent manifested by the provision
held invalid, illegal or unenforceable and to give effect to Section 14
hereof.

16.          Amendment
and Waiver.  No supplement, modification, amendment, or
cancellation of this Agreement shall be binding unless executed in writing by
the parties hereto.  No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.

17.          Notice. 
Except as otherwise provided herein, any notice or demand which, by the
provisions hereof, is required or which may be given to or served upon the
parties hereto shall be in writing and, if by telegram, telecopy or telex,
shall be deemed to have been validly served, given or delivered when sent, if
by overnight delivery, courier or personal delivery, shall be deemed to have
been validly served, given or delivered upon actual delivery and, if mailed,
shall be deemed to have been validly served, given or delivered three (3)
business days after deposit in the United States mail, as registered or
certified mail, with proper postage prepaid and addressed to the party or
parties to be notified at the addresses set forth on the signature page of this

8

Agreement (or such
other address(es) as a party may designate for itself by like notice).  If to the Company, notices and demands shall
be delivered to the attention of the Secretary of the Company.

18.          Governing
Law.  This Agreement shall be governed exclusively
by and construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.

19.          Counterparts. 
This Agreement may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original but all of which
together shall constitute but one and the same Agreement.  Only one such counterpart need be produced to
evidence the existence of this Agreement.

20.          Headings.  The headings of the sections of this Agreement
are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction hereof.

21.          Entire
Agreement.  This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, written and
oral, between the parties with respect to the subject matter of this Agreement;
provided, however, that this Agreement is a supplement to and in furtherance of
the Company’s Certificate of Incorporation, Bylaws, the Code and any other
applicable law, and shall not be deemed a substitute therefor, and does not
diminish or abrogate any rights of Indemnitee thereunder.

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IN
WITNESS WHEREOF,
the parties hereto have entered into this Agreement effective as of the date
first above written.

	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INDEMNITEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature of Indemnitee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print or Type Name of IndemniteeExhibit 10.2

 

LEASE AGREEMENT BETWEEN

 

TRINET ESSENTIAL FACILITIES X, INC.,

 

AS LANDLORD, AND

 

ARYX THERAPEUTICS, INC.,

 

AS TENANT

 

DATED NOVEMBER 16, 2004

 

6300 DUMBARTON CIRCLE, FREMONT, CALIFORNIA, 94555

 

 

BASIC LEASE INFORMATION

 

 

	
  Lease
  Date:

  	
   

  	
  November 16,  2004

  
	
   

  	
   

  	
   

  
	
  Landlord:

  	
   

  	
  TriNet Essential Facilities X, Inc., a Maryland
  corporation

  
	
   

  	
   

  	
   

  
	
  Tenant:

  	
   

  	
  Aryx Therapeutics, Inc., a California corporation

  
	
   

  	
   

  	
   

  
	
  Premises:

  	
   

  	
  The “Premises”,
  containing for purposes of this Lease approximately 44,000 rentable square
  feet, are located at 6300 Dumbarton Circle, Fremont, California, 94555 are
  outlined on the plan attached to this Lease as Exhibit A and consist
  of the real property described in Exhibit B, together with a two-story
  office/research and development building (the “Building”) and the driveways, parking facilities,
  loading dock areas, roadways, any rail tracks associated with the Building
  and all other improvements located on such real property and all easements
  associated with the foregoing or the operation thereof. Landlord and Tenant
  stipulate that the number of rentable square feet in the Premises set forth
  above is conclusive and shall be binding upon them.

  
	
   

  	
   

  	
   

  
	
  Term:

  	
   

  	
  Ninety-six (96) months, commencing on the Rent
  Commencement Date and ending at 5:00 p.m. local time on the last day of the
  ninety-sixth (96th) full calendar month following the Rent
  Commencement Date, subject to adjustment and earlier termination as provided
  in the Lease (the “Term”).

  
	
   

  	
   

  	
   

  
	
  Rent
  Commencement Date:

  	
   

  	
  March 1, 2005, subject to possible adjustment
  pursuant to Section 3(b) hereof (the “Rent
  Commencement Date”).

  
	
   

  	
   

  	
   

  
	
  Basic
  Rent:

  	
   

  	
  Basic Rent shall be the following amounts for the
  following periods of time:

  

 

	
  Lease Month

  	
   

  	
  Monthly Basic Rent

  	
   

  
	
  1-12

  	
   

  	
  $

  	
  52,700.00

  	
   

  
	
  13-24

  	
   

  	
  $

  	
  70,400.00

  	
   

  
	
  25-36

  	
   

  	
  $

  	
  72,600.00

  	
   

  
	
  37-48

  	
   

  	
  $

  	
  74,800.00

  	
   

  
	
  49-60

  	
   

  	
  $

  	
  77,000.00

  	
   

  
	
  61-72

  	
   

  	
  $

  	
  79,200.00

  	
   

  
	
  73-84

  	
   

  	
  $

  	
  81,400.00

  	
   

  
	
  85-96

  	
   

  	
  $

  	
  83,600.00

  	
   

  

 

As used herein, the term “Lease Month” means each calendar
month during the Term (and if the Rent Commencement Date does not occur on the
first day of a calendar month, the period from the Rent Commencement Date to
the first day of the next calendar month shall be included in the first Lease
Month for purposes of determining the duration of the Term and the monthly
Basic Rent rate applicable for such partial month).

 

i

 

	
  First Month’s
  Prepaid Rent:

  	
   

  	
  $63,260.00.

  
	
   

  	
   

  	
   

  
	
  Additional Rent:

  	
   

  	
  Tenant’s Proportionate Share of Operating Costs,
  Taxes and Insurance Costs.

  
	
   

  	
   

  	
   

  
	
  Security Deposit:

  	
   

  	
  $96,800.00.

  
	
   

  	
   

  	
   

  
	
  Letter of
  Credit:

  	
   

  	
  $903,200.00, decreased by $200,000.00 on the first
  (1st) day of the thirty-seventh (37th) month of the
  Term and on each subsequent anniversary thereof until the amount of the
  Letter of Credit is $100,000.00, provided that there shall be no reduction if
  any Event of Default has occurred.

  
	
   

  	
   

  	
   

  
	
  Rent:

  	
   

  	
  Basic Rent, Additional Rent, and all other sums that
  Tenant may owe to Landlord or otherwise be required to pay under the Lease.

  
	
   

  	
   

  	
   

  
	
  Permitted Use:

  	
   

  	
  General office, research and development, and
  laboratory.

  
	
   

  	
   

  	
   

  
	
  Tenant’s
  Proportionate Share:

  	
   

  	
  100%.

  
	
   

  	
   

  	
   

  
	
  Liability
  Insurance Amount:

  	
   

  	
  $5,000,000.00.

  

 

	
  Tenant’s
  Address:

  	
   

  	
  Prior to Commencement Date:

  	
   

  	
  Following Commencement Date:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Aryx Therapeutics, Inc.

  	
   

  	
  Aryx Therapeutics, Inc.

  
	
   

  	
   

  	
  2255 Martin Avenue

  	
   

  	
  6300 Dumbarton Circle

  
	
   

  	
   

  	
  Santa Clara, CA 95050

  	
   

  	
  Fremont, CA 94555

  
	
   

  	
   

  	
  Attention: David Nagler

  	
   

  	
  Attention: David Nagler

  
	
   

  	
   

  	
  Telephone: (408) 869-2761 ext. 211

  	
   

  	
  Telephone: (408) 869-2761 ext. 211

  
	
   

  	
   

  	
  Telecopy:   (408) 869-2773

  	
   

  	
  Telecopy:   (408) 869-2773

  

 

ii

 

	
  Landlord’s
  Address: 

  	
   

  	
  SFI I, LLC

  
	
   

  	
   

  	
  c/o iStar Financial, Inc.

  
	
   

  	
   

  	
  One Embarcadero Center

  
	
   

  	
   

  	
  Suite 3300

  
	
   

  	
   

  	
  San Francisco, California 94111

  
	
   

  	
   

  	
  Attention: Asset Management - 6300

  
	
   

  	
   

  	
  Dumbarton Circle, Fremont,
  California

  
	
   

  	
   

  	
  Telephone: 415-391-4300

  
	
   

  	
   

  	
  Facsimile: 415-391-6259

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
  SFI I, LLC

  
	
   

  	
   

  	
  c/o iStar Financial, Inc.

  
	
   

  	
   

  	
  1114 Avenue of the Americas, 27th Floor

  
	
   

  	
   

  	
  New York, New York 10036

  
	
   

  	
   

  	
  Attention: COO - 6300
  Dumbarton Circle,

  
	
   

  	
   

  	
  Fremont, California

  
	
   

  	
   

  	
  Telephone: 212-930-9400

  
	
   

  	
   

  	
  Facsimile: 212-930-9494

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
  SFI I, LLC

  
	
   

  	
   

  	
  c/o iStar Financial, Inc.

  
	
   

  	
   

  	
  3480 Preston Ridge Road, Suite 575

  
	
   

  	
   

  	
  Alpharetta, Georgia 30005

  
	
   

  	
   

  	
  Attention: Director of Lease Administration -

  
	
   

  	
   

  	
  6300 Dumbarton Circle, Fremont,
  California

  
	
   

  	
   

  	
  Telephone: 678-297-0100

  
	
   

  	
   

  	
  Facsimile: 678-297-0101

  

 

iii

 

The foregoing Basic Lease
Information is incorporated into and made a part of the Lease identified above.
If any conflict exists between any Basic Lease Information and the Lease, then
the Lease shall control.

 

 

	
  LANDLORD:

  	
   

  	
  TRINET ESSENTIAL
  FACILITIES X, INC., a Maryland corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Erick Stiger

  
	
   

  	
   

  	
  Name:

  	
  Erick Stiger

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
						

 

 

	
  TENANT:

  	
   

  	
  ARYX THERAPEUTICS, INC.
  a California corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Peter G. Milner

  
	
   

  	
   

  	
  Name:

  	
  PETER G. MILNER

  
	
   

  	
   

  	
  Title:

  	
  PRESIDENT AND CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David Nagler

  
	
   

  	
   

  	
  Name:

  	
  DAVID NAGLER

  
	
   

  	
   

  	
  Title:

  	
  VICE PRESIDENT CORPORATE
  AFFAIRS

  
									

 

iv

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Definitions and Basic Provisions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Lease Grant

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Termination of Existing Lease and Existing Sublease;
  Tender of Possession; Early Occupancy

  	
   

  	
  1

  
	
   

  	
   

  	
  (a)

  	
  Termination of Existing Lease and Existing Sublease

  	
   

  	
  1

  
	
   

  	
   

  	
  (b)

  	
  Tender of Possession

  	
   

  	
  1

  
	
   

  	
   

  	
  (c)

  	
  Early Occupancy

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Rent

  	
   

  	
  2

  
	
   

  	
   

  	
  (a)

  	
  Payment

  	
   

  	
  2

  
	
   

  	
   

  	
  (b)

  	
  Operating Costs and Taxes

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Delinquent Payment; Handling Charges

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Security Deposit; Letter of Credit

  	
   

  	
  3

  
	
   

  	
   

  	
  (a)

  	
  Security Deposit

  	
   

  	
  3

  
	
   

  	
   

  	
  (b)

  	
  Letter of Credit

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Landlord’s Maintenance Obligations

  	
   

  	
  4

  
	
   

  	
   

  	
  (a)

  	
  Building’s Structure

  	
   

  	
  4

  
	
   

  	
   

  	
  (b)

  	
  Outside Areas, Landscaping, Etc

  	
   

  	
  4

  
	
   

  	
   

  	
  (c)

  	
  Landlord’s Right to Perform Tenant’s Obligations

  	
   

  	
  5

  
	
   

  	
   

  	
  (d)

  	
  Capital Expenditure Items

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Improvements; Alterations; Tenant’s Maintenance and
  Repair Obligations; Signage

  	
   

  	
  5

  
	
   

  	
   

  	
  (a)

  	
  Improvements; Alterations

  	
   

  	
  5

  
	
   

  	
   

  	
  (b)

  	
  Repairs; Maintenance

  	
   

  	
  5

  
	
   

  	
   

  	
  (c)

  	
  Performance of Work

  	
   

  	
  6

  
	
   

  	
   

  	
  (d)

  	
  Mechanic’s Liens

  	
   

  	
  6

  
	
   

  	
   

  	
  (e)

  	
  Janitorial Services

  	
   

  	
  7

  
	
   

  	
   

  	
  (f)

  	
  Landlord’s Right to Perform Tenant’s Maintenance
  Obligations

  	
   

  	
  7

  
	
   

  	
   

  	
  (g)

  	
  Signage

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Utilities; Licenses and Permits

  	
   

  	
  7

  
	
   

  	
   

  	
  (a)

  	
  Utilities

  	
   

  	
  7

  
	
   

  	
   

  	
  (b)

  	
  Licenses and Permits

  	
   

  	
  7

  
	
   

  	
   

  	
  (c)

  	
  Landlord’s Right to Perform Tenant’s Obligations

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Use; Compliance With Laws

  	
   

  	
  7

  
	
   

  	
   

  	
  (a)

  	
  Use

  	
   

  	
  7

  
	
   

  	
   

  	
  (b)

  	
  Compliance With Laws

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Assignment and Subletting

  	
   

  	
  8

  
	
   

  	
   

  	
  (a)

  	
  Transfers

  	
   

  	
  8

  
	
   

  	
   

  	
  (b)

  	
  Consent Standards

  	
   

  	
  8

  
	
   

  	
   

  	
  (c)

  	
  Request for Consent

  	
   

  	
  8

  
	
   

  	
   

  	
  (d)

  	
  Conditions to Consent

  	
   

  	
  8

  
	
   

  	
   

  	
  (e)

  	
  Attornment by Subtenants

  	
   

  	
  9

  
	
   

  	
   

  	
  (f)

  	
  Cancellation

  	
   

  	
  9

  
	
   

  	
   

  	
  (g)

  	
  Additional Compensation

  	
   

  	
  9

  
	
   

  	
   

  	
  (h)

  	
  Permitted Transfers

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  Insurance; Waivers; Subrogation; Indemnity

  	
   

  	
  10

  
	
   

  	
   

  	
  (a)

  	
  Insurance

  	
   

  	
  10

  

 

v

 

	
   

  	
   

  	
  (b)

  	
  No Subrogation

  	
   

  	
  10

  
	
   

  	
   

  	
  (c)

  	
  Indemnity

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
   

  	
  Subordination;
  Attornment; Notice to Landlord’s Mortgagee

  	
   

  	
  11

  
	
   

  	
   

  	
  (a)

  	
  Subordination

  	
   

  	
  11

  
	
   

  	
   

  	
  (b)

  	
  Attornment

  	
   

  	
  11

  
	
   

  	
   

  	
  (c)

  	
  Notice to
  Landlord’s Mortgagee

  	
   

  	
  11

  
	
   

  	
   

  	
  (d)

  	
  Landlord’s
  Mortgagee’s Protection Provisions

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
   

  	
  Rules and
  Regulations

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
   

  	
  Condemnation

  	
   

  	
  12

  
	
   

  	
   

  	
  (a)

  	
  Total Taking

  	
   

  	
  12

  
	
   

  	
   

  	
  (b)

  	
  Partial Taking —
  Tenant’s Rights

  	
   

  	
  12

  
	
   

  	
   

  	
  (c)

  	
  Partial Taking
  —Landlord’s Rights

  	
   

  	
  12

  
	
   

  	
   

  	
  (d)

  	
  Temporary Taking

  	
   

  	
  12

  
	
   

  	
   

  	
  (e)

  	
  Award

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
   

  	
  Fire or Other
  Casualty

  	
   

  	
  13

  
	
   

  	
   

  	
  (a)

  	
  Repair Estimate

  	
   

  	
  13

  
	
   

  	
   

  	
  (b)

  	
  Tenant’s Rights

  	
   

  	
  13

  
	
   

  	
   

  	
  (c)

  	
  Landlord’s
  Rights

  	
   

  	
  13

  
	
   

  	
   

  	
  (d)

  	
  Repair
  Obligation

  	
   

  	
  13

  
	
   

  	
   

  	
  (e)

  	
  Abatement of
  Rent

  	
   

  	
  13

  
	
   

  	
   

  	
  (f)

  	
  Exclusive Remedy

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
   

  	
  Personal
  Property Taxes

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
   

  	
  Events of
  Default

  	
   

  	
  14

  
	
   

  	
   

  	
  (a)

  	
  Payment Default

  	
   

  	
  14

  
	
   

  	
   

  	
  (b)

  	
  Abandonment

  	
   

  	
  14

  
	
   

  	
   

  	
  (c)

  	
  Estoppel

  	
   

  	
  14

  
	
   

  	
   

  	
  (d)

  	
  Insurance

  	
   

  	
  14

  
	
   

  	
   

  	
  (e)

  	
  Mechanic’s Liens

  	
   

  	
  14

  
	
   

  	
   

  	
  (f)

  	
  Other Defaults

  	
   

  	
  14

  
	
   

  	
   

  	
  (g)

  	
  Insolvency

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
   

  	
  Remedies

  	
   

  	
  14

  
	
   

  	
   

  	
  (a)

  	
  Continuance of
  Lease in Effect

  	
   

  	
  15

  
	
   

  	
   

  	
  (b)

  	
  Termination of
  Lease

  	
   

  	
  15

  
	
   

  	
   

  	
  (c)

  	
  Election to
  Terminate or Continue

  	
   

  	
  15

  
	
   

  	
   

  	
  (d)

  	
  Rights and
  Remedies Upon Termination

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20.

  	
   

  	
  Non-Waiver;
  Cumulative Remedies

  	
   

  	
  16

  
	
   

  	
   

  	
  (a)

  	
  No Waiver

  	
   

  	
  16

  
	
   

  	
   

  	
  (b)

  	
  Cumulative
  Remedies

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  21.

  	
   

  	
  Intentionally
  Omitted

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  22.

  	
   

  	
  Surrender of
  Premises

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  23.

  	
   

  	
  Holding Over

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  24.

  	
   

  	
  Certain Rights
  Reserved by Landlord

  	
   

  	
  17

  
	
   

  	
   

  	
  (a)

  	
  Building
  Operations

  	
   

  	
  17

  
	
   

  	
   

  	
  (b)

  	
  Security

  	
   

  	
  17

  
	
   

  	
   

  	
  (c)

  	
  Prospective
  Purchasers and Lenders

  	
   

  	
  17

  
	
   

  	
   

  	
  (d)

  	
  Prospective
  Tenants

  	
   

  	
  17

  

 

vi

 

	
  25.

  	
   

  	
  Intentionally
  Omitted

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  26.

  	
   

  	
  Miscellaneous

  	
   

  	
  17

  
	
   

  	
   

  	
  (a)

  	
  Landlord
  Transfer

  	
   

  	
  17

  
	
   

  	
   

  	
  (b)

  	
  Landlord’s
  Liability

  	
   

  	
  17

  
	
   

  	
   

  	
  (c)

  	
  Brokerage

  	
   

  	
  17

  
	
   

  	
   

  	
  (d)

  	
  Estoppel
  Certificates

  	
   

  	
  17

  
	
   

  	
   

  	
  (e)

  	
  Notices

  	
   

  	
  18

  
	
   

  	
   

  	
  (f)

  	
  Separability

  	
   

  	
  18

  
	
   

  	
   

  	
  (g)

  	
  Amendments;
  Binding Effect

  	
   

  	
  18

  
	
   

  	
   

  	
  (h)

  	
  Quiet Enjoyment

  	
   

  	
  18

  
	
   

  	
   

  	
  (i)

  	
  No Merger

  	
   

  	
  18

  
	
   

  	
   

  	
  (j)

  	
  No Offer

  	
   

  	
  18

  
	
   

  	
   

  	
  (k)

  	
  Entire Agreement

  	
   

  	
  18

  
	
   

  	
   

  	
  (l)

  	
  Waiver of Jury
  Trial

  	
   

  	
  19

  
	
   

  	
   

  	
  (m)

  	
  Governing Law

  	
   

  	
  19

  
	
   

  	
   

  	
  (n)

  	
  Recording

  	
   

  	
  19

  
	
   

  	
   

  	
  (o)

  	
  Water or Mold
  Notification

  	
   

  	
  19

  
	
   

  	
   

  	
  (p)

  	
  Joint and
  Several Liability

  	
   

  	
  19

  
	
   

  	
   

  	
  (q)

  	
  Financial
  Reports

  	
   

  	
  19

  
	
   

  	
   

  	
  (r)

  	
  Landlord’s Fees

  	
   

  	
  19

  
	
   

  	
   

  	
  (s)

  	
  Telecommunications

  	
   

  	
  19

  
	
   

  	
   

  	
  (t)

  	
  Confidentiality

  	
   

  	
  20

  
	
   

  	
   

  	
  (u)

  	
  Authority

  	
   

  	
  20

  
	
   

  	
   

  	
  (v)

  	
  Security Service

  	
   

  	
  20

  
	
   

  	
   

  	
  (w)

  	
  Intentionally
  Omitted

  	
   

  	
  20

  
	
   

  	
   

  	
  (x)

  	
  Prohibited
  Persons and Transactions

  	
   

  	
  20

  
	
   

  	
   

  	
  (y)

  	
  List of Exhibits

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  27.

  	
   

  	
  Environmental
  Requirements

  	
   

  	
  21

  
	
   

  	
   

  	
  (a)

  	
  Prohibition
  against Hazardous Materials

  	
   

  	
  21

  
	
   

  	
   

  	
  (b)

  	
  Environmental
  Requirements

  	
   

  	
  21

  
	
   

  	
   

  	
  (c)

  	
  Removal of
  Hazardous Materials

  	
   

  	
  21

  
	
   

  	
   

  	
  (d)

  	
  Tenant’s
  Indemnity

  	
   

  	
  21

  
	
   

  	
   

  	
  (e)

  	
  Inspections and
  Tests

  	
   

  	
  22

  
	
   

  	
   

  	
  (f)

  	
  Tenant’s
  Financial Assurance in the Event of a Breach

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  28.

  	
   

  	
  Parking

  	
   

  	
  22

  
							

 

vii

 

LIST OF DEFINED TERMS

 

	
   

  	
  Page No.

  
	
  Additional Rent

  	
  ii

  
	
  Affiliate

  	
  1

  
	
  Approval Criteria

  	
  D-7

  
	
  Architect

  	
  D-1, D-6

  
	
  Basic Lease Information

  	
  1

  
	
  Basic Rent

  	
  i

  
	
  Building

  	
  i

  
	
  Building’s Structure

  	
  1

  
	
  Building’s Systems

  	
  1

  
	
  Casualty

  	
  12

  
	
  Collateral

  	
  15

  
	
  Commencement Date

  	
  i

  
	
  Completed Application for Payment

  	
  D-8

  
	
  Construction Allowance

  	
  D-4, D-8, D-10

  
	
  Damage Notice

  	
  12

  
	
  Default Rate

  	
  2

  
	
  Environmental Requirements

  	
  21

  
	
  Event of Default

  	
  13

  
	
  Fair Market Rent

  	
  I-1

  
	
  Extension Period

  	
  I-1

  
	
  GAAP

  	
  9

  
	
  Hazardous Materials

  	
  21

  
	
  including

  	
  1

  
	
  Insurance Costs

  	
  H-2

  
	
  Landlord

  	
  1, E-1, J-2, L-1

  
	
  Landlord’s Mortgagee

  	
  10

  
	
  Law

  	
  1

  
	
  Laws

  	
  1

  
	
  Lease

  	
  1, E-1, F-1,
  J-2, L-1

  
	
  Lease Month

  	
  ii

  
	
  Mortgage

  	
  10

  
	
  OFAC

  	
  20

  
	
  Operating Costs and Tax Statement

  	
  G-2

  
	
  Permitted Transfer

  	
  9

  
	
  Permitted Transferee

  	
  9

  
	
  Permitted Use

  	
  ii

  
	
  Premises

  	
  i

  
	
  Primary Lease

  	
  10

  
	
  Rent

  	
  ii

  
	
  Repair Period

  	
  12

  
	
  Security Deposit

  	
  ii

  
	
  Space Plans

  	
  D-1, D-6, D-12

  
	
  Space Plans Delivery Deadline

  	
  D-1, D-6

  
	
  Substantial Completion

  	
  D-3, D-8, D-11,
  D-13

  
	
  Substantially Completed

  	
  D-3, D-8, D-11,
  D-13

  
	
  Taking

  	
  11

  
	
  Tangible Net Worth

  	
  9

  
	
  Taxes

  	
  G-2

  
	
  Telecommunications Services

  	
  19

  
	
  Tenant

  	
  1, E-1, J-2, L-1

  
	
  Tenant Delay Day

  	
  D-3, D-11, D-13

  

 

viii

 

	
  Tenant
  Party

  	
  1

  
	
  Tenant’s
  Proportionate Share

  	
  ii

  
	
  Term

  	
  i

  
	
  Total
  Construction Costs

  	
  D-4, D-8, D-10

  
	
  Transfer

  	
  7

  
	
  UCC

  	
  15

  
	
  Work

  	
  D-3, D-7, D-10,
  D-12

  
	
  Working
  Drawings

  	
  D-3, D-7, D-12

  
	
  Working
  Drawings Delivery Deadline

  	
  D-2, D-6

  

 

ix

 

LEASE

 

THIS LEASE
AGREEMENT (this “Lease”) is
entered into as of November 16, 2004 (the “Effective
Date”), between TRINET ESSENTIAL FACILITES X, INC., a Maryland
corporation (“Landlord”),
and ARYX THERAPEUTICS, INC., a California corporation (“Tenant”).

 

1.         Definitions and Basic Provisions. The
definitions and basic provisions set forth in the Basic Lease Information (the “Basic Lease Information”) executed
by Landlord and Tenant contemporaneously herewith are incorporated herein by
reference for all purposes. Additionally, the following terms shall have the
following meanings when used in this Lease: “Affiliate”
means any person or entity which, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
party in question; “Building’s Structure”
means the structural roof elements, footings, foundation, slab and structural
portions of exterior load-bearing walls (expressly excluding any painting or
sealing) of the Building; “Building’s
Systems”  means the Building’s HVAC, life-safety,
plumbing, electrical, and mechanical systems; “including”
means including, without limitation; “Laws”
means all federal, state, and local laws, ordinances, rules and regulations,
all court orders, governmental directives, and governmental orders, and all
interpretations of the foregoing, and all restrictive covenants affecting the Premises,
and “Law” means any of the
foregoing; and “Tenant Party”
means any of the following persons: Tenant; any assignees claiming by, through,
or under Tenant; any subtenants claiming by, through, or under Tenant; and any
of their respective agents, contractors, employees, licensees, guests, and
invitees.

 

2.         Lease Grant. Subject to the terms of
this Lease, Landlord leases to Tenant, and Tenant leases from Landlord, the
Premises.

 

3.         Termination of Existing Lease and Existing Sublease;
Tender of Possession: Early Occupancy.

 

(a)       Termination of Existing Lease and Existing Sublease.
Landlord and Tenant acknowledge that, as of the Effective Date, (i) Landlord
has leased the entire Premises to Kelly-Clark, Inc. d/b/a Acosta Sales and
Marketing Company (“Acosta”)
pursuant to that certain Lease dated September 1, 1988 (as amended, the “Existing Lease”), and (ii) Acosta
has subleased the entire Premises to SangStat Medical Corporation (“SangStat”) pursuant to that certain
Sublease dated March 9, 1999 (as such sublease may have been amended from time
to time (the “Existing Sublease”).
Notwithstanding anything to the contrary in this Lease, Landlord’s obligation
to deliver possession of the Premises to Tenant under this Lease is hereby
expressly conditioned on the execution by Landlord and Acosta (and, if
applicable, SangStat) of a termination agreement (a “Termination Agreement”), satisfactory to Landlord in
its sole and absolute discretion, providing, among other things, that (1) the
Existing Lease and the Existing Sublease, and all rights of use or occupancy
claimed by, through or under Acosta and/or SangStat with respect to the
Premises, shall terminate effective no later than February 28, 2005, and (2)
for purposes of performing the Work described in Exhibit D hereto,
Tenant shall have the right to use and occupy the Premises from and after the
later of the Effective Date or the date of the Termination Agreement. If
Landlord has not obtained a fully-executed Termination Agreement on or before
the Effective Date, then (x) the validity of this Lease shall not be affected
or impaired thereby, (y) Landlord shall not be in default hereunder or be
liable for damages therefor, and (z) this Lease shall not be void, voidable or
cancelable by either party until the date that is thirty (30) days after the
Effective Date. If Landlord has not obtained a fully-executed Termination
Agreement by the date that is thirty (30) days after the Effective Date, then
Tenant shall have the right to terminate this Lease by written notice given to
Landlord by earlier of (1) the date on which Landlord delivers to Tenant a copy
of a fully-executed Termination Agreement or (2) the date that is forty-five
(45) days after the Effective Date. Such right to terminate shall be Tenant’s
sole remedy for such failure to obtain a Termination Agreement, and in no event
shall either Landlord be liable in damages to Tenant in connection therewith.

 

(b)       Tender of Possession. Landlord shall
deliver the Premises to Tenant as provided in Section 3(c) below. The Rent
Commencement Date shall not be changed or extended due to any delay in
performing the Work or due to any other delay caused or permitted by Tenant,
subject to the following:

 

1

 

(1)       If (A) Landlord obtains a
fully-executed Termination Agreement and (B) Landlord fails to deliver
possession of the Premises on March 1, 2005, then the Rent Commencement Date
shall be extended on a day-for-day basis for each day Landlord so fails to
deliver possession of the premises, provided that if such failure continues for
sixty (60) days after March 1, 2005, then Tenant shall have the right, as
Tenant’s sole remedy, to terminate this Lease by written notice to Landlord
given no later than sixty-five (65) days after the March 1, 2005.

 

(2)       If (A) Landlord does not
obtain a fully-executed Termination Agreement, (B) Tenant does not timely
deliver written notice of termination as provided in Section 3(a) above and (C)
Landlord fails to deliver possession of the Premises on March 1, 2005, then the
Rent Commencement Date shall be extended on a day-for-day basis for each day
Landlord so fails to deliver possession of the Premises, provided that if such
failure continues for sixty (60) days after expiration the Existing Lease, then
Tenant shall have the right, as Tenant’s sole remedy, to terminate this Lease
by written notice to Landlord given no later than sixty-five (65) days after
expiration of the Existing Lease.

 

(3)       If Tenant Substantially
Completes the Work prior to March 1, 2005, then the Rent Commencement Date
shall be accelerated to the date of such Substantial Completion.

 

(4)       Within ten (10) days after
request by Landlord, Tenant shall execute and deliver to Landlord a letter
substantially in the form of Exhibit E hereto confirming (A) the Rent
Commencement Date and the expiration date of the initial Term, (B) that Tenant
has accepted the Premises pursuant to Section 3(c), and (C) that Landlord has
performed all of its obligations with respect to the Premises; however, the
failure of the parties to execute such letter shall not defer the Rent
Commencement Date or otherwise invalidate this Lease.

 

(c)       Early Occupancy. If Landlord obtains a
fully-executed Termination Agreement, for purposes of performing the Work
described in Exhibit D hereto, Tenant shall have the right to enter and
occupy the Premises beginning on the later of (i) the Effective Date or (ii)
the date of the Termination Agreement. By so using or occupying the Premises,
Tenant shall be deemed to have accepted the Premises (including any
improvements, alterations, fixtures and equipment therein or thereto) AS-IS,
WHERE-IS and WITH ALL FAULTS, in their condition as of the date of such use or
occupancy; except that Landlord shall deliver the roof in watertight condition
and the mechanical, electrical and plumbing systems and the roll up doors in
good working condition. Tenant acknowledges and agrees that Landlord has
limited knowledge of the condition or intended use of any of the existing
improvements, alterations, fixtures or equipment that were installed and/or
used by Acosta and/or SangStat, that Tenant is accepting such existing
improvements, alterations, fixtures and equipment in their condition as of the
date of Tenant’s first use or occupancy of all or any portion of the Premises,
and that Landlord’s obligation to deliver the mechanical, electrical and
plumbing systems in good working condition is expressly limited by and subject
to the impact (if any) that the existence and condition of such existing improvements,
alterations, fixtures and equipment may have on such systems. Occupancy of the
Premises by Tenant prior to the Rent Commencement Date shall be subject to all
of the provisions of this Lease excepting only those requiring the payment of
Basic Rent and Additional Rent, provided that Tenant shall pay any and all
costs (including utility costs and costs of any additional insurance Landlord
determines is necessary in connection with such early occupancy) directly
related to such occupancy of the Premises by Tenant. The obligations of
Landlord under this Section 3(c) are expressly conditioned on the full
execution of a Termination Agreement as provided in Section 3(a).

 

4.         Rent.

 

(a)       Payment. Tenant shall timely pay to
Landlord Rent, without notice, demand, deduction or set off (except as
otherwise expressly provided herein), by good and sufficient check drawn on a
national banking association at Landlord’s address provided for in this Lease
or as otherwise specified by Landlord (including, without limitation, by wire
transfer) and shall be accompanied by all applicable state and local sales or
use taxes. The obligations of Tenant to pay Basic Rent and other sums to
Landlord and the obligations of Landlord under this Lease are independent
obligations. Basic Rent, adjusted as herein provided, shall be payable monthly
in advance. The “First Month’s Prepaid Rent” set forth in the Basic Lease
Information shall be payable contemporaneously with the execution of this
Lease; thereafter, Basic Rent shall be payable on the first day of each month
beginning on the

 

2

 

first day of the second
full calendar month of the Term. The monthly Basic Rent for any partial month
at the beginning of the Term shall equal the product of 1/365 of the annual
Basic Rent in effect during the partial month and the number of days in the
partial month, and shall be due on the Rent Commencement Date. Payments of
Basic Rent for any fractional calendar month at the end of the Term shall be
similarly prorated. Tenant shall pay Additional Rent at the same time and in
the same manner as Basic Rent.

 

(b)       Operating Costs and Taxes. Tenant shall
pay Operating Costs and Taxes in accordance with Exhibit G hereto.

 

5.         Delinquent Payment; Handling Charges. All
past due payments required of Tenant hereunder shall bear interest from the
date due until paid at the lesser of fifteen percent per annum or the maximum
lawful rate of interest (such lesser amount is referred to herein as the “Default Rate”); additionally,
Landlord, in addition to all other rights and remedies available to it, may
charge Tenant a fee equal to the greater of (a) $50.00 or (b) five percent of
the delinquent payment to reimburse Landlord for its cost and inconvenience
incurred as a consequence of Tenant’s delinquency. In no event, however, shall
the charges permitted under this Section 5 or elsewhere in this Lease, to the
extent they are considered to be interest under applicable Law, exceed the
maximum lawful rate of interest. Notwithstanding the foregoing, with respect to
the first occurrence (but not any subsequent occurrence) during any 12-month
period that Tenant fails to make payment when due, (a) the late fee referenced
above shall not be charged until five days after Landlord delivers written
notice of such delinquency to Tenant and (b) the interest referenced above
shall not be assessed until the date Landlord delivers written notice of such
delinquency to Tenant.

 

6.         Security Deposit; Letter of Credit.

 

(a)       Security Deposit. Contemporaneously
with the execution of this Lease, Tenant shall pay to Landlord the Security
Deposit, which shall be held by Landlord to secure Tenant’s performance of its
obligations under this Lease. The Security Deposit is not an advance payment of
Rent or a measure or limit of Landlord’s damages upon an Event of Default (as
defined herein). Landlord may, from time to time following an Event of Default
and without prejudice to any other remedy, use all or a part of the Security
Deposit to perform any obligation Tenant fails to perform hereunder or to
compensate Landlord for any damages due to a default by Tenant. In this regard,
Tenant hereby waives any restriction on the uses to which the Security Deposit
may be applied as contained in Section 1950.7(c) of the California Civil Code
and/or any successor statute. Following any such application of the Security
Deposit, Tenant shall pay to Landlord on demand the amount so applied in order
to restore the Security Deposit to its original amount. Provided that Tenant has
performed all of its obligations hereunder, Landlord shall, within 90 days
after the expiration of the Term and Tenant’s surrender of the Premises in
compliance with the provisions of this Lease, return to Tenant the portion of
the Security Deposit which was not applied to satisfy Tenant’s obligations (and
Tenant hereby waives the provisions of California Civil Code Section 1950.7 to
the contrary). The Security Deposit may be commingled with other funds, and no
interest shall be paid thereon. If Landlord transfers its interest in the
Premises and the transferee assumes Landlord’s obligations under this Lease,
then Landlord may assign the Security Deposit to the transferee in conformity
with the provisions of Section 1950.7 of the California Civil Code and/or any
successor statute, and Landlord thereafter shall have no further liability for
the return of the Security Deposit. The rights and obligations of Landlord and
Tenant under this Section 6 are subject to any other requirements and
conditions imposed by Laws applicable to the Security Deposit.

 

(b)       Letter of Credit. Contemporaneously
with the execution of this Lease, Tenant shall provide to Landlord, at Tenant’s
sole cost and expense, an irrevocable standby letter of credit in the amount
set forth in the Basic Lease Information, in form and substance reasonably
satisfactory to Landlord and issued by Comerica Bank, or other bank that is
reasonably satisfactory to Landlord (including replacements thereof permitted
hereunder, the “Letter of Credit”).
The Letter of Credit shall: (1) name Landlord as beneficiary; (2) allow
Landlord to make partial and multiple draws thereunder up to the face amount,
as determined by Landlord; (3) require the issuing bank to pay to Landlord the
amount of a draw upon receipt by such bank of a sight draft signed by Landlord
and presented to the issuing bank; and (4) provide that Landlord can freely
transfer it upon an assignment or other transfer of its interest in this Lease
to the assignee or transferee, without charge to Landlord and without recourse,
and without having to obtain the consent of Tenant or the issuing bank.
Landlord shall be entitled to draw upon the Letter of Credit in accordance with
this paragraph or at any time within thirty (30) days of the expiration date of
the Letter of Credit, unless Tenant shall have delivered to Landlord a
replacement Letter of Credit meeting the

 

3

 

requirements of this
Section 6(b) and with an expiration date not less than twelve (12) months after
the date of delivery. The Letter of Credit (or a replacement thereof
satisfactory to Landlord) shall remain in effect until the expiration or the
sooner termination of this Lease. The Letter of Credit shall be held by
Landlord as credit enhancement for the performance by Tenant of the terms of
this Lease to be performed by Tenant. Landlord may (but shall not be obligated
to) use, apply or retain all or any portion of the proceeds of a draw under the
Letter of Credit as are reasonably necessary for the following purposes: (i) to
remedy any Event of Default by Tenant in the payment of Basic Rent or
Additional Rent or a late charge or interest on defaulted rent, or any other
monetary payment obligation of Tenant under this Lease (as the same may be amended
from time to time); (ii) to repair damage to the Premises caused or permitted
to occur by Tenant which Tenant shall have failed to correct within the period
required by this Lease following notice from Landlord; (iii) to clean and
restore and repair the Premises following their surrender to Landlord if not
surrendered in the condition required pursuant to the provisions of Section 22,
and (iv) to remedy any other Event of Default of Tenant to the extent permitted
by Law including, without limitation, paying in full on Tenant’s behalf any
sums claimed by materialmen or contractors of Tenant to be owing to them by
Tenant for work done or improvements made at Tenant’s request to the Premises
and paying damages payable under California Civil Code section 1951.2. If
Landlord so uses or applies all or any portion of the proceeds of a draw under
the Letter of Credit, Tenant shall within ten (10) business days after demand
therefor, at Landlord’s sole option, either cause the Letter of Credit to be
restored to the full amount thereof or deposit cash with Landlord in an amount
sufficient to restore the Letter of Credit to the full amount thereof, and
Tenant’s failure to do so shall, at Landlord’s option, be an Event of Default
under this Lease. If Tenant performs all of Tenant’s obligations under this
Lease, the Letter of Credit, or so much thereof as has not theretofore been
applied by Landlord, shall be returned, without payment of interest or other
increment for their use, to Tenant within thirty (30) days following expiration
or earlier termination of this Lease. Landlord’s return of the Letter of Credit
or any part thereof shall not be construed as an admission that Tenant has
performed all of its obligations under this Lease. No trust relationship is
created herein between Landlord and Tenant with respect to the Letter of
Credit. The amount of the Letter of Credit shall be reduced to the Letter of
Credit amount in effect from time to time as set forth in the Basic Lease
Information. Upon Landlord’s receipt of a replacement Letter of Credit in such
reduced amount, Landlord shall surrender the Letter of Credit previously held.
In no event shall the Letter of Credit or any proceeds drawn thereunder be
considered prepaid rent, except to the extent Landlord elects to apply such
proceeds to rent becoming due in the future. Upon drawing proceeds under the
Letter of Credit in accordance with this Lease, Landlord shall have the right,
but not the obligation, to apply all or a portion of such proceeds to rent
which is due and unpaid or to future rent payable under this Lease with respect
to any period thereafter, in such order as Landlord may elect.

 

7.         Landlord’s Maintenance Obligations.
This Lease is intended to be a net lease; accordingly, Landlord’s maintenance
obligations are limited to the obligations specifically set forth in this
Section 7.

 

(a)       Building’s Structure. Landlord shall,
at its sole cost and expense, repair and maintain the Building’s Structure to a
commercially reasonable standard for buildings of a type comparable to the
Premises owned by reasonable and prudent commercial landlords; provided,
however, that Landlord shall not be responsible for (i) any such work until
Tenant notifies Landlord of the need therefor in writing, (ii) alterations to
the Building’s Structure required by applicable law because of Tenant’s use of
the Premises (which alterations shall be Tenant’s responsibility), (iii) any
structural damage caused by Tenant’s acts or omissions or failure to comply
with Tenant’s obligations under this Lease or (iv) any such work to the extent
it requires that any costs be incurred and/or any specialized consultants be
hired, which costs would not be incurred or which consultants would not be
hired were it not for the existence of any improvement, alteration or other
item constructed or installed in the Premises for Tenant’s particular use of
the Premises (including as part of the Work). The Building’s Structure does not
include exterior surfaces, roof membranes, skylights, windows, glass or plate glass,
doors or overhead doors, special fronts, or office entries, dock bumpers, dock
plates or levelers, loading areas and docks, and loading dock equipment or any
other items not expressly set forth in Section 1 above as being part of the
Building’s Structure, all of which shall be maintained and replaced, as
necessary, by Tenant.

 

(b)       Outside Areas, Landscaping, Etc.
Landlord shall maintain the areas of the Premises outside the Building,
including landscaping and general property management duties, to a commercially
reasonable standard for buildings of a type comparable to the Premises owned by
reasonable and prudent commercial landlords, and the costs thereof shall be
part of Operating Costs.

 

4

 

(c)       Landlord’s Right to Perform Tenant’s Obligations.
If at any time during the Term Landlord determines, in Landlord’s
reasonable discretion, that Tenant is not adequately performing any of Tenant’s
obligations under Section 8, 9 or 10(b), following notice and a reasonable
opportunity to cure, Landlord may elect to take over and perform any such
obligations going forward, in which event all costs incurred by Landlord in
performing such obligations (together with a management fee of three percent
(3%) of such costs) shall be part of Operating Costs.

 

(d)       Capital Expenditure Items. Landlord
shall comply with the provisions of Paragraph 4 of Exhibit G.

 

8.         Improvements; Alterations; Tenant’s Maintenance and
Repair Obligations; Signage.

 

(a)       Improvements; Alterations.

 

(1)       In General.
Improvements to the Premises shall be installed at Tenant’s expense only in
accordance with plans and specifications which have been previously submitted
to and approved in writing by Landlord (which approval shall not be unreasonably
withheld, conditioned or delayed), and by engineers, contractors and
subcontractors which have been previously approved in writing by Landlord,
which approval shall not be unreasonably withheld, conditioned or delayed and
shall be governed by the provisions set forth in this Section 8(a). No
alterations or physical additions in or to the Premises may be made without
Landlord’s prior written consent, which shall not be unreasonably withheld,
conditioned or delayed; however, Landlord may withhold its consent to any
alteration or addition that would adversely affect (in the reasonable
discretion of Landlord) (1) the Building’s Structure or the Building’s Systems
(including the Building’s restrooms or mechanical rooms), (2) the exterior
appearance of the Building, (3) the appearance of the Building’s common areas,
or (4) the provision of services to other Building occupants (if any). Subject
to the provisions of Section 8(g) below, Tenant shall not paint or install
lighting or decorations, signs, window or door lettering, or advertising media
of any type visible from the exterior of the Premises without the prior written
consent of Landlord, which consent may be withheld in Landlord’s sole and
absolute discretion. In connection with any alteration, addition or improvement
made by Tenant in accordance with this Section 8(a) (expressly excluding any
improvements made as part of the Work, with respect to which improvements the
terms and provisions of Exhibit D shall control), Tenant shall pay to
Landlord a supervision fee equal to two and one-half percent (2.5%) of Tenant’s
cost to make such alteration, addition or improvement. All alterations,
additions, and improvements shall be constructed, maintained, and used by
Tenant, at its risk and expense, in accordance with all Laws; Landlord’s
consent to or approval of any alterations, additions or improvements (or the
plans therefor) shall not constitute a representation or warranty by Landlord,
nor Landlord’s acceptance, that the same comply with sound architectural and/or
engineering practices or with all applicable Laws, and Tenant shall be solely
responsible for ensuring all such compliance.

 

(2)       Minor Alterations.
Notwithstanding Section 8(a)(l) above, Tenant, without Landlord’s prior written
consent (but subject to the other terms and conditions of this Section 8,
including Section 8(c) below), shall be permitted to make alterations to the
Premises that do not affect the Building’s Structure, do not affect the
Building’s Systems and do not materially affect the appearance of the Premises
viewed from the exterior, provided that: (a) such alterations do not exceed
$50,000 individually or $100,000 in the aggregate, (b) Tenant shall timely
provide Landlord the information required pursuant to Section 8(c) below, (c) Tenant
shall notify Landlord in  writing
within thirty (30) days of completion of the alteration and deliver to Landlord
a set of the plans and specifications therefor, either “as built” or marked to
show construction changes made, and (d) Tenant shall, upon Landlord’s request
made within a reasonable time prior to termination of this Lease, remove the
alteration at the termination of the Lease and restore the Premises to its
condition prior to such alteration.

 

(b)       Repairs; Maintenance. Except for
Landlord’s obligations set forth in Section 7, Tenant shall, at its sole
expense, repair, replace and maintain all portions of the Premises in a good,
clean, safe, and operable condition and in accordance with all Laws and the
equipment manufacturer’s suggested service programs, and shall not permit or
allow to remain any waste or damage to any portion of the Premises. No later
than 14 days

 

5

 

prior to the end of the
Term, Tenant shall deliver to Landlord a certificate from an engineer
reasonably acceptable to Landlord certifying that all such items which Tenant
is required to maintain hereunder are then in good repair and condition and
have been maintained in accordance with this Section 8. Landlord shall transfer
to Tenant, to the extent possible at no cost to Landlord and in Landlord’s
possession, any warranties or service contracts for Building’s Systems Tenant
is responsible to repair and maintain. Notwithstanding anything in this Section
8(b) or Section 7 above to the contrary, if and when Tenant is required to
undertake a repair or replacement in or to the Premises which, in accordance
with GAAP, is considered a capital improvement or capital repair item, Tenant
shall first advise Landlord thereof and provide Landlord with Tenant’s
assessment of the nature and scope of the work to be performed, whereupon
Landlord shall have the option in its sole discretion to undertake the capital
improvement or capital repair and to charge Tenant therefor. If Landlord elects
to handle the work, Tenant shall reimburse Landlord within thirty (30) days of
receipt of billing therefor accompanied by reasonably supportive documentation,
unless such capital improvement work is a Major Capital Expenditure or
an Excess Capital Expenditure, in which event Paragraph 4 of Exhibit G
shall control.

 

(c)       Performance of Work. All work described
in this Section 8 shall be performed only by Landlord or by contractors and
subcontractors approved in writing by Landlord, which approval shall not be unreasonably
withheld, conditioned or delayed. Tenant shall cause all contractors and
subcontractors to procure and maintain insurance coverage naming Landlord,
Landlord’s property management company and Landlord’s asset management company
as additional insureds against such risks, in such amounts, and with such
companies as Landlord may reasonably require. Tenant shall provide Landlord
with the identities, mailing addresses and telephone numbers of all persons
performing work or supplying materials prior to beginning such construction and
Landlord may post on and about the Premises notices of non-responsibility
pursuant to applicable Laws. All such work shall be performed in accordance
with all Laws and in a good and workmanlike manner so as not to damage the Premises
(including the Building’s Structure and the Building’s Systems). All such work
which may affect the Building’s Structure or the Building’s Systems must be
approved by the Building’s engineer of record, at Tenant’s expense and, at
Landlord’s election, must be performed by Landlord’s usual contractor for such
work. All work affecting the roof of the Building must be performed by
Landlord’s roofing contractor, and no such work will be permitted if it would
void or reduce the warranty on the roof.

 

(d)       Mechanic’s Liens. All work performed,
materials furnished, or obligations incurred by or at the request of a Tenant
Party shall be deemed authorized and ordered by Tenant only, and Tenant shall
not permit any mechanic’s liens to be filed against the Premises in connection
therewith. Upon completion of any such work, Tenant shall deliver to Landlord
final lien waivers from all contractors, subcontractors and materialmen who
performed such work. If such a lien is filed, then Tenant shall, within fifteen
(15) days after Landlord has delivered notice of the filing thereof to Tenant
(or such earlier time period as may be necessary to prevent the forfeiture of
the Premises or any interest of Landlord therein or the imposition of a civil
or criminal fine with respect thereto), either (1) pay the amount of the lien
and cause the lien to be released of record, or (2) diligently contest such
lien and deliver to Landlord a bond or other security reasonably satisfactory
to Landlord. If Tenant fails to timely take either such action, then Landlord
may pay the lien claim, and any amounts so paid, including expenses and
interest at the Default Rate from the time of Landlord’s payment, shall be paid
by Tenant to Landlord within ten days after Landlord has invoiced Tenant therefor.
Landlord and Tenant acknowledge and agree that their relationship is and shall
be solely that of “landlord-tenant” (thereby excluding a relationship of
“owner-contractor,” “owner-agent” or other similar relationships). Accordingly,
all materialmen, contractors, artisans, mechanics, laborers and any other
persons now or hereafter contracting with Tenant, any contractor or
subcontractor of Tenant or any other Tenant Party for the furnishing of any
labor, services, materials, supplies or equipment with respect to any portion
of the Premises, at any time from the date hereof until the end of the Term,
are hereby charged with notice that they look exclusively to Tenant to obtain
payment for same. Nothing herein shall be deemed a consent by Landlord to any liens
being placed upon the Premises or Landlord’s interest therein due to any work
performed by or for Tenant or deemed to give any contractor or subcontractor or
materialman any right or interest in any funds held by Landlord to reimburse
Tenant for any portion of the cost of such work. Without limiting the
generality of the foregoing, Tenant shall notify Landlord in writing no later
than one (1) day after the commencement of any work or the furnishing of any
materials at or to the Premises in order that Landlord shall be able timely to post
and record Notices of Non-Responsibility. Tenant shall defend, indemnify and
hold harmless Landlord and its agents and representatives from and against all
claims, demands, causes of action, suits, judgments, damages and expenses
(including attorneys’ fees) in any way arising from or relating to the failure
by any Tenant Party to pay for any work performed, materials

 

6

 

furnished, or obligations incurred by
or at the request of a Tenant Party. This indemnity provision shall survive
termination or expiration of this Lease.

 

(e)       Janitorial Services. Tenant, at its
sole expense, shall provide its own janitorial services to the Premises and
shall maintain the Premises in a clean and safe condition. Tenant shall store
all trash and garbage in receptacles and shall, at its sole expense, arrange
for the regular pickup of such trash and garbage. If Tenant fails to provide
janitorial services to the Premises or trash removal services in compliance
with the foregoing, Landlord, in addition to any other rights and remedies
available to it, may provide such services, and Tenant shall pay to Landlord
the cost thereof, together with interest thereon at the Default Rate from the
time of Landlord’s payment, within ten days after Landlord delivers to Tenant
an invoice therefor.

 

(f)        Landlord’s Right to Perform Tenant’s Maintenance
Obligations. As provided in Section 7(c), Landlord may perform
Tenant’s maintenance obligations at Tenant’s cost. In addition, Tenant shall
repair or replace, subject to Landlord’s direction and supervision, any damage
to the Premises caused by a Tenant Party (or Landlord may elect to repair such
damage at Tenant’s expense, rather than having Tenant repair such damage). The
cost of all maintenance, repair or replacement work performed by Landlord under
this Section 8, together with a management fee of three percent (3%) of such
costs, shall be part of Operating Costs.

 

(g)       Signage. Notwithstanding Section 8(a)
above, throughout the Term, Tenant shall have the right to install building and
monument signs on, in or about the Premises, subject to Landlord’s prior
approval, which shall not be unreasonably withheld, conditioned or delayed, and
to all applicable Laws. Tenant shall be responsible for maintaining any such
signs in first-class condition and shall remove such signs at the expiration or
earlier termination of this Lease. Tenant shall repair all damage to the
Premises caused by the installation, maintenance or removal of such signs.

 

9.         Utilities; Licenses and Permits.

 

(a)       Utilities. Tenant shall, at its sole
cost and expense, contract for and pay for all water, gas, electricity, heat,
telephone, sewer, sprinkler charges and other utilities and services used at
the Premises, together with any taxes, penalties, surcharges, connection
charges, maintenance charges, and the like pertaining to Tenant’s use of the
Premises. Tenant, at its expense, shall obtain all utility services for the
Premises, including making all applications therefor, obtaining meters and
other related equipment, and paying all deposits and connection charges.
Landlord shall not be liable for any interruption or failure of utility service
to the Premises, and such interruption or failure of utility service shall not
be a constructive eviction of Tenant, constitute a breach of any implied
warranty, or entitle Tenant to any abatement of Tenant’s obligations hereunder.

 

(b)       Licenses and Permits. Tenant shall, at
its sole cost and expense, obtain and keep in force during the Term, and all
extensions thereof, all licenses, certificates and permits necessary for it to
use the Premises in accordance with applicable Laws. Upon Landlord’s request,
Tenant shall promptly deliver to Landlord copies of all such licenses,
certificates and permits.

 

(c)       Landlord’s Right to Perform Tenant’s Obligations.
As provided in Section 7(c), Landlord may perform Tenant’s obligations under
this Section 9. Any out-of-pocket sums expended by Landlord with respect to any
of the foregoing, together with interest thereon at the Default Rate from the
time of Landlord’s payment, shall be deemed to be Additional Rent owing by
Tenant to Landlord and shall be part of Operating Costs.

 

10.       Use; Compliance With Laws.

 

(a)       Use. Tenant shall not use the Premises
for any use other than the Permitted Use, shall comply with all Laws relating
to the use, condition, access to, and occupancy of the Premises and will not
commit waste, overload the Building’s Structure or the Building’s Systems or subject
the Premises to use that would damage the Premises. The Premises shall not be
used for any use which is disreputable, creates extraordinary fire hazards, or
results in an increased rate of insurance on the Premises or its contents, or
for the storage of any Hazardous Materials (except as provided in Section 27
hereto). Outside storage, including storage of trucks or other vehicles, is
prohibited without Landlord’s prior written consent. If, because of a Tenant
Party’s acts or because Tenant vacates

 

7

 

Premises, the rate of
insurance on the Premises or its contents increases, then Tenant shall pay to
Landlord the amount of such increase on demand. Tenant shall conduct its
business and control each other Tenant Party so as not to create any nuisance
or unreasonably interfere with other tenants (if any) or Landlord in its
management of the Premises.

 

(b)       Compliance With Laws. Tenant shall not
do or permit anything to be done in or about the Premises that will in any way
violate or conflict with any Law now in force or hereinafter enacted. Tenant,
at its sole cost and expense, shall promptly comply with all such present and
future Laws relating to the condition, use or occupancy of the Premises and
shall perform all work to the Premises required to effect such compliance,
unless such work is required to correct a violation of a Law that was
applicable prior to the date of Tenant’s first entry upon or occupancy of the
Premises and with which, as then interpreted, the Premises failed to comply
prior to such date. The judgment of any court of competent jurisdiction or the
admission of Tenant in an action against Tenant, whether or not Landlord is a
party thereto, that Tenant has violated any Law shall be conclusive of that
fact as between Landlord and Tenant. Tenant shall immediately furnish Landlord
with any notices received from any insurance company or governmental agency or
inspection bureau regarding any unsafe or unlawful conditions within the
Premises or the violation of any Law.

 

11.       Assignment and Subletting.

 

(a)       Transfers. Except in connection with
any Permitted Transfer as provided in Section 11(h), Tenant shall not, without
the prior written consent of Landlord, (1) assign, transfer, or encumber this
Lease or any estate or interest herein, whether directly or by operation of
law, (2) permit any other entity to become Tenant hereunder by merger,
consolidation, or other reorganization, (3) if Tenant is an entity other than a
corporation whose stock is publicly traded, permit the transfer of an ownership
interest in Tenant so as to result in a change in the current control of
Tenant, (4) sublet any portion of the Premises, (5) grant any license,
concession, or other right of occupancy of any portion of the Premises, or (6)
permit the use of the Premises by any parties other than Tenant (any of the
events listed in Section 11(a)(1) through 11(a) (6) being a “Transfer”).

 

(b)       Consent Standards. Landlord shall not
unreasonably withhold, condition or delay its consent to any assignment or
subletting of the Premises, provided that, in Landlord’s reasonable business
judgment, the proposed transferee (1) is creditworthy, (2) has a good
reputation in the business community, (3) will use the Premises only for the
Permitted Use and will not use the Premises in any manner that would conflict
with any exclusive use agreement or other similar agreement entered into by
Landlord with any other tenant of the Premises, (4) will not use the Premises
in a manner that would materially increase the pedestrian or vehicular traffic
to the Premises, (5) is not a governmental entity, or subdivision or agency
thereof, and (6) is not a person or entity with whom Landlord is then, or has
been within the six-month period prior to the time Tenant seeks to enter into
such assignment or subletting, negotiating to lease space in the Premises.
Additionally, Landlord may withhold its consent in its sole discretion to any
proposed Transfer if any Event of Default by Tenant then exists. Notwithstanding
any contrary provision of law, including California Civil Code Section
1995.310, Tenant shall have no right, and Tenant hereby waives and relinquishes
any right, to cancel or terminate this Lease in the event Landlord is
determined to have unreasonably withheld or delayed its consent to a proposed
Transfer.

 

(c)       Request for Consent. If Tenant requests
Landlord’s consent to a Transfer, then, at least 15 business days prior to the
effective date of the proposed Transfer, Tenant shall provide Landlord with a written
description of all terms and conditions of the proposed Transfer, copies of the
proposed documentation, and the following information about the proposed
transferee: name and address; reasonably satisfactory information about its
business and business history; its proposed use of the Premises; banking,
financial, and other credit information; and general references sufficient to
enable Landlord to determine the proposed transferee’s creditworthiness and
character. Concurrently with Tenant’s notice of any request for consent to a
Transfer, Tenant shall pay to Landlord a fee of $1,000 to defray Landlord’s
expenses in reviewing such request, and Tenant shall also reimburse Landlord
immediately upon request for its reasonable attorneys’ fees incurred in connection
with considering any request for consent to a Transfer (not to exceed $2,000).

 

(d)       Conditions to Consent. If Landlord
consents to a proposed Transfer, then the proposed assignee shall deliver to
Landlord a written agreement whereby it expressly assumes Tenant’s obligations
hereunder

 

8

 

and any proposed
subtenant shall deliver to Landlord a written agreement whereby it expressly
evidences its agreement that its sublease is subordinate to this Lease;
however, any transferee of less than all of the space in the Premises shall be
liable only for obligations under this Lease that are properly allocable to the
space subject to the Transfer for the period of the Transfer. No Transfer shall
release Tenant from its obligations under this Lease. Landlord’s consent to any
Transfer shall not waive Landlord’s rights as to any subsequent Transfers. If
an Event of Default occurs while the Premises or any part thereof are subject
to a Transfer, then Landlord, in addition to its other remedies, may collect
directly from such transferee all rents becoming due to Tenant and apply such
rents against Rent. Tenant authorizes its transferees to make payments of rent
directly to Landlord upon receipt of notice from Landlord to do so following
the occurrence of an Event of Default hereunder. Tenant shall be responsible
for the cost of any demising walls or other improvements necessitated by a
proposed subletting or assignment, which improvements shall be subject to
Section 8 hereof.

 

(e)       Attornment by Subtenants. Each sublease
by Tenant hereunder shall be subject and subordinate to this Lease and to the
matters to which this Lease is or shall be subordinate, and each subtenant by
entering into a sublease is deemed to have agreed that in the event of
termination, re-entry or dispossession by Landlord under this Lease, Landlord
may, at its option, take over all of the right, title and interest of Tenant,
as sublandlord, under such sublease, and such subtenant shall, at Landlord’s option,
attorn to Landlord pursuant to the then executory provisions of such sublease,
except that Landlord shall not be (1) liable for any previous act or omission
of Tenant under such sublease, (2) subject to any counterclaim, offset or
defense that such subtenant might have against Tenant, (3) bound by any
previous modification of such sublease not approved by Landlord in writing or
by any rent or additional rent or advance rent which such subtenant might have
paid for more than the current month to Tenant, and all such rent shall remain
due and owing, notwithstanding such advance payment, (4) bound by any security
or advance rental deposit made by such subtenant which is not delivered or paid
over to Landlord and with respect to which such subtenant shall look solely to
Tenant for refund or reimbursement, or (5) obligated to perform any work in the
subleased space or to prepare it for occupancy, and in connection with such
attornment, the subtenant shall execute and deliver to Landlord any instruments
Landlord may reasonably request to evidence and confirm such attornment. Each
subtenant or licensee of Tenant shall be deemed, automatically upon and as a
condition of its occupying or using the Premises or any part thereof, to have
agreed to be bound by the terms and conditions set forth in this Section 11(e).
The provisions of this Section 11(e) shall be self-operative, and no further
instrument shall be required to give effect to this provision.

 

(f)        Cancellation. Landlord may, within 30
days after submission of Tenant’s written request for Landlord’s consent to an
assignment or subletting for substantially all of the remainder of the Term,
cancel this Lease as to the portion of the Premises proposed to be sublet or
assigned as of the date the proposed Transfer is to be effective. If Landlord
cancels this Lease as to any portion of the Premises, then this Lease shall
cease for such portion of the Premises and Tenant shall pay to Landlord all
Rent accrued through the cancellation date relating to the portion of the
Premises covered by the proposed Transfer. Thereafter, Landlord may lease such
portion of the Premises to the prospective transferee (or to any other person)
without liability to Tenant.

 

(g)       Additional Compensation. Tenant shall
pay to Landlord, promptly following receipt thereof, fifty percent (50%) of the
excess of (1) all compensation received by Tenant for a Transfer less the
actual out-of-pocket costs reasonably incurred by Tenant with unaffiliated
third parties (i.e., market rate brokerage commissions, reasonable legal fees
and any generic improvement costs for work approved in advance by Landlord) in
connection with such Transfer (such costs shall be amortized on a straight-line
basis over the term of the Transfer in question) over (2) the Rent allocable to
the portion of the Premises covered thereby.

 

(h)       Permitted Transfers. Notwithstanding
Section 11(a), Tenant may Transfer all or part of its interest in this Lease or
all or part of the Premises (a “Permitted
Transfer”) to the following types of entities (a “Permitted Transferee”) without the
written consent of Landlord:

 

(1)       an Affiliate of Tenant;

 

(2)       any corporation, limited
partnership, limited liability partnership, limited liability company or other
business entity in which or with which Tenant, or its corporate successors or
assigns, is merged or consolidated, in accordance with applicable statutory
provisions governing merger

 

9

 

and consolidation of
business entities, so long as (A) Tenant’s obligations hereunder are assumed by
the entity surviving such merger or created by such consolidation; and (B) the
Tangible Net Worth of the surviving or created entity is not less than the
Tangible Net Worth of Tenant as of the date hereof

 

(3)       any corporation, limited
partnership, limited liability partnership, limited liability company or other
business entity acquiring all or substantially all of Tenant’s assets if such
entity’s Tangible Net Worth after such acquisition is not less than the Tangible
Net Worth of Tenant as of the date hereof.

 

In addition, a sale or
transfer of the capital stock, interests or memberships of Tenant shall be
deemed a Permitted Transfer if (i) such sale or transfer occurs in connection
with any bona fide financing or capitalization for the benefit of Tenant or
(ii) Tenant is or becomes through such transfer a corporation whose stock is
publicly traded, in either case only so long as the Tangible Net Worth of the
surviving, created or resulting entity is not less than the Tangible Net Worth
of Tenant as of the date hereof.

 

Tenant shall promptly
notify Landlord of any such Permitted Transfer. Tenant shall remain liable for
the performance of all of the obligations of Tenant hereunder, or if Tenant no
longer exists because of a merger, consolidation, or acquisition, the surviving
or acquiring entity shall expressly assume in writing the obligations of Tenant
hereunder. Additionally, the Permitted Transferee shall comply with all of the
terms and conditions of this Lease, including the Permitted Use, and the use of
the Premises by the Permitted Transferee may not violate any other agreements
affecting the Premises, the Landlord or other tenants of the Premises. No later
than 30 days after the effective date of any Permitted Transfer, Tenant agrees
to furnish Landlord with (A) copies of the instrument effecting any of the
foregoing Transfers, (B) documentation establishing Tenant’s satisfaction of
the requirements set forth above applicable to any such Transfer, and (C) evidence
of insurance as required under this Lease with respect to the Permitted
Transferee. The occurrence of a Permitted Transfer shall not waive Landlord’s
rights as to any subsequent Transfers. “Tangible
Net Worth” means the excess of total assets over total liabilities,
in each case as determined in accordance with generally accepted accounting
principles consistently applied (“GAAP”),
excluding, however, from the determination of total assets all assets which
would be classified as intangible assets under GAAP including goodwill,
licenses, patents, trademarks, trade names, copyrights, and franchises. Any
subsequent Transfer by a Permitted Transferee shall be subject to the terms of
this Section 11.

 

12.      Insurance; Waivers; Subrogation; Indemnity.

 

(a)       Insurance. Tenant shall maintain
insurance policies in accordance with Exhibit H hereto.

 

(b)       No Subrogation. Landlord and Tenant
each waives any claim it might have against the other for any damage to or
theft, destruction, loss, or loss of use of any property, to the extent the
same is insured against under any insurance policy of the types described in
this Section 12 that covers the Premises, Landlord’s or Tenant’s fixtures,
personal property, leasehold improvements, or business, or is required to be
insured against under the terms hereof, regardless of whether the negligence of
the other party caused such Loss. Additionally, Tenant waives any claim it may
have against Landlord for any Loss to the extent such Loss is caused by a
terrorist act. Each party shall cause its insurance carrier to endorse all
applicable policies waiving the carrier’s rights of recovery under subrogation
or otherwise against the other party.

 

(c)       Indemnity. Subject to Section 12(b),
Tenant shall defend with competent counsel satisfactory to Landlord any claims
made or legal actions filed or threatened against Landlord with respect to the
violation of any Law, or the death, bodily injury, personal injury, property
damage, or interference with contractual or property rights suffered by any
third party occurring within the Premises or resulting from Tenant’s use or
occupancy of the Premise, or resulting from Tenant’s activities in or about the
Premises, and Tenant shall indemnify and hold Landlord, Landlord’s partners,
principals, members, employees, agents and contractors harmless from any loss
liability, penalties, or expense whatsoever (including any loss attributable to
vacant space which otherwise would have been leased, but for such activities)
resulting therefrom, except to the extent proximately caused by the active
negligence or willful misconduct of Landlord. Subject to Section 12(b) and the
foregoing sentence, Landlord shall defend, indemnify and hold harmless Tenant
and its representatives and agents from and against all claims,

 

10

 

demands, liabilities,
causes of action, suits, judgments, damages and expenses (including reasonable
attorneys’ fees) arising from Landlord’s failure to perform its obligations
under this Lease. The indemnities set forth in this Lease shall survive
termination or expiration of this Lease and shall not terminate or be waived,
diminished or affected in any manner by any abatement or apportionment of Rent
under any provision of this Lease. If any proceeding is filed for which
indemnity is required hereunder, the indemnifying party agrees, upon request
therefor, to defend the indemnified party in such proceeding at its sole cost
utilizing counsel satisfactory to the indemnified party.

 

13.      Subordination; Attornment; Notice to Landlord’s
Mortgagee.

 

(a)       Subordination. This Lease shall be
subordinate to any deed of trust, mortgage, or other security instrument (each,
a “Mortgage”), or any
ground lease, master lease, or primary lease (each, a “Primary Lease”), that now or
hereafter covers all or any part  of
the Premises (the mortgagee under any such Mortgage, beneficiary under any such
deed of trust, or the lessor under any such Primary Lease is referred to herein
as a “Landlord’s Mortgagee”).
Any Landlord’s Mortgagee may elect, at any time, unilaterally, to make this
Lease superior to its Mortgage, Primary Lease, or other interest in the
Premises by so notifying Tenant in writing. The provisions of this Section
shall be self-operative and no further instrument of subordination shall be
required; however, in confirmation of such subordination, Tenant shall execute
and return to Landlord (or such other party designated by Landlord) within ten
days after written request therefor such documentation, in recordable form if required,
as a Landlord’s Mortgagee may reasonably request to evidence the subordination
of this Lease to such Landlord’s Mortgagee’s Mortgage or Primary Lease
(including a subordination, non-disturbance and attornment agreement) or, if
the Landlord’s Mortgagee so elects, the subordination of such Landlord’s
Mortgagee’s Mortgage or Primary Lease to this Lease. Notwithstanding the
foregoing, Landlord shall use commercially reasonable efforts to obtain a
nondisturbance agreement in form and substance reasonably satisfactory to
Tenant from any existing lender, and Tenant’s obligation to execute future
subordination agreements shall be conditioned upon its receipt of a
commercially reasonable nondisturbance agreement.

 

(b)       Attornment. Tenant shall attorn to any party
succeeding to Landlord’s interest in the Premises, whether by purchase,
foreclosure, deed in lieu of foreclosure, power of sale, termination of lease,
or otherwise, upon such party’s request, and shall execute such agreements
confirming such attornment as such party may reasonably request; provided that
such party recognizes Tenant’s rights under this Lease, except that such party
shall not: (a) be liable for any act or omission of any prior landlord under
this Lease; (b) be subject to any offsets or defenses which Tenant might have
against any prior Landlord under this Lease (prior to such party becoming
landlord under this Lease); (c) be bound by any Rent or Additional Rent which
Tenant might have paid to any prior landlord under this Lease for more than the
current month or more than one (1) month prior to the due date for the then
current installment; (d) be liable for any deposits made or prepaid Rent paid
by Tenant hereunder unless such deposits or payments have been transferred to
such party; or (e) be bound by any amendment or modification of this Lease made
without any required lessor’s or lender’s consent.

 

(c)       Notice to Landlord’s Mortgagee. Tenant
shall not seek to enforce any remedy it may have for any default on the part of
Landlord without first giving written notice by certified mail, return receipt
requested, specifying the default in reasonable detail, to any Landlord’s
Mortgagee whose address has been given to Tenant, and affording such Landlord’s
Mortgagee a reasonable opportunity to perform Landlord’s obligations hereunder.

 

(d)       Landlord’s Mortgagee’s Protection Provisions.
If Landlord’s Mortgagee shall succeed to the interest of Landlord under this
Lease, Landlord’s Mortgagee shall not be: (1) liable for any act or omission of
any prior lessor (including Landlord); (2) bound by any rent or additional rent
or advance rent which Tenant might have paid for more than the current month to
any prior lessor (including Landlord), and all such rent shall remain due and
owing, notwithstanding such advance payment; (3) bound by any security or
advance rental deposit made by Tenant which is not delivered or paid over to
Landlord’s Mortgagee and with respect to which Tenant shall look solely to
Landlord for refund or reimbursement; (4) bound by any termination, amendment
or modification of this Lease made without Landlord’s Mortgagee’s consent and
written approval, except for those terminations, amendments and modifications
permitted to be made by Landlord without Landlord’s Mortgagee’s consent pursuant
to the terms of the loan documents between Landlord and Landlord’s Mortgagee;
(5) subject to the defenses which Tenant might have against any prior lessor
(including Landlord); and (6) subject to the offsets which Tenant might

 

11

 

have against any prior lessor (including Landlord) except for
those offset rights which (A) are expressly provided in this Lease, (B) relate
to periods of time following the acquisition of the Premises by Landlord’s
Mortgagee, and (C) Tenant has provided written notice to Landlord’s Mortgagee
and provided Landlord’s Mortgagee a reasonable opportunity to cure the event
giving rise to such offset event. Landlord’s Mortgagee shall have no liability
or responsibility under or pursuant to the terms of this Lease or otherwise
after it ceases to own an interest in the Premises. Nothing in this Lease shall
be construed to require Landlord’s Mortgagee to see to the application of the
proceeds of any loan, and Tenant’s agreements set forth herein shall not be
impaired on account of any modification of the documents evidencing and
securing any loan.

 

14.       Rules and Regulations. Tenant shall
comply with the rules and regulations of the Premises which are attached hereto
as Exhibit C to the extent that they do not conflict with any provisions
of this Lease. Landlord may, from time to time, change such rules and
regulations for the safety, care, or cleanliness of the Premises and related
facilities, provided that such changes are applicable to all tenants of the
Premises, will not unreasonably interfere with Tenant’s use of the Premises and
are enforced by Landlord in a non-discriminatory manner. Tenant shall be
responsible for the compliance with such rules and regulations by each Tenant
Party.

 

15.       Condemnation.

 

(a)       Total Taking. If the entire Premises
are taken by right of eminent domain or conveyed in lieu thereof (a “Taking”), this Lease shall
terminate as of the date of the Taking.

 

(b)       Partial Taking – Tenant’s Rights. If
any part of the Premises becomes subject to a Taking and such Taking will
prevent Tenant from conducting on a permanent basis its business in the
Premises in a manner reasonably comparable to that conducted immediately before
such Taking, then Tenant may terminate this Lease as of the date of such Taking
by giving written notice to Landlord within 30 days after the Taking, and Basic
Rent and Additional Rent shall be apportioned as of the date of such Taking. If
Tenant does not terminate this Lease, then Rent shall be abated on a reasonable
basis as to that portion of the Premises rendered untenantable by the Taking.

 

(c)       Partial Taking – Landlord’s Rights. If
any material portion, but less than all, of the Premises becomes subject to a
Taking, or if Landlord is required to pay any of the proceeds arising from a
Taking to a Landlord’s Mortgagee, then Landlord may terminate this Lease by
delivering written notice thereof to Tenant within 30 days after such Taking,
and Basic Rent and Additional Rent shall be apportioned as of the date of such
Taking. If Landlord does not so terminate this Lease, then this Lease will
continue, but if any portion of the Premises has been taken, Rent shall abate
as provided in the last sentence of Section 15(b).

 

(d)       Temporary Taking. If all or any portion
of the Premises becomes subject to a Taking for a limited period of time, this
Lease shall remain in full force and effect and Tenant shall continue to
perform all of the terms, conditions and covenants of this Lease, including the
payment of Basic Rent and all other amounts required hereunder. If any such
temporary Taking terminates prior to the expiration of the Term, Tenant shall
restore the Premises as nearly as possible to the condition prior to such
temporary Taking, at Tenant’s sole cost and expense. Landlord shall be entitled
to receive the entire award for any such temporary Taking, except that Tenant
shall be entitled to receive the portion of such award which (1) compensates
Tenant for its loss of use of the Premises within the Term and (2) reimburses
Tenant for the reasonable out-of-pocket costs actually incurred by Tenant to
restore the Premises as required by this Section 15(d).

 

(e)       Award. If any Taking occurs, then
Landlord shall receive the entire award or other compensation for the Premises
taken; however, Tenant may separately pursue a claim (to the extent it will not
reduce Landlord’s award) against the condemnor for the value of Tenant’s
personal property which Tenant is entitled to remove under this Lease, moving
costs, loss of business, and other claims it may have. The rights of Landlord
and Tenant regarding any Taking shall be determined as provided in this
Section, and each party hereby waives the provisions of Section 1265.130 of the
California Code of Civil Procedure, and the provisions of any similar law
hereinafter enacted, allowing either party to petition the Supreme Court to
terminate this Lease and/or otherwise allocate condemnation awards between
Landlord and Tenant in the event of a Taking.

 

12

 

16.       Fire or Other Casualty.

 

(a)       Repair Estimate. If the Premises are
damaged by fire or other casualty (a “Casualty”),
Landlord shall, within 90 days after such Casualty, deliver to Tenant a good
faith estimate (the “Damage Notice”)
of the time needed to repair the damage caused by such Casualty, and shall
include in such notice an estimate of the date upon which Landlord reasonably
expects to have completed the restoration (the “Anticipated Restoration Date”).

 

(b)       Tenant’s Rights. If a material portion
of the Premises is damaged by Casualty such that Tenant is prevented from
conducting its business in the Premises in a manner reasonably comparable to
that conducted immediately before such Casualty and Landlord estimates that the
damage caused thereby cannot be repaired within 210 days after the commencement
of repairs (the “Repair Period”),
then Tenant may terminate this Lease by delivering written notice to Landlord
of its election to terminate within 30 days after the Damage Notice has been
delivered to Tenant; provided, however, that if such damage occurs within
twelve (12) months of the last day of the Term and the time estimated to
substantially complete the repair exceeds one hundred eighty (180) days after
the commencement of repairs, then Tenant may terminate this Lease by delivering
written notice to Landlord of its election to terminate within 30 days after
the Damage Notice has been delivered to Tenant.

 

(c)       Landlord’s Rights. If a Casualty
damages the Premises and (1) Landlord estimates that the damage to the Premises
cannot be repaired within the Repair Period, (2) the damage to the Premises
exceeds 50% of the replacement cost thereof (excluding foundations and
footings), as estimated by Landlord, and such damage occurs during the last two
years of the Term, (3) regardless of the extent of damage to the Premises, the
damage is not fully covered by Landlord’s insurance policies or Landlord makes
a good faith determination that restoring the Premises would be uneconomical, or
(4) Landlord is required to pay any insurance proceeds arising out of the
Casualty to a Landlord’s Mortgagee, then Landlord may terminate this Lease by
giving written notice of its election to terminate within 30 days after the
Damage Notice has been delivered to Tenant.

 

(d)       Repair Obligation. If neither party
elects to terminate this Lease following a Casualty, then Landlord shall,
within a reasonable time after such Casualty, begin to repair the Premises and
shall proceed with reasonable diligence to restore the Premises to
substantially the same condition as they existed immediately before such
Casualty; however, Landlord shall not be required to repair or replace any
alterations or betterments within the Premises (which shall be promptly and
with due diligence repaired and restored by Tenant at Tenant’s sole cost and
expense) or any furniture, equipment, trade fixtures or personal property of
Tenant or others in the Premises, and Landlord’s obligation to repair or
restore the Premises shall be limited to the extent of the insurance proceeds
actually received by Landlord for the Casualty in question. If this Lease is
terminated under the provisions of this Section 16, Landlord shall be entitled
to the full proceeds of the insurance policies providing coverage for all
alterations, improvements and betterments in the Premises (and, if Tenant has
failed to maintain insurance on such items as required by this Lease, Tenant
shall pay Landlord an amount equal to the proceeds Landlord would have received
had Tenant maintained insurance on such items as required by this Lease). If
Landlord shall have failed to complete the restoration by a date that is thirty
(30) days following the Anticipated Restoration Date, and such failure was not
caused in whole or in part by any Tenant Party or events beyond Landlord’s
reasonable control, then Tenant may terminate this Lease by delivering written
notice to Landlord of its intention to terminate within sixty (60) days after
the Anticipated Restoration Date; provided, however, that such termination
shall be automatically rescinded, and this Lease shall continue in full force
and effect, if Landlord substantially completes the restoration within sixty
(60) days after receipt of Tenant’s notice of intention to terminate.

 

(e)       Abatement of Rent. If the Premises are
damaged by Casualty, Rent for the portion of the Premises rendered untenantable
by the damage shall be abated on a reasonable basis from the date of damage
until the completion of Landlord’s repairs (or until the date of termination of
this Lease by Landlord or Tenant as provided above, as the case may be).

 

(f)        Exclusive Remedy. This Section 16 shall
provide Tenant’s sole and exclusive remedy in the event of damage or
destruction to the Premises, and Tenant, as a material inducement to Landlord
entering into this Lease, irrevocably waives and releases Tenant’s rights under
California Civil Code Sections 1932(2), 1933(4), 1941 and 1942. No damages,
compensation or claim shall be payable by Landlord for any inconvenience, any

 

13

 

interruption or cessation
of Tenant’s business, or any annoyance, arising from any damage to or
destruction of all or any portion of the Premises, except for the abatement of
rent provided in Section 16(e) above.

 

17.       Personal Property Taxes. Tenant shall
be liable for all taxes levied or assessed against personal property,
furniture, or fixtures placed by Tenant in the Premises. If any taxes for which
Tenant is liable are levied or assessed against Landlord or Landlord’s property
and Landlord elects to pay the same, or if the assessed value of Landlord’s
property is increased by inclusion of such personal property, furniture or
fixtures and Landlord elects to pay the taxes based on such increase, then Tenant
shall pay to Landlord, within 30 days following written request therefor, the
part of such taxes for which Tenant is primarily liable hereunder, together
with interest thereon at the Default Rate from the time of Landlord’s payment;
however, Landlord shall not pay such amount if Tenant notifies Landlord that it
will contest the validity or amount of such taxes before Landlord makes such
payment, and thereafter diligently proceeds with such contest in accordance
with Law and if the non-payment thereof does not pose a threat of loss or
seizure of the Premises or interest of Landlord therein or impose any fee or
penalty against Landlord.

 

18.       Events of Default. Each of the
following occurrences shall be an “Event
of Default”:

 

(a)       Payment Default. Tenant’s failure to
pay Rent within five days after Landlord has delivered written notice to Tenant
that the same is due; however, an Event of Default shall occur hereunder
without any obligation of Landlord to give any notice if Tenant fails to pay
Rent when due and, during the 12 month interval preceding such failure,
Landlord has given Tenant written notice of failure to pay Rent on one or more
occasions;

 

(b)       Abandonment. Tenant abandons the
Premises;

 

(c)       Estoppel. Tenant fails to provide any
estoppel certificate after Landlord’s written request therefor pursuant to
Section 26(d) and such failure shall continue for five days after Landlord’s
second written notice thereof to Tenant;

 

(d)       Insurance. Tenant fails to procure,
maintain and deliver to Landlord evidence of the insurance policies and
coverages as required under Exhibit H and such failure continues for
five days following Landlord’s notice thereof to Tenant;

 

(e)       Mechanic’s Liens. Tenant fails to pay
and release of record, or diligently contest and bond around, any mechanic’s
lien filed against the Premises for any work performed, materials furnished, or
obligation incurred by or at the request of Tenant, within the time and in the
manner required by Section 8(d);

 

(f)        Other Defaults. Tenant’s failure to
perform, comply with, or observe any other agreement or obligation of Tenant
under this Lease and the continuance of such failure for a period of more than
30 days after Landlord has delivered to Tenant written notice thereof, provided
that if such failure is not reasonably susceptible of cure within such 30-day
period, no Event of Default shall be deemed to have occurred if Tenant
commences such cure within the 30-day period and thereafter diligently
prosecutes such cure to completion; and

 

(g)       Insolvency. The filing of a petition by
or against Tenant (the term “Tenant” shall include, for the purpose of this
Section 18(g), any guarantor of Tenant’s obligations hereunder) (1) in any
bankruptcy or other insolvency proceeding; (2) seeking any relief under any
state or federal debtor relief law; (3) for the appointment of a liquidator or
receiver for all or substantially all of Tenant’s property or for Tenant’s
interest in this Lease; (4) for the reorganization or modification of Tenant’s
capital structure; or (5) in any assignment for the benefit of creditors
proceeding; however, if such a petition is filed against Tenant, then such
filing shall not be an Event of Default unless Tenant fails to have the
proceedings initiated by such petition dismissed within 90 days after the
filing thereof.

 

19.       Remedies. Upon any Event of Default,
Landlord may, in addition to all other rights and remedies afforded Landlord
hereunder or by law or equity, take any one or more of the following actions:

 

14

 

(a)       Continuance of Lease in Effect.
Landlord may, at Landlord’s election, keep this Lease in effect and enforce, by
an action at law or in equity, all of its rights and remedies under this Lease
including, without limitation, (i) the right to recover the rent and other sums
as they become due by appropriate legal action, (ii) the right to make payments
required by Tenant, or perform Tenant’s obligations and be reimbursed by Tenant
for the cost thereof with interest at the Default Rate from the date the sum is
paid by Landlord until Landlord is reimbursed by Tenant, and (iii) the remedies
of injunctive relief and specific performance to prevent Tenant from violating
the terms of this Lease and/or to compel Tenant to perform its obligations
under this Lease, as the case may be.

 

(b)       Termination of Lease. Landlord may, at
Landlord’s election, terminate this Lease by giving Tenant written notice of
termination, in which event this Lease shall terminate on the date set forth
for termination in such notice. Any termination under this subparagraph shall
not relieve Tenant from its obligation to pay to Landlord all Basic Rent and
Additional Rent then or thereafter due, or any other sums due or thereafter
accruing to Landlord, or from any claim against Tenant for damages previously
accrued or then or thereafter accruing. In no event shall any one or more of
the following actions by Landlord, in the absence of a written election by
Landlord to terminate this Lease constitute a termination of this Lease:

 

(1)       Appointment of a receiver
or keeper in order to protect Landlord’s interest hereunder;

 

(2)       Consent to any subletting
of the Premises or assignment of this Lease by Tenant, whether pursuant to the
provisions hereof or otherwise; or

 

(3)       Any action taken by
Landlord or its partners, principals, members, officers, agents, employees, or
servants, which is intended to mitigate the adverse effects of any breach of
this Lease by Tenant, including, without limitation, any action taken to
maintain and preserve the Premises on any action taken to relet the Premises or
any portion thereof for the account at Tenant and in the name of Tenant.

 

(c)       Election to Terminate or Continue. In
the event Tenant breaches this Lease and abandons the Premises, Landlord may
terminate this Lease, but this Lease shall not terminate unless Landlord gives
Tenant written notice of termination. If Landlord does not terminate this Lease
by giving written notice of termination, Landlord may enforce all its rights
and remedies under this Lease, including the right and remedies provided by
California Civil Code Section 1951.4 (“lessor may continue lease in effect
after lessee’s breach and abandonment and recover rent as it becomes due, if
lessee has right to sublet or assign, subject only to reasonable limitations”),
as in effect on the Lease Date.

 

(d)       Rights and Remedies Upon Termination.
In the event Landlord terminates this Lease, Landlord shall be entitled, at
Landlord’s election, to the rights and remedies provided in California Civil
Code Section 1951.2, as in effect on the Lease Date. For purposes of computing
damages pursuant to Section 1951.2, an interest rate equal to the maximum rate
of interest then not prohibited by law shall be used where permitted. Such
damages shall include, without limitation:

 

(1)       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 be reasonably avoided, computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco, at the time of
award plus one percent; and

 

(2)       Any other amount necessary
to compensate Landlord for all detriment proximately caused by Tenant’s failure
to perform Tenant’s obligations under this Lease, or which in the ordinary
course of things would be likely to result thereform, including without
limitation, the following: (i) expenses for cleaning, repairing or restoring
the Premises, (ii) expenses for altering, remodeling or otherwise improving the
Premises for the purpose of reletting, including removal of existing leasehold
improvements and/or installation of additional leasehold improvements
(regardless of how the same is funded, including reduction of rent, a direct
payment or allowance to a new tenant, or otherwise),

 

15

 

(iii)      broker’s fees allocable to
the remainder of the Term, advertising costs and other expenses of reletting
the Premises; (iv) costs of carrying and maintaining the Premises, such as
taxes, insurance premiums, utility charges and security precautions, (v)
expenses incurred in removing, disposing of and/or storing any of Tenant’s
personal property, inventory or trade fixtures remaining therein; (vi)
reasonable attorney’s fees, expert witness fees, court costs and other
reasonable expenses incurred by Landlord (but not limited to taxable costs) in
retaking possession of the Premises, establishing damages hereunder, and
releasing the Premises; and (vii) any other expenses, costs or damages
otherwise incurred or suffered as a result of Tenant’s default.

 

20.       Non-Waiver; Cumulative Remedies.

 

(a)       No Waiver. Landlord’s acceptance of
Rent following an Event of Default shall not waive Landlord’s rights regarding
such Event of Default. No waiver by Landlord of any violation or breach of any
of the terms contained herein shall waive Landlord’s rights regarding any
future violation of such term. Landlord’s acceptance of any partial payment of
Rent shall not waive Landlord’s rights with regard to the remaining portion of
the Rent that is due, regardless of any endorsement or other statement on any
instrument delivered in payment of Rent or any writing delivered in connection
therewith; accordingly, Landlord’s acceptance of a partial payment of Rent
shall not constitute an accord and satisfaction of the full amount of the Rent
that is due.

 

(b)       Cumulative Remedies. Any and all
remedies set forth in this Lease: (1) shall be in addition to any and all other
remedies Landlord may have at law or in equity, (2) shall be cumulative, and
(3) may be pursued successively or concurrently as Landlord may elect. The
exercise of any remedy by Landlord shall not be deemed an election of remedies
or preclude Landlord from exercising any other remedies in the future.
Additionally, Tenant shall defend, indemnify and hold harmless Landlord,
Landlord’s Mortgagee and their respective representatives and agents from and
against all claims, demands, liabilities, causes of action, suits, judgments,
damages and expenses (including reasonable attorneys’ fees) arising from
Tenant’s failure to perform its obligations under this Lease.

 

21.       Intentionally Omitted.

 

22.       Surrender of Premises. No act by
Landlord shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept a surrender of the Premises shall be valid unless it is in
writing and signed by Landlord. At the expiration or termination of this Lease,
Tenant shall deliver to Landlord the Premises with all improvements located
therein in good repair and condition, free of Hazardous Materials placed on the
Premises during the Term, broom-clean, reasonable wear and tear (and
condemnation and Casualty damage, as to which Sections 15 and 16 shall control)
excepted, and shall deliver to Landlord all keys to the Premises. Provided that
Tenant has performed all of its obligations hereunder, Tenant may remove all
unattached trade fixtures, furniture, and personal property placed in the
Premises by Tenant (but Tenant may not remove any such item which was paid for,
in whole or in part, by Landlord or any wiring or cabling unless Landlord
requires such removal). Additionally, Tenant shall remove such alterations,
additions, improvements, trade fixtures, personal property, equipment, wiring,
conduits, cabling, and furniture as Landlord may request; however, Tenant shall
not be required to remove any addition or improvement to the Premises if
Landlord has specifically agreed in writing at the time Landlord gave its
approval of the improvement or addition in question that such improvement or
alteration need not be removed. Tenant shall repair all damage caused by such
removal. All items not so removed shall, at Landlord’s option, be deemed to
have been abandoned by Tenant and may be appropriated, sold, stored, destroyed,
or otherwise disposed of by Landlord without notice to Tenant and without any
obligation to account for such items. The provisions of this Section 22 shall
survive the end of the Term.

 

23.       Holding Over. If Tenant fails to vacate
the Premises at the end of the Term, then Tenant shall be a tenant at
sufferance and, in addition to all other damages and remedies to which Landlord
may be entitled for such holding over, (a) Tenant shall pay, in addition to the
other Rent, Basic Rent equal to the greater of (1) 150% of the Rent payable
during the last month of the Term, or (2) 100% of the prevailing rental rate in
the Premises for similar space, and (b) Tenant shall otherwise continue to be
subject to all of Tenant’s obligations under this Lease. The provisions of this
Section 23 shall not be deemed to limit or constitute a waiver of any other
rights or remedies of Landlord provided herein or at law.

 

16

 

24.       Certain Rights Reserved by Landlord.
Provided that the exercise of such rights does not unreasonably interfere with
Tenant’s occupancy of the Premises, Landlord shall have the following rights:

 

(a)       Building Operations. To decorate and to
make inspections, repairs, alterations, additions, changes, or improvements,
whether structural or otherwise, in and about the Premises, or any part
thereof; to enter upon the Premises (after giving Tenant reasonable notice
thereof at least 24 hours in advance, which may be oral notice, except in cases
of real or apparent emergency, in which case no notice shall be required) and,
during the continuance of any such work, to temporarily close doors, entryways,
public space, and corridors in the Premises; to interrupt or temporarily
suspend Premises services and facilities; to change the name of the Premises;
and to change the arrangement and location of entrances or passageways, doors,
and doorways, corridors, elevators, stairs, restrooms, or other public parts of
the Premises;

 

(b)       Security. To take such reasonable
measures as Landlord deems advisable for the security of the Premises and its
occupants; evacuating the Premises for cause, suspected cause, or for drill
purposes; temporarily denying access to the Premises; and closing the Premises
after normal business hours and on Sundays and holidays, subject, however, to
Tenant’s right to enter when the Premises is closed after normal business hours
under such reasonable regulations as Landlord may prescribe from time to time;

 

(c)       Prospective Purchasers and Lenders. To
enter the Premises at all reasonable hours to show the Premises to prospective
purchasers or lenders, with no less than 24 hours notice in advance to Tenant;

 

(d)       Prospective Tenants. At any time during
the last 12 months of the Term (or earlier if Tenant has notified Landlord in
writing that it does not desire to renew the Term) or at any time following the
occurrence of an Event of Default, to enter the Premises at all reasonable
hours to show the Premises to prospective tenants, with no less than 24 hours
notice in advance to Tenant; and

 

25.       Intentionally Omitted.

 

26.       Miscellaneous.

 

(a)       Landlord Transfer. Landlord may
transfer any portion of the Premises and any of its rights under this Lease. If
Landlord assigns its rights under this Lease, then Landlord shall thereby be
released from any further obligations hereunder arising after the date of
transfer, and the assignee shall be liable for Landlord’s obligations hereunder
arising from and after the transfer date.

 

(b)       Landlord’s Liability. The liability of
Landlord (and its partners, shareholders or members) to Tenant (or any person
or entity claiming by, through or under Tenant) for any default by Landlord
under the terms of this Lease or any matter relating to or arising out of the
occupancy or use of the Premises shall be limited to Tenant’s actual direct,
but not consequential, damages therefor and shall be recoverable only from the
equity interest of Landlord in the Premises (which interest shall be deemed to
include the net proceeds of any sale of the Premises), and Landlord (and its
partners, shareholders or members) shall not be personally liable for any
deficiency.

 

(c)       Brokerage. Neither Landlord nor Tenant
has dealt with any broker or agent in connection with the negotiation or
execution of this Lease, other than (i) Colliers International, who represents
Landlord and whose commission (which applies only to the initial Term) shall be
paid by Landlord pursuant to a separate written agreement and (ii) CRESA
Partners, who represents Tenant and whose commission shall be paid out of the
commission paid to Landlord’s Broker pursuant to a separate written agreement.
Tenant and Landlord shall each indemnify the other against all costs, expenses,
attorneys’ fees, liens and other liability for commissions or other
compensation claimed by any broker or agent claiming the same by, through, or
under the indemnifying party.

 

(d)       Estoppel Certificates. From time to
time, Tenant shall furnish to any party designated by Landlord, within ten days
after Landlord has made a request therefor, a certificate signed by Tenant
confirming and containing such factual certifications and representations as to
this Lease as Landlord may reasonably request.

 

17

 

Unless otherwise required
by Landlord’s Mortgagee or a prospective purchaser or mortgagee of the
Premises, the initial form of estoppel certificate to be signed by Tenant is
attached hereto as Exhibit F. If Tenant does not deliver to Landlord the
certificate signed by Tenant within such time period, Landlord, Landlord’s
Mortgagee and any prospective purchaser or mortgagee, may conclusively presume
and rely upon the following facts: (1) this Lease is in full force and effect,
(2) the terms and provisions of this Lease have not been changed except as
otherwise represented by Landlord, (3) not more than one monthly installment of
Basic Rent and other charges have been paid in advance, (4) there are no claims
against Landlord nor any defenses or rights of offset against collection of
Rent or other charges, and (5) Landlord is not in default under this Lease. In
such event, Tenant shall be estopped from denying the truth of the presumed
facts. Landlord shall, following written request by Tenant, promptly execute
and deliver to Tenant a commercially reasonable landlord estoppel certificate.

 

(e)       Notices. All notices and other
communications given pursuant to this Lease shall be in writing and shall be
(1) mailed by first class, United States Mail, postage prepaid, certified, with
return receipt requested, and addressed to the parties hereto at the address
specified in the Basic Lease information, (2) hand delivered to the intended
addressee, (3) sent by a nationally recognized overnight courier service, or (4)
sent by facsimile transmission during normal business hours followed by a
confirmatory letter sent in another manner permitted hereunder. All notices
shall be effective upon delivery to the address of the addressee. The parties
hereto may change their addresses by giving notice thereof to the other in
conformity with this provision.

 

(f)        Separability. If any clause or
provision of this Lease is illegal, invalid, or unenforceable under present or
future laws, then the remainder of this Lease shall not be affected thereby and
in lieu of such clause or provision, there shall be added as a part of this
Lease a clause or provision as similar in terms to such illegal, invalid, or
unenforceable clause or provision as may be possible and be legal, valid, and
enforceable.

 

(g)       Amendments; Binding Effect. This Lease
may not be amended except by instrument in writing signed by Landlord and
Tenant. No provision of this Lease shall be deemed to have been waived by
Landlord unless such waiver is in writing signed by Landlord, and no custom or
practice which may evolve between the parties in the administration of the
terms hereof shall waive or diminish the right of Landlord to insist upon the
performance by Tenant in strict accordance with the terms hereof. The terms and
conditions contained in this Lease shall inure to the benefit of and be binding
upon the parties hereto, and upon their respective successors in interest and
legal representatives, except as otherwise herein expressly provided. This
Lease is for the sole benefit of Landlord and Tenant, and, other than
Landlord’s Mortgagee, no third party shall be deemed a third party beneficiary
hereof.

 

(h)       Quiet Enjoyment. Provided Tenant has
performed all of its obligations hereunder, Tenant shall peaceably and quietly
hold and enjoy the Premises for the Term, without hindrance from Landlord or
any party claiming by, through, or under Landlord, but not otherwise, subject
to the terms and conditions of this Lease.

 

(i)        No Merger. There shall be no merger of
the leasehold estate hereby created with the fee estate in the Premises or any
part thereof if the same person acquires or holds, directly or indirectly, this
Lease or any interest in this Lease and the fee estate in the leasehold
Premises or any interest in such fee estate.

 

(j)        No Offer. The submission of this Lease
to Tenant shall not be construed as an offer, and Tenant shall not have any
rights under this Lease unless Landlord executes a copy of this Lease and
delivers it to Tenant.

 

(k)       Entire Agreement. This Lease constitutes
the entire agreement between Landlord and Tenant regarding the subject matter
hereof and supersedes all oral statements and prior writings relating thereto.
Except for those set forth in this Lease, no representations, warranties, or
agreements have been made by Landlord or Tenant to the other with respect to
this Lease or the obligations of Landlord or Tenant in connection therewith.
The normal rule of construction that any ambiguities be resolved against the
drafting party shall not apply to the interpretation of this Lease or any
exhibits or amendments hereto.

 

18

 

(l)        Waiver of Jury Trial. TO THE MAXIMUM EXTENT
PERMITTED BY LAW, LANDLORD AND TENANT EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN
ANY LITIGATION OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE ARISING
OUT OF OR WITH RESPECT TO THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED HERETO.

 

(m)      Governing Law. This Lease shall be
governed by and construed in accordance with the laws of the state in which the
Premises are located.

 

(n)       Recording. Tenant shall not record this
Lease or any memorandum of this Lease without the prior written consent of
Landlord, which consent may be withheld or denied in the sole and absolute
discretion of Landlord, and any recordation by Tenant shall be a material
breach of this Lease. Tenant grants to Landlord a power of attorney to execute
and record a release releasing any such recorded instrument of record that was
recorded without the prior written consent of Landlord.

 

(o)       Water or Mold Notification. To the
extent Tenant or its agents or employees discover any water leakage, water
damage or mold in or about the Premises, Tenant shall promptly notify Landlord
thereof in writing.

 

(p)       Joint and Several Liability. If Tenant
is comprised of more than one party, each such party shall be jointly and
severally liable for Tenant’s obligations under this Lease. All unperformed
obligations of Tenant hereunder not fully performed at the end of the Term
shall survive the end of the Term, including payment obligations with respect
to Rent and all obligations concerning the condition and repair of the
Premises.

 

(q)       Financial Reports. Within 15 days after
Landlord’s request, Tenant will furnish Tenant’s most recent audited financial
statements (including any notes to them) to Landlord, or, if no such audited
statements have been prepared, such other financial statements (and notes to
them) as may have been prepared by an independent certified public accountant
or, failing those, Tenant’s internally prepared financial statements. If Tenant
is a publicly traded corporation, Tenant may satisfy its obligations hereunder
by providing to Landlord Tenant’s most recent annual and quarterly reports.
Tenant will discuss its financial statements with Landlord and, following the
occurrence of an Event of Default hereunder, will give Landlord access to
Tenant’s books and records in order to enable Landlord to verify the financial
statements. Landlord will not disclose any aspect of Tenant’s financial
statements that Tenant designates to Landlord as confidential except (1) to
Landlord’s agents and advisers, (2) to Landlord’s Mortgagee or prospective
mortgagees or purchasers of the Premises, (3) in litigation between Landlord
and Tenant, and/or (4) if required by court order. Tenant shall not be required
to deliver the financial statements required under this Section 26(q) more than
once in any I2-month period unless requested by Landlord’s Mortgagee or a
prospective buyer or lender of the Premises or an Event of Default occurs.

 

(r)        Landlord’s Fees. Whenever Tenant
requests Landlord to take any action not required of it hereunder or give any
consent required or permitted under this Lease, Tenant will reimburse Landlord
for Landlord’s reasonable, out-of-pocket costs payable to third parties and
incurred by Landlord in reviewing the proposed action or consent, including
reasonable attorneys’, engineers’ or architects’ fees, within 30 days after
Landlord’s delivery to Tenant of a statement of such costs. Tenant will be
obligated to make such reimbursement without regard to whether Landlord
consents to any such proposed action.

 

(s)       Telecommunications. Tenant and its telecommunications
companies, including local exchange telecommunications companies and
alternative access vendor services companies, shall have no right of access to
and within the Premises, for the installation and operation of
telecommunications systems, including voice, video, data, Internet, and any
other services provided over wire, fiber optic, microwave, wireless, and any
other transmission systems (“Telecommunications
Services”), for part or all of Tenant’s telecommunications
within the Premises and from the Premises to any other location without
Landlord’s prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed. All providers of Telecommunications Services
shall be required to comply with the reasonable rules and regulations of the
Premises, applicable Laws and Landlord’s reasonable policies and practices for
the Premises. Tenant acknowledges that Landlord shall not be required to

 

19

 

provide or arrange for
any Telecommunications Services and that Landlord shall have no liability to
any Tenant Party in connection with the installation, operation or maintenance
of Telecommunications Services or any equipment or facilities relating thereto.
Tenant, at its cost and for its own account, shall be solely responsible for
obtaining all Telecommunications Services.

 

(t)        Confidentiality. Tenant acknowledges
that the terms and conditions of this Lease are to remain confidential for
Landlord’s benefit, and may not be disclosed by Tenant to anyone, by any manner
or means, directly or indirectly, without Landlord’s prior written consent. The
consent by Landlord to any disclosures shall not be deemed to be a waiver on
the part of Landlord of any prohibition against any future disclosure.
Notwithstanding anything herein to the contrary and except as reasonably
necessary to comply with any applicable federal and state securities laws, each
party (and each employee, representative, or other agent of such party) may
disclose to any and all persons, without limitation of any kind, the U.S.
federal and state income tax treatment and tax structure of this Lease and all
materials of any kind (including opinions or other tax analyses) that are
provided to such party relating to such U.S. federal and state income tax
treatment and tax structure. For this purpose, “tax structure” is any fact that
may be relevant to understanding the U.S. federal or state income tax treatment
of this Lease.

 

(u)       Authority. Tenant (if a corporation,
partnership or other business entity) hereby represents and warrants to
Landlord that Tenant is a duly formed and existing entity qualified to do
business in the state in which the Premises are located, that Tenant has full
right and authority to execute and deliver this Lease, and that each person
signing on behalf of Tenant is authorized to do so. Tenant shall, within thirty
(30) days after request, deliver to Landlord certified copies of documents
evidencing Tenant’s formation, qualification, good standing and authorization
of this Lease. Landlord hereby represents and warrants to Tenant that Landlord
is a duly formed and existing entity qualified to do business in the state in
which the Premises are located, that Landlord has full right and authority to
execute and deliver this Lease, and that each person signing on behalf of
Landlord is authorized to do so.

 

(v)       Security Service. Tenant acknowledges
and agrees that, while Landlord may (but shall not be obligated to) patrol the
Premises, Landlord is not providing any security services with respect to the
Premises and 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.

 

(w)      Intentionally Omitted.

 

(x)        Prohibited Persons and Transactions.
Tenant represents and warrants that neither Tenant nor, to the best of its
knowledge, any of its affiliates, nor any of their respective partners,
members, shareholders or other equity owners, and none of their respective
employees, officers, directors, representatives or agents is a person or entity
with whom U.S. persons or entities are restricted from doing business under
regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including
those named on OFAC’s Specially Designated and Blocked Persons List) or under
any statute, executive order (including the September 24, 2001, Executive Order
Blocking Property and Prohibiting Transactions with Persons Who Commit,
Threaten to Commit, or Support Terrorism), or other governmental action and is
not and will not Transfer this Lease to, contract with or otherwise engage in
any dealings or transactions or be otherwise associated with such persons or
entities.

 

(y)       List of Exhibits. All exhibits and
attachments attached hereto are incorporated herein by this reference.

 

Exhibit A
– Outline of Premises

Exhibit B –
Legal Description

Exhibit C
– Rules and Regulations

Exhibit D
– Tenant Finish-Work

Exhibit E –
Form of Confirmation of Commencement Date Letter

Exhibit F
– Form of Tenant Estoppel Certificate

 

20

 

Exhibit G –
Operating Costs and Taxes

Exhibit H –
Insurance

 

27.       Environmental Requirements.

 

(a)       Prohibition against Hazardous Materials.
Except for Hazardous Materials contained in products used by Tenant in
reasonable, legally permissible quantities in connection with any Permitted
Use, Tenant shall not permit or cause any party to bring any Hazardous
Materials upon the Premises or transport, store, use, generate, manufacture,
dispose, or release any Hazardous Materials on or from the Premises without
Landlord’s prior written consent. Tenant, at its sole cost and expense, shall
operate its business in the Premises in strict compliance with all
Environmental Requirements and all requirements of this Lease. Tenant shall
complete and certify to disclosure statements as requested by Landlord from
time to time relating to Tenant’s transportation, storage, use, generation,
manufacture, or release of Hazardous Materials on the Premises, and Tenant
shall promptly deliver to Landlord a copy of any notice of violation relating to
the Premises of any Environmental Requirement.

 

(b)       Environmental Requirements. The term “Environmental Requirements” means
all Laws regulating or relating to health, safety, or environmental conditions
on, under, or about the Premises or the environment including the following:
the Comprehensive Environmental Response, Compensation and Liability Act; the
Resource Conservation and Recovery Act; the Clean Air Act; the Clean Water Act;
the Toxic Substances Control Act and all state and local counterparts thereto,
and any common or civil law obligations including nuisance or trespass, and any
other requirements of Section 14 and Exhibit C of this Lease. The term “Hazardous Materials” means and
includes any substance, material, waste, pollutant, or contaminant that is or
could be regulated under any Environmental Requirement or that may adversely
affect human health or the environment, including any solid or hazardous waste,
hazardous substance, asbestos, petroleum (including crude oil or any fraction
thereof, natural gas, synthetic gas, polychlorinated biphenyls (PCBs), and
radioactive material). For purposes of Environmental Requirements, to the
extent authorized by law, Tenant is and shall be deemed to be the responsible
party, including the “owner” and “operator” of Tenant’s “facility” and the
“owner” of all Hazardous Materials brought on the Premises by a Tenant Party
and the wastes, by-products, or residues generated, resulting, or produced
therefrom.

 

(c)       Removal of Hazardous Materials. Tenant,
at its sole cost and expense, shall remove all Hazardous Materials stored,
disposed of or otherwise released by a Tenant Party onto or from the Premises,
in a manner and to a level satisfactory to Landlord and to a level and in a
manner that complies with all Environmental Requirements and does not limit any
future uses of the Premises or require the recording of any deed restriction or
notice regarding the Premises. Tenant shall perform such work at any time
during the period of this Lease upon written request by Landlord or, in the
absence of a specific request by Landlord, before Tenant’s right to possession
of the Premises terminates or expires. If Tenant fails to perform such work
within the time period specified by Landlord or before Tenant’s right to
possession would terminate or expire but for the last sentence of this
subparagraph (whichever is earlier), Landlord may at its discretion, and
without waiving any other remedy available under this Lease or at law or equity
(including an action to compel Tenant to perform such work), perform such work
at Tenant’s cost. Tenant shall pay all costs incurred by Landlord in performing
such work, together with interest thereon at the Default Rate from the time of
Landlord’s payment, within ten days after Landlord’s request therefor. Such
work performed by Landlord is on behalf of Tenant and Tenant remains the owner,
generator, operator, transporter, and/or arranger of the Hazardous Materials
for purposes of Environmental Requirements. Tenant agrees not to enter into any
agreement with any person, including any governmental authority, regarding the
removal of Hazardous Materials that have been disposed of or otherwise released
onto or from the Premises without the written approval of the Landlord.

 

(d)       Tenant’s Indemnity. Tenant shall
indemnify, defend, and hold Landlord harmless from and against any and all
losses (including diminution in value of the Premises and loss of rental income
from the Premises), claims, demands, actions, suits, damages (including
punitive damages), expenses (including remediation, removal, repair, corrective
action, or cleanup expenses), and costs (including actual attorneys’ fees,
consultant fees or expert fees and including removal or management of any
asbestos brought onto the Premises or disturbed in breach of the requirements
of this Section 27, regardless of whether such removal or management is
required by Law) which are brought or recoverable against, or suffered or
incurred by Landlord as a result of any release of

 

21

 

Hazardous Materials or
any breach of the requirements under this Section 27 by a Tenant Party
regardless of whether Tenant had knowledge of such noncompliance. Landlord
shall indemnify, defend, and hold Tenant harmless from and against any and all
losses, claims, demands, actions, suits, damages, expenses, and costs which are
brought or recoverable against, or suffered or incurred by Tenant as a result
of any release of Hazardous Materials by Landlord at the Premises. The obligations
of Landlord and Tenant under this Section 27 shall survive any expiration or
termination of this Lease.

 

(e)       Inspections and Tests. Landlord shall
have access to, and a right to perform inspections and tests of, the Premises
to determine Tenant’s compliance with Environmental Requirements, its
obligations under this Section 27, or the environmental condition of the
Premises. Access to the Premises shall be granted to Landlord upon Landlord’s
prior notice to Tenant and at such times so as to minimize, so far as may be
reasonable under the circumstances, any disturbance to Tenant’s operations.
Such inspections and tests shall be conducted at Landlord’s expense, unless
such inspections or tests reveal that Tenant has not complied with any
Environmental Requirement, in which case Tenant shall reimburse Landlord for
the reasonable cost of such inspection and tests. Landlord’s receipt of or
satisfaction with any environmental assessment in no way waives any rights that
Landlord holds against Tenant. Tenant shall promptly notify Landlord of any
communication or report that Tenant makes to any governmental authority
regarding any possible violation of Environmental Requirements or release or
threat of release of any Hazardous Materials onto or from the Premises. Each
party shall, within five days of receipt thereof, provide the other party with
a copy of any documents or correspondence received from any governmental agency
or other party relating to a possible violation of Environmental Requirements
or claim or liability associated with the release or threat of release of any
Hazardous Materials onto or from the Premises.

 

(f)        Tenant’s Financial Assurance in the Event of a Breach.
In addition to all other rights and remedies available to Landlord under this
Lease or otherwise, Landlord may, in the event of a breach of the requirements
of this Section 27 that is not cured within 30 days following notice of such
breach by Landlord, require Tenant to provide financial assurance (such as
insurance, escrow of funds or third party guarantee) in an amount and form
satisfactory to Landlord. The requirements of this Section 27 are in addition
to and not in lieu of any other provision in this Lease.

 

28.       Parking. Tenant shall have the
exclusive right to use such parking spaces as are located at the Premises.
Parking spaces will be available to Tenant without charge during the Term.
Landlord shall not be responsible for enforcing Tenant’s parking rights against
third parties.

 

22

 

LANDLORD AND TENANT
EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR
TENANT’S INTENDED COMMERCIAL PURPOSE, AND TENANT’S OBLIGATION TO PAY RENT
HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES OR THE
PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT
ABATEMENT, DEMAND, SETOFF OR DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD
OF ITS DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED.

 

This Lease is
executed on the respective dates set forth below, but for reference purposes,
this Lease shall be dated as of the date first above written. If the execution
date is left blank, this Lease shall be deemed executed as of the date first
written above.

 

 

	
  LANDLORD:

  	
   

  	
  TRINET ESSENTIAL
  FACILITIES X, INC.,
  a Maryland corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Erick Stiger

  
	
   

  	
   

  	
  Name:

  	
  Erick Stiger

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
  Execution Date:

  	
  11/16/04

  
							

 

	
  TENANT:

  	
   

  	
  ARYX THERAPEUTICS,
  INC., a California corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ Peter G. Milner

  
	
   

  	
   

  	
  Name:

  	
  PETER G. MILNER

  
	
   

  	
   

  	
  Title:

  	
  PRESIDENT AND CEO

  
	
   

  	
   

  	
  Execution Date:

  	
  11/11/2004

  
							

 

	
   

  	
   

  	
  By:

  	
   /s/ David Nagler

  
	
   

  	
   

  	
  Name:

  	
  DAVID NAGLER

  
	
   

  	
   

  	
  Title:

  	
  VICE PRESIDENT
  CORPORATE AFFAIRS

  
	
   

  	
   

  	
  Execution Date:

  	
  11/11/2004

  
							

 

23

 

EXHIBIT A

 

OUTLINE OF PREMISES

 

 

See
Attached Site Plan and Floor Plan

 

A-1

 

SITE PLAN

 

 

 

FLOOR PLAN – FIRST FLOOR

 

 

FLOOR PLAN – SECOND FLOOR

 

 

 

EXHIBIT B 

 

LEGAL DESCRIPTION

 

THE REAL PROPERTY HEREIN
REFERRED TO IS SITUATED IN THE COUNTY OF ALAMEDA, CITY OF FREMONT, STATE OF
CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

 

Parcel 2 of Parcel Map
6773 Filed December 16, 1994 in Book 216 of Maps, Pages 19 and 20, Alameda
County Records.

 

A.P.N. 543-439-142

 

B-1

 

EXHIBIT C 

 

RULES AND REGULATIONS

 

The following
rules and regulations shall apply to the Premises, the parking areas associated
therewith, and the appurtenances thereto:

 

1.         Sidewalks, doorways,
vestibules, halls, stairways, loading dock areas and associated overhead doors,
and other similar areas shall not be obstructed by tenants or used by any
tenant for purposes other than ingress and egress to and from their respective
leased premises and for going from one to another part of the Building.

 

2.         Plumbing (including
outside drains and sump pumps), fixtures and appliances shall be used only for
the purposes for which designed, and no sweepings, rubbish, rags or other
unsuitable material shall be thrown or deposited therein. Damage resulting to
any such fixtures or appliances from misuse by a tenant or its agents, employees
or invitees, shall be paid by such tenant.

 

3.         No signs, advertisements
or notices shall be painted or affixed on or to any windows or doors or other
part of the Building visible from the exterior of the Premises without the
prior written consent of Landlord. Except as consented to in writing by
Landlord or in accordance with Tenant’s building standard improvements, no
draperies, curtains, blinds, shades, screens or other devices shall be hung at
or used in connection with any window or exterior door or doors of the
Premises. No awning shall be permitted on any part of the Premises. Tenant
shall not place anything against or near glass partitions or doors, or windows
which might appear unsightly from outside the Premises.

 

4.         Tenant, at its expense,
shall be responsible for providing all door locks in the Premises and shall
provide to Landlord, at Tenant’s expense, contemporaneously with the
installation of such devices, a master key, card keys, access codes or other
means to allow Landlord immediate access to all areas within the Premises.

 

5.         Landlord may prescribe
weight limitations and determine the locations for safes and other heavy
equipment or items, which shall in all cases be placed in the Building so as to
distribute weight in a manner acceptable to Landlord which may include the use
of such supporting devices as Landlord may require. All damages to the Building
caused by the installation or removal of any property of a tenant, or done by a
tenant’s property while in the Building, shall be repaired at the expense of
such tenant.

 

6.         Corridor doors, when not
in use, shall be kept closed. Nothing shall be swept or thrown into the
corridors, halls, elevator shafts or stairways. No portion of any tenant’s
leased premises shall at any time be used or occupied as sleeping or lodging
quarters.

 

7.         Tenant shall not make or
permit any vibration or improper, objectionable or unpleasant noises or odors
in the Building or otherwise interfere in any way with other tenants or persons
having business with them. Tenant shall not introduce, disturb or release
asbestos or PCB’s into or from the Premises.

 

8.         Intentionally deleted.

 

9.         Landlord will not be
responsible for lost or stolen personal property, money or jewelry from
tenant’s leased premises or public or common areas regardless of whether such
loss occurs when the area is locked against entry or not.

 

10.       Intentionally deleted.

 

11.       All vehicles are to be
currently licensed, in good operating condition, parked for business purposes
having to do with Tenant’s business operated in the Premises, parked within
designated parking spaces, one vehicle to each space. No vehicle shall be
parked as a “billboard” vehicle in the parking lot. Any vehicle parked
improperly may be towed away. Tenant, Tenant’s agents, employees, vendors and
customers who do not operate or park their vehicles as required shall subject
the vehicle to being towed at the expense of the owner or driver. Landlord may

 

C-1

 

place a “boot” on the
vehicle to immobilize it and may levy a charge of $50.00 to remove the “boot.”
Tenant shall indemnify, hold and save harmless Landlord of any liability
arising from the towing or booting of any vehicles belonging to a Tenant Party.

 

12.       Intentionally deleted.

 

13.       Tenant shall not permit
storage outside the Premises, including 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.

 

14.       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.

 

15.       Tenant shall not park or
operate any semi-trucks or semi-trailers in the parking areas associated with
the Building.

 

16.       Tenant will not permit any
Tenant Party to bring onto the Premises any handgun, firearm or other weapons
of any kind, illegal drugs or, unless expressly permitted by Landlord in
writing, alcoholic beverages.

 

17.       Tenant shall not permit its
employees, invitees or guests to smoke in the Premises or the lobbies,
passages, corridors, elevators, vending rooms, rest rooms, stairways or any
other area shared in common with other tenants in the Building or permit its
employees, invitees, or guests to loiter at the Building entrances for the
purposes of smoking. Landlord may, but shall not be required to, designate an
area for smoking outside the Building.

 

C-2

 

EXHIBIT D

 

TENANT FINISH-WORK:
ALLOWANCE

(Tenant Performs the Work)

 

1.         Acceptance of Premises. Except as set
forth in this Exhibit and the Lease, Tenant accepts the Premises in their “AS-IS” condition on the date that
Tenant first enters or occupies the Premises pursuant to the Lease.

 

2.         Space Plans.

 

(a)       Preparation and Delivery. On or before
the tenth (10th) business day following the Effective Date (the “Space Plans Delivery Deadline”),
Tenant shall deliver to Landlord a space plan prepared by Dowler-Gruman
Architects or another design consultant reasonably acceptable to Landlord (the “Architect”) depicting improvements
to be installed in the Premises (the “Space
Plans”).

 

(b)       Approval Process.
Landlord shall notify Tenant whether it approves of the submitted Space Plans
within five business days after Tenant’s submission thereof. If Landlord
disapproves of such Space Plans, then Landlord shall notify Tenant thereof
specifying in reasonable detail the reasons for such disapproval, in which case
Tenant shall, within three business days after such notice, revise such Space
Plans in accordance with Landlord’s objections and submit to Landlord for its
review and approval. Landlord shall notify Tenant in writing whether it
approves of the resubmitted Space Plans within three business days after its
receipt thereof. This process shall be repeated until the Space Plans have been
finally approved by Landlord and Tenant. If Landlord fails to notify Tenant
that it disapproves of the initial Space Plans within five business days (or,
in the case of resubmitted Space Plans, within three business days) after the
submission thereof, then Landlord shall be deemed to have approved the Space
Plans in question.

 

3.         Working Drawings.

 

(a)       Preparation and Delivery. On or before
the tenth (10th)  business day
following the date on which the Space Plans are approved (or deemed approved)
by Landlord and Tenant (the “Working
Drawings Delivery Deadline”), Tenant shall provide to Landlord
for its approval final working drawings, prepared by the Architect, of all
improvements that Tenant proposes to install in the Premises; such working
drawings shall include the partition layout, ceiling plan, electrical outlets
and switches, telephone outlets, drawings for any modifications to the
mechanical and plumbing systems of the Building, and detailed plans and
specifications for the construction of the improvements called for under this
Exhibit in accordance with all applicable Laws.

 

(b)       Approval Process. Landlord shall notify
Tenant whether it approves of the submitted working drawings within ten
business days after Tenant’s submission thereof. If Landlord disapproves of
such working drawings, then Landlord shall notify Tenant thereof specifying in
reasonable detail the reasons for such disapproval, in which case Tenant shall,
within five business days after such notice, revise such working drawings in
accordance with Landlord’s objections and submit the revised working drawings
to Landlord for its review and approval. Landlord shall notify Tenant in writing
whether it approves of the resubmitted working drawings within five business
days after its receipt thereof. This process shall be repeated until the
working drawings have been finally approved by Tenant and Landlord. If Landlord
fails to notify Tenant that it disapproves of the initial working drawings
within ten business days (or, in the case of resubmitted working drawings,
within five business days) after the submission thereof, then Landlord shall be
deemed to have approved the working drawings in question.

 

(c)       Landlord’s Approval; Performance of Work.
Landlord’s approval of such working drawings shall not be unreasonably
withheld, conditioned or delayed provided that (1) they comply with all Laws,
(2) the improvements depicted thereon do not adversely affect the Building’s
Structure or the Building’s Systems (including the Building’s restrooms or
mechanical rooms), the exterior appearance of the Building, or the appearance
of the Building’s common areas or elevator lobby areas, (3) such working drawings
are sufficiently detailed to allow construction of the improvements in a good
and workmanlike manner, and (4) the improvements depicted thereon conform to
the reasonable rules and regulations promulgated from time to time by Landlord
for the

 

D-1

 

construction of tenant
improvements (a copy of which has been delivered to Tenant). As used herein, “Working Drawings” means the final
working drawings approved by Landlord, as amended from time to time by any approved
changes thereto, and “Work”
means all improvements to be constructed in accordance with and as indicated on
the Working Drawings, together with any work required by governmental
authorities to be made to other areas of the Building as a result of the
improvements indicated by the Working Drawings. Landlord’s approval of the
Working Drawings shall not be a representation or warranty of Landlord that
such drawings are adequate for any use or comply with any Law, but shall merely
be the consent of Landlord thereto. Tenant shall, at Landlord’s request, sign
the Working Drawings to evidence its review and approval thereof. After the
Working Drawings have been approved, Tenant shall cause the Work to be
performed in accordance with the Working Drawings.

 

4.         Contractors; Performance of Work. The
Work shall be performed only by licensed contractors and subcontractors
approved in writing by Landlord, which approval shall not be unreasonably
withheld, conditioned or delayed. All contractors and subcontractors shall be
required to procure and maintain insurance against such risks, in such amounts,
and with such companies as Landlord may reasonably require. Certificates of
such insurance, with paid receipts therefor, must be received by Landlord
before the Work is commenced. The Work shall be performed in a good and
workmanlike manner free of defects, shall conform strictly with the Working
Drawings, and shall be performed in such a manner and at such times as and not
to unreasonably interfere with or delay Landlord’s other contractors, the
operation of the Building, and the occupancy thereof by other tenants. All
contractors and subcontractors shall contact Landlord and schedule time periods
during which they may use Building facilities in connection with the Work (e.g.,
elevators, excess electricity, etc.).

 

5.         Construction Contracts.

 

(a)       Tenant’s General Contractor. Tenant
shall enter into a construction contract with a general contractor selected by
Tenant and approved by Landlord in a form acceptable to Tenant’s representative
for the Work, which shall comply with the provisions of this Section 5 and
provide for, among other things, (1) a one-year warranty for all defective
Work; (2) a requirement that Tenant’s Contractor maintain general commercial
liability insurance of not less than a combined single limit of $5,000,000,
naming Landlord, Landlord’s property management company, Landlord’s asset
management company, Landlord’s Mortgagee, Tenant, and each of their respective
Affiliates as additional insureds; (3) a requirement that the contractor
perform the Work in substantial accordance with the Space Plans and the Working
Drawings and in a good and workmanlike manner; (4) a requirement that the
contractor is responsible for daily cleanup work and final clean up (including
removal of debris); and (5) those items described in Section 5(b)
(collectively, the “Approval Criteria”).
Landlord shall have three business days to notify Tenant whether it approves
the proposed construction agreements. If Landlord disapproves of the proposed
construction agreements, then it shall specify in reasonable detail the reasons
for such disapproval, in which case Tenant shall revise the proposed
construction agreements to correct the objections and resubmit then to Landlord
within two business days after Landlord notifies Tenant of its objections
thereto, following which Landlord shall have two business days to notify Tenant
whether it approves the revised construction agreements. If Landlord fails to
notify Tenant that it disapproves of the construction agreements within three
business days after the initial construction agreements or two business days
after the revised construction agreements (as the case may be) are delivered to
Landlord, then Landlord shall be deemed to have approved the construction
agreements.

 

(b)       All Construction Contracts. Unless
otherwise agreed in writing by Landlord and Tenant, each of Tenant’s
construction contracts shall: (1) provide a schedule and sequence of
construction activities and completion reasonably acceptable to Landlord, (2)
be in a contract form that satisfies the Approval Criteria, (3) require the
contractor and each subcontractor to name Landlord, Landlord’s property
management company, Landlord’s asset management company, and Tenant as additional
insured on such contractor’s insurance maintained in connection with the
construction of the Work, (4) be assignable following an Event of Default by
Tenant under this Lease to Landlord and Landlord’s Mortgagees, and (5) contain
at least a one-year warranty for all workmanship and materials.

 

6.         Change Orders. Tenant may initiate
changes in the Work. Each such change must receive the prior written approval
of Landlord, such approval not to be unreasonably withheld or delayed; however,
(a) if such

 

D-2

 

requested change would
adversely affect (1) the Building’s Structure or the Building’s Systems
(including the Building’s restrooms or mechanical rooms), (2) the exterior
appearance of the Building, or (3) the appearance of the Building’s common
areas or elevator lobby areas, or (b) if any such requested change might delay
the Rent Commencement Date, Landlord may withhold its consent in its reasonable
discretion. Tenant shall, upon completion of the Work, furnish Landlord with an
accurate architectural “as-built” plan of the Work as constructed, which plan
shall be incorporated into this Exhibit D by this reference for all
purposes. If Tenant requests any changes to the Work described in the Space
Plans or the Working Drawings, then such increased costs and any additional
design costs incurred in connection therewith as the result of any such change
shall be added to the Total Construction Costs.

 

7.         Definitions. As used herein “Substantial Completion,”  “Substantially Completed,” and any
derivations thereof mean the Work in the Premises is substantially completed
(as reasonably determined by Tenant’s Architect) in accordance with the Working
Drawings and a temporary certificate of occupancy (or its substantial equivalent)
has been issued therefor. Substantial Completion shall have occurred even
though minor details of construction, decoration, landscaping and mechanical
adjustments remain to be completed.

 

8.         Walk-Through; Punchlist. When Tenant
considers the Work in the Premises to be Substantially Completed, Tenant will
notify Landlord and within three business days thereafter, Landlord’s
representative and Tenant’s representative shall conduct a walk-through of the
Premises and identify any necessary touch-up work, repairs and minor completion
items that are necessary for final completion of the Work. Neither Landlord’s
representative nor Tenant’s representative shall unreasonably withhold his or
her agreement on punchlist items. Tenant shall use reasonable efforts to cause
the contractor performing the Work to complete all punchlist items within 30
days after agreement thereon.

 

9.         Excess Costs. The entire cost of
performing the Work (including design of and space planning for the Work and
preparation of the Working Drawings, costs of construction labor and materials,
electrical usage during construction, additional janitorial services, general
tenant signage, related taxes and insurance costs, licenses, permits,
certifications, surveys and other approvals required by Law, and the
construction supervision fee referenced in Section 11 of this Exhibit, all of
which costs are herein collectively called the “Total Construction Costs”) shall be paid by Tenant
(subject to the Construction Allowance described below). Upon approval of the
Working Drawings and selection of a contractor, Tenant shall promptly execute a
work order agreement which identifies such drawings and itemizes the Total
Construction Costs and sets forth the Construction Allowance.

 

10.       Construction Allowance. Landlord shall
provide to Tenant a construction allowance not to exceed sixty dollars ($60.00)
per rentable square foot in the Premises (the “Construction
Allowance”) to be applied toward the Total Construction Costs,
as adjusted for any changes to the Work. When the Work has been finally
completed and Tenant has paid the Total Construction Costs to the contractor
from its own funds Landlord shall pay to Tenant the Construction Allowance, or
so much thereof that has been paid by Tenant as the Total Construction Costs,
following the receipt by Landlord of the following items: (i) a request for
payment, (ii) final lien waivers from all persons performing work or supplying
or fabricating materials for the Work, fully executed, acknowledged and in
recordable form, (iii) the Architect’s certification that the Work has been
requested has been finally completed, including any punch-list items, on the
appropriate AIA form or another form approved by Landlord, (iv) the permanent
certificate of occupancy issued for the Premises, (v) delivery of the
architectural “as-built” plan for the Work as constructed (as set forth above)
to Landlord’s construction representative (set forth below), and (vi) an
estoppel certificate confirming such factual matters as Landlord or Landlord’s
Mortgagee may reasonably request, including evidence of all payments made to
Tenant’s contractor (collectively, a “Completed
Application for Payment”). Landlord shall pay the amount
requested, up to the amount of the Construction Allowance, in the Completed
Application for Payment to Tenant within 30 days following Tenant’s submission
of the Completed Application for Payment. If, however, the Completed
Application for Payment is incomplete or incorrect, Landlord’s payment of such
request shall be deferred until 30 days following Landlord’s receipt of the
complete and correct Completed Application for Payment. Notwithstanding
anything to the contrary contained in this Exhibit, Landlord shall not be
obligated to make any disbursement of the Construction Allowance during the
pendency of any of the following: (A) Landlord has received written notice of
any unpaid claims relating to any portion of the Work or materials in
connection therewith, other than claims which will be paid in full from such disbursement,
(B) there is an unbonded lien outstanding against the Premises or Tenant’s
interest therein by reason of work done,

 

D-3

or claimed to have been
done, or materials supplied or specifically fabricated, claimed to have been
supplied or specifically fabricated, to or for Tenant or the Premises, (C) the
conditions to the advance of the Construction Allowance are not satisfied, or
(D) an Event of Default by Tenant exists. The Construction Allowance must be
used (that is, the Work must be fully complete and the Construction Allowance
disbursed) within twelve (12) months following the Rent Commencement Date or
shall be deemed forfeited with no further obligation by Landlord with respect
thereto.

 

11.       Construction Management. Landlord or
its Affiliate or agent shall supervise the Work and coordinate the relationship
between the Work, the Building and the Building’s Systems. In consideration for
Landlord’s construction supervision services, Tenant shall pay to Landlord a
construction supervision fee equal to two and one-half percent (2.5%) of the
Total Construction Costs.

 

12.       Construction Representatives.
Landlord’s and Tenant’s representatives for coordination of construction and
approval of change orders will be as follows, provided that either party may
change its representative upon written notice to the other:

 

	
   

  	
  Landlord’s Representative:

  	
   

  	
  Chris Boschen

  
	
   

  	
   

  	
  c/o iStar Financial Inc.

  
	
   

  	
   

  	
  One Embarcadero Center

  
	
   

  	
   

  	
  Suite 3300

  
	
   

  	
   

  	
  San Francisco, California 94111

  
	
   

  	
   

  	
  Telephone:   415-263-8688

  
	
   

  	
   

  	
  Telecopy:     415-391-6259

  
	
   

  	
   

  	
   

  
	
   

  	
  Tenant’s Representative:

  	
   

  	
  David Nagler

  
	
   

  	
   

  	
  c/o Aryx Therapeutics, Inc.

  
	
   

  	
   

  	
  2255 Martin Avenue

  
	
   

  	
   

  	
  Santa Clara, CA 95050

  
	
   

  	
   

  	
  Telephone:   408-869-2761 ext. 211

  
	
   

  	
   

  	
  Telecopy:     408-869-2773

  

 

13.       Miscellaneous. To the extent not
inconsistent with this Exhibit, Sections 8(a) and 22 of this Lease shall govern
the performance of the Work and Landlord’s and Tenant’s respective rights and
obligations regarding the improvements installed pursuant thereto.

 

D-4

 

EXHIBIT
E

 

CONFIRMATION
OF RENT COMMENCEMENT DATE

 

             ,
200  

 

 

 

 

 

Re:                 Lease Agreement
(the “Lease”) dated                          ,
2004, between TriNet Essential Facilities X, Inc., a Maryland corporation (“Landlord”), and Aryx Therapeutics,
Inc., a California corporation (“Tenant”).
Capitalized terms used herein but not defined shall be given the meanings
assigned co them in the Lease.

 

Ladies and Gentlemen:

 

Landlord and
Tenant agree as follows:

 

1.         Condition of Premises. Tenant has
accepted the Premises in their as-is condition, subject to the terms of the
Lease, as of              ,
200  , which is the date Tenant first entered or occupied the
Premises pursuant to the Lease. Any improvements required by the terms of the
Lease to be made by Landlord have been completed to the full and complete
satisfaction of Tenant in all respects, and Landlord has fulfilled all of its
duties under the Lease with respect to such initial tenant improvements.
Furthermore, Tenant acknowledges that the Premises are suitable for the
Permitted Use.

 

2.         Rent Commencement Date. The Rent
Commencement Date of the Lease is                           ,
200  .

 

3.         Expiration Date. The Term is scheduled
to expire on the last day of the    th full calendar month
of the Term, which date is                           ,
200  .

 

4.         Contact Person. Tenant’s contact person
in the Premises is:

 

 

 

	
   

  	
  Attention:

  	
   

  	
   

  	
   

  
	
   

  	
  Telephone:

  	
  -

  	
  -

  	
   

  
	
   

  	
  Telecopy:

  	
  -

  	
  -

  	
   

  

 

5.         Ratification. Tenant hereby ratifies
and confirms its obligations under the Lease, and represents and warrants to
Landlord that it has no defenses thereto. Additionally, Tenant further confirms
and ratifies that, as of the date hereof, (a) the Lease is and remains in good
standing and in full force and effect, and (b) Tenant has no claims,
counterclaims, set-offs or defenses against Landlord arising out of the Lease
or in any way relating thereto or arising out of any other transaction between
Landlord and Tenant.

 

6.         Binding Effect; Governing Law. Except
as modified hereby, the Lease shall remain in full effect and this letter shall
be binding upon Landlord and Tenant and their respective successors and
assigns. If any inconsistency exists or arises between the terms of this letter
and the terms of the Lease, the terms of this letter shall prevail. This letter
shall be governed by the laws of the state in which the Premises are located.

 

E-1

 

Please indicate
your agreement to the above matters by signing this letter in the space
indicated below and returning an executed original to us.

 

	
   

  	
   

  	
   

  	
  Sincerely,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  TRINET ESSENTIAL
  FACILITIES X, INC., a

  
	
   

  	
   

  	
   

  	
  Maryland corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  
								

 

	
  Agreed and accepted:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARYX THERAPEUTICS,
  INC., a California

  	
   

  	
   

  
	
  corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
							

 

E-2

 

EXHIBIT F

 

FORM OF TENANT ESTOPPEL
CERTIFICATE

 

The undersigned is
the Tenant under the Lease (defined below) between TriNet Essential Facilities
X, Inc., a Maryland corporation, as Landlord, and the undersigned as Tenant,
for the Premises located at 6300 Dumbarton Circle, Fremont, California, 94555
and hereby certifies as follows:

 

1.         The Lease consists of the
original Lease Agreement dated as of                          ,
200   between Tenant and Landlord [‘s predecessor-in-interest] and the following amendments or
modifications thereto (if none, please state “none”): 

 

 

 

The documents listed
above are herein collectively referred to as the “Lease” and represent the entire agreement between the
parties with respect to the Premises. All capitalized terms used herein but not
defined shall be given the meaning assigned to them in the Lease.

 

2.         The Lease is in full
force and effect and has not been modified, supplemented or amended in any way
except as provided in Section 1 above.

 

3.         The Term commenced on                          ,
200   and the Term expires, excluding any renewal options, on                           ,
200   , and Tenant has no option to purchase all or any part of
the Premises or, except as expressly set forth in the Lease, any option to
terminate or cancel the Lease.

 

4.         Tenant currently occupies
the Premises described in the Lease and Tenant has not transferred, assigned,
or sublet any portion of the Premises nor entered into any license or
concession agreements with respect thereto except as follows (if none, please
state “none”): 

 

 

 

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

 

6.         All conditions of the
Lease to be performed by Landlord necessary to the enforceability of the Lease
have been satisfied and Landlord is not in default thereunder. In addition,
Tenant has not delivered any notice to Landlord regarding a default by Landlord
thereunder.

 

7.         As of the date hereof,
there are no existing defenses or offsets, or, to the undersigned’s knowledge,
claims or any basis for a claim, that the undersigned has against Landlord and
no event has occurred and no condition exists, which, with the giving of notice
or the passage of time, or both, will constitute a default under the Lease.

 

8.         No rental has been paid
more than 30 days in advance and no security deposit has been delivered to
Landlord except as provided in the Lease.

 

9.         If Tenant is a
corporation, partnership or other business entity, Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in the state in which the Premises are located and that Tenant has
full right and authority to execute and deliver this Estoppel Certificate and
that each person signing on behalf of Tenant is authorized to do so.

 

F-1

 

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

 

11.       Other than in compliance
with all applicable laws and incidental to the ordinary course of the use of
the Premises, the undersigned has not used or stored any hazardous substances
in the Premises.

 

12.       All tenant improvement work
to be performed by Landlord under the Lease has been completed in accordance
with the Lease and has been accepted by the undersigned and all reimbursements
and allowances due to the undersigned under the Lease in connection with any
tenant improvement work have been paid in full.

 

Tenant acknowledges that
this Estoppel Certificate may be delivered to Landlord, Landlord’s Mortgagee or
to a prospective mortgagee or prospective purchaser, and their respective
successors and assigns, and acknowledges that Landlord, Landlord’s Mortgagee
and/or such prospective mortgagee or prospective purchaser will be relying upon
the statements contained herein in disbursing loan advances or making a new
loan or acquiring the property of which the Premises are a part and that
receipt by it of this certificate is a condition of disbursing loan advances or
making such loan or acquiring such property.

 

Executed as of                          ,
200    .

 

	
  TENANT:

  	
   

  	
   

  
	
   

  	
   

  	
  a

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
							

 

F-2

 

EXHIBIT G

 

OPERATING COSTS

 

1.        Tenant shall pay to Landlord Tenant’s Proportionate
Share of the annual Operating Costs (defined below). Landlord may make a good
faith estimate of Tenant’s Proportionate Share of Operating Costs to be due by
Tenant for any calendar year or part thereof during the Term. During each
calendar year or partial calendar year of the Term, Tenant shall pay to
Landlord, in advance concurrently with each monthly installment of Basic Rent,
an amount equal to the estimated Tenant’s Proportionate Share of Operating
Costs for such calendar year or part thereof divided by the number of months
therein. From time to time, Landlord may estimate and re-estimate the amount of
Tenant’s Proportionate Share of Operating Costs to be due by Tenant and deliver
a copy of the estimate or re-estimate to Tenant. Thereafter, the monthly
installments of Tenant’s Proportionate Share of Operating Costs payable by
Tenant shall be appropriately adjusted in accordance with the estimations so
that, by the end of the calendar year in question, Tenant shall have paid all
of Tenant’s Proportionate Share of Operating Costs as estimated by Landlord.
Any amounts paid based on such an estimate shall be subject to adjustment as
herein provided when actual Operating Costs are available for each calendar
year.

 

2.        The
term “Operating Costs”
means all expenses and disbursements (subject to the limitations set forth
below), including any capital expenditures, that Landlord incurs in connection
with the ownership, operation, and maintenance of the Premises, determined in
accordance with GAAP (or other sound accounting principles customarily used by
prudent, commercial landlords) consistently applied, including the following
costs: (a) wages and salaries of all on-site employees engaged in the
operation, maintenance or security of the Premises (together with Landlord’s
reasonable allocation of expenses of off-site employees who perform a portion
of their services in connection with the operation, maintenance or security of
the Premises), including taxes, insurance and benefits relating thereto; (b)
all supplies and materials used in the operation, maintenance, repair,
replacement, and security of the Premises; (c) any utilities (including fuel,
gas, electricity, water, sewer, and other services) incurred by Landlord in
connection with the operation, maintenance or security of the Premises (e.g.,
mechanical, electrical and telecommunications rooms) as reasonably determined
by Landlord; (d) repairs, replacements, and general maintenance of the Premises
performed by Landlord, including those items described in Sections 7(b) and (c)
and any other paving and parking areas and roads, alleys and driveways, trash
collection, sweeping, mowing, landscaping and exterior painting, the cost of
maintaining utility lines, fire sprinklers and fire protection systems,
exterior lighting, and mechanical and plumbing systems serving the Premises;
(e) fair market rental and other costs with respect to the management office
for the Premises; (f) any service, maintenance and management contracts with
independent contractors for the operation, maintenance, management, repair,
replacement, and security of the Premises (including alarm service, window
cleaning, and elevator maintenance); (g) professional services rendered for the
general benefit of the Premises; (h) environmental insurance or environmental
management fees; (i) any insurance deductibles for insurance maintained by
Landlord; and (j) a property management fee equal to three percent (3%) of
Basic Rent.

 

Operating Costs
shall not include costs for (1) Landlord’s obligations to maintain the
Building’s Structure as and to the extent set forth in Section 7(a) of the
Lease; (2) depreciation; (3) fees, costs, principal and interest related to any
mortgage(s) or deed(s) of trust, all payments made under any ground or
underlying lease and all other non-operating debts of Landlord; (4) costs for
which Landlord is otherwise reimbursed; (5) costs associated with leasing space
in the Premises (including, without limitation, brokerage commissions,
marketing costs, attorneys’ fees, lease concessions, rental abatements and
construction allowances granted to specific tenants); (6) costs incurred in
connection with the sale, financing or refinancing of the Premises; (7) Taxes;
(8) Insurance Costs; (9) fines, interest and penalties incurred due to the late
payment of Taxes or Operating Costs (unless caused by Tenant); (10)
organizational expenses associated with the creation, maintenance and operation
of the entity which constitutes Landlord; (11) any penalties or damages that
Landlord pays to Tenant or to other tenants under their respective leases; (12)
costs associated with damage or repairs to the Premises, project or the common
areas necessitated by Landlord’s failure to perform its obligations under the
Lease; (13) reserves for Landlord’s repair, replacement or improvement of the
Premises or any portion thereof; (14) salaries or benefits of personnel over
the level of property manager; (15) fees, accountant fees and other expenses
incurred in disputes with other tenants or occupants or associated with the
enforcement of any other leases or defense of Landlord’s title to or interest
in the Premises or any part thereof except to the extent arising from the acts
or omissions of Tenant; (16) any costs, fines, or penalties incurred due to
violations by Landlord or any tenant (other than Tenant) of any governmental
rule or authority, the

 

G-1

 

Lease or any other lease;
(17) costs incurred in renovating or otherwise improving, decorating, painting,
expanding or altering leased space for tenants other than Tenant; (18) costs
arising from Landlord’s charitable or political contributions; or (19) costs
for the purchase of any sculpture, paintings or other objects of art.

 

3.         Tenant shall also pay
Tenant’s Proportionate Share of the Taxes for each year and partial year
falling within the Term. Tenant shall pay Tenant’s Proportionate Share of Taxes
in the same manner as provided above for Tenant’s Proportionate Share of
Operating Costs. “Taxes”
means taxes, assessments, and governmental charges or fees whether federal,
state, county or municipal, and whether they be by taxing districts or
authorities presently taxing or by others, subsequently created or otherwise,
and any other taxes and assessments (including non-governmental assessments for
common charges under a restrictive covenant or other private agreement that are
not treated as part of Operating Costs) now or hereafter attributable to the
Premises (or its operation), excluding, however, penalties and interest thereon
and federal and state taxes on income (if the present method of taxation
changes so that in lieu of or in addition to the whole or any part of any Taxes,
there is levied on Landlord a capital tax directly on the rents received
therefrom or a franchise tax, assessment, or charge based, in whole or in part,
upon such rents for the Premises, then all such taxes, assessments, or charges,
or the part thereof so based, shall be deemed to be included within the term
“Taxes” for purposes hereof). Taxes shall include the costs of consultants
retained in an effort to lower taxes and all costs incurred in disputing any
taxes or in seeking to lower the tax valuation of the Premises. For property
tax purposes, Tenant waives all rights to protest or appeal the appraised value
of the Premises and all rights to receive notices of reappraisement.

 

4.         Capital Expenditures.
In the event that Tenant, as part of its maintenance, repair and replacement
obligations set forth in Section 8 of the Lease, is required to perform work,
the cost of which is generally considered a capital expenditure and: (i) the
useful life of which extends beyond the Term and (ii) whose cost either (A)
exceeds $50,000.00 per item (a “Major
Capital Expenditure”) or (B) together with any costs that are
generally considered capital expenditures, that have been previously incurred
by Tenant as part of its maintenance, repair and replacement obligations set forth
in Section 8 of the Lease, and that are not Major Capital Expenditures exceeds
$200,000.00 in the aggregate (an “Excess
Capital Expenditure”), then (and only then) the cost of such
Major Capital Expenditure or Excess Capital Expenditure shall be initially
borne by Landlord, but shared by Landlord and Tenant in proportions equal to
the relationship between the length of the Term and the length of the useful
life of the Major Capital Expenditure or Excess Capital Expenditure, as
applicable. As an example of a Major Capital Expenditure, if there are two (2)
years remaining in the Term and Tenant replaces an HVAC unit with a cost of
$60,000.00 and a useful life of ten (10) years, Landlord will bear the initial
cost of such work, but such cost will be amortized (using the Amortization
Interest Rate, as defined below) over ten (10) years and Tenant will be
responsible for the annual amortized portion of such cost during the remainder
of the Term, such that Tenant shall be responsible for twenty percent (20%) of
the cost of such HVAC unit, and Landlord will bear the remainder of the cost.
As an example of an Excess Capital Expenditure, if there are two (2) years
remaining in the Term, Tenant has previously incurred a total of $190,000.00 in
costs that are generally considered capital expenditures and that are not Major
Capital Expenditures and Tenant repairs an HVAC unit at a cost of $30,000.00
(and such cost is generally considered to be a capital expenditure) and a
useful life of ten (10) years, Tenant shall be solely responsible for the first
$10,000.00 of such cost (such that Tenant shall have incurred a total of
$200,000.00), and Landlord will bear the initial cost of the remaining
$20,000.00, but such $20,000.00 will be amortized (using the Amortization Interest
Rate, as defined below) over ten (l0) years and Tenant will be responsible for
the annual amortized portion of such cost during the remainder of the Term,
such that Tenant shall be responsible for twenty percent (20%) of such
$20,000.00, and Landlord will bear the remaining portion of such $20,000.00. At
Landlord’s option, though, Tenant shall pay its portion of the cost (a) in one
lump sum within ten (10) days following completion of the work in question and
receipt of Landlord’s demand therefor accompanied by reasonably detailed
supportive documentation therefor, or (b) on an amortized basis over the
remaining months of the Term using the Amortization Interest Rate, along with
Basic Rent. Tenant will notify Landlord in advance if Tenant in good faith
determines that any such Major Capital Expenditure or Excess Capital
Expenditure is necessary, specifying in reasonable detail the nature of the
work required and the estimated cost of performing such work, and the parties
will thereafter meet and confer with each other in good faith in order to
evaluate the need for the work in question. If it is determined that such work
is necessary, then Landlord shall determine in Landlord’s sole discretion which
party shall perform such work; provided, however, that Landlord shall perform
any such work required during the last two (2) years of the initial Term or the
Extension Period, as applicable. The party performing the Major Capital
Expenditure or Excess Capital Expenditure work shall do so promptly and with due
diligence. For purposes of this Paragraph 4, the term “Amortization Interest Rate” shall
mean the Prime Rate of interest published by the Wall Street Journal as of the

 

G-2

 

date of the expenditure
plus three percent (3%) (and if such rate ceases to be published, then such
comparable rate [plus 3%] as selected by Landlord in the exercise of its good
faith commercially reasonable judgment). Notwithstanding anything to the
contrary in this Paragraph 4, in no event shall either of the following be
considered a Major Capital Expenditure or an Excess Capital Expenditure: (y)
the maintenance, repair or replacement of any improvement, alteration or other
item constructed or installed in the Premises for Tenant’s particular use of
the Premises (including as part of the Work) or (z) any work required to be
performed by Tenant to comply with Laws pursuant to Section 10(b) of the Lease.
Without limiting the generality of the immediately foregoing sentence, if the
performance of any Major Capital Expenditure or Excess Capital Expenditure work
(regardless of which party performs such work) requires that any costs be
incurred and/or that any specialized consultants be hired, which costs would
not be incurred or which consultants would not be hired were it not for the
existence of any improvement, alteration or other item constructed or installed
in the Premises for Tenant’s particular use of the Premises (including as part
of the Work), then Tenant shall be solely responsible for hiring such
consultants and for paying such costs (and such costs shall not be considered
in determining any Major Capital Expenditure or Excess Capital Expenditure).

 

5.         By April 1 of each
calendar year, or as soon thereafter as practicable, Landlord shall furnish to
Tenant a statement of Operating Costs and Taxes for the previous year (the “Operating Costs and Tax Statement”).
If Tenant’s estimated payments of Operating Costs or Taxes under Paragraph 1
above for the year covered by the Operating Costs and Tax Statement exceed
Tenant’s Proportionate Share of such items as indicated in the Operating Costs
and Tax Statement, then Landlord shall promptly credit or reimburse Tenant for
such excess; likewise, if Tenant’s estimated payments of Operating Costs or
Taxes under Paragraph 1 above for such year are less than Tenant’s
Proportionate Share of such items as indicated in the Operating Costs and Tax
Statement, then Tenant shall promptly pay Landlord such deficiency.

 

6.         In the event Tenant
objects in writing to any Operating Costs and Tax Statement within sixty (60)
days after receipt of such Operating Costs and Tax Statement, then Tenant shall
have the right, during the twelve (12) month period following delivery of such
Operating Costs and Tax Statement, at Tenant’s sole cost, to review in
Landlord’s offices Landlord’s records relevant to such statement or billing.
Such review shall be carried out only by a nationally reputable accounting firm
that is not being compensated on a contingency or other incentive basis, and
shall be subject to Landlord’s reasonable audit procedures. If, as of the date
sixty (60) days after Tenant’s receipt of such Operating Costs and Tax
Statement, Tenant shall not have objected thereto in writing, or if, during the
twelve (12) month period following delivery of such Operating Costs and Tax
Statement, Tenant shall not have carried out a review of Landlord’s records,
then such Operating Costs and Tax Statement shall be final and binding upon
Landlord and Tenant, and Tenant shall have no further right to object to such
Operating Costs and Tax Statement. If Tenant timely delivers a written
objection to an Operating Costs and Tax Statement and, within such twelve (12)
month period, Tenant conducts an audit and delivers to Landlord a written
statement specifying objections to such Operating Costs and Tax Statement, then
Tenant and Landlord shall meet to attempt to resolve such objection within ten
(10) days after delivery of the objection statement. If such objection is not
resolved within such ten (10) day period, then either party shall have the
right, at any time within sixty (60) days after the expiration of such ten (10)
day period, to require that the dispute be submitted to binding arbitration
under the rules of the American Arbitration Association. If neither Landlord
nor Tenant commences an arbitration proceeding within such sixty (60) day
period, then the Operating Costs and Tax Statement in question shall be final
and binding on Landlord and Tenant. Notwithstanding that any such dispute
remains unresolved, Tenant shall be obligated to pay Landlord all Basic Rent
and Additional Rent as and when due (including any disputed amount). The audit
and arbitration procedures set forth in this Paragraph 6 shall be Tenant’s
exclusive remedy with respect to the calculation of the amount of Tenant’s
obligations under this Exhibit G. If the result of the audit and
arbitration procedures set forth in this Paragraph 6 is that Tenant made
overpayments in excess of five percent (5%) of Tenant’s Proportionate Share of
Operating Costs and Taxes for the period in question, Landlord shall pay for
the reasonable cost of the audit within 30 days following receipt of Tenant’s
invoice therefor.

 

G-3

 

EXHIBIT H

 

INSURANCE

 

1.           Tenant’s Insurance. Effective as of the
earlier of (a) the date Tenant enters or occupies the Premises, or (b) the Rent
Commencement Date, and continuing throughout the Term, Tenant shall maintain
the following insurance policies: (1) commercial general liability insurance in
amounts of $5,000,000 per occurrence or, following the expiration of the
initial Term, such other amounts as Landlord may from time to time reasonably
require (and, if the use and occupancy of the Premises include any activity or
matter that is or may be excluded from coverage under a commercial general
liability policy, Tenant shall obtain such endorsements to the commercial
general liability policy or otherwise obtain insurance to insure all liability
arising from such activity or matter in such amounts as Landlord may reasonably
require), insuring Tenant, Landlord, Landlord’s property management company and
Landlord’s asset management company against all liability for injury to or
death of a person or persons or damage to property arising from the use and
occupancy of the Premises, (2) insurance covering the full value of all
alterations and improvements and betterments in the Premises, naming Landlord
and Landlord’s Mortgagee as additional loss payees as their interests may
appear, (3) insurance covering the full value of all furniture, trade fixtures
and personal property (including property of Tenant or others) in the Premises
or otherwise placed in the Premises by or on behalf of a Tenant Party, (4)
contractual liability insurance sufficient to cover Tenant’s indemnity
obligations hereunder (but only if such contractual liability insurance is not
already included in Tenant’s commercial general liability insurance policy),
(5) worker’s compensation insurance, and (6) business interruption insurance.
Tenant’s insurance shall provide primary coverage to Landlord when any policy
issued to Landlord provides duplicate or similar coverage, and in such
circumstance Landlord’s policy will be excess over Tenant’s policy. Tenant
shall furnish to Landlord certificates of such insurance and such other
evidence satisfactory to Landlord of the maintenance of all insurance coverages
required hereunder at least ten days prior to the earlier of the Rent
Commencement Date or the date Tenant enters or occupies the Premises, and at
least 15 days prior to each renewal of said insurance, and Tenant shall obtain
a written obligation on the part of each insurance company to notify Landlord
at least 30 days before cancellation or a material change of any such insurance
policies. All such insurance policies shall be in form reasonably satisfactory
to Landlord and issued by companies licensed to do business in the state in
which the Premises is located and having an A.M. Best rating of at least A:X
(or the equivalent of such rating) or otherwise approved in writing by
Landlord. If Tenant fails to comply with the foregoing insurance requirements
or to deliver to Landlord the certificates or evidence of coverage required
herein, Landlord, in addition to any other remedy available pursuant to this
Lease or otherwise, may, but shall not be obligated to, obtain such insurance
and Tenant shall pay to Landlord on demand the premium costs thereof, plus an
administrative fee of 15% of such cost.

 

2.         Landlord’s Insurance. Throughout the
Term of this Lease, Landlord shall maintain, as a minimum, the following
insurance policies, so long as they are available at commercially reasonable
rates: (a) insurance on the Premises (including all improvements thereto and all
fixtures, equipment and personal property at the Premises) under an “All Risks
of Physical Loss” policy, which shall include, without limitation, coverage for
loss or damage by water, flood, earthquake, terrorism, subsidence and
sprinklers, in an amount equal to 100% of the full replacement cost; (b)
property insurance for the Premises replacement value, less a
commercially-reasonable deductible if Landlord so chooses; (c) loss of rental
income for not less than 12 months; and (d) commercial general liability
insurance in an amount of not less than $3,000,000. Landlord may, but is not
obligated to, maintain such other insurance and additional coverages as it may
deem necessary. The cost of all insurance carried by Landlord with respect to
the Premises shall be included in Insurance Costs. The foregoing insurance
policies and any other insurance carried by Landlord shall be for the sole
benefit of Landlord and under Landlord’s sole control, and Tenant shall have no
right or claim to any proceeds thereof or any other rights thereunder.

 

3.         Cost of Landlord’s Insurance. Tenant
shall pay Tenant’s Proportionate Share of the cost of the property, including
any commercially reasonable deductibles, and liability insurance carried by
Landlord from time to time with respect to the Premises (including other
improvements and Landlord’s personal property used in connection therewith),
which may include fire and extended coverage insurance (including extended and
broad form coverage risks, mudslide, land subsidence, volcanic eruption, flood,
earthquake, terrorism and rent loss insurance) and comprehensive general public
liability insurance and excess liability insurance, in such amounts and
containing such terms as Landlord deems necessary or desirable (collectively, “Insurance Costs”). During each
month of the

 

H-1

 

Term, Tenant shall make a
monthly payment to Landlord equal to 1/12th of Tenant’s Proportionate Share of
Insurance Costs that will be due and payable for that particular year. Each
payment of Insurance Costs shall be due and payable at the same time as, and in
the same manner as, provided above for Basic Rent. The initial monthly payment
of Insurance Costs is based upon Landlord’s good faith estimate of Tenant’s
Proportionate Share of the estimated Insurance Costs for the remainder of the
first calendar year. The monthly payment of Insurance Costs is subject to
increase or decrease as determined by Landlord to reflect accurately Tenant’s
Proportionate Share of estimated Insurance Costs. If, following Landlord’s
receipt of the bill for the insurance premiums for a calendar year, Landlord
determines that Tenant’s total payments of Insurance Costs are less than
Tenant’s Proportionate Share of actual Insurance Costs, Tenant shall pay to
Landlord the difference upon demand; if Tenant’s total payments of Insurance
Costs are more than Tenant’s Proportionate Share of actual Insurance Costs,
Landlord shall retain such excess and credit it to Tenant’s future payments of
Insurance Costs (unless such adjustment is at the end of the Term, in which
event Landlord shall refund such excess to Tenant).

 

H-2

 

EXHIBIT I 

 

RENEWAL OPTIONS

 

1.         So long as Aryx
Therapeutics, Inc. (or any Permitted Transferee to which this entire Lease has
been assigned in accordance with the requirements of Section 11 of the Lease)
is the Tenant hereunder and occupies the entirety of the Premises, and subject
to the condition set forth in clause (b) below, Tenant shall have one (1)
option to extend the term of this Lease with respect to the entirety of the
Premises for a period of five (5) years from the expiration of the ninety-sixty
(96th) month of the Term (the “Extension
Period”), subject to the following conditions:

 

(a)       The option to extend shall
be exercised, if at all, by notice of exercise given to Landlord by Tenant not
more than three hundred sixty (360) days nor less than one hundred eighty (180)
days prior to the expiration of the ninety-sixth (96th) month of the
Term;

 

(b)       Anything herein to the
contrary notwithstanding, if Tenant is in default under any of the terms,
covenants or conditions of this Lease (and, with respect to any non-monetary
default only, any applicable notice and cure period has expired), either at the
time Tenant exercises the extension option or on the commencement date of the
Extension Period, Landlord shall have, in addition to all of Landlord’s other
rights and remedies provided in this Lease, the right to terminate option to
extend upon notice to Tenant.

 

2.         In the event the option
is exercised in a timely fashion, the Lease shall be extended for the term of
the Extension Period upon all of the terms and conditions of this Lease,
provided that the Basic Rent for the Extension Period shall be the “Fair Market
Rent” for the Premises. For purposes hereof, “Fair
Market Rent” shall mean the base rent for the Premises, based
upon the rental rate per square foot that an unaffiliated landlord and tenant
would agree to for a lease on the terms of this Lease for the Extension Period
for comparable premises in the vicinity of the Premises, determined pursuant to
the process described below. In determining Fair Market Rent, appropriate
consideration shall be given to such factors as commissions, rental concessions
and tenant improvement allowances, if any, which would be payable by Landlord
in similar transactions, but which would be offset by the costs to Tenant of
relocating its business operations from the Premises to other property or
properties (including moving costs, additional construction costs, employee
relocation costs, negotiation costs, administrative expenses and costs of
business down-time). In no event, however, shall any adjustment of Basic Rent
pursuant to this paragraph result in a decrease of the Basic Rent for the
Premises below the amount due from Tenant for the preceding portion of the
initial Term for which Basic Rent had been fixed.

 

3.         Within 30 days after
receipt of Tenant’s notice of exercise, Landlord shall notify Tenant in writing
of Landlord’s estimate of the Basic Rent for the Extension Period, based on the
provisions of Paragraph 2 above. Within 15 days after receipt of such notice
from Landlord, Tenant shall have the right either to (i) accept Landlord’s statement
of Basic Rent as the Basic Rent for the Extension Period; (ii) elect to
arbitrate Landlord’s estimate of Fair Market Rent, such arbitration to be
conducted pursuant to the provisions hereof; or (iii) withdraw its notice of
exercise by giving written notice of such withdrawal to Landlord. Failure on
the part of Tenant to either withdraw its notice of exercise or require
arbitration of Fair Market Rent within such 15-day period shall constitute
acceptance of the Basic Rent for the Extension Period as calculated by
Landlord. If Tenant elects arbitration, the arbitration shall be concluded
within 90 days after the date of Tenant’s election, subject to extension for an
additional 30-day period if a third arbitrator is required and does not act in
a timely manner. To the extent that arbitration has not been completed prior to
the expiration of any preceding period for which Basic Rent has been
determined, Tenant shall pay Basic Rent at the rate in effect on the expiration
date of the initial Term, with the potential for an adjustment to be made once
Fair Market Rent is ultimately determined by arbitration.

 

4.         In the event of
arbitration, the judgment or the award rendered in any such arbitration may be
entered in any court having jurisdiction and shall be final and binding between
the parties. The arbitration shall be conducted and determined in the City and
County of San Francisco in accordance with the then prevailing rules of the
American Arbitration Association or its successor for arbitration of commercial
disputes except to the extent that the procedures mandated by such rules shall
be modified as follows:

 

I-1

 

(a)       Tenant shall make demand
for arbitration in writing within 30 days after service of Landlord’s
determination of Fair Market Rent given under Paragraph 3 above, specifying
therein the name and address of the person to act as the arbitrator on its
behalf. The arbitrator shall be qualified as a real estate appraiser familiar
with the Fair Market Rent of similar industrial, research and development, or
office space in the vicinity of the Premises who would qualify as an expert
witness over objection to give opinion testimony addressed to the issue in a
court of competent jurisdiction. Failure on the part of Tenant to make a proper
demand in a timely manner for such arbitration shall constitute a waiver of the
right thereto. Within 15 days after the service of the demand for arbitration,
Landlord shall give notice to Tenant, specifying the name and address of the
person designated by Landlord to act as arbitrator on its behalf who shall be
similarly qualified. If Landlord fails to notify Tenant of the appointment of
its arbitrator, within or by the time above specified, then the arbitrator
appointed by Tenant shall be the arbitrator to determine the issue.

 

(b)       In the event that two
arbitrators are chosen pursuant to Paragraph 4(a) above, the arbitrators so
chosen shall, within 15 days after the second arbitrator is appointed determine
the Fair Market Rent. If the two arbitrators shall be unable to agree upon a
determination of Fair Market Rent within such 15-day period, they, themselves,
shall appoint a third arbitrator, who shall be a competent and impartial person
with qualifications similar to those required of the first two arbitrators
pursuant to 4(a). In the event they are unable to agree upon such appointment
within seven days after expiration of such 15-day period, the third arbitrator
shall be selected by the parties themselves, if they can agree thereon, within
a further period of 15 days. If the parties do not so agree, then either party,
on behalf of both, may request appointment of such a qualified person by the
then Chief Judge of the United States District Court having jurisdiction over the
county in which the Premises is located, acting in his private and not in his
official capacity, and the other party shall not raise any question as to such
Judge’s full power and jurisdiction to entertain the application for and make
the appointment. The three arbitrators shall decide the dispute if it has not
previously been resolved by following the procedure set forth below.

 

(c)       Where an issue cannot be
resolved by agreement between the two arbitrators selected by Landlord and
Tenant or settlement between the parties during the course of arbitration, the
issue shall be resolved by the three arbitrators within 15 days of the
appointment of the third arbitrator in accordance with the following procedure.
The arbitrator selected by each of the parties shall state in writing his
determination of the Fair Market Rent supported by the reasons therefor with
counterpart copies to each party. The arbitrators shall arrange for a
simultaneous exchange of such proposed resolutions. The role of the third
arbitrator shall be to select which of the two proposed resolutions most
closely approximates his determination of Fair Market Rent. The third
arbitrator shall have no right to propose a middle ground or any modification
of either of the two proposed resolutions. The resolution he chooses as most
closely approximating his determination shall constitute the decision of the
arbitrators and be final and binding upon the parties.

 

(d)       In the event of a failure,
refusal or inability of any arbitrator to act, his successor shall be appointed
by him, but in the case of the third arbitrator, his successor shall be
appointed in the same manner as provided for appointment of the third
arbitrator. The arbitrators shall decide the issue within 15 days after the
appointment of the third arbitrator. Any decision in which the arbitrator
appointed by Landlord and the arbitrator appointed by Tenant concur shall be
binding and conclusive upon the parties. Each party shall pay the fee and
expenses of its respective arbitrator and both shall share equally the fee and
expenses of the third arbitrator, if any, and the attorneys’ fees and expenses
of counsel for the respective parties and of witnesses shall be paid by the
respective party engaging such counsel or calling such witnesses.

 

(e)       The arbitrators shall have
the right to consult experts and competent authorities to obtain factual
information or evidence pertaining to a determination of Fair Market Rent, but
any such consultation shall be made in the presence of both parties with full
right on their part to cross-examine. The arbitrators shall render their
decision and award in writing with counterpart copies to each party. The
arbitrators shall have no power to modify the provisions of this Lease.

 

I-2

 

BMR-6300 DUMBARTON CIRCLE LLC

17140
Bernardo Center Drive, Suite 222

San Diego, California 92128

 

Aryx Therapeutics, Inc.

6300 Dumbarton Circle

Fremont, California 94555

Attn: David Nagler

 

June 17,
2005

 

Dear Mr. Nagler:

 

This letter is in
response to your request that Aryx Therapeutics, Inc. (“Tenant”), assume
responsibility for maintaining the area surrounding our property at 6300
Dumbarton Circle in Fremont, California.

 

We agree that it
would be in the best interest of Tenant and BMR-6300 Dumbarton Circle LLC (“Landlord”)
to grant your request. Therefore, we propose replacing in its entirety Section
7(b) of that certain Lease Agreement dated as of November 16, 2004 (the “Lease”),
by and between Trinet Essential Facilities X, Inc. (as predecessor-in-interest
to Landlord), and Tenant with the following:

 

Tenant shall maintain the
areas of the Premises outside the Building, including general property
management duties, to a commercially reasonable standard for buildings of a
type comparable to the Premises owned by reasonable and prudent commercial
landlords, and the costs thereof shall be part of Operating Costs.

 

Other than as
stated above, the Lease shall remain in full force and effect, unmodified
except according to the terms of this letter agreement. Please acknowledge your
consent and agreement to the above by executing in the space provided below,
and returning a fax and original signature to me at the address above. This
letter may be executed in one or more counterparts, each of which, when taken
together, shall constitute one original.

 

Please do not
hesitate to call me if you have any questions.

 

	
   

  	
   

  	
   

  	
  Sincerely yours,

  
	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
   

  	
  

  /s/ Gary A. Kreitzer

  	
   

  
	
   

  	
   

  	
   

  	
  Gary A. Kreitzer

  
	
   

  	
   

  	
   

  	
  Executive Vice
  President

  

 

 

Acknowledged and agreed:

 

	
  ARYX THERAPEUTICS, INC.

  	
   

  	
   

  	
   

  
	
  By: 

  	
  

  /s/ David Nagler

  	
   

  	
   

  	
   

  	
   

  
	
  Name: 

  	
  DAVID NAGLER

  	
   

  	
   

  	
   

  	
   

  
	
  Its: 

  	
  VICE PRESIDENT
  CORPORATE AFFAIRS

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