Document:

Exhibit 10.12

 

KILROY CENTRE DEL MAR

 

OFFICE LEASE

 

This Office Lease (the “Lease”),
dated as of the date set forth in Section 1 of the Summary of Basic
Lease Information (the “Summary”),
below, is made by and between KILROY REALTY, L.P., a Delaware limited
partnership (“Landlord”), and
CARDIUM THERAPEUTICS, INC., a Delaware corporation (“Tenant”).

 

SUMMARY OF BASIC LEASE INFORMATION

 

	
   

  	
   

  	
  TERMS OF LEASE

  	
   

  	
  DESCRIPTION

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Date:

  	
   

  	
   

  	
  September 30, 2005.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Premises:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.1

  	
   

  	
  Building:

  	
   

  	
  That certain five
  (5)-story building (the “Building”)
  located at 3611 Valley Centre Drive, San Diego, California 92130, which
  Building contains 129,680 rentable square feet of space, and which Building
  is commonly referred to as “Building 2” within the “Project.”

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.2

  	
   

  	
  Premises:

  	
   

  	
  5,727 rentable square feet
  of space located on the fifth (5th) floor of the Building and commonly known
  as Suite 525, as further set forth in Exhibit A to the Office Lease.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.3

  	
   

  	
  Project:

  	
   

  	
  The Building is part of a
  five (5) office-building project known as “Kilroy Centre Del Mar,” as further set forth in Article 1
  of this Lease.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Lease Term

  	
   

  	
   

  
	
   

  	
   

  	
  (Article 2):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.1

  	
   

  	
  Length of Term:

  	
   

  	
  Two (2) years and no
  (0) months.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.2

  	
   

  	
  Lease Commencement Date:

  	
   

  	
  November 1, 2005.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.3

  	
   

  	
  Lease Expiration Date:

  	
   

  	
  October 31, 2007.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.4

  	
   

  	
  Option Term(s)

  	
   

  	
  Two (2) options to
  renew, the first (1st) for a term of one (1) year, and the
  second (2nd) for a term of two (2) years, all as more particularly
  set forth in Section 2.2 of this Lease.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Base Rent (Article 3):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Monthly

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Monthly

  	
   

  	
  Rental Rate

  	
   

  
	
   

  	
   

  	
  Annual

  	
   

  	
  Installment

  	
   

  	
  per Rentable

  	
   

  
	
  Lease Year

  	
   

  	
  Base Rent*

  	
   

  	
  of Base Rent*

  	
   

  	
  Square Foot*

  	
   

  
	
  1

  	
   

  	
  $

  	
  257,715.00

  	
   

  	
  $

  	
  21,476.25

  	
   

  	
  $

  	
  3.750

  	
   

  
	
  2

  	
   

  	
  $

  	
  268,023.00

  	
   

  	
  $

  	
  22,335.25

  	
   

  	
  $

  	
  3.900

  	
   

  
	
  First Option
  Term

  (Lease Year 3)

  	
   

  	
  $

  	
  278,745.00

  	
   

  	
  $

  	
  23,228.75

  	
   

  	
  $

  	
  4.056

  	
   

  

 

*                 The
initial Annual Base Rent (and Monthly Installment of Base Rent) was calculated
by multiplying the initial Monthly Rental Rate per Rentable Square Foot by the
number of rentable square feet of space in the Premises.  In all subsequent Lease Years, the
calculation of Annual Base Rent (and Monthly Installment of Base Rent) reflects
an annual increase of four percent (4.0%). 
Notwithstanding the calculations identified above, (i) in each
instance the resulting Monthly Installment of Base Rent was rounded up or down,
as applicable, to the nearest twenty-five cents ($0.25), (ii) the Annual
Base Rent is, therefore, an amount equal to exactly twelve (12) times such
rounded Monthly Installment of Base Rent amount, and (iii) the Monthly
Rental Rate per Rentable Square Foot is, for all years following the first (1st) Lease Year, only an approximation for reference purposes only.

 

	
  5.

  	
   

  	
  Base Year

  	
   

  	
  Calendar year 2006

  
	
   

  	
   

  	
  (Article 4):

  	
   

  	
   

  

 

i

 

	
  6.

  	
   

  	
  Tenant’s Share

  	
   

  	
  4.4163%.

  
	
   

  	
   

  	
  (Article 4):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Permitted Use

  (Article 5):

  	
   

  	
  To the extent the same
  complies with applicable laws and zoning and are otherwise consistent with
  the character of the Project as a first-class office building Project, Tenant
  shall use the Premises solely for general office use and uses incidental
  thereto.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Security Deposit

  	
   

  	
  $21,476.25.

  
	
   

  	
   

  	
  (Article 21):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  Parking Passes Ratio

  (Article 28):

  	
   

  	
  Four (4) unreserved
  parking passes for every 1,000 usable square feet of the Premises.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Address of Tenant

  	
   

  	
  Address of Landlord (Section 29.12):

  
	
   

  	
   

  	
  (Section 29.11):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cardium Therapeutics, Inc.

  11622 El Camino Real, Suite 300

  San Diego, CA 92130

  Attention: President

  (Prior to Lease Commencement Date)

  	
   

  	
  Kilroy Realty, L.P.

  c/o Kilroy Realty Corporation

  12200 West Olympic Boulevard, Suite 200

  Los Angeles, California 90064

  Attention: Legal Department

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  	
   

  	
   

  	
   

  	
  with
  copies to:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cardium Therapeutics, Inc.

  3611 Valley Centre Dr., Suite 525

  San Diego, CA 92130

  Attention: President

  (After Lease Commencement Date)

  	
   

  	
  Kilroy Realty Corporation

  3611 Valley Centre Drive, Suite 550

  San Diego, California 92130

  Attention: Mr. Brian Galligan

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  And

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Allen Matkins Leck Gamble &
  Mallory LLP

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1901 Avenue of the Stars, Suite 1800

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Los Angeles, California
  90067

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Attention: Anton N. Natsis, Esq.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Broker(s)

  (Section 29.10):

  	
   

  	
  The Irving Hughes Group
  (representing Tenant);

  CB Richard Ellis (representing Landlord)

  

 

ii

 

ARTICLE I

 

PREMISES,
BUILDING, PROJECT AND COMMON AREAS

 

1.1                                 The Premises. 
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
the premises set forth in Section 2.2 of the Summary (the “Premises”). The outline of the Premises is
set forth in Exhibit A
attached hereto and Landlord and Tenant hereby stipulate that, for purposes of
this Lease, the “rentable square feet” of the Premises shall be deemed as set
forth in Section 2.2 of the Summary.  The parties hereto agree that the lease of
the Premises is upon and subject to the terms, covenants and conditions (the “TCCs”) herein set forth, and Tenant
covenants as a material part of the consideration for this Lease to keep and
perform each and all of such TCCs by it to be kept and performed and that this
Lease is made upon the condition of such performance.  The parties hereto hereby acknowledge that
the purpose of Exhibit A
is to show the approximate location of the Premises in the “Building,” as that term is defined in Section 1.1.2,
below, only, and such exhibit is not meant to constitute an agreement,
representation or warranty as to the construction of the Premises, the precise
area thereof or the specific location of the “Common
Areas,” as that term is defined in Section 1.1.3, below,
or the elements thereof or of the accessways to the Premises or the “Project,” as that term is defined in Section 1.1.2,
below.  Except as specifically set forth
in this Lease, Landlord shall not be obligated to provide or pay for any
improvement work or services related to the improvement of the Premises.  Tenant also acknowledges that neither
Landlord nor any agent of Landlord has made any representation or warranty
regarding the condition of the Premises, the Building or the Project or with
respect to the suitability of any of the foregoing for the conduct of Tenant’s
business, except as specifically set forth in this Lease.  The taking of possession of the Premises by
Tenant shall conclusively establish that the Premises and the Building were at
such time in good and sanitary order, condition and repair.

 

1.2                                 The Building and the Project.  The Premises are a part of the building set
forth in Section 2.1 of the Summary (the “Building”). 
The Building is part of an office project known as “Kilroy Centre Del Mar.” The term “Project,” as used in this Lease, shall mean
(i) the Building and the Common Areas, (ii) the land (which is
improved with landscaping, parking facilities and other improvements) upon
which the Building and the Common Areas are located, and (iii) the other
office buildings located adjacent to the Building and the land upon which such
adjacent office buildings are located.

 

1.3                                 Common Areas. 
Tenant shall have the non-exclusive right to use in common with other
tenants in the Project, and subject to the rules and regulations referred
to in Article 5 of this Lease, those portions of the Project which
are provided, from time to time, for use in common by Landlord, Tenant and any
other tenants of the Project (such areas, together with such other portions of
the Project designated by Landlord, in its discretion, including certain areas
designated for the exclusive use of certain tenants, or to be shared by
Landlord and certain tenants, are collectively referred to herein as the “Common Areas”). The manner in which the
Common Areas are maintained and operated shall be at the sole discretion of
Landlord and the use thereof shall be subject to such rules, regulations and
restrictions as Landlord may make from time to time, provided that such rules,
regulations and restrictions do not unreasonably interfere with the rights
granted to Tenant under this Lease and the permitted use granted under Section 5.1,
below.  Landlord reserves the right to
close temporarily, make alterations or additions to, or change the location of
elements of the Project and the Common Areas; provided that no such changes
shall be permitted which materially reduce Tenant’s rights or access hereunder.
Except when and where Tenant’s right of access is specifically excluded in this
Lease, Tenant shall have the right of access to the Premises, the Building, and
the Project parking facility twenty-four (24) hours per day, seven (7) days
per week during the “Lease Term,” as that term is defined in Article 2,
below.

 

ARTICLE 2 

 

LEASE TERM; OPTION TERM(S) 

 

2.1                                 Initial Lease Term. The TCCs and provisions of this Lease
shall be effective as of the date of this Lease. The term of this Lease (the “Lease Term”) shall be as set forth in Section 3.1
of the Summary, shall commence on the date set forth in Section 3.2
of the Summary (the “Lease Commencement Date”),
and shall terminate on the date set forth in Section 3.3 of the
Summary (the “Lease Expiration Date”)
unless this Lease is sooner terminated as hereinafter provided.  For purposes of this Lease, the term “Lease Year” shall mean each consecutive
twelve (12) month period during the Lease Term.

 

2.2                                 Option Terms.

 

2.2.1                        Option Right. 
Landlord hereby grants the Tenant originally named herein (the “Original Tenant”) and its “Permitted
Transferee,” as that term is set forth in Section 14.7 of this
Lease, two (2) options to extend the Lease Term for the entire Premises,
the first of which shall extend the Term for a period of one (1) year, and
the second (2nd) of which shall further extend the
Term for two (2) years (each, an “Option
Term”); provided, however, such second such option to extend the
Lease shall be subject and subordinate to the right of first refusal with
regard to the Premises which has previously been granted to Peregrine Systems, Inc.,
a Delaware corporation (the “Superior Right
Holder”) pursuant to its existing lease for all of floors 1 though 4
of the Building and a portion of the remainder of floor 5 of the Building.  Such option shall be exercisable only by
Notice delivered by Tenant to Landlord (the “Exercise
Notice”) not less than six (6) months prior to the expiration
of the then-applicable Lease Term, stating that Tenant is exercising such
option, provided that, as of the date of delivery of such Exercise Notice, (i) Tenant
is not then in default under this Lease (beyond any applicable notice and cure
periods), (ii) Tenant has not been in default under this Lease (beyond any
applicable notice and cure periods) more than once during the preceding twelve
(12)-month period, and (iii) Tenant has not been in default under this
Lease (beyond any applicable notice and cure periods) more than twice during
the Lease Term.  Upon the proper exercise
of such option to extend (subject to the Superior Right Holder’s right of first
refusal), and provided that, as of the end of the then applicable Lease Term, (A) Tenant
is not in default under this Lease (beyond any applicable notice and cure
periods), (B) Tenant has not been in default under this Lease (beyond any
applicable notice and cure periods) more than once during the preceding twelve
(12)-month period, and (C) Tenant has not been in default under this Lease
(beyond any applicable notice and cure periods) more than twice during the
Lease Term, then the Lease Term, as it applies to the entire Premises, shall be
extended for the applicable period (i.e.,
by one (1) year with regard to the first such option to extend, and

 

1

 

by two (2) years with regard to the second such option to extend).
The rights contained in this Section 2.2 shall only be exercised by
the Original Tenant or its Permitted Transferee (and not any other assignee,
sublessee or other transferee of the Original Tenant’s interest in this Lease)
if Original Tenant and/or its Permitted Transferee is in occupancy of the
entire then-existing Premises.

 

2.2.2                        Option Rent. 
The Base Rent payable by Tenant during the first Option Term (the “1st Option Rent”) shall be
as set forth in Section 4 of the Summary.  The Base Rent payable by Tenant during the
second Option Term (the “2nd Option Rent”) shall be
the “Market Rent,” as the same shall be determined in accordance with Exhibit B attached hereto.  Throughout the Option Term(s), Tenant shall
remain obligated to pay Additional Rent pursuant to the TCCs of Article 4
of this Lease.

 

2.3                                 Beneficial Occupancy. Notwithstanding the Lease
Commencement Date, Landlord shall deliver possession of the Premises to Tenant,
and Tenant shall have the right to occupy the Premises, commencing on the
second (2nd) business day
following the later to occur of (i) the full execution and delivery of
this Lease between the parties, (ii) Tenant’s delivery to Landlord of the
Security Deposit required pursuant to Section 8 of the Summary and Article 21
of this Lease, (iii) Tenant’s delivery to Landlord of the evidence of
insurance required pursuant to Section 10.4 of this Lease, and (iv) Tenant’s
delivery of written notification to Landlord of the satisfaction of the “Condition
Precedent,” as that term is set forth in Section 2.4, below, or Tenant’s
waiver of the same; provided, however, in connection with such period of
beneficial occupancy, all of the terms and conditions of this Lease shall apply
(other than Tenant’s obligation to pay Base Rent), as though the Lease
Commencement Date had occurred (although the Lease Commencement Date shall not
actually occur until November 1, 2005).

 

2.4                                 Condition Precedent;
Early Termination.  Landlord and Tenant hereby
acknowledge and agree that, in accordance with the remaining TCCs of this Section 2.4,
Tenant’s securing funding, on or before October 25, 2005, raised through
National Securities Corporation, in an amount totaling no less than Twenty-Five
Million and No/100 Dollars ($25,000,000.00) is a condition precedent to this
Lease (the “Condition Precedent”).  In connection with the foregoing, Tenant represents
and warrants to Landlord that (x)
National Securities Corporation has, as of the date of this Lease, received
commitments for at least the first Twenty Million Dollars of such funding
requirement, (y) Tenant shall
proceed with commercially reasonable due diligence to do all things necessary
or advisable to satisfy such Condition Precedent (i.e., to timely secure the
remainder of such funding requirement) as soon as reasonably possible, and (z) Tenant shall immediately notify
Landlord in writing upon satisfaction of such Condition Precedent (i.e., upon
Tenant securing the remainder of such finding requirement).  In the event the Condition Precedent is not
satisfied on or before October 25, 2005, and Tenant has otherwise
satisfied the TCCs of this Section 2.4, Tenant shall thereafter
have the right to terminate this Lease immediately upon written notice (the “Termination Notice”) given to Landlord on
or before 5:00 P.M. (Pacific Time) on Wednesday, October 26, 2005;
provided, however, if such funding is nevertheless issued within thirty (30)
days of Landlord’s receipt of such Termination Notice, then such Termination
Notice shall be deemed rescinded and this Lease shall remain in full force and
effect.

 

ARTICLE 3 

 

BASE RENT 

 

Tenant shall pay, without prior notice or demand, to Landlord or
Landlord’s agent at the management office of the Project, or, at Landlord’s
option, at such other place as Landlord may from time to time designate in
writing, by a check for currency which, at the time of payment, is legal tender
for private or public debts in the United States of America, base rent (“Base Rent”) as set forth in Section 4
of the Summary, payable in equal monthly installments as set forth in Section 4
of the Summary in advance on or before the first day of each and every calendar
month during the Lease Term, without any setoff or deduction whatsoever.  The Base Rent for the first full month of the
Lease Term which occurs after the expiration of any free rent period shall be
paid at the time of Tenant’s execution of this Lease. If any payment of Rent is
for a period which is shorter than one month, the Rent for any such fractional
month shall accrue on a daily basis during such fractional month and shall
total an amount equal to the product of (i) a fraction, the numerator of
which is the number of days in such fractional month (i.e., the number of days for which Rent is
due) and the denominator of which is the actual number of days occurring in
such calendar month, and (ii) the then-applicable Monthly Installment of
Base Rent. All other payments or adjustments required to be made under the TCCs
of this Lease that require proration on a time basis shall be prorated on the
same basis.

 

ARTICLE 4 

 

ADDITIONAL RENT 

 

4.1                                 General Terms. In addition to paying the Base Rent
specified in Article 3 of this Lease, Tenant shall pay “Tenant’s Share” of the annual “Direct Expenses,” as those terms are
defined in Sections 4.2.6 and 4.2.2 of this Lease, respectively, which
are in excess of the amount of Direct Expenses applicable to the “Base Year,”
as that term is defined in Section 4.2.1, below; provided, however,
that in no event shall any decrease in Direct Expenses for any Expense Year
below Direct Expenses for the Base Year entitle Tenant to any decrease in Base
Rent or any credit against sums due under this Lease.  Such payments by Tenant, together with any
and all other amounts payable by Tenant to Landlord pursuant to the TCCs of
this Lease, are hereinafter collectively referred to as the “Additional Rent,” and the Base Rent and the
Additional Rent are herein collectively referred to as “Rent.” 
All amounts due under this Article 4 as Additional Rent
shall be payable for the same periods and in the same manner as the Base Rent;
provided, however, the parties hereby acknowledge that the first monthly
installment of Tenant’s Share of any “Estimated Excess,” as that term is set
forth in, and pursuant to the terms and conditions of, Section 4.4.2
of this Lease, shall first be due and payable for the calendar month occurring
immediately following the expiration of the Base Year.  Without limitation on other obligations of
Tenant which survive the expiration of the Lease Term, the obligations of
Tenant to pay the Additional Rent provided for in this Article 4
shall survive the expiration of the Lease Term.

 

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

 

2

 

4.2.1                   “Base Year” shall mean the period set forth
in Section 5 of the Summary.

 

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

 

4.2.3                   “Expense Year” shall mean each calendar year
in which any portion of the Lease Term falls, through and including the
calendar year in which the Lease Term expires, provided that Landlord, upon
notice to Tenant, may change the Expense Year from time to time to any other
twelve (12) consecutive month period, and, in the event of any such change,
Tenant’s Share of Direct Expenses shall be equitably adjusted for any Expense
Year involved in any such change.

 

4.2.4                        “Operating Expenses” shall mean all
expenses, costs and amounts of every kind and nature which Landlord pays or
accrues during any Expense Year because of or in connection with the ownership,
management, maintenance, security, repair, replacement, restoration or
operation of the Project, or any portion thereof, in accordance with sound real
estate management and accounting principles, consistently applied.  Without limiting the generality of the
foregoing, Operating Expenses shall specifically include any and all of the
following:  (i) the cost of
supplying all utilities, the cost of operating, repairing, maintaining, and
renovating the utility, telephone, mechanical, sanitary, storm drainage, and
elevator systems, and the cost of maintenance and service contracts in
connection therewith; (ii) the cost of licenses, certificates, permits and
inspections and the cost of contesting any governmental enactments which may
affect Operating Expenses, and the costs incurred in connection with a
governmentally mandated transportation system management program or similar
program; (iii) the cost of all insurance carried by Landlord in connection
with the Project; (iv) the cost of landscaping, relamping, and all
supplies, tools, equipment and materials used in the operation, repair and
maintenance of the Project, or any portion thereof; (v) costs incurred in
connection with the parking areas servicing the Project; (vi) fees and other
costs, including management fees, consulting fees, legal fees and accounting
fees, of all contractors and consultants in connection with the management,
operation, maintenance and repair of the Project; (vii) payments under any
equipment rental agreements and the fair rental value of any management office
space; (viii) wages, salaries and other compensation and benefits,
including taxes levied thereon, of all persons (other than persons generally
considered to be higher in rank than the position of Project manager) engaged
in the operation, maintenance and security of the Project; (ix) costs
under any instrument pertaining to the sharing of costs by the Project; (x)
operation, repair, maintenance and replacement of all systems and equipment and
components thereof of the Building; (xi) the cost of janitorial, alarm,
security and other services, replacement of wall and floor coverings, ceiling
tiles and fixtures in common areas, maintenance and replacement of curbs and
walkways, repair to roofs and re-roofing; (xii) amortization of the cost of
acquiring or the rental expense of personal property used in the maintenance,
operation and repair of the Project, or any portion thereof (which amortization
calculation shall include interest at the “Interest Rate,” as that term is set
forth in Article 25 of this Lease); (xiii) the cost of capital
improvements or other costs incurred in connection with the Project (A) which
are intended to effect economies in the operation or maintenance of the
Project, or any portion thereof, (B) that are required to comply with
present or anticipated conservation programs, (C) which are replacements
or modifications of nonstructural items located in the Common Areas required to
keep the Common Areas in good order or condition, or (D) that are required
under any governmental law or regulation by a federal, state or local
governmental agency, except for capital repairs, replacements or other
improvements to remedy a condition existing prior to the Lease Commencement
Date which an applicable governmental authority, if it had knowledge of such
condition prior to the Lease Commencement Date, would have then required to be
remedied pursuant to then-current governmental laws or regulations in their
form existing as of the Lease Commencement Date and pursuant to the
then-current interpretation of such governmental laws or regulations by the
applicable governmental authority as of the Lease Commencement Date; provided,
however, that any capital expenditure shall be amortized with interest at the
Interest Rate over the shorter of (X) seven (7) years, or (Y) its useful
life as Landlord shall reasonably determine in accordance with sound real
estate management and accounting principles; (xiv) costs, fees, charges or
assessments imposed by, or resulting from any mandate imposed on Landlord by,
any federal, state or local government for fire and police protection, trash
removal, community services, or other services which do not constitute “Tax
Expenses” as that term is defined in Section 4.2.5, below; and (xv)
payments under any easement, license, operating agreement, declaration,
restrictive covenant, or instrument pertaining to the sharing of costs by the
Building. Notwithstanding the foregoing, for purposes of this Lease, Operating
Expenses shall not, however, include:

 

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

 

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

 

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

 

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

 

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

 

(f)                                    the wages and benefits of any employee who does not devote
substantially all of his or her employed time to the Project unless such wages
and benefits are prorated to reflect time spent on operating and managing the
Project vis-à-vis time spent on matters unrelated to operating and managing the
Project; provided, that in no

 

3

 

event shall Operating Expenses for purposes of this Lease include wages
and/or benefits attributable to personnel above the level of Project manager;

 

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

 

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

 

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

 

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

 

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

 

(l)                                     costs, other than those incurred in ordinary maintenance and
repair, for sculpture, paintings, fountains or other objects of art;

 

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

 

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

 

(o)                                 costs to the extent arising from the negligence or willful
misconduct of Landlord or its agents, employees, vendors, contractors, or
providers of materials or services, 
which negligence or willful misconduct shall be deemed to include any
failure by Landlord to timely comply with any applicable federal, state or
local law or regulations; and

 

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

 

If Landlord is not furnishing any
particular work or service (the cost of which, if performed by Landlord, would
be included in Operating Expenses) to a tenant who has undertaken to perform
such work or service in lieu of the performance thereof by Landlord, Operating
Expenses shall be deemed to be increased by an amount equal to the additional
Operating Expenses which would reasonably have been incurred during such period
by Landlord if it had at its own expense furnished such work or service to such
tenant.  If the Project is not at least
ninety-five percent (95%) occupied during all or a portion of the Base Year or
any Expense Year, Landlord may elect to make an appropriate adjustment to the
components of Operating Expenses for such year to determine the amount of
Operating Expenses that would have been incurred had the Project been
ninety-five percent (95%) occupied; and the amount so determined shall be
deemed to have been the amount of Operating Expenses for such year.  Operating Expenses for the Base Year shall
not include market-wide cost increases due to extraordinary circumstances,
including, but not limited to, Force Majeure, boycotts, strikes, conservation
surcharges, embargoes or shortages, or amortized costs relating to capital
improvements.  In no event shall the
components of Direct Expenses for any Expense Year related to the cost of
utilities or Project services or insurance costs be less than the corresponding
components of Direct Expenses related to the cost of utilities and Project
services and insurance costs in the Base Year. 
Landlord shall not (i) make a profit by charging items to Operating
Expenses that are otherwise also charged separately to others and (ii) subject
to Landlord’s right to adjust the components of Operating Expenses described
above in this paragraph, collect Operating Expenses from Tenant and all other
tenants in the Building in an amount in excess of what Landlord incurs for the
items included in Operating Expenses. 

 

4.2.5                        Taxes.

 

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

 

4.2.5.2               Tax Expenses
shall include, without limitation: (i) Any tax on the rent, right to rent
or other income from the Project, or any portion thereof, or as against the
business of leasing the Project, or any portion thereof; (ii) Any
assessment, tax, fee, levy or charge in addition to, or in substitution,
partially or totally, of any assessment, tax, fee, levy or charge previously
included within the definition of real property tax, it being acknowledged by
Tenant and Landlord that Proposition 13 was adopted by the voters of the State
of California in the June 1978 election (“Proposition

 

4

 

13”)
and that assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such services as fire protection, street, sidewalk
and road maintenance, refuse removal and for other governmental services formerly
provided without charge to property owners or occupants, and, in further
recognition of the decrease in the level and quality of governmental services
and amenities as a result of Proposition 13, Tax Expenses shall also include
any governmental or private assessments or the Project’s contribution towards a
governmental or private cost-sharing agreement for the purpose of augmenting or
improving the quality of services and amenities normally provided by
governmental agencies; (iii) Any assessment, tax, fee, levy, or charge
allocable to or measured by the area of the Premises or the Rent payable
hereunder, including, without limitation, any business or gross income tax or
excise tax with respect to the receipt of such rent, or upon or with respect to
the possession, leasing, operating, management, maintenance, alteration,
repair, use or occupancy by Tenant of the Premises, or any portion thereof; and
(iv) Any assessment, tax, fee, levy or charge, upon this transaction or
any document to which Tenant is a party, creating or transferring an interest
or an estate in the Premises.

 

4.2.5.3               Any costs
and expenses (including, without limitation, reasonable attorneys’ fees)
incurred in attempting to protest, reduce or minimize Tax Expenses shall be
included in Tax Expenses in the Expense Year such expenses are paid.  Except as set forth in Section 4.2.5.4,
below, refunds of Tax Expenses shall be credited against Tax Expenses and
refunded to Tenant regardless of when received, based on the Expense Year to
which the refund is applicable, provided that in no event shall the amount to
be refunded to Tenant for any such Expense Year exceed the total amount paid by
Tenant as Additional Rent under this Article 4 for such Expense
Year.  If Tax Expenses for any period during
the Lease Term or any extension thereof are increased after payment thereof for
any reason, including, without limitation, error or reassessment by applicable
governmental or municipal authorities, Tenant shall pay Landlord upon demand
(but in no event more than thirty (30) days before due to such governmental or
municipal authorities) Tenant’s Share of any such increased Tax Expenses
included by Landlord as Building Tax Expenses pursuant to the TCCs of this
Lease. Notwithstanding anything to the contrary contained in this Section 4.2.8
(except as set forth in Section 4.2.8.1, above), there shall be
excluded from Tax Expenses (i) all excess profits taxes, franchise taxes,
gift taxes, capital stock taxes, inheritance and succession taxes, estate
taxes, federal and state income taxes, and other taxes to the extent applicable
to Landlord’s general or net income (as opposed to rents, receipts or income
attributable to operations at the Project), (ii) any items included as
Operating Expenses, and (iii) any items paid by Tenant under Section 4.5
of this Lease.

 

4.2.5.4               Notwithstanding
anything to the contrary set forth in this Lease, the amount of Tax Expenses
for the Base Year and any Expense Year shall be calculated without taking into
account any decreases in real estate taxes obtained in connection with
Proposition 8, and, therefore, the Tax Expenses in the Base Year and/or an
Expense Year may be greater than those actually incurred by Landlord, but
shall, nonetheless, be the Tax Expenses due under this Lease; provided that (i) any
costs and expenses incurred by Landlord in securing any Proposition 8 reduction
shall not be included in Direct Expenses for purposes of this Lease, and (ii) tax
refunds under Proposition 8 shall not be deducted from Tax Expenses, but rather
shall be the sole property of Landlord. 
Landlord and Tenant acknowledge that this Section 4.2.5.4 is
not intended to in any way affect (A) the inclusion in Tax Expenses of the
statutory two percent (2.0%) annual increase in Tax Expenses (as such statutory
increase may be modified by subsequent legislation), or (B) the inclusion
or exclusion of Tax Expenses pursuant to the terms of Proposition 13, which
shall be governed pursuant to the terms of Sections 4.2.5.1 through 4.2.5.3,
above.

 

4.2.6                        “Tenant’s Share” shall mean the percentage
set forth in Section 6 of the Summary, which percentage is not
subject to change during the Lease Term.

 

4.3                                 Allocation of Direct Expenses. The parties
acknowledge that the Building is a part of a multi-building project and that
certain costs and expenses are incurred on a Project-wide basis, as opposed to
be incurred solely with regard to the Building, and such Project-wide costs and
expenses are therefore shared between the tenants of the Building and the
tenants of the other buildings in the Project. Accordingly, as set forth in Section 4.2
above, to the extent Direct Expenses (which consists of Operating Expenses and
Tax Expenses as set forth in Sections 4.2.4 and 4.2.5, above) are
determined annually for the Project as a whole, a portion of such Direct
Expenses (which portion shall be determined by Landlord on a reasonable and
equitable basis), shall be allocated to the tenants of the Building (as opposed
to the tenants of any other buildings in the Project) and such portion shall be
included in the Direct Expenses for purposes of this Lease. As a result, it is
hereby acknowledged that Direct Expenses for purposes of this Lease shall
include (i) all Direct Expenses attributable solely to the Building, and (ii) such
equitable portion of the Direct Expenses attributable to the Project as a
whole.

 

4.4                                 Calculation and Payment of Additional Rent. If for any
Expense Year ending or commencing within the Lease Term, Tenant’s Share of
Direct Expenses for such Expense Year exceeds Tenant’s Share of Direct Expenses
applicable to the Base Year, then Tenant shall pay to Landlord, in the manner
set forth in Section 4.4.1, below, and as Additional Rent, an
amount equal to the excess (the “Excess”).

 

4.4.1                        Statement of Actual Building Direct Expenses and Payment by Tenant. Landlord
shall give to Tenant following the end of each Expense Year, a statement (the “Statement”) which shall state in general
major categories the Building Direct Expenses incurred or accrued for the Base
Year or such preceding Expense Year, as applicable, and which shall indicate
the amount of the Excess.  Landlord shall
use commercially reasonable efforts to deliver such Statement to Tenant on or
before May 1 following the end of the Expense Year to which such Statement
relates. Upon receipt of the Statement for each Expense Year commencing or
ending during the Lease Term, if an Excess is present, Tenant shall pay, within
thirty (30) days after receipt of the Statement, the full amount of the Excess
for such Expense Year, less the amounts, if any, paid during such Expense Year
as “Estimated Excess,” as that term is defined in Section 4.4.2,
below, and if Tenant paid more as Estimated Excess than the actual Excess,
Tenant shall receive a credit in the amount of Tenant’s overpayment against
Rent next due under this Lease.  The
failure of Landlord to timely furnish the Statement for any Expense Year shall
not prejudice Landlord or Tenant from enforcing its rights under this Article 4.
Even though the Lease Term has expired and Tenant has vacated the Premises,
when the final determination is made of Tenant’s Share of Building Direct
Expenses for the Expense Year in which this Lease terminates, if an Excess is
present, Tenant shall, within thirty (30) days after receipt of the Statement,
pay to Landlord such amount, and if Tenant paid more as Estimated Excess than
the actual Excess, Landlord shall, within thirty (30) days, deliver a check
payable to Tenant in the amount of the overpayment.  The provisions of this Section 4.4.1
shall survive the expiration or earlier termination of the Lease Term.  Notwithstanding the immediately preceding
sentence, Tenant shall not be responsible for Tenant’s Share of any Building
Direct Expenses attributable to any Expense Year which are first billed to
Tenant more than two (2) calendar years after the Lease Expiration Date,
provided that in any event Tenant shall be responsible for Tenant’s Share of
Direct

 

5

 

Expenses levied by any governmental authority or by any public utility
companies at any time following the Lease Expiration Date which are
attributable to any Expense Year.

 

4.4.2                        Statement of Estimated Building Direct Expenses. In
addition, Landlord shall give Tenant a yearly expense estimate statement (the “Estimate Statement”) which shall set forth
in general major categories Landlord’s reasonable estimate (the “Estimate”) of what the total amount of
Building Direct Expenses for the then-current Expense Year shall be and the
estimated excess (the “Estimated Excess”)
as calculated by comparing the Building Direct Expenses for such Expense Year,
which shall be based upon the Estimate, to the amount of Building Direct
Expenses for the Base Year.  Landlord
shall use commercially reasonable efforts to deliver such Estimate Statement to
Tenant on or before May 1 following the end of the Expense Year to which
such Estimate Statement relates. The failure of Landlord to timely furnish the
Estimate Statement for any Expense Year shall not preclude Landlord from
enforcing its rights to collect any Additional Rent under this Article 4,
nor shall Landlord be prohibited from revising any Estimate Statement or
Estimated Excess theretofore delivered to the extent necessary.  Thereafter, Tenant shall pay, within thirty
(30) days after receipt of the Estimate Statement, a fraction of the Estimated
Excess for the then-current Expense Year (reduced by any amounts paid pursuant
to the second to last sentence of this Section 4.4.2). Such
fraction shall have as its numerator the number of months which have elapsed in
such current Expense Year, including the month of such payment, and twelve (12)
as its denominator.  Until a new Estimate
Statement is furnished (which Landlord shall have the right to deliver to Tenant
at any time), Tenant shall pay monthly, with the monthly Base Rent
installments, an amount equal to one-twelfth (1/12) of the total Estimated
Excess set forth in the previous Estimate Statement delivered by Landlord to
Tenant.  Throughout the Lease Term
Landlord shall maintain books and records with respect to Building Direct
Expenses in accordance with generally accepted real estate accounting and
management practices, consistently applied.

 

4.5                                 Taxes and Other Charges
for Which Tenant Is Directly Responsible.

 

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

 

4.5.2                        If the
tenant improvements in the Premises, whether installed and/or paid for by
Landlord or Tenant and whether or not affixed to the real property so as to
become a part thereof, are assessed for real property tax purposes at a
valuation higher than the valuation at which tenant improvements conforming to
Landlord’s “building standard” in other space in the Building are assessed,
then the Tax Expenses levied against Landlord or the property by reason of such
excess assessed valuation shall be deemed to be taxes levied against personal
property of Tenant and shall be governed by the provisions of Section 4.5.1,
above.

 

4.5.3                        Notwithstanding
any contrary provision herein, Tenant shall pay prior to delinquency any (i) rent
tax or sales tax, service tax, transfer tax or value added tax, or any other
applicable tax on the rent or services herein or otherwise respecting this
Lease, (ii) taxes assessed upon or with respect to the possession,
leasing, operation, management, maintenance, alteration, repair, use or
occupancy by Tenant of the Premises or any portion of the Project, including
the Project parking facility; or (iii) taxes assessed upon this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Premises.

 

4.6                                 Landlord’s Books and Records. Upon Tenant’s
written request given not more than ninety (90) days after Tenant’s receipt of
a Statement for a particular Expense Year, and provided that Tenant is not then
in default under this Lease beyond the applicable cure period provided in this
Lease, Landlord shall furnish Tenant with such reasonable supporting
documentation in connection with said Building Direct Expenses as Tenant may
reasonably request.  Landlord shall
provide said information to Tenant within sixty (60) days after Tenant’s
written request therefor.  Within one
hundred eighty (180) days after receipt of a Statement by Tenant (the “Review Period”), if Tenant disputes the
amount of Additional Rent set forth in the Statement, an independent certified
public accountant (which accountant (A) is a member of a nationally or
regionally recognized accounting firm, and (B) is not working on a
contingency fee basis), designated and paid for by Tenant, may, after
reasonable notice to Landlord and at reasonable times, inspect Landlord’s
records with respect to the Statement at Landlord’s offices, provided that
Tenant is not then in default under this Lease (beyond any applicable notice
and cure periods) and Tenant has paid all amounts required to be paid under the
applicable Estimate Statement and Statement, as the case may be.  In connection with such inspection, Tenant
and Tenant’s agents must agree in advance to follow Landlord’s reasonable rules and
procedures regarding inspections of Landlord’s records, and shall execute a
commercially reasonable confidentiality agreement regarding such inspection.  Tenant’s failure to dispute the amount of
Additional Rent set forth in any Statement within the Review Period shall be
deemed to be Tenant’s approval of such Statement and Tenant, thereafter, waives
the right or ability to dispute the amounts set forth in such Statement.  If after such inspection, Tenant still
disputes such Additional Rent, a determination as to the proper amount shall be
made, at Tenant’s expense, by an independent certified public accountant (the “Accountant”) selected by Landlord and
subject to Tenant’s reasonable approval; provided that if such determination by
the Accountant proves that Direct Expenses were overstated by more than five
percent (5%), then the cost of the Accountant and the cost of such
determination shall be paid for by Landlord. Tenant hereby acknowledges that
Tenant’s sole right to inspect Landlord’s books and records and to contest the
amount of Direct Expenses payable by Tenant shall be as set forth in this Section 4.6,
and Tenant hereby waives any and all other rights pursuant to applicable law to
inspect such books and records and/or to contest the amount of Direct Expenses
payable by Tenant.

 

ARTICLE 5

 

USE OF PREMISES 

 

Tenant shall use the Premises solely for the “Permitted Use,” as that
term is defined in Section 7 of the Summary, and Tenant shall not
use or permit the Premises to be used for any other purpose or purposes
whatsoever without the prior written consent of Landlord, which may be withheld
in Landlord’s sole and absolute discretion. 
Tenant covenants and agrees that it shall not use, or suffer or permit
any person or persons to use, the Premises or any part thereof for any use or

 

6

 

purpose
contrary to the reasonable rules and regulations promulgated by Landlord
from time to time (“Rules and
Regulations”), or in violation of the laws of the United States of
America, the State of California, or the ordinances, regulations or
requirements of the local municipal or county governing body or other lawful
authorities having jurisdiction over the Building, or in a manner otherwise
inconsistent with the character of the Project as a first-class office building
Project.  Tenant shall faithfully observe
and comply with the Rules and Regulations.

 

ARTICLE 6

 

SERVICES AND UTILITIES 

 

6.1                                 Standard Tenant Services. Landlord shall provide the following
services and utilities.

 

6.1.1                        Subject to
reasonable change implemented by Landlord and all governmental rules,
regulations and guidelines applicable thereto, Landlord shall provide heating
and air conditioning when necessary for normal comfort for normal office use in
the Premises (“HVAC”) from Monday
through Friday from 7:30 a.m. to 6 p.m., and on Saturday from 9:00 a.m.
to 1:00 p.m. (collectively, the “Building
Hours”), except for the date of observation of locally and
nationally recognized holidays (collectively, the “Holidays”). The daily time periods identified hereinabove are
sometimes referred to as the “Business Hours.”

 

6.1.2                        Landlord
shall provided adequate electrical wiring and facilities and power for normal
general office use as determined by Landlord. 
Tenant shall pay directly to the utility company pursuant to the utility
company’s separate meters (or to Landlord in the event Landlord provides
submeters instead of the utility company’s meters), the cost of all electricity
provided to and/or consumed in the Premises (including normal and excess
consumption and including the cost of electricity to operate the HVAC air
handlers), which electricity shall be separately metered (as described above or
otherwise equitably allocated and charged by Landlord to Tenant and other
tenants of the Building).  Tenant shall
pay such cost (including the cost of such meters or submeters) within ten (10) days
after demand and as Additional Rent under this Lease (and not as part of the
Operating Expenses).  Landlord shall
designate the electricity utility provider from time to time.

 

6.1.3                        As part of
Operating Expenses, Landlord shall replace lamps, starters and ballasts for
Building standard lighting fixtures within the Premises.  In addition, Tenant shall bear the cost of
replacement of lamps, starters and ballasts for non-Building standard lighting
fixtures within the Premises.

 

6.1.4                        Landlord
shall provide city water from the regular Building outlets for drinking,
lavatory and toilet purposes.

 

6.1.5                        Landlord
shall provide janitorial services five (5) days per week, except the date
of observation of the Holidays, in and about the Premises and window washing
services in a manner consistent with other comparable buildings in the vicinity
of the Project.

 

6.1.6                        Landlord shall provide
nonexclusive, non-attended automatic passenger elevator service during the
Building Hours, and shall have one elevator available at all other times.

 

6.1.7                        Landlord shall
provide nonexclusive freight elevator service subject to scheduling by
Landlord.

 

Tenant shall cooperate fully with Landlord at all
times and abide by all regulations and requirements that Landlord may
reasonably prescribe for the proper functioning and protection of the HVAC,
electrical, mechanical and plumbing systems.

 

6.2                                 Above Standard Tenant Services. Notwithstanding anything to the contrary set forth in Section 4
or this Article 6, Tenant shall directly pay to Landlord one
hundred percent (100%) of the cost of all services required by Tenant to be
provided by Landlord which are in excess of the services set forth in Section 6.1,
above (collectively, the “Above-Standard
Tenant Service”), including, but not limited to, (i) twenty-four
(24) hour security services, (ii) twenty-four (24) hour porter service, (iii) any
over-standard use more particularly identified in Section 6.3,
below.

 

6.3                                 Overstandard Tenant Use. Tenant shall not, without Landlord’s prior written consent,
use heat-generating machines, machines other than normal fractional horsepower
office machines, or equipment or lighting other than Building standard lights
in the Premises, which may affect the temperature otherwise maintained by the
air conditioning system or increase the water normally furnished for the
Premises by Landlord pursuant to the terms of Section 6.1 of this
Lease.  If such consent is given,
Landlord shall have the right to install supplementary air conditioning units
or other facilities in the Premises, including supplementary or additional
metering devices, and the cost thereof, including the cost of installation,
operation and maintenance, increased wear and tear on existing equipment and
other similar charges, shall be paid by Tenant to Landlord upon billing by
Landlord.  If Tenant uses water,
electricity, heat or air conditioning in excess of that supplied by Landlord
pursuant to Section 6.1 of this Lease, Tenant shall pay to
Landlord, upon billing, the cost of such excess consumption, the cost of the
installation, operation, and maintenance of equipment which is installed in
order to supply such excess consumption, and the cost of the increased wear and
tear on existing equipment caused by such excess consumption; and Landlord may
install devices to separately meter any increased use and in such event Tenant
shall pay the increased cost directly to Landlord, on demand, at the rates
charged by the public utility company furnishing the same, including the cost
of such additional metering devices. 
Tenant’s use of electricity shall never exceed the capacity of the
feeders to the Project or the risers or wiring installation, and Tenant shall
not install or use or permit the installation or use of any computer or
electronic data processing equipment in the Premises, without the prior written
consent of Landlord.  If Tenant desires
to use heat, ventilation or air conditioning during hours other than those for
which Landlord is obligated to supply such utilities pursuant to the terms of Section 6.1
of this Lease, Tenant shall give Landlord such prior notice, if any, as
Landlord shall from time to time establish as appropriate, of Tenant’s desired
use in order to supply such utilities, and Landlord shall supply such utilities
to Tenant at such hourly cost to Tenant (which shall be treated as Additional
Rent) as Landlord shall from time to time establish.

 

6.4                                 Interruption of Use.  Tenant agrees that
Landlord shall not be liable for damages, by abatement of Rent or otherwise,
for Tenant’s failure to obtain, or for any failure to furnish or delay in
furnishing, any service (including telephone and telecommunication services),
or for any diminution in the quality or quantity thereof, when such failure or
delay or diminution is occasioned, in whole or in part, by repairs, replacements,
or improvements, by any strike, lockout or other labor trouble, by inability to
secure electricity, gas, water, or other fuel at the Building after reasonable
effort to do so, by any accident or casualty whatsoever, by act or default of
Tenant or other parties, or by any other cause; and such failures

 

7

 

or delays or diminution shall never be deemed to
constitute an eviction or disturbance of Tenant’s use and possession of the
Premises or relieve Tenant from paying Rent or performing any of its
obligations under this Lease. 
Furthermore, Landlord shall not be liable under any circumstances for a
loss of, or injury to, property or for injury to, or interference with, Tenant’s
business, including, without limitation, loss of profits, however occurring,
through or in connection with or incidental to Tenant’s failure to obtain, or
for any failure to furnish any of the services or utilities as set forth in
this Article 6.

 

ARTICLE 7

 

REPAIRS

 

Tenant shall, at Tenant’s own expense, keep
the Premises, including all improvements, fixtures, equipment, window
coverings, and furnishings therein, in good order, repair and condition
(subject to reasonable wear and tear) at all times during the Lease Term; provided,
however, in no event shall the foregoing requirement a higher standard or
condition than that existing on the date the Premises were delivered to
Tenant.  In addition, Tenant shall, at
Tenant’s own expense but under the supervision and subject to the prior
approval of Landlord, and within any reasonable period of time specified by
Landlord, promptly and adequately repair all damage to the Premises and replace
or repair all damaged or broken fixtures and appurtenances; provided however,
that, at Landlord’s option, or if Tenant fails to make such repairs, Landlord
may, but need not, make such repairs and replacements, and Tenant shall pay
Landlord the cost thereof, including a percentage of the cost thereof (to be
uniformly established for the Building) sufficient to reimburse Landlord for
any fees and other costs or expenses arising from Landlord’s involvement with
such repairs and replacements forthwith upon being billed for same. Landlord
may, but shall not be required to, enter the Premises at all reasonable times
to make such repairs, alterations, improvements and additions to the Premises
or to the Building or to any equipment located in the Building as Landlord
shall desire or deem necessary or as Landlord may be required to do by
governmental or quasi-governmental authority or court order or decree.  Tenant hereby waives and releases its right
to make repairs at Landlord’s expense under Sections 1941 and 1942 of the
California Civil Code, or under any similar law, statute, or ordinance now or
hereafter in effect.

 

ARTICLE 8

 

ADDITIONS
AND ALTERATIONS 

 

Tenant may not make any improvements,
alterations, additions or changes to the Premises during the Lease Term without
the consent of Landlord, which consent may be granted, withheld or conditioned
in the sole and absolute discretion of Landlord.  All improvements, fixtures and/or equipment
which currently exist or may be installed or placed in or about the Premises,
and all signs installed in, on or about the Premises, from time to time, shall
be and become the property of Landlord, except that Tenant may remove any
improvements, fixtures and/or equipment which Tenant can substantiate to
Landlord have not been paid for with any tenant improvement allowance funds
provided to Tenant by Landlord, provided Tenant repairs any damage to the
Premises and Building caused by such removal.

 

ARTICLE 9

 

COVENANT
AGAINST LIENS 

 

Tenant has no authority or power to cause or
permit any lien or encumbrance of any kind whatsoever, whether created by act
of Tenant, operation of law or otherwise, to attach to or be placed upon the
Building or Premises, and any and all liens and encumbrances created by Tenant
shall attach to Tenant’s interest only. 
Tenant covenants and agrees not to suffer or permit any lien of
mechanics or materialmen or others to be placed against the Building or the
Premises with respect to work or services claimed to have been performed for or
materials claimed to have been furnished to Tenant or the Premises, and, in
case of any such lien attaching or notice of any lien, Tenant covenants and
agrees to cause it to be immediately released and removed of record.  Notwithstanding anything to the contrary set
forth in this Lease, in the event that such lien is not released and removed on
or before the date notice of such lien is delivered by Landlord to Tenant,
Landlord, at its sole option, may immediately take all action necessary to
release and remove such lien, without any duty to investigate the validity
thereof, and all sums, costs and expenses, including reasonable attorneys’ fees
and costs, incurred by Landlord in connection with such lien shall be deemed
Additional Rent under this Lease and shall immediately be due and payable by
Tenant.

 

ARTICLE 10

 

INSURANCE 

 

10.1                           Indemnification and Waiver. To the extent not prohibited by law, Landlord, its members,
partners and their respective officers, agents, servants, employees, and
independent contractors (collectively, “Landlord
Parties”) shall not be liable for any damage either to person or
property or resulting from the loss of use thereof, which damage is sustained
by Tenant or by other persons claiming through Tenant.  Tenant shall indemnify, defend, protect, and
hold harmless Landlord Parties from any and all loss, cost, damage, expense and
liability (including without limitation court costs and reasonable attorneys’
fees) incurred in connection with or arising from (i) any cause in, on or
about the Premises, and (ii) any acts, omissions or negligence of Tenant
or of any person claiming by, through or under Tenant, its partners, and their
respective officers, agents, servants, employees, and independent contractors
(collectively, the “Tenant Parties”),
in, on or about the Project, in either event either prior to, during, or after
the expiration of the Lease Term, provided that the terms of the foregoing
indemnity shall not apply to the extent of the negligence or willful misconduct
of the Landlord Parties, specifically including, but not limited to, Landlord’s
failure to satisfy its compliance with Applicable Law as set forth in Article 24
of this Lease.  The provisions of this Section 10.1
shall survive the expiration or sooner termination of this Lease with respect
to any claims or liability occurring prior to such expiration or termination.

 

10.2                           Tenant’s Compliance with Landlord’s Fire and
Casualty Insurance. Tenant
shall, at Tenant’s expense, comply as to the Premises with all insurance
company requirements pertaining to the use of the Premises.  If Tenant’s conduct or use of the Premises
causes any increase in the premium for such insurance policies, then Tenant
shall reimburse Landlord for any such increase. Tenant, at Tenant’s expense,
shall comply with all rules, orders, regulations or

 

8

 

requirements of the American Insurance Association (formerly the
National Board of Fire Underwriters) and with any similar body.

 

10.3                           Tenant’s Insurance. Tenant shall maintain Commercial/Comprehensive General
Liability Insurance covering the insured against claims of bodily injury,
personal injury and property damage (including loss of use thereof) arising out
of Tenant’s operations, and contractual liabilities (covering the performance
by Tenant of its indemnity agreements) including a Broad Form endorsement
covering the insuring provisions of this Lease and the performance by Tenant of
the indemnity agreements set forth in Section 10.1 of this Lease,
for limits of liability not less than $3,000,000.00 for each occurrence and
$3,000,000.00 annual aggregate, with 0% Insured’s participation.  In addition, Tenant shall carry Property
Insurance covering (i) all office furniture, trade fixtures, office
equipment, merchandise and all other items of Tenant’s property on the Premises
installed by, for, or at the expense of Tenant, and (ii) all existing
and/or future tenant improvements, alterations and additions to the Premises,
including any improvements, alterations or additions installed at Tenant’s
request above the ceiling of the Premises or below the floor of the Premises.  Such insurance shall be written on an “all
risks” of physical loss or damage basis, for the full replacement cost value
new without deduction for depreciation of the covered items and in amounts that
meet any co-insurance clauses of the policies of insurance and shall include a
vandalism and malicious mischief endorsement, sprinkler leakage coverage and
earthquake sprinkler leakage coverage. Furthermore, Tenant shall maintain (A) Worker’s
Compensation or other similar insurance pursuant to all applicable state and
local statutes and regulations, and Employer’s Liability Insurance or other
similar insurance pursuant to all applicable state and local statutes and
regulations, with a waiver of subrogation endorsement and with minimum limits
of One Million and No/100 Dollars ($1,000,000.00) per employee and One Million
and No/100 Dollars ($1,000,000.00) per occurrence, and (B) Comprehensive
Automobile Liability Insurance covering all owned, hired, or non-owned vehicles
with the following limits of liability: 
One Million Dollars ($1,000,000.00) combined single limit for bodily
injury and property damage.

 

10.4                           Form of Policies. The minimum limits of policies of insurance required of
Tenant under this Lease shall in no event limit the liability of Tenant under
this Lease.  Such insurance shall (i) name
Landlord, and any other party it so specifies, as an additional insured; (ii) specifically
cover the liability assumed by Tenant under this Lease, including, but not
limited to, Tenant’s obligations under Section 10.1 of this Lease; (iii) be
issued by an insurance company having a rating of not less than A-VIII in Best’s
Insurance Guide or which is otherwise acceptable to Landlord and licensed to do
business in the State of California; (iv) be primary insurance as to all
claims thereunder and provide that any insurance carried by Landlord is excess
and is non-contributing with any insurance requirement of Tenant; (v) provide
that said insurance shall not be canceled or coverage changed unless thirty
(30) days’ prior written notice shall have been given to Landlord and any
mortgagee.  Tenant shall deliver said
policy or policies or certificates thereof to Landlord on or before the Lease
Commencement Date and at least thirty (30) days before the expiration dates
thereof.  In the event Tenant shall fail
to procure such insurance, or to deliver such policies or certificate, Landlord
may, at its option, procure such policies for the account of Tenant, and the
cost thereof shall be paid to Landlord as Additional Rent within five (5) days
after delivery to Tenant of bills therefore.

 

10.5                           Subrogation. Landlord and Tenant agree to have their respective
insurance companies issuing property damage insurance waive any rights of
subrogation that such companies may have against Landlord or Tenant, as the
case may be, so long as the insurance carried by Landlord and Tenant,
respectively, is not invalidated thereby. 
Notwithstanding anything to the contrary contained in this Lease,
Landlord and Tenant hereby waive any right that either may have against the
other on account of any loss or damage to their respective property to the
extent such loss or damage is insurable under policies of insurance for fire
and all risk coverage, theft, public liability, or other similar insurance.

 

10.6                           Additional Insurance Obligations. Tenant shall carry and maintain during the entire Lease
Term, at Tenant’s sole cost and expense, increased amounts of the insurance
required to be carried by Tenant pursuant to this Article 10, and
such other reasonable types of insurance coverage and in such reasonable
amounts covering the Premises and Tenant’s operations therein, as may be
reasonably requested by Landlord.

 

ARTICLE 11

 

DAMAGE AND
DESTRUCTION 

 

11.1         Repair of Damage to
Premises by Landlord. If the Premises or any common areas of the
Building serving or providing access to the Premises shall be damaged by fire
or other casualty, Landlord shall promptly and diligently, subject to
reasonable delays for insurance adjustment or other matters beyond Landlord’s
reasonable control, and subject to all other terms of this Article 11,
restore the base, shell and core of the Premises and such common areas.  Such restoration shall be to substantially
the same condition of the base, shell and core of the Premises and common areas
prior to the casualty, except for modifications required by zoning and building
codes and other laws or by the holder of a mortgage on the Building, or any
other modifications to the common areas deemed desirable by Landlord, provided
access to the Premises and any common restrooms serving the Premises shall not
be materially impaired. Notwithstanding any other provision of this Lease, upon
the occurrence of any damage to the Premises, Tenant shall assign to Landlord
(or to any party designated by Landlord) all insurance proceeds payable to
Tenant under Tenant’s insurance carried under Section 10.3(ii) of
this Lease, and Landlord shall use commercially reasonable efforts to repair
any injury or damage to the tenant improvements installed in the Premises and
shall return such tenant improvements to their original condition; provided
that if the actual and reasonable cost of such repair by Landlord exceeds the
amount of insurance proceeds received by Landlord from Tenant’s insurance
carrier, as assigned by Tenant, the cost of such repairs shall be paid by
Tenant to Landlord prior to Landlord’s repair of the damage; provided, however,
to the extent the actual and reasonable cost of such repair by Landlord is less
than the amount so assigned or otherwise delivered to Landlord, then any excess
(i.e., the difference between the proceeds and the actual and reasonable cost
of such repairs) shall be refunded to Tenant promptly upon completion of
Landlord’s repair of such injury or damage. 
In connection with such repairs and replacements, Tenant shall, prior to
the commencement of construction, submit to Landlord, for Landlord’s review and
approval, all plans, specifications and working drawings relating thereto, and
Landlord shall reasonably select the contractors to perform such improvement
work.  Landlord shall not be liable for
any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant’s
business resulting in any way from such damage or the repair thereof; provided
however, that if such fire or other casualty shall have damaged the Premises or
common areas reasonably necessary to Tenant’s occupancy, and if such damage is
not the result of the willful misconduct of Tenant or Tenant’s employees,
contractors, licensees, or invitees,

 

9

 

Landlord shall allow Tenant a proportionate abatement of Rent, during
the time and to the extent the Premises are unfit for occupancy for the
purposes permitted under this Lease, and not occupied by Tenant as a result
thereof.

 

11.2                           Landlord’s Option to Repair. Notwithstanding the terms of Section 11.1 of
this Lease, Landlord may elect not to rebuild and/or restore the Premises
and/or Building and instead terminate this Lease by notifying Tenant in writing
of such termination within sixty (60) days after the date of discovery of such
damage, such notice to include a termination date giving Tenant ninety (90)
days to vacate the Premises, but Landlord may so elect only if the Building
shall be damaged by fire or other casualty or cause, whether or not the
Premises are affected, and one or more of the following conditions is
present:  (i) repairs cannot
reasonably be completed within one hundred eighty (180) days of the date of
discovery of damage (when such repairs are made without the payment of overtime
or other premiums); (ii) the holder of any mortgage on the Building shall
require that the insurance proceeds or any portion thereof be used to retire
the mortgage debt; or (iii) the damage is not fully covered, except for
deductible amounts, by Landlord’s insurance policies.  In addition, in the event that the Premises
or the Building is destroyed or damaged to any substantial extent during the
last twelve (12) months of the Lease Term (subject to Tenant’s timely delivery
of an Exercise Notice with regard to any then-remaining Option Term pursuant to
the TCCs of Section 2.2 of this Lease), then notwithstanding
anything contained in this Article 11, Landlord shall have the
option to terminate this Lease by giving written notice to Tenant of the
exercise of such option within thirty (30) days after the date of such damage
or destruction, in which event this Lease shall cease and terminate as of the
date of such notice.  Upon any such termination
of this Lease pursuant to this Section 11.2, Tenant shall pay the
Base Rent and Additional Rent, properly apportioned up to such date of
termination, and both parties hereto shall thereafter be freed and discharged
of all further obligations hereunder, except as provided for in provisions of
this Lease which by their terms survive the expiration or earlier termination
of the Lease Term.  In the event that
Landlord elects to not rebuild and/or restore the Premises and/or Building, but
instead terminates this Lease pursuant to the TCCs of this Section 11.2,
then Tenant shall be entitled to retain any “net” proceeds of its insurance
policies maintained under Section 10.3(ii) after deducting the
amount that would otherwise have been reasonably been required for, and applied
toward, Landlord’s repair of damage to the Premises under Section 11.1,
above.

 

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

 

ARTICLE 12

 

NONWAIVER 

 

No waiver of any provision of this Lease
shall be implied by any failure of Landlord to enforce any remedy on account of
the violation of such provision, even if such violation shall continue or be
repeated subsequently, any waiver by Landlord of any provision of this Lease
may only be in writing, and no express waiver shall affect any provision other
than the one specified in such waiver and that one only for the time and in the
manner specifically stated.  No receipt
of monies by Landlord from Tenant after the termination of this Lease shall in
any way alter the length of the Lease Term or of Tenant’s right of possession
hereunder or after the giving of any notice shall reinstate, continue or extend
the Lease Term or affect any notice given Tenant prior to the receipt of such
monies, it being agreed that after the service of notice or the commencement of
a suit or after final judgment for possession of the Premises, Landlord may
receive and collect any Rent due, and the payment of said Rent shall not waive
or affect said notice, suit or judgment.

 

ARTICLE 13

 

CONDEMNATION

 

If the whole or any material part of the
Premises or Building shall be taken by power of eminent domain or condemned by
any competent authority for any public or quasi-public use or purpose, or if
any adjacent property or street shall be so taken or condemned, or reconfigured
or vacated by such authority in such manner as to require the use,
reconstruction or remodeling of any part of the Premises or Building, or if
Landlord shall grant a deed or other instrument in lieu of such taking by
eminent domain or condemnation, this Lease shall terminate upon notice by
either Landlord or Tenant to the other party. 
Landlord shall be entitled to receive the entire award or payment in
connection therewith. Tenant hereby waives any and all rights it might
otherwise have pursuant to Section 1265.130 of The California Code of
Civil Procedure.

 

ARTICLE 14

 

ASSIGNMENT
AND SUBLETTING 

 

14.1                           Transfers.
Tenant shall not, without the prior written consent of Landlord, assign,
mortgage, pledge, hypothecate, encumber, or permit any lien to attach to, or
otherwise transfer, this Lease or any interest hereunder, permit any
assignment, or other transfer of this Lease or any interest hereunder by
operation of law, sublet the Premises or any part thereof, or enter into any
license or concession agreements or otherwise permit the occupancy or use of
the Premises or any part thereof by any persons other than Tenant and its
employees and contractors.  In connection
with any such transfer contemplated by Tenant, Tenant shall submit a written
request for consent notice to Landlord, together with any information
reasonably required by Landlord which will enable Landlord to determine (i) the
financial responsibility, character, and reputation of the proposed transferee,
(ii) the nature of such transferee’s business, (iii) the proposed use
of the applicable portion of the Premises, and (iv) any other reasonable
consent parameters.  Any transfer made
without Landlord’s prior written consent shall, at Landlord’s option, be null,
void and of no effect, and shall, at Landlord’s option, constitute a default by
Tenant under this Lease.  Whether or not
Landlord consents to any proposed transfer, Tenant shall pay Landlord’s review
and processing fees, as well as any reasonable professional fees (including,
without limitation,

 

10

 

attorneys’, accounts’, architects’, engineers’ and consultants’ fees)
incurred by Landlord, within thirty (30) days after written request by
Landlord.

 

14.2                           Landlord’s Consent. Landlord shall not unreasonably withhold its consent to any
proposed Transfer of the Subject Space to the Transferee on the terms specified
in the Transfer Notice.  Without
limitation as to other reasonable grounds for withholding consent, the parties
hereby agree that it shall be reasonable under this Lease and under any
applicable law for Landlord to withhold consent to any proposed Transfer where
one or more of the following apply: (i) transferee is of a character or
reputation or engaged in a business which is not consistent with the quality of
the Building or the Project; (ii) transferee is not a party of reasonable
financial worth and/or financial stability in light of the responsibilities to
be undertaken in connection with the transfer on the date consent is requested;
(iii) transferee intends to use the applicable portion(s) of the Premises
for purposes which are not permitted under this Lease; (iv) transferee is
either a governmental agency or instrumentality thereof; or (v) the
proposed transfer would cause a violation of another lease for space in the
Project, or would give an occupant of the Project a right to cancel its
lease.  Notwithstanding anything to the
contrary in this Lease, if Tenant or any proposed transferee claims that
Landlord has unreasonably withheld or delayed its consent under Section 14.2
or otherwise has breached or acted unreasonably under this Article 14,
their sole remedies shall be a declaratory judgment and an injunction for the
relief sought without any monetary damages, and Tenant hereby waives all other
remedies, including, without limitation, any right at law or equity to
terminate this Lease, on its own behalf and, to the extent permitted under all
applicable laws, on behalf of the proposed Transferee.  Tenant shall indemnify, defend and hold
harmless Landlord from any and all liability, losses, claims, damages, costs,
expenses, causes of action and proceedings involving any third party or parties
(including without limitation Tenant’s proposed subtenant or assignee) who
claim they were damaged by Landlord’s wrongful withholding or conditioning of
Landlord’s consent.

 

14.3                           Transfer Premium. If Landlord consents to a proposed transfer, as a condition
thereto which the parties hereby agree is reasonable, Tenant shall pay to
Landlord fifty percent (50%) of any “Transfer Premium,” as that term is defined
in this Section 14.3, received by Tenant from such Transferee.  “Transfer
Premium” shall mean all rent, additional rent or other consideration
payable by such transferee in connection with the transfer in excess of the
Rent and Additional Rent payable by Tenant under this Lease during the term of
the transfer (on a per rentable square foot basis if less than all of the
Premises is transferred), after deducting the reasonable expenses incurred by
Tenant for (i) any changes, alterations and improvements to the Premises
in connection with the Transfer, (ii) any improvement allowance or free
base rent reasonably provided to the Transferee, and (iii) any brokerage
commissions in connection with the Transfer. 
The Transfer Premium shall also include, but not be limited to, key
money, bonus money or other cash consideration paid by transferee to Tenant in
connection with such transfer, and any payment in excess of fair market value
for services rendered by Tenant to transferee or for assets, fixtures,
inventory, equipment, or furniture transferred by Tenant to transferee in
connection with such Transfer.

 

14.4                           Landlord’s Option as to Subject Space. In the event that a proposed Transfer, if consented to,
would cause fifty percent (50%) or more of the Premises to be subleased or
licensed to a party (or parties) other than Original Tenant and/or a Permitted
Transferee, then notwithstanding anything to the contrary contained in this Article 14,
Landlord shall have the option, by giving written notice to Tenant within
thirty (30) days after receipt of Tenant’s written request for consent to so
transfer, to recapture the corresponding portion of the Premises.  Such recapture notice shall cancel and
terminate this Lease with respect to such portion of the Premises as of the
effective date of the proposed transfer. 
In the event of a recapture by Landlord, if this Lease shall be canceled
with respect to less than the entire Premises, the Rent reserved herein shall
be prorated on the basis of the number of rentable square feet retained by
Tenant in proportion to the number of rentable square feet contained in the
Premises, and this Lease as so amended shall continue thereafter in full force
and effect, and upon request of either party, the parties shall execute written
confirmation of the same.  If Landlord
declines, or fails to elect in a timely manner to recapture the subject space
under this Section 14.4, then, provided Landlord has consented to
the proposed transfer, Tenant shall be entitled to proceed to transfer the
subject space to the proposed transferee, subject to provisions of this Article 14.

 

14.5                           Effect of Transfer. If Landlord consents to a transfer, (i) the TCCs of
this Lease shall in no way be deemed to have been waived or modified, (ii) such
consent shall not be deemed consent to any further transfer by either Tenant or
a transferee, (iii) Tenant shall deliver to Landlord, promptly after
execution, an original executed copy of all documentation pertaining to the
transfer in form reasonably acceptable to Landlord, (iv) Tenant shall
furnish upon Landlord’s request a complete statement, certified by an
independent certified public accountant, or Tenant’s chief financial officer,
setting forth in detail the computation of any Transfer Premium Tenant has
derived and shall derive from such Transfer, and (v) no Transfer relating
to this Lease or agreement entered into with respect thereto, whether with or
without Landlord’s consent, shall relieve Tenant or any guarantor of the Lease
from any liability under this Lease, including, without limitation, in
connection with the subject space. 
Landlord or its authorized representatives shall have the right at all
reasonable times to audit the books, records and papers of Tenant relating to
any Transfer, and shall have the right to make copies thereof. If the Transfer
Premium respecting any Transfer shall be found understated, Tenant shall,
within thirty (30) days after demand, pay the deficiency, and if understated by
more than five percent (5.0%), Tenant shall pay Landlord’s costs of such audit.

 

14.6                           Occurrence of Default. Any transfer hereunder shall be subordinate and subject to
the provisions of this Lease, and if this Lease shall be terminated during the
term of any transfer, Landlord shall have the right to:  (i) treat such transfer as cancelled and
repossess the subject space by any lawful means, or (ii) require that such
transferee attorn to and recognize Landlord as its landlord under any such
transfer.  If Tenant shall be in default
under this Lease, Landlord is hereby irrevocably authorized, as Tenant’s agent
and attorney-in-fact, to direct any transferee to make all payments under or in
connection with the transfer directly to Landlord (which Landlord shall apply
towards Tenant’s obligations under this Lease) until such default is
cured.  Such transferee shall rely on any
representation by Landlord that Tenant is in default hereunder, without any
need for confirmation thereof by Tenant. 
Upon any assignment, the assignee shall assume in writing all
obligations and covenants of Tenant thereafter to be performed or observed
under this Lease.  No collection or
acceptance of rent by Landlord from any transferee shall be deemed a waiver of
any provision of this Article 14 or the approval of any transferee
or a release of Tenant from any obligation under this Lease, whether
theretofore or thereafter accruing; provided, however, that any collection or
acceptance of Rent by Landlord from such transferee shall be applied against
any corresponding obligation to pay Rent owed by Tenant hereunder.  In no event shall Landlord’s enforcement of
any provision of this Lease against any transferee be deemed a waiver of
Landlord’s right to enforce any term of this Lease

 

11

 

against Tenant or any other person. If Tenant’s obligations hereunder
have been guaranteed, Landlord’s consent to any Transfer shall not be effective
unless the guarantor also consents to such Transfer.

 

14.7                           Non-Transfers. Notwithstanding anything to the contrary contained in this Article 14,
(i) an assignment or subletting of all or a portion of the Premises to an
affiliate of Tenant (an entity which is controlled by, controls, or is under
common control with, Tenant), (ii) an assignment of the Premises to an
entity which acquires all or substantially all of the assets or interests
(partnership, stock or other) of Tenant, or (iii) an assignment of the
Premises to an entity which is the resulting entity of a merger or
consolidation of Tenant, shall not be deemed a Transfer under this Article 14,
provided that Tenant notifies Landlord of any such assignment or sublease and
promptly supplies Landlord with any documents or information requested by
Landlord regarding such assignment or sublease or such affiliate, and further
provided that such assignment or sublease is not a subterfuge by Tenant to
avoid its obligations under this Lease. 
The transferee under a transfer specified in items (i), (ii) or (iii) above
shall be referred to as a “Permitted Transferee.”
“Control,” as used in this Section 14.7,
shall mean the ownership, directly or indirectly, of more than fifty percent
(50%) of the voting securities of, or possession of the right to vote, in the
ordinary direction of its affairs, of more than fifty percent (50%) of the
voting interest in, any person or entity.

 

ARTICLE 15

 

OWNERSHIP
AND REMOVAL OF TRADE FIXTURES 

 

15.1                           Surrender of Premises. No act or thing done by Landlord or any agent or employee
of Landlord during the Lease Term shall be deemed to constitute an acceptance
by Landlord of a surrender of the Premises unless such intent is specifically
acknowledged in a writing signed by Landlord. 
The delivery of keys to the Premises to Landlord or any agent or
employee of Landlord shall not constitute a surrender of the Premises or effect
a termination of this Lease, whether or not the keys are thereafter retained by
Landlord, and notwithstanding such delivery Tenant shall be entitled to the
return of such keys at any reasonable time upon request until this Lease shall
have been properly terminated.

 

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

 

ARTICLE 16

 

HOLDING
OVER 

 

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

 

ARTICLE 17

 

ESTOPPEL CERTIFICATES 

 

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

 

12

 

ARTICLE 18

 

SUBORDINATION

 

This Lease is subject and subordinate to all present and future ground
or underlying leases of the Project and to the lien of any mortgages or trust
deeds, now or hereafter in force against the Project and the Building, if any,
and to all renewals, extensions, modifications, consolidations and replacements
thereof, and to all advances made or hereafter to be made upon the security of
such mortgages or trust deeds, unless the holders of such mortgages or trust
deeds, or the lessors under such ground lease or underlying leases, require in
writing that this Lease be superior thereto. 
Tenant covenants and agrees in the event any proceedings are brought for
the foreclosure of any such mortgage, or if any ground or underlying lease is
terminated, to attorn, without any deductions or set-offs whatsoever, to the
purchaser upon any such foreclosure sale, or to the lessor of such ground or
underlying lease, as the case may be, if so requested to do so by such
purchaser or lessor, and to recognize such purchaser or lessor as the lessor
under this Lease.  Tenant shall, within
five (5) days of request by Landlord, execute such further instruments or
assurances as Landlord may reasonably deem necessary to evidence or confirm the
subordination or superiority of this Lease to any such mortgages, trust deeds,
ground leases or underlying leases. 
Tenant hereby irrevocably authorizes Landlord to execute and deliver in
the name of Tenant any such instrument or instruments if Tenant fails to do so,
provided that such authorization shall in no way relieve Tenant from the
obligation of executing such instruments of subordination or superiority.  Tenant waives the provisions of any current
or future statute, rule or law which may give or purport to give Tenant
any right or election to terminate or otherwise adversely affect this Lease and
the obligations of the Tenant hereunder in the event of any foreclosure
proceeding or sale.

 

ARTICLE 19 

 

DEFAULTS; REMEDIES 

 

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

 

19.1.1                  Any failure
by Tenant to pay any Rent or any other charge required to be paid under this
Lease, or any part thereof, within five (5) business days following Tenant’s
receipt of a written notice from Landlord that the same was not paid when due;
or

 

19.1.2                  Except where
a specific time period is otherwise set forth for Tenant’s performance in this
Lease, (in which event the failure to perform by Tenant within such time period
shall be a default by Tenant under this Section 19.1.2, unless
cured within five (5) business days following Tenant’s receipt of a
written notice from Landlord that the same was not observed or performed when
required) any failure by Tenant to observe or perform any other provision,
covenant or condition of this Lease to be observed or performed by Tenant where
such failure continues for thirty (30) days after written notice thereof from
Landlord to Tenant; provided that if the nature of such default is such that
the same cannot reasonably be cured within such thirty (30) day period, Tenant
shall not be deemed to be in default if it diligently commences such cure
within such period and thereafter diligently proceeds to rectify and cure such
default, but in no event exceeding a period of time in excess of sixty (60)
days after written notice thereof from Landlord to Tenant; or

 

19.1.3                  To the
extent permitted by law, a general assignment by Tenant or any guarantor of
this Lease for the benefit of creditors, or the taking of any corporate action
in furtherance of bankruptcy or dissolution whether or not there exists any
proceeding under an insolvency or bankruptcy law, or the filing by or against
Tenant or any guarantor of any proceeding under an insolvency or bankruptcy
law, unless in the case of a proceeding filed against Tenant or any guarantor
the same is dismissed within sixty (60) days, or the appointment of a trustee
or receiver to take possession of all or substantially all of the assets of
Tenant or any guarantor, unless possession is restored to Tenant or such
guarantor within thirty (30) days, or any execution or other judicially
authorized seizure of all or substantially all of Tenant’s assets located upon
the Premises or of Tenant’s interest in this Lease, unless such seizure is
discharged within thirty (30) days; or

 

19.1.4                  The failure
by Tenant to observe or perform according to the provisions of Articles 5,
14, 17 or 18 of this Lease where such failure continues for more than five (5) business
days after written notice from Landlord that the same was not observed or
performed when required.

 

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

 

19.2                           Remedies Upon Default. Upon the occurrence of any event of
default by Tenant, Landlord shall have, in addition to any other remedies
available to Landlord at law or in equity (all of which remedies shall be
distinct, separate and cumulative), the option to pursue any one or more of the
following remedies, each and all of which shall be cumulative and nonexclusive,
without any notice or demand whatsoever.

 

19.2.1
Terminate this Lease, in which event Tenant shall immediately surrender the
Premises to Landlord, and if Tenant fails to do so, Landlord may, without
prejudice to any other remedy which it may have for possession or arrearages in
rent, enter upon and take possession of the Premises and expel or remove Tenant
and any other person who may be occupying the Premises or any part thereof,
without being liable for prosecution or any claim or damages therefore; and
Landlord may recover from Tenant the following: (i) the worth at the time
of award of any unpaid rent which has been earned at the time of such
termination; plus (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; plus (iii) the worth at the time of award of
the amount by which the unpaid rent for the balance of the Lease Term after the
time of award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; plus (iv) any other amount reasonably
necessary to compensate Landlord for all the detriment proximately caused by
Tenant’s failure to perform its obligations under this Lease, specifically
including but not limited to, brokerage commissions and advertising expenses
incurred, expenses of remodeling the Premises or any portion thereof for a new
tenant, whether for the same or a different use, and any special concessions
made to obtain a new tenant; and (v) at Landlord’s election, such other
amounts in addition to or in lieu of the foregoing as may be permitted from
time to time by applicable law.  The term
“rent” as used in this Section 19.2.1 shall be deemed to be and to
mean all sums of every nature required to be paid by Tenant pursuant to the
terms of this Lease, whether to Landlord or to others.  As used in Sections 19.2.1(i) and
(ii), above, the “worth at the time of award” shall be computed by
allowing interest at the rate set forth in Article 24 of this
Lease, but in no case greater than the maximum amount of such interest

 

13

 

permitted by law. As used in Section 19.2.1(iii) above,
the “worth at the time of award” shall be computed by discounting such amount
at the discount rate of the Federal Reserve Bank of San Francisco at the time
of award plus one percent (1%).

 

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

 

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

 

19.3                           Waiver of Default. No waiver by Landlord or Tenant of
any violation or breach of any of the terms, provisions and covenants herein
contained shall be deemed or construed to constitute a waiver of any other or
later violation or breach of the same or any other of the terms, provisions,
and covenants herein contained. 
Forbearance by Landlord in enforcement of one or more of the remedies
herein provided upon an event of default shall not be deemed or construed to
constitute a waiver of such default.  The
acceptance of any Rent hereunder by Landlord following the occurrence of any
default, whether or not known to Landlord, shall not be deemed a waiver of any
such default, except only a default in the payment of the Rent so accepted.

 

ARTICLE 20 

 

FORCE MAJEURE 

 

Any prevention, delay or stoppage due to strikes, lockouts, labor
disputes, acts of God, inability to obtain services, labor, or materials or
reasonable substitutes therefore, governmental actions, civil commotions, fire
or other casualty, and other causes beyond the reasonable control of the party
obligated to perform, except with respect to the obligations imposed with
regard to Rent and other charges to be paid by Tenant pursuant to this Lease
(collectively, the “Force Majeure”),
notwithstanding anything to the contrary contained in this Lease, shall excuse
the performance of such party for a period equal to any such prevention, delay
or stoppage and, therefore, if this Lease specifies a time period for
performance of an obligation of either party, that time period shall be
extended by the period of any delay in such party’s performance caused by a
Force Majeure.

 

ARTICLE 21 

 

SECURITY DEPOSIT 

 

21.1                           Security Deposit. Concurrent with Tenant’s execution
of this Lease, Tenant shall deposit with Landlord a security deposit (the “Security Deposit”) in the amount set forth
in Section 8 of the Summary, as security for the faithful
performance by Tenant of all of its obligations under this Lease.

 

21.2                           Application of Security Deposit. If Tenant
defaults with respect to any provisions of this Lease, including, but not
limited to, the provisions relating to the payment of Rent, the removal of
property and the repair of resultant damage, Landlord may, without notice to
Tenant, but shall not be required to apply all or any part of the Security
Deposit for the payment of any Rent or any other sum in default and Tenant
shall, upon demand therefor, restore the Security Deposit to its original
amount. Any unapplied portion of the Security Deposit shall be returned to
Tenant, or, at Landlord’s option, to the last assignee of Tenant’s interest
hereunder, within sixty (60) days following the expiration of the Lease
Term.  Tenant shall not be entitled to
any interest on the Security Deposit. 
Tenant hereby waives the provisions of Section 1950.7 of the
California Civil Code, or any successor statute.

 

ARTICLE 22 

 

SUBSTITUTION OF OTHER PREMISES 

 

Landlord shall
have the right to move Tenant, upon one hundred twenty (120) days’ prior
written notice of the date of such move, to other space in the Project (the “Substitute
Premises”) reasonably similar to the Premises in terms of size, design,
amenities, access and improvements, and all terms hereof shall apply to the new
space with equal force.  In such event,
Landlord shall (i) give Tenant prior notice and a concurrent opportunity
to inspect any proposed Substitute Premises, (ii) provide Tenant, at
Landlord’s sole cost and expense, a reasonable allowance for moving expenses,
stationery, business cards and related items to replace those which become
obsolete by such move, (iii) provide Tenant, at Landlord’s sole cost and
expense, with tenant improvements at least equal in quality to those in the
Premises and shall move Tenant’s effects to the new space at Landlord’s sole
cost and expense at such time and in such manner as to inconvenience Tenant as
little as reasonably practicable. 
Simultaneously with such relocation of the Premises, the parties shall
immediately execute an amendment to this Lease stating the relocation of the
Premises.  In no event shall Tenant’s
Rent be increased unless Tenant has requested a space larger than the Premises
at the time of notice of relocation or unless Tenant has then currently been in
negotiations with Landlord for expansion space. 
Alternatively, in the event that the rentable square footage of the new
space is smaller than that of the Premises, Tenant’s Share and Tenant’s rental
obligations under this Lease (on a per rentable square foot basis) shall be
proportionately decreased.

 

ARTICLE 23 

 

SIGNS 

 

23.1                           Directory Signage. A building directory is located in
the lobby of the Building (the “Directory”).
Tenant shall have the right, at Landlord’s initial cost and expense, to have
one strip in such Directory identifying Tenant, its

 

14

 

suite number and location; provided, however, any subsequent
modifications to such strip shall be at Tenant’s sole cost and expense.

 

23.2                           Suite Signage. Tenant shall be entitled, Landlord’s
initial cost, to identification signage outside of Tenant’s Premises on the
floor on which Tenant’s Premises are located; provided, however, any subsequent
modifications to such identification signage shall be at Tenant’s sole cost and
expense.  The location, quality, design,
style, lighting and size of such signage shall be consistent with the Landlord’s
Building standard signage program and shall be subject to Landlord’s prior
written approval, in its sole discretion. Upon the expiration or earlier
termination of this Lease, Tenant shall be responsible, at its sole cost and
expense, for the removal of such signage and the repair of all damage to the
Building caused by such removal.

 

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

 

ARTICLE 24 

 

COMPLIANCE WITH LAW 

 

Tenant shall not do anything or suffer anything to be done in or about
the Premises which will in any way conflict with any law, statute, ordinance or
other governmental rule, regulation or requirement now in force or which may
hereafter be enacted or promulgated (collectively, “Applicable Laws”). At its sole cost and expense, Tenant shall
promptly comply with all such Applicable Laws which relate to (i) Tenant’s
use of the Premises for non-general office use, (ii) the Alterations or
Tenant Improvements in the Premises, or (iii) the Base Building, but, as
to the Base Building, only to the extent such obligations are triggered by
Tenant’s Alterations, the Tenant Improvements, or use of the Premises for
non-general office use.  Should any
standard or regulation now or hereafter be imposed on Landlord or Tenant by a
state, federal or local governmental body charged with the establishment, regulation
and enforcement of occupational, health or safety standards for employers,
employees, landlords or tenants, then Tenant agrees, at its sole cost and
expense, to comply promptly with such standards or regulations.  Landlord shall comply with all Applicable
Laws relating to the Base Building, provided that compliance with such
Applicable Laws is not the responsibility of Tenant under this Lease, and
provided further that Landlord’s failure to comply therewith would prohibit
Tenant from obtaining or maintaining a certificate of occupancy for the
Premises, or would unreasonably and materially affect the safety of Tenant’s
employees or create a significant health hazard for Tenant’s employees or
otherwise prevent or materially impair Tenant’s use of the Premises.  Landlord shall be permitted to include in
Operating Expenses any costs or expenses incurred by Landlord under this Article 24
to the extent consistent with the terms of Section 4.2.4, above.

 

ARTICLE 25 

 

LATE CHARGES 

 

If any installment of Rent or any other sum due from Tenant shall not
be received by Landlord or Landlord’s designee within five (5) business
days following Tenant’s receipt of written notice from Landlord that the same
was not received when due, then Tenant shall pay to Landlord a late charge
equal to five percent (5%) of the amount due plus any reasonable attorneys’
fees actually incurred by Landlord by reason of Tenant’s failure to pay Rent
and/or other charges when due hereunder. 
The late charge shall be deemed Additional Rent and the right to require
it shall be in addition to all of Landlord’s other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord’s remedies in any manner. 
In addition to the late charge described above, any Rent or other
amounts owing hereunder which are not paid when due shall thereafter bear
interest until paid at a rate equal to ten percent (10%) per annum, provided
that in no case shall such rate be higher than 
the highest rate permitted by applicable law.

 

ARTICLE 26 

 

LANDLORD’S RIGHT TO CURE DEFAULT;
PAYMENTS BY TENANT 

 

All covenants and agreements to be kept or performed by Tenant under
this Lease shall be performed by Tenant at Tenant’s sole cost and expense and
without any reduction of Rent.  If Tenant
shall fail to perform any of its obligations under this Lease, within a
reasonable time after such performance is required by the terms of this Lease,
Landlord may, but shall not be obligated to, after reasonable prior notice to
Tenant, make any such payment or perform any such act on Tenant’s part without
waiving its right based upon any default of Tenant and without releasing Tenant
from any obligations hereunder.  Except
as may be specifically provided to the contrary in this Lease, Tenant shall pay
to Landlord, within fifteen (15) days after delivery by Landlord to Tenant of
statements therefore: (i) sums equal to expenditures reasonably made and
obligations incurred by Landlord in connection with the remedying by Landlord
of Tenant’s defaults pursuant to the provisions of this Article 21;
(ii) sums equal to all losses, costs, liabilities, damages and expenses
referred to in Article 10 of this Lease; and (iii) sums equal
to all expenditures made and obligations incurred by Landlord in collecting or
attempting to collect the Rent or in enforcing or attempting to enforce any
rights of Landlord under this Lease or pursuant to law, including, without
limitation, all legal fees and other amounts so expended.  Tenant’s obligations under this Article 21
shall survive the expiration or sooner termination of the Lease Term.

 

ARTICLE 27 

 

ENTRY BY LANDLORD 

 

Landlord reserves the right at all reasonable times
and upon reasonable notice to the Tenant to enter the Premises to (i) inspect
them; (ii) show the Premises to prospective purchasers, mortgagees or
tenants, or to the ground or underlying

 

15

 

lessors;
(iii) post notices of non-responsibility; or (iv) alter, improve or
repair the Premises or the Building if necessary to comply with current
building codes or other applicable laws, or for structural alterations, repairs
or improvements to the Building. Notwithstanding anything to the contrary
contained in this Article 22, Landlord may enter the Premises at
any time to (A) perform services required of Landlord; (B) take
possession due to any breach of this Lease in the manner provided herein; and (C) perform
any covenants of Tenant which Tenant fails to perform.  Any such entries shall be without the abatement
of Rent and shall include the right to take such reasonable steps as required
to accomplish the stated purposes. 
Tenant hereby waives any claims for damages or for any injuries or
inconvenience to or interference with Tenant’s business, lost profits, any loss
of occupancy or quiet enjoyment of the Premises, and any other loss occasioned
thereby. For each of the above purposes, Landlord shall at all times have a key
with which to unlock all the doors in the Premises, excluding Tenant’s vaults,
safes and special security areas designated in advance by Tenant.  In an emergency, Landlord shall have the
right to use any means that Landlord may deem proper to open the doors in and
to the Premises. Any entry into the Premises in the manner hereinbefore described
shall not be deemed to be a forcible or unlawful entry into, or a detainer of,
the Premises, or an actual or constructive eviction of Tenant from any portion
of the Premises.

 

ARTICLE 28 

 

TENANT PARKING 

 

Tenant and the Tenant’s parties (including Tenant’s visitors) shall be
entitled to utilize, without charge during the initial Lease Term, commencing
on the Lease Commencement Date, the number of parking passes set forth in Section 9
of the Summary, on a monthly basis throughout the Lease Term, which parking
permits shall pertain to the Project parking areas; provided, however, during
any Option Term, Tenant shall rent such parking passes from Landlord and shall
pay to Landlord therefore, on a monthly basis, the prevailing rate charged from
time to time at the location of such parking passes. Notwithstanding anything
to the contrary set forth in the immediately preceding sentence, Tenant shall
be responsible for the full amount of any taxes imposed by any governmental
authority in connection with Tenant’s use of such parking passes or Tenant’s
use of the Project parking facility. 
Tenant’s continued right to use the parking passes is conditioned upon
Tenant abiding by all rules and regulations which are prescribed from time
to time for the orderly operation and use of the Project parking facility,
including any sticker or other identification system established by Landlord,
Tenant’s cooperation in seeing that Tenant’s employees and visitors also comply
with such rules and regulations and Tenant not being in default under this
Lease (beyond any applicable notice and cure periods).  Landlord specifically reserves the right to
change the size, configuration, design, layout and all other aspects of the
Project parking facility at any time and Tenant acknowledges and agrees that
Landlord may, without incurring any liability to Tenant and without any
abatement of Rent under this Lease, from time to time, close-off or restrict
access to the Project parking facility for purposes of permitting or
facilitating any such construction, alteration or improvements.  Landlord may delegate its responsibilities
hereunder to a parking operator in which case such parking operator shall have
all the rights of control attributed hereby to the Landlord.  The parking passes to which Tenant is
entitled pursuant to this Article 28 are provided to Tenant solely
for use by Tenant’s own personnel and such passes may not be transferred,
assigned, subleased or otherwise alienated by Tenant without Landlord’s prior
approval.  Tenant may validate visitor
parking by such method or methods as the Landlord may establish, at the
validation rate from time to time generally applicable to visitor parking.

 

ARTICLE 29 

 

MISCELLANEOUS PROVISIONS 

 

29.1                           Transfer of Landlord’s Interest. Tenant acknowledges
that Landlord has the right to transfer all or any portion of its interest in
the Building and in this Lease, and Tenant agrees that in the event of any such
transfer, Landlord shall automatically be released from all liability under
this Lease and Tenant agrees to look solely to such transferee for the
performance of Landlord’s obligations hereunder after the date of transfer and
such transferee shall be deemed to have fully assumed and be liable for all
obligations of this Lease to be performed by Landlord, including the return of
any Security Deposit, and Tenant shall attorn to such transferee; provided,
however, Landlord shall remain responsible to Tenant for Landlord’s obligations
which arose prior to the date of such transfer pursuant to the terms and
condition of this Lease.  The liability
of any transferee of Landlord shall be limited to the interest of such
transferee in the Building and such transferee shall be without personal
liability under this Lease, and Tenant hereby expressly waives and releases
such personal liability on behalf of itself and all persons claiming by,
through or under Tenant.  Tenant further
acknowledges that Landlord may assign its interest in this Lease to a mortgage
lender as additional security and agrees that such an assignment shall not
release Landlord from its obligations hereunder and that Tenant shall continue
to look to Landlord for the performance of its obligations hereunder.

 

29.2                           Time of Essence. Time is of the essence of this
Lease and each of its provisions.

 

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

 

29.4                           Prohibition Against Recording. Neither this
Lease, nor any memorandum, affidavit or other writing with respect thereto,
shall be recorded by Tenant or by anyone acting through, under or on behalf of
Tenant.

 

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

 

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

 

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

 

16

 

and every other term, provision and condition of this Lease shall be
valid and enforceable to the fullest extent possible permitted by law.

 

29.8                           Landlord Exculpation. It is expressly understood and
agreed that notwithstanding anything in this Lease to the contrary, and
notwithstanding any applicable law to the contrary, the liability of Landlord
and the Landlord Parties hereunder (including any successor landlord) and any
recourse by Tenant against Landlord or the Landlord Parties shall be limited
solely and exclusively to an amount which is equal to the lesser of (a) the
interest of Landlord in the Building or (b) the equity interest Landlord
would have in the Building if the Building were encumbered by third-party debt
in an amount equal to eighty percent (80%) of the value of the Building (as
such value is determined by Landlord), and neither Landlord, nor any of the
Landlord Parties shall have any personal liability therefore, and Tenant hereby
expressly waives and releases such personal liability on behalf of itself and
all persons claiming by, through or under Tenant. Notwithstanding any contrary
provision herein, neither Landlord nor the Landlord Parties shall be liable
under any circumstances for injury or damage to, or interference with, Tenant’s
business, including but not limited to, loss of profits, loss of rents or other
revenues, loss of business opportunity, loss of goodwill or loss of use, in
each case, however occurring.

 

29.9                           Entire Agreement. It is understood and acknowledged
that there are no oral agreements between the parties hereto affecting this
Lease and this Lease supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Landlord to Tenant with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this
Lease.  This Lease and any side letter or
separate agreement executed by Landlord and Tenant in connection with this
Lease and dated of even date herewith contain all of the terms, covenants,
conditions, warranties and agreements of the parties relating in any manner to
the rental, use and occupancy of the Premises, shall be considered to be the
only agreement between the parties hereto and their representatives and agents,
and none of the terms, covenants, conditions or provisions of this Lease can be
modified, deleted or added to except in writing signed by the parties
hereto.  All negotiations and oral
agreements acceptable to both parties have been merged into and are included
herein. There are no other representations or warranties between the parties,
and all reliance with respect to representations is based totally upon the
representations and agreements contained in this Lease.

 

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

 

29.11                     Notices. All notices, demands, statements or
communications (collectively, “Notices”)
given or required to be given by either party to the other hereunder shall be
in writing, shall be sent by United States certified or registered mail,
postage prepaid, return receipt requested, or delivered personally (i) to
Tenant at the appropriate address set forth in Section 9 of the
Summary, or to such other place as Tenant may from time to time designate in a
Notice to Landlord; or (ii) to Landlord at the addresses set forth in Section 9
of the Summary, or to such other firm or to such other place as Landlord may from
time to time designate in a Notice to Tenant. 
Any Notice will be deemed given on the date it is mailed as provided in
this Section 29.11 or upon the date personal delivery is made.  If Tenant is notified of the identity and
address of Landlord’s mortgagee or ground or underlying lessor, Tenant shall
give to such mortgagee or ground or underlying lessor written notice of any
default by Landlord under the terms of this Lease by registered or certified
mail, and such mortgagee or ground or underlying lessor shall be given a
reasonable opportunity to cure such default prior to Tenant’s exercising any
remedy available to Tenant.

 

29.12                     Attorneys’ Fees. If either party commences litigation
against the other for the specific performance of this Lease, for damages for
the breach hereof or otherwise for enforcement of any remedy hereunder, the
prevailing party shall be entitled to recover from the other party such costs
and reasonable attorneys’ fees as may have been incurred, including any and all
costs incurred in enforcing, perfecting and executing such judgment.

 

29.13                     Governing Law. This Lease shall be construed and
enforced in accordance with the laws of the State of

California.

 

29.14                     Brokers. Landlord and Tenant hereby warrant
to each other that they have had no dealings with any real estate broker or
agent in connection with the negotiation of this Lease, excepting only the real
estate brokers or agents specified in Section 11 of the Summary
(the “Brokers”), and that they know of no
other real estate broker or agent (other than the Brokers) who is entitled to a
commission in connection with this Lease. 
Each party agrees to indemnify and defend the other party against and
hold the other party harmless from any and all claims, demands, losses,
liabilities, lawsuits, judgments, costs and expenses (including without
limitation reasonable attorneys’ fees) with respect to any leasing commission
or equivalent compensation alleged to be owing on account of any dealings with
any real estate broker or agent (other than the Brokers) occurring by, through,
or under the indemnifying party.

 

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

 

29.16                     No Representations or Warranties by Landlord. Except as expressly set forth in this Lease to the
contrary, Tenant hereby specifically acknowledges and agrees that (i) Landlord
has made no representations or warranties to Tenant with regard to any of the
following, and (ii) Landlord has no obligation and has made no promises
with regard to any of the following:  (A) the
alteration, remodeling, improvement, renovations, repair or decoration of the
Premises, Building, common areas (including any parking facilities) or any part
thereof, (B) the condition, appearance and configuration of the Premises,
Building, the common areas (including any parking facilities) or any part
thereof, and/or (C) the “Redevelopment,” as that term is set forth in Section 29.17,
below.  However, Tenant hereby
acknowledges that Landlord is currently engaged in, or anticipates that it will
engage during the Lease Term in, such Redevelopment.

 

29.17                     Development &
Redevelopment of the Building and Project.

 

29.17.1            Subdivision. Landlord
reserves the right to further subdivide all or a portion of the Project. Tenant
agrees to execute and deliver, upon demand by Landlord and in the form
requested by Landlord, any additional documents needed to conform this Lease to
the circumstances resulting from such subdivision.

 

17

 

29.17.2            The Other Improvements.
If portions of the Project or property adjacent to the Project (collectively,
the “Other Improvements”) are
owned by an entity other than Landlord, Landlord, at its option, may enter into
an agreement with the owner or owners of any or all of the Other Improvements
to provide (i) for reciprocal rights of access and/or use of the Project
and the Other Improvements, (ii) for the common management, operation,
maintenance, improvement and/or repair of all or any portion of the Project and
the Other Improvements, (iii) for the allocation of a portion of the
Direct Expenses to the Other Improvements and the operating expenses and taxes
for the Other Improvements to the Project, and (iv) for the use or
improvement of the Other Improvements and/or the Project in connection with the
improvement, construction, and/or excavation of the Other Improvements and/or
the Project.  Nothing contained herein
shall be deemed or construed to limit or otherwise affect Landlord’s right to
convey all or any portion of the Project or any other of Landlord’s rights
described in this Lease.

 

29.18                     Hazardous Substances.

 

29.18.1            Definitions. For purposes of this Lease, the
following definitions shall apply:  “Hazardous Material(s)” shall mean any
solid, liquid or gaseous substance or material that is described or
characterized as a toxic or hazardous substance, waste, material, pollutant,
contaminant or infectious waste, or any matter that in certain specified
quantities would be injurious to the public health or welfare, or words of
similar import, in any of the “Environmental Laws,” as that term is defined
below, or any other words which are intended to define, list or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity or reproductive toxicity and
includes, without limitation, asbestos, petroleum (including crude oil or any
fraction thereof, natural gas, natural gas liquids, liquefied natural gas, or
synthetic gas usable for fuel, or any mixture thereof), petroleum products,
polychlorinated biphenyls, urea formaldehyde, radon gas, nuclear or radioactive
matter, medical waste, soot, vapors, fumes, acids, alkalis, chemicals,
microbial matters (such as molds, fungi or other bacterial matters), biological
agents and chemicals which may cause adverse health effects, including but not
limited to, cancers and /or toxicity.  “Environmental Laws” shall mean any and all
federal, state, local  or
quasi-governmental laws (whether under common law, statute or otherwise),
ordinances, decrees, codes, rulings, awards, rules, regulations or guidance or
policy documents now or hereafter enacted or promulgated and as amended from
time to time, in any way relating to (i) the protection of the
environment, the health and safety of persons (including employees), property
or the public welfare from actual or potential release, discharge, escape or
emission (whether past or present) of any Hazardous Materials or (ii) the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of any Hazardous Materials.

 

29.18.2            Compliance with Environmental Laws.   Landlord
covenants that during the Lease Term, Landlord shall comply with all
Environmental Laws in accordance with, and as required by, the TCCs of Article 24
of this Lease. Tenant represents and warrants that, except as herein set forth,
it will not use, store or dispose of any Hazardous Materials in or on the
Premises.  However, notwithstanding the
preceding sentence, Landlord agrees that Tenant may use, store and properly
dispose of commonly available household cleaners and chemicals to maintain the
Premises and Tenant’s routine office operations (such as printer toner and
copier toner) (hereinafter the “Permitted
Chemicals”). Landlord and Tenant acknowledge that any or all of the
Permitted Chemicals described in this paragraph may constitute Hazardous
Materials.  However, Tenant may use,
store and dispose of same, provided that in doing so, Tenant fully complies
with all Environmental Laws.

 

29.18.3            Landlord’s Right of Environmental Audit.  Landlord may, upon
reasonable notice to Tenant, be granted access to and enter the Premises no
more than once annually to perform or cause to have performed an environmental
inspection, site assessment or audit. Such environmental inspector or auditor
may be chosen by Landlord, in its sole discretion, and be performed at Landlord’s
sole cost and expense. To the extent that the report prepared upon such
inspection, assessment or audit, indicates the presence of Hazardous Materials
in violation of Environmental Laws, or provides recommendations or suggestions to
prohibit the release, discharge, escape or emission of any Hazardous Materials
at, upon, under or within the Premises, or to comply with any Environmental
Laws, Tenant shall promptly, at Tenant’s sole expense, comply with such
recommendations or suggestions, including, but not limited to performing such
additional investigative or subsurface investigations or remediation(s) as
recommended by such inspector or auditor. Notwithstanding the above, if at any
time, Landlord has actual notice or reasonable cause to believe that Tenant has
violated, or permitted any violations of any Environmental Law, then Landlord
will be entitled to perform its environmental inspection, assessment or audit
at any time, notwithstanding the above mentioned annual limitation, and Tenant
must reimburse Landlord for the cost or fees incurred for such as Additional
Rent.

 

29.18.4            Indemnifications. Landlord agrees to indemnify,
defend, protect and hold harmless the Tenant Parties from and against any
liability, obligation, damage or costs, including without limitation, attorneys’
fees and costs, resulting directly or indirectly from any use, presence,
removal or disposal of any Hazardous Materials to the extent such liability,
obligation, damage or costs was a result of actions (i) caused by Landlord
or Landlord Parties, or (ii) knowingly permitted by Landlord or Landlord
Parties regardless of the identity of the party taking such action (excepting
Tenant and any Tenant Parties). Tenant agrees to indemnify, defend, protect and
hold harmless the Landlord Parties from and against any liability, obligation,
damage or costs, including without limitation, attorneys’ fees and costs,
resulting directly or indirectly from any use, presence, removal or disposal of
any Hazardous Materials or breach of any provision of this section, to the
extent such liability, obligation, damage or costs was a result of actions
caused or permitted by Tenant or a Tenant Party.

 

[Signature Page Immediately
Follows]

 

18

 

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

 

	
   

  	
  “LANDLORD”:

  
	
   

  	
   

  
	
   

  	
  KILROY
  REALTY, L.P.,

  a Delaware limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Kilroy
  Realty Corporation,

  a Maryland corporation,

  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  “TENANT”:

  
	
   

  	
   

  
	
   

  	
  CARDIUM
  THERAPEUTICS, INC.,

  a Delaware corporation,

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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  Its:

  	
   

  	
   

  
									

 

19

 

EXHIBIT A

 

KILROY
CENTRE DEL MAR

 

OUTLINE OF
PREMISES

 

[ATTACHED]

 

1

 

EXHIBIT B

 

KILROY CENTRE DEL MAR

 

MARKET RENT

 

In connection with Tenant’s exercise of its second option to extend the
Lease Term pursuant to Section 2.2 of the Lease, the 2nd Option Rent shall be determined in
accordance with the TCCs of this Exhibit B.

 

1.                                       Market Rent. 
For purposes of this Lease, the term “Market
Rent” shall mean rent (including additional rent and considering any
“base year” or “expense stop” applicable thereto), including all escalations,
at which tenants, as of the commencement of the second Option Term are,
pursuant to transactions completed within the eighteen (18) months prior to the
first day of such second Option Term, leasing non-sublease, non-encumbered,
non-synthetic, non-equity space (unless such space was leased pursuant to a
definition of “fair market” comparable to the definition of Market Rent)
comparable in size, location and quality to the Premises for a “Comparable
Term,” as that term is defined in this Section 2.2.2 (the “Comparable Deals”), which comparable space
is located in the “Comparable Buildings,” as that term is defined in this Section 2.2.2,
giving appropriate consideration to the annual rental rates per rentable square
foot (adjusting the base rent component of such rate to reflect a net value
after accounting for whether or not utility expenses are directly paid by the
tenant such as Tenant’s direct utility payments provided for in Section 6.1
of this Lease), the standard of measurement by which the rentable square
footage is measured, the ratio of rentable square feet to usable square feet,
and taking into consideration only, and granting only, the following
concessions (provided that the rent payable in Comparable Deals in which the
terms of such Comparable Deals are determined by use of a discounted fair
market rate formula shall be equitably increased in order that such Comparable
Deals will not reflect a discounted rate) (collectively, the “Rent Concessions”):  (a) rental abatement concessions or
build-out periods, if any, being granted such tenants in connection with such
comparable spaces; (b) tenant improvements or allowances provided or to be
provided for such comparable space, taking into account the value of the
existing improvements in the Premises, such value to be based upon the age,
quality and layout of the improvements and the extent to which the same could
be utilized by general office users as contrasted with this specific Tenant, (c) Proposition
13 protection, and (d) all other monetary concessions, if any, being
granted such tenants in connection with such comparable space; provided,
however, that notwithstanding anything to the contrary herein, no consideration
shall be given to the fact that Landlord is or is not required to pay a real
estate brokerage commission in connection with the applicable term or the fact
that the Comparable Deals do or do not involve the payment of real estate
brokerage commissions.  The term “Comparable Term” shall refer to the length
of the lease term, without consideration of options to extend such term, for
the space in question.  In addition, the
determination of the Market Rent shall include a determination as to whether,
and if so to what extent, Tenant must provide Landlord with financial security,
such as a letter of credit or guaranty, for Tenant’s rent obligations during
any Option Term.  Such determination
shall be made by reviewing the extent of financial security then generally
being imposed in Comparable Transactions upon tenants of comparable financial
condition and credit history to the then existing financial condition and
credit history of Tenant (with appropriate adjustments to account for
differences in the then-existing financial condition of Tenant and such other
tenants). If in determining the Market Rent, Tenant is entitled to a tenant
improvement or comparable allowance for the improvement of the Premises (the “Option Term TI Allowance”), Landlord may,
at Landlord’s sole option, elect any or a portion of the following:  (A) to grant some or all of the Option
Term TI Allowance to Tenant in the form as described above (i.e., as an
improvement allowance), and/or (B) to reduce the rental rate component of
the Market Rent to be an effective rental rate which takes into consideration
that Tenant will not receive the total dollar value of such excess Option Term
TI Allowance (in which case the Option Term TI Allowance evidenced in the
effective rental rate shall not be granted to Tenant).  The term “Comparable
Buildings” shall mean the Building and other first-class office
buildings which are comparable to the Building in terms of age (based upon the
date of completion of construction or major renovation as to the building
containing the portion of the Premises in question), quality of construction,
level of services and amenities, size and appearance, and are located in the
Del Mar, California area (the (“Comparable
Area”).

 

2.                                       Tenant’s and Landlord’s Market Rent Calculations.
Concurrently with Tenant’s delivery of its Exercise Notice to Landlord, Tenant
shall deliver to Landlord Tenant’s calculation of the Market Rent (the “Tenant’s 2nd Option Rent Calculation”). 
Landlord shall deliver notice (the “Landlord
Response Notice”) to Tenant on or before the date which is thirty
(30) days after Landlord’s receipt of the Exercise Notice and Tenant’s 2nd Option Rent
Calculation (the “Landlord Response Date”),
stating that (A) Landlord is accepting Tenant’s 2nd Option Rent
Calculation as the Market Rent, or (B) rejecting Tenant’s 2nd Option Rent
Calculation and setting forth Landlord’s calculation of the Market Rent (the “Landlord’s 2nd Option Rent Calculation”). Within
ten (10) business days of its receipt of the Landlord Response Notice,
Tenant may, at its option, accept the Market Rent contained in the Landlord’s 2nd Option Rent
Calculation.  If Tenant does not
affirmatively accept or Tenant rejects the Market Rent specified in the
Landlord’s 2nd Option Rent Calculation, the parties
shall follow the procedure, and the Market Rent shall be determined as set
forth in Section 3, below.

 

3.                                       Determination of Market Rent. In the event
Tenant objects or is deemed to have objected to the Market Rent, Landlord and
Tenant shall attempt to agree upon the Market Rent using reasonable good-faith
efforts.  If Landlord and Tenant fail to
reach agreement within sixty (60) days following Tenant’s objection or deemed
objection to the Landlord’s 2nd Option Rent
Calculation (the “Outside Agreement Date”),
then in connection with the 2nd Option Rent,
Landlord’s 2nd Option Rent Calculation and Tenant’s 2nd Option Rent
Calculation, each as previously delivered to the other party, shall be
submitted to the arbitrators pursuant to the TCCs of this Section 3,
and (ii) in connection with any other contested calculation of market
Rent, the parties shall each make a separate determination of the Market Rent
and shall submit the same to the arbitrators pursuant to the TCCs of this Section 3.
The submittals shall be made concurrently with the selection of the arbitrators
pursuant to this Section 3 and shall be submitted to arbitration in
accordance with Section 3.1 through 3.7 of this Exhibit B, but subject to the
conditions, when appropriate, of Section 2, above.

 

3.1                                 Landlord and
Tenant shall each appoint one arbitrator who shall by profession be a real
estate broker, appraiser or attorney who shall have been active over the five (5) year
period ending on the date of such appointment in the leasing (or appraisal, as
the case may be) of first-class office properties in the Comparable Area.  The determination of the arbitrators shall be
limited solely to the issue of whether Landlord’s or Tenant’s submitted Market
Rent, is the closest to the actual Market Rent as determined by the arbitrators,
taking into account the requirements of

 

1

 

Section 1 of
this Exhibit B. Each such
arbitrator shall be appointed within fifteen (15) days after the Outside
Agreement Date. Landlord and Tenant may consult with their selected arbitrators
prior to appointment and may select an arbitrator who is favorable to their
respective positions. The arbitrators so selected by Landlord and Tenant shall
be deemed (“Advocate Arbitrators”).

 

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

 

3.3                                 The
three arbitrators shall within thirty (30) days of the appointment of the Neutral
Arbitrator reach a decision as to Market Rent and determine whether the
Landlord’s or Tenant’s determination of Market Rent as submitted pursuant to
this Section 3 and Section 2, above, is closest to
Market Rent as determined by the arbitrators and simultaneously publish a
ruling (“Award”) indicating
whether Landlord’s 2nd
Option Rent Calculation or Tenant’s 2nd Option Rent Calculation is
closest to the Market Rent as determined by the arbitrators.  Following notification of the Award, the
Landlord’s 2nd Option
Rent Calculation or Tenant’s 2nd
Option Rent Calculation, whichever is selected by the arbitrators as being
closest to Market Rent shall become the 2nd Option Rent.

 

3.4                                 The Award
issued by the majority of the three arbitrators shall be binding upon Landlord
and

Tenant.

 

3.5                                 If either
Landlord or Tenant fail to appoint an Advocate Arbitrator within fifteen (15)
days after the Outside Agreement Date, either party may petition the presiding
judge of the Superior Court of San Diego County to appoint such Advocate
Arbitrator subject to the criteria in Section 3.1 of this Exhibit B, or if he or she
refuses to act, either party may petition any judge having jurisdiction over
the parties to appoint such Advocate Arbitrator.

 

3.6                                 If the two Advocate Arbitrators
fail to agree upon and appoint the Neutral Arbitrator, then either party may
petition the presiding judge of the Superior Court of San Diego County to
appoint the Neutral Arbitrator, subject to criteria in Section 3.1
of this Exhibit B, or
if he or she refuses to act, either party may petition any judge having
jurisdiction over the parties to appoint such arbitrator.

 

3.7                                 The cost of
arbitration shall be paid by Landlord and Tenant equally.

 

2

 

EXHIBIT C

 

KILROY
CENTRE DEL MAR

 

FORM OF TENANT’S ESTOPPEL
CERTIFICATE

 

The undersigned as Tenant under that certain Office Lease (the “Lease”)
made and entered into as of                   ,
2004 by and between                           
as Landlord, and the undersigned as Tenant, for Premises on the                           floor(s)
of the office building located at                             ,
                            ,
California                       ,
certifies as follows:

 

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

 

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

 

3.                                       Base Rent
became payable on                         .

 

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

 

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

 

6.                                       Tenant shall
not modify the documents contained in Exhibit A without the prior
written consent of Landlord’s mortgagee.

 

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

 

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

 

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

 

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

 

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

 

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

 

13.                                 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.

 

14.                                 To the
undersigned’s knowledge, all tenant improvement work to be performed by
Landlord under the Lease has been completed in accordance with the Lease and
has been accepted by the undersigned and all reimbursements and allowances due
to the undersigned under the Lease in connection with any tenant improvement
work have been paid in full.

 

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

 

Executed at                         on
the        day of                               ,
200  .

 

	
   

  	
   

  	
  “Tenant”:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  ,

  
	
   

  	
   

  	
  a

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
								

 

1

 

OFFICE LEASE

 

KILROY REALTY

 

KILROY CENTRE DEL MAR

 

 

KILROY REALTY, L.P.,

 

a Delaware limited partnership,

 

as Landlord,

 

and

 

CARDIUM THERAPEUTICS, INC.,

 

a Delaware corporation,

 

as Tenant.

 

 

TABLE OF
CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE 1

  	
  PREMISES,
  BUILDING, PROJECT, AND COMMON AREAS

  	
  1

  
	
  ARTICLE 2

  	
  LEASE
  TERM; OPTION TERM(S)

  	
  1

  
	
  ARTICLE 3

  	
  BASE
  RENT

  	
  2

  
	
  ARTICLE 4

  	
  ADDITIONAL
  RENT

  	
  2

  
	
  ARTICLE 5

  	
  USE OF
  PREMISES

  	
  6

  
	
  ARTICLE 6

  	
  SERVICES
  AND UTILITIES

  	
  7

  
	
  ARTICLE 7

  	
  REPAIRS

  	
  8

  
	
  ARTICLE 8

  	
  ADDITIONS
  AND ALTERATIONS

  	
  8

  
	
  ARTICLE 9

  	
  COVENANT
  AGAINST LIENS

  	
  8

  
	
  ARTICLE 10

  	
  INSURANCE

  	
  8

  
	
  ARTICLE 11

  	
  DAMAGE
  AND DESTRUCTION

  	
  9

  
	
  ARTICLE 12

  	
  NONWAIVER

  	
  10

  
	
  ARTICLE 13

  	
  CONDEMNATION

  	
  10

  
	
  ARTICLE 14

  	
  ASSIGNMENT
  AND SUBLETTING

  	
  10

  
	
  ARTICLE 15

  	
  OWNERSHIP
  AND REMOVAL OF TRADE FIXTURES

  	
  12

  
	
  ARTICLE 16

  	
  HOLDING
  OVER

  	
  12

  
	
  ARTICLE 17

  	
  ESTOPPEL
  CERTIFICATES

  	
  12

  
	
  ARTICLE 18

  	
  SUBORDINATION

  	
  13

  
	
  ARTICLE 19

  	
  DEFAULTS;
  REMEDIES

  	
  13

  
	
  ARTICLE 20

  	
  FORCE
  MAJEURE

  	
  14

  
	
  ARTICLE 21

  	
  SECURITY
  DEPOSIT

  	
  14

  
	
  ARTICLE 22

  	
  SUBSTITUTION
  OF OTHER PREMISES

  	
  14

  
	
  ARTICLE 23

  	
  SIGNS

  	
  14

  
	
  ARTICLE 24

  	
  COMPLIANCE
  WITH LAW

  	
  15

  
	
  ARTICLE 25

  	
  LATE
  CHARGES

  	
  15

  
	
  ARTICLE 26

  	
  LANDLORD’S
  RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

  	
  15

  
	
  ARTICLE 27

  	
  ENTRY
  BY LANDLORD

  	
  15

  
	
  ARTICLE 28

  	
  TENANT
  PARKING

  	
  16

  
	
  ARTICLE 29

  	
  MISCELLANEOUS
  PROVISIONS

  	
  16

  

 

i

 

INDEX

 

	
   

  	
  Page(s)

  
	
   

  	
   

  
	
  1st Option Rent

  	
  2

  
	
  2nd Option
  Rent

  	
  2

  
	
  Accountant

  	
  6

  
	
  Additional
  Rent

  	
  2

  
	
  Applicable
  Laws

  	
  15

  
	
  Base
  Rent

  	
  2

  
	
  Base
  Year

  	
  3

  
	
  Condition
  Precedent

  	
  2

  
	
  Control

  	
  12

  
	
  Direct
  Expenses

  	
  3

  
	
  Environmental
  Laws

  	
  18

  
	
  Estimate

  	
  6

  
	
  Estimate
  Statement

  	
  6

  
	
  Estimated
  Excess

  	
  6

  
	
  Excess

  	
  5

  
	
  Exercise
  Notice

  	
  1

  
	
  Expense
  Year

  	
  3

  
	
  Force
  Majeure

  	
  14

  
	
  Hazardous
  Material(s)

  	
  18

  
	
  HVAC

  	
  7

  
	
  Landlord

  	
  iii

  
	
  Landlord
  Parties

  	
  8

  
	
  Lease

  	
  iii

  
	
  Lease
  Commencement Date

  	
  1

  
	
  Lease
  Expiration Date

  	
  1

  
	
  Lease
  Term

  	
  1

  
	
  Lease
  Year

  	
  1

  
	
  Operating
  Expenses

  	
  3

  
	
  Option
  Term

  	
  1

  
	
  Other
  Improvements

  	
  18

  
	
  Permitted
  Transferee

  	
  12

  
	
  Premises

  	
  1

  
	
  Proposition
  13

  	
  4

  
	
  Rent

  	
  2

  
	
  Review
  Period

  	
  6

  
	
  Security
  Deposit

  	
  14

  
	
  Statement

  	
  5

  
	
  Summary

  	
  iii

  
	
  Superior
  Right Holder

  	
  1

  
	
  Tax
  Expenses

  	
  4

  
	
  Tenant

  	
  iii

  
	
  Tenant
  Parties

  	
  8

  
	
  Tenant’s
  Share

  	
  5

  
	
  Termination
  Notice

  	
  2

  
	
  Transfer
  Premium

  	
  11

  

 

iiExhibit
10.13

 

YALE EXCLUSIVE LICENSE
AGREEMENT

 

THIS AGREEMENT by and between YALE
UNIVERSITY, a corporation organized and existing under and by virtue of a
charter granted by the general assembly of the Colony and State of Connecticut
and located in New Haven, Connecticut (“YALE”), and SCHERING AKTIENGESELLSCHAFT
with Offices in Müllerstrasse 178, D-13353, Berlin, Germany (“LICENSEE”) shall
be effective the date of final execution below (“Effective Date”). Each of
LICENSEE on one hand and YALE on the other hand, is referred to a “Party” and
collectively as the “Parties.”

 

In the course of research conducted under
YALE auspices, Dr. William Sessa, in the Department of Pharmacology at YALE
(the “INVENTOR”), produced an Invention entitled “eNOS Mutations Useful For
Gene Therapy and Therapeutic Screening” (the “INVENTION”); and

 

Pursuant to an
assignment by the INVENTOR to YALE of all his right, title and interest in and
to the INVENTION and any resulting patents, YALE is the owner of the INVENTION,
subject to rights reserved by the U.S. government; and

 

LICENSEE wishes to obtain a license to the
INVENTION and any resulting patents, and YALE is willing to grant such a
license to LICENSEE subject to the terms and conditions of this Agreement;

 

Therefore, in consideration of these
statements, the parties agree as follows:

 

ARTICLE  1           DEFINITIONS

 

The following terms used in this Agreement shall be defined as set
forth below:

 

1.1           “AFFILIATE” means any entity or person that
directly or indirectly controls, is controlled by or is under common control
with LICENSEE. For purposes of this definition, “control” means possession of
the power to direct the management of such entity or person, whether through
ownership of more than 50% of voting securities, by contract or otherwise.

 

1.2           “CONFIDENTIAL INFORMATION” means any and all
information, KNOW-HOW, and data, technical or non-technical, which relates to
LICENSED INTELLECTUAL PROPERTY or to the Agreement itself and which is
disclosed to one Party by the other Party during the negotiation of or under
this Agreement.

 

1.3           “DILIGENCE REPORTS” has the meaning set forth
in Section 6.2.

 

1.4           “FIELD” means all cardiovascular-related
therapeutic uses of LICENSED INTELLECTUAL PROPERTY that does not involve small
molecule drug delivery.

 

1

 

1.5           “FIRST COMMERCIAL SALE” means the date
LICENSEE or an AFFILIATE or sublicensee of LICENSEE first sells commercially,
pursuant to a REGULATORY APPROVAL, a LICENSED PRODUCT in United States, Japan or
any country of the European Union; provided however, that where such
first commercial sale has occurred in any country for which pricing, or
reimbursement approval is necessary for widespread sale, then such sale shall
not be deemed a FIRST COMMERCIAL SALE until such pricing or reimbursement
approval has been obtained.

 

1.6           “IND” means an investigational new drug
application required to be filed with the Federal Food, Drug and Cosmetic
Administration pursuant to 21 C.F.R. §312, as such regulations may be amended
from time to time, to test drug products in humans or foreign equivalent.

 

1.7           “KNOW-HOW means information that relates to
the LICENSED INTELLECTUAL PROPERTY and is contained in manuscripts, the Office
of Cooperative Research at Yale invention disclosure form, or other documents
or information which is disclosed by the INVENTORS of the LICENSED INTELLECTUAL
PROPERTY and which is useful, but not patentable.

 

1.8           “LICENSED INTELLECTUAL PROPERTY” means the
INVENTION as covered by the United States or foreign patent application(s) and
patents(s) arising out of the provisional patent application attached as
Appendix “A” and owned by YALE during the term of this Agreement and includes
LICENSED INTELLECTUAL PROPERTY referred to in the The Research Agreement
between LICENSEE and YALE as of the Effective Date (see Appendix B), together
with any continuations, continuations-in-part, and any divisional, or
substitute patents, any reissues or re-examinations of any such applications or
patents, and any extension of the term of any such patent.

 

1.9           “LICENSED METHODS” means any method,
procedure, process or other subject matter, the manufacture, use or sale of
which without a license from YALE, would infringe any ISSUED CLAIM of the
LICENSED INTELLECTUAL PROPERTY.

 

1.10         “LICENSED PRODUCTS” means any products,
apparatus, kit, or component part thereof in the FIELD, the manufacture, use or
sale of which without a license from YALE, would infringe any ISSUED CLAIM of
the LICENSED INTELLECTUAL PROPERTY,

 

1.11         “LICENSED TERRITORY” shall mean the whole
world.

 

1.12         “ISSUED CLAIM” means a claim of an issued
patent or patent application claiming the LICENSED INTELLECTUAL PROPERTY that
has not been held unenforceable, unpatentable or invalid by a decision of a court or government agency of competent
jurisdiction, unappealable or unappealed within the time allowed to appeal, and
which has not been admitted to be invalid or unenforceable through re-issue,
re-examination, disclaimer or otherwise.

 

1.13         “NDA” means a new drug application filed with
the FDA pursuant to 21 C.F.R. 200, as such regulations may be amended for
approval by such agency for the sale of LICENSED PRODUCT in the United States.
Reference to NDA includes, to the extent applicable, an biologies license
application.

 

1.14         “NET SALES: means the amount invoiced by
LICENSEE, an Affiliate or permitted sublicensee for sales of LICENSED PRODUCTS,
as the case may be, to a third party, less deductions for (i) shipping or
freight charges prepaid or allowed, and other charges such as insurance,
relating thereto as is customary in LICENSEE’S normal business practices; (ii)
sales and excise taxes or customs duties paid by the

 

2

 

selling party and any other governmental charge imposed upon the sales
of such LICENSED PRODUCTS, as the case may be; (iii) distributors fees,
rebates, or allowances actually granted, allowed or incurred; (iv) quantity
cash discounts or chargebacks actually granted, allowed or incurred in the
ordinary course of business in connection with the sale of such LICENSED
PRODUCT, as the case may be; (v) allowances or credits to customers, not in
excess of the selling price of such LICENSED PRODUCTS, as the case may be, on
account of governmental requirements, rejection, outdating recalls or for value
of returned trade goods of such LICENSED PRODUCTS, as the case may be; and (vi)
an estimate for bad debts determined in accordance with such Party’s normal
accounting procedures consistently applied within and across its pharmaceutical
operating units, whether or not invoiced to the customer. For the purpose of
calculating LICENSEE’S NET SALES, the Parties recognize that (a) LICENSEE’S
customers may include persons in the chain of commerce who enter into
agreements with LICENSEE as to price even though title to the LICENSED PRODUCT,
as the case may be, does not pass directly from LICENSEE to such customers, and
even thought payment for such LICENSED PRODUCT, as the case may be, is not made
by such customers directly to LICENSEE and (b) in such cases chargebacks paid
by LICENSEE to or thorough a third party (such as a wholesaler) can be deducted
by LICENSEE from gross revenue in order to calculate a Party’s NET SALES. Any
deductions listed above which involve payment by LICENSEE shall be taken as a
deduction against aggregate sales for the period in which the payment is made.
Sales of LICENSED PRODUCTS, as the case may be, between a Party and its
Affiliates solely for research or clinical testing purposes shall be excluded
from the computation of NET SALES.

 

1.15         “PHASE I CLINICAL TRlAL(S)” means a Phase I
clinical trial for a LICENSED PRODUCT as described in 21 C.F.R. §312 (a).

 

1.16         “REGULATORY APPROVAL”, means any approvals,
product and/or establishment licenses, registrations, or authorizations of any
federal, state or local regulatory agency, department, bureau or other
governmental entity, necessary for the manufacture, use, storage, importation,
export, transport or sale of LICENSED PRODUCT in a regulatory jurisdiction.

 

ARTICLE   2   LICENSE
GRANT AND TERM

 

2.1           Subject to all the terms and conditions of
this Agreement, YALE hereby grants to LICENSEE an exclusive, worldwide license,
under the LICENSED INTELLECTUAL PROPERTY within the FIELD, with the right to
grant sublicenses, to make, have made, use, sell, offer to sell, import and
export LICENSED PRODUCTS and to practice any LICENSED METHOD (the “LICENSE”).

 

2.2           The LICENSE is expressly made subject to Yale’s
reservation of the right to make, use and practice the LICENSED INTELLECTUAL
PROPERTY for its own non-commercial purposes. Nothing in this Agreement shall
be construed to grant by implication, estoppel or otherwise any licenses under
patents of YALE other than the LICENSED INTELLECTUAL PROPERTY.

 

2.3           Unless
terminated earlier as provided in Article 12, the LICENSE shall commence on the
date of full execution of this Agreement and the LICENSE, shall automatically
end on the date of the last to expire of the patents described in the LICENSED
INTELLECTUAL PROPERTY.

 

3

 

2.4           If LICENSED INTELLECTUAL PROPERTY exists in
countries outside the U.S., the LICENSE granted in Article 2.1 shall
automatically convert to a paid-up, non-exclusive license, on a country-by-country
basis when the last to expire of the patents as described in the LICENSED
INTELLECTUAL PROPERTY in that country expires,

 

2.5           Appendix B is incorporated and a part of this
Agreement.

 

ARTICLE   3   SUBLICENSES

 

3.1           YALE hereby grants to LICENSEE the right to
sublicense the right to make, use, sell, offer to sell, import or export any
LICENSED PRODUCT and to practice any LICENSED METHOD, provided this Agreement
is in effect and LICENSEE is not in breach.

 

3.2           Any sublicense granted by LICENSEE shall
include substantially the same Definitions, and provisions on Due Diligence,
Confidentiality and Publicity, Reporting Requirements, Indemnification,
Insurance and Warranties, Patent Notices and Use of Yale’s Name: provided
further, such sublicenses do not relieve LICENSEE from the royalty rate
obligations of Article 5 of this Agreement.

 

3.3           If, prior to LICENSEE reaching the “B3”
decision, that is, to file an IND and initiate Phase I CLINICAL TRIALS in the
United States with respect to a LICENSED PRODUCT, LICENSEE enters into a
sublicense with a third party with respect to such LICENSED PRODUCT for such
third party to Solely develop and commercialize such LICENSED PRODUCT, then
LICENSEE shall pay to YALE Thirty (30%) Percent of any lump sum fee, milestone
payment, or advance payment received by LICENSEE from any sublicensee. “Solely”
means that Schering does not retain any rights to develop and commercialize
such LICENSED PRODUCT, that is, for the avoidance of doubt, Schering acts in
the nature of a broker and grant all its rights and responsibilities to a third
party.

 

3.4           LICENSEE shall promptly:

 

a)   provide YALE with a copy of each sublicense
granted by LICENSEE under this Agreement and any amendments to such sublicense
or termination of it;

 

b)   guarantee to pay all payments due YALE from
sublicenses; and

 

c)   summarize and deliver copies of all reports
due to LICENSEE from sublicensees.

 

ARTICLE   4   LICENSE
ISSUE FEE

 

4.1           LICENSEE shall pay to YALE, upon execution of
this Agreement, a non-refundable license issue fee of Fifty Thousand
($50,000.00) Dollars. Said fee is not an advance upon Earned Royalties.

 

4.2           LICENSEE shall pay the following milestone
payments. Milestone payments are paid once only on the first LICENSED PRODUCT
that meets such milestone regardless of the number of LICENSED PRODUCTS, the
number of times a milestone is reached or number of indications for such
LICENSED PRODUCT (S).

 

4.2.1     One Hundred-Fifty Thousand ($150,000.00)
Dollars:

 

4

 

upon entering LICENSEE’S “B2” phase of drug
development (preclinical development dossier and regulatory toxicity).

 

4.2.2     Eight Hundred-Twenty-Five Thousand
($825,000.00) Dollars:

 

upon filing the first 1ND for the first
LICENSED PRODUCT in any one of the United States, or Japan or a country in the
European Union.

 

4.2.3     Nine Hundred Thousand ($900,000.00) Dollars:

 

upon filing first BLA or NDA in the United
States.

 

4.2.4     One Million Five Hundred Thousand
($1,500,000.00) Dollars:

 

upon the FIRST COMMERCIAL SALE of the first
LICENSED PRODUCT.

 

4.2.5     Three Million ($3,000,000.00) Dollars:

 

upon first Ten Million ($10,000,000.00)
Dollars in NET SALES.

 

4.3           Neither the license issue fee of Article 4.1
nor the milestone payments of Article 4.2 shall be credited against royalties
payable under Article 5.  If there is no
ISSUED CLAIM in the LICENSED INTELLECTUAL PROPERTY claiming the LICENSED
PRODUCT in whole or in part, then LICENSEE shall not pay the Milestones stated
in Sections 4.2.4 and 4.2.5.

 

ARTICLE   5   ROYALTIES

 

5.1           Provided there is a ISSUED CLAIM in
such country, as consideration for the license granted under this Agreement
LICENSEE on a country-by-country basis shall pay to YALE an earned royalty of
NET SALES in each calendar year as follows:

 

4% on NET SALES up to $250 million

 

5% on NET SALES greater than $250 million and
less than $500 million

 

6% on NET SALES greater than $500 million

 

5.2           LICENSEE shall pay all royalties accruing to
YALE within thirty (30) days after the end of each calendar quarter (March 31,
June 30, September 30 and December 31) in which NET SALES occur.

 

5.3           During the term of this Agreement, LICENSEE
agrees to pay an annual License Maintenance Fee (“LMF”) commencing on the
January 1 after the date of final execution and every January 1 thereafter
until the January 1 that LICENSEE starts to pay Minimum Royalty Payments under
Article 5.4. The LMF shall be Fifteen Thousand ($15,000.00) Dollars.

 

5.3.1
The LMF shall not be owed YALE in those years in which LICENSEE is funding
Professor Sessa’s laboratory with a minimum of Seventy Five Thousand ($75,000.00)
Dollars in direct costs.

 

5.4           Provided royalties are due pursuant to
Section 5.1 of this Agreement, during the term of this Agreement, LICENSEE
agrees to pay YALE annual Minimum Royalty Payments (“MRP”), commencing on the
first January 1 to occur Six (6) months after the date of the FIRST COMMERCIAL
SALE in the United States. The MRP shall be in the

 

5

 

amount of Fifty Thousand Dollars ($50,000.00). LICENSEE shall continue
to pay the MRP until the end of the term of the last to expire ISSUED CLAIM in
the LICENSED INTELLECTUAL PROPERTY that claims the LICENSED PRODUCT. YALE shall
fully credit each MRP made against any Earned Royalties payable by LICENSEE in
the same year.

 

5.5           If it is established that any ISSUED CLAIM is
dominated by another patent and LICENSEE is required to obtain a license from a
third party in order to practice the LICENSED INTELLECTUAL PROPERTY, then
royalty payment due YALE may be reduced by the royalty and payments made to
such third party, but in no event may LICENSEE reduce the earned royalty on NET
SALES by more than Forty Percent (40%). LICENSEE shall justify any such
deduction to YALE.

 

YALE shall pay any and all taxes levied on account of royalties or
other payments that it receives from LICENSEE under this Agreement. If laws or
regulations require that taxes be withheld, LICENSEE will (i) deduct those
taxes from the remittable royalty, (ii) timely pay the taxes to the proper
taxing authority, and (iii) send proof of payment to YALE within thirty (30)
days of receipt of confirmation of payment from the relevant taxing authority.
LICENSEE agrees to make all lawful and reasonable efforts to minimize such
taxes to YALE.

 

5.6           Payments by LICENSEE under this Agreement
shall be paid to YALE in U.S. dollars by wire transfer of immediately available
funds to an account at a commercial bank designated by YALE. Where payments are
based on NET SALES in countries other than the United States, the amount of
such NET SALES expressed in the currency of each country shall be converted
first into Deutsche Marks, or if the Deutsche Mark shall have been replaced by
the Euro, into Euros, and then into U.S. dollars
at the average exchange rate (calculated at the average of the “bid” and “asked”
exchange rate) for the applicable quarter,
provided, however, that the conversion of the currency in question into
Deutsche Marks or Euros prior to conversion into U.S. dollars shall be for calculation
purposes only, and no additional fee or commission will be incurred as a consequence
of the multiple currency conversions. In determining the average exchange rate
for any quarter, the standard shall be the exchange rate quoted by the Frankfurt
Fixing or any appropriate successor rate fixing procedure then in effect between
European First Class Banks for the applicable currency at 1:00 p.m. on the last
business day of the applicable quarter. If there is no Frankfurt Fixing or
appropriate successor rate fixing procedure in effect as of any date of
determination, the Parties shall agree on another reference rate. If overdue,
the royalties and any other payments due under this Agreement, shall bear
interest until payment at a per annum rate two percent (2%) above the prime
rate in effect at Citibank on the due date. The payment of such interest shall
not foreclose YALE from exercising any other right it may have as a consequence
of the lateness of any payment.

 

ARTICLE   6   DUE
DILIGENCE

 

6.1           LICENSEE shall plan and as soon as
practicable after execution of this Agreement, implement appropriate research
and development, testing and production

 

6

 

efforts directed toward commercialization of the LICENSED PRODUCTS
and/or LICENSED METHODS and shall provide to YALE a copy of such plan (“Plan”),
which is incorporated into this Agreement and attached as “Appendix C” and
which shall be reviewed annually.

 

6.1.1        The Plan shall discuss, in detail, the
LICENSEE’s goals and objectives with regards to pursuing development plans for
the LICENSED INTELLECTUAL PROPERTY using various gene therapy vectors.

 

6.2           Within thirty (30) days of the anniversary of
the date of final execution of this Agreement, LICENSEE shall provide diligence
reports (“DILIGENCE REPORTS”) to YALE, indicating progress and problems to date
in commercialization, and a forecast and schedule of major events required to
market the LICENSED PRODUCTS.

 

6.3           If at any time LICENSEE abandons or suspends
its development or marketing or its intent to market the LICENSED PRODUCTS and
or LICENSED METHODS for a period exceeding ninety (90) days, LICENSEE shall
immediately notify YALE giving reasons and a statement of its intended actions,

 

6.4           If LICENSEE shall fail to use commercially
reasonable efforts to implement the Plan, YALE shall send LICENSEE a written
notice concerning such alleged failure. YALE and LICENSEE shall meet to discuss
such alleged failure. If, after such discussion, LICENSEE is failing to use
commercially reasonable efforts to implement the Plan, then YALE shall be
entitled to terminate this Agreement in accordance with Article 12.5.

 

ARTICLE   7   CONFIDENTIALITY
AND PUBLICITY

 

7.1           YALE and LICENSEE each recognize that the
other’s CONFIDENTIAL INFORMATION constitutes highly valuable information.
Subject to the Parties’ rights and obligations pursuant to this Agreement, YALE
and LICENSEE agree that during the term of this Agreement and for five years
thereafter, they:

 

a)             will keep confidential and will cause their
Affiliates to keep confidential, the other’s CONFIDENTIAL INFORMATION by taking
whatever action it would take to preserve the confidentiality of its own
CONFIDENTIAL INFORMATION; and

 

b)            will only disclose that part of the other’s
CONFIDENTIAL INFORMATION that is necessary for those officers, employees or
agents who need to know to carry out its responsibilities under this Agreement;
and

 

c)             will, not disclose the other’s CONFIDENTIAL
INFORMATION to any third parties except sublicensees under any circumstance
without written permission from the other Party; and

 

d)            will, within sixty (60) days of the request
of the other Party upon termination of this Agreement, return all the
CONFIDENTIAL INFORMATION disclosed to the other Party pursuant to this Agreement
except for one copy which may be retained by the Recipient for monitoring
compliance with Article 7.

 

7.2           The obligations of confidentiality described
above shall not pertain to that part of the CONFIDENTIAL INFORMATION which:

 

7

 

a)   was known to the recipient Party prior to the
disclosure by the disclosing Party; or

b)   is or becomes publicly known through no fault
or omission attributable to the recipient Party; or

c)   is rightfully given to the recipient Party
from sources independent of the disclosing Party; or

d)   is required to be disclosed by law in the
opinion of recipient Party’s General Counsel, but only after prompt written
notice to the owner of the CONFIDENTIAL INFORMATION and opportunity to seek a protective
order or to agree to such disclosure,

 

7.2           Publicity. Except as required by law, neither Party may disclose the terms of
this Agreement without the written consent of the other Party.

 

ARTICLE   8   REPORTS,
RECORDS AND INSPECTIONS

 

8.1           LICENSEE shall keep, and shall cause each of
its Affiliates and sublicensees to keep full and accurate books of account
containing all particulars that may be necessary for the purpose of calculating
NET SALES and all payments to YALE. Such books of account shall be kept in
their principal place of business and, with all necessary supporting data,
shall for three (3) years next following the end of the calendar year to which
each shall pertain be open for inspection by an independent certified
accountant selected by YALE and reasonable acceptable to LICENSEE upon
reasonable notice during normal business hours at YALE’S expense for the sole
purpose of verifying payments or compliance with this Agreement, but in not
event more than once a each calendar year. All information and data shall be
use only for the purpose of verifying payments. In the event that such
inspection shall indicate that in any calendar year the payments that should
have been paid by LICENSEE are at least five (5%) percent greater than those
that were actually paid by LICENSEE, then LICENSEE shall pay the cost of such
inspection. All underpayments and overpayments are immediately due and payable.

 

8.2           LICENSEE and its sublicensees shall keep and
maintain complete and accurate records and books containing an accurate
accounting of all data in sufficient detail to enable verification of EARNED
ROYALTIES and other payments under this Agreement. LICENSEE shall preserve such
book and record for THREE (3) years after the sales recorded were actually
made. Such books and records shall be open to inspection by YALE or an
independent certified public accountant, at YALE’s expense, during normal business
hours upon TEN (10) days prior written notice, for the purpose of verifying the
accuracy of the reports and computations rendered by LICENSEE.

 

ARTICLE   9   PATENT
PROTECTION

 

9.1           The patent applications covering the
INVENTION and the dates they were filed are listed in Appendix “A.” It is
understood that as of the date of final execution of this Agreement no patent
protection exists in the U.S. or any foreign country but only the potential to
realize the same.

 

8

 

9.2           With regards to the United States, YALE, at
LICENSEE’S request, shall file patent applications and continuations-in-part in
YALE’S name and at LICENSEE’S expense, covering the INVENTION and thereafter,
YALE shall prosecute such patent applications. YALE shall consult with LICENSEE
as to the preparation, filing, prosecution and maintenance of patent applications
for the INVENTION and any patents resulting therefrom and shall promptly
furnish LICENSEE with copies of documents relevant to such consultation. Within
thirty (30) days of receiving such documents from YALE or as soon as reasonably
practical in the event a response is required imminently, LICENSEE will provide
YALE with comments or suggestions relating to such documents. YALE will give
due consideration to any modifications or additions suggested by LICENSEE. Any
and all U.S. patent applications, continuations-in-part, and resulting patents
claiming the INVENTION where inventors are solely employees of YALE shall remain
the property of YALE.  All other U.S.
patents, patent applications, continuations and continuations-in-part that are
subject to this Agreement and arising out of the Research Agreement shall be
owned pursuant to the terms stated in Section 8 of the Research Agreement.

 

9.3           With regards to all intended international
filings, all conversions of international applications according to the Patent
Cooperation Treaty into national or regional patent applications, and all
filings of translations of a granted European patent in the national patent
offices of the member states of the European Patent Convention in relation to
the Licensed Intellectual Property, YALE shall inform LICENSEE as soon as
possible but in no event less than thirty (30) days prior to such intended
international filings, conversions or national filings. LICENSEE will notify
YALE if it wishes YALE to prosecute such Licensed Intellectual Property in the
following group of countries at LICENSEE’S expense: United States, Japan,
Australia, Canada, Europe (only member states of the European Patent
Convention). Upon such notification, YALE agrees to file patent applications in
such countries. In addition, if requested by LICENSEE in writing, YALE shall
file in additional countries designated by LICENSEE, provided that LICENSEE
agrees to pay for the costs associated with such additional filings. If LICENSEE
chooses not to proceed with the filing and/or prosecution of any of the Licensed
Intellectual Property in any country of the countries listed above, it shall
notify YALE not less than thirty (30) days prior to the day on which LICENSEE
intends such patent filing and/or prosecution to cease, or as soon as
reasonably practical in the event a response is required before eminently. In
such case, LICENSEE shall not be obligated to pay on-going patent expenses for
such Licensed Intellectual Property in such country, and LICENSEE’S rights
under this Agreement may be terminated, solely with respect to that country
pursuant to Section 12.5.

 

In the event YALE wishes to file and/or prosecute the Licensed
Intellectual Property in any country other than the countries listed above, and
LICENSEE does not agree to file, YALE may file at its own expense and LICENSEE
shall not be obligated to pay on-going patent expenses for such patent
application or patent in such country. In such case, LICENSEE’S rights under
this Agreement may by terminated, solely with respect to that country pursuant
to Section 12.5. For the avoidance of any doubt, LICENSEE acknowledges that
YALE, at its sole discretion, may cease prosecution of such patent application
or maintenance of any patent resulting therefrom in such country at any time.
Upon the filing of such patent application, YALE shall notify LICENSEE that
Yale has filed a patent application in such
country. YALE shall have the right to license its rights in such patent
application and/or patent in such country to a third party, provided however,
that YALE agrees that during the seven (7) years period from the filing of the

 

9

 

patent application in such country, before accepting an offer from a
third party, YALE will give LICENSEE the opportunity to obtain a license to
such patent application and/or patent at the same financial compensation that a
third party is willing to pay to YALE, YALE shall inform LICENSEE of such offer
and shall allow LICENSEE sixty (60) days in which to elect whether to license
YALE’S interest in such rights under the terms of such offer.

 

9.4           The costs mentioned in Articles 9.2 and 9.3
shall include, but are not limited to any taxes, annuities, working fees,
maintenance fees, renewal and extension charges. Payment of such costs shall be
made, at YALE’s option, either directly to patent counsel selected by YALE and
reasonably acceptable to LICENSEE. In either case, LICENSEE shall make payment
directly to the appropriate patent counsel within Thirty (30) Days of receiving
their invoice. If LICENSEE fails to make payment within the thirty day period, LICENSEE
shall be obligated to pay any reasonable late charges incurred by YALE as a result
of such delay.

 

9.5           All U.S. patent applications covering the
INVENTION shall be prepared, prosecuted, filed and maintained by independent
patent counsel chosen by YALE and reasonably acceptable to LICENSEE. Said
independent patent counsel shall be ultimately responsible to LICENSEE for
patents, patent applications, continuations and continuations-in-part that
disclose and claim the INVENTION. YALE shall instruct patent counsel to keep
both YALE and LICENSEE fully informed of the progress of all such patent
applications and patents, and to give both YALE and LICENSEE reasonable opportunity
to comment on the type and scope of useful claims and the nature of supporting
disclosures. YALE will not finally abandon any patent application for which LICENSEE
is bearing expenses without LICENSEE’s written consent. The Party directing
prosecution shall have no liability to the other Party for damages, whether direct,
indirect or incidental, consequential or otherwise, allegedly arising from its
good faith decisions, actions and omissions in connection with such
prosecution, except as provided in Article 9.

 

9.6           LICENSEE shall apply, and shall require
sublicensees to apply, the patent marking notices required by the law of any
country where LICENSED PRODUCTS are made, sold or used, to the extent feasible
and practical, and in accordance with the applicable patent laws of that
country.

 

9.7           LICENSEE accepts responsibility for costs
incurred by YALE as of the Effective Date for the conversion of U.S. patent
#60/129550 originally filed April 16, 1999, in an amount of not to exceed
$15,000. LICENSEE shall pay such amount not later than thirty (30) days
following receipt of an invoice from YALE.

 

ARTICLE   10   INFRINGEMENT AND LITIGATION

 

10.1         Each Party shall promptly notify the other in
writing in the event that it obtains knowledge of infringing activity by third
parties, is sued or threatened with an infringement suit in any country as a
result of activities that concern the LICENSED INTELLECTUAL PROPERTY.

 

10.2         a)             LICENSEE shall have the sole obligation to
defend the LICENSED INTELLECTUAL PROPERTY against infringement or interference
by third parties. This

 

10

 

obligation includes bringing any legal action
for infringement and defending any counter claim of invalidity or action of a
third party for declaratory judgment for non-infringement or non-interference.
LICENSEE may settle such suits solely in its own name and solely at its own
expense and through counsel of its own selection. LICENSEE shall bear the
expense of such legal actions and shall obtain all the benefits from it. Any
recoveries with respect to such patent infringement shall be divided as
follows: (i) LICENSEE shall recover its expenses; (ii) YALE shall receive a
royalty percentage as specified in Article 5; and (iii) LICENSEE shall retain
any remaining amount as revenue.

 

b)            Except for providing reasonable assistance,
at the request and expense of LICENSEE, YALE shall have no obligation regarding
the legal actions described in Article 10.2 unless required to participate by
law. However, YALE shall have the right to participate in any such action
through its own counsel and at its own expense.

 

c)             In the event LICENSEE fails to initiate or
participate in the actions described in Article 10.2(a) within six (6) months
of written notice from YALE. YALE shall have the right to initiate such legal
action to uphold the LICENSED INTELLECTUAL PROPERTY and, provided YALE
initiates such action in such country, YALE may terminate the LICENSEE’s
license in such country.

 

10.3         In the event LICENSEE is permanently enjoined
from exercising its license right granted under this Agreement pursuant to an
infringement action brought by a third party, or if both LICENSEE and YALE
elect not to undertake the defense or settlement of a suit alleging
infringement for a period of six (6) months from notice of such suit, then the
LICENSEE shall have the right to terminate this Agreement in the country where
the suit was filed with respect to the licensed patent following thirty (30)
days written notice to YALE and in accordance with the terms of Article 12.

 

ARTICLE   11   USE
OF YALE’s AND LICENSEE’S NAMES

 

11.1         LICENSEE shall not use the name “Yale” or “Yale
University”, nor any adaptation of it, nor the names of any of its employees,
for any purpose without prior written consent obtained from YALE or said
employee in each instance, except that LICENSEE may state that it is licensed
by YALE under one or more of the patents and/or applications comprising the
LICENSED INTELLECTUAL PROPERTY. YALE shall not use the name of “Schering” or “Berlex”
nor any adaptation of such names, nor the names of any of its employees, for
any purpose without prior written consent obtained from LICENSEE or said
employee in each instance.

 

ARTICLE   12   TERMINATION

 

12.1         Upon termination of this Agreement, for
material breach by LICENSEE as determined by a final judgement of a court of
competent jurisdiction all rights and licenses granted to LICENSEE under the
terms of this Agreement are terminated and YALE has the option to terminate any
sublicense granted by LICENSEE. Upon such termination LICENSEE shall cease to
manufacture LICENSED PRODUCTS and within sixty (60) days of the effective date
of termination LICENSEE shall return to YALE:

 

a)             the last report, and

 

b)            all payments prorated to the date of
termination.

 

11

 

LICENSEE shall have the right to sell all LICENSED PRODUCT in inventory
at the time of termination. All such sales of LICENSED PRODUCT shall be subject
to the terms of this Agreement, as in effect prior to termination.

 

12.2         Termination of this Agreement shall not
affect any rights or obligations accrued prior to the effective date of such
termination and specifically LICENSEE’s obligation to pay all royalties and other
payments specified by Article 5. Articles 1, and 7, the preservation and
inspection obligations of Article 8, Article 11, and the indemnification obligations
of Article 13 all survive any such termination.

 

12.3         The rights provided in this Article 12 shall
be in addition and without prejudice to any other rights which the parties may
have with respect to any breach or violations of the provisions of this
Agreement.

 

12.4         Waiver by either Party of one or more
defaults or breaches shall not deprive such Party of the right to terminate
because of any subsequent default or breach.

 

12.5         YALE may terminate this Agreement, and such
termination shall be automatically effective at the end of sixty (60) days
written notice or the period specified below, in the event LICENSEE:

 

a)             fails to make any payment whatsoever due and
payable pursuant to this Agreement unless LICENSEE shall make all such payments
within said sixty (60) day period; provided that (i)YALE has sent
LICENSEE a prior written notice that such payment is due and payable, and
(ii)YALE intends to exercise its right to terminate pursuant to this Section
12.5, and (iii) LICENSEE fails to cure within thirty (30) days of the end of
such sixty (60) day period or

 

b)            shall cease to carry on its business, then
this Agreement also terminates automatically without any notice to LICENSEE, or

 

c)             fails to have adequate insurance as described
in Article 13, or

 

d)            commits a material breach as determined by a
final judgement of a court of competent jurisdiction

 

12.6          LICENSEE shall have the right to terminate
this Agreement:

 

a)             at any time on six (6) months notice to YALE
provided LICENSEE is not in breach and upon payment of all amounts due YALE
throughout the effective date of termination. Upon written notice from YALE,
LlCENSEE shall provide YALE with any and all data prepared in development of
the LICENSED PRODUCTS or METHODS.

 

ARTICLE   13   INDEMNIFICATION;
INSURANCE; NO WARRANTIES

 

13.1         LICENSEE shall defend, indemnify and hold
harmless YALE, its, trustees, directors, officers, employees, and agents
against any and all claims, demands, damages, losses and expenses of any
nature, including legal expenses and attorney’s fees arising out of:

 

a)             the death, personal injury, or illness of any
person or out of damage to any property resulting from

 

b)            the production, manufacture, sale, use,
lease, or other disposition or consumption or advertisement of the LICENSED
PRODUCTS by LICENSEE or other transferees; or in connection with

 

12

 

c)             any
statement, representation or warranty of LICENSEE or other transferees with respect to the LICENSED
PRODUCTS.

 

13.2         LICENSEE is self insured and/or maintains
third party liability insurance adequate to cover liability claims that arise
out of manufacture, use or sale of LICENSED PRODUCTS.

 

13.3         a)             YALE makes NO REPRESENTATIONS or WARRANTIES
that any LICENSED INTELLECTUAL PROPERTY claims, issued or pending, are valid,
or that the manufacture, use, sale or other disposal of the LICENSED PRODUCTS
does NOT infringe upon any patent or other rights NOT vested in YALE.

 

b)            YALE disclaims all warranties whatsoever with
respect to the LICENSED INTELLECTUAL PROPERTY and the LICENSED PRODUCTS either
express or implied, including, but not limited to warranties or merchantability
or fitness for a particular purpose. LICENSEE shall make no statements,
representation or warranties whatsoever to any third parties which are
inconsistent with such disclaimer by YALE.

 

ARTICLE   14   NOTICES,
PAYMENTS

 

14.1         Any payment, notice or other communication
required by this Agreement shall be sent by Registered or Certified first class
U.S. Mail, postage prepaid, and shall be deemed delivered if sent to the
following addresses or to such other address as such Party shall designate by
written notice to the other Party:

 

	
  FOR YALE:

  	
   

  	
  FOR LICENSEE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Director

  	
   

  	
  Schering
  Aktiengesellschaft

  
	
  YALE
  UNIVERSITY

  	
   

  	
  13342
  Berlin

  
	
  Office
  of Cooperative Research

  	
   

  	
  Germany

  
	
  P.O.
  Box 208366

  	
   

  	
  Attention:
  Legal Department

  
	
  155
  Whitney Avenue, Room 210

  	
   

  	
   

  
	
  New Haven, CT 06520-8336

  	
   

  	
  Berlex
  Biosciences

  
	
   

  	
   

  	
  15049
  San Pablo Avenue

  
	
   

  	
   

  	
  Richmond,
  CA 94804

  
	
   

  	
   

  	
  Attention:
  Legal Department

  

 

13

 

ARTICLE   15  
LAWS AND REGULATIONS

 

15.1         This Agreement shall be governed by and in
accordance with the laws of the state of Connecticut except where the federal
laws of the United States are applicable and have precedence.

 

15.2         LICENSEE shall comply with all foreign and
United States federal, state, and local laws, regulations, rules and orders
applicable to the testing, production, transportation, packaging, labeling,
export, sale and use of the LICENSED PRODUCTS. In particular, LICENSEE shall be
responsible for assuring compliance with all U.S. export laws and regulations
applicable to this license and LICENSEE’s activities under this Agreement.

 

ARTICLE   16   MISCELLANEOUS

 

16.1         Binding Effect.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective legal representatives,
successors and permitted assigns.

 

16.2         Entire
Agreement.  This Agreement constitutes
the entire agreement of the parties relating to the LICENSED INTELLECTUAL
PROPERTY, and all prior representations and understandings are superseded by
this Agreement.

 

16.3         Severability.  The provisions of this Agreement shall be
deemed separable. If any part of this Agreement is rendered void, invalid, or
unenforceable, such shall not affect the validity or enforceability of the
remainder of this Agreement unless the part or parts which are void, invalid or
unenforceable shall substantially impair the value of the entire Agreement as
to either Party.

 

16.4         Headings.  Paragraph headings are inserted for
convenience of reference only and do not form a part of this Agreement.

 

16.5         No Third Party
Beneficiaries.  No Person not a party to
this Agreement, including any employee of any Party to this Agreement, shall
have or acquire any rights by reason of this Agreement. Nothing contained in
this Agreement shall be deemed to constitute the parties partners with each
other or any third party.

 

16.6         Amendment;
Assignment. This Agreement may not be amended except by written agreement
executed by each of the parties, and shall not be assigned by LICENSEE except
with the written consent of YALE; provided however, LICENSEE may perform some
or all of its obligations under this Agreement through Affiliates, provided
however, LICENSEE shall remain responsible for and be a guarantor of the
performance by its Affiliates and shall cause its Affiliates to comply with the
provisions of this Agreement in connection with such performance. LICENSEE
shall not permit any of its AFFILIATES to commit any act (including any act of
omission) that LICENSEE is prohibited hereunder from committing directly.

 

14

 

16.7         Surviving Rights. The
rights and obligations set forth in this Agreement shall extend beyond the term
or termination of the Agreement only to the extent expressly provided for
herein, or the extent that the survival of such rights or obligations are
necessary to permit their complete fulfillment or dischange.

 

IN WITNESS to their Agreement the parties have caused this Agreement to
be executed in duplicate originals by their duly authorized representatives.

 

	
  Yale University

  	
  Schering AG

  
	
  /s/ Jon Soderstrom

  	
   

  	
   

  
	
  Jon Soderstrom

  	
   

  	
   

  
	
  Managing Director,
  [ILLEGIBLE]

  	
   

  	
   

  
	
   

  	
  Name

  	
  /s/ [ILLEGIBLE]

  
	
  Cooperative Research 

  	
  Title

  	
   

  
	
  Date

  	
  6/29/00

  	
   

  	
  Date

  	
    09/08/2000

  
	
   

  	
   

  	
   

  
	
   

  	
  Name

  	
  /s/ [ILLEGIBLE]

  
	
   

  	
  Title

  	
   

  
	
   

  	
  Date

  	
    09/08/2000

  
							

 

15

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