Document:

Exh 10.1 License and Collaboration Agreement

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

Exhibit 10.1

LICENSE AND COLLABORATION AGREEMENT
By and Between
IPSEN PHARMA SAS
and
LEXICON PHARMACEUTICALS, INC

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

TABLE OF CONTENTS

	
			
	Article 1
	Definitions
	1

	Section 1.1
	“Accounting Standards”
	1

	Section 1.2
	“Affiliate”
	1

	Section 1.3
	“Bankruptcy Code”
	2

	Section 1.4
	“Business Day”
	2

	Section 1.5
	“Carcinoid Field”
	2

	Section 1.6
	“cGMP”
	2

	Section 1.7
	“Change of Control”
	2

	Section 1.8
	“Commercialization Plan”
	2

	Section 1.9
	“Commercialization Program”
	2

	Section 1.10
	“Compound”
	2

	Section 1.11
	“Confidential Information”
	3

	Section 1.12
	“Control” or “Controlled”
	3

	Section 1.13
	“Cover”, “Covering” or “Covered”
	3

	Section 1.14
	“Development Plan”
	3

	Section 1.15
	“Development Program”
	3

	Section 1.16
	“Diligent Efforts”
	3

	Section 1.17
	“Drug Master File”
	4

	Section 1.18
	“EEA”
	4

	Section 1.19
	“EMA”
	4

	Section 1.20
	“EU”
	4

	Section 1.21
	“Executive Officers”
	4

	Section 1.22
	“FDA”
	4

	Section 1.23
	“Field”
	4

	Section 1.24
	“Financial Year”
	4

	Section 1.25
	“First Commercial Sale”
	5

	Section 1.26
	“FTE”
	5

	Section 1.27
	“FTE Rate”
	5

	Section 1.28
	“GCP”
	5

	Section 1.29
	“Generic Product”
	5

	Section 1.30
	“GLP”
	6

	Section 1.31
	“IND”
	6

	Section 1.32
	“INN” or “International Nonproprietary Name”
	6

	Section 1.33
	“Initial Indication”
	6

	Section 1.34
	“Ipsen Competitor”
	6

	Section 1.35
	“Ipsen Patent Rights”
	6

	Section 1.36
	“Ipsen Technology”
	6

	Section 1.37
	“Joint Technology”
	7

	Section 1.38
	“Know-How”
	7

	Section 1.39
	“Laws”
	7

	Section 1.40
	“Lexicon Territory”
	7

	Section 1.41
	“Licensed Intellectual Property”
	7

	Section 1.42
	“Licensed Patent Rights”
	7

i

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

	
			
	Section 1.43
	“Licensed Product”
	8

	Section 1.44
	“Licensed Technology”
	8

	Section 1.45
	“Licensed Territory”
	8

	Section 1.46
	“Licensed Trademark”
	8

	Section 1.47
	“LX1033”
	8

	Section 1.48
	“MAA”
	8

	Section 1.49
	“Major EU Country”
	8

	Section 1.50
	“Manufacturing Costs”
	8

	Section 1.51
	“Marketing Authorization”
	9

	Section 1.52
	“Net Sales”
	9

	Section 1.53
	“New Indication”
	11

	Section 1.54
	“Party”
	11

	Section 1.55
	“Patent Right”
	11

	Section 1.56
	“Phase 3 Study”
	11

	Section 1.57
	“Phase 4 Study”
	11

	Section 1.58
	“Person”
	11

	Section 1.59
	“Post Approval Study”
	11

	Section 1.60
	“Post-Marketing Commitment Study”
	12

	Section 1.61
	“Regulatory Approval”
	12

	Section 1.62
	“Regulatory Authority”
	12

	Section 1.63
	“Regulatory Documentation”
	12

	Section 1.64
	“Sponsor”
	12

	Section 1.65
	“Study Cost Offset Amount”
	12

	Section 1.66
	“[**]”
	12

	Section 1.67
	“Third Party”
	13

	Section 1.68
	“Third Party Acquirer”
	13

	Section 1.69
	“TPH”
	13

	Section 1.70
	“US” or “USA”
	13

	Section 1.71
	“Valid Claim”
	13

	Section 1.72
	“WIPO”
	13

	Section 1.73
	“Additional Definitions”
	13

	Article 2
	Governance; Decision-Making
	15

	Section 2.1
	Joint Steering Committee
	15

	Section 2.2
	Joint Development Committee
	19

	Section 2.3
	Joint Commercialization Committee
	21

	Section 2.4
	Executive Steering Committee
	23

	Article 3
	Development
	23

	Section 3.1
	Overview; Development Plan
	23

	Section 3.2
	Responsibilities for the Conduct of Development
	24

	Section 3.3
	Responsibilities for Clinical Study Costs
	25

	Section 3.4
	Failure to Perform by Lexicon; Ipsen Step-In Right
	26

	Section 3.5
	Access and Audit Rights
	27

	Section 3.6
	Manufacture and Supply for Development
	27

	Article 4
	Regulatory Matters
	27

	Section 4.1
	Overview; Regulatory Filings
	27

ii

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

	
			
	Section 4.2
	Communications with Regulatory Authorities
	29

	Section 4.3
	Product Withdrawals and Recalls
	30

	Section 4.4
	Pharmacovigilance; Safety Data Reporting
	31

	Section 4.5
	Regulatory Compliance
	31

	Article 5
	Commercialization; Manufacture and Supply
	32

	Section 5.1
	Overview; Commercialization Plan
	32

	Section 5.2
	Manufacture and Supply
	32

	Section 5.3
	Complaints
	34

	Section 5.4
	Product Labelling
	34

	Article 6
	Diligence
	34

	Section 6.1
	Diligence Obligations
	34

	Section 6.2
	Reports
	34

	Article 7
	Grant of Licenses
	35

	Section 7.1
	Lexicon License Grants
	35

	Section 7.2
	Ipsen License Grants
	36

	Section 7.3
	Retained Rights
	36

	Section 7.4
	Disclosure of Technology
	37

	Section 7.5
	No Implied Licenses
	37

	Section 7.6
	Section 365(n) of the Bankruptcy Code
	37

	Section 7.7
	[**]
	37

	Section 7.8
	Exclusivity & Non-Compete
	38

	Article 8
	Financial Provisions
	38

	Section 8.1
	Upfront Payment
	38

	Section 8.2
	Development and Regulatory Milestones
	38

	Section 8.3
	Sales Milestones
	39

	Section 8.4
	Royalties
	41

	Section 8.5
	Development Costs
	43

	Section 8.6
	Recordkeeping; Audit Rights
	43

	Section 8.7
	Method of Payment
	44

	Section 8.8
	Invoices
	45

	Section 8.9
	Late Payments
	45

	Section 8.10
	Tax Withholding
	45

	Section 8.11
	Blocked Payments
	45

	Article 9
	Intellectual Property Ownership, Protection and Related Matters
	46

	Section 9.1
	Ownership of Inventions
	46

	Section 9.2
	Prosecution and Maintenance of Patent Rights
	46

	Section 9.3
	Third Party Infringement
	48

	Section 9.4
	Claimed Infringement
	50

	Section 9.5
	Patent Invalidity Claim
	50

	Section 9.6
	Certification Under Drug Price Competition and Patent Restoration Act
	50

	Section 9.7
	Patent Marking
	50

	Section 9.8
	Trademark
	50

	Article 10
	Confidentiality
	52

	Section 10.1
	Confidential Information
	52

	Section 10.2
	Employee, Director, Consultant and Advisor Obligations
	53

iii

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

	
			
	Section 10.3
	Publicity
	53

	Section 10.4
	Other Disclosures
	54

	Section 10.5
	Publications
	55

	Section 10.6
	Clinical Trial Registry
	55

	Section 10.7
	Confidentiality Term
	56

	Article 11
	Representations and Warranties
	56

	Section 11.1
	Representations and Warranties of Both Parties
	56

	Section 11.2
	Representations and Warranties of Lexicon
	56

	Section 11.3
	Representations and Warranties of Ipsen
	58

	Section 11.4
	Mutual Covenants
	58

	Section 11.5
	Covenants of Ipsen
	58

	Section 11.6
	Covenants of Lexicon
	59

	Section 11.7
	DISCLAIMER
	59

	Article 12
	Term and Termination
	59

	Section 12.1
	Term
	59

	Section 12.2
	Survival of Licenses
	59

	Section 12.3
	Termination For Material Breach
	60

	Section 12.4
	Termination by Ipsen upon Lexicon Change of Control or Sale of TPH Business
	60

	Section 12.5
	Termination by Ipsen for Convenience
	60

	Section 12.6
	Termination by Lexicon for Ipsen Patent Challenge
	61

	Section 12.7
	Termination by Ipsen other than Lexicon Uncured Breach
	61

	Section 12.8
	Effects of Termination by Lexicon for Ipsen Uncured Breach or Ipsen Patent Challenge or by Ipsen upon a Change of Control, for Convenience or Other Than Lexicon Uncured Breach
	61

	Section 12.9
	Effects of Termination by Ipsen for Convenience
	63

	Section 12.10
	Survival
	64

	Article 13
	Dispute Resolution
	64

	Section 13.1
	Disputes; Executive Officers
	65

	Section 13.2
	Arbitration
	65

	Article 14
	Indemnification
	67

	Section 14.1
	Indemnification by Ipsen
	67

	Section 14.2
	Indemnification by Lexicon
	68

	Section 14.3
	Procedure
	68

	Section 14.4
	Insurance
	69

	Section 14.5
	Limitation of Liability
	69

	Article 15
	Miscellaneous Provisions
	70

	Section 15.1
	Governing Law
	70

	Section 15.2
	Assignment
	70

	Section 15.3
	Entire Agreement; Amendments
	70

	Section 15.4
	Notices
	70

	Section 15.5
	Exports
	71

	Section 15.6
	Force Majeure
	71

	Section 15.7
	[**]
	72

	Section 15.8
	Performance by Affiliates and Sublicensees
	72

	Section 15.9
	Independent Contractors
	72

iv

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

	
			
	Section 15.10
	Construction
	72

	Section 15.11
	Interpretation
	72

	Section 15.12
	Headings
	73

	Section 15.13
	English Language
	73

	Section 15.14
	No Implied Waivers; Rights Cumulative
	73

	Section 15.15
	Severability
	73

	Section 15.16
	Execution in Counterparts
	73

Exhibits

Exhibit 1.10     -    Description of Telotristat Etiprate
Exhibit 1.14    -    Initial Development Plan
Exhibit 1.42    -    Licensed Patent Rights
Exhibit 1.46    -    Licensed Trademark
Exhibit 1.47    -    Description of LX1033

v

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

LICENSE AND COLLABORATION AGREEMENT
This License and Collaboration Agreement (this “Agreement”), dated the 21st day of October, 2014 (the “Effective Date”), is by and between Ipsen PHARMA SAS, a French corporation with its principal offices at 65 Quai Georges Gorse, Boulogne-Billancourt 92100, France (“Ipsen”), and Lexicon Pharmaceuticals, Inc., a Delaware corporation with its principal offices at 8800 Technology Forest Place, The Woodlands, Texas 77381 U.S.A. (“Lexicon”).  
Introduction
WHEREAS Lexicon is engaged in the development of, and owns and controls intellectual property rights to, the Compound (as defined herein);
WHEREAS Ipsen and Lexicon are interested in collaborating in the development of the Compound and Licensed Products (as defined herein) and in the commercialization of Licensed Products in the Licensed Territory (as defined herein); 
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Ipsen and Lexicon agree as follows:
Article 1
Definitions
For purposes of clarity, when used in this Agreement, each of the following terms shall have the meanings set forth in this Article 1:
Section 1.1    “Accounting Standards”
means, with respect to a Party or its Affiliates or its or their sublicensees, United States generally accepted accounting principles, or International Financial Reporting Standards, in each case, as used by the applicable Party for its financial reporting and consistently applied.
Section 1.2    “Affiliate”
means, with respect to a Person, any other Person that controls, is controlled by, or is under common control with such first Person.  For purposes of this Section 1.2, “control” shall refer to (a) in the case of a Person that is a corporate entity, direct or indirect ownership of fifty percent (50%) or more of the stock or shares having the right to vote for the election of directors of such Person, or (b) in the case of a Person that is not a corporate entity, the possession, directly or indirectly, of the power to direct, or cause the direction of, the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise.  Notwithstanding the foregoing, Invus, L.P., a Bermuda limited partnership, and Affiliates of Invus, L.P. that would not otherwise be Affiliates of Lexicon but for Invus, L.P.’s ownership of Lexicon’s capital stock, shall be deemed not to be Affiliates of Lexicon.
Section 1.3    “Bankruptcy Code”
means the U.S. Bankruptcy Code, 11 U.S.C. §§ 101-1330, as amended, and similar laws governing bankruptcy and insolvency in countries outside the United States.

1

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

Section 1.4    “Business Day”
means a day on which banking institutions in New York, New York, USA and Paris, France are open for business, excluding any Saturday or Sunday.
Section 1.5    “Carcinoid Field”
means the diagnosis, treatment and/or prevention of carcinoid syndrome and/or asymptomatic and symptomatic, functional and non-functional gastro-enteropancreatic neuroendocrine tumors (“GEPNET”) and their complications in humans.
Section 1.6    “cGMP” 
means all applicable standards relating to manufacturing practices for fine chemicals, intermediates, bulk products and/or finished pharmaceutical products, including all applicable requirements detailed in the FDA’s current Good Manufacturing Practices regulations, 21 CFR Parts 210 and 211, and The Rules Governing Medicinal Products in the European Community, Volume IV, Good Manufacturing Practice for Medicinal Products, as each may be amended from time to time.
Section 1.7    “Change of Control”
means the occurrence of either (a) a Third Party becoming the “beneficial owner” (as defined in the rules and regulations promulgated under the Securities Exchange Act of 1934), directly or indirectly, of Lexicon securities representing more than fifty percent (50%) of the combined voting power of Lexicon’s then-outstanding voting securities or (b) the sale by Lexicon, in one or more related transactions, of all or substantially all of Lexicon’s property and assets to a Third Party.
Section 1.8    “Commercialization Plan”
means the sales and marketing plan for Licensed Products in the Licensed Territory, as prepared, updated and amended from time to time in accordance with Section 2.1(b) and Section 5.1(a).
Section 1.9    “Commercialization Program”
means the commercialization activities of the Parties directed to the sales and marketing of Licensed Products in the Licensed Territory and manufacturing and supply activities of the Parties in support thereof, in each case undertaken in accordance with the Commercialization Plan.
Section 1.10    “Compound”
means the small molecule inhibitor of TPH known as telotristat etiprate, or LX1606, as specifically described in Exhibit 1.10, and [**].
Section 1.11    “Confidential Information”
means all Know-How or other confidential or proprietary information of a Party that is disclosed (whether in written, graphic, oral, electronic or other form) by or on behalf of such Party to the other Party in connection with this Agreement, including the terms of this Agreement, information regarding the Compound or any Licensed Product, the Development Plan, the Development Program, the Commercialization Plan, the Commercialization Program, or intellectual property or regulatory matters relating thereto, or the scientific 

2

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

or business affairs or other activities of such Party.  All information disclosed prior to the Effective Date by or on behalf of either Party under, and subject to, the confidentiality agreement between Lexicon and Ipsen dated July 28, 2009, as amended (the “Confidentiality Agreement”) shall be deemed “Confidential Information” of the disclosing Party hereunder.
Section 1.12    “Control” or “Controlled”
means with respect to any Know-How, Patent Right or other intellectual property right, the possession (whether by license (other than pursuant to this Agreement) or ownership, or control over an Affiliate with such a license or ownership) by a Party of the ability to grant to the other Party access, ownership or a license as provided herein without violating the terms of any agreement or arrangement with any Third Party.
Section 1.13    “Cover”, “Covering” or “Covered”
means, as to a Patent Right and a product or technology, that, but for a license granted to a Party under or an ownership interest of such Party in such Patent Right (and in the case of pending patent applications, assuming such applications become issued patents), the manufacture, use, offer for sale, sale or importation by such Party of such product or technology would infringe such Patent Right.
Section 1.14     “Development Plan”
means the plan for the conduct of all activities related to the research and development of the Compound and Licensed Products for the purpose of obtaining and maintaining Marketing Authorization in the Licensed Territory, as updated and amended from time to time in accordance with Section 2.1(b) and Section 3.1.  The initial Development Plan, setting forth the research and development activities that are pending or planned as of the Effective Date, is attached hereto as Exhibit 1.14 (the “Initial Development Plan”).
Section 1.15    “Development Program”
means the pre-clinical, clinical and other research, development, regulatory and pre-commercial manufacturing activities of the Parties directed to the Compound and Licensed Products and undertaken in accordance with the Development Plan.
Section 1.16    “Diligent Efforts”
means (a) where applied to carrying out specific tasks and obligations under this Agreement, expending reasonable, diligent, good faith efforts and resources to accomplish such task or obligation as such Party would normally use to accomplish a similar task or obligation under similar circumstances; and (b) where applied to development or commercialization of the Compound or a Licensed Product, the use of reasonable, diligent, good faith efforts and resources, in an active and ongoing program, as commonly used by such Party for a product discovered or owned by such Party, which product is at a similar stage in its development or product life and is of similar market potential.  Diligent Efforts requires that a Party, at a minimum, assign responsibility for such obligations to qualified employees, set annual goals and objectives for carrying out such obligations and allocate resources designed to meet such goals and objectives.
Section 1.17    “Drug Master File”
means any (a) drug master files filed with the FDA with respect to the Licensed Product, (b) active substance master file (ASMF) filed with the EMA, and (c) equivalent filing in other countries in the Licensed Territory.

3

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

Section 1.18    “EEA”
means the European Economic Area as it may be constituted from time to time.
Section 1.19    “EMA”
means the European Medicines Agency or any successor agency thereof.
Section 1.20    “EU”
means the European Union, as may be constituted from time to time.
Section 1.21    “Executive Officers”
mean the chief executive officer of Ipsen (or a senior executive officer of Ipsen designated by such officer) and the chief executive officer of Lexicon (or a senior executive officer of Lexicon designated by such officer).
Section 1.22    “FDA”
means the United States Food and Drug Administration or any successor agency thereto.
Section 1.23    “Field”
means any and all uses in humans, including, without limitation, therapeutic and prophylactic use in human disease.
Section 1.24    “Financial Year”
means the twelve (12) consecutive calendar months starting 1st January and ending on 31st December of such twelve (12) consecutive calendar months’ period.
Section 1.25    “First Commercial Sale”
means, with respect to a given Licensed Product in a given country in the Licensed Territory, the date on which such Licensed Product is first sold in a bona fide commercial sale following Marketing Authorization of such Licensed Product in such country by, on behalf of or under the authority of Ipsen or any of Ipsen’s Affiliates or sublicensees in an arm’s-length transaction to a Third Party.
Section 1.26    “FTE”
means a full time equivalent person year (consisting of a total of [**] hours per year) of scientific or technical work or scientific or technical managerial work on or directly related to activities undertaken by a Party hereunder.
Section 1.27    “FTE Rate”
means (a) with respect to Lexicon personnel, [**], and (b) with respect to Ipsen personnel, [**], in each case per FTE per annum for personnel engaged in the manufacturing and development of the Licensed Product, increased or decreased annually on January 1 of each year, commencing with January 1, 2016, by the percentage increase or decrease in the Consumer Price Index as of the then-most-recent December 31 over 

4

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with the Securities and Exchange Commission.
Asterisks denote omissions.

the Consumer Price Index as of December 31, 2014.  As used in this Section 1.27, Consumer Price Index means (y) the Consumer Price Index - Urban Wage Earners and Clerical Workers, US City Average, All Items, 1982-84 = 100, published by the United States Department of Labor, Bureau of Labor Statistics (or its successor equivalent index) for the FTE Rate applicable to Lexicon’s personnel and (z) the French consumer price index as published by the French National Institute of Statistics and Economics Studies (INSEE) available at http://www.insee.fr/en for the FTE Rate applicable to Ipsen’s personnel. 
Section 1.28    “GCP”
means good clinical practices requirements (U.S. 21 C.F.R. Parts 50, 54, 56, 58, 210, 211 and 312), and comparable foreign regulatory standards, including requirements for the public dissemination of clinical trial information (e.g., 42 U.S.C. § 282), as they may be updated from time to time.
Section 1.29    “Generic Product”
means, with respect to a Licensed Product, any pharmaceutical product comprising the Compound that (a) is distributed in the Licensed Territory by a Person other than Ipsen or its Affiliates or any Person authorized by Ipsen or its Affiliates under a Marketing Authorization issued by a Regulatory Authority based, in whole or in part, on bioequivalence and interchangeability with such Licensed Product, including any product authorized for sale (i) in the EU pursuant to a provision of Articles 10, 10a or 10b of Parliament and Council Directive 2001/83/EC as amended (including an application under Article 6.1 of Parliament and Council Regulation (EC) No 726/2004 that relies for its content on any such provision) or (ii) in any other country or jurisdiction pursuant to all equivalents of such provisions and (b) is substitutable under applicable Laws for such Licensed Product when dispensed in the Licensed Territory without the intervention of a physician or other health care provider with prescribing authority.
Section 1.30    “GLP”
means good laboratory practice standards promulgated or endorsed by the FDA, as defined in U.S. 21 C.F.R. Part 58 (or such other comparable regulatory standards in jurisdictions outside the U.S.), as they may be updated from time to time.
Section 1.31    “IND”
means an application submitted to a Regulatory Authority to initiate human clinical trials, including (a) an Investigational New Drug application or any successor application or procedure, (b) any non-US equivalent of a United States IND, including any Clinical Trial Application filed with the EMA and (c) all supplements and amendments that may be submitted to a Regulatory Authority with respect to the foregoing.
Section 1.32    “INN” or “International Nonproprietary Name”
means an official nonproprietary or generic name granted by the WHO to facilitate the identification of an active substance that is unique to such active substance, and any non-WHO equivalent of an INN, including a USAN granted by the USAN Council.
Section 1.33    “Initial Indication”
means the first indication in the Carcinoid Field for which a Marketing Authorization is obtained  based on the studies conducted under the Initial Development Plan.

5

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with the Securities and Exchange Commission.
Asterisks denote omissions.

Section 1.34    “Ipsen Competitor”
means a Third Party that actively commercializes in the Licensed Territory one or more approved pharmaceutical products in the Carcinoid Field, which commercialization generated more than [**] in the most recently completed calendar year as of the closing of the applicable Change of Control transaction (and for the avoidance of any doubt, including approved pharmaceutical products for the treatment and prevention of GEPNET), or any Affiliate of such Third Party.
Section 1.35    “Ipsen Patent Rights”
means all Patent Rights that are Controlled by Ipsen at any time during the Development Program or Ipsen’s commercialization of any Licensed Product and that Cover any Ipsen Technology, including Ipsen’s interests in Joint Patent Rights.
Section 1.36    “Ipsen Technology”
means all Know-How Controlled by Ipsen at any time during the Development Program or Ipsen’s commercialization of any Licensed Product and that is used in, or necessary for, the research, development, manufacture, use or sale of the Compound or any Licensed Product, including Ipsen’s interests in Joint Technology.
Section 1.37    “Joint Technology”
means Know-How that is developed by one or more employees, agents or consultants of Lexicon on the one hand, and one or more employees, agents or consultants of Ipsen, on the other hand, in the performance of this Agreement.
Section 1.38    “Know-How”
means any technical, scientific or business information, data or materials, including all biological, chemical, pharmacological, toxicological, preclinical, clinical, and assay information, data and materials, analyses, ideas, discoveries, inventions, methods, techniques, improvements, concepts, designs, processes, procedures, compositions, plans, formulae, specifications and trade secrets, whether or not patentable, including documents and other media (including paper, notebooks, books, files, ledgers, records, tapes, discs, diskettes, CD-ROM, trays and containers and any other media developed following the Effective Date) containing or storing any of the foregoing.
Section 1.39    “Laws”
means all laws, statutes, rules, regulations, orders, judgments, or ordinances having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision.
Section 1.40    “Lexicon Territory”
means the USA, Canada and Japan.
Section 1.41    “Licensed Intellectual Property”
means Licensed Technology, Licensed Patent Rights and Licensed Trademark.

6

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Asterisks denote omissions.

Section 1.42    “Licensed Patent Rights”
means, in each case to the extent Controlled by Lexicon:
(a)    the  patents and patent applications that are listed in Exhibit 1.42, 
(b)    any patents and patent applications (e.g., provisionals, divisionals, continuations, continuations-in-part, reissues, reexaminations, renewals, extensions (including any supplementary protections certificates), additions, substitute applications, utility patents, utility models, design patents and certificates of invention) that issue from or claim priority to any patent application listed in Exhibit 1.42, and
(c)     any Patent Rights other than those included in sub-paragraphs (a) and (b) that are Controlled by Lexicon at any time during the Development Program and that Cover any Licensed Technology, including Lexicon’s interests in Joint Patent Rights.
Section 1.43    “Licensed Product”
means any pharmaceutical preparation in final form containing the Compound, alone or in combination with one or more additional active ingredients, for sale by prescription, over the counter or any other method in all dosage strengths, releases and formulations, including any new formulations and improvements that contain the Compound as an active ingredient.
Section 1.44    “Licensed Technology”
means any Know-How that is Controlled by Lexicon at any time during the Development Program and that is used in, or necessary for, the research, development, manufacture, use or sale of the Compound or any Licensed Product, including Lexicon’s interests in Joint Technology.
Section 1.45    “Licensed Territory”
means the entire world excluding the Lexicon Territory.
Section 1.46    “Licensed Trademark”
means, to the extent Controlled by Lexicon, the trademark that is listed in Exhibit 1.46.
Section 1.47    “LX1033”
means Lexicon’s small molecule inhibitor of TPH known as LX1033, as specifically described in Exhibit 1.47.
Section 1.48    “MAA”
means an application submitted to a Regulatory Authority for Marketing Authorization of a Licensed Product in any country, including without limitation any Marketing Authorization Application filed with the EMA, and all supplements and amendments that may be submitted to a Regulatory Authority with respect to the foregoing.

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Section 1.49    “Major EU Country”
means any of France, Germany, Italy, Spain or the United Kingdom.
Section 1.50    “Manufacturing Costs”
means, as to a Party, such Party’s fully burdened costs of manufacturing and packaging the Compound and Licensed Products, including the following:
(a)    with regard to a Party’s internal costs and charges, all internal costs of such Party’s personnel directly engaged in manufacturing, packaging and shipment of the Compound and Licensed Products for the Licensed Territory, including the costs of such personnel engaged in managing suppliers, at the FTE Rate [**], which work-time spent shall be justified by a time-keeping log; provided however that in the event such personnel are also concurrently engaged in the development and manufacture of products other than the Licensed Product, such personnel’s work time shall be appropriately allocated between the other product and the Licensed Product for purpose of calculating the internal costs specifically dedicated to the Licensed Product; and 
(b)    with regard to a Party’s external costs and charges, the invoiced costs and charges of suppliers of goods, including raw materials and services, including contract manufacturing organizations (CMO), directly related to the manufacture, packaging and shipment of the Compound and Licensed Products.
Section 1.51    “Marketing Authorization”
means the authorization issued by the relevant Regulatory Authority necessary to place on the market a Licensed Product in any country or regulatory jurisdiction (i.e., an approval of an MAA, if required in the applicable country or regulatory jurisdiction).
Section 1.52    “Net Sales”
means, with respect to a Licensed Product, the gross amount invoiced by Ipsen, its Affiliates or its sublicensees on sales or other dispositions of Licensed Products to Third Party customers, less the following deductions:
(a)    Trade, cash or quantity discounts actually allowed and taken directly with respect to such sales;
(b)    Tariffs, duties, excises, sales taxes or other taxes imposed upon and paid directly with respect to the production, sale, delivery or use of the Licensed Product (excluding taxes based on the income or profits of the selling party);
(c)    Amounts repaid or credited by reason of rejections, defects, recalls or returns or because of chargebacks, refunds, rebates or retroactive price reductions;
(d)    Amounts written off as uncollectible in accordance with applicable Accounting Standards, consistently applied, provided that if any such written-off amounts are subsequently collected, such amounts shall thereupon be included in Net Sales;
(e)    Price concessions either mandated by or negotiated with commercial or governmental payers; and

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(f)    Freight, insurance and other transportation charges incurred in shipping a Licensed Product to Third Parties.
Such amounts shall be determined from the books and records of Ipsen, its Affiliates or its sublicensees, as applicable, maintained in accordance with applicable Accounting Standards, consistently applied.
In the case of any sale of Licensed Products for consideration other than cash, such as barter or countertrade, Net Sales shall be calculated on average sales price for the applicable Licensed Product(s) in the applicable country in the entire applicable year.  In the case that Licensed Product(s) are sold as part of a bundle for less than the average sales price for the applicable Licensed Product(s) in the applicable country in the entire applicable year, Net Sales shall be based upon the higher of (x) the discounted price for which such Licensed Product(s) are actually sold or (y) the discounted price for which such Licensed Product(s) would be sold if the discounts applied to all products in the bundle were applied equally to such products in proportion to their respective average sales prices in the applicable country in the entire applicable year.
Sales of Licensed Products between Ipsen and its Affiliates or its sublicensees, or among such Affiliates and sublicensees, shall be disregarded for purposes of calculating Net Sales hereunder, except for sales to Affiliates or sublicensees that are the intended end user.
In the event a Licensed Product is sold as part of a Combination Product (as defined below), the Net Sales from the Combination Product, for the purposes of determining royalty payments, shall be determined by multiplying the Net Sales of the Combination Product during the applicable royalty reporting period by the fraction A/A+B, where A is the average sale price of the Licensed Product when sold separately in finished form, and B is the average sale price of the other product(s) included in the Combination Product when sold separately in finished form, in each case during the applicable royalty reporting period or, if sales of both the Licensed Product and the other product(s) did not occur in such period, then in the most recent royalty reporting period in which sales of both occurred.
In the event that such average sale price cannot be determined for both the Licensed Product and all other products(s) included in the Combination Product, Net Sales for the purposes of determining royalty payments shall be calculated by multiplying the Net Sales of the Combination Product by the fraction of C/C+D where C is the fair market value of the Licensed Product and D is the fair market value of all other pharmaceutical product(s) included in the Combination Product.  In such event, Ipsen shall in good faith make a determination of the respective fair market values of the Licensed Product and all other pharmaceutical products included in the Combination Product, and shall notify Lexicon of such determination and provide Lexicon with data to support such determination.  Lexicon shall have the right to review such determination and supporting data, and to notify Ipsen if it disagrees with such determination.  If Lexicon does not agree with such determination and if the Parties are unable to agree in good faith as to such respective fair market values, then such matter shall be referred to the Executive Officers for resolution pursuant to Section 13.1 and, if the Executive Officers are unable to resolve such matter in accordance with Section 13.1, such matter shall be referred to binding arbitration for resolution pursuant to Section 13.2.  
As used above, the term “Combination Product” means any pharmaceutical preparation in final form containing the Compound in combination with one or more additional proprietary (i.e., non-generic) active ingredients, for sale by prescription, over-the-counter or any other method.  
Section 1.53    “New Indication”
means any indication other than the Initial Indication.

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Section 1.54    “Party”
means Ipsen or Lexicon; “Parties” means Ipsen and Lexicon.
Section 1.55    “Patent Right”
means any right in any patent applications in any of the countries of the world, all patents that issue from such applications, including utility patents, utility models, design patents and certificates of invention, and all provisional, divisionals, continuations, continuations-in-part, reissues, reexaminations, renewals, extensions (including any supplementary protection certificates), additions or substitute applications with respect to any such patent applications and patents.
Section 1.56    “Phase 3 Study”
means a human clinical trial of a Licensed Product that is designed to establish that a pharmaceutical product is safe and efficacious for its intended use, which trial is intended to support Marketing Authorization of a Licensed Product, as described in 21 C.F.R. § 312.21(c), or similar clinical study in a country other than the United States.
Section 1.57    “Phase 4 Study”
means a human clinical trial, conducted following Marketing Authorization for the Licensed Product in a particular indication, the principal purpose of which is to monitor the long term efficacy and safety in patients being studied with the Licensed Product in such indication or a related indication (including drug-drug interaction, dose-response, schedule of administration and/or duration, use of the drug in other patient populations or other stages of the disease, safety studies and/or other studies designed to support use under the approved indication) as further described in 21 C.F.R. §312.21, or similar clinical study in a country other than the United States.
Section 1.58    “Person”
means any natural person or any corporation, company, partnership, limited liability company, joint venture, firm, agency or other entity, including a Party.
Section 1.59    “Post Approval Study”
means any Phase 4 Study that is not required by the applicable Regulatory Authorities, such as any studies conducted in support of pricing or reimbursement for the Licensed Product (such as health economic studies, epidemiological studies, modeling and pharmacoeconomic studies), post-marketing surveillance studies, investigator sponsored studies and health economics studies.
Section 1.60    “Post-Marketing Commitment Study”
means any Phase 4 Study or other test or study with respect to a Licensed Product that is required by the applicable Regulatory Authorities as a precondition to granting or maintaining a Marketing Authorization for such Licensed Product.

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Section 1.61    “Regulatory Approval”
means any and all approvals, licenses, registrations or authorizations of any Regulatory Authority necessary for the research, development, manufacture, use, storage, import, promotion, marketing and sale of a product in a country or jurisdiction, including INDs and Marketing Authorizations. 
Section 1.62    “Regulatory Authority”
means any federal, national, multinational, state, provincial or local regulatory agency, department, bureau or other governmental entity with authority over the testing, approval, manufacture, use, storage, import, promotion, marketing or sale of a product in a country, including the FDA and EMA.
Section 1.63    “Regulatory Documentation”
shall mean all applications, registrations, licenses, authorizations and approvals (including all Regulatory Approvals), all correspondence submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority) and all supporting documents and all documentation of the results of clinical studies and tests, relating to the Licensed Product and all data contained in any of the foregoing, MAA, clinical data, adverse event files and complaint files.
Section 1.64    “Sponsor”
means the Party that takes on the ultimate responsibility for the initiation, performance and management of, including any financing or arranging the financing for, the appropriate clinical study.
Section 1.65    “Study Cost Offset Amount”
means, in the event that Ipsen assumes responsibility for conducting any Phase 3 Study or Post-Marketing Commitment Study pursuant to Section 3.2(b)(ii) or any clinical study under Section 3.4, an offset of [**].
Section 1.66    “[**]”
means a [**], that [**].  
Section 1.67    “Third Party”
means any Person other than a Party or any of its Affiliates.
Section 1.68    “Third Party Acquirer”
means the counterparty to Lexicon in any Change of Control transaction.
Section 1.69    “TPH”
means tryptophan hydroxylase.
Section 1.70    “US” or “USA”
means United States of America, its territories and possessions.

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Section 1.71    “Valid Claim”
means, as to a Licensed Product, on a country-by-country basis, (a) an unexpired claim of an issued patent within the Licensed Patent Rights or Joint Patent Rights that (i) Covers the manufacture, use, offer for sale, sale or importation of such Licensed Product in such country, and (ii) has not lapsed or been revoked, withdrawn or found to be unpatentable, invalid or unenforceable by a decision of a court or other authority of competent jurisdiction in the subject country, from which decision no further appeal can be taken, or with respect to which an appeal is not taken within the time (including any extensions) allowed for appeal, and that has not been disclaimed or admitted to be invalid or unenforceable through reissue, disclaimer or otherwise or (b) a claim of a pending patent application within the Licensed Patent Rights or Joint Patent Rights that Covers the manufacture, use, offer for sale, sale or importation of such Licensed Product in such country, which claim has not been revoked, cancelled, withdrawn or abandoned and that has not been pending for more than seven (7) years from the filing date of the earliest patent application from which such pending claim derives priority.
Section 1.72    “WIPO”
means the World Intellectual Property Organization. 
Section 1.73    “Additional Definitions”.
Each of the following definitions is set forth in the section of this Agreement indicated below:
	
		
	Definitions
	Section

	1974 Convention
	15.1

	Agreement
	Preamble

	Alliance Manager
	2.1(c)

	AMF
	10.3(a)(ii)

	Arbitration Request
	13.2(a)

	Breaching Party
	12.3

	CMC
	2.2(e)

	Claims
	14.1

	Combination Product
	1.52

	Commercial Supply Costs
	5.2(b)

	Competitive Infringement
	9.3(a)

	Confidentiality Agreement
	1.11

	CMO
	3.5

	CRO
	3.4

	[**]
	8.3(b)

	Effective Date
	Preamble

	GEPNET
	1.5

	ICC
	13.2(c)

	ICC Rules
	13.2(c)

	Indemnified Party
	14.3(a)

	Indemnifying Party
	14.3(a)

	Initial Development Plan
	1.14

	Invalidity Claim
	9.5(a)

	Ipsen
	Preamble

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	JCC
	2.3(a)

	JDC
	2.2(a)

	Joint Invention
	9.1(b)

	JSC
	2.1(a)

	Lexicon
	Preamble

	Losses
	14.1

	Manufacturing Technology
	5.2(e)(i)

	Non-Arbitrable Dispute
	13.1(b)

	Non-Breaching Party
	12.3

	Paragraph IV Certification
	9.6

	Patent Challenge
	12.6

	Patent Prosecution
	9.2(e)

	Pre-Generic Launch Net Sales
	8.4(e)(i)

	Publishing Party
	10.5(a)

	Quality Technical Agreement
	5.2(d)

	[**]
	8.3(b)

	Rolling Forecast
	5.2(c)

	Royalty Term
	8.4(b)

	SDEA
	4.4

	SEC
	10.3(a)(ii)

	Severed Clause
	15.15

	Subsequent Commercial Orders
Subject Disclosure
	5.2(c)
10.3(a)

	Term
	12.1

	Terminated Territories
	12.9

	Third Party License
	8.4(f)

	Third Party License Costs
	8.4(f)

	Third Party License Cost Cap
	8.4(f)

	Tribunal
	13.2(e)

	USAN
	9.8(c)

	USAN Council
	9.8(c)

	WHO
	9.8(c)

Article 2
Governance; Decision-Making
Section 2.1    Joint Steering Committee
(a)    Formation and Membership.  Within [**] after the Effective Date, Ipsen and Lexicon shall establish a joint steering committee (the “JSC”) to review, coordinate and provide overall strategic direction to their activities pursuant to the Development Plan and the Commercialization Plan.  The JSC shall be comprised of [**] senior executives of Ipsen and [**] senior executives of Lexicon with appropriate experience and level of decision-making authority.  Each Party may change any one or more of its representatives on the JSC at any time upon written notice to the other Party.  Lexicon’s participation on the JSC after [**] shall be at Lexicon’s election.  From time to time, the JSC may, in its discretion, establish one or more subcommittees or project teams to oversee particular projects or activities, as the JSC deems necessary or advisable.  The Executive Officers shall not be members of the JSC.

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(b)    Responsibilities.  The JSC shall act as a consultative and, to the extent expressly granted authority hereunder, a decision-making body for the purpose of monitoring the implementation of the Development Plan and Development Program and the Commercialization Plan and Commercialization Program, and generally shall act as the forum for strategic information sharing, discussion, review and monitoring of the development of the Licensed Products worldwide, and of the commercialization of the Licensed Products in and the manufacture of the Licensed Products for the Licensed Territory.  In particular, the JSC shall be responsible for:
(i)    monitoring a global strategy for the development of the Compound and Licensed Products and providing overall strategic direction with respect to activities conducted under the Development Plan;
(ii)    reviewing the Development Plan and suggesting or approving such updates or amendments to the Development Plan as the JSC deems appropriate, including all budget amendments, with a view to ensuring that the Licensed Product obtain Marketing Authorization as soon as reasonably practicable;
(iii)    reviewing updates provided by the JDC relating to the clinical data, non-clinical data, and other results and analyses with respect to the development activities related to the Licensed Product, promptly after such data, results and analyses become available;
(iv)    determining whether any clinical and/or pre-clinical studies not included in the Initial Development Plan (A) are required to obtain and/or maintain Marketing Authorization for a Licensed Product for the Initial Indication in the EU and EEA countries or (B) are otherwise advisable in support of the Development Program, in each case pursuant to Section 3.1(b);
(v)    monitoring a strategy for the commercialization of Licensed Products in the Licensed Territory and providing overall strategic direction with respect to activities conducted under the Commercialization Plan;
(vi)    reviewing and approving the initial Commercialization Plan, including resourcing of activities under the initial Commercialization Plan;
(vii)    reviewing the Commercialization Plan and suggesting or approving such updates or amendments to the Commercialization Plan as the JSC deems appropriate;
(viii)    monitoring the Parties’ plans and activities relating to the development of Licensed Products under the Development Plan and commercialization of Licensed Products under the Commercialization Plan and serving as a forum for the Parties to discuss such development and commercialization;
(ix)    overseeing the JDC and JCC, and the Parties’ progress in the conduct of activities under the Development Plan and the Commercialization Plan;
(x)    reviewing and evaluating regulatory matters relating to the Licensed Product in the Licensed Territory and pharmacovigilance and safety matters worldwide for the Licensed Product;
(xi)    reviewing and providing overall strategic direction directed to obtaining, maintaining and enforcing patent protection and market and data exclusivity for Licensed Products in the Licensed Territory;

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(xii)    attempting to resolve disputes arising under this Agreement that are referred to the JSC by the JDC, JCC or either of the Parties (for clarity, the JSC shall not have the authority to resolve disputes between the Parties regarding whether a Party has fulfilled or breached any obligation under this Agreement); and
(xiii)    performing such other tasks and undertaking such other responsibilities as may be set forth in this Agreement.
(c)    Alliance Managers.  Each Party shall appoint one representative who shall be an employee of such Party having appropriate qualification and experience in business management and the coordination of licensing and collaborations to serve as an alliance manager (“Alliance Manager”) with responsibility for: (i) coordinating and managing processes and day-to-day interfaces to ensure the governance and communications between the Parties are in place and fully functional for the activities to be performed by both Parties under this Agreement, (ii) overseeing the Parties’ activities conducted in accordance with this Agreement, (iii) ensuring appropriate liaison among the Parties, the JSC, the JDC, the JCC and any other joint subcommittees or project teams and (iv) facilitating contact between the Parties with respect to all such activities.  Each Party may change its Alliance Manager at any time upon written notice to the other Party.  The Alliance Manager is responsible for driving the alliance progress, establishing and maintaining effective and regular communication between the Parties and resolving issues between the Parties.  The Alliance Managers will not be members, but may attend the meetings of, the JSC, the JDC and JCC and be responsible for communicating with and reporting to the JSC on all relevant matters.  Each Party shall bear the costs of its Alliance Manager, which costs shall be excluded from the Parties’ respective development and manufacturing costs.
(d)    Administrative Matters.  Lexicon shall appoint from among its members, a person who shall act as a chairperson of the JSC until [**], following which time the chairperson of the JSC shall be appointed by Ipsen from among its members.  The Alliance Manager from the chairing Party will work with the chairperson and the other Party’s Alliance Manager to develop JSC meeting agendas.  The chairperson shall be responsible for calling meetings of the JSC and for leading the meetings.  The Alliance Manager of Lexicon and of Ipsen shall alternate to serve as secretary of such meetings.  The secretary shall promptly prepare and distribute to all members of the JSC draft minutes of the meeting in reasonable detail for review and comment within [**] of the meeting, including a list of any actions or decisions approved by the JSC.  The JSC members shall then have [**] to provide comments with the goal of enabling the secretary to incorporate timely received comments and distribute final approved minutes of each JSC meeting within [**] after the meeting.
(e)    Decision-Making.  Each Party shall have one (1) vote on the JSC.  Subject to Section 2.1(f), both Parties must vote in the affirmative to allow the JSC to take any action that requires the approval of the JSC.  Decision on any matter may be taken at a meeting, by teleconference, videoconference or by written agreement.  Either Party may convene a special meeting of the JSC in accordance with Section 2.1(h)(iii) for the purpose of resolving any disagreement at the JDC or JCC level or other disputes within the JSC’s jurisdiction, in case any of the foregoing represents a material issue the resolution of which cannot reasonably await until the next scheduled meeting of the JSC.
(f)    Escalation to Executive Officers; Casting Vote.  If the JSC is unable to resolve any dispute within the responsibilities of the JSC specified in Section 2.1(b) within [**] after the matter is presented to the JSC for resolution, or if the JSC no longer remains in place at the time of a dispute within the responsibilities of the JSC specified in Section 2.1(b) and the Parties are unable to resolve such dispute within 

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[**] after one Party, by written notice to the other Party, presents such issue for resolution, either Party may, by notice to the other Party, refer such dispute or other matter to the Executive Officers for resolution pursuant to Section 13.1.  If the Executive Officers are unable to resolve any such matter that is within the responsibilities of the JSC pursuant to Section 13.1, then: 
(i)    Lexicon shall have the final decision-making authority in its reasonable discretion to resolve any such dispute as to clinical studies for which [**], provided that Lexicon may not make a decision that is inconsistent with the terms and conditions of this Agreement or that materially changes the development activities set forth in the Initial Development Plan;
(ii)    Ipsen shall have the final decision-making authority in its reasonable discretion to resolve any such dispute as to clinical studies for which [**], provided that Ipsen may not make a decision that is inconsistent with the terms and conditions of this Agreement; 
(iii)    if the dispute involves [**], Lexicon shall have the final decision-making authority to resolve any such dispute in its reasonable discretion, provided that Lexicon may not make a decision that is inconsistent with the terms and conditions of this Agreement;
(iv)    if the dispute involves [**], Ipsen shall have the final decision-making authority to resolve any such dispute in its reasonable discretion, provided that Ipsen may not make a decision that is inconsistent with the terms and conditions of this Agreement; and
(v)    if the dispute involves [**], Ipsen shall have the final decision-making authority to resolve any such dispute in its reasonable discretion, provided that Ipsen may not make a decision that is inconsistent with the terms and conditions of this Agreement.
The decision of the Party with a casting vote shall be final and binding on the members of the JSC, the JDC, the JSC and the other Party.
(g)    Matters Excluded from JSC Decision-Making and Casting Votes.  Notwithstanding Section 2.1(f):
(i)    Matters Requiring Agreement between the Parties. The following matters may only be decided by the mutual agreement of the Parties and shall not be subject to either Party’s final decision-making authority and shall not be subject to resolution by binding arbitration pursuant to Article 13:
(A)    any proposal by one Party to increase the other Party’s obligations or reduce the other Party’s rights under this Agreement; or
(B)    any matter that is expressly stated in this Agreement to require the other Party’s prior approval or consent, or the mutual agreement of the Parties.
(ii)    Matters Involving the Interpretation of the Agreement. The following matters shall be decided by the mutual agreement of the Parties, but, in the absence of such mutual agreement, such matters shall be subject to resolution by binding arbitration pursuant to Article 13:
(A)    any determination that the events required for the payment of development, regulatory or sales milestone payments have not occurred; or

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(B)    any resolution of disputes regarding the Parties’ rights and obligations under this Agreement. 
(h)    Meetings.
(i)    The first JSC meeting shall be held within [**] of the Effective Date.  The JSC shall meet at least [**].  After [**], the JSC shall meet [**].  The location of JSC meetings shall be as agreed by the Parties, and may be held in person, alternating locations between the Parties, or by telephone conference call or by videoconference; provided that prior to [**] at least [**] shall be held in person.  The Parties anticipate that the meetings at Lexicon’s location will be held in The Woodlands, Texas or Princeton, New Jersey, USA, and that the meetings at Ipsen’s location will be held in Paris, France or Slough, United Kingdom.
(ii)    Each Party shall use reasonable efforts to cause its representatives to attend the meetings of the JSC.  In addition, each Party may, at its discretion, invite a reasonable number of non-voting employees or officers, and, with the consent of the other Party, consultants or scientific advisors, to attend meetings of the JSC or the relevant portion thereof; provided that any such consultants or scientific advisors are bound by written obligations of confidentiality with the Party that appointed it/her/him that are at least as stringent as those set forth in this Agreement.
(iii)    Either Party may also request that a special meeting of the JSC be convened for the purpose of resolving disputes in connection with, or for the purpose of reviewing or making a decision pertaining to, any material matter within the purview of the JSC, the examination or resolution of which cannot reasonably be postponed until the next scheduled JSC meeting, by providing written notice to the other Party.  Such meeting shall be convened at such time as may be mutually agreed upon by the Parties, but in any event shall be held within [**] after the date of such notice.
Section 2.2    Joint Development Committee.
(a)    Formation and Membership.  Within [**] after the Effective Date, Ipsen and Lexicon shall establish a joint development committee (the “JDC”) comprised of appropriate representatives of Ipsen and Lexicon, each of whom shall have experience and seniority sufficient to enable him or her to make day-to-day operational decisions on behalf of the Party he or she represents.  Each Party may change any one or more of its representatives on the JDC at any time upon written notice to the other Party.  Lexicon’s participation on the JDC after [**] shall be at Lexicon’s election.  From time to time, the JDC may, in its discretion, establish one or more project teams, to, upon mutual agreement of the Parties, implement and coordinate various aspects of the Development Plan.
(b)    Administrative Matters.  Lexicon shall appoint a person from among its members who shall act as a chairperson of the JDC.  The chairperson shall be responsible for calling meetings of the JDC and for leading the meetings.  A JDC member of Lexicon and of Ipsen shall alternate to serve as secretary of such meetings.  The secretary shall promptly prepare and distribute to all members of the JDC draft minutes of the meeting in reasonable detail for review and comment within [**] of the meeting, including a list of any actions or decisions approved by the JDC.  The JDC members shall then have [**] to provide comments, with the goal of enabling the secretary to incorporate timely received comments and distribute final approved minutes of each JDC meeting within [**] after the meeting. 
(c)    Decision-Making.  Each Party shall have one (1) vote on the JDC.  Both Parties must vote in the affirmative to allow the JDC to take any action that requires the approval of the JDC.  Action on any matter may be taken at a meeting, by teleconference or videoconference or by written agreement.  If the 

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JDC is unable to reach unanimous agreement on any matter within the JDC’s jurisdiction, then the matter shall be referred to the JSC for resolution under Section 2.1(b)(xii) or, if the JSC no longer remains in place, the Executive Officers for resolution under Section 13.1 (subject to Section 2.1(f) and each Party’s final decision-making authority as to matters covered thereunder).
(d)    Meetings.
(i)    The first JDC meeting shall be held between the Parties within [**] of the Effective Date.  The JDC shall meet at least [**] until [**].  Thereafter, the JDC shall meet [**] or when the Parties mutually agree as necessary where matters requiring a joint decision and collaboration arise.  The location of JDC meetings shall be as agreed by the Parties, and may be held in person, alternating locations between the Parties, or by telephone conference call or by videoconference; provided that prior to [**] at least [**] shall be held in person.  The Parties anticipate that the meetings at Lexicon’s location will be held in The Woodlands, Texas or Princeton, New Jersey, USA, and that the meetings at Ipsen’s location will be held in Paris, France or Slough, England.
(ii)    Each Party shall use reasonable efforts to cause its representatives to attend the meetings of the JDC.  If a Party’s representative is unable to attend a meeting, such Party may designate an alternate representative to attend such meeting in place of the absent representative.  In addition, each Party may, at its discretion, invite a reasonable number of additional employees, and, with the consent of the other Party, consultants or scientific advisors, to attend the meetings of the JDC or the relevant portion thereof, provided that any such consultants or scientific advisors are bound by written obligations of confidentiality with the Party that appointed it/her/him that are at least as stringent as those set forth in this Agreement.
(iii)    Either Party may also request that a special meeting of the JDC be convened for the purpose of resolving material disputes in connection with, or for the purpose of reviewing or making a material decision pertaining to, the implementation of the Development Plan, the examination or resolution of which cannot reasonably be postponed until the next scheduled JDC meeting, by providing written notice to the other Party.  Such meeting shall be convened at such time as may be mutually agreed upon by the Parties, but in any event shall be held within [**] after the date of such notice.
(e)    Responsibilities.  The JDC shall be responsible for:
(i)    designing a global strategy for the development of the Compound and Licensed Products;
(ii)    reviewing, and recommending to the JSC for JSC review and approval, updates and amendments to the Development Plan as appropriate, including all budget amendments;
(iii)    providing strategic direction with respect to non-clinical and clinical activities for the Compound and Licensed Products;
(iv)    overseeing the research and development of the Compound;
(v)    overseeing and advising on the pre-clinical and clinical manufacture of the Compound and Licensed Products;

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(vi)    overseeing the progress of the Development Program and monitoring the Parties’ compliance with their respective obligations under the Development Plan, including the accomplishment of key objectives;
(vii)    reviewing and approving the protocols (and any amendments thereto), and the statistical analysis plans (including amendments) of studies to be conducted under the Development Plan; 
(viii)    monitoring the progress of clinical trials to be conducted under the Development Plan and the final clinical study report;
(ix)    reviewing all activities related to pharmaceutical development, new formulation development, drug development, Chemistry, Manufacturing and Control (“CMC”), drug product new campaigns, manufacturing scale-up/optimization, QC testing and release of batches of active ingredient and drug product; 
(x)    reviewing serious adverse events relating to [**]; 
(xi)    performing such other tasks and undertaking such other responsibilities as may be set forth in this Agreement; and
(xii)    providing updates to the JSC relating to clinical data, non-clinical data and other results and analyses with respect to the development activities related to the Licensed Product, promptly after such data, results and analyses become available.
Section 2.3    Joint Commercialization Committee. 
(a)    Formation and Membership.  Within [**] after the Effective Date, Ipsen and Lexicon shall establish a joint commercialization committee (the “JCC”) comprised of appropriate representatives of Ipsen and Lexicon, each of whom shall have experience and seniority sufficient to enable him or her to make day-to-day operational decisions on behalf of the Party he or she represents.  Each Party may change any one or more of its representatives on the JCC at any time upon written notice to the other Party.  Lexicon’s participation on the JCC after [**] shall be at Lexicon’s election.  From time to time, the JCC may, in its discretion, establish one or more project teams, to, upon mutual agreement of the Parties, implement and coordinate various aspects of the Commercialization Plan.
(b)    Administrative Matters.  Ipsen shall appoint a chairperson of the JCC from among its members.  The chairperson shall be responsible for calling meetings of the JCC and for leading the meetings.  A JCC member of Ipsen and of Lexicon shall alternate to serve as secretary of such meetings.  The secretary shall promptly prepare and distribute to all members of the JCC draft minutes of the meeting in reasonable detail for review and comment within [**] of the meeting, including a list of any actions or decisions approved by the JCC.  The JCC members shall then have [**] to provide comments, with the goal of enabling the secretary to incorporate timely received comments and distribute final approved minutes of each JCC meeting within [**] after the meeting.
(c)    Decision-Making.  Each Party shall have one (1) vote on the JCC.  Both Parties must vote in the affirmative to allow the JCC to take any action that requires the approval of the JCC.  Action on any matter may be taken at a meeting, by teleconference or videoconference or by written agreement.  If the JCC is unable to reach unanimous agreement on any matter within the JCC’s jurisdiction, then the matter shall be referred to the JSC for resolution under Section 2.1(b)(xii) or, if the JSC no longer remains in place, 

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the Executive Officers for resolution under Section 13.1 (subject to Section 2.1(f) and each Party’s final decision-making authority as to matters covered thereunder). 
(d)    Meetings.
(i)    The first JCC meeting shall be held between the Parties within [**] of [**].  The JCC shall meet at least [**].  The location of JCC meetings shall be as agreed by the Parties, and may be held in person, alternating locations between the Parties, or by telephone conference call or by videoconference; provided that prior to [**] at least [**] shall be held in person.  The Parties anticipate that the meetings at Lexicon’s location will be held in The Woodlands, Texas or Princeton, New Jersey, USA, and that the meetings at Ipsen’s location will be held in Paris, France or Slough, England.
(ii)    Each Party shall use reasonable efforts to cause its representatives to attend the meetings of the JCC.  If a Party’s representative is unable to attend a meeting, such Party may designate an alternate representative to attend such meeting in place of the absent representative.  In addition, each Party may, at its discretion, invite a reasonable number of additional employees, and, with the consent of the other Party, consultants or scientific advisors, to attend the meetings of the JCC or the relevant portion thereof, provided that any such consultants or scientific advisors are bound by written obligations of confidentiality with the Party that appointed it/her/him that are at least as stringent as those set forth in this Agreement.
(iii)    Either Party may also request that a special meeting of the JCC be convened for the purpose of resolving material disputes in connection with, or for the purpose of reviewing or making a material decision pertaining to, the implementation of the Commercialization Plan, the examination or resolution of which cannot reasonably be postponed until the next scheduled JCC meeting, by providing written notice to the other Party.  Such meeting shall be convened at such time as may be mutually agreed upon by the Parties, but in any event shall be held within [**] after the date of such notice.
(e)    Responsibilities.  The JCC shall be responsible for: 
(i)    reviewing, and recommending to the JSC for JSC review and approval, updates and amendments to the Commercialization Plan as appropriate;
(ii)    designing and overseeing a global branding and product positioning strategy for the Licensed Products;
(iii)    ensuring coherent medical messaging with respect to Licensed Products;
(iv)    overseeing a global publication strategy for Licensed Products;
(v)    overseeing and advising on the commercial supply of the Compound and Licensed Products for the Licensed Territory;
(vi)    if applicable, overseeing the transfer of manufacturing responsibility from Lexicon to Ipsen under Section 5.2;
(vii)    overseeing the progress of the Commercialization Program and monitoring the Parties’ compliance with their respective obligations under the Commercialization Plan, including the accomplishment of key objectives; 

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(viii)    reviewing business factors such as those that relate to the Diligent Efforts standard with respect to countries in the Licensed Territory (other than EU and EEA countries), to determine whether commercialization activities with respect to such countries should be recommended to the JSC for addition to the Commercialization Plan pursuant to clause (i) above; and 
(ix)    performing such other tasks and undertaking such other responsibilities as may be set forth in this Agreement. 
Section 2.4    Executive Steering Committee.  The Executive Officers of the Parties shall meet once a year to discuss strategic issues and other issues that either Party deems important to maintain a successful development and commercial collaboration.
Article 3
Development
Section 3.1    Overview; Development Plan.
(a)    Subject to and in accordance with the terms and conditions of this Agreement, including Sections 3.2 and 3.3, the Parties shall collaborate on the research and development of the Compound and Licensed Product(s) in accordance with the Development Plan.  Updates and amendments to the Development Plan shall be reviewed by the JDC and reviewed and approved by the JSC, and shall be consistent with the terms and conditions of this Agreement. The Development Plan shall specify, among other things:
(i)    research and development objectives,
(ii)    activities to be performed, including all pre-clinical and clinical trials and Regulatory Approvals required for manufacturing, marketing and selling Licensed Products,
(iii)    the Party responsible for performance of an activity,
(iv)    associated budgets for planned development activities over the next [**],
(v)    timelines for performance, and
(vi)    specific deliverables.
(b)    Upon the determination by the JSC that any pre-clinical or clinical studies not included in the Initial Development Plan (i) are required to obtain and/or maintain Marketing Authorization for a Licensed Product for the Initial Indication in the EU and EEA countries or (ii) are otherwise advisable in support of the Development Program, then the JDC shall review and recommend and the JSC shall review and approve, an amendment to the Development Plan reflecting such additional pre-clinical or clinical studies, including associated budgets.  The costs of such additional clinical studies will be borne by the Parties as provided in Section 3.3 below.
(c)    Each Party shall use Diligent Efforts to perform its respective obligations under the Development Plan in accordance with:
(i)    the Development Plan; 
(ii)    all applicable Laws; and

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(iii)    cGMP, GCP and GLP to the extent applicable.
Section 3.2    Responsibilities for the Conduct of Development.
(a)    Lexicon shall:
(i)    unless otherwise agreed by the Parties, or unless Lexicon declines to become the Sponsor for a Phase 3 Study or Post-Marketing Commitment Study required to obtain Marketing Authorization of a Licensed Product for the Initial Indication in the EU and EEA countries that is not included in the Initial Development Plan (as to which Ipsen may elect to become the Sponsor in accordance with Section 3.2(b)(ii)), be responsible for conducting all clinical studies that are required to obtain Marketing Authorization for Licensed Products for the Initial Indication in the EU and EEA countries, including all Phase 3 Studies and Post-Marketing Commitment Studies that are so required; 
(ii)    have the first right to become the Sponsor for and to assume responsibility for conducting other clinical studies that the JSC determines are otherwise advisable in support of the Development Program to obtain Marketing Authorization of a Licensed Product in one or more countries of the Lexicon Territory and in one or more countries in the Licensed Territory; and
(iii)    have the sole right to become the Sponsor for and to assume responsibility for conducting other clinical studies that are required to obtain Marketing Authorization of a Licensed Product in one or more countries of the Lexicon Territory but not in any country of the Licensed Territory.
The costs of such clinical studies shall be borne by the Parties as set forth in Section 3.3.
(b)    Ipsen shall be the Sponsor for and shall be responsible for conducting:
(i)    any clinical studies not included in the Initial Development Plan, but which, as determined by the JSC, are required to obtain and maintain Marketing Authorization for a Licensed Product for the Initial Indication in countries in the Licensed Territory, but not in countries of the EU or EEA;
(ii)    any clinical studies not included in the Initial Development Plan, but which, as determined by the JSC, are required to obtain and maintain Marketing Authorization for a Licensed Product for the Initial Indication in countries of the EU or EEA or that is a Phase 3 Study or Post-Marketing Commitment Study as to which Lexicon declines to become the Sponsor and as to which Ipsen may elect to become the Sponsor;
(iii)    any clinical studies not included in the Initial Development Plan, but which, as determined by the JSC, are required to obtain and maintain Marketing Authorization for a Licensed Product in New Indications in countries in the Licensed Territory, but not in the Lexicon Territory, and are reflected in a subsequent amendment to the Development Plan; and
(iv)    at Ipsen’s discretion, any clinical studies as to which Lexicon declines to exercise its first right to become the Sponsor pursuant to Section 3.2(a)(ii).
The costs of such clinical studies shall be borne by the Parties as set forth in Section 3.3.
(c)    Each Party shall keep or cause to be kept written records and reports of the results and progress of the clinical studies, Phase 4 Studies, Post Approval Studies and Post-Marketing Commitment 

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Studies of the Licensed Products performed by such Party in sufficient detail to enable review and analysis by the JSC.
Section 3.3    Responsibilities for Clinical Study Costs.
(a)    Lexicon shall solely bear one hundred percent (100%) of the costs of all pre-clinical and clinical studies included in the Initial Development Plan. 
(b)    Lexicon shall solely bear one hundred percent (100%) of (i) the costs of all pre-clinical and clinical studies not included in the Initial Development Plan that are [**] and (ii) any Phase 3 Study [**] that is not included in the Initial Development Plan and is [**].
(c)    Lexicon shall bear seventy percent (70%) and Ipsen shall bear thirty percent (30%) of the costs of any Post-Marketing Commitment Study [**] that is not included in the Initial Development Plan and is [**].
(d)    Lexicon shall bear fifty percent (50%) and Ipsen shall bear fifty percent (50%) of the costs of any Post-Marketing Commitment Study [**] that is not included in the Initial Development Plan and is [**]. 
(e)    Ipsen shall solely bear one hundred percent (100%) of the costs of all clinical studies that are [**].
(f)    Subject to Ipsen being entitled to a credit against future sales milestone payments as provided in Section 8.3(d) and/or to a royalty offset as provided in Section 8.4(d), Ipsen shall bear one hundred percent (100%) of the costs of any Phase 3 Study or Post-Marketing Study for [**] or any clinical study [**].
(g)    Lexicon shall bear seventy percent (70%) and Ipsen shall bear thirty percent (30%) of the costs of any mutually agreed clinical studies that are [**].
(h)    The Sponsor of a clinical study set forth in this Section 3.3 shall pay the entire costs of the clinical study and shall be responsible for maintaining a complete, accurate and detailed account of such costs.  The Sponsor shall then, as to any such clinical study for which the Parties share costs, provide the other Party with a detailed written report of such costs and the other Party shall then pay to the Sponsor such other Party’s share of such costs as set forth in this Section 3.3 and in accordance with Section 8.5, subject to such other Party’s right to audit the Sponsor’s records and books related to such costs as provided in Section 8.6.  
Section 3.4    Failure to Perform by Lexicon; Ipsen Step-In Right.  
In the event that Lexicon fails in any material respect to perform its obligations with respect to any clinical study for which Lexicon has become the Sponsor (other than a clinical study that Lexicon elects to conduct to obtain Marketing Authorization of a Licensed Product in one or more countries of the Lexicon Territory but not in any country of the Licensed Territory) as reflected in the Development Plan, and upon failure to cure within [**] after Ipsen’s notice to Lexicon of such failure, Ipsen may elect, in lieu of termination (to the extent such failure constitutes a material breach of this Agreement) or such other remedies to which it may be entitled on account of such failure, by providing Lexicon with written notice to such effect, to assume responsibility for conducting such clinical study as Sponsor.  In such event, the Parties shall use Diligent Efforts to transition such clinical study to Ipsen, including the transfer of the applicable IND for the 

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Licensed Product to Ipsen or the grant by Lexicon to Ipsen of such rights under such IND as Ipsen may require to assume such responsibility, and Ipsen shall thereafter be responsible for all clinical study costs associated therewith as set forth in Section 3.3, subject to Ipsen being entitled to a credit against future milestone payments as provided in Section 8.3(d) and/or a royalty offset as provided in Section 8.4(d), which shall be Ipsen’s sole and exclusive remedy and Lexicon’s sole and exclusive liability for such failure.  In addition, to allow Ipsen to undertake and continue the development activities in lieu of Lexicon as Sponsor, Lexicon shall use Diligent Efforts to transition applicable Third Party clinical research organization (“CRO”) engagements to Ipsen as Ipsen may reasonably request.  Ipsen shall also have the right to obtain from such Third Party CRO the clinical data and other data, information, materials and services that Ipsen deems necessary or useful to undertake and continue the applicable clinical study.  Lexicon shall execute such documents, agreements and instruments as Ipsen may reasonably request to effectuate the foregoing and upon Ipsen’s request, will reasonably cooperate with and assist Ipsen in exercising such rights and to secure the services of such Third Party CRO.
Section 3.5    Access and Audit Rights.  
For any clinical trial for which a Party has responsibility (i.e., the Sponsor), such Party may engage one or more reputable and qualified Third Party CROs and contract manufacturing organizations (each, a “CMO”) for such purpose; provided that the other Party shall have the right to monitor and audit (together with or on behalf of the contracting Party) any such services provided by any such CRO and CMO.  To allow the other Party to exercise its right to monitor and audit, the other Party shall be copied on the quality assurance audit plan applicable to the clinical study and shall receive a copy of all audit reports.  In addition, upon the other Party’s request filed [**] in advance, the Sponsor shall allow the other Party to audit and inspect, during normal business hours, all records maintained by the Sponsor relating to the conduct by the Sponsor of the clinical study, including those generated by the CROs and/or CMO conducting such study on behalf of the Sponsor and the investigational sites, to assess compliance with GCP and GMP standards and applicable regulatory requirements.  The Sponsor shall use reasonable efforts to allow a representative of the other Party to attend the audit and/or inspection conducted by the Sponsor at the CROs and investigational sites and/or the CMO site together with the Sponsor.
Section 3.6    Manufacture and Supply for Development.
The costs of clinical supply of the Compound and Licensed Products for all clinical trials and other development activities conducted pursuant to this Agreement shall be allocated between the Parties in the same manner as all other costs of conducting such clinical trials and other development activities.  Lexicon shall source such clinical supply for both Parties from a reputable Third Party CMO and, in the event Ipsen is responsible for conducting any clinical studies pursuant to Section 3.2(b) or 3.4, shall provide such supply to Ipsen for such clinical studies in accordance with the Development Plan.
Article 4
Regulatory Matters
Section 4.1    Overview; Regulatory Filings.
(a)    The Parties shall work together in good faith to develop a plan within [**] following [**] pursuant to which Lexicon shall, in each case as may be required to enable Ipsen to file MAAs and obtain Marketing Authorizations for Licensed Products in the Licensed Territory:

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(i)    transfer to Ipsen all Regulatory Approvals and regulatory filings submitted to any Regulatory Authority in the Licensed Territory for the Compound and Licensed Products that are in Lexicon’s name and Controlled by Lexicon, other than INDs relating to clinical trials conducted by Lexicon pursuant to the Development Plan;
(ii)    to the extent that such transfer is not permitted under applicable Laws, provide to Ipsen a right of reference or use to such Regulatory Approvals and regulatory filings.  Lexicon shall provide appropriate notification of Ipsen’s access and reference rights to the applicable Regulatory Authorities (including, to the extent applicable, an informed consent letter under Article 10c of Directive 2001/83/EC as amended), at the expense of Ipsen seeking such right of reference.  For the purposes of this Agreement, “right of reference” shall mean the “right of reference or use” as defined in 21 C.F.R. §314.3(b) and any equivalent regulation outside the US, including Article 10c of Directive 2001/83/EC, as each may be amended from time to time; and
(iii)    provide to Ipsen copies in electronic form of all Regulatory Approvals and regulatory filings submitted to any Regulatory Authority in the Licensed Territory including those related to CMC, manufacturing and product development, validation and manufacturing for the Compound and Licensed Products that are in Lexicon’s name and Controlled by Lexicon, Regulatory Documentation in Lexicon’s possession or Control, and the Drug Master File. 
(b)    Subject to Section 4.1(a) above, following the transfer of Regulatory Approvals and regulatory filings to Ipsen, Ipsen shall own and be responsible for preparing, filing and maintaining in its own name and to obtain as a marketing authorization holder all regulatory filings and Regulatory Approvals that are required for the research, development, manufacture, use, marketing or sale of the Compound and Licensed Products in the Licensed Territory, provided, that: 
(i)    Lexicon shall own and be responsible for preparing, filing and maintaining all INDs relating to clinical trials conducted by Lexicon pursuant to the Development Plan;
(ii)    Lexicon shall provide Ipsen with assistance as may be reasonably requested by Ipsen with respect to regulatory filings in accordance with the Development Plan;
(iii)    Lexicon shall have a right of reference or use to such regulatory filings and Regulatory Approvals to the extent necessary for the conduct of Lexicon’s activities under this Agreement and to the extent necessary or useful to develop, have developed, make, have made, use, offer for sale, sell, have sold, and import the Compound and Licensed Products in the Field in the Lexicon Territory;
(iv)    Ipsen shall provide Lexicon with copies of all regulatory submissions to, and material communications with, Regulatory Authorities in the EU and EEA and Lexicon shall have the right to review and comment on such submissions and communications, in each case as set forth in Section 4.2(a) below; and
(v)    each Party shall take such actions and otherwise cooperate with the other Party as may be reasonably requested by the other Party to enable the other Party to conduct the clinical trials and perform other development, regulatory, manufacturing and commercialization activities assigned to it under the Development Plan or Commercialization Plan (for clarity, all filings and all interactions with Regulatory Authorities in the Licensed Territory shall be conducted and implemented by and shall be in the name of Ipsen).

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(c)    Ipsen shall pay Lexicon, within [**] following [**], for (i) all internal costs of Lexicon personnel at the FTE Rate, plus (ii) all out-of-pocket costs and expenses incurred by Lexicon, with respect to each of clause (i) and (ii) to the extent incurred in transferring to Ipsen Regulatory Approvals and regulatory filings (or providing Ipsen with a right of reference thereto), providing copies of Regulatory Approvals and regulatory filings, Regulatory Documentation, and the Drug Master File, and performing other regulatory activities assigned to Lexicon under the Development Plan or Commercialization Plan, provided that (x) such costs shall be appropriately apportioned to the extent they are also related to activities for countries outside the Licensed Territory (e.g. Canada), and (y) all the foregoing is in accordance with the costs and expenses forecasted in the applicable budget as approved by the JSC or is additionally requested by Ipsen, it being understood that such approved budget shall include an allowance of [**] percent ([**]%) for cost overruns, provided such overruns, upon their occurrence, are appropriately documented and justified, and that Lexicon’s obligations to perform activities pursuant to Sections 4.1(a) and 4.1(b) shall be subject to prior approval by the JSC of a budget therefor.  
Section 4.2    Communications with Regulatory Authorities.
(a)    Following the transfer of Regulatory Approvals and regulatory filings to Ipsen in accordance with Section 4.1, Ipsen shall be responsible for all submissions to, and communications and interactions with, Regulatory Authorities in the Licensed Territory with respect to the Compound and all Licensed Products, provided, that:
(i)    Lexicon shall be responsible for all submissions to, and communications and interactions with, Regulatory Authorities in the Licensed Territory with respect to INDs relating to clinical trials conducted by Lexicon pursuant to the Development Plan;
(ii)    Ipsen shall keep Lexicon promptly informed, through the JSC, JDC and JCC and Ipsen’s reports pursuant to Section 6.2, regarding Ipsen’s (or its Affiliate’s or sublicensee’s) regulatory strategy, planned regulatory submissions and material communications with Regulatory Authorities in the Licensed Territory with respect to the Compound and all Licensed Products, including any changes to such strategy, submissions or communications;
(iii)    Lexicon shall provide Ipsen with copies, for information, of regulatory submissions to, and material communications with, any Regulatory Authorities in the Lexicon Territory relating to the Compound and all Licensed Products and as to clinical trials conducted by Lexicon in the Licensed Territory pursuant to the Development Plan; and
(iv)    Ipsen shall provide Lexicon with copies, for information, of regulatory submissions to, and material communications with, any Regulatory Authorities in the Licensed Territory relating to the Compound and all Licensed Products.
(b)    In addition to each Party’s rights and obligations under clause (a):
(i)    Ipsen shall provide Lexicon, if feasible, with reasonable advance notice of any material meeting or substantive telephone conference with the EMA relating to the Compound or Licensed Products; and
(ii)    As to any human clinical trial for the Compound or a particular Licensed Product for a given indication conducted or to be conducted by Lexicon under the Development Plan, Ipsen shall have the right to attend and participate in any such material meeting or material conference call with 

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such Regulatory Authorities relating to such clinical trial (or the results thereof) or the Compound or Licensed Product used in such clinical trial.
(c)    Without limiting the generality of any of the foregoing in this Section 4.2, each Party shall also promptly provide the other Party with a copy of all material correspondence that such Party (or its Affiliate or sublicensee) receives from, or submits to, any Regulatory Authorities, in the Lexicon Territory (and as to clinical trials conducted by Lexicon in the Licensed Territory pursuant to the Development Plan) in the case of Lexicon and in the Licensed Territory in the case of Ipsen, including: (A) contact reports concerning substantive conversations or substantive meetings with all Regulatory Authorities, (B) documents related to regulatory milestone events and dates (e.g., filing and submission, validation, agency review questions, CHMP opinion and FDA complete response letter and their equivalent), (C) all IND annual reports and cover letters of all agency submissions (it being understood that the other Party may request, and shall then receive, copies of all attachments to any such cover letters) relating to the Compound or any Licensed Product.  Each Party shall also provide the other Party with any meeting minutes that such Party prepares that reflect material communications with any Regulatory Authorities in the Lexicon Territory (and as to clinical trials conducted by Lexicon in the Licensed Territory pursuant to the Development Plan) in the case of Lexicon and in the Licensed Territory in the case of Ipsen regarding the Compound or any Licensed Product.
Section 4.3    Product Withdrawals and Recalls.
If any Regulatory Authority (a) threatens, initiates or advises any action to remove any Licensed Product from the market in the Lexicon Territory or Licensed Territory, or (b) requires or advises either Party or such Party’s Affiliates or sublicensees to distribute a “Dear Doctor” letter or its equivalent regarding use of such Licensed Product in the Lexicon Territory or Licensed Territory, then Lexicon or Ipsen, as applicable, shall notify the other Party of such event as soon as practicable but not later than [**]  (or sooner if required by applicable Laws) after such Party becomes aware of the action, threat, advice or requirement (as applicable).  The JSC or any senior representatives of the Parties will discuss and attempt to agree upon whether to recall or withdraw a Licensed Product in the Licensed Territory; provided, however, that if the Parties fail to agree within an appropriate time period or if the matter involves a safety issue that, in order to protect patient safety, does not allow for sufficient time for a discussion at the JSC level (in which event Ipsen, as the holder of the MAA in the Licensed Territory for the Licensed Product at issue, shall nonetheless provide advance notice and consultation with Lexicon to the maximum practical extent prior to making a decision), Ipsen shall decide whether to recall or withdraw such Licensed Product in the Licensed Territory and shall undertake any such recall or withdrawal at its own cost and expense. If requested by Ipsen, Lexicon shall reasonably cooperate with Ipsen in such efforts to recall or withdraw such Licensed Product in the Licensed Territory.  For clarity, Lexicon shall decide in its sole discretion whether to recall or withdraw a Licensed Product in the Lexicon Territory and shall undertake any such recall or withdrawal at its own cost and expense.
Section 4.4    Pharmacovigilance; Safety Data Reporting.
The collaboration between the Parties may involve exchanging safety information and adverse events for the Licensed Product(s).  Therefore, the Parties agree to enter into negotiations to promptly set up, within [**] following the Effective Date, a detailed safety data exchange agreement (the “SDEA”) setting forth the procedures governing the coordination of collection, investigation, reporting and exchange of information to enable collaboration on all matters of safety of use of the Licensed Product worldwide including the exchange of Adverse Drug Reactions information and similar matters sufficient to permit each Party to comply with its legal obligations (including, to the extent applicable, those obligations contained in ICH guidelines 

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E2A, E2B and E2C).  The SDEA shall also set forth the location and responsibility for holding the global pharmacovigilance database, which shall be maintained by Lexicon and established as soon as reasonably feasible to enable the Parties to comply with the international requirements and regulations and monitor the patients’ safety (e.g., IB, ASR or its replacement, PSUR).  The SDEA shall be negotiated in good faith between the pharmacovigilance departments of each Party.  The SDEA, which shall define the roles and responsibilities of both Parties in terms of pharmacovigilance and define the detailed safety exchange required to permit compliance by both Parties with safety reporting requirements to Regulatory Authorities and other entities and ensure worldwide safety surveillance, shall provide among other things that Lexicon shall not transfer the responsibility or holding of the global pharmacovigilance database to any sublicensee, CRO or any Third Party without Ipsen’s express consent and approval, which shall not be unreasonably withheld or delayed if such transferee (together with its Affiliates) is a pharmaceutical company of comparable size as (or greater size than) Ipsen and agrees to grant Ipsen access and other rights to the global pharmacovigilance database substantially equivalent to those granted by Lexicon under the SDEA.  The use by Lexicon of a Sublicensee, a CRO or any Third Party shall be at Lexicon’s sole cost and expense.
Section 4.5    Regulatory Compliance.
Each Party agrees that in performing its obligations under this Agreement, (a) it shall comply in all material respects with all applicable regulatory requirements and standards, including FDA’s current Good Manufacturing Practices, Good Laboratory and Good Clinical Practices, and comparable foreign regulatory standards, and other applicable rules, regulations and requirements, and (b) it will not employ or use the services of any person that has been debarred under Section 306(a) or 306(b) of the US Federal Food, Drug, and Cosmetic Act.
Article 5
Commercialization; Manufacture and Supply
Section 5.1    Overview; Commercialization Plan.
(a)    Subject to and in accordance with the terms and conditions of this Agreement, including Article 2 and Section 5.2, Ipsen shall commercialize Licensed Products in the Field in the Licensed Territory in accordance with the Commercialization Plan.  Ipsen shall submit the initial Commercialization Plan, including related budgets, for JCC review and JSC review and approval by no later than [**].  Ipsen shall submit an updated Commercialization Plan for JCC review and JSC review and approval no less frequently than [**].  All updates and amendments to the Commercialization Plan shall be reviewed by the JCC and reviewed and approved by the JSC, and shall be consistent with the terms and conditions of this Agreement. The Commercialization Plan shall specify, with a breakdown by country within the EU and the rest of the Licensed Territory, including countries in which commercialization activities are planned, among other things:
(i)    commercialization objectives,
(ii)    activities to be performed, including marketing, sales, medical communications, medical publications and education,
(iii)    infrastructure and other capabilities required for all pre-launch, launch and commercialization activities,
(iv)    resources for planned commercialization activities,

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(v)    timelines for performance, including plans and forecasts, 
(vi)    manufacturing and supply requirements for the Licensed Territory, and
(vii)    specific deliverables.
(b)    Ipsen shall use Diligent Efforts to perform its obligations in accordance with the Commercialization Plan and all applicable Laws.  Ipsen shall have sole responsibility for the commercialization of Licensed Products in the Field in the Licensed Territory, including all costs and expenses relating thereto, and for booking sales of Licensed Products throughout the Licensed Territory.
Section 5.2    Manufacture and Supply. 
Within [**] following [**], the Parties shall negotiate in good faith and enter into a definitive supply agreement that includes the following terms, as well as other reasonable and customary contract manufacturing terms, including such additional terms relating to forecasting, minimum remaining shelf life, non-conforming product, failure to supply, remedies and limitations of liability: 
(a)    Supply Requirement: During the Term of the Agreement and subject to the other provisions in this Section 5.2, Lexicon shall use Diligent Efforts to manufacture (or have manufactured) and sell to Ipsen, all of Ipsen’s and its sublicensees’ requirements of the Licensed Product for sale in the Licensed Territory.  Lexicon shall supply Ipsen with finished dosage form of the Licensed Product under the terms of the definitive supply agreement, and shall promptly inform Ipsen of any manufacturing issues that may affect the supply of the Licensed Product to Ipsen, including quality issues, capacity limitations and expected supply shortage. 
(b)    Commercial Supply Costs: Subject to the royalty offset provided in Section 8.4(c), the costs of commercial supply of Licensed Products for all commercialization activities conducted pursuant to this Agreement shall be the sole responsibility of Ipsen pursuant to this Section 5.2.  Lexicon shall source such commercial supply from a reputable Third Party CMO and shall provide such supply to Ipsen for its commercialization activities in accordance with the Commercialization Plan.  Ipsen shall, as may be further described in the definitive supply agreement, pay Lexicon, within [**] following Lexicon’s invoices, Lexicon’s Manufacturing Costs plus [**] percent ([**]%) (the “Commercial Supply Costs”), for all commercial supply of Licensed Products provided by Lexicon pursuant to the definitive supply agreement.
(c)    Order Requirement and Forecast: To enable Lexicon to plan its manufacturing production, within [**] of [**], Ipsen shall provide Lexicon with a non-binding [**] rolling forecast (“Rolling Forecast”) of its anticipated quarterly orders of the Licensed Product.  The terms of the definitive supply agreement will contain provisions to the effect that, within [**] following [**], Ipsen shall place an initial order for commercial supply of Licensed Product from [**] in a quantity sufficient to satisfy Ipsen’s expected requirements for Licensed Product of [**].  The Commercial Supply Costs for such initial [**] order shall be paid by Ipsen in [**].  Lexicon shall provide Ipsen with a [**] invoice at least [**] prior to the end of each [**].  In the event [**], Ipsen may [**].  Orders for supply of Licensed Product for subsequent periods (“Subsequent Commercial Orders”) will be made pursuant to the terms of the definitive commercial supply agreement, in a manner that will allow for adequate time for Lexicon to arrange for the manufacture of such quantities of Licensed Product.  The terms of the definitive supply agreement may also provide for terms relating to the order of Licensed Product by Ipsen for early access programs prior to First Commercial Sale.  For the Subsequent Commercial Orders, the Parties shall ensure to establish inventory management processes 

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designed to reduce the stock of Licensed Products to reach a [**] stock inventory that relate appropriately to Ipsen’s firm orders.
(d)    Quality Technical Agreement. Lexicon shall use Diligent Efforts to manufacture or have manufactured the Licensed Product in accordance with the product specifications and in accordance with cGMP and as set forth in a quality agreement, which shall be entered into between the Parties within [**] of the Effective Date.  The quality agreement will set out the responsibility of the Parties in connection with the Licensed Products as related to quality control, quality assurance and change control (“Quality Technical Agreement”). 
(e)    Discontinuation of Commercial Supply Obligations.  Following the expiration or termination of [**], Lexicon may elect, by providing [**] prior written notice to Ipsen to such effect, to discontinue its commercial supply obligations pursuant to this Section 5.2.  If Lexicon so elects to discontinue its commercial supply obligations, then Lexicon shall, at Ipsen’s sole cost and expense, use Diligent Efforts to transition such manufacturing of the Licensed Product to Ipsen (or its designated Affiliate or Third Party manufacturer).  As part of such transition of manufacturing to Ipsen, Lexicon shall:
(i)    subject to Ipsen’s cooperation in accordance with this Section 5.2(e), use Diligent Efforts to transfer to Ipsen, as promptly as practicable (or at such other time as the Parties may mutually agree), copies of all regulatory filings and other Licensed Technology that are necessary or useful for Ipsen (or the Affiliate or Third Party manufacturer identified by Ipsen) to manufacture the Licensed Product, including manufacturing processes, analytical methods, specifications, protocols, assays, batch records, quality control data, transportation and storage requirements and other manufacturing documentation or files (collectively, “Manufacturing Technology”); and
(ii)    provide all reasonably necessary technical assistance to Ipsen with respect to the use and implementation of such Manufacturing Technology as may be mutually agreed by the Parties.
(f)    Ipsen shall cooperate with Lexicon in undertaking all such transition activities, including with respect to the scheduling and planning of associated meetings.
Section 5.3    Complaints.  Ipsen shall be responsible for handling all complaints with respect to all Licensed Products in the Licensed Territory, and all costs and expenses associated therewith.  Lexicon shall be responsible for handling all complaints with respect to all Licensed Products in the Lexicon Territory, and all costs and expenses associated therewith.
Section 5.4    Product Labelling.  To the extent permitted under applicable Laws, all Licensed Products in the Licensed Territory shall carry the Ipsen name and logo on the product label and shall state that the Licensed Product is licensed from Lexicon; and all written promotional materials associated with each Licensed Product in the Licensed Territory shall indicate that the Licensed Product was licensed from Lexicon.
Article 6
Diligence
Section 6.1    Diligence Obligations.
Without limiting either Party’s obligations under Section 3.1(c) and 5.1(b), (a) the Parties shall use Diligent Efforts to perform their respective obligations under the Development Plan and Commercialization Plan and 

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(b) Ipsen shall use Diligent Efforts to obtain Regulatory Approvals for and commercialize at least one (1) Licensed Product in the Licensed Territory and to achieve each of the milestone events set forth in Sections 8.2 and 8.3.
Section 6.2    Reports.
Each Party shall provide written reports to the other Party within [**] after the end of each [**] period during each calendar year in which research and development activities with respect to the Compound and Licensed Products continue pursuant to the Development Plan, setting forth in reasonable detail such Party’s and its Affiliates’ and sublicensees’ (a) activities and progress during such preceding [**] period in carrying out the Development Plan, including information concerning clinical studies, achievement of development and regulatory event milestones, filing of applications for and securing of Regulatory Approvals, sublicensing efforts, and the territories in which the foregoing activities are conducted, such information to be provided separately for each Licensed Product, and (b) any such planned research, development and manufacturing activities in the next [**] period, including expected timelines.  In addition, following [**], each Party shall provide written reports to the other Party within [**] after the end of each [**] period during each calendar year setting forth in reasonable detail such Party’s and its Affiliates’ and sublicensees’ (a) activities and progress during such preceding [**] period in carrying out the Commercialization Plan, including information concerning the preparations for commercial launch of the Licensed Products, First Commercial Sale, achievement of sales level event milestones and the territories in which the foregoing activities are conducted, such information to be provided separately for each Licensed Product, and (b) any planned commercialization activities in the next [**] period, including expected timelines.

Article 7
Grant of Licenses
Section 7.1    Lexicon License Grants.
(a)    Grant.  Subject to the terms and conditions of this Agreement, Lexicon hereby grants to Ipsen an exclusive (even as to Lexicon), royalty-bearing right and license, with the right to grant sublicenses subject to Section 7.1(b), under Licensed Intellectual Property, including Lexicon’s rights in Joint Technology and Joint Patent Rights, to develop, have developed, make, have made, use, offer for sale, sell, have sold, and import the Compound and Licensed Products in the Field in the Licensed Territory.
(b)    Sublicense Rights.
(i)    Subject to the remainder of this Section 7.1(b), Ipsen shall have the right to enter into sublicenses relating to the license granted in Section 7.1(a) to Third Parties or Affiliates with which Ipsen has agreed to develop, manufacture or commercialize the Compound and Licensed Products in the Licensed Territory, either jointly, in collaboration with or on behalf of Ipsen; provided that, each such sublicensee is bound in writing, and shall be required to bind in writing any of its further sublicensees, as applicable, to assign or grant to Ipsen rights or licenses giving Ipsen Control of any Patent Rights, including joint Patent Rights, and Know-How that is developed or otherwise controlled by such sublicensee at any time while such sublicensee has a license to any Ipsen Technology, Ipsen Patent Rights, Licensed Intellectual Property or access to any Confidential Information of Lexicon, and that is used in, or necessary for, the research, development, manufacture, use or sale of the Compound or any Licensed Product, such that such developed or otherwise controlled Patent Rights and Know-How are included in the licenses granted to Lexicon in Section 7.2.  

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(ii)    Ipsen’s right to grant sublicenses shall be without Lexicon’s consent and without any written notice to Lexicon if such sublicense is granted to an Affiliate.  However, a written notice shall be sent by Ipsen to Lexicon for Lexicon’s information as to the identity of the Third Party if such sublicense is granted to a Third Party. 
(iii)    Each sublicense granted by Ipsen under this Section 7.1(b) shall be subject and subordinate to, and consistent with, the terms and conditions of this Agreement, and shall provide that any such sublicensee shall not further sublicense except on terms consistent with this Section 7.1(b).  
(iv)    Ipsen shall be responsible for the performance of its sublicensees, and shall ensure that any such sublicensees comply with all applicable provisions of this Agreement.  In the event of a material default by any sublicensee under a sublicense agreement, Ipsen will inform Lexicon and take such action, after consultation with Lexicon, which in Ipsen’s reasonable business judgment will address such default.
Section 7.2    Ipsen License Grants.
(a)    Performance of Development Plan.  Subject to the terms and conditions of this Agreement, Ipsen hereby grants to Lexicon and its Affiliates a non-exclusive, non-royalty bearing license in the Licensed Territory, without the right to grant sublicenses except as contemplated by the Development Plan or as otherwise authorized in writing by Ipsen, under the Ipsen Technology and Ipsen Patent Rights, including Ipsen’s rights to Joint Technology and Joint Patent Rights, for the sole purpose of performing Lexicon’s obligations under this Agreement, including conducting the activities assigned to Lexicon under the Development Plan or Commercialization Plan.
(b)    Lexicon Territory.  Subject to the terms and conditions of this Agreement, Ipsen hereby grants to Lexicon an exclusive (even as to Ipsen), non-royalty-bearing right and license, with the right to grant sublicenses (subject, in the case of any sublicense of development and commercialization rights to the Licensed Product, the applicable sublicensee (and its further sublicensees) granting rights or licenses giving Lexicon Control of any Patent Rights, including joint Patent Rights, and Know-How that is developed or otherwise controlled by such sublicensee (or its further sublicensees) at any time while such sublicensee has a license to any Ipsen Technology, Ipsen Patent Rights or access to any Confidential Information of Ipsen, and that is used in, or necessary for, the research, development, manufacture, use or sale of the Compound or any Licensed Product, such that such developed or otherwise controlled Patent Rights and Know-How are included in the licenses granted to Ipsen in Section 7.1), under Ipsen Technology and Ipsen Patent Rights, including Ipsen’s rights in Joint Technology and Joint Patent Rights, to develop, have developed, make, have made, use, offer for sale, sell, have sold, and import the Compound and Licensed Products in the Field in the Lexicon Territory.
Section 7.3    Retained Rights.
Notwithstanding Section 7.1, Lexicon retains rights under the Licensed Intellectual Property to perform its obligations under this Agreement, including conducting the activities assigned to it under the Development Plan or Commercialization Plan.
Section 7.4    Disclosure of Technology.
(a)    Commencing on the Effective Date and continuing during the Development Program, Lexicon (consistent with its applicable confidential disclosure obligations to Third Parties, if any) shall use 

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Diligent Efforts to disclose to Ipsen (a) all Licensed Technology specified in the Development Plan, and (b) any Licensed Technology not specified in the Development Plan that Lexicon reasonably believes to be necessary or useful for the development, manufacture or commercialization of the Compound or Licensed Products hereunder.  In particular, Lexicon shall use Diligent Efforts during such period to disclose or make available to Ipsen all material data and information in its possession or otherwise under its Control, regarding Licensed Products and Licensed Intellectual Property, all the foregoing as may be necessary or useful for the development, manufacture or commercialization of the Compound or Licensed Products hereunder.
(b)    Commencing on the Effective Date and continuing during the Development Program and Commercialization Program, Ipsen (consistent with its applicable confidential disclosure obligations to Third Parties, if any) shall use Diligent Efforts to disclose to Lexicon all information relating to (a) all Ipsen Technology specified in the Development Plan, and (b) any Ipsen Technology not specified in the Development Plan that Ipsen reasonably believes to be necessary or useful for the development, manufacture or commercialization of the Compound or Licensed Products hereunder.  In particular, Ipsen shall use Diligent Efforts during such period to disclose or make available to Lexicon all material data and information in its possession or otherwise under its Control, regarding Ipsen Patent Rights and Ipsen Technology, all the foregoing as may be necessary or useful for the development, manufacture or commercialization of the Compound or Licensed Products hereunder. 
Section 7.5    No Implied Licenses.
Except as explicitly set forth in this Agreement, neither Party grants to the other Party any license, express or implied, under its intellectual property rights.
Section 7.6    Section 365(n) of the Bankruptcy Code.
All rights and licenses granted under or pursuant to any section of this Agreement are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code licenses of rights to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code.  The Parties shall retain and may fully exercise all of their respective rights and elections under the Bankruptcy Code.
Section 7.7    [**].
In the event Lexicon determines to [**], Lexicon shall provide Ipsen with written notice to such effect.  If requested by Ipsen within [**] of such notice, the Parties shall enter into good faith negotiations with respect to [**], which negotiations will be [**] for a period of [**] following such request.  In the event the Parties do not [**] within such [**] period, Lexicon will be free, at any time thereafter, to [**], and may [**]; provided that if Lexicon does not [**] within [**] following the expiration of the [**], then Ipsen shall have the right to [**] during which the Parties shall [**], in which case Lexicon may [**] but may not [**] until [**].
Section 7.8    Exclusivity & Non-Compete.  
During the [**], neither Lexicon nor any of its Affiliates shall, itself or through, with or on behalf of any Third Party, commercialize anywhere in the Licensed Territory (except any country or countries with respect to which Ipsen has terminated this Agreement pursuant to Section 12.5) Licensed Products for use in the Field, other than pursuant to this Agreement.  Until [**], neither Party nor any of its Affiliates (other than Third Party Acquirers and their Affiliates, which shall not be so restricted) shall, itself or through, with or on behalf of any Third Party, commercialize in such country (except any country or countries with 

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respect to which Ipsen has terminated this Agreement pursuant to Section 12.5) (a) any [**], including, but not limited to, [**] for use in the [**] or (b) any [**], whether or not a [**], for use (i) in the [**] or (ii) for any other [**], in each case other than pursuant to this Agreement. 

Article 8
Financial Provisions
Section 8.1    Upfront Payment.
Ipsen shall pay Lexicon a one-time, non-refundable, non-creditable fee of Twenty-Three Million Dollars (US$23,000,000) within [**] after the Effective Date. 
Section 8.2    Development and Regulatory Milestones.
(a)    Ipsen shall pay Lexicon the following event milestone payments, subject to adjustment pursuant to Section 8.2(b) and (c):
	
			
	Milestone Event 
	U.S. Dollars
(in Millions)

	 
	 
	 

	(i)
	[**]
	U.S.$[**]

	 
	 
	 

	(ii)
	[**]
	U.S.$ [**]

	 
	 
	 

	(iii)
	[**]
	U.S.$ [**]

	 
	 
	 

	(iv)
	[**]
	U.S.$ [**]

	 
	 
	 

	(v)
	[**]
	U.S.$ [**]

	 
	 
	 

	(vi)
	[**]
	U.S.$ [**]

	 
	 
	 

	(vii)
	[**]
	U.S.$ [**]

	 
	 
	 

	(viii)
	[**]
	U.S.$ [**]

	 
	 
	 

(b)In the event the milestone described in clause (i) of the table set forth in Section 8.2(a) above [**], then the milestone payment applicable to such milestone shall be adjusted from [**] to [**] if such milestone is [**], to [**] if such milestone is [**], and to [**] if such milestone is [**].
(c)    In the event the milestone described in clause (ii) of the table set forth in Section 8.2(a) above [**], then the milestone payment applicable to such milestone shall be adjusted from [**] to [**], if such milestone does not occur within [**], such milestone payment shall be adjusted to [**], and if such milestone does not occur within [**], such milestone payment shall be adjusted to [**].
(d)    Each milestone payment set forth in this Section 8.2 shall be payable by Ipsen based upon the achievement of the related milestone events by Ipsen or any of its Affiliates or sublicensees.  Ipsen shall provide notice to Lexicon promptly upon achievement of each such milestone event and no later than [**] after such achievement.  Ipsen shall pay Lexicon the corresponding milestone payment within [**] after achievement of each such milestone event.

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(e)    With respect to the regulatory events set forth in clauses (i) and (ii) of the table set forth in Section 8.2(a) above, the Parties acknowledge that they anticipate that Ipsen will [**].  Notwithstanding the foregoing, in the event that Ipsen [**], each of the regulatory events set forth in clauses (i) and (ii) of the table set forth in Section 8.2(a) above shall be deemed to have been achieved upon [**].
(f)    For the avoidance of doubt, each milestone payment shall be due only with respect to the first occurrence of the applicable milestone event set forth in Section 8.2(a).
Section 8.3    Sales Milestones.
(a)    Ipsen shall pay Lexicon the following sales milestone payments: 
	
			
	Sales Milestone Event 
	Euros
(in Millions)

	 
	 
	 

	(i)
	First time aggregate Net Sales of all Licensed Products in the Licensed Territory equals or exceeds €[**] in any four (4) consecutive calendar quarters 
	€[**]

	 
	 
	 

	(ii)
	First time aggregate Net Sales of all Licensed Products in the Licensed Territory equals or exceeds €[**] in any four (4) consecutive calendar quarters
	€[**]

	 
	 
	 

	(iii)
	First time aggregate Net Sales of all Licensed Products in the Licensed Territory equals or exceeds €[**] in any four (4) consecutive calendar quarters
	€[**]

	 
	 
	 

	(iv)
	First time aggregate Net Sales of all Licensed Products in the Licensed Territory equals or exceeds €[**] in any four (4) consecutive calendar quarters
	€[**]

	 
	 
	 

(b)    Each sales milestone payment set forth in Section 8.3(a) shall be payable by Ipsen upon the achievement of the related sales milestone event, and Ipsen shall provide notice to Lexicon promptly upon achievement of such sales milestone event.  Ipsen shall pay Lexicon each such sales milestone payment concurrently with the royalty payments for Net Sales occurring during the calendar quarter in which such sales milestone is first achieved; provided however, if [**], Ipsen shall have the option to [**], upon notice to Lexicon prior to [**].  Upon termination or expiration of this Agreement for any reason, any [**], shall immediately become due, and Ipsen shall immediately pay such amount to Lexicon.
(c)    For purposes of clarity, more than one of the sales milestones set forth above may be earned in the same four (4) consecutive calendar quarter period or in overlapping four (4) consecutive calendar quarter periods.  For example, if aggregate worldwide Net Sales of all Licensed Products have not achieved any of the sales milestone thresholds set forth in Section 8.3(a) above in any previous four (4) consecutive calendar quarter period, and aggregate, worldwide Net Sales with respect to all Licensed Products then exceed €[**] in a four (4) consecutive calendar quarter period, then all four milestone payments set forth in clauses (i), (ii), (iii) and (iv) of Section 8.3(a) above shall become payable to Lexicon hereunder, subject to Ipsen’s right to [**] as set forth in Section 8.3(b).

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(d)    Reduction for Clinical Study Costs.  
Ipsen may credit any Study Cost Offset Amount (if applicable) with respect to a Licensed Product against the amount of sales milestone payments set forth in Section 8.3(a) to the extent not previously credited against sales milestone payments under this Section 8.3(d) or royalties under Section 8.4(d) with respect to such Licensed Product.
(e)    For the avoidance of doubt, each milestone payment shall be due only with respect to the first occurrence of the applicable milestone event set forth in Section 8.3(a).
Section 8.4    Royalties.
(a)    Royalty Rate. Subject to the remainder of this Section 8.4, Ipsen shall pay Lexicon royalties on aggregate annual (calendar year) Net Sales of all Licensed Products in the Licensed Territory, at the incremental royalty rates set forth below:
	
		
	Aggregate Annual Net Sales (in Euros) for all Licensed Product(s) in the Licensed Territory

	 
	 

	Portion of calendar year Net Sales up to and including
 €[**]
	[**]%

	 
	 

	Portion of calendar year Net Sales that exceeds
€[**], up to and including €[**]
	[**]%

	 
	 

	Portion of calendar year Net Sales that exceeds 
€[**], up to and including €[**]
	[**]%

	 
	 

	Portion of calendar year Net Sales that exceeds
€[**]
	[**]%

(b)    Royalty Term.  The applicable royalties payable to Lexicon under Section 8.4(a) above (as the royalty rates applicable under the foregoing may be reduced by Sections  8.4(c), (d), (e) and (f)) shall be paid by Ipsen on each Licensed Product, on a Licensed Product-by-Licensed Product and a country-by-country basis, until the latest of (A) the expiration of the last-to-expire Valid Claim that Covers such Licensed Product in such country, (B) the expiration of all data and regulatory exclusivity applicable to such Licensed Product pursuant to statute or regulation in such country, or (C) ten (10) years after the First Commercial Sale of such Licensed Product in such country (the “Royalty Term”). 
(c)    Reduction for Commercial Supply Costs.  The Commercial Supply Costs actually paid by Ipsen to Lexicon pursuant to Section 5.2 shall be subject to deduction, on a Licensed Product-by-Licensed Product and country-by-country basis, by Ipsen from any royalties that are subsequently due to Lexicon under this Agreement with respect to such Licensed Product in such country; provided that Ipsen will only be entitled to deduct Commercial Supply Costs for those units of a Licensed Product the sales of which are reflected in Net Sales in the applicable royalty report; provided further that Ipsen shall not be permitted to deduct, on a unit-by-unit basis, more than the royalties that are payable on the Net Sales resulting from the sale of such unit of Licensed Product.  
(d)    Reduction for Clinical Study Costs.  Ipsen may credit any Study Cost Offset Amount (if applicable) with respect to a Licensed Product against the amount of royalties payable pursuant to Section 

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8.4(a) or 8.4(e) to the extent not previously credited against sales milestone payments under Section 8.3(d) or royalties under this Section 8.4(d) with respect to such Licensed Product.  
(e)    Reduction for Generic Competition or Loss of Exclusivity.  
(i)    In the event that, in any country in the Licensed Territory during the Royalty Term for a Licensed Product, one or more Generic Products of a Licensed Product is launched in such country, and (A) Net Sales of such Licensed Product in such country decline by greater than [**] percent ([**]%) relative to the average Net Sales of such Licensed Product in such country for the four (4) calendar quarters immediately preceding the calendar quarter in which the Generic Product is launched in such country (the “Pre-Generic Launch Net Sales”) or (B) such Generic Product achieves [**] percent ([**]%) or more of the unit-based market share in such country during any given calendar quarter as determined by IMS, then the royalty rates set forth in Section 8.4(a) shall be reduced in such country by [**] percent ([**]%) for each calendar quarter ending after the Generic Product was launched in which such Net Sales remain below the applicable percentage of the Pre-Generic Launch Net Sales or such Generic Product maintains at least the applicable percentage of the unit-based market share in such country; provided that , the foregoing clause (x) shall not preclude the applicability of this Section 8.4(e) to future calendar quarters if such Generic Product or any other Generic Product is re-launched or launched, as applicable, in such country and Net Sales again fall below the applicable percentage of the Pre-Generic Launch Net Sales or the Generic Product again achieves at least the applicable percentage of the unit-based market share in such country 
(ii)    In the event that, in any country in the Licensed Territory during the Royalty Term for a Licensed Product, such Licensed Product is not Covered by a Valid Claim of the Licensed Patent Rights in such country and there is no data or regulatory exclusivity applicable to such Licensed Product in such country,  then the royalty rates set forth in Section 8.4(a) shall be reduced in such country by [**] percent ([**]%) for the remainder of the Royalty Term applicable to such Licensed Product in such country.  
(iii)    Notwithstanding anything to the contrary in this Section 8.4(e), the royalty reductions in this Section 8.4(e) shall not be cumulative, with only a single reduction under clause (i) or (ii) above, but not both, being applicable, such that the maximum royalty reduction under this Section 8.4(e) shall be [**] percent ([**]%). 
(f)    Third Party Licenses.  Ipsen shall be responsible for the costs, including royalties, milestones and fees, of all Third Party Licenses (as defined below) entered into by Ipsen with Third Parties that are necessary so as not to infringe any Third Party Patent Rights in the manufacture, use, offer for sale, sale or importation of the Compound or any Licensed Products in the Licensed Territory hereunder (each such arrangement, a “Third Party License”, and the costs, including royalties, milestones and fees, of all such Third Party Licenses, “Third Party License Costs”).  The Parties agree that Ipsen shall take the lead in negotiating and entering into any Third Party Licenses, provided that [**] percent ([**]%) of the Third Party License Costs actually paid by Ipsen to the applicable licensors shall be subject to deduction (“Third Party License Cost Cap”), on a Licensed Product-by-Licensed Product and country-by-country basis, by Ipsen from any royalties that are subsequently due to Lexicon under this Agreement with respect to such Licensed Product in such country.  
(g)    Royalties Payable Only Once.  The obligation to pay royalties is imposed only once with respect to the same unit of a Licensed Product.

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(h)    Royalty Reports and Payments.  After the First Commercial Sale of a Licensed Product in the Licensed Territory, Ipsen shall deliver to Lexicon, within [**] after the end of each calendar quarter, reasonably detailed written accountings of Net Sales of Licensed Products and royalties and sales milestone payments, if any, due to Lexicon, for such calendar quarter.  Such quarterly reports shall indicate gross sales on a country-by-country and product-by-product basis, the deductions from gross sales used in calculating Net Sales and the resulting calculation of royalties and sales milestone payments.  When Ipsen delivers such accountings to Lexicon, Ipsen shall also deliver all royalty payments due hereunder to Lexicon for the calendar quarter.
Section 8.5    Development Costs.
(a)    For clinical trials conducted by Lexicon under Section 3.2 and for which Ipsen is responsible for a share of costs pursuant to Section 3.3, Ipsen shall pay Lexicon, within [**] following Lexicon’s invoice with respect thereto, the specified percentage as provided in Section 3.3 of (a) all internal costs of Lexicon personnel directly engaged in the development activities of the clinical trials of the Licensed Product for the Licensed Territory at the FTE Rate, which time spent shall be justified by a time-keeping log and provided however that in the event such personnel is also concurrently engaged in the development activities of products other than the Licensed Product, such personnel’s work-time shall be appropriately allocated between the other product and the Licensed Product for purpose of calculating the internal costs specifically dedicated to the Licensed Product; plus (b) all out-of-pocket costs and expenses incurred by Lexicon, including costs and expenses of any Third Party contract research and manufacturing organizations, with respect to each of clause (a) and (b) to the extent incurred in performing activities assigned to Lexicon under the Development Plan and provided (i) the applicable activities relating to conducting the Development Program have been previously approved by the JSC prior to their start and (ii) the amounts involved are within the approved budget (it being understood that the approved budget shall include an allowance of [**] percent ([**]%) for cost overruns), provided such overruns, upon their occurrence, are appropriately documented and justified.  It is further understood that Lexicon’s obligations to perform any given Development Program activities shall be subject to prior approval by the JSC of a budget therefor.  For purposes of this Agreement, an overrun shall be justified if it is incurred by Lexicon in activities that are pursuant to the Development Plan approved by the JSC and the objectives thereof.   This Section shall apply mutatis mutandis to Lexicon for clinical trials conducted by Ipsen under Section 3.2 and for which Lexicon is responsible for a share of costs pursuant to Section 3.3.
(b)    For clinical trials conducted by Ipsen under Section 3.2, Ipsen shall pay Lexicon, within [**] following Lexicon’s invoice, Lexicon’s Manufacturing Costs for all clinical supply of the Compound and Licensed Products for clinical trials and other development activities conducted pursuant to this Agreement.
Section 8.6    Recordkeeping; Audit Rights.
(a)    Audits by Lexicon.  During the Term, and for a period of [**] thereafter, Ipsen shall keep, and shall require its Affiliates and sublicensees to keep, complete and accurate records of the latest [**] of (i) any costs of clinical trials incurred by Ipsen as described in Section 8.5, (ii) Net Sales of Licensed Products to which royalties or sales milestones attach hereunder and all deductions from gross sales used in calculating Net Sales, and (iii) records of time-keeping logs sufficient to justify the work-time spent by each FTE of Ipsen.  For the sole purpose of verifying amounts payable to Lexicon hereunder, Lexicon shall have the right [**] at Lexicon’s expense to retain an independent certified public accountant selected by Lexicon and reasonably acceptable to Ipsen, to review such records for a period covering not more than the preceding 

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[**] in the location(s) where such records are maintained by Ipsen, its Affiliates or its sublicensees upon reasonable notice and during regular business hours and under obligations of confidence.  Such independent certified public accountant may be required by Ipsen to enter into a confidentiality agreement and in no event shall such accountant disclose to Lexicon any information other than such as relates to the accuracy of reports and payments made or due hereunder.  Results of such review shall be made available to both Lexicon and Ipsen.  If the review reflects an underpayment of any amounts payable to Lexicon, such underpayment shall be remitted to Lexicon, within [**] after the notification of the results by Lexicon to Ipsen, together with interest calculated in the manner provided in Section 8.9.  If the underpayment is equal to or greater than [**] percent ([**]%) of the amount that was otherwise due, Ipsen shall pay all of the reasonable out of pocket expenses of such review.  
(b)    Audits by Ipsen.  During the Term, and for a period of [**] thereafter, Lexicon shall keep, and shall require its Affiliates and sublicensees to keep, complete and accurate records of the latest [**] of (i) any costs of clinical trials incurred by Lexicon as described in Section 8.5 and Manufacturing Costs incurred in the conduct of the clinical, development and manufacturing activities hereunder, (ii) any internal costs of Lexicon personnel at the FTE Rate and out-of-pocket costs and expenses incurred by Lexicon in the conduct of research, development and regulatory activities under the Development Plan or Commercialization Plan for which Lexicon otherwise invoices Ipsen hereunder, and (iii) any records of time-keeping logs sufficient to justify the work-time spent by each FTE of Lexicon.  For the sole purpose of verifying amounts payable by Ipsen hereunder, Ipsen shall have the right [**] at Ipsen’s expense to retain an independent certified public accountant selected by Ipsen and reasonably acceptable to Lexicon, to review such records for a period covering not more than the preceding [**] in the location(s) where such records are maintained by Lexicon, its Affiliates or its sublicensees upon reasonable notice and during regular business hours and under obligations of confidence.  Such independent certified public accountant may be required by Lexicon to enter into a confidentiality agreement and in no event shall such accountant disclose to Ipsen any information other than such as relates to the accuracy of reports and payments made or due hereunder.  Results of such review shall be made available to both Lexicon and Ipsen.  If the review reflects an overpayment of any such amounts by Ipsen, the amount of such overpayment shall be refunded to Ipsen within [**] after such review.  If the overpayment is equal to or greater than [**] percent ([**]%) of the amount that was otherwise due, Lexicon shall pay all of the reasonable out of pocket expenses of such review.  
Section 8.7    Method of Payment.
All amounts payable by Ipsen under Sections 8.1 and 8.2 shall be paid by or on behalf of Ipsen in U.S. Dollars and all other amounts payable by Ipsen hereunder shall be paid by or on behalf of Ipsen in Euros.  With respect to sales of Licensed Products invoiced in Euros, the royalties payable to Lexicon shall be expressed in Euros.  With respect to sales of Licensed Products invoiced in a currency other than Euros, the royalties payable shall be expressed in their Euro equivalent, calculated using the applicable conversion rates for buying Euros published by The Wall Street Journal (Eastern Edition) on the last Business Day of the calendar quarter to which the royalty report relates.  With respect to any other costs or expenses incurred in a currency other than Euros that become due and payable to Lexicon hereunder, such amounts shall be expressed in their Euro equivalent, calculated using the applicable conversion rates for buying Euros published by The Wall Street Journal (Eastern Edition) on the invoice date relating to such payment.  All payments due to a Party hereunder shall be made by wire transfer directly to an account designated by such Party.

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Section 8.8    Invoices.
Unless otherwise expressly stated in this Agreement, each Party shall invoice the other Party on a quarterly basis for costs or expenses that become due and payable to the invoicing Party hereunder, and the other Party shall pay the invoicing Party such invoiced amount within [**] following receipt thereof unless otherwise specified in the applicable provision of this Agreement.
Section 8.9    Late Payments.
Any payment under this Agreement that is not paid on or before the date such payment is due shall bear interest at the lesser of (a) [**] percentage points above the prime rate of interest of JP Morgan Chase & Co. as announced on the date such payment is due, or (b) the highest rate permitted by applicable Laws, calculated on the number of days such payments are overdue and compounded monthly.  In addition, the Party responsible for paying shall reimburse the payee Party for all costs and expenses, including without limitation attorneys’ fees and legal expenses, incurred in the collection of late payments, provided, that the foregoing shall not apply with respect to payments disputed in good faith by the paying Party unless the payee Party is successful in such dispute or the paying Party ceases to dispute such payments.
Section 8.10    Tax Withholding.
Each Party will be solely responsible for its own tax obligations.  Notwithstanding the foregoing, Ipsen shall make all payments to Lexicon hereunder from the United States or France, will not withhold any tax from payments made from the United States, and, for payments made from France, will not withhold any tax for so long as the applicable withholding rate in the double taxation treaty between the United States and France is zero percent (0%).
Section 8.11    Blocked Payments.
In the event that, by reason of applicable Laws in any country, it becomes impossible or illegal for Ipsen or its Affiliates, to transfer, or have transferred on its behalf, royalties or other payments to Lexicon, such royalties or other payments shall be deposited in local currency in the relevant country to the credit of Lexicon in a recognized banking institution designated by Lexicon or, if none is designated by Lexicon within a period of [**], in a recognized banking institution selected by Ipsen or its Affiliates, as the case may be, and identified in a notice in writing given to Lexicon. The foregoing shall apply reciprocally to any payment that would be due by Lexicon to Ipsen hereunder.

Article 9
Intellectual Property Ownership, Protection and Related Matters
Section 9.1    Ownership of Inventions.
(a)    Solely-Owned Inventions.  Each Party shall exclusively own all right, title and interest in and to all inventions made or conceived solely by the employees, agents, consultants or contractors of such Party or its Affiliates in the course of performing its activities under this Agreement.
(b)    Joint Inventions.  All inventions made or conceived jointly by employees, agents, consultants or contractors of Lexicon or its Affiliates, and employees, agents, consultants or contractors of Ipsen or its Affiliates, shall be owned jointly on the basis of each Party having an undivided interest in the whole (“Joint Inventions”).  Each Party covenants that it will not subject any such Joint Invention to any lien, 

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encumbrance, security interest and/or other imposition that would affect the other Party’s title or right to use the Joint Invention or to sell or otherwise assign its rights thereunder without consent of the other Party, except as otherwise provided by the terms of this Agreement.  
(c)    Inventorship.  For purposes of determining the Parties’ rights under this Agreement, the determination of inventorship shall be made in accordance with United States patent laws.  In the event of any dispute regarding inventorship, if the Parties are unable to resolve the dispute, the Parties shall jointly engage mutually acceptable independent U.S. patent counsel not regularly employed by either Party (or, if the Parties are unable to mutually agree on such patent counsel, the ICC shall appoint such patent counsel) to resolve such dispute.  The decision of such independent patent counsel shall be binding on the Parties with respect to the issue of inventorship.
Section 9.2    Prosecution and Maintenance of Patent Rights.
(a)    Licensed Patent Rights Solely Controlled by Lexicon.  Subject to the cooperation provisions of Section 9.2(e), Lexicon shall have the sole right and option (but not the obligation) to prepare, file and prosecute any patent applications and to maintain any patents within the Licensed Patent Rights (other than any Joint Patent Right), in Lexicon’s name, and to control any administrative proceeding (e.g. appeal, interference, reexamination, reissue, opposition, derivation, post-grant review) relating thereto, in the Licensed Territory, at Ipsen’s expense.  In the event that Lexicon elects not to file, prosecute, or maintain, or elects to abandon any Licensed Patent Right in the Licensed Territory, or declines to control any administrative proceeding relating thereto, Lexicon shall give Ipsen reasonable written notice to this effect, sufficiently in advance to permit Ipsen, in its sole discretion and expense, to undertake such filing, prosecution and maintenance, or to control such administrative proceeding relating thereto, without a loss of rights, and thereafter Ipsen may, upon written notice to Lexicon and in Lexicon’s name, file, prosecute and maintain such Licensed Patent Right and control any administrative proceeding relating thereto. 
(b)    Ipsen Patent Rights Solely Controlled by Ipsen.  Ipsen shall have the exclusive right and option (but not the obligation), at its sole cost and expense, to prepare, file and prosecute any patent applications and to maintain any patents within Ipsen Patent Rights (other than Joint Patent Rights) in Ipsen’s name, and to control any administrative proceeding relating thereto.
(c)    Joint Patent Rights.  Lexicon shall have the first right and option (but not the obligation) to file and prosecute any patent applications and to maintain any patents within the Joint Patent Rights in both Parties’ names, and to control any administrative proceeding relating thereto.  In the event that Lexicon elects not to file, prosecute, or maintain, or elects to abandon any Joint Patent Right, or declines to control any administrative proceeding relating thereto, Lexicon shall give Ipsen reasonable written notice to this effect, sufficiently in advance to permit Ipsen, in its sole discretion and expense, to undertake such filing, prosecution and maintenance, or to control such administrative proceeding relating thereto, without a loss of rights, and thereafter Ipsen may, upon written notice to Lexicon and jointly in both Parties’ names, file, prosecute and maintain such Joint Patent Rights and control any administrative proceeding relating thereto.  If required under applicable Law in order for the prosecuting Party to control any administrative proceeding relating to the filing, prosecution or maintenance of any Joint Patent Rights, the other Party shall join as a party thereto.
(d)    Costs and Expenses.  As from the Effective Date, the Parties shall bear the costs of preparing, filing, prosecuting, and maintaining Patent Rights other than Joint Patent Rights in accordance with Sections 9.2(a) and 9.2(b) and the costs and expenses in preparing, filing, prosecuting, and maintaining 

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Joint Patent Rights in accordance with Section 9.2(c) shall be shared in the same manner as set forth in Section 9.2(a) to the extent Lexicon maintains responsibility therefor, and shall be borne by Ipsen to the extent Ipsen assumes such responsibility.
(e)    Cooperation.  Each Party agrees to cooperate with the other with respect to the preparation, filing, prosecution and maintenance of patents and patent applications pursuant to Section 9.2(a), (b), (c), and with respect to administrative proceedings relating thereto (collectively, “Patent Prosecution”) by or through the following: 
(i)    with regard to Section 9.2(c), the execution of all documents and instruments and the performance of all acts that are reasonably necessary to enable the other Party to continue any Patent Prosecution that the cooperating Party has elected not to pursue;
(ii)    making its employees, agents and consultants reasonably available to the other Party (or to the other Party’s authorized attorneys, agents or representatives), to the extent reasonably necessary for any Patent Prosecution;
(iii)    the provision (itself or through patent counsel) to the other Party of a copy of each proposed material correspondence pertaining to substantive Patent Prosecution on the merits with any patent office in the Licensed Territory, as well as the provision of draft copies of patent applications to be submitted to the WIPO under the Patent Cooperation Treaty, or submitted to any patent office in the Licensed Territory reasonably in advance of any applicable filing or response deadline to allow the other Party to review and comment on the content of such proposed correspondence and advise the prosecuting Party as to the conduct of such Patent Prosecution, which comments and advice the prosecuting Party will not unreasonably decline to follow, provided that doing so is consistent with the goal of obtaining optimal patent coverage for Licensed Products in the Licensed Territory;
(iv)    the provision (itself or through patent counsel) to the other Party of copies of all material correspondence pertaining to substantive Patent Prosecution on the merits with any patent office in the Licensed Territory after its submission or receipt; and
(v)    the seeking of patent term extensions, adjustments, and the like wherever available for the Licensed Patent Rights.
Section 9.3    Third Party Infringement.
(a)    Notice.  Each Party shall promptly report in writing to the other Party during the Term any (i) known or suspected infringement of any issued claims within the Licensed Patent Rights by a Third Party, or (ii) any known or suspected misappropriation of any of the Licensed Technology by a Third Party.  In the event such known or suspected infringement or misappropriation involves the manufacture, sale, offer for sale, use, or importation in the Licensed Territory of the Compound or a Licensed Product being developed or commercialized by Ipsen hereunder (“Competitive Infringement”), the reporting Party shall provide the evidence in its possession regarding such Competitive Infringement to the other Party.  Promptly after receipt of a notice of Competitive Infringement, the Parties shall discuss in good faith the Competitive Infringement and appropriate actions that could be taken to end the Competitive Infringement.  

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(b)    Enforcement.
(i)    Competitive Infringement.  Subject to any rights of and obligations to Lexicon’s Third Party licensors, Ipsen shall have the first right to initiate a suit or take other appropriate action that it believes necessary to end any Competitive Infringement, at Ipsen’s sole control and expense.  If Ipsen fails to initiate a suit or take other appropriate action that it has the initial right to initiate or take to end such Competitive Infringement within [**] (or such shorter period specified below in this Section 9.3(b) or in Section 9.6, if applicable) after becoming aware of the basis for such suit or action, then Lexicon may, in its discretion, initiate a suit or take other appropriate action that it believes necessary to end such Competitive Infringement.  The [**] period in the immediately preceding sentence shall be shortened as reasonably necessary to enable Lexicon to initiate a suit or take other appropriate action if, in the absence of such shortening, a loss of rights with respect to such suit or other action would occur (e.g., if a generic pharmaceutical maker files an abbreviated new drug application or analogous application for which the reference listed drug is a Licensed Product and, in order to obtain an automatic stay from the EMA with respect to the approval of such application, a patent infringement suit must be brought within a shorter period of time).  The Party filing any such suit or taking any such action shall be responsible for all costs in connection therewith and, therefore, shall control all decision-making related to any such suit or action, subject to Section 9.3(c) below.
(ii)    Infringement other than Competitive Infringement.  Lexicon shall have the sole right to initiate a suit or take other appropriate action that it believes necessary to end any infringement of the Licensed Patent Rights other than a Competitive Infringement.  Lexicon shall notify Ipsen in writing prior to initiating such suit or action, and promptly after receipt of such notice, the Parties shall discuss in good faith the advisability of such suit or action in view of any identified risks to the Licensed Patent Rights and the Licensed Products.  
(c)    Conduct of Actions.  The Party initiating suit or action shall have the sole and exclusive right to select counsel for any suit initiated by it referred to in Section 9.3(b) above.  If required under applicable Law in order for the initiating Party to initiate or maintain such suit or action, the other Party shall join as a party to the suit or action.  Such other Party shall offer reasonable assistance to the initiating Party in connection therewith at no charge to the initiating Party except for reimbursement of reasonable out-of-pocket expenses incurred in rendering such assistance.  The Party filing any such suit or taking any such action shall provide the other Party with an opportunity to make suggestions and comments regarding such suit or action.  Thereafter, the Party filing any such suit or taking any such action shall, to the extent permitted by applicable Law, keep the other Party promptly informed, and shall from time to time consult with such other Party regarding the status of any such suit or action and shall provide such other Party with copies of all material documents (i.e., complaints, answers, counterclaims, material motions, orders of the court, memoranda of law and legal briefs, interrogatory responses, depositions, material pre-trial filings, expert reports, affidavits filed in court, transcripts of hearings and trial testimony, trial exhibits and notices of appeal) filed in, or otherwise relating to, such suit or action.  The Party not initiating such suit or action shall cooperate with the Party initiating such suit or action to the extent reasonably requested, and shall have the right to participate and be represented in any such suit by its own counsel at its own expense.  Neither Party shall conduct any such suit or action in a manner that materially places at risk the scope or validity of any Licensed Patent Right without the prior written approval of the other Party, and neither Party shall settle or compromise any claim or proceeding relating to Licensed Intellectual Property without obtaining the prior written consent of the other Party, such consent not to be unreasonably withheld.

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(d)    Recoveries.  With respect to any suit or action to protect Licensed Intellectual Property referred to in Section 9.3(b) above, any recovery obtained as a result of any such proceeding, by settlement or otherwise, shall be applied in the following order of priority:
(i)    first, the Party initiating the suit or action with respect to Licensed Intellectual Property shall be reimbursed for all out-of-pocket costs and expenses in connection with such proceeding paid by such Party and not otherwise recovered; and
(ii)    second, any remainder shall be paid [**] percent ([**]%) to the Party initiating such suit or action and [**] percent ([**]%) to the other Party. 
Section 9.4    Claimed Infringement.
In the event that a Party becomes aware of any claim or threat of claim that the manufacture, sale, offer for sale, use, or importation of the Compound or any Licensed Product by Lexicon or Ipsen hereunder infringes or misappropriates the intellectual property rights of any Third Party, such Party shall promptly notify the other Party.  Each Party shall provide to the other Party copies of any notices it receives from Third Parties regarding any alleged infringement of Third Party Patent Rights or any alleged misappropriation of Third Party Know-How.  Such notices shall be provided promptly, but in no event after more than [**] following receipt thereof.  In any such instance, the Parties shall cooperate in undertaking an appropriate course of action.
Section 9.5    Patent Invalidity Claim. 
(a)    If a Third Party at any time asserts a claim that any Licensed Patent Right is invalid or otherwise unenforceable (“Invalidity Claim”), whether as a defense in an infringement action brought by Ipsen or Lexicon pursuant to Section 9.3 or in any declaratory judgment action or otherwise, the Parties shall cooperate with each other in preparing and formulating a response to such Invalidity Claim.  Neither Party shall settle or compromise any Invalidity Claim without the consent of the other Party, which consent shall not be unreasonably withheld. 
(b)    If any Invalidity Claim is brought against Ipsen or Lexicon in any action other than as a defense in any action brought by Ipsen or Lexicon asserting that any Licensed Patent Right is invalid or otherwise unenforceable, the Parties shall bear the costs of defending such Invalidity Claim in the same manner as they bear costs of Patent Prosecution relating to the applicable Licensed Patent Right pursuant to Section 9.2(d). 
Section 9.6    Certification Under Drug Price Competition and Patent Restoration Act.
If a Party becomes aware of any certification filed pursuant to (a) 21 U.S.C. §355(b)(2)(A)(iv) or 355(j)(2)(A)(vii)(IV) or (b) any comparable Law under any other jurisdiction, including any amendment or successor statute to any of the foregoing clause (a) or (b), and such certification claims that any Licensed Patent Right or Joint Patent Right, in each case Covering the Compound or a Licensed Product in the Field, is invalid or otherwise unenforceable, or that infringement will not arise from the manufacture, sale, offer for sale, use, or importation of a product by a Third Party (a “Paragraph IV Certification”), such Party shall promptly notify the other Party in writing within [**] after its receipt thereof.

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Section 9.7    Patent Marking.
Ipsen agrees to comply with the patent marking statutes in each country in which Licensed Products are sold by Ipsen, its Affiliates or sublicensees.
Section 9.8    Trademark.
(a)    Lexicon filed an application for registration of the name “Xermelo” with the Office for Harmonization in the Internal Market and such registration was approved by the EMA on 25 April 2014.
(b)    Lexicon shall be responsible for securing and for maintaining at Ipsen’s expense the Licensed Trademark in the Licensed Territory and shall use Diligent Efforts in that regard.  In the event Lexicon is unable to obtain or maintain the Licensed Trademark in some country(ies) in the Licensed Territory, the Parties shall negotiate in good faith concerning the selection of such other trademarks (i.e., back-up names) as may be available for marketing the Licensed Product in those countries.
(c)    All rights granted hereunder to Ipsen with respect to the Licensed Trademark shall be exercised, and all Licensed Products bearing the Licensed Trademark shall be manufactured, in accordance with quality standards established by the JCC, which quality standards shall be approved by Lexicon for consistency with the quality standards applied by Lexicon to its own products and the Parties shall reasonably cooperate to enable Lexicon to monitor Ipsen’s compliance with such quality standards.
(d)    Confusion with LX1033.  To avoid any confusion or association with its other small molecule inhibitor TPH LX1033, if Lexicon continues to directly or indirectly, or through any Third Party, develop, commercialize, distribute or otherwise exploit LX1033, Lexicon agrees that:
(i)    it will not seek Marketing Authorization for LX1033 in the Licensed Territory under:
(A)    the Licensed Trademark, or 
(B)    a tradename that is identical, similar to or is confusingly similar to the Licensed Trademark. 
(ii)    Following the Effective Date, Lexicon will use reasonable efforts to have the EMA approve the invented name “Xermelo” to apply to the Licensed Product designated under the INN “telotristat etiprate”.
(iii)    Lexicon agrees to request an INN for LX1033 other than “telotristat” with the World Health Organization (“WHO”) and a new United States Adopted Name (“USAN”) for LX1033 with the United States Adopted Name Council (“USAN Council”).  
(e)    The Parties shall cooperate with each other and use Diligent Efforts to protect the Licensed Trademark from infringement by Third Parties in the Licensed Territory.  Without limiting the foregoing, each Party shall promptly notify the other Party of any known, threatened or suspected infringement, imitation or unauthorized use of or unfair competition relating to the Licensed Trademark in the Licensed Territory.  Lexicon shall have the first right to determine in its discretion whether to and to what extent to institute, prosecute and/or defend any action or proceedings involving or affecting any rights relating to the Licensed Trademark. Upon Lexicon’s reasonable request, Ipsen shall cooperate with and assist Lexicon 

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in any of Lexicon’s enforcement efforts with respect to the Licensed Trademark.  Lexicon shall promptly inform Ipsen if Lexicon elects not to take action against any actual or suspected infringement of the Licensed Trademark in the Licensed Territory, in which case, Ipsen shall then have the right, but not the obligation, to bring or assume control of any such action against the allegedly infringing Third Party as Ipsen determines may be necessary, provided however, that Ipsen shall not enter into any settlement or compromise of any claim relating to the Licensed Trademark without the prior written consent of Lexicon.  In the event that Ipsen brings or assumes control of any such action, then Lexicon agrees to reasonably assist Ipsen in connection therewith.  In either case, the Party that initiated and prosecuted, or maintained the defense of the action shall bear all of the costs and expenses (including reasonable attorneys’ fees) incurred in connection with the action and shall be entitled to recoup those amounts in the event of recovery, by settlement or otherwise.  The amount of any recovery remaining as to any such infringement in the Licensed Territory shall be shared equally by the Parties.
(f)    The Parties, including  any future licensee of Lexicon in the Lexicon Territory, to the extent reasonably feasible shall collaborate to have a global, worldwide trademark to be used on the Licensed Product in the Licensed Territory and in the Lexicon Territory.
Article 10
Confidentiality
Section 10.1    Confidential Information.
All Confidential Information disclosed by a Party or any of its Affiliates to the other Party or any of its Affiliates during the Term shall not be used by the receiving Party or any of its Affiliates except in connection with the activities contemplated by this Agreement, shall be maintained in confidence by the receiving Party and its Affiliates (except to the extent disclosure is reasonably necessary for research, development, manufacture or commercialization of the Compound or a Licensed Product as contemplated hereunder, for the filing, prosecution and/or maintenance of Patent Rights for which such receiving Party is responsible, or to enforce the provisions of this Agreement), and shall not otherwise be disclosed by the receiving Party or its Affiliates to any Person that is not a Party or one of its Affiliates (except as set forth in the remainder of this Article 10), without the prior written consent of the disclosing Party, except to the extent that the Confidential Information of the disclosing Party:
(a)    was known or used without any obligation of confidentiality to the disclosing Party by the receiving Party or any of its Affiliates prior to its date of disclosure to the receiving Party; or
(b)    either before or after the date of the disclosure to the receiving Party hereunder is lawfully disclosed to the receiving Party or any of its Affiliates by sources other than the disclosing Party rightfully in possession of the Confidential Information; or
(c)    either before or after the date of the disclosure to the receiving Party hereunder becomes published or generally known to the public through no fault or omission on the part of the receiving Party; or
(d)    is independently developed by or for the receiving Party or any of its Affiliates without access to or knowledge of the Confidential Information; or
(e)    is required to be disclosed by the receiving Party to comply with applicable Laws, including the rules of the SEC or any stock exchange, or to defend or prosecute litigation or to comply with 

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legal process, provided that the receiving Party provides prior written notice of such disclosure to the disclosing Party (to the extent feasible) and only discloses Confidential Information of the other Party to the extent necessary for such legal compliance or litigation purpose.
Section 10.2    Employee, Director, Consultant and Advisor Obligations.
Ipsen and Lexicon each agrees that it and its Affiliates shall provide Confidential Information received from the other Party only to the receiving Party’s respective employees, directors, consultants, agents and advisors, and to the employees, directors, consultants, agents and advisors of the receiving Party’s Affiliates, who have a need to know such Confidential Information to assist the receiving Party in fulfilling its obligations under this Agreement and who are bound by obligations of confidentiality and non-use that are at least as restrictive as those set forth in this Agreement.  Each Party shall remain responsible for any failure by any of such Party’s Affiliates, employees, directors, consultants, agents and advisors to treat such Confidential Information as required under Section 10.1.
Section 10.3    Publicity.
(a)    Upon execution of this Agreement, the Parties shall issue a press release announcing the execution of this Agreement, the form of which has been agreed to by the Parties prior to the Effective Date.  Thereafter, the Parties shall only issue press releases or make other public disclosures regarding this Agreement (each such press release or public disclosure, a “Subject Disclosure”):
(i)    that have been expressly approved by the other Party (such approval not to be unreasonably withheld, conditioned or delayed);
(ii)    if advised by counsel to issue such Subject Disclosure in order to comply with applicable Laws, including the disclosure rules of the U.S. Securities and Exchange Commission (“SEC”), the French Autorités des Marchés Financiers (“AMF”) or a similar regulatory agency in a country other than the United States and France or of any stock exchange of other securities trading institution (for clarity such issuance is also subject to Section 10.3(b));
(iii)    if the contents of such Subject Disclosure have previously been made public other than through a breach of this Agreement by such Party; or
(iv)     to the extent that such Subject Disclosure describes one or more of the following: 
(A)    the commencement, completion or “top-line” results of clinical studies of the Compound or any Licensed Product;
(B)    the completion of patient enrollments for clinical studies;
(C)    in the case of Lexicon, the occurrence of any milestone for which Lexicon receives a milestone payment hereunder;
(D)    Net Sales of Licensed Products;
(E)    in the case of Lexicon, payments received by Lexicon under this Agreement;

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(F)    the filing for or receipt of Marketing Authorization with respect to the Compound or any Licensed Product; and
(G)    the presence and participation of the Parties at scientific or financial forums relating to the Compound or Licensed Products.
(b)    Unless not feasible under the circumstances because of the need to comply with applicable Laws or stock exchange rules, each Party shall provide the other Party with a draft Subject Disclosure at least [**] prior to its intended publication for the other Party’s review.  The other Party may provide the Party with suggested modifications to the draft Subject Disclosure and the Party shall consider in good faith the other Party’s suggestions in issuing such Subject Disclosure.
Section 10.4    Other Disclosures.
Notwithstanding anything in this Agreement to the contrary, each Party shall have the right to disclose Confidential Information and/or the terms of this Agreement (as applicable):
(a)    to investors, potential investors, lenders, potential lenders, acquirers, potential acquirers, investment bankers and other Third Parties in connection with financing, partnering and acquisition activities, solely under obligations of confidentiality and non-use that are at least as restrictive as those set forth in this Article 10;
(b)    to sublicensees, potential sublicensees, collaborators, potential collaborators, and Third Party contractors for purposes of engaging in the research, development, manufacture or commercialization of the Compound or Licensed Products as contemplated hereunder, solely under obligations of confidentiality and non-use that are at least as restrictive as those set forth in this Article 10;
(c)    as required by applicable Laws, including rules of the SEC, the AMF or similar regulatory agency in a country other than the United States and France or of any stock exchange or other securities trading institution.  In the event that this Agreement shall be included in any report, statement or other document filed by either Party or an Affiliate of either Party with the SEC, the AMF or similar regulatory agency in a country other than the United States and France or any stock exchange or other securities trading institution, such Party shall, or shall cause such Party’s Affiliate to, seek confidential treatment from the SEC, similar regulatory agency, stock exchange or other securities trading institution of any provisions of this Agreement as may be reasonably requested by the other Party, and such Party shall use, or shall cause such Party’s Affiliate, as the case may be, to use, reasonable efforts to obtain such confidential treatment.
Section 10.5    Publications.
(a)    A Party seeking to publish or present scientific or technical data, results or other information with respect to the Compound or any Licensed Product (the “Publishing Party”) shall provide the other Party and (if the JDC remains in place) the JDC with a copy of any proposed publication or presentation at least [**] (or at least [**] in the case of abstracts or oral presentations) prior to submission for publication by the Publishing Party or its Affiliates so as to provide such other Party with an opportunity to recommend any changes it reasonably believes are necessary to continue to maintain the Confidential Information disclosed by the other Party to the Publishing Party in accordance with the requirements of this Agreement or to not jeopardize the patentability of any results or data.

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(b)    If the non-Publishing Party notifies the Publishing Party that such publication or presentation, in the non-Publishing Party’s reasonable judgment, (i) contains an invention for which such Party desires to obtain patent protection, or (ii) contains any Confidential Information of such Party, or could be expected to have an adverse effect on the commercial value of any Confidential Information disclosed by such Party to the Publishing Party, the Publishing Party shall delete such Confidential Information from the proposed publication or presentation and shall further delay such publication or presentation for a period reasonably sufficient to permit the timely preparation and filing of a patent application(s) on any invention disclosed in such publication or presentation (but no less than [**] from the date of the non-Publishing Party’s notice thereof).
(c)    For as long as the JCC remains in place, the JCC shall be responsible for overseeing and facilitating the Parties’ communications and activities with respect to publications and presentations under this Section 10.5, and for serving as the initial forum for resolving any disputes (in accordance with Section 2.2(c)) between the Parties arising under this Section 10.5, with any unresolved disputes being escalated to the JSC and, if unresolved by the JSC, to the Executive Officers for resolution pursuant to Section 13.1.  If the JCC is dissolved, the JSC shall be responsible for overseeing and facilitating such communications and activities between the Parties, and for serving as the initial forum for resolving any disputes that may arise between the Parties under this Section 10.5.
Section 10.6    Clinical Trial Registry.
Each of Ipsen and Lexicon shall have the obligation to the extent required by applicable Laws or regulations to publish summaries of data and results from any human clinical trials conducted by such Party under this Agreement on its clinical trials registry or on a government-sponsored database such as www.clinicaltrials.gov or other publicly available websites such as www.clinicalstudyresults.org, without requiring the consent of the other Party.  The content of such publication shall be submitted to the JDC for prior approval.
Section 10.7    Confidentiality Term.
All obligations of confidentiality imposed under this Article 10 shall expire five (5) years following termination or expiration of this Agreement.

Article 11
Representations and Warranties
Section 11.1    Representations and Warranties of Both Parties.
Each Party hereby represents and warrants to the other Party, as of the Effective Date, that:
(a)    such Party is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;
(b)    such Party has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder;
(c)    this Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, binding obligation, enforceable against it in accordance with the terms hereof;

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(d)    the execution, delivery and performance of this Agreement by such Party does not conflict with any agreement or any provision thereof, or any instrument or binding understanding, oral or written, to which it is a party or by which it is bound, nor to the best of its knowledge violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over such Party; and
(e)    no government authorization, consent, approval, license, exemption of or filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, under any applicable Laws currently in effect, is or will be necessary for, or in connection with, the transactions contemplated by this Agreement or any other agreement or instrument executed in connection herewith, or for the performance by it of its obligations under this Agreement and such other agreements, except for Regulatory Approvals.
Section 11.2    Representations and Warranties of Lexicon.
Lexicon hereby represents and warrants to Ipsen, as of the Effective Date, that, except as Lexicon has disclosed to Ipsen as of the Effective Date:
(a)    Lexicon is the owner of, or has Control of, the Licensed Patent Rights listed on Exhibit 1.42 and the Licensed Trademark listed on Exhibit 1.46;
(b)    Exhibit 1.42 is a complete and correct list of all Licensed Patent Rights in the Licensed Territory that claim or are directed to the Compound and are Controlled by Lexicon as of the Effective Date;
(c)    Exhibit 1.46 is a complete and correct list of each Licensed Trademark in the Licensed Territory that is Controlled by Lexicon as of the Effective Date;
(d)    To Lexicon’s knowledge, with respect to the application to register the invented name “Xermelo” as a trademark in the EU, as of the Effective Date, (i) there are no outstanding claims or allegations that the Licensed Trademark infringes upon any rights of a Third Party in the Licensed Territory and (ii) neither the sale of the Licensed Product in the Licensed Territory nor the manufacture, development, advertisement, marketing or promoting of the Licensed Product in the Licensed Territory under the Licensed Trademark infringes upon any registered rights of a Third Party in the Territory;
(e)    Lexicon has the right to grant all rights and licenses it purports to grant to Ipsen with respect to the Licensed Intellectual Property under this Agreement;
(f)    Lexicon has not granted, as of the Effective Date, any right or license, to any Third Party relating to any of the Licensed Intellectual Property, that would conflict with, or limit the scope of, any of the rights or licenses granted to Ipsen hereunder;
(g)    Lexicon has not granted any liens or security interests on the Licensed Intellectual Property;
(h)    To Lexicon’s knowledge, it has not (i) employed or used any contractor or consultant that employs any individual or entity debarred by the FDA (or subject to a similar sanction of EMA) or, (ii) employed any individual or entity that is the subject of an FDA debarment investigation or proceeding (or similar proceeding of EMA), in each of clauses (i) and (ii) in the conduct of research and development activities directed to the Compound or any Licensed Product;

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(i)    As of the Effective Date, (i) Lexicon has not received any written allegation from a Third Party that any of the Licensed Patent Rights is invalid or unenforceable and (ii) Lexicon has not received any written notice that any Patent Right within the Licensed Patent Rights is subject to interference, reexamination, reissue, revocation, opposition, appeal or other administrative proceedings;
(j)    Lexicon has not received, with respect to the Compound, any written notice of infringement or misappropriation or any other written communication relating to a possible infringement or misappropriation of any patent rights or any know-how Controlled by a Third Party;
(k)    The Patent Rights listed on Exhibit 1.42 have been filed in good faith, have been prosecuted in accordance with any applicable duty of candor, and have been maintained in a manner consistent with Lexicon’s standard practice, in each applicable jurisdiction in which such Patent Rights have been filed, no official final deadlines with respect to prosecution thereof have been missed and all applicable fees have been paid on or before the due date for payment; and
(l)    All inventors of inventions claimed in the Patent Rights listed on Exhibit 1.42 have assigned their entire right, title and interest in and to such inventions to Lexicon and the inventors listed are correct and there are no claims or assertions in writing received by Lexicon regarding the inventorship of such Patent Rights alleging that additional or alternative inventors ought to be listed.
Section 11.3    Representations and Warranties of Ipsen.
Ipsen hereby represents and warrants to Lexicon, as of the Effective Date, that it:
(a)    Is a wholly-owned subsidiary and controlled Affiliate of Ipsen SA; and
(b)    Owns and operates substantially all of the pharmaceuticals business and associated assets that are consolidated by Ipsen SA.
Section 11.4    Mutual Covenants.
Each Party hereby covenants to the other Party that:
(a)    All employees of such Party or its Affiliates working under this Agreement will be under the obligation to assign all right, title and interest in and to their inventions and discoveries arising in the performance of such work, whether or not patentable, to such Party as the sole owner thereof;
(b)    Such Party will not knowingly (i) employ or use any contractor or consultant that employs any individual or entity debarred by the FDA (or subject to a similar sanction of EMA) or, (ii) employ any individual who or entity that is the subject of an FDA debarment investigation or proceeding (or similar proceeding of EMA), in each of clauses (i) and (ii) in the conduct of its activities under this Agreement;
(c)    Such Party shall perform its activities pursuant to this Agreement in compliance in all material respects with applicable Laws; and
(d)    Neither Party shall, during the Term, grant any right or license to any Third Party relating to any of the intellectual property rights it owns or Controls which would conflict with, or limit the scope of, any of the rights or licenses granted or to be granted to the other Party hereunder.

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Section 11.5    Covenants of Ipsen.
Ipsen hereby covenants to Lexicon, during the Term, that:
(a)    there will be no change in its status as a wholly-owned subsidiary and controlled Affiliate of Ipsen SA; and
(b)    it will not engage in any action, including, without limitation, any transfer of assets or other changes to its business or operations, which would (i) result in it not owning and operating substantially all of the pharmaceuticals business and associated assets that are consolidated by Ipsen SA or (ii) otherwise have the effect of materially modifying its relationship with Ipsen SA.
Section 11.6    Covenants of Lexicon.
Lexicon hereby covenants to Ipsen, during the Term, that Lexicon shall not, directly or indirectly or through any Third Party, commercialize, distribute or otherwise exploit Lexicon’s other molecule LX1033 in any indication and in any field under a trademark that is identical, similar to or confusingly similar to Licensed Trademark as set forth in Section 9.8.
Section 11.7    DISCLAIMER.
EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY THAT ANY PATENTS ARE VALID OR ENFORCEABLE, AND EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH PARTY DISCLAIMS ANY IMPLIED WARRANTIES WITH REGARDS TO:  (A) THE SUCCESS OF ANY STUDY OR TEST COMMENCED UNDER THIS AGREEMENT, (B) THE SAFETY OR USEFULNESS FOR ANY PURPOSE OF THE TECHNOLOGY OR MATERIALS, INCLUDING THE COMPOUND, IT PROVIDES OR DISCOVERS UNDER THIS AGREEMENT; OR (C) THE VALIDITY, ENFORCEABILITY, OR NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OR TECHNOLOGY IT PROVIDES OR LICENSES TO THE OTHER PARTY UNDER THIS AGREEMENT.

Article 12
Term and Termination
Section 12.1    Term. 
This Agreement shall become effective as of the Effective Date, may be terminated as set forth in this Article 12, and otherwise remains in effect until the expiration of all payment obligations of Ipsen under this Agreement (the “Term”).
Section 12.2    Survival of Licenses.
Notwithstanding anything herein, on a Licensed Product-by-Licensed Product and country-by-country basis, upon the expiration (but not the earlier termination) of all royalty payment obligations for a Licensed Product in a country, the licenses granted to Ipsen in Section 7.1 shall be deemed to be perpetual and fully paid-up with respect to such Licensed Product in such country.

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Section 12.3    Termination For Material Breach.
Upon any material breach of this Agreement by either Party (in such capacity, the “Breaching Party”), the other Party (in such capacity, the “Non-Breaching Party”) may terminate this Agreement by providing [**] prior written notice ([**] prior written notice with respect to any payment breach) to the Breaching Party, specifying the material breach.  The termination shall become effective at the end of the [**]  (or, with respect to any payment breach, [**]) period unless (a) the Breaching Party cures such breach during such [**] (or, with respect to any payment breach, [**]) period (unless, with respect to any payment breach, the Party owing payment believes in good faith that such payment is not due and has notified the other Party thereof (including the basis of its good faith belief in reasonable detail) and paid any undisputed amount to the other Party, in which case the dispute shall be settled in accordance with Article 13, and the Agreement shall not be terminated for such reason as long as the dispute is pending), or (b) solely with respect to a breach that is not a payment breach, if such breach is not susceptible to cure within [**] of the receipt of written notice of the breach, the Breaching Party is diligently pursuing a cure (unless such breach, by its nature, is incurable, in which case the Agreement may be terminated immediately) and effects such cure within an additional [**] after the end of such [**] period.
Section 12.4    Termination by Ipsen upon Lexicon Change of Control or Sale of TPH Business.
Lexicon shall provide Ipsen with prompt written notice upon the consummation of (a) any Change of Control of Lexicon where the Third Party Acquirer is an Ipsen Competitor; (b) the sale of all or substantially all of Lexicon’s business relating to the research, development, manufacture and commercialization of products which inhibit TPH to an Ipsen Competitor or (c) any acquisition by Lexicon of a Third Party company which is an Ipsen Competitor (or acquisition of ownership directly or indirectly of at least 50% of the voting securities or power to its share to direct the management or policies of such Ipsen Competitor, whether through ownership of voting securities, by contract or otherwise).  In such event, Ipsen shall have the right to terminate this Agreement upon [**] prior written notice to Lexicon given by Ipsen not later than [**] following its receipt of such notice from Lexicon.  For clarity, other than Ipsen’s obligations explicitly set forth in Sections 12.8 and 12.9, no compensation whatsoever shall be due by Ipsen by reason of termination under this Section 12.4.
Section 12.5    Termination by Ipsen for Convenience.
Ipsen shall have the right to terminate this Agreement (a) in its entirety or (b) with respect to any country or countries in the Licensed Territory for any reason upon [**] prior written notice, provided, that after receiving such notice Lexicon shall have the right to elect, in Lexicon’s sole option and discretion and by written notice to Ipsen, to accelerate such termination period to a date specified by Lexicon.  For clarity, other than Ipsen’s obligations explicitly set forth in Sections 12.8 and 12.9, no compensation whatsoever shall be due by Ipsen by reason of termination under this Section 12.5, provided further however that such notice shall not relieve Ipsen of its obligation to continue to exercise Diligent Efforts during the resulting [**] notice period, or such shorter period specified by Lexicon.
Section 12.6    Termination by Lexicon for Ipsen Patent Challenge.
If Ipsen or any of its Affiliates or sublicensees challenges the validity, enforceability, patentability or scope of any claim(s) included in any Licensed Patent Rights, or supports, directly or indirectly, any such challenge (any of the foregoing, a “Patent Challenge”), Lexicon shall have the right to terminate this Agreement upon [**] written notice to Ipsen with respect to the Licensed Patent Right(s) so challenged by Ipsen or any of its Affiliates or sublicensees.

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Section 12.7    Termination by Ipsen other than Lexicon Uncured Breach
(a)    Ipsen may terminate this Agreement upon [**] advance written notice to Lexicon, provided that such notice is provided within [**] after the occurrence of one of the following: if (i) the withdrawal of the Licensed Product from the market in one or more Major EU Countries for health or safety reasons is commenced by Ipsen or ordered or required by the EMA or another applicable Regulatory Authority or (ii) substantially all ongoing clinical studies of the Licensed Product are ordered or required to be terminated by the FDA or the EMA.
(b)    Ipsen may terminate this Agreement upon [**] advance written notice to Lexicon if, [**]. 
Section 12.8     Effects of Termination by Lexicon for Ipsen Uncured Breach or Ipsen Patent Challenge or by Ipsen upon a Change of Control, for Convenience or Other Than Lexicon Uncured Breach.
Upon termination of this Agreement in its entirety by Lexicon pursuant to Section 12.3 (Termination for Material Breach) or pursuant to Section 12.6 (Termination for Ipsen Patent Challenge), or termination of this Agreement in its entirety by Ipsen pursuant to Section 12.4 (Termination upon Lexicon Change of Control or Sale of TPH Business), Section 12.5 (Termination by Ipsen for Convenience), or pursuant to Section 12.7 (Termination by Ipsen with Immediate Effect other than Lexicon Uncured Breach):
(a)    All rights and licenses granted by Lexicon to Ipsen shall terminate and revert to Lexicon;
(b)    Ipsen shall transfer to Lexicon ownership of all Regulatory Approvals and regulatory filings, data and dossiers in Ipsen’s or its Affiliates’ possession or control relating to the Compound and all Licensed Products; 
(c)    Ipsen shall assign to Lexicon its entire right, title, and interest in and to all preclinical and clinical data, safety data and all other supporting data, including pharmacology and biology data, in Ipsen’s or its Affiliates’ possession or control relating to, and to the extent necessary for Lexicon to continue, or used by Ipsen in, the research, development or commercialization of the Compound and Licensed Products;
(d)    At Lexicon’s option and upon Lexicon’s request as to any or all of the following, Ipsen (or its relevant Affiliate) shall:
(i)    transfer to Lexicon (or its designee) the manufacturing process, documents, materials and other Know-How, to the extent the foregoing is Controlled by Ipsen, it being understood that in the case of any manufacturing process or other Know-How, Ipsen shall only be committed to transfer to Lexicon what it is legally or contractually, as applicable, permitted to transfer, and shall use Diligent Efforts to have transferred to Lexicon any process or other Know-How which is not under the Control of Ipsen (in all cases provided that Ipsen shall not be committed to incur any costs pursuant to the use of such process or other Know-How by or on behalf of Lexicon) which are used (at the time of the termination) by or on behalf of Ipsen, its Affiliates or sublicensees in the manufacture of the Compound and such Licensed Products, and provide reasonable technical assistance relating to the manufacture, testing and supply of the Compound and such Licensed Product as necessary or useful for Lexicon to be qualified or to qualify a Third Party for the manufacturing of the Compound or such Licensed Products, such assistance being limited to assistance that a manufacturer familiar with, and having experience with equipment for, manufacturing of small molecules 

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and products containing small molecules, would require, and in any case not to exceed a total of [**] hours of working time by Ipsen’s personnel over a period not to exceed [**];
(ii)    sell to Lexicon (or its designee) Ipsen’s then-existing inventory of such Compound and Licensed Products, at Ipsen’s Manufacturing Cost plus [**] percent ([**]%);
(iii)    to the extent Ipsen (or an Affiliate of Ipsen) is manufacturing (on its own or through any Third Party contract manufacturer) the Compound or any Licensed Product, continue to manufacture and supply the Compound and such Licensed Product to Lexicon, for a period of up to [**] as requested by Lexicon, until manufacturing has been transitioned to Lexicon hereunder.  Ipsen shall be obligated to supply quantities of the Compound and such Licensed Products sufficient to satisfy Lexicon’s requirements under a manufacturing transfer and transition plan to be negotiated by the Parties in good faith so that Lexicon can assume all commercialization activities with regard to the Compound and such Licensed Products.  Ipsen will supply such quantities of the Compound and such Licensed Product at Ipsen’s Manufacturing Cost plus [**] percent ([**]%);
(iv)    assign or cause the assignment to Lexicon of any and all applicable Third Party manufacturing and supply agreements for the Compound or such Licensed Products and, at Lexicon’s direction, facilitate discussions between Lexicon and the applicable Third Party manufacturers with respect to such agreements;
(v)    promptly transfer to Lexicon or its designee on-going clinical trials being conducted by or under authority of Ipsen as of the date of the termination notice, continue to conduct such clinical trials up to such transfer or, if requested by Lexicon, terminate such clinical trials in a manner conforming to applicable Laws and regulations.  It is understood that Ipsen shall in no case be obligated to incur costs beyond those budgeted for such clinical trials during the period prior to termination, costs related to any change of any kind decided by Lexicon, costs related to any translation or reformatting of documents or databases (it being understood that any data or data bases shall be transferred on an as is basis) or costs related to converting or adapting any database or software; 
(vi)    transfer to Lexicon any Marketing Authorization obtained on or before the date of termination and, if commercial launch of Licensed Product(s) has occurred on or before the date of termination, Ipsen shall, at the request of Lexicon, continue to market, promote, distribute and commercialize the Licensed Product(s), and continue to pay amounts due to Lexicon pursuant to Article 8, until the date when, on a country-by-country basis, the Marketing Authorization has been transferred to Lexicon or Lexicon’s designee; and
(vii)    grant to Lexicon, effective upon such termination of the Agreement,  a non-exclusive, worldwide, royalty-free, irrevocable, perpetual license, with the right to grant sublicenses to any Third Party, under the Ipsen Patent Rights and Ipsen Technology, including Ipsen’s interest in any Joint Patent Rights or Joint Technology, in each case to the extent used by Ipsen, its Affiliates or sublicensees in the research, development, manufacture, use or sale of the Compound or Licensed Products in the Field and for the sole purpose of conducting research, development, manufacturing and/or commercialization of the Compound or Licensed Products in the Field (for clarity Ipsen shall retain the right to all other uses and practice of the Ipsen Patent Rights and Ipsen Technology, including Ipsen’s interest in any Joint Patent Rights or Joint Technology), and, in such event, Lexicon shall be responsible for any pass-through license fee obligations to Ipsen’s Third Party licensors incurred as a result of Lexicon’s exercise of such license rights; and

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(e)    Ipsen shall assign to Lexicon Ipsen’s and its Affiliates’ entire right, title and interest in, to and under any trademark used by Ipsen, its Affiliates or sublicensees exclusively in connection with the marketing and sale of a Licensed Product, it being understood that such assignment shall not include the Ipsen name or trademark for the Ipsen company itself.
Section 12.9    Effects of Termination by Ipsen for Convenience.
If this Agreement is terminated by Ipsen pursuant to Section 12.5 with respect to any country or countries in the Licensed Territory (collectively, the “Terminated Territories”), then:
(a)    the effects of termination set forth in Sections 12.8(a), 12.8(d) and 12.8(e) above shall apply solely as to such Terminated Territories (in case the Agreement is terminated with respect to one or more Terminated Territories);
(b)    in lieu of the effects of termination set forth in Section 12.8(b) with respect to regulatory filings and Regulatory Approvals, Ipsen shall:
(i)    transfer to Lexicon ownership of all such regulatory filings filed in, and Regulatory Approvals received with respect to, any Terminated Territory (or any country therein), which filings or Regulatory Approvals are in Ipsen’s or its Affiliates’ possession or control and relate to the Compound and Licensed Products; and
(ii)    to the extent necessary for Lexicon to resume development or manufacturing or commercialization of the Compound or a Licensed Product in any Terminated Territory,
(A)    grant Lexicon or its designee a right of reference or use to any and all such regulatory filings filed in, and Regulatory Approvals received with respect to, any country or territory other than a Terminated Territory (or any country therein), which filings or Regulatory Approvals are in Ipsen’s or its Affiliates’ possession or control and relate to the Compound and Licensed Products, (for clarity Ipsen shall transfer to Lexicon ownership of all such regulatory filings and Regulatory Approvals in the event of a termination of this Agreement in its entirety (except for a termination by Ipsen for Lexicon uncured material breach)); and
(B)    sign, and cause its Affiliates to sign, any instruments reasonably requested by Lexicon in order to effect the grants contemplated above in this Section 12.9(b); and
(c)    Ipsen shall transfer to Lexicon, and grant Lexicon a right to use (consistent with the license granted to Lexicon under Section 12.8(d)(vii)), all preclinical and clinical data, safety data and all other supporting data, including pharmacology and biology data, in Ipsen’s or its Affiliates’ possession or control relating to, and to the extent necessary for Lexicon to continue, the research, development or commercialization of the Compound or Licensed Products in any Terminated Territory(ies), as applicable.
Section 12.10    Survival.
(a)    Upon expiration or termination of this Agreement for any reason, all rights and obligations of each Party shall terminate hereunder, except as expressly set forth in Section 12.2, 12.9, 12.9 or this Section 12.10; provided, however, that nothing in this Agreement shall be construed to release either Party from any obligations or liabilities that matured prior to the effective date of expiration or termination, or which are attributable to a period prior to such expiration or termination.  In addition, and notwithstanding 

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the terms of Section 12.8(d)(v) and Section 12.9(a), Ipsen shall remain responsible for payment to Lexicon of all such costs that are committed by Lexicon in connection with any human clinical trials conducted by Lexicon hereunder for a period of [**] beyond the effective date of termination by Ipsen under Section 12.5, to the extent that the clinical trials giving rise to such costs were non-terminable as of the date of termination of this Agreement, for ethical or regulatory reasons. 
(b)    Notwithstanding anything in this Agreement to the contrary, the following provisions shall expressly survive any expiration or termination of this Agreement in accordance with their terms:  Article 8 (in each case, to the extent any amounts are due but unpaid as of the effective date of expiration or termination); Section 8.3(b); Section 8.6; Section 9.1; Article 10; Sections 12.2, 12.8-12.10; Article 13; Article 14; and Article 15.
Article 13
Dispute Resolution
Section 13.1    Disputes; Executive Officers.
(a)    In the event any dispute arises out of or in relation to or in connection with this Agreement, including failure to perform under or breach of, the Agreement or any issue relating to the interpretation or application of the Agreement, the Parties shall use good faith efforts to resolve such dispute within [**] after the matter arises and, in the case of matters within the responsibilities of the JDC, JCC or JSC, within [**] after such matter presented to the JSC for resolution.  If the Parties are unable to resolve such dispute within the applicable [**] period set forth in Section 2.1(f)), the Parties shall refer such dispute to their respective Executive Officers, and such Executive Officers shall attempt in good faith to resolve such dispute within [**], except for the following types of disputes:  (i) any dispute concerning inventorship arising under Section 9.1(c), which shall not be subject to resolution by the Executive Officers under this Section 13.1 or by binding arbitration under Section 13.2, but shall instead be resolved by independent patent counsel as set forth in Section 9.1(c).
(b)    In addition, any dispute with respect to which a Party has final decision-making authority pursuant to Section 2.1(f) or that is otherwise specified not to be subject to resolution through binding arbitration (each, a “Non-Arbitrable Dispute”), which if unresolved at the JSC level or by the Executive Officers after escalation to the Executive Officers, shall not be subject to resolution by binding arbitration under Section 13.2, but shall instead be resolved by or deadlocked as set forth in Section 2.1(f) or 2.1(g), as applicable.
Section 13.2    Arbitration.
If the Executive Officers are unable to resolve a given dispute referred to such Executive Officers pursuant to Section 13.1 within [**] following such referral of such dispute to such Executive Officers, except for any Non-Arbitrable Disputes, either Party may have the given dispute settled by binding arbitration in the manner described below:
(a)    Arbitration Request.  If a Party intends to begin an arbitration to resolve a dispute arising under this Agreement, such Party shall provide written notice (the “Arbitration Request”) to the other Party of such intention and the issues for resolution.
(b)    Additional Issues.  Within [**] after the receipt of the Arbitration Request, the other Party may, by written notice, add additional issues for resolution.

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(c)    Arbitration Location; Rules. Except as expressly provided herein, the sole mechanism for resolution of any claim, dispute or controversy arising out of or in connection with or relating to this Agreement or the breach or alleged breach thereof shall be arbitration by the International Chamber of Commerce (“ICC”) in London, United Kingdom, or in such other venue as the Parties agree, under the Arbitration Rules then in effect for the ICC (“ICC Rules”)  except as provided herein.
(d)    English Language.  All proceedings shall be held in English and a transcribed record prepared in English.  Documents submitted in the arbitration (the originals of which are not in English) shall be submitted together with a reasonably complete and accurate English translation.
(e)    Selection of Arbitrators.  The Parties shall each choose one arbitrator within [**] of receipt of notice of the intent to arbitrate and the said two arbitrators shall select by mutual agreement a third arbitrator within [**] after they have been selected as arbitrators.  If a Party fails to appoint an arbitrator within the time herein provided or any extension of time that is mutually agreed on, the International Court of Arbitration of the ICC shall make the appointment within [**] of such failure.  If the two Party-appointed arbitrators fail to appoint the third arbitrator within the time herein provided or any extension of time that is mutually agreed upon, the International Court of Arbitration of the ICC shall make the appointment within [**] of such failure.  The three arbitrators shall be referred to as the “Tribunal.”
(f)    Costs; Exclusion from Award.  The award rendered by the Tribunal shall not include costs of arbitration, attorneys’ fees or costs for expert and other witnesses, which shall be the responsibility of each Party (i.e. each Party shall bear its own costs and expenses), except that the Parties shall share equally the fees of the arbitrators.
(g)    Time Schedule.  Within [**] of initiation of arbitration, the Parties shall reach agreement upon and thereafter follow procedures directed at assuring that the arbitration will be concluded and the award rendered within no more than [**] from selection of the three arbitrators.  Failing such agreement, the Tribunal will design and the Parties will follow procedures directed at meeting such a time schedule.
(h)    Powers of Arbitrators.  The Tribunal:
(i)    shall not have any power or authority to add to, alter, amend or modify the terms of this Agreement but shall specify rules sufficient to allow reasonable discovery by the Parties;
(ii)    shall establish and enforce appropriate rules to ensure that the proceedings, including the decision, be kept confidential and that all Confidential Information of the Parties be kept confidential and be used for no purpose other than the arbitration;
(iii)    shall have the power to enforce specifically this Agreement and the terms and conditions hereof in addition to any other remedies at law or in equity; and
(iv)    shall issue all decisions in writing in the form of an award or order.
(i)    Injunctive Relief.  Nothing in this Agreement shall be deemed as preventing either Party from seeking injunctive relief (or any other interim equitable relief) from the Tribunal (or, prior to the constitution of the Tribunal, from an emergency arbitrator appointed by the ICC pursuant to Article 29 of the ICC Rules of Arbitration (or any successor rule)) during any arbitration if necessary to protect trade secrets, know how or other proprietary information; avoid irreparable harm, or preserve the status quo pending the 

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arbitration proceeding.  Any such award or order by the Tribunal or the emergency arbitrator shall be enforceable in any court of competent jurisdiction; however, the Parties shall not be entitled to seek injunctive or other interim equitable relief in the first instance from a court, but may seek court involvement only as a matter of enforcing an arbitral award or order as to such relief after it has been rendered by the Tribunal or an emergency arbitrator.
(j)    Experience.  If the issues in dispute involve scientific or technical matters, any arbitrators chosen hereunder shall have educational training and/or experience sufficient to demonstrate a reasonable level of knowledge in the pharmaceuticals and biotechnology fields.
(k)    Judgment.  Judgment on any award or order rendered by the Tribunal, including awards or orders for any injunctive relief or other interim equitable relief pursuant to Section 13.2(i) of may be entered in any court having jurisdiction thereof.
(l)    Survivability.  Any duty to arbitrate under the Agreement shall remain in effect and be enforceable after termination of the Agreement. 
Article 14
Indemnification
Section 14.1    Indemnification by Ipsen.
Ipsen shall indemnify, defend and hold harmless Lexicon and its Affiliates, and its and their respective directors, officers, employees and agents, from and against any and all liabilities, damages, losses, costs and expenses, including the reasonable fees of attorneys and other professional Third Parties (collectively, “Losses”), arising out of or resulting from any and all Third Party suits, claims, actions, proceedings or demands (“Claims”) based upon:
(a)    the gross negligence, recklessness or wrongful intentional acts or omissions of Ipsen or its Affiliates and its or their respective directors, officers, employees and agents, in connection with Ipsen’s performance of its obligations or exercise of its rights under this Agreement;
(b)    any breach of any representation, warranty or covenant made by Ipsen under this Agreement;
(c)    any act or omission by Ipsen that results in a breach of any of Lexicon’s agreements with Lexicon Third Party licensors; or
(d)    the research, development, manufacture or commercialization (including marketing and sale) by or for Ipsen, its Affiliates or sublicensees of the Compound or any Licensed Product, in each case for the Licensed Territory, including (i) any product liability, personal injury, property damage or other damage, and (ii) infringement of any patent or other intellectual property right of any Third Party (subject to the rights of Ipsen under Section 8.4(f) and excluding any such infringement Losses arising from a breach by Lexicon of its representations and warranties set forth in Section 11.2), in each case resulting from any of the foregoing activities described in this Section 14.1.

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Section 14.2    Indemnification by Lexicon.
Lexicon shall indemnify, defend and hold harmless Ipsen and its Affiliates, and its or their respective directors, officers, employees and agents, from and against any and all Losses, arising out of or resulting from any and all Third Party Claims based upon:
(a)    the gross negligence, recklessness or wrongful intentional acts or omissions of Lexicon or its Affiliates or its or their respective directors, officers, employees and agents, in connection with Lexicon’s performance of its obligations or exercise of its rights under this Agreement;
(b)    any breach of any representation, warranty or covenant made by Lexicon under this Agreement; or
(c)    the research, development, manufacture or commercialization (including marketing and sale) by or for Lexicon, its Affiliates or sublicensees of the Compound or any Licensed Product, in each case for the Lexicon Territory, including (i) any product liability, personal injury, property damage or other damage, and (ii) infringement of any patent or other intellectual property right of any Third Party, in each case resulting from any of the foregoing activities described in this Section 14.2.
Section 14.3    Procedure.
(a)    A Person entitled to indemnification under this Article 14 (an “Indemnified Party”) shall give prompt written notification to the Person from whom indemnification is sought (the “Indemnifying Party”) of the commencement of any action, suit or proceeding relating to a Third Party claim for which indemnification may be sought or, if earlier, upon the assertion of any such claim by a Third Party (it being understood and agreed, however, that the failure by an Indemnified Party to give notice of a Third-Party claim as provided in this Section 14.3 shall not relieve the Indemnifying Party of its indemnification obligation under this Agreement except and only to the extent that such Indemnifying Party is actually damaged as a result of such failure to give notice).
(b)    Within [**] after delivery of such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of such action, suit, proceeding or claim with counsel reasonably satisfactory to the Indemnified Party.
(c)    If the Indemnifying Party does not assume control of such defense, the Indemnified Party shall control such defense and, without limiting the Indemnifying Party’s indemnification obligations, the Indemnifying Party shall reimburse the Indemnified Party for all costs and expenses, including reasonable attorney’s fees, incurred by the Indemnified Party in defending itself within [**] after receipt of any invoice therefor from the Indemnified Party.
(d)    The Party not controlling such defense may participate therein at its own expense; provided that, if the Indemnifying Party assumes control of such defense and the Indemnified Party in good faith concludes, based on advice from counsel, that the Indemnifying Party and the Indemnified Party have conflicting interests with respect to such action, suit, proceeding or claim, the Indemnifying Party shall be responsible for the reasonable fees and expenses of counsel to the Indemnified Party in connection with its participation in the defense action.

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(e)    The Party controlling such defense shall keep the other Party advised of the status of such action, suit, proceeding or claim and the defense thereof and shall consider recommendations made by the other Party with respect thereto.
(f)    The Indemnified Party shall not agree to any settlement of such action, suit, proceeding or claim without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, delayed or conditioned.  The Indemnifying Party shall not agree to any settlement of such action, suit, proceeding or claim or consent to any judgment in respect thereof that does not include a complete and unconditional release of the Indemnified Party from all liability with respect thereto, that imposes any liability or obligation on the Indemnified Party or that acknowledges fault by the Indemnified Party without the prior written consent of the Indemnified Party.
Section 14.4    Insurance. 
Each Party shall procure and maintain for a period until one (1) year after expiration or termination of this Agreement commercial general liability insurance, including product liability insurance, contractual liability, bodily injury, property damage and personal injury coverage adequate to cover its obligations and liabilities hereunder and which are consistent with normal business practices of comparable companies with respect to similar obligations and liabilities, at all times during which the Compound and Licensed Products are clinically tested or commercially distributed or sold by or on behalf of such Party or its Affiliates.  Such coverage shall be with an insurance carrier with an A.M. Best minimum rating of A or Moodys, S&P or Fitch equivalent.  During the Term, each Party shall not permit such insurance to be reduced, expired or cancelled, without reasonable prior written notice to the other Party.  It is understood that such insurance shall not be construed to create any limit of either Party’s obligations or liabilities with respect to its indemnification obligations hereunder.  In the event of use by either Party of subcontractors, sublicensees or any Third Party in the performance of such Party’s obligations under the Agreement, such Party shall ensure that its subcontractor, sublicensee or Third Party shall have a proper and adequate general liability insurance to cover its risks with respect to the other Party for damages mentioned above.  Each Party shall provide the other, upon request, with evidence of such insurance (e.g., certificate of insurance).
Section 14.5    Limitation of Liability.
EXCEPT TO THE EXTENT SUCH PARTY MAY BE REQUIRED TO INDEMNIFY THE OTHER PARTY UNDER THIS ARTICLE 14 WITH RESPECT TO THIRD PARTY CLAIMS, NEITHER PARTY NOR ITS RESPECTIVE AFFILIATES OR SUBLICENSEES SHALL BE LIABLE FOR ANY (AND HEREBY DISCLAIM ALL) SPECIAL, EXEMPLARY, CONSEQUENTIAL, PUNITIVE OR OTHER INDIRECT DAMAGES, WHETHER BASED UPON WARRANTY, CONTRACT, TORT, STRICT LIABILITY OR OTHER LEGAL THEORY.

Article 15
Miscellaneous Provisions
Section 15.1    Governing Law.
Except for matters of intellectual property law, which shall be determined in accordance with the national intellectual property laws relevant to the intellectual property in question, this Agreement, and any disputes between the Parties relating to the subject matter of this Agreement, shall be construed and the respective rights of the Parties hereto determined according to the substantive laws of the State of New York, USA, excluding (a) its conflicts of laws principles; (b) the United Nations Conventions on Contracts for the 

61

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with the Securities and Exchange Commission.
Asterisks denote omissions.

International Sale of Goods; (c) the 1974 Convention on the Limitation Period in the International Sale of Goods (the “1974 Convention”); and (d) the Protocol amending the 1974 Convention, done at Vienna April 11, 1980.
Section 15.2    Assignment.
Neither Lexicon nor Ipsen may assign this Agreement in whole or in part without the prior written consent of the other, except to an Affiliate or in connection with the merger, sale or transfer of all or substantially all of the stock, assets or business of Lexicon, on the one hand, or Ipsen, on the other, to which the subject matter of this Agreement pertains.  The assigning Party shall remain primarily liable for the performance of this Agreement notwithstanding any assignment of this Agreement.
Section 15.3    Entire Agreement; Amendments.
This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof, and supersedes all previous arrangements with respect to the subject matter hereof, whether written or oral, including the Confidentiality Agreement.  Any amendment or modification to this Agreement shall be made in writing signed by both Parties.
Section 15.4    Notices.
Any notice required or provided for by the terms of this Agreement shall be in writing and shall be sufficient if (a) delivered personally or (b) sent by registered or certified mail, return receipt requested, or reputable overnight business courier, in each case properly addressed to a Party as set forth below.  The effective date of notice shall be the actual date of receipt by the Party receiving the same.
Notices to Lexicon shall be addressed to:
Lexicon Pharmaceuticals, Inc.
8800 Technology Forest Place
The Woodlands, Texas 77381 
U.S.A.
Attention:  General Counsel
with a copy to:
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
U.S.A.
Attention:  Steven D. Barrett, Esq.

Notices to Ipsen shall be addressed to:
Ipsen Pharma SAS
65, Quai Georges Gorse
92100 Boulogne-Billancourt
France
Attention:  Executive Vice President General Counsel

62

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

Any Party may change its notification address by giving notice to the other Party in the manner herein provided.  For clarity, the additional copy will be addressed for convenience only and the notification shall be deemed to have been validly delivered when addressed to the main addressee.
Section 15.5    Exports.
The Parties acknowledge that the export of technical data, materials or products is subject to the exporting Party receiving any necessary export licenses and that the Parties cannot be responsible for any delays attributable to export controls that are beyond the reasonable control of either Party.  Ipsen and Lexicon agree not to export or reexport, directly or indirectly, the Compound or any Licensed Product (or any associated products, information, items, articles, computer software, media, technical data, the direct product of such data, samples or equipment received or generated under this Agreement) in violation of any US export laws or other Laws or regulations that may be applicable.  Ipsen and Lexicon agree to obtain similar covenants from their Affiliates, sublicensees and contractors with respect to the subject matter of this Section.
Section 15.6    Force Majeure.
Each Party shall be excused from the performance of its obligations under the Agreement, and no failure or omission by a Party in the performance of any obligation of this Agreement shall be deemed a breach of this Agreement or create any liability if the same shall arise from any cause or causes beyond the control of such Party, (including the following: acts of God; acts or omissions of any government; any rules, regulations or orders issued by any governmental authority or by any officer, department, agency or instrumentality thereof; labor disputes, epidemic, failure or default of public utilities or common carriers, fire; storm; flood; earthquake; accident; war; rebellion; terrorism; insurrection; riot; and invasion) and such excuse shall be continued so long as the condition constituting force majeure continues; provided that such failure or omission resulting from one of the above causes is cured as soon as is practicable after the end of the occurrence of one or more of the above-mentioned causes.  The Party claiming such force majeure shall notify the other Party with notice of the force majeure event as soon as practicable, but in no event longer than [**] after its occurrence, which notice shall reasonably identify the affected obligations under this Agreement and the extent to which performance thereof will be affected.  In such event, the Parties shall meet and/or discuss promptly to determine an equitable solution to minimize and if reasonably feasible, overcome, the effects of any such event.
Section 15.7    [**].
In the event [**], at the request of either Party the Parties shall [**], including but not limited to [**].
Section 15.8    Performance by Affiliates and Sublicensees.
To the extent that this Agreement imposes obligations on Affiliates or sublicensees of a Party, such Party agrees to cause such Party’s Affiliates and sublicensees to perform such obligations.
Section 15.9    Independent Contractors.
It is understood and agreed that the relationship between the Parties hereunder is that of independent contractors and that nothing in this Agreement shall be construed as authorization for either Lexicon or Ipsen to act for, bind or commit the other in any way.  The Alliance Managers shall remain employees of Ipsen or Lexicon, as the case may be.

63

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Asterisks denote omissions.

Section 15.10    Construction.
Each Party agrees that this Agreement shall be interpreted without regard to any presumption or rule requiring construction against the Party causing this Agreement to be drafted.
Section 15.11    Interpretation.
Any reference in this Agreement to an Article, Section, subsection, paragraph, clause, Schedule, or Exhibit shall be deemed to be a reference to any Article, Section, subsection, paragraph, clause, Schedule, or Exhibit, of or to, as the case may be, this Agreement.  Except where the context clearly otherwise requires, (a) wherever used, the use of any gender will be applicable to all genders, (b) any definition of or reference to any agreement, instrument or other document refers to such agreement, instrument other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or therein), (c) any reference to any laws refers to such laws as from time to time enacted, repealed or amended, (d) the words “herein”, “hereof” and hereunder”, and words of similar import, refer to this Agreement in its entirety and not to any particular provision hereof, (e) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “but not limited to”, “without limitation” or words of similar import, (f) the word “day” means a calendar day, the word “month” means a calendar month and the word “year” means a calendar year, (g) the word “quarterly” refers to calendar quarters (e.g. January 1 to march 31, April 1 to June 30, July 1 to September 30 or October 1 to December 31) and (h) each accounting term used herein that is not specifically defined herein shall have the meaning given to it under applicable IFRS, to the extent consistent with its usage and the other definitions in the Agreement.
Section 15.12    Headings.
The captions or headings of the Sections or other subdivisions hereof are inserted only as a matter of convenience or for reference and shall have no effect on the meaning of the provisions hereof.
Section 15.13    English Language.
This Agreement was prepared and is established in the English language, any translation thereof shall be deemed for convenience only and shall never prevail against the original English version. All reports, notices and communications to be exchanged under this Agreement shall be in the English language, provided however that, notwithstanding anything herein to the contrary, neither Party shall be under any obligation to translate into English any document originally established and existing in another language, for the sole purpose of communicating such document to the other Party, it being agreed that such documents will be provided on an as is basis.
Section 15.14    No Implied Waivers; Rights Cumulative.
No failure on the part of Lexicon or Ipsen to exercise, and no delay in exercising, any right, power, remedy or privilege under this Agreement, or provided by statute or at law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, power, remedy or privilege or be construed as a waiver of any breach of this Agreement or as an acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy or privilege preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege.

64

Confidential materials omitted and filed separately
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Asterisks denote omissions.

Section 15.15    Severability.
If, under applicable Law, any provision of this Agreement is held to be invalid or unenforceable, or otherwise directly or indirectly affects the validity of any other material provision(s) of this Agreement (such invalid or unenforceable provision, a “Severed Clause”), this Agreement shall endure except for the Severed Clause.  The Parties shall consult one another and use reasonable efforts to agree upon a valid and enforceable provision that is a reasonable substitute for the Severed Clause in view of the objectives contemplated by the Parties when entering into the Agreement and the general balance of the respective interests of the Parties as initially intended under the Agreement.
Section 15.16    Execution in Counterparts.
This Agreement may be executed in counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, and all of which counterparts, taken together, shall constitute one and the same instrument.
[Remainder of This Page Intentionally Left Blank]

65

Confidential materials omitted and filed separately
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Asterisks denote omissions.

IN WITNESS WHEREOF, the Parties have executed this License and Collaboration Agreement as of the Effective Date.
	
		
	IPSEN PHARMA SAS
	 

	 
	 

	 
	 

	 
	 

	By:
	 

	Name:
	 

	Title:
	 

	 
	 

	 
	 

	LEXICON PHARMACEUTICALS, INC.
	 

	 
	 

	 
	 

	 
	 

	By:
	 

	Name:
	 

	Title:
	 

66

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

Exhibit 1.10
Description of Telotristat Etiprate
Telotristat etiprate is the hippurate salt of telotristat ethyl.
Telotristat ethyl, also known as LX1032, has the chemical name, CAS identifier, and chemical structure shown below:
Chemical name:  (S)-ethyl 2-amino-3-(4-(2-amino-6-((R)-1-(4-chloro-2-(3-methyl-1H-pyrazol-1-yl)phenyl)-2,2,2-trifluoroethoxy)pyrimidin-4-yl)phenyl)propanoate
CAS Registry number:  1033805-22-9
Chemical structure:

Telotristat etiprate, also known as LX1606, is the hippurate salt of telotristat ethyl, and has the chemical name, CAS identifier, and chemical structure shown below:
Chemical Name:  (S)-ethyl 2-amino-3-(4-(2-amino-6-((R)-1-(4-chloro-2-(3-methyl-1H-pyrazol-1-yl)phenyl)-2,2,2-trifluoroethoxy)pyrimidin-4-yl)phenyl)propanoate 2-benzamidoacetate
CAS Registry number:  1137608-69-5  
Chemical Structure:

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

Exhibit 1.14
Initial Development Plan
Initial Development Plan Summary

		
	A.
	Clinical Studies

		
	 ̄
	Completed Studies:

	
						
	Protocol/ Study Number
	Study Description
	Number of Subjects/ Patients
	Demographics
	Route of Administration
	Dosing Schema

	[**]
	[**]
	[**]
	[**]
	[**]
	[**]

[**]

		
	 ̄
	In-Progress Studies:

	
						
	Protocol/ Study Number
	Study Description
	Number of Subjects/ Patients
	Demographics
	Route of Administration
	Dosing Schema

	[**]
	[**]
	[**]
	[**]
	[**]
	[**]

		
	B.
	Preclinical Studies

	
								
	Type of Study, Species/Strain
	Study Number
	Method of Administration
	Duration of Dosing
	Dose (mg/kg)
	GLP Compliant
	Testing Facility
	Status

	Single-dose toxicity

	[**]
	[**]
	[**]
	[**]
	[**]
	[**]
	[**]
	[**]

	Carcinogenicity

	[**]
	[**]
	[**]
	[**]
	[**]
	[**]
	[**]
	[**]

	[**]

	Reproductive Toxicity

	[**]
	[**]
	[**]
	[**]
	[**]
	[**]
	[**]
	[**] 

	Local Tolerance

	[**]
	[**]
	[**]
	[**]
	[**]
	[**]
	[**]
	[**]

[**]

		
	C.
	NDA/MAA Filing Timeline

[**]

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

Exhibit 1.42
Licensed Patent Rights
	
								
	Lexicon Reference
	Country
	Filing Number
	Filing Date
	Publication Number
	Publication Date
	Grant Number
	Grant Date

	[**]
	[**]
	[**]
	[**]
	[**]
	[**]
	[**]
	[**]

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

Exhibit 1.46
Licensed Trademark
	
				
	Trademark
	Country
	Application No.
	Filing Date

	[**]
	[**]
	[**]
	[**]

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

Confidential materials omitted and filed separately
with the Securities and Exchange Commission.
Asterisks denote omissions.

Exhibit 1.47

Description of LX1033
Telotristat, also known as LX1033, has the chemical name, CAS identifier and chemical structure shown below:
Chemical Name:  (S)-2-amino-3-(4-(2-amino-6-((R)-1-(4-chloro-2-(3-methyl-1H-pyrazol-1-yl)phenyl)-2,2,2-trifluoroethoxy)pyrimidin-4-yl)phenyl)propanoic acid
CAS Registry number:  1033805-28-5  
Chemical Structure:Exhibit 10.1 

1019 MARKET STREET 

LEASE AGREEMENT 

1019 MARKET ST. PROPERTY, LLC, 

a Delaware limited liability company, 

as Landlord, 

and 

ZENDESK, INC., 

a Delaware corporation, 

as Tenant 

 

 

SUMMARY OF BASIC LEASE INFORMATION 

This Summary of Basic Lease Information (“Summary”) is hereby incorporated into and made a part of the attached Lease Agreement. Each reference in the Lease Agreement to any term of this Summary shall have the meaning as set forth in this Summary for such term. In the event of a conflict between the terms of this Summary and the Lease Agreement, the terms of the Lease Agreement shall prevail. Any capitalized terms used herein and not otherwise defined herein shall have the meaning as set forth in the Lease Agreement. 

 

	
TERMS OF LEASE

(References are to

the Lease Agreement)
	
  
	
DESCRIPTION

	
 
	
 

	
1. Lease Date:
	
  
	
September 6, 2013

	
 
	
 

	
2. Landlord:
	
  
	
1019 MARKET ST. PROPERTY, LLC,

a Delaware limited liability company

	
 
	
 

	
3. Address of Landlord

    (Section 24.17):
	
  
	
c/o Westport Capital Partners LLC

2121 Rosecrans Ave., Suite 4325

El Segundo, California 90245

Attn: Wm. Gregory Geiger

 

and

 

c/o Cannae Partners

703 Market Street, Suite 400

San Francisco, California 94103

Attn: Jay Atkinson

 

And an additional copies to:

 

c/o Westport Capital Partners LLC

40 Danbury Rd.

Wilton, Connecticut 06897

Attn: Marc Porosoff

 

and

 

Kennerly, Lamishaw & Rossi LLP

707 Wilshire Boulevard, Suite 1400

Los Angles, California 90017

Attn: William J. Birney, Esq.

	
 
	
 

	
4. Tenant:
	
  
	
ZENDESK, INC.,

a Delaware corporation

 

(i) 

 

 

 

	
5. Address of Tenant

    (Section 24.17):
	
  
	
989 Market Street, Suite 300

San Francisco, California 94103

Attn: Ainsley Hill

 

with a copy to:

 

989 Market Street, Suite 300

San Francisco, California 94103

Attn: Alan Black

 

and a copy to:

 

Goodwin Procter LLP

601 S. Figueroa Street, 41st Floor

Los Angeles, California 90017

Attn: Douglas A. Praw, Esq.

(Prior to Lease Commencement Date)

 

And

 

1019 Market Street

San Francisco, California 94103

Attn: Ainsley Hill

 

with a copy to:

 

1019 Market Street

San Francisco, California 94103

Attn: Alan Black

 

and a copy to:

 

Goodwin Procter LLP

 

601 S. Figueroa Street, 41st Floor

Los Angeles, California 90017

Attn: Douglas A. Praw, Esq.

(After Lease Commencement Date)

	
 
	
 

	
6. Premises (Article 1):
	
  
	
Approximately 72,933 rentable square feet of space, comprising the entire office portion of the Building located at 1019 Market Street, San Francisco, California, as depicted in the floor plans attached hereto as Exhibit A.

	
 
	
 

	
7. Term (Article 2).
	
  
	
 

	
 
	
 

	
    7.1 Lease Term:
	
  
	
Approximately eight (8) years and five (5) months.

	
 
	
 

	
    7.2 Lease Commencement       Date:
	
  
	
The earliest to occur of (i) the date upon which Tenant first commences to conduct business in the Premises, (ii) the date upon which a certificate of occupancy (or its legal equivalent) is issued for the Premises by the City of San Francisco, (iii) March 5, 2014, or (iv) the date that is one hundred fifty (150) days after the Effective Date, subject to the provisions of the Tenant Work Letter, attached hereto as Exhibit B, including Landlord Caused Delay.

	
 
	
 

	
    7.3 Lease Expiration       Date:
	
  
	
The last day of the one hundred first (101st) full calendar month following the Lease Commencement Date.

	
 
	
 

	
    7.4 Amendment to Lease:
	
  
	
Subject to Article 2 of the Lease Agreement, Landlord and Tenant may confirm the Lease Commencement Date and Lease Expiration Date in an Amendment to Lease (Exhibit C).

 

(ii) 

 

 

 

	
    7.5 Option Term:
	
  
	
One five (5) year Option Term in accordance with the Extension Option Rider attached to the Lease.

	
 
	
 

	
8. Base Rent (Article 3):
	
  
	
 

 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Months of Lease

Term
	
  
	
Annual Base Rent
	
 
	
  
	
Monthly Installment
of Base Rent
	
 
	
  
	
Annual Rental Rate
per Rentable Square
Foot
	
 

	
1 - 12*
	
  
	
$
	
3,373,151.25
	
  
	
  
	
$
	
281,095.94
	
  
	
  
	
$
	
46.25
	
  

	
13 - 24
	
  
	
$
	
3,474,528.12
	
  
	
  
	
$
	
289,544.01
	
  
	
  
	
$
	
47.64
	
  

	
25 - 36
	
  
	
$
	
3,578,822.31
	
  
	
  
	
$
	
298,235.19
	
  
	
  
	
$
	
49.07
	
  

	
37 - 48
	
  
	
$
	
3,686,033.82
	
  
	
  
	
$
	
307,169.49
	
  
	
  
	
$
	
50.54
	
  

	
49 - 60
	
  
	
$
	
3,796,162.65
	
  
	
  
	
$
	
316,346.89
	
  
	
  
	
$
	
52.05
	
  

	
61 - 72
	
  
	
$
	
3,910,667.46
	
  
	
  
	
$
	
325,888.96
	
  
	
  
	
$
	
53.62
	
  

	
73 - 84
	
  
	
$
	
4,027,360.26
	
  
	
  
	
$
	
335,613.36
	
  
	
  
	
$
	
55.22
	
  

	
85 - 96
	
  
	
$
	
4,148,429.04
	
  
	
  
	
$
	
345,702.42
	
  
	
  
	
$
	
56.88
	
  

	
97 - 101
	
  
	
$
	
4,273,144.47
	
  
	
  
	
$
	
356,095.37
	
  
	
  
	
$
	
58.59
	
  

 

	
*
	
Month 1 through 5 subject to abatement as provided in Section 3.2 of the Lease Agreement 

 

	
9. Additional Rent

    (Article 4):
	
  
	
 

	
 
	
 

	
    9.1 Expense Base Year
	
  
	
Calendar year 2014.

	
 
	
 

	
    9.2 Utilities Base Year
	
  
	
Calendar year 2014.

	
 
	
 

	
    9.3 Tenant’s Share of Direct Expenses and Utilities Costs
	
  
	
96.70% (i.e., 72,933 rentable square feet within the Premises / 75,423 rentable square feet within the Building).

	
 
	
 

	
10. Letter of Credit Amount:
	
  
	
$3,608,344.90, subject to reduction as provided in the Letter of Credit Rider.

	
 
	
 

	
11. Tenant Improvement Allowance:
	
  
	
$3,537,250.50, payable in accordance with to Exhibit B.

	
 
	
 

	
12. Brokers

     (Section 24.23):
	
  
	
The CAC Group, representing Landlord and Cornish & Carey Commercial Newmark Knight Frank, representing Tenant

	
 
	
 

	
13. Effective Date
	
  
	
The date on which the Substantial Completion of the Storefront Work occurs in accordance with Exhibit B.

 

(iii) 

 

 

TABLE OF CONTENTS 

 

	
 
	
  
	
Page
	
 

	
 
	
 

	
ARTICLE 1 REAL PROPERTY, BUILDING AND PREMISES
	
  
	
 
	
1
	
  

	
 
	
 

	
1.1 Real Property, Building and Premises
	
  
	
 
	
1
	
  

	
1.2 Condition of Premises
	
  
	
 
	
1
	
  

	
1.3 Rentable Square Feet
	
  
	
 
	
1
	
  

	
 
	
 

	
ARTICLE 2 LEASE TERM
	
  
	
 
	
2
	
  

	
 
	
 

	
ARTICLE 3 BASE RENT
	
  
	
 
	
2
	
  

	
 
	
 

	
3.1 Base Rent
	
  
	
 
	
2
	
  

	
3.2 Conditional Abatement of Base Rent
	
  
	
 
	
3
	
  

	
 
	
 

	
ARTICLE 4 ADDITIONAL RENT
	
  
	
 
	
3
	
  

	
 
	
 

	
4.1 Additional Rent
	
  
	
 
	
3
	
  

	
4.2 Definitions
	
  
	
 
	
4
	
  

	
4.3 Calculation and Payment of Additional Rent
	
  
	
 
	
9
	
  

	
4.4 
	
  
	
 
	
9
	
  

	
4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible
	
  
	
 
	
11
	
  

	
4.6 Late Charges
	
  
	
 
	
11
	
  

	
4.7 Tenant’s Audit Rights
	
  
	
 
	
11
	
  

	
 
	
 

	
ARTICLE 5 USE OF PREMISES
	
  
	
 
	
12
	
  

	
 
	
 

	
ARTICLE 6 SERVICES AND UTILITIES
	
  
	
 
	
13
	
  

	
 
	
 

	
6.1 Standard Tenant Services
	
  
	
 
	
13
	
  

	
6.2 Overstandard Tenant Use
	
  
	
 
	
14
	
  

	
6.3 Interruption of Use
	
  
	
 
	
15
	
  

	
6.4 Access to Premises
	
  
	
 
	
15
	
  

	
6.5 Janitorial
	
  
	
 
	
15
	
  

	
6.6 Additional Services
	
  
	
 
	
16
	
  

	
 
	
 

	
ARTICLE 7 REPAIRS
	
  
	
 
	
16
	
  

	
 
	
 

	
7.1 Tenant’s Repairs
	
  
	
 
	
16
	
  

	
7.2 Landlord’s Repairs
	
  
	
 
	
16
	
  

	
7.3 Tenant’s Right to Repair
	
  
	
 
	
17
	
  

	
 
	
 

	
ARTICLE 8 ADDITIONS AND ALTERATIONS
	
  
	
 
	
18
	
  

	
 
	
 

	
8.1 Landlord’s Consent to Alterations
	
  
	
 
	
18
	
  

	
8.2 Manner of Construction
	
  
	
 
	
19
	
  

	
8.3 Landlord’s Property
	
  
	
 
	
20
	
  

 

(iv) 

 

 

	
ARTICLE 9 COVENANT AGAINST LIENS
	
  
	
 
	
20
	
  

	
 
	
 

	
ARTICLE 10 INDEMNIFICATION AND INSURANCE
	
  
	
 
	
21
	
  

	
 
	
 

	
10.1 Indemnification and Waiver
	
  
	
 
	
21
	
  

	
10.2 Tenant’s Compliance with Landlord’s Fire and Casualty Insurance
	
  
	
 
	
22
	
  

	
10.3 Tenant’s Insurance
	
  
	
 
	
22
	
  

	
10.4 Subrogation
	
  
	
 
	
23
	
  

	
10.5 Additional Insurance Obligations
	
  
	
 
	
24
	
  

	
 
	
 

	
ARTICLE 11 DAMAGE AND DESTRUCTION
	
  
	
 
	
24
	
  

	
 
	
 

	
11.1 Repair of Damage to Premises by Landlord
	
  
	
 
	
24
	
  

	
11.2 Landlord’s Option to Repair
	
  
	
 
	
25
	
  

	
11.3 Damage at the End of Lease Term
	
  
	
 
	
26
	
  

	
11.4 Waiver of Statutory Provisions
	
  
	
 
	
27
	
  

	
11.5 Abatement of Rent When Tenant Is Prevented From Using Premises
	
  
	
 
	
27
	
  

	
 
	
 

	
ARTICLE 12 CONDEMNATION
	
  
	
 
	
28
	
  

	
 
	
 

	
12.1 Permanent Taking
	
  
	
 
	
28
	
  

	
12.2 Temporary Taking
	
  
	
 
	
28
	
  

	
 
	
 

	
ARTICLE 13 COVENANT OF QUIET ENJOYMENT
	
  
	
 
	
29
	
  

	
 
	
 

	
ARTICLE 14 ASSIGNMENT AND SUBLETTING
	
  
	
 
	
29
	
  

	
 
	
 

	
14.1 Transfers
	
  
	
 
	
29
	
  

	
14.2 Landlord’s Consent
	
  
	
 
	
30
	
  

	
14.3 Transfer Premium
	
  
	
 
	
31
	
  

	
14.4 Landlord’s Option as to Subject Space
	
  
	
 
	
31
	
  

	
14.5 Effect of Transfer
	
  
	
 
	
32
	
  

	
14.6 Additional Transfers
	
  
	
 
	
32
	
  

	
14.7 Affiliated Companies/Restructuring of Business Organization
	
  
	
 
	
32
	
  

	
 
	
 

	
ARTICLE 15 SURRENDER; OWNERSHIP AND REMOVAL OF TRADE FIXTURES
	
  
	
 
	
33
	
  

	
 
	
 

	
15.1 Surrender of Premises
	
  
	
 
	
33
	
  

	
15.2 Removal of Tenant Property by Tenant
	
  
	
 
	
33
	
  

	
 
	
 

	
ARTICLE 16 HOLDING OVER
	
  
	
 
	
34
	
  

	
 
	
 

	
ARTICLE 17 ESTOPPEL CERTIFICATES
	
  
	
 
	
34
	
  

	
 
	
 

	
ARTICLE 18 SUBORDINATION
	
  
	
 
	
35
	
  

 

(v) 

 

 

	
ARTICLE 19 TENANT’S DEFAULTS; LANDLORD’S REMEDIES; LANDLORD DEFAULTS
	
  
	
 
	
35
	
  

	
 
	
 

	
19.1 Events of Default by Tenant
	
  
	
 
	
35
	
  

	
19.2 Landlord’s Remedies Upon Default
	
  
	
 
	
36
	
  

	
19.3 Payment by Tenant
	
  
	
 
	
37
	
  

	
19.4 Security for Performance of Tenant’s Obligations
	
  
	
 
	
37
	
  

	
19.5 Sublessees of Tenant
	
  
	
 
	
38
	
  

	
19.6 Waiver of Default
	
  
	
 
	
38
	
  

	
19.7 Payment of Rent and Security Deposit After Default
	
  
	
 
	
38
	
  

	
19.8 Efforts to Relet
	
  
	
 
	
38
	
  

	
19.9 Waiver of Reinstatement
	
  
	
 
	
38
	
  

	
19.10 Default by Landlord
	
  
	
 
	
39
	
  

	
 
	
 

	
ARTICLE 20 SIGNS
	
  
	
 
	
39
	
  

	
 
	
 

	
20.1 Building Standard Signage
	
  
	
 
	
39
	
  

	
20.2 Exterior Signage
	
  
	
 
	
39
	
  

	
20.3 Transferability
	
  
	
 
	
40
	
  

	
20.4 Maintenance/Removal
	
  
	
 
	
40
	
  

	
20.5 Use of Exterior Portion of the Building
	
  
	
 
	
40
	
  

	
 
	
 

	
ARTICLE 21 COMPLIANCE WITH LAW
	
  
	
 
	
41
	
  

	
 
	
 

	
ARTICLE 22 ENTRY BY LANDLORD
	
  
	
 
	
41
	
  

	
 
	
 

	
ARTICLE 23 ROOFTOP RIGHTS
	
  
	
 
	
42
	
  

	
 
	
 

	
23.1 Telecommunications Equipment
	
  
	
 
	
42
	
  

	
23.2 Rooftop Deck
	
  
	
 
	
43
	
  

	
 
	
 

	
ARTICLE 24 MISCELLANEOUS PROVISIONS
	
  
	
 
	
43
	
  

	
 
	
 

	
24.1 Terms; Captions
	
  
	
 
	
43
	
  

	
24.2 Binding Effect
	
  
	
 
	
43
	
  

	
24.3 No Waiver
	
  
	
 
	
43
	
  

	
24.4 Modification of Lease
	
  
	
 
	
44
	
  

	
24.5 Transfer of Landlord’s Interest
	
  
	
 
	
44
	
  

	
24.6 Prohibition Against Recording
	
  
	
 
	
44
	
  

	
24.7 Landlord’s Title; Air Rights
	
  
	
 
	
44
	
  

	
24.8 Relationship of Parties
	
  
	
 
	
45
	
  

	
24.9 Application of Payments
	
  
	
 
	
45
	
  

	
24.10 Time of Essence
	
  
	
 
	
45
	
  

	
24.11 Partial Invalidity
	
  
	
 
	
45
	
  

	
24.12 No Warranty
	
  
	
 
	
45
	
  

	
24.13 Landlord Exculpation
	
  
	
 
	
45
	
  

 

(vi) 

 

 

	
24.14 Entire Agreement
	
  
	
 
	
45
	
  

	
24.15 Right to Lease
	
  
	
 
	
46
	
  

	
24.16 Force Majeure
	
  
	
 
	
46
	
  

	
24.17 Notices
	
  
	
 
	
46
	
  

	
24.18 Joint and Several
	
  
	
 
	
47
	
  

	
24.19 Authority
	
  
	
 
	
47
	
  

	
24.20 Attorneys’ Fees; Landlord Bankruptcy Proceedings
	
  
	
 
	
47
	
  

	
24.21 Governing Law
	
  
	
 
	
47
	
  

	
24.22 Submission of Lease
	
  
	
 
	
47
	
  

	
24.23 Brokers
	
  
	
 
	
47
	
  

	
24.24 Independent Covenants
	
  
	
 
	
47
	
  

	
24.25 Confidentiality
	
  
	
 
	
48
	
  

	
24.26 Property Management
	
  
	
 
	
48
	
  

	
24.27 Landlord Renovations
	
  
	
 
	
48
	
  

	
24.28 Prohibited Party Transactions
	
  
	
 
	
49
	
  

	
24.29 Certified Access Specialist (CASp) Inspection
	
  
	
 
	
49
	
  

	
24.30 Consent and Approvals
	
  
	
 
	
49
	
  

	
24.31 Counterparts
	
  
	
 
	
50
	
  

EXHIBITS 

 

	
 
	
 
	
 

	
 
	
 

	
A
	
  
	
FLOOR PLANS OF THE PREMISES

	
 
	
 

	
B
	
  
	
TENANT WORK LETTER

	
 
	
 

	
C
	
  
	
AMENDMENT TO LEASE

	
 
	
 

	
D
	
  
	
RULES AND REGULATIONS

	
 
	
 

	
E
	
  
	
FORM OF TENANT’S ESTOPPEL CERTIFICATE

	
 
	
 

	
F-1
	
  
	
APPROXIMATE LOCATION OF TENANT’S BUILDING EXTERIOR SIGNS

	
 
	
 

	
F-2
	
  
	
RETAIL SIGNAGE LOCATION

	
 
	
 

	
G
	
  
	
JANITORIAL SCHEDULE

	
 
	
 

	
H
	
  
	
HVAC DEPRECIATION SCHEDULE

	
 
	
 

	
I
	
  
	
PROHIBITED USES

 

(vii) 

 

 

EXTENSION OPTION RIDER 

LETTER OF CREDIT RIDER 

 

(viii) 

 

 

INDEX OF DEFINED TERMS 

 

	
 
	
 
	
 
	
 
	
 

	
 
	
  
	
Page
	
 

	
 
	
 

	
Abated Rent
	
  
	
 
	
3
	
  

	
Abatement Event
	
  
	
 
	
27
	
  

	
Abatement Period
	
  
	
 
	
3
	
  

	
Acceptable Changes
	
  
	
 
	
18
	
  

	
Accountant
	
  
	
 
	
12
	
  

	
Additional Rent
	
  
	
 
	
3
	
  

	
Affiliates
	
  
	
 
	
32
	
  

	
Alteration Supervision Fee
	
  
	
 
	
18
	
  

	
Alterations
	
  
	
 
	
18
	
  

	
Base Operating Expenses
	
  
	
 
	
12
	
  

	
Base Rent
	
  
	
 
	
2
	
  

	
Base, Shell, and Core
	
  
	
 
	
1
	
  

	
BOMA
	
  
	
 
	
1
	
  

	
Brokers
	
  
	
 
	
47
	
  

	
Building
	
  
	
 
	
1
	
  

	
Building Exterior Signs
	
  
	
 
	
39
	
  

	
Business Hours
	
  
	
 
	
15
	
  

	
Calendar Year
	
  
	
 
	
4
	
  

	
Claims
	
  
	
 
	
21
	
  

	
Codes
	
  
	
 
	
49
	
  

	
Comparable Buildings
	
  
	
 
	
1
	
  

	
Cost Pools
	
  
	
 
	
5
	
  

	
Damage Termination Date
	
  
	
 
	
26
	
  

	
Damage Termination Notice
	
  
	
 
	
26
	
  

	
Direct Expenses
	
  
	
 
	
4
	
  

	
Eligibility Period
	
  
	
 
	
27
	
  

	
Estimate
	
  
	
 
	
10
	
  

	
Estimate Statement
	
  
	
 
	
10
	
  

	
Estimated Excess
	
  
	
 
	
10
	
  

	
Estimated Repair Period
	
  
	
 
	
25
	
  

	
Excess
	
  
	
 
	
10
	
  

	
Excluded Claims
	
  
	
 
	
21
	
  

	
Expense Base Year
	
  
	
 
	
4
	
  

	
Expense Year
	
  
	
 
	
4
	
  

	
Force Majeure
	
  
	
 
	
46
	
  

	
Hazardous Material
	
  
	
 
	
13
	
  

	
Holidays
	
  
	
 
	
15
	
  

	
HVAC
	
  
	
 
	
13
	
  

	
Interest Rate
	
  
	
 
	
11
	
  

	
Landlord
	
  
	
 
	
1
	
  

	
Landlord Objection Notice
	
  
	
 
	
17
	
  

	
Landlord Parties
	
  
	
 
	
21
	
  

	
Landlord’s Damage Notice
	
  
	
 
	
25
	
  

 

(ix) 

 

 

	
Laws
	
  
	
 
	
41
	
  

	
Lease Commencement Date
	
  
	
 
	
2
	
  

	
Lease Expiration Date
	
  
	
 
	
2
	
  

	
Lease Term
	
  
	
 
	
2
	
  

	
Lease Year
	
  
	
 
	
2
	
  

	
Mortgagee
	
  
	
 
	
35
	
  

	
Notices
	
  
	
 
	
46
	
  

	
Operating Expenses
	
  
	
 
	
4
	
  

	
Original Tenant
	
  
	
 
	
40
	
  

	
Outside Repair Period
	
  
	
 
	
17
	
  

	
Overlap Period
	
  
	
 
	
28
	
  

	
Premises
	
  
	
 
	
1
	
  

	
Project
	
  
	
 
	
1
	
  

	
Proposition 13
	
  
	
 
	
8
	
  

	
Real Property
	
  
	
 
	
1
	
  

	
Recapture Notice
	
  
	
 
	
31
	
  

	
Renovations
	
  
	
 
	
48
	
  

	
Rent
	
  
	
 
	
2
	
  

	
Review Period
	
  
	
 
	
11
	
  

	
Roof Deck
	
  
	
 
	
43
	
  

	
Special Use Improvements
	
  
	
 
	
20
	
  

	
Statement
	
  
	
 
	
10
	
  

	
Subject Space
	
  
	
 
	
29
	
  

	
Subsequent Year
	
  
	
 
	
7
	
  

	
Systems and Equipment
	
  
	
 
	
7
	
  

	
Tax Expenses
	
  
	
 
	
7
	
  

	
Telecommunications Equipment
	
  
	
 
	
42
	
  

	
Tenant
	
  
	
 
	
1
	
  

	
Tenant Damage Event
	
  
	
 
	
25
	
  

	
Tenant’s Share
	
  
	
 
	
9
	
  

	
Transfer Notice
	
  
	
 
	
29
	
  

	
Transfer Premium
	
  
	
 
	
31
	
  

	
Transferee
	
  
	
 
	
29
	
  

	
Transfers
	
  
	
 
	
29
	
  

	
Utilities Base Year
	
  
	
 
	
9
	
  

	
Utilities Costs
	
  
	
 
	
9
	
  

	
Work Letter
	
  
	
 
	
1
	
  

 

(x) 

 

 

LEASE AGREEMENT 

This Lease Agreement, which includes the preceding Summary attached hereto and incorporated herein by this reference (the Lease Agreement and Summary to be known sometimes collectively hereafter as the “Lease”), dated as of the date set forth in Section 1 of the Summary, is made by and between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and ZENDESK, INC., a Delaware corporation (“Tenant”). 

ARTICLE 1 

REAL PROPERTY, BUILDING AND PREMISES 

1.1 Real Property, Building and Premises. Upon and subject to the terms, covenants and conditions hereinafter set forth in this Lease, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 6 of the Summary (the “Premises”), which Premises constitutes the entire office portion of the building (the “Building”) located at 1019 Market Street, San Francisco, California. The outlines of the floor plans of the Premises is set forth in Exhibit A attached hereto and incorporated herein by this reference. The Building and the land upon which the Building is situated are herein sometimes collectively referred to as the “Real Property” or “Project” Tenant is hereby granted the right to the nonexclusive use of the common corridors and hallways, stairwells, elevators, restrooms and other public or common areas located in the Building. The common areas shall be maintained and operated in a manner consistent with that provided by landlords of the similarly renovated office buildings in the mid-Market corridor of the City of San Francisco between 5th Street and 11th Street, which are institutionally owned (the “Comparable Buildings”) by Landlord or its designated property manager and the use thereof shall be subject to such reasonable and non-discriminatory rules, regulations and restrictions as Landlord may make from time to time Landlord reserves the right to make alterations or additions to or to change the location of elements of the Real Property and the common areas thereof. However, Landlord shall not make alterations or additions that impair Tenant’s use of, or access to, the Premises and/or the Building. 

1.2 Condition of Premises. Except as expressly set forth in this Section 1.2 and in the Tenant Work Letter attached hereto as Exhibit B and incorporated herein by this reference (the “Work Letter”), Landlord shall not be obligated to provide or pay for any improvement, remodeling or refurbishment work or services related to the improvement, remodeling or refurbishment of the Premises, Building or Real Property, and Tenant shall accept the same in its “As Is” condition on the Lease Commencement Date. 

1.3 Rentable Square Feet. For purposes hereof, the “rentable square feet” of the Premises and the Building have been calculated by Landlord pursuant to the Standard Method for Measuring Floor Area in Office Buildings, ANSI Z65.1 1996 (“BOMA”). The parties hereby stipulate that the Premises contain the rentable square feet set forth in Section 6.1 of the Summary, and such square footage amount is not subject to adjustment or remeasurement by Landlord or Tenant. Accordingly, there shall be no adjustment in the Base Rent or other amounts set forth in this Lease which are determined based upon rentable square feet of the Premises. 

 

-1- 

 

 

ARTICLE 2 

LEASE TERM 

The terms and provisions of this Lease shall be effective as of the date of this Lease except for the provisions of this Lease relating to the payment of Rent. The term of this Lease (the “Lease Term”) shall be as set forth in Section 7.1 of the Summary and shall commence on the date (the “Lease Commencement Date”) set forth in Section 7.2 of the Summary (subject, however, to the terms of the Tenant Work Letter, including any Landlord Caused Delay), and shall terminate on the date (the “Lease Expiration Date”) set forth in Section 7.3 of the Summary, 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; provided, however, that the first Lease Year shall commence on the Lease Commencement Date and end and end on the last day of the eleventh month thereafter and the second and each succeeding Lease Year shall commence on the first day of the next calendar month; and further provided that the last Lease Year shall end on the Lease Expiration Date. In the event that the Lease Commencement Date is a date which is other than the date set forth in Section 7.2(iii) of the Summary, within a reasonable period of time after the date Tenant takes possession of the Premises or receives the certificate of occupancy for the Premises, Landlord shall deliver to Tenant an Amendment to Lease in the form as set forth in Exhibit C attached hereto and incorporated herein by this reference, wherein the parties shall specify such different Lease Commencement Date and the Lease Expiration Date, and which Amendment to Lease Tenant shall execute and return to Landlord within ten (10) days of receipt thereof. Notwithstanding anything herein to the contrary, in no event shall the Lease Commencement Date be a date which is later than the date set forth in Section 7.2(iii) of the Summary. Subject to Section 6.1 of the Work Letter, Landlord shall give Tenant nonexclusive access to the Premises during a period of fourteen (14) days prior to the Lease Commencement Date for the purposes of Tenant’s installing in the Premises voice and data cabling and outlets, telephone equipment and furniture, fixtures and equipment. During such access period prior to the Commencement Date, (i) Tenant covenants that Tenant, its employees, agents and contractors shall not interfere with or cause any delay in Landlord’s completion of the Landlord Work; (ii) Tenant’s access and use of the Premises prior to the Lease Commencement Date shall be subject to all provisions of this Lease; and (iii) Tenant shall not conduct any business in the Premises and none of Tenant’s employees shall office in the Premises. Such access period shall not advance the Expiration Date of this Lease. 

ARTICLE 3 

BASE RENT 

3.1 Base Rent. Tenant shall pay, without notice or demand, to Landlord or Landlord’s agent at the management office of the Building, or at such other place as Landlord may from time to time designate in writing, in currency or a check for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, pursuant to a monthly invoice sent to Tenant, base rent (“Base Rent”) as set forth in Section 8 of the Summary, payable in equal monthly installments as set forth in Section 8 of the Summary in advance on or before the first (1st) day of each and every month during the Lease Term, without 

 

-2- 

 

 

any setoff or deduction whatsoever. The Base Rent for the first full month of the Lease Term (after the abatement period set forth in Section 3.2 below) shall be paid at the time of Tenant’s execution of this Lease. If any rental payment date (including the Lease Commencement Date) falls on a day of the month other than the first (1st) day of such month or if any rental payment is for a period which is shorter than one month, then the rental for any such fractional month shall be a proportionate amount of a full calendar month’s rental based on the proportion that the number of days in such fractional month bears to the number of days in the calendar month during which such fractional month occurs. All other payments or adjustments required to be made under the terms of this Lease that require proration on a time basis shall be prorated on the same basis. 

3.2 Conditional Abatement of Base Rent. Notwithstanding anything to the contrary contained in Section 3.1 above and provided that Tenant faithfully performs all of the terms and conditions of this Lease during the Abatement Period (as defined below), Landlord hereby agrees to abate Tenant’s obligation to pay Tenant’s monthly Base Rent (the “Abated Rent”) for the first five (5) full months of the Lease Term (the “Abatement Period”), which total amount of Abated Rent is $1,405,479.70 (i.e., 5 months x $281,095.94 per month = $1,405,479.70). During the Abatement Period, Tenant shall remain responsible for the payment of all of its other monetary obligations under this Lease. If at any time during the Abatement Period an uncured default by Tenant occurs, then the abatement of Base Rent provided for in this Section 3.1 shall immediately become void, the Base Rent payable by Tenant to Landlord shall immediately equal the amount set forth in Section 8 of the Summary without abatement, and in the event such default results in the early termination of this Lease pursuant to the provisions of Section 19.1, then as a part of the recovery set forth in Section 19.2 below, Landlord shall be entitled to the recovery of the Abated Rent. 

ARTICLE 4 

ADDITIONAL RENT 

4.1 Additional Rent. In addition to paying the Base Rent specified in Article 3 above, Tenant shall pay as additional rent the sum of the following: (i) Tenant’s Share (as such term is defined below) of the annual Direct Expenses which are in excess of the amount of Direct Expenses applicable to the Expense Base Year; plus (ii) Tenant’s Share of the annual Utilities Costs which are in excess of the amount of Utilities Costs applicable to the Utilities Base Year. Such additional rent, together with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease (including, without limitation, pursuant to Article 6), shall be hereinafter collectively referred to as the “Additional Rent.” The Base Rent and Additional Rent are herein collectively referred to as the “Rent.” All amounts due under this Article 4 as Additional Rent shall be payable for the same periods and in the same manner, time and place as the Base Rent. Without limitation on other obligations of Tenant which shall 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. 

 

-3- 

 

 

4.2 Definitions. As used in this Article 4, the following terms shall have the meanings hereinafter set forth: 

4.2.1 “Calendar 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 Expiration Date. 

4.2.2 “Expense Base Year” shall mean the year set forth in Section 9.1 of the Summary. 

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

4.2.4 “Expense Year” shall mean each Calendar Year. 

4.2.5 “Operating Expenses” shall mean all expenses, costs and amounts of every kind and nature which Landlord shall pay during any Expense Year because of or in connection with the ownership, management, maintenance, repair, replacement, restoration or operation of the Building and Real Property, including, without limitation, any amounts paid for: (i) the cost of operating, maintaining, repairing, renovating and managing the utility systems, mechanical systems, sanitary and storm drainage systems, any elevator systems and all other “Systems and Equipment” (as defined in Section 4.2.6 of this Lease), and the cost of supplies and equipment and maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections (except for those incurred with respect to the installation of Tenant’s or other occupant’s improvements in the Building or incurred in renovating or otherwise improving vacant space in the Building), and the cost of contesting the validity or applicability of any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with implementation and operation of a transportation system management program or similar program; (iii) the cost of insurance carried by Landlord, in such amounts as Landlord may reasonably determine or as may be required by any mortgagees or the lessor of any underlying or ground lease affecting the Real Property and/or the Building; (iv) the cost of landscaping, relamping, supplies, tools, equipment and materials, and all fees, charges and other costs (including consulting fees, legal fees and accounting fees) incurred in connection with the management, operation, repair and maintenance of the Building and Real Property; (v) alarm and security services; (vi) any equipment rental agreements or management agreements (including the cost of any reasonable management fee and the fair rental value of any office space provided thereunder); (vii) wages, salaries and other compensation and benefits of all persons actually engaged in the operation, management, maintenance or security of the Building and Real Property, and employer’s Social Security taxes, unemployment taxes or insurance, and any other taxes which may be levied on such wages, salaries, compensation and benefits (but not any of Landlord’s general corporate overhead and general administrative expenses); (viii) payments under any easement, license, operating agreement, declaration, restrictive covenant, underlying or ground lease (excluding rent), or instrument pertaining to the sharing of costs by the Building or Real Property; (ix) 

 

-4- 

 

 

the cost of janitorial service for the Project, but excluding janitorial services for the premises, window cleaning, trash removal, replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms and other common or public areas or facilities, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (x) amortization (including interest on the unamortized cost) of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Building and Real Property; (xi) the cost of any capital improvements or other costs (I) which are intended as a labor-saving device or to materially reduce the costs associated with the operation or maintenance of the Building and Real Property, (II) made to the Building or Real Property after the Lease Commencement Date that are required under any governmental law or regulation, or (III) which are reasonably determined by Landlord to be in the best interests of the Building and/or the Real Property; provided, however, that if any such cost described in (I), (II) or (III) above, is a capital expenditure, such cost shall be amortized (including interest on the unamortized cost) over its useful life as Landlord shall reasonably determine and (x) costs of pest control, if any, undertaken by Landlord in the Common Areas, but excluding therefrom any pest control costs to the extent such work is conducted with regard to pests and vermin located in, or originating from, the retail space in the Building. 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 Building is less than one hundred percent (100%) occupied during all or a portion of any Expense Year (including the Expense Base Year), Landlord shall make an appropriate adjustment to the variable components of Operating Expenses for such year or applicable portion thereof, employing sound accounting and management principles, to determine the amount of Operating Expenses that would have been paid had the Building been one hundred percent (100%) occupied; and the amount so determined shall be deemed to have been the amount of Operating Expenses for such year, or applicable portion thereof. Each time Landlord provides Tenant with an actual and/or estimated statement of Operating Expenses, such statement shall be itemized on a line item by line item basis, showing the applicable expense of the applicable year and the year prior to the applicable year. The parties acknowledge that Tenant is not anticipated to be conducting business in the entire Premises during the entirety of the Expense Base Year, so that a gross-up of the Operating Expenses for the Expense Base Year will likely be required pursuant to the above. Without limitation of the foregoing, for purposes of extrapolating the Operating Expenses for the Expense Base Year (notwithstanding the fact that Tenant did not conduct business in the entirety of the Premises for the entire Base Expense Year) Landlord’s gross-up of the actual Operating Expenses shall take into account the actual costs incurred for those floors of the Premises that were fully operational during the Base Expense Year and shall, based on discussions with Tenant and Landlord’s property manager, extrapolate the variable components of the Operating Expenses for the Building during the Expense Base Year based on the number of floors of the Premises that were fully operations during the Expense Base Year. For purposes of this Section Landlord shall consider a particular floor of the Premises to be fully operational if Tenant is conducting any business therefrom. (The final grammatical paragraph of Paragraph 4.7 below sets forth Tenant’s rights to audit Landlord’s calculation of the Operating Expenses for the Base Year, including the gross-up of the same pursuant to the above, as applicable). 

Landlord shall have the right, from time to time, in its discretion, but with prior written notice to Tenant, to equitably allocate some or all of the Direct Expenses (and/or Utilities Costs) between the office and retail portions of the Building for purposes of determining Direct Expenses (and/or Utilities Costs) and/or the provision of various services and amenities thereto (the “Cost Pools”). 

 

-5- 

 

 

Notwithstanding anything to the contrary set forth in this Article 6, when calculating Operating Expenses for the Expense Base Year, Operating Expenses shall exclude market-wide labor-rate increases due to extraordinary circumstances, including, but not limited to, boycotts and strikes and costs relating to capital improvements or expenditures. 

Notwithstanding the foregoing, Operating Expenses shall not, however, include: (A) costs of leasing commissions, attorneys’ fees and other costs and expenses incurred in connection with negotiations or disputes with present or prospective tenants or other occupants of the Building; (B) costs (including permit, license and inspection costs) incurred in renovating or otherwise improving, decorating or redecorating rentable space for other tenants or vacant rentable space; (C) costs incurred due to the violation by Landlord of the terms and conditions of any lease of space in the Building; (D) costs of overhead or profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for services in or in connection with the Building to the extent the same exceeds the costs of overhead and profit increment included in the costs of such services which could be obtained from third parties on a competitive basis; (E) except as otherwise specifically provided in this Section 4.2.5, costs of interest on debt or amortization on any mortgages, and rent payable under any ground lease of the Real Property; (F) Utilities Costs; (G) contributions to operating expense reserves and any bad debt loss, rent loss or other reserve for bad debt or rent loss; (H) any costs incurred to test, survey, clean up, contain, abate or remove any environmental or hazardous waste or materials, including without limitation, asbestos containing materials, from the Building, any other building in the Project or the common areas, or to remedy any breach or violation of any environmental laws; (I) interest, fines or penalties for any late payments by Landlord not due to the act or neglect of Tenant or its agents, contractors or employees; (J) “in-house” legal and/or account fees; (K) legal fees, late charges and penalties incurred in connection with Landlord’s noncompliance with or violation of law; (L) costs resulting from the negligence or willful misconduct of Landlord, its employees, agents and/or contractors and not reimbursed by insurance; (M) advertising and promotional expenses and costs associated with maintaining Landlord’s corporate (or other entity) existence and other overhead and administrative costs of Landlord not directly incurred in the operation and maintenance of the Building or the Project; (N)) any entertainment, dining or travel expenses of Landlord for any purpose: (O) costs incurred in connection with the making of repairs or replacements which are the obligation of any other tenant or occupant; (P) political contributions or contributions to charitable organizations; (Q) costs or fees relating to the defense of Landlord’s title to or interest in the Project, or any part thereof; (R) costs (including, without limitation, fines, penalties, interest, and costs of repairs, replacements, alterations and/or improvements) incurred in bringing the Real Property into compliance with building codes and other applicable Laws in effect as of the Lease Commencement Date and as interpreted by applicable governmental authorities as of such date, including, without limitation, any costs to correct building code violations pertaining to the Building or any other improvements to the Real Property, to the extent such violations exist as of the Lease Commencement Date under any applicable building codes in effect and as interpreted by applicable governmental authorities as of such date; (S) depreciation or amortization of the Building or its components or the common area; (T) any costs in connection with an expansion of the rentable area of the Building or adding any new Building amenities, or any costs incurred in connection with any additions to the common areas, including the purchase of additional land or other development rights; (U) the cost of any item or service for which Tenant separately reimburses Landlord or pays to third parties, or that Landlord provides selectively to one or more, but not all Tenants of the Building, 

 

-6- 

 

 

other than Tenant, whether or not Landlord is reimbursed by such other tenant(s), including, without limitation, the actual cost of any special electrical, heating, ventilation or air conditioning required by any tenant that exceeds the standard for the Building; (V) the cost of correcting defects in the initial construction in the Building or any common area; (W) the costs of leasing equipment or other items which if purchased would constitute a capital expenditure; (X) the cost of Landlord in performing work expressly provided in this Lease to be at Landlord’s expense; and (Y) any personal property taxes of Landlord for equipment or items not used directly in the operation or maintenance of the Building or the Common Area. 

If, in any calendar year following the Base Year (a “Subsequent Year”), a new type of expense item (e.g. earthquake insurance) is included in Operating Expenses which was not included in the Base Year Operating Expenses, then the cost of such new type of item shall be added to the Base Year Operating Expenses for purposes of determining the Operating Expenses payable under this Lease for such Subsequent Year and no additional amounts shall be paid by Tenant as a result of the addition of the new type of expense item except to the extent of Tenant’s Share of amounts in excess of the Base Year amount for such item. During each Subsequent Year, the same amount shall continue to be included in the computation of Operating Expenses for the Base Year, resulting in each such Subsequent Year Operating Expenses only including the increase in the cost of such new item over the Base Year, as so adjusted. However, if in any Subsequent Year thereafter, such new item is not included in Operating Expenses, no such addition shall be made to Base Year Operating Expenses. Conversely, as reasonably determined by Landlord, when an expense item that was originally included in the Base Year Operating Expenses is, in any Subsequent Year, no longer included in Operating Expenses, then the cost of such item shall be deleted from the Base Year Operating Expenses for purposes of determining the Operating Expenses payable under this Lease for such Subsequent Year and Tenant shall be entitled to a reimbursement to the extent of any over payment pertaining to such item as provided in Section 4.3 below. The same amount shall continue to be deleted from the Base Year Operating Expenses for each Subsequent Year thereafter that the item is not included. 

4.2.6 “Systems and Equipment” shall mean any plant, machinery, transformers, duct work, cable, wires, and other equipment, facilities, and systems designed to supply heat, ventilation, air conditioning and humidity or any other services or utilities, or comprising or serving as any component or portion of the electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or fire/life safety systems or equipment, or any other mechanical, electrical, electronic, computer or other systems or equipment which serve the Building in whole or in part. 

4.2.7 “Tax Expenses” shall mean all federal, state, county, or local governmental or municipal taxes, fees, assessments, 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 assessments, fees and taxes, child care subsidies, fees and/or assessments, job training subsidies, fees and/or assessments, open space fees and/or assessments, housing subsidies and/or housing fund fees or assessments, public art fees and/or assessments, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with the Real Property), which Landlord shall pay 

 

-7- 

 

 

during any Expense Year because of or in connection with the ownership, leasing and operation of the Real Property or Landlord’s interest therein. For purposes of this Lease, Tax Expenses shall be calculated as if all of the renovations and the tenant improvements in the Building were fully constructed and the Real Property, the Building, and all renovations and tenant improvements in the Building were fully assessed for real estate tax purposes. 

4.2.7.1 Tax Expenses shall include, without limitation: 

(i) Any tax on Landlord’s rent, right to rent or other income from the Real Property or as against Landlord’s business of leasing any of the Real Property; 

(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 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. It is the intention of Tenant and Landlord that all such new and increased assessments, taxes, fees, levies, and charges and all similar assessments, taxes, fees, levies and charges be included within the definition of Tax Expenses for purposes of this Lease; 

(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 gross income tax 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; 

(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; and 

(v) Any reasonable expenses incurred by Landlord in attempting to protest, reduce or minimize Tax Expenses. 

4.2.7.2 In no event shall Tax Expenses for any Expense Year be less than the component of Tax Expenses included in Direct Expenses for the Expense Base Year. 

4.2.7.3 Notwithstanding anything to the contrary contained in this Section 4.2.7, 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 net income taxes, and other taxes to the extent applicable to Landlord’s net income (as opposed to rents, receipts or income attributable to operations at the Building or Real Property), (ii) any items included as Operating Expenses or Utilities Costs, and (iii) any items paid by Tenant under Section 4.4 of this Lease. 

 

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4.2.8 “Tenant’s Share” shall mean the percentage set forth in Section 9.3 of the Summary. Tenant’s Share was calculated by multiplying the number of rentable square feet of the Premises by 100 and dividing the product by the total rentable square feet in the Building. In the event either the rentable square feet of the Premises and/or the total rentable square feet of the Building is changed, Tenant’s Share shall be appropriately adjusted, and, as to the Expense Year in which such change occurs, Tenant’s Share for such year shall be determined on the basis of the number of days during such Expense Year that each such Tenant’s Share was in effect. 

4.2.9 “Utilities Base Year” shall mean the calendar year set forth in Section 9.2 of the Summary. 

4.2.10 “Utilities Costs” shall mean all actual charges for utilities for the Building and the Real Property, but excluding the utilities for the Premises which Tenant shall pay directly to the utility provider therefor pursuant to Article 6 below, which Landlord shall pay during any Expense Year, including, but not limited to, the costs of water, sewer and electricity and other utilities as well as related fees, assessments and surcharges (but excluding those charges (if any) for which tenants directly reimburse Landlord or otherwise pay directly to the utility company). Utilities Costs shall be calculated assuming the Building is at least one hundred percent (100%) occupied during all or any portion of an Expense Year (including the Utilities Base Year). If, during all or any part of any Expense Year, Landlord does not provide any utilities (the cost of which, if provided by Landlord, would be included in Utilities Costs) to a tenant (including Tenant) who has undertaken to provide the same instead of Landlord, Utilities Costs shall be deemed to be decreased by the amount equal to the Utilities Costs which would reasonably have been incurred during such period by Landlord if Landlord had at its own expense provided such utilities to such tenant. Utilities Costs shall include any costs of utilities which are allocated to the Real Property under any declaration, restrictive covenant, or other instrument pertaining to the sharing of costs by the Real Property or any portion thereof, including any covenants, conditions or restrictions now or hereafter recorded against or affecting the Real Property. For purposes of determining Utilities Costs incurred for the Utilities Base Year, Utilities Costs for the Utilities Base Year shall not include any one time special charges, “tap fees,” costs or fees or extraordinary charges or costs incurred in the Utilities Base Year only, including those attributable to deregulation, boycotts, embargoes, strikes or other shortages of services or fuel. In addition, if in any Expense Year subsequent to the Utilities Base Year, the amount of Utilities Costs decreases due to a reduction in the cost of providing utilities to the Real Property for any reason, including without limitation, because of deregulation of the utility industry and/or reduction in rates achieved in contracts with utilities providers, then for purposes of the Expense Year in which such decrease in Utilities Costs occurred and all subsequent Expense Years, the Utilities Costs for the Utilities Base Year shall be decreased by an amount equal to such decrease. 

4.3 Calculation and Payment of Additional Rent. 

4.4.1 Calculation of Excess. If for any Expense Year ending or commencing within the Lease Term, (i) Tenant’s Share of Direct Expenses for such Expense Year exceeds Tenant’s Share of Direct Expenses for the Expense Base Year and/or (ii) Tenant’s Share of 

 

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Utilities Costs for such Expense Year exceeds Tenant’s Share of Utilities Costs for the Utilities Base Year, then Tenant shall pay to Landlord, in the manner set forth in Section 4.3.2, below, and as Additional Rent, an amount equal to such excess (the “Excess”). 

4.4.2 Statement of Actual Direct Expenses and Utilities Costs and Payment by Tenant. Landlord shall endeavor to give to Tenant on or before the first day of April following the end of each Expense Year, a statement (the “Statement”) which shall state the Direct Expenses and Utilities Costs incurred or accrued for such preceding Expense Year, and which shall indicate the amount, if any, of any Excess. Upon receipt of the Statement for each Expense Year ending during the Lease Term, if an Excess is present, Tenant shall pay, with its next installment of Base Rent due, 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 4.3.3 of this Lease. The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord 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 the Direct Expenses and Utilities Costs for the Expense Year in which this Lease terminates, if an Excess is present, Tenant shall immediately pay to Landlord an amount as calculated pursuant to the provisions of Section 4.3.1 of this Lease. The provisions of this Section 4.3.2 shall survive the expiration or earlier termination of the Lease Term. 

4.4.3 Statement of Estimated Direct Expenses and Utilities Costs. In addition, Landlord shall endeavor to give Tenant a yearly expense estimate statement (the “Estimate Statement”) which shall set forth Landlord’s reasonable estimate (the “Estimate” ) of what the total amount of Direct Expenses and Utilities Costs for the then-current Expense Year shall be and the estimated Excess (the “Estimated Excess”) as calculated by comparing (i) Tenant’s Share of Direct Expenses, which shall be based upon the Estimate, to Tenant’s Share of Direct Expenses for the Expense Base Year, and (ii) Tenant’s Share of Utilities Costs, which shall be based upon the Estimate, to Tenant’s Share of Utilities Costs for the Utilities Base Year. The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Estimated Excess under this Article 4. If pursuant to the Estimate Statement an Estimated Excess is calculated for the then-current Expense Year, Tenant shall pay, with its next installment of Base Rent due, a fraction of the Estimated Excess for the then-current Expense Year (reduced by any amounts paid pursuant to the last sentence of this Section 4.3.3). Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year to the month of such payment, both months inclusive, and shall have twelve (12) as its denominator. Until a new Estimate Statement is furnished, 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. 

 

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4.5 Taxes and Other Charges for Which Tenant Is Directly Responsible. Tenant shall reimburse Landlord upon demand for any and all taxes or assessments required to be paid by Landlord (except to the extent included in Tax Expenses by Landlord), excluding state, local and federal personal or corporate income taxes measured by the net income of Landlord from all sources and estate and inheritance taxes, whether or not now customary or within the contemplation of the parties hereto, when: 

4.5.1 Said taxes are measured by or reasonably attributable to the cost or value of Tenant’s equipment, furniture, fixtures and other personal property located in the Premises, or by the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, to the extent the cost or value of such leasehold improvements exceeds the cost or value of a building standard build-out as determined by Landlord regardless of whether title to such improvements shall be vested in Tenant or Landlord; 

4.5.2 Said taxes are 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 Real Property; or 

4.5.3 Said taxes are 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 Late Charges. If any installment of Rent or any other sum due from Tenant shall not be received by Landlord or Landlord’s designee by the due date therefor, then Tenant shall pay to Landlord a late charge equal to five percent (5%) of the amount due plus any attorneys’ fees incurred by Landlord by reason of Tenant’s failure to pay Rent and/or other charges when due hereunder; provided, that the foregoing late charge shall be revised to ten percent (10%) upon the second (2nd) time that any installment of Rent or any other sum is delinquent in any twelve (12) month period. 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, at law and/or in equity 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 by the date that they are due shall thereafter bear interest until paid at a rate (the “Interest Rate”) equal to the lesser of (i) the “Prime Rate” or “Reference Rate” announced from time to time by the Bank of America (or such reasonable comparable national banking institution as selected by Landlord in the event Bank of America ceases to exist or publish a Prime Rate or Reference Rate), plus four percent (4%), or (ii) the highest rate permitted by applicable law. 

4.7 Tenant’s Audit Rights. Within one hundred twenty (120) days after receipt of a Statement by Tenant (“Review Period”), if Tenant disputes the amount set forth in the Statement, Tenant’s employees or an independent certified public accountant (which accountant is a member of a nationally or regionally recognized accounting firm and is not paid on a contingency fee basis), designated by Tenant, may, after reasonable notice to Landlord and at reasonable times, inspect Landlord’s records at Landlord’s offices at the location of the Building or such other location in San Francisco County, California as may be designated by Landlord; provided, however, that notwithstanding any such timely objection, dispute, inspection, and/or audit, and as a condition precedent to Tenant’s exercise of its right of objection, dispute, inspection and/or audit as set forth in this Section 4.6, Tenant shall not be permitted to withhold payment of, and Tenant shall timely pay to Landlord, the full amounts as required by the provisions of this Article 4 in accordance with such Statement. However, such payment may be made under protest pending the outcome of any audit which may be performed by the accountant as described below. Notwithstanding the foregoing, Tenant shall only have the right to review Landlord’s records one (1) time during any twelve (12) month period. No subtenant shall have any right to conduct an audit, and no assignee shall conduct an audit for any period during which 

 

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such assignee was not in possession of the Premises. Tenant’s failure to dispute and/or audit the amounts 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, but within thirty (30) days after the Review Period, Tenant notifies Landlord in writing that Tenant still disputes such amounts, a certification as to the proper amount shall be made, at Tenant’s expense (except as provided hereinbelow), by an independent certified public accountant selected by Landlord and who is a member of a nationally or regionally recognized accounting firm and is not paid on a contingency fee basis (the “Accountant”). Such certification shall be binding upon Landlord and Tenant. Landlord shall cooperate in good faith with Tenant and the Accountant to show Tenant and the accountant the information upon which the certification is to be based. If such certification by the Accountant proves that the Direct Expenses and Utilities Cost set forth in the Statement were overstated by more than five percent (5%), then the cost of the Accountant and the cost of such certification shall be paid for by Landlord. Promptly following the parties’ receipt of such certification, the parties shall make such appropriate payments or reimbursements, as the case may be, to each other, as are determined to be owing pursuant to such certification. Tenant agrees to keep, and to cause all of Tenant’s employees and consultants to keep, all of Landlord’s books and records and the audit, and all information pertaining thereto and the results thereof, strictly confidential, and in connection therewith, Tenant shall cause such employees, consultants to execute such reasonable confidentiality agreements as Landlord may require prior to conducting any such inspections and/or audits. 

Upon written request by Tenant to Landlord at any time following the last day of the Expense Base Year and after which Landlord has completed Landlord’s calculation of Operating Expenses for the Expense Base Year (“Base Operating Expenses” ) (and Landlord shall use reasonable efforts to complete such calculation within one hundred fifty (150) days following the last day of the Expense Base Year), Landlord shall deliver to Tenant for Tenant’s review a Landlord’s Statement setting forth Landlord’s calculation of Base Operating Expenses, and, upon receipt of such Landlord’s Statement, Tenant shall have the right to review Landlord’s books and records related to Landlord’s statement and, if necessary, audit Landlord’s books and records, with respect to the calculation of Base Operating Expenses, with such review and/or audit to be in accordance with the provisions above in this Section 4.7, as they apply to Tenant’s review and audit of Landlord’s Statement for a particular calendar year (including, without limitation, the procedures that apply in the event the parties disagree regarding the results of Tenant’s review or audit of Base Operating Expenses) and, once the foregoing review and/or audit process has been completed as to the Base Operating Expenses, Tenant shall not be permitted to re-evaluate the Base Operating Expenses at a later date unless additional information pertinent to the gross-up has been obtained and requires an adjustment to Landlord’s Statement for the Base Operating Expenses. 

ARTICLE 5 

USE OF PREMISES 

Tenant shall use the Premises solely for general office purposes consistent with the character of the Building as a first-class office building (and such other incidental uses, as kitchens, dining areas, storage areas, meeting space, including on the roof deck, and showers, 

 

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and bicycle storage and parking contemplated under this Lease or as otherwise approved by Landlord), and Tenant shall not use or permit the Premises to be used for any other purpose or purposes whatsoever. By way of example and not limitation, general office use shall not include medical office use or any similar use, laboratory use, classroom use, an executive suite or similar use, any use not characterized by applicable zoning and land use restrictions as general office use, any use which would require Landlord or Tenant to obtain a conditional use permit or variance from any federal, state or local authority, or any other use not compatible, in Landlord’s sole judgment, with the Building. Tenant further 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 purpose contrary to the provisions of Exhibit D, attached hereto and incorporated herein by this reference, or in violation of the laws of the United States of America, the state in which the Building is located, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Building. Tenant shall comply with all recorded covenants, conditions, and restrictions, and the provisions of all ground or underlying leases, now or hereafter affecting the Real Property. Tenant shall not use or allow another person or entity to use any part of the Premises for the storage, use, treatment, manufacture or sale of “Hazardous Material,” as that term is defined below, except for ordinary and general office supplies, such as copier toner, liquid paper, glue, ink and common household cleaning materials (some or all of which may constitute Hazardous Materials as defined in this Lease). As used herein, the term “Hazardous Material” means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the state in which the Building is located or the United States Government. 

ARTICLE 6 

SERVICES AND UTILITIES 

6.1 Standard Tenant Services. Landlord shall provide the following services on all days during the Lease Term, in a manner consistent with that provided by landlords of the Comparable Buildings unless otherwise stated below. 

6.1.1 Subject to the terms of Section 6.2 below, Landlord shall provide heat, ventilation and air conditioning (“HVAC”) for normal comfort for normal office use in the Premises at Landlord’s actual cost, which may include the actual charges of the HVAC, the depreciation of the HVAC equipment, pursuant to a schedule agreed upon by Tenant and Landlord, and engineer time). Tenant shall have full control over the HVAC provided to the Premises and be entitled to use HVAC on demand at the hours and periods desired by Tenant subject to the terms of Section 6.2 below. 

6.1.2 Landlord shall provide adequate electrical wiring and facilities for normal general office use as determined by Landlord. Tenant shall contract for and pay directly to the utility company pursuant to the utility company’s separate meters (or to Landlord in the event that Landlord provides submeters instead of the utility company’s meters), the cost of all electricity provided to and/or consumed in the Premises. Upon request, Landlord shall replace lamps, starters and ballasts for Building standard lighting fixtures within the Premises as part of Operating Expenses. 

 

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

6.1.4 Landlord shall provide window washing services. 

6.1.5 Landlord shall provide automatic passenger elevator service at all times. 

6.1.6 Tenant shall be fully responsible for janitorial services for the Premises pursuant to Section 6.5 below. Landlord shall provide trash removal from the trash bins provided for the Building and shall provide janitorial services for the common areas, exterior of the Building, elevators, and common area restrooms, according to the Schedule attached hereto as Exhibit G. 

6.1.7 Landlord shall, throughout the Lease Term, retain a reputable and licensed security services firm for the provision of security for the Building seven (7) days per week and twenty four (24) hours per day, pursuant to such security procedures, hours, rules and scheduling; provided, however, that neither Landlord nor any of the “Landlord Parties” (as defined in Section 10.1.1 below) shall be liable for, and Landlord and the Landlord Parties are hereby released from any responsibility for, any damage either to person or property or any losses, costs, expenses or claims incurred in connection with or arising from any acts or omissions of Landlord’s security personnel. After the fourth (4th) Lease Year, Landlord will review the security procedures at the Comparable Buildings. Based on this review, in Landlord’s reasonable opinion, if other buildings are providing security services less than 24 hours a day, 7 days a week, then Landlord will request an adjustment to the security services provided to the Building’s and shall present the adjustment, including the proposed hours, schedule, and procedures, in writing, for Tenant’s review and approval, which shall not be unreasonably withheld, conditioned or delayed. Landlord will reserve the right to modify the Building security services after the initial Lease Term; provided, that any changes to the security services provided during the Option Term shall be agreed to by Tenant in the lease amendment memorializing the extension of the Lease Term. As a component of the security services provided by Landlord, at Landlord’s expense, Landlord shall install a card reader security system at the Building entrances, elevators and stair corridors. Tenant shall be entitled to use the stairwells for internal connectivity between floors. 

6.2 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 Tenant’s consumption of electricity shall exceed three (3) watts per usable square foot of the Premises, calculated on an annualized basis for the Business Hours (as defined below), Tenant shall pay to Landlord, concurrently with the next payment of Base Rent due Landlord, the actual cost of such excess consumption, the actual cost of the installation, operation, and maintenance of equipment which is installed in order to supply such excess consumption, and the actual 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, concurrently with 

 

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the next payment of Base Rent due Landlord, including the cost of such additional metering devices. If the Building is not fully occupied by Tenant pursuant to this Lease and Tenant desires to use HVAC in the Premises during hours other than between Monday through Friday, during the period from 7:00 a.m. to 6:00 p.m. (the “Business Hours”), except for the date of observation of New Year’s Day, Presidents’ Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and other locally or nationally recognized holidays as designated by Landlord (collectively, the “Holidays”): (x) Tenant shall give Landlord such prior notice, as Landlord shall from time to time establish as appropriate, of Tenant’s desired use thereof (Tenant can give as little as two hours’ notice of its desired use); (y) Landlord shall supply such after-hours HVAC to Tenant at Landlord’s actual hourly cost, determined on a per floor basis equal the actual cost incurred by Landlord to supply such after-hours HVAC on an hourly basis; and (z) Tenant shall pay such cost to Landlord as Additional Rent within thirty (30) days after billing. Notwithstanding the foregoing, in all instances where Tenant is using HVAC in excess of eleven (11) hours per day on a floor-by-floor basis, measured weekly on an average daily basis, or on days other as described hereinabove, Tenant shall pay to Landlord (1) the increased wear and tear and depreciation on equipment to provide such after-hours HVAC, based on the depreciation schedule attached hereto as Exhibit H, and (2) any additional maintenance costs incurred by Landlord, as Additional Rent within thirty (30) days after billing. 

6.3 Interruption of Use. Except as otherwise set forth in this Lease, Tenant agrees that Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by 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 beyond Landlord’s reasonable control; and such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant’s use and possession of the Premises or relieve Tenant from paying Rent (except as provided in Section 11.5 below) or performing any of its obligations under this Lease. Furthermore, Landlord shall not be liable under any circumstances for a loss of, or injury to, property or for injury to, or interference with, Tenant’s business, including, without limitation, loss of profits, however occurring, through or in connection with or incidental to a failure to furnish any of the services or utilities as set forth in this Article 6. 

6.4 Access to Premises. Subject to all of the terms and conditions of this Lease, including the Rules and Regulations attached hereto as Exhibit D, and all applicable Laws, Tenant shall have access to the Premises twenty-four (24) hours per day, seven (7) days per week. 

6.5 Janitorial. Tenant shall be fully responsible, at Tenant’s sole cost and expense, for providing janitorial services for the Premises. Such janitorial services shall be provided by licensed contractors selected by Tenant and reasonably approved by Landlord (and if required by Landlord shall be union or non-union affiliated and shall have such other labor affiliations so as to not cause any labor disharmony at the Project, as determined by Landlord). In addition, such janitorial services shall be consistent with the operation and appearance of the Building and conform to the cleaning specifications reasonably provided from time to time by Landlord, 

 

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including, without limitation, the daily cleaning of all interior surfaces of the Premises. Landlord’s initial minimum cleaning standards and schedule for the Premises are set forth on Exhibit G attached hereto. 

6.6 Additional Services. Landlord shall also have the exclusive right, but not the obligation, to provide any additional services which may be requested by Tenant, including, without limitation, locksmithing, lamp replacement, additional janitorial service, mold removal, and additional repairs and maintenance, provided that Tenant shall pay to Landlord upon billing, the sum of all costs to Landlord of such additional services plus an administration fee. Charges for any utilities or services for which Tenant is required to pay from time to time hereunder, shall be deemed Additional Rent hereunder and shall be billed on a monthly basis. 

ARTICLE 7 

REPAIRS 

7.1 Tenant’s Repairs. Subject to Landlord’s repair obligations in Sections 7.2 and 11.1 below, Tenant shall, at Tenant’s own expense, keep the Premises, including all improvements, fixtures and furnishings therein, in good order, repair and condition at all times during the Lease Term, which repair obligations shall include, without limitation, the obligation to promptly and adequately repair all damage to the Premises and replace or repair all damaged or broken fixtures and appurtenances. By way of example, and not limitation, Tenant shall be responsible, at Tenant’s sole expense, for repairing and/or replacing, carpet, marble, tile or other flooring, paint, wall coverings, corridor and interior doors and door hardware, telephone and computer equipment, interior glass, window treatments, ceiling tiles, shelving, cabinets, millwork and other tenant improvements. In addition, Tenant shall be responsible for the installation, maintenance and repair of all telephone, computer and related cabling from the telephone terminal room on the floor on which the Premises is located to and throughout the Premises, and Tenant shall be responsible for any loss, cost, damage, liability and expense (including attorneys’ fees) arising out of or related to the installation, maintenance, repair and replacement of such cabling. 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 all overhead, general conditions, fees and other costs or expenses arising from Landlord’s involvement with such repairs and replacements forthwith upon being billed for same. 

7.2 Landlord’s Repairs. Anything contained in Section 7.1 above to the contrary notwithstanding, and subject to Articles 11 and 12 below, Landlord shall repair and maintain the structural portions of the Building, including the basic plumbing, heating, ventilating, air conditioning and electrical systems serving the Building and not located in the Premises; provided, however, if such maintenance and repairs are caused in part or in whole by the act, neglect, fault of or omission of any duty by Tenant, its agents, servants, employees or invitees, Tenant shall pay to Landlord as additional rent, the reasonable cost of such maintenance and repairs. Except as otherwise set forth in this Lease, Landlord shall not be liable for any failure to make any such repairs, or to perform any maintenance unless such failure shall persist for an unreasonable time after written notice of the need of such repairs or maintenance is given to 

 

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Landlord by Tenant. Except as otherwise set forth in this Lease, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant’s business arising from the making of any repairs, alterations or improvements in or to any portion of the Building or the Premises or in or to fixtures, appurtenances and equipment therein. Tenant hereby waives and releases its right (if any) to make repairs at Landlord’s expense under Section 1932, Subdivision 1, and Sections 1941 and 1942 of the California Civil Code, Section 431.70 of the California Code of Civil Procedure, and under any similar law, statute, or ordinance now or hereafter in effect. 

7.3 Tenant’s Right to Repair. Notwithstanding anything to the contrary set forth in this Article 7, if Tenant provides written notice to Landlord of the need for repairs and/or maintenance which are Landlord’s obligation to perform pursuant to Section 7.2 above, and Landlord fails to undertake such repairs and/or maintenance within a reasonable period of time, given the circumstances, after receipt of such notice, but in any event not later than ten (10) business days after receipt of such notice (or such longer time as is reasonably necessary if more than ten (10) business days are reasonably required to complete such repairs and Landlord commences such repairs within such 10 business-day period and thereafter diligently attempts to complete same, but in no event longer than ninety (90) days), then Tenant may proceed to undertake such repairs and/or maintenance upon delivery of an additional five (5) business days’ notice to Landlord that Tenant is taking such required action (provided, however that neither of the notices shall be required in the event of an emergency which threatens life or where there is imminent danger to property or a possibility that a failure to take immediate action could cause an imminent and material disruption in Tenant’s normal and customary business activities within the Premises). If such repairs and/or maintenance were required under the terms of this Lease to be performed by Landlord and are not performed by Landlord prior to the expiration of such 5-business day period (the “Outside Repair Period”), then Tenant shall be entitled to reimbursement by Landlord of Tenant’s actual, reasonable, and documented costs and expenses in performing such maintenance and/or repairs. Such reimbursement shall be made within thirty (30) days after Landlord’s receipt of invoice of such costs and expenses, and if Landlord fails to so reimburse Tenant within such 30-day period, then Tenant shall be entitled to offset against the Rent payable by Tenant under this Lease the amount of such invoice, which shall have accrued on the amount of such invoice during the period from and after Tenant’s delivery of such invoice to Landlord through and including the earlier of the date Landlord delivers the payment to Tenant or the date Tenant offsets such amount against the Rent; provided, however, that notwithstanding the foregoing to the contrary, if (i) Landlord delivers to Tenant prior to the expiration of the Outside Repair Period described above, a written objection (the “Landlord Objection Notice”) to Tenant’s right to receive any such reimbursement based upon Landlord’s good faith claim that such action did not have to be taken by Landlord pursuant to the terms of this Lease, or (ii) Landlord delivers to Tenant, within thirty (30) days after receipt of Tenant’s invoice, a written objection to the payment of such invoice based upon Landlord’s good faith claim that such charges are excessive (in which case, Landlord shall reimburse Tenant, within such 30-day period, the amount Landlord contends would not be excessive), then Tenant shall not be entitled to such reimbursement or offset against Rent. Tenant, as its sole remedy, may require that such disagreement be submitted by the parties to a dispute resolution procedure mutually and reasonably agreed to by the parties, which shall be the Expedited JAMS Procedures or another reputable dispute resolution group mutually agreed upon by Landlord and Tenant or a mutually agreed upon expert acting independently; provided that any expert selected for such 

 

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procedure shall be a building manager or other building management expert with substantial experience in first-class building operations. (If Landlord and Tenant have not agreed upon the dispute resolution group or independent expert within fifteen (15) days after their agreement to submit the dispute to the dispute resolution procedure, then the parties shall be deemed to have selected JAMS as the dispute resolution group.) If the parties engage in a dispute resolution procedure pursuant to the immediately preceding sentence, the parties shall be bound by the results of such procedure. Each party shall bear one-half (1/2) of the cost of the dispute resolution procedure; provided, however, if the resolution of the dispute includes an award of costs to one of the parties, then the losing party shall pay the entire cost of the dispute resolution procedure in accordance with such resolution. In the event Tenant undertakes such repairs and/or maintenance, and such work will affect the Systems and Equipment, any structural portions of the Building, any common areas of the Real Property and/or the exterior appearance of the Building, Tenant shall use only those unrelated third party contractors used by Landlord in the Building for such work unless such contractors are unwilling or unable to perform such work at competitive prices, in which event Tenant may utilize the services of any other qualified contractor which normally and regularly performs similar work in the Comparable Buildings. Tenant shall comply with the other terms and conditions of this Lease if Tenant takes the required action, except that Tenant is not required to obtain Landlord’s consent for such repairs. 

ARTICLE 8 

ADDITIONS AND ALTERATIONS 

8.1 Landlord’s Consent to Alterations. Except as provided hereinbelow, Tenant may not make any improvements, alterations, additions or changes to the Premises (collectively, the “Alterations”) without first procuring the prior written consent of Landlord to such Alterations, which consent shall be requested by Tenant not less than fifteen (15) business days prior to the commencement thereof. Landlord shall not unreasonably withhold or delay its consent for any Alterations, except that Landlord may withhold its consent, in its sole and absolute discretion, with respect to such Alterations which (i) affect any area, or which can be seen from any area, outside the Premises or the Building, and/or (ii) affect the structural components or Systems and Equipment of the Building. Notwithstanding anything to the contrary contained in this Section 8.1, Tenant may make non-structural interior alterations, additions or improvements to the interior of the Premises (collectively, the “Acceptable Changes”) without Landlord’s consent, provided that: (a) Tenant delivers to Landlord written notice of such Acceptable Changes at least ten (10) days prior to the commencement thereof; (b) the aggregate cost of all such Acceptable Changes during any twelve (12) consecutive month period does not exceed Fifty Thousand Dollars ($50,000.00); (c) such Acceptable Changes shall be performed by or on behalf of Tenant in compliance with the other provisions of this Article 8; (d) such Acceptable Changes do not require the issuance of a building permit or other governmental approval; (e) such Acceptable Changes do not affect any Systems and Equipment, the ground floor lobby areas of the Building, pertain to painting of the exposed brick portions of the Premises, and cannot be seen from outside the Premises; and (f) such Acceptable Changes shall be performed by qualified contractors and subcontractors which normally and regularly perform similar work in the Comparable Buildings. Tenant shall pay for all overhead, general conditions, fees, taxes and other costs and expenses of the Alterations and except for Acceptable Changes, Tenant shall pay to Landlord the Alteration Supervision Fee. The “Alteration Supervision Fee” shall be an 

 

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amount equal to zero percent (0%) of the costs of the Alterations if such costs are, in the aggregate, up to $49,999.99, six percent (6%) of the costs of such Alterations if such costs are, in the aggregate, between $50,000.00 and $99,999.99, five percent (5%) of the cost of the Alterations, if such costs are, in the aggregate, between $100,000.00 and $250,000.00, or four percent (4%) of the costs of such Alterations, if such costs are, in the aggregate, in excess of $250,000.00. The construction of the initial improvements to the Premises (and the Landlord supervision fee therefor) shall be governed by the terms of the Tenant Work Letter and not the terms of this Article 8. 

8.2 Manner of Construction. Landlord may impose, as a condition of its consent to all Alterations or repairs of the Premises or about the Premises, such requirements as Landlord in its reasonable discretion may deem desirable, including, but not limited to, the requirement that Tenant provide Landlord with detailed plans and specifications and an estimated budget for the proposed Alteration and that Tenant utilize for such purposes only contractors, materials, mechanics and materialmen approved by Landlord; provided, however, Landlord may impose such requirements as Landlord may determine, in its sole and absolute discretion, with respect to any work affecting the structural components of the Building or Systems and Equipment (including designating specific contractors to perform such work). Tenant shall construct such Alterations and perform such repairs in conformance with any and all applicable rules and regulations of any federal, state, county or municipal code or ordinance and pursuant to a valid building permit, issued by the city in which the Building is located, and in conformance with Landlord’s construction rules and regulations. Landlord’s approval of the plans, specifications and working drawings for Tenant’s Alterations shall create no responsibility or liability on the part of Landlord for their completeness, design sufficiency, or compliance with all laws, rules and regulations of governmental agencies or authorities. All work with respect to any Alterations must be done in a good and workmanlike manner and diligently prosecuted to completion to the end that the Premises shall at all times be a complete unit except during the period of work. In performing the work of any such Alterations, Tenant shall have the work performed in such manner as not to obstruct access to the Building or the common areas for any other tenant of the Building, and as not to obstruct the business of Landlord or other tenants in the Building, or interfere with the labor force working in the Building. If Tenant makes any Alterations, Tenant agrees to carry “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 below immediately upon completion thereof. In addition, with respect to any Alterations to be made in the Building which cost in excess of $100,000.00, Landlord may, in its discretion, require Tenant to obtain a lien and completion bond, or, at Tenant’s option, some alternate form of security reasonably satisfactory to Landlord, in an amount sufficient to ensure the lien-free completion of such Alterations and naming Landlord as a co-obligee. Upon completion of any Alterations, Tenant shall (i) cause a Notice of Completion to be recorded in the office of the Recorder of the county in which the Building is located in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, (ii) deliver to the Building management office a reproducible copy of the “as built” drawings of the Alterations, and (iii) deliver to Landlord evidence of payment, contractors’ affidavits and full and final waivers of all liens for labor, services or materials. 

 

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8.3 Landlord’s Property. All Alterations, improvements and/or fixtures (excluding Tenant’s trade fixtures, moveable furniture and personal property) which may be installed or placed in or about the Premises, from time to time, shall be at the sole cost of Tenant and shall become the property of Landlord upon expiration of the Lease Term or earlier termination of this Lease; provided, however: (i) Tenant may not remove any Tenant Improvements or Alterations paid for by Landlord with Landlord’s own funds or out of any tenant improvement allowances provided by Landlord (except any such removal made in connection with Alterations approved by Landlord); and (ii) Landlord may, by written notice delivered to Tenant concurrently with Landlord’s approval of the final working drawings for any Alterations (or for the initial tenant improvements constructed for the Premises), identify those Alterations (or initial tenant improvements for Tenant’s initial occupancy, as the case may be) which Landlord will require Tenant to remove at the expiration or earlier termination of this Lease; provided further, however, that Tenant shall in no event be required to remove any such Alterations (or initial tenant improvements, as the case may be) other than (a) any raised floors, internal stairwells, vaults and other similar special use tenant improvements, (b) the Telecommunications Equipment (as defined in Section 23.1 below) and all phone and data cabling, (c) those other improvements or alterations which are of such specialized nature or application that the same are not reasonably suited for use by a successor occupant of the Premises and (d) the Rooftop Deck (as defined in Section 23.1 below) to the extent required by the governmental approvals permitting the installation and use of the Rooftop Deck (collectively, “Special Use Improvements”). If Landlord requires Tenant to remove any such Alterations (or any such initial tenant improvements which are constructed for the Premises, Tenant, at its sole cost and expense, shall remove the identified Alterations and improvements on or before the expiration or earlier termination of this Lease and repair any damage to the Premises caused by such removal. If Tenant fails to complete such removal and/or to repair any damage caused by the removal of any Alterations or Special Use Improvements, Landlord may do so and may charge the actual cost thereof to Tenant. 

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 Real Property, Building or Premises, and any and all liens and encumbrances created by Tenant shall attach to Tenant’s interest only. Tenant may obtain leasehold financing and other financing secured by Tenant’s leasehold interest in the Premises and Tenant’s personal property. Any such financing obtained by Tenant shall not violate the provisions of this Article 9 or the provisions of Article 14 below. Landlord shall have the right at all times to post and keep posted on the Premises any notice which it deems necessary for protection from such liens. Tenant covenants and agrees not to suffer or permit any lien of mechanics or materialmen or others to be placed against the Real Property, 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 (excluding any work performed by Landlord), and, in case of any such lien attaching or notice of any lien (excluding any liens attached as a result of work performed by Landlord), Tenant covenants and agrees to cause it to be released and removed of record (by payment, statutory bond or other lawful means) within twenty (20) days after Tenant has notice 

 

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of such lien. Notwithstanding anything to the contrary set forth in this Lease, in the event that such lien is not released and removed of record within such 20-day period, then 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 reasonable 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 be paid by Landlord to Tenant within thirty (30) days after written demand by Landlord. 

ARTICLE 10 

INDEMNIFICATION AND INSURANCE 

10.1 Indemnification and Waiver. 

10.1.1 Except as expressly provided in Section 10.1.2 below, Tenant hereby assumes all risk of damage to property and injury to persons, in, on, or about the Premises from any cause whatsoever and agrees that Landlord, and its partners and subpartners, and their respective officers, agents, property managers, employees, and independent contractors (collectively, “Landlord Parties”) shall not be liable for, and are hereby released from any responsibility for, any damage to property or injury to persons or resulting from the loss of use thereof, which damage or injury is sustained by Tenant or by other persons claiming through Tenant. In addition, except as expressly provided in Section 10.1.2 below, Tenant shall indemnify, defend, protect, and hold harmless the Landlord Parties from any and all loss, cost, damage, expense and liability, including without limitation court costs and reasonable attorneys’ fees (collectively, “Claims”) incurred in connection with or arising from any cause in, on or about the Premises (including, without limitation, Tenant’s installation, placement and removal of Alterations, improvements, fixtures and/or equipment in, on or about the Premises), and any acts, omissions or negligence of Tenant or of any person claiming by, through or under Tenant, or of the contractors, agents, servants, employees, subtenants, licensees or invitees of Tenant or any such person, in, on or about the Premises, Buildings and Real Property; provided, however, such indemnity shall not include any lost profit, loss of business or other consequential damages. Notwithstanding the foregoing, prior to the Effective Date the foregoing indemnity shall apply only to the acts, omissions or negligence of Tenant. 

10.1.2 Notwithstanding the foregoing to the contrary, the assumption of risk and release by Tenant set forth in Section 10.1.1 above, and Tenant’s indemnity of Landlord in Section 10.1.1 above, shall not apply to: (i) any Claims to the extent resulting from the gross negligence or willful misconduct of the Landlord Parties (collectively, the “Excluded Claims”); or (ii) any loss of or damage to Landlord’s property to the extent Landlord has waived such loss or damage pursuant to Section 10.4 below. In addition, Landlord shall indemnify, defend, protect and hold Tenant harmless from all such Excluded Claims, except for (A) any loss or damage to Tenant’s property to the extent Tenant has waived such loss or damage pursuant to Section 10.4 below, and (B) any lost profits, loss of business or other consequential damages. In no event shall Tenant be liable to Landlord for any special or consequential damages, except for damages expressly provided for in Article 16 of this Lease with regard to Tenant’s failure to timely surrender the Premises to Landlord as provided in Article 16. In no event shall lost rent or other damages of Landlord provided for in Article 19 below be deemed special or consequential damages. 

 

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10.1.3 The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease. 

10.2 Tenant’s Compliance with Landlord’s Fire and Casualty Insurance. Landlord shall, from and after the date hereof until the expiration of the Lease Term, maintain in effect the following insurance: (i) physical damage insurance (including a rental loss endorsement) providing coverage in the event of fire, vandalism, malicious mischief and all other risks normally covered under “special form” policies in the geographical area of the Building, covering the Building (excluding, at Landlord’s option, the property required to be insured by Tenant pursuant to Section 10.3 below) in an amount not less than one hundred percent (100%) of the full replacement value (less reasonable deductibles) of the Building, together with such other risks as Landlord may from time to time determine (provided however, that Landlord shall have the right, but not the obligation, to obtain earthquake and/or flood insurance); and (ii) commercial general liability insurance including a Commercial Broad Form Endorsement or the equivalent in the amount of at least Five Million Dollars ($5,000,000.00), against claims of bodily injury, personal injury or property damage arising out of Landlord’s operations, assumed liabilities (including the liabilities assumed by Landlord under this Lease), contractual liabilities, or use of the Building and common areas. Such coverages may be carried under blanket insurance policies. The insurers providing such insurance shall be licensed to do business in the State of California and the policies of insurance with respect to property loss or damage by fire or other casualty shall contain a waiver of subrogation as provided in Section 10.4 below. 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 Landlord’s insurance policies, then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant’s expense, shall comply with all rules, orders, regulations or requirements of the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body where applicable due to Tenant’s Alterations or use of the Premises. 

10.3 Tenant’s Insurance. Tenant shall maintain the following coverages in the following amounts, from and after the Effective Date. 

10.3.1 Commercial General Liability Insurance covering the insured against claims of bodily injury, personal injury and property damage arising out of Tenant’s operations, assumed liabilities or use of the Premises, including a Broad Form Commercial General Liability 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: 

 

	
Bodily Injury and
	
  
	
$
	
5,000,000 each occurrence
	
  

	
Property Damage Liability
	
  
	
$
	
5,000,000 annual aggregate
	
  

	
Personal Injury Liability
	
  
	
$
	
5,000,000 each occurrence
	
  

	
 
	
  
	
$
	
5,000,000 annual aggregate
	
  

 

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10.3.2 Physical Damage 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, (ii) the Tenant Improvements, including any Tenant Improvements which Landlord permits to be installed above the ceiling of the Premises or below the floor of the Premises, and (iii) all other 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 a “special form” 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. 

10.3.3 Worker’s compensation insurance as required by law. 

10.3.4 Business interruption, loss of income and extra expense insurance in amounts sufficient to pay for Tenant’s operating income, continuing expenses and extra expenses attributable to perils commonly insured against by prudent tenants or attributable to prevention of access to the Premises as a result of such perils. 

10.3.5 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-VII in Best’s Insurance Guide or which is otherwise acceptable to Landlord and licensed to do business in the state in which the Building is located; (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, other than for non-payment, unless thirty (30) days’ prior written notice shall have been given to Landlord and any mortgagee or ground or underlying lessor of Landlord; and (vi) contain a cross-liability endorsement or severability of interest clause acceptable to Landlord. Tenant shall deliver certificates thereof to Landlord on or before the Lease Commencement Date and within thirty (30) days of the expiration dates thereof. If Tenant shall fail to procure such insurance, or deliver such certificate, within such time periods, Landlord may, at its option after ten (10) days written notice, in addition to all of its other rights and remedies under this Lease, and without regard to any notice and cure periods set forth in Section 19.1, procure such policies for the account of Tenant, and the cost thereof shall be paid to Landlord as Additional Rent within ten (10) days after delivery of bills therefor. 

10.4 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. As long as such waivers of subrogation are contained in their respective insurance policies, or would have been contained in such insurance policies had the responsible party used commercially reasonable efforts to obtain such waivers and such waivers are routinely and customarily available, 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 

 

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insurance for fire and all risk coverage, theft, or other similar insurance. If either party fails to carry the amounts and types of insurance required to be carried by it pursuant to this Article 10, such failure shall be deemed to be a covenant and agreement by such party to self-insure with respect to the type and amount of insurance which such party so failed to carry, with full waiver of subrogation with respect thereto. In furtherance of the foregoing, Tenant acknowledges and agrees that notwithstanding the negligence or breach of this Lease by Landlord or its agents, neither Landlord nor its agents shall be liable under any circumstances for: (i) injury or damage to the person or goods, wares, merchandise or other property of Tenant, Tenant’s employees, contractors, invitees, customers, or any other person in or about the Premises, from any cause, (ii) any damages arising from any act or neglect of any other tenant of Landlord or from the failure of Landlord or its agents to enforce the provisions of any other lease in the Project, or (iii) injury to Tenant’s business or for any loss of income or profit therefrom. Instead, it is intended that Tenant’s sole recourse in the event of such damages or injury be to file a claim on the insurance policy(ies) that Tenant is required to maintain pursuant to the provisions of this Article 10. 

10.5 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, but in no event shall such increased amounts of insurance or such other reasonable types of insurance be in excess of that required by landlords of the Comparable Buildings for tenants of comparable financial strength and consistent with the size of the space leased by such tenants and any new insurance shall be added to the Base Year Operating Expenses in accordance with the provisions of Section 4.2.5 above; provided, further, that Tenant shall only be required to obtain any types of new insurance coverage (as opposed to increased coverage under types of insurance already required under this Lease) if such coverage is available to Tenant at commercially reasonable rates. 

ARTICLE 11 

DAMAGE AND DESTRUCTION 

11.1 Repair of Damage to Premises by Landlord. Tenant shall promptly notify Landlord after Tenant becomes aware of any damage to the Premises resulting from fire or any other casualty. If the Premises or any common areas of the Building or Real Property 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 any other modifications to the common areas deemed reasonably desirable by Landlord provided access to the Premises and any common restrooms serving the Premises shall not be materially impaired thereby. 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 

 

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required under Sections 10.3.2(ii) and (iii) of this Lease, and Landlord shall repair any injury or damage to the Tenant Improvements and Alterations installed in the Premises and shall return such Tenant Improvements and Alterations to their original condition; provided that if the cost of such repair by Landlord (based on competitive pricing by all contractors and subcontractors and without any profit mark-up or supervision fees to 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 on a progress payment basis with the first such payment being due from Tenant after Landlord’s commencement of the repair of the damage. In connection with such repairs and replacements, Tenant shall, prior to the commencement of construction, submit to Landlord, for Landlord’s reasonable review and approval, all plans, specifications and working drawings relating thereto, and Landlord shall select the contractors to perform such improvement work pursuant to Landlord’s standard competitive bidding procedures. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant’s business resulting in any way from such damage or the repair thereof; provided however, that if such fire or other casualty shall have damaged the Premises or common areas necessary to Tenant’s occupancy to such a degree that Tenant is prevented from using, and does not use, all or any part of the Premises as a result thereof and such fire or other casualty is not the result of Tenant’s gross negligence or willful misconduct, then Landlord shall allow Tenant a proportionate abatement of Rent during the time and to the extent Tenant is so prevented from using and does not use the Premises as a result thereof. Landlord shall use commercially reasonable efforts to minimize any such inconvenience, annoyance or interference to Tenant resulting from Landlord’s repair of any damage pursuant to this Section 11.1. 

11.2 Landlord’s Option to Repair. Within forty-five (45) days after Landlord becomes aware of such damage, Landlord shall notify Tenant in writing (“Landlord’s Damage Notice”) of the estimated time, in Landlord’s reasonable judgment, required to substantially complete the repairs of such damage (the “Estimated Repair Period”). Notwithstanding the terms of Section 11.1 above, Landlord may elect not to rebuild and/or restore the Premises and/or the Building and instead terminate this Lease by notifying Tenant in writing of such termination within forty-five (45) days after Landlord becomes aware of such damage, 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 in Landlord’s opinion, as set forth in Landlord’s Damage Notice, reasonably be completed within ten (10) months after the date of Landlord’s Damage Notice (when such repairs are made without the payment of overtime or other premiums); or (ii) the damage is not fully covered by Landlord’s insurance policies obtained or required to be obtained by Landlord pursuant to Section 10.2 above. If (a) Landlord does not elect to terminate this Lease pursuant to Landlord’s termination right as provided above, (b) the damage constitutes a Tenant Damage Event (as defined below), and (c) the repair of such damage cannot, in the reasonable opinion of Landlord, as set forth in Landlord’s Damage Notice, be completed within one year after Landlord becomes aware of such damage, then Tenant may elect to terminate this Lease by delivering written notice thereof to Landlord within thirty (30) days after Tenant’s receipt of Landlord’s Damage Notice, which termination shall be effective as of the date of such termination notice thereof to Landlord. As used herein, a “Tenant Damage Event” shall mean damage to all or any part of the Premises or any common areas of the Building providing access to the Premises by fire or other casualty, which damage (x) is not the result of the gross negligence or willful misconduct of Tenant or any 

 

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of Tenant’s employees, agents, contractors, licensees or invitees, (y) substantially interferes with Tenant’s use of or access to the Premises and (z) would entitle Tenant to an abatement of Rent pursuant to Section 11.1 above. In addition, in the event of a Tenant Damage Event, and if neither Landlord nor Tenant has elected to terminate this Lease as provided hereinabove, but Landlord fails to substantially complete the repair and restoration of such Tenant Damage Event within the Estimated Repair Period plus ninety (90) days, plus the number of days of delay, if any, attributable to events of “Force Majeure,” as that term is defined in Section 24.16 below, plus the number of days of delay, if any, as are attributable to the acts or omissions of Tenant or Tenant’s employees, agents, contractors, licensees or invitees, then Tenant shall have the right to terminate this Lease during the first five (5) business days of each calendar month following the end of such period until such time as the repairs to be made by Landlord are complete, by notice to Landlord (the “Damage Termination Notice”), effective as of a date set forth in the Damage Termination Notice (the “Damage Termination Date”), which Damage Termination Date shall not be less than ten (10) business days following the end of each such month. Notwithstanding the foregoing, if Tenant delivers a Damage Termination Notice to Landlord, then Landlord shall have the right to suspend the occurrence of the Damage Termination Date for a period ending thirty (30) days after the Damage Termination Date set forth in the Damage Termination Notice by delivering to Tenant, within five (5) business days of Landlord’s receipt of the Damage Termination Notice, a certificate of Landlord’s contractor responsible for the repair of the damage certifying that it is such contractor’s good faith judgment that the repairs to be made by Landlord shall be substantially completed within thirty (30) days after the Damage Termination Date. If such repairs shall be substantially completed prior to the expiration of such thirty-day period, then the Damage Termination Notice shall be of no force or effect, but if such repairs shall not be substantially completed within such 30-day period, then this Lease shall terminate upon the expiration of such thirty-day period. At any time, and from time to time, after the date of the damage, Tenant may request that Landlord inform Tenant of the reasonable opinion of Landlord’s contractor of the date of completion of Landlord’s repair work, and Landlord shall respond to such request within ten (10) business days. 

11.3 Damage at the End of Lease Term. Further, in the event that the Premises or the Building are destroyed or damaged to any substantial extent during the last twelve (12) months of the Lease Term (except that, in the event that Tenant shall have exercised its option to renew pursuant to the Extension Option Rider attached to this Lease, such twelve (12) month period shall be the last twelve (12) months of the Option Term), then notwithstanding anything contained in this Article 11, Landlord shall have the option to terminate this Lease, and to the extent such destruction or damage constitutes a Tenant Damage Event and the repair of same is reasonably expected by Landlord to require more than sixty (60) days to substantially complete, Tenant shall have the option to terminate this Lease, by giving written termination notice to the other party of the exercise of such option within thirty (30) days after the date such party becomes aware of such damage or destruction. If either Landlord or Tenant exercises any of its options to terminate this Lease as provided above in Section 11.2 above: (1) this Lease shall cease and terminate as of the date set forth in such party’s termination notice, which termination date shall be no less than thirty (30) days and no more than one hundred twenty (120) days after such termination notice is delivered to the other party; (2) Tenant shall pay the Base Rent and Additional Rent, properly apportioned up to such date of termination and subject to abatement as provided in Section 11.1 above; and (3) 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. 

 

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11.4 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 Real Property, 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 Real Property. 

11.5 Abatement of Rent When Tenant Is Prevented From Using Premises. In the event that Tenant is prevented from using, and does not use, the Premises or any portion thereof as a result of (i) any failure by Landlord to provide any of the essential utilities and services to the Premises required to be provided by Landlord under Section 6.1 of this Lease, (ii) any failure by Landlord to provide access to the Premises (including, without limitation, as a result of any Renovations undertaken by Landlord pursuant to Section 24.27 below), or (iii) any failure by Landlord to perform Landlord’s repair obligations pursuant to Section 7.2 above, and such failure is not the result of the negligence or willful misconduct of Tenant or any of Tenant’s employees, agents, contractors, licensees or invitees (such event shall be known as a “Abatement Event”), then Tenant shall give Landlord notice of such Abatement Event. If such Abatement Event continues for five (5) consecutive business days after Landlord’s receipt of any such notice from Tenant (“Eligibility Period”), then the Rent shall be abated or reduced, as the case may be, during such time after the Eligibility Period that Tenant continues to be so prevented from using, and does not use, the Premises or a portion thereof, in the proportion that the usable area of the portion of the Premises that Tenant is prevented from using, and does not use, bears to the total usable area of the Premises; provided, however, in the event that Tenant is prevented from using, and does not use, a portion of the Premises for a period of time in excess of the Eligibility Period, and the remaining portion of the Premises is not sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, then Rent shall be abated for such time as Tenant continues to be so prevented from using, and does not use, the Premises. If, however, Tenant re-occupies any portion of the Premises during such period, the Rent allocable to such re-occupied portion, based on the proportion that the usable area of such re-occupied portion of the Premises bears to the total usable area of the Premises, shall be payable by Tenant from the date Tenant re-occupies such portion of the Premises. Except as expressly provided in this Section 11.5, nothing contained herein shall be interpreted to mean that Tenant is excused from paying Rent due hereunder. Notwithstanding the foregoing provisions of this Section 11.5 to the contrary which limits Tenant’s right to abatement for only those time periods which follow the Eligibility Period, (A) to the extent Tenant is specifically entitled to abatement without regard to the Eligibility Period because of an eminent domain taking and/or because of a casualty damage or destruction pursuant to the provisions of this Article 11 or Article 12 below, then the Eligibility Period shall not be applicable, and (B) the Eligibility Period shall also not be applicable following the occurrence of any other Abatement 

 

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Event described above which is not an eminent domain taking or a casualty damage or destruction, to the extent and for the number of days that Landlord is reimbursed from the proceeds of rental interruption insurance purchased by Landlord as part of Operating Expenses. Further, if Tenant’s right to abatement occurs during a free rent period (for these purposes, free rent shall be deemed to include half rent, etc.) which arises after the Lease Commencement Date, Tenant’s free rent period shall be extended for the number of days that the abatement period overlapped the free rent period (“Overlap Period”). Landlord shall have the right to extend the Expiration Date for a period of time equal to the Overlap Period if Landlord sends a notice to Tenant of such election within ten (10) days following the end of the extended free rent period. To the extent Tenant has prepaid Rent (as it does each month since Rent is due on the first day of each month) and Tenant is subsequently entitled to an abatement, such prepaid, and subsequently abated, Rent should be refunded to, and paid by Landlord to, Tenant within thirty (30) days after the end of the appropriate month. 

ARTICLE 12 

CONDEMNATION 

12.1 Permanent Taking. If the whole or any 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, Landlord shall have the option to terminate this Lease upon ninety (90) days’ notice, provided such notice is given no later than one hundred eighty (180) days after the date of such taking, condemnation, reconfiguration, vacation, deed or other instrument. If more than twenty-five percent (25%) of the rentable square feet of the Premises is taken, or if access to the Premises is substantially impaired, Tenant shall have the option to terminate this Lease upon ninety (90) days’ notice, provided such notice is given no later than one hundred eighty (180) days after the date of such taking. Landlord shall be entitled to receive the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenant’s personal property and fixtures belonging to Tenant and removable by Tenant upon expiration of the Lease Term pursuant to the terms of this Lease, and for moving expenses, so long as such claim does not diminish the award available to Landlord, its ground lessor with respect to the Real Property or its mortgagee, and such claim is payable separately to Tenant. All Rent shall be apportioned as of the date of such termination, or the date of such taking, whichever shall first occur. If any part of the Premises shall be taken, and this Lease shall not be so terminated, the Base Rent and Tenant’s Share of Direct Expenses and Utilities Costs shall be proportionately abated. Tenant hereby waives any provision of California law that conflicts with the foregoing provisions of this Article 12 including, without limitation, Sections 1265.110-1265.160 of the California Code of Civil Procedure. 

12.2 Temporary Taking. Notwithstanding anything to the contrary contained in this Article 12, in the event of a temporary taking of all or any portion of the Premises for a period of one hundred and eighty (180) days or less, then this Lease shall not terminate but the Base Rent and Tenant’s Share of Direct Expenses and Utilities Costs shall be abated for the period of such taking in proportion to the ratio that the amount of rentable square feet of the Premises taken bears to the total rentable square feet of the Premises. Landlord shall be entitled to receive the entire award made in connection with any such temporary taking. 

 

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ARTICLE 13 

COVENANT OF QUIET ENJOYMENT 

Landlord covenants that Tenant, on paying the Rent, charges for services and other payments herein reserved and on keeping, observing and performing all the other terms, covenants, conditions, provisions and agreements herein contained on the part of Tenant to be kept, observed and performed, shall, during the Lease Term, peaceably and quietly have, hold and enjoy the Premises subject to the terms, covenants, conditions, provisions and agreements hereof without interference by any persons lawfully claiming by or through Landlord. The foregoing covenant is in lieu of any other covenant express or implied. 

ARTICLE 14 

ASSIGNMENT AND SUBLETTING 

14.1 Transfers. Except as provided in Section 14.7 below, Tenant shall not, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed, 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 such foregoing transfer of this Lease or any interest hereunder by operation of law, sublet the Premises or any part thereof, or permit the use of the Premises by any persons other than Tenant and its employees (all of the foregoing are hereinafter sometimes referred to collectively as “Transfers” and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a “Transferee”). If Tenant shall desire Landlord’s consent to any Transfer, Tenant shall notify Landlord in writing, which notice (the “Transfer Notice”) shall include (i) the proposed effective date of the Transfer, which shall not be less than thirty (30) days nor more than one hundred eighty (180) days after the date of delivery of the Transfer Notice, (ii) a description of the portion of the Premises to be transferred (the “Subject Space”), (iii) all of the terms of the proposed Transfer, the name and address of the proposed Transferee, and a copy of all existing and/or proposed documentation pertaining to the proposed Transfer, including all existing operative documents to be executed to evidence such Transfer or the agreements incidental or related to such Transfer, (iv) current financial statements of the proposed Transferee certified by an officer, partner or owner thereof, and (v) such other information as Landlord may reasonably require. 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. Each time Tenant requests Landlord’s consent to a proposed Transfer, whether or not Landlord shall grant consent, within thirty (30) days after written request by Landlord, as Additional Rent hereunder, Tenant shall pay to Landlord Seven Hundred Fifty Dollars ($750.00) for Landlord’s review and processing fees, and, in addition, Tenant shall reimburse Landlord for any reasonable out-of-pocket legal fees incurred by Landlord in connection with Tenant’s proposed Transfer. 

 

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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. Notwithstanding the foregoing, Tenant hereby waives Tenant’s rights (if any) under Section 1995.310 of the California Civil Code and agrees 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, without limitation as to other reasonable grounds for withholding consent: 

14.2.1 Landlord has sued or been sued by the proposed Transferee or has otherwise been involved in a legal dispute with the proposed Transferee or one of its affiliates; 

14.2.2 The Transferee engages in any of the Prohibited Uses (as defined below), either within the Premises or, with regard to the Prohibited Uses listed as items 3 and 10 on Exhibit I hereto, in any other locations or online; 

14.2.3 The Transferee intends to use the Subject Space for purposes which are not permitted under this Lease; 

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

14.2.5 The Transfer will result in more than a reasonable and safe number of occupants per floor within the Subject Space; and 

14.2.6 In the event that Landlord has recaptured any portion of the Premises pursuant to Section 14.4 below, then from and after such date, it shall be reasonable for Landlord to withhold its consent if either the proposed Transferee, or any person or entity which directly or indirectly, controls, is controlled by, or is under common control with, the proposed Transferee, (i) occupies space in the Building at the time of the request for consent, (ii) is negotiating with Landlord to lease space in the Building at such time, or (iii) has negotiated with Landlord during the six (6)-month period immediately preceding the Transfer Notice, and in each instance Landlord has adequate available space in the Building to reasonably meet such tenant’s space requirements. 

If Landlord consents to any Transfer pursuant to the terms of this Section 14.2 (and does not exercise any recapture rights Landlord may have under Section 14.4 of this Lease), Tenant may within six (6) months after Landlord’s consent, but not later than the expiration of said six-month period, enter into such Transfer of the Premises or portion thereof, upon substantially the same terms and conditions as are set forth in the Transfer Notice furnished by Tenant to Landlord pursuant to Section 14.1 of this Lease, provided that if there are any changes in the terms and conditions from those specified in the Transfer Notice (i) such that Landlord would initially have been entitled to refuse its consent to such Transfer under this Section 14.2, or (ii) which would cause the proposed Transfer to be more favorable to the Transferee than the terms set forth in Tenant’s original Transfer Notice, Tenant shall again submit the Transfer to Landlord for its approval and other action under this Article 14 (including Landlord’s right of recapture, if any, under Section 14.4 of this Lease). Tenant’s sole remedy in the event that Landlord shall wrongfully withhold consent to or disapprove any assignment or sublease shall be to obtain an order by a court of competent jurisdiction that Landlord grant such consent; in no event shall Landlord be liable for damages with respect to its granting or withholding consent to any proposed assignment or sublease. 

 

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14.3 Transfer Premium. Except as otherwise provided in Section 14.7 below, if Landlord consents to a Transfer, as a condition thereto which the parties hereby agree is reasonable, Tenant shall pay to Landlord fifty percent (50%) of any “Transfer Premium,” as that term is defined in this Section 14.3, received by Tenant from such Transferee. “Transfer Premium” shall mean all rent, additional rent and other consideration received from such Transferee in excess of the Rent, Additional Rent and other consideration payable by Tenant under this Lease on a per rentable square foot basis if less than all of the Premises is transferred, after deducting the actual, reasonable and documented expenses incurred by Tenant for (i) any changes, alterations and improvements made to the Premises, and/or any tenant improvement allowance provided by Tenant to the Transferee, in connection with the Transfer, (ii) any brokerage commissions and advertising expenses in connection with the Transfer, (iii) reasonable legal fees incurred by Tenant in negotiating the Transfer and obtaining Landlord’s consent thereto, (iv) costs of advertising the space for sublease or assignment, (v) unamortized cost of initial and subsequent improvements to the Premises by Tenant, and (vi) any other costs actually paid in assigning or subletting the Subject Space. The Transfer Premium shall not apply to any assignment or sublease to an Affiliate pursuant to the provisions of Section 14.7 below. “Transfer Premium” shall also include, but not be limited to, key money and bonus money 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 the Transferee in connection with such Transfer. For purposes of calculating Transfer Premium during the Abatement Period, the Base Rent shall be equal to $46.25 per rentable square of the Subject Space. Throughout the Lease Term, Tenant shall have the right to modify Base Rent for potential Transfer to full service by adding $4.00 per rentable square of the Subject Space without paying a Transfer Premium to Landlord to cover such gross-up expenses. 

14.4 Landlord’s Option as to Subject Space. Notwithstanding anything to the contrary contained in this Article 14, in the event that (i) the Subject Space of the proposed Transfer pertains to more than thirty-nine percent (39%) of the rentable area of the Premises and (ii) the term of the proposed Transfer is longer than eighty percent (80%) of the remaining Lease Term (including the Option Term, if Tenant has exercised such Option pursuant to the Extension Option Rider), then Landlord shall have the option, by giving written notice to Tenant (the “Recapture Notice”) within thirty (30) days after receipt of any Transfer Notice, to recapture the Subject Space. Such Recapture Notice shall cancel and terminate this Lease with respect to the Subject Space as of the date stated in the Transfer Notice as the effective date of the proposed Transfer until the last day of the term of the Transfer as set forth in the Transfer Notice. If Landlord provides its Recapture Notice to Tenant, Tenant has thirty (30) days in which to rescind the Transfer Notice and shall retain the Subject Space without a Transfer. 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 the last paragraph of Section 14.2 of this Lease. 

 

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14.5 Effect of Transfer. If Landlord consents to a Transfer, (i) the terms and conditions of this Lease shall in no way be deemed to have been waived or modified, (ii) such consent shall not be deemed consent to any further Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord, promptly after execution, an original executed copy of all documentation pertaining to the Transfer in form reasonably acceptable to Landlord, and (iv) 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 liability under this Lease. 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 Landlord’s costs of such audit. 

14.6 Additional Transfers. Except as provided in Section 14.7 below, for purposes of this Lease, the term “Transfer” shall also include (i) if Tenant is a partnership, the withdrawal or change, voluntary, involuntary or by operation of law, of fifty percent (50%) or more of the partners, or transfer of twenty-five percent or more of partnership interests, within a twelve (12)-month period, or the dissolution of the partnership without immediate reconstitution thereof, and (ii) if Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded through an exchange or over the counter), (A) the dissolution, merger, consolidation or other reorganization of Tenant, (B) the sale or other transfer of more than an aggregate of fifty percent (50%) of the voting shares of Tenant (other than to immediate family members by reason of gift or death), within a twelve (12) month period or (C) the sale, mortgage, hypothecation or pledge of more than an aggregate of fifty percent (50%) of the value of the unencumbered assets of Tenant within a twelve (12) month period. 

14.7 Affiliated Companies/Restructuring of Business Organization. The assignment or subletting by Tenant of all or any portion of this Lease or the Premises to, or the use of the Premises by, (i) any person or entity which controls, is controlled by or under common control with Tenant (with control being defined as ownership, directly or indirectly, of at least fifty percent (50%) of the voting stock of such entity), or (ii) any entity which purchases all or substantially all of the assets of Tenant, or (iii) any entity into which Tenant is merged or consolidated (all such persons or entities described in (i), (ii) and (iii) being sometimes hereinafter referred to as “Affiliates”) shall not be deemed a Transfer under this Article 14, and thus shall not be subject to Landlord’s right to receive any Transfer Premium pursuant to Section 14.3 above, or Landlord’s recapture right in Section 14.4 above, provided that: 

(a) any such Affiliate was not formed as a subterfuge to avoid the obligations of this Article 14; 

(b) Tenant gives Landlord at least ten (10) days’ prior notice of any such assignment or sublease to an Affiliate; 

 

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(c) Any such Affiliate has, as of the effective date of any such assignment or sublease a tangible net worth and net income, in the aggregate, computed in accordance with generally accepted accounting principles (but excluding goodwill as an asset), which is equal to or greater than Tenant as of the effective date of any such assignment or sublease and sufficient to meet the obligations of Tenant under the assignment or sublease; 

(d) any such assignment or sublease shall be subject and subordinate to all of the terms and provisions of this Lease, and such assignee, if applicable, shall assume, in a written document delivered to Landlord upon or prior to the effective date of such assignment, all the obligations of Tenant under this Lease arising after the effective date of such assignment, including, without limitation, the provisions of Article 5 of the Lease regarding the use of the Premises; and 

(e) Tenant shall remain fully liable for all obligations to be performed by Tenant under this Lease. 

Notwithstanding anything hereinabove contained, Tenant acknowledges and agrees that Landlord’s consent shall be required, and may be withheld in Landlord’s sole discretion, if the proposed Transferee (or any Affiliate of such Transferee) is a person or entity that has previously defaulted under a lease or other agreement with Landlord or any Affiliate of Landlord, or against which Landlord or such Landlord Affiliate has entered into adversarial litigation, arbitration, mediation or other dispute resolution/settlement proceedings. 

ARTICLE 15 

SURRENDER; 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. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof, shall not work a merger, and at the option of Landlord shall operate as an assignment to Landlord of all subleases or subtenancies affecting the Premises. 

15.2 Removal of Tenant Property by Tenant. Upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject to the provisions of this Article 15, quit and surrender possession of the Premises to Landlord in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and tear and repairs which are specifically made the responsibility of Landlord hereunder excepted. Upon such expiration or termination, subject to the terms of Section 8.3 above, Tenant shall, without expense to Landlord, remove or cause to be removed 

 

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from the Premises all debris and rubbish, and such items of furniture, equipment, telephone, computer and any satellite cabling, 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 (i) for the first two (2) months of the holdover, one hundred fifty percent (150%) of the Base Rent applicable during the last rental period of the Lease Term under this Lease and (ii) for the remainder of the holdover period, two hundred percent (200%) 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. Landlord hereby 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) business days following a request in writing by a party, the other party shall execute and deliver to the requesting party an estoppel certificate, which shall be substantially in the form of Exhibit E, attached hereto (or such other commercially reasonable form as may be reasonably required by any prospective mortgagee or purchaser of the Project, or any portion thereof, if Landlord is the requesting party), indicating therein any exceptions thereto that may exist at that time, and shall also contain any other information reasonably requested by the requesting party. Failure of a party to execute and deliver such estoppel certificate within such 10-business day period, where such failure continues for an additional five (5) business days after a subsequent notice of such failure is delivered by the requesting party to such party, shall constitute an acknowledgment by such party that statements included in the estoppel certificate delivered to such party by the requesting party made in connection with a proposed sale or financing by Landlord or proposed Transfer by Tenant, as the case may be, are true and correct, without exception. 

 

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ARTICLE 18 

SUBORDINATION 

This Lease is subject and subordinate to all present and future ground or underlying leases of the Real Property and to the lien of any mortgages or trust deeds, now or hereafter in force against the Real Property 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. Notwithstanding any contrary provision of this Article 18, a condition precedent to the subordination of this Lease to any future mortgage, deed of trust, ground or underlying lease is that Landlord shall obtain for the benefit of Tenant a commercially reasonable subordination, non-disturbance and attornment agreement from the mortgagee, beneficiary or lessor (collectively, a “Mortgagee”) under such future instrument. 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 ten (10) business days of request by Landlord, execute such further commercially reasonable instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm the subordination or superiority of this Lease to any such mortgages, trust deeds, ground leases or underlying leases. Tenant waives the provisions of any current or future statute, rule or law which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease and the obligations of the Tenant hereunder in the event of any foreclosure proceeding or sale. Landlord represents and warrants to Tenant that as of the Lease Date, there are no other deeds of trust or ground leases encumbering the Real Property. 

ARTICLE 19 

TENANT’S DEFAULTS; LANDLORD’S REMEDIES; LANDLORD DEFAULTS 

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

19.1.1 Any failure by Tenant to pay any Rent or any other charge required to be paid under this Lease, or any part thereof, when due, where such failure shall continue for a period of three (3) days after written notice thereof from Landlord; or 

19.1.2 Any failure by Tenant to observe or perform any other provision, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant; provided however, that if the nature of such default is such that the same cannot reasonably be cured within a 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 said default as soon as possible but in no event longer than ninety (90) days; or 

 

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19.1.3 Abandonment or vacation of the Premises by Tenant. Abandonment is herein defined to include, but is not limited to, any absence by Tenant from the Premises for twenty (20) days or longer while in default of any provision of this Lease. 

19.1.4 Any failure by Tenant to execute and deliver any statement described in Article 18 requested by Landlord, where such failure continues for five (5) business days after delivery of written notice of such failure by Landlord to Tenant. 

Any notice given pursuant to this Section 15.1 shall be in lieu of, and not in addition to, any notice required under Section 1161 of the California Code of Civil Procedure, or any similar or successor statute. 

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

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

 

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

The term “rent” as used in this Section 19.2 shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to others. As used in Paragraphs 19.2.1(i) and (ii), above, the “worth at the time of award” shall be computed by allowing interest at the Interest Rate set forth in Section 4.5 of this Lease. As used in Paragraph 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 may, but shall not be obligated to, make any such payment or perform or otherwise cure any such obligation, provision, covenant or condition on Tenant’s part to be observed or performed (and may enter the Premises for such purposes). Any such actions undertaken by Landlord pursuant to the foregoing provisions of this Section 19.2.3 shall not be deemed a waiver of Landlord’s rights and remedies as a result of Tenant’s failure to perform and shall not release Tenant from any of its obligations under this Lease. Tenant shall have no right of self-help to perform repairs or any other obligation of Landlord, and shall have no right to withhold, set-off, or abate Rent. Without limitation of the preceding sentence, Tenant hereby waives Tenant’s rights (if any) under Section 1932, Subdivision 1, and Section 1942 of the California Civil Code, Section 431.70 of the California Code of Civil Procedure, and similar laws. 

19.3 Payment by Tenant. Tenant shall pay to Landlord, within fifteen (15) days after delivery by Landlord to Tenant of statements therefor: (i) sums equal to expenditures reasonably made and obligations incurred by Landlord in connection with Landlord’s performance or cure of any of Tenant’s obligations pursuant to the provisions of Section 19.2.3 above; and (ii) 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 Section 19.3 shall survive the expiration or sooner termination of the Lease Term. 

19.4 Security for Performance of Tenant’s Obligations. Notwithstanding any security deposit held by Landlord pursuant to Article 20, Tenant hereby agrees that in the event of a default by Tenant, Landlord shall be entitled to seek and obtain a writ of attachment and/or a temporary protective order and Tenant hereby waives any rights or defenses to contest such a writ of attachment and/or temporary protective order on the basis of California Code of Civil Procedure Section 483.010 or any other related statute or rule. 

 

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19.5 Sublessees of Tenant. Whether or not Landlord elects to terminate this Lease on account of any default by Tenant, as set forth in this Article 19, Landlord shall have the right to terminate any and all subleases, licenses, concessions or other consensual arrangements for possession entered into by Tenant and affecting the Premises or may, in Landlord’s sole discretion, succeed to Tenant’s interest in such subleases, licenses, concessions or arrangements. In the event of Landlord’s election to succeed to Tenant’s interest in any such subleases, licenses, concessions or arrangements, Tenant shall, as of the date of notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable thereunder. 

19.6 Waiver of Default. No waiver by Landlord of any violation or breach by Tenant 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 by Tenant 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 a default by Tenant 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. 

19.7 Payment of Rent and Security Deposit After Default. If Tenant fails to pay Base Rent, Tenant’s Share of Direct Expenses or any other monetary obligation due hereunder on the date it is due, then after Tenant’s third failure to pay any monetary obligation on the date it is due, at Landlord’s option, all monetary obligations of Tenant hereunder shall thereafter be paid by cashier’s check, and Tenant shall, upon demand, provide Landlord with an additional security deposit equal to three (3) months’ Base Rent. If Landlord has required Tenant to make said payments by cashier’s check or to provide an additional security deposit, Tenant’s failure to make a payment by cashier’s check or to provide the additional security deposit shall be a default hereunder. 

19.8 Efforts to Relet. For the purposes of this Article 19, Tenant’s right to possession shall not be deemed to have been terminated by efforts of Landlord to relet the Premises, by its acts of maintenance or preservation with respect to the Premises, or by appointment of a receiver to protect Landlord’s interests hereunder. If Landlord elects to terminate this Lease pursuant to Section 19.2.1 above following Tenant’s default, Landlord shall use commercially reasonable efforts to mitigate its damages to the extent required by applicable Laws. The foregoing enumeration is not exhaustive, but merely illustrative of acts which may be performed by Landlord without terminating Tenant’s right to possession. 

19.9 Waiver of Reinstatement. Tenant hereby waives all rights under California Code of Civil Procedure Sections 1174 and 1179 and California Civil Code Section 3275 providing for relief from forfeiture and any other right now or hereafter existing to redeem the Premises or reinstate this Lease after termination pursuant to this Article 19 or by order or judgment of any court or by any legal process. 

 

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19.10 Default by Landlord. Landlord shall be in default under this Lease if (i) Landlord fails to perform any of its obligations hereunder and said failure continues for a period of thirty (30) days after written notice thereof from Tenant to Landlord; provided that if such failure cannot reasonably be cured within said 30-day period, Landlord shall be in default hereunder only if Landlord fails to commence the cure of said failure within said 30-day period, or having commenced the curative action within said 30-day period, fails to diligently pursue same, and (ii) each Mortgagee of whose identity Tenant has been notified in writing shall have failed to cure such default within thirty (30) days (or such longer period of time as may be specified in any written agreement between Tenant and Mortgagee regarding such matter) after receipt of written notice from Tenant of Landlord’s failure to cure within the time periods provided above. In the event of an uncured default by Landlord under the Lease, Tenant shall use reasonable efforts to mitigate its damages and losses arising from any such default and Tenant may pursue any and all remedies available to it at Law or in equity, provided, however, in no event shall Tenant claim a constructive or actual eviction or that the Premises have become unsuitable or uninhabitable prior to a default and failure to cure by Landlord and its Mortgagee under this Lease and, further provided, in no event shall Tenant be entitled to receive more than its actual direct damages, it being agreed that Tenant hereby waives any claim it otherwise may have for special or consequential damages. 

ARTICLE 20 

SIGNS 

20.1 Building Standard Signage. Landlord shall provide space on the Building directory on the ground floor lobby of the Building for a listing identifying Tenant’s name and suite numbers in a location and with a design reasonably acceptable to Landlord and Tenant. Landlord shall also install signage identifying Tenant’s name: (a) either (i) on the entry door to the Premises located on each floor of the Building or (ii) on one (1) of the walls adjacent to such entry door; and (b) in any common elevator lobbies of the Building. All such signage described in this Section 20.1 shall use Building standard materials and lettering and shall otherwise be subject to Landlord’s reasonable approval. Landlord shall pay for the cost of the initial installation of such signage, and Tenant shall pay for the cost of any changes thereto. 

20.2 Exterior Signage. Tenant shall not place, affix or maintain any signs, advertising placards, names, insignia, trademarks, descriptive material or any other similar item or items in, on or attached to the storefront, the glass panes and supports of the windows, the door, the roof or the demising walls of the Premises except as Landlord shall approve in writing in accordance with the provisions of this Section 20.2. Subject to Tenant obtaining the approval of all applicable governmental entities and Tenant’s compliance with all applicable Laws and the terms of this Article 20, Tenant shall have the right to install, at Tenant’s cost, one (1) sign displaying Tenant’s logo and Tenant’s name, “Zendesk” on (i) the Market Street elevation of the Building, (ii) the East elevation of the Building and (iii) the West elevation of the Building, each in the approximate location depicted on Exhibit F-1 attached hereto and labeled “office” or “Zendesk”, as applicable (the “Building Exterior Signs”). Regardless of whether any such items are depicted on Exhibit F-1 attached hereto, the graphics, materials, color, design, lettering, lighting, size, specifications, manner of affixing and exact location of the Building Exterior Signs shall be subject to Landlord’s reasonable approval. Tenant shall pay for all costs and expenses related to 

 

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the Building Exterior Signs, including, without limitation, costs of the design, construction, installation, maintenance, insurance, utilities, repair and replacement of the Building Exterior Signs. Tenant shall install and maintain the Building Exterior Signs in compliance with all Laws and subject to the applicable provisions of Articles 8 and 9 above. 

20.3 Transferability. The rights granted to Tenant under this Article 20 are personal to the original tenant executing this Lease (the “Original Tenant”) and any Affiliate to which Tenant’s entire interest in this Lease has been assigned pursuant to Section 14.7 (but any name change on the Building Exterior Signs to reflect such Affiliate assignee shall be subject to Landlord’s approval, which approval shall not be unreasonably withheld or delayed) and may not be exercised or used by or assigned to any other person or entity. 

20.4 Maintenance/Removal. Should the Building Exterior Signs require maintenance, repairs or replacement as determined in Landlord’s reasonable judgment, Landlord shall have the right to provide written notice thereof to Tenant and Tenant shall cause such repairs, replacement and/or maintenance to be performed within fifteen (15) days after receipt of such notice from Landlord, at Tenant’s sole cost and expense; provided, however, if such repairs, replacement and/or maintenance are reasonably expected to require longer than fifteen (15) days to perform, Tenant shall commence such repairs, replacement and/or maintenance within such fifteen (15) day period and shall diligently prosecute such repairs, replacement and maintenance to completion. Should Tenant fail to perform such maintenance, repairs or replacement within the periods described in the immediately preceding sentence, Landlord shall have the right to cause such work to be performed and to charge Tenant as Additional Rent for the costs of such work. Upon the expiration or earlier termination of this Lease, Tenant shall, at Tenant’s sole cost and expense, cause the Building Exterior Signs to be removed, and Tenant shall repair all damage occasioned thereby and restore the affected areas to their original condition prior to the installation of Building Exterior Sign, normal wear and tear excepted. If Tenant fails to remove such signage and repair and restore the affected areas as provided in the immediately preceding sentence, within fifteen (15) days following the expiration or earlier termination of this Lease, then Landlord may perform such work, and all costs and expenses incurred by Landlord in so performing such work shall be reimbursed by Tenant to Landlord within fifteen (15) days after Tenant’s receipt of invoice therefor. The immediately preceding sentence shall survive the expiration or earlier termination of this Lease. Tenant shall be responsible for maintaining insurance on the Building Exterior Signs as part of the insurance required to be carried by Tenant pursuant to Section 10.2 above. 

20.5 Use of Exterior Portion of the Building. Landlord agrees that except for bona fide identity signage and/or logos installed on the Building for the benefit of bona fide tenants in the Building, Landlord shall not grant any rights to any tenant or other third party to utilize the exterior surfaces (or any material portion thereof) of the Building for the purpose of advertising, promoting or identifying a person, sign, cause, project, product, service or the like by the placement of a billboard or similar advertising on the walls of the Building. Further, Landlord shall use reasonable efforts to inform Tenant of the type and location of the signage for the retail tenant at the Building. Any retail signage for the Building may only be placed within the area depicted and labeled “Retail” on Exhibit F-2 attached hereto. 

 

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ARTICLE 21 

COMPLIANCE WITH LAW 

On and after the Lease Commencement Date, Landlord shall be responsible for ensuring that all common areas, including restrooms, are in compliance with all Laws (as defined below). Tenant shall not do anything or suffer anything to be done in or about the Premises or Buildings which will in any way conflict with any federal, state or local laws, statutes, ordinances or other governmental rules, regulations or requirements now in force or which may hereafter be enacted or promulgated, including, without limitation the Americans with Disabilities Act of 1990 (collectively, the “Laws”). At its sole cost and expense, Tenant shall promptly comply with all such Laws, including, without limitation, the making of any alterations and improvements to the Premises. Notwithstanding the foregoing to the contrary, Landlord shall be responsible for making all alterations and improvements required by applicable Laws with respect to the items which are Landlord’s responsibility to repair and maintain pursuant to Section 7.2 of this Lease (i.e., the structural portions of the Building, the exterior windows of the Building, the roof of the Building (other than the portions upon which Telecommunications Equipment and/or the Roof Deck are situated), the Base, Shell and Core components of the Building and the common areas of the Building and Real Property); provided, however, that Tenant shall reimburse Landlord, within thirty (30) days after invoice, for the costs of any such improvements and alterations and other compliance costs to the extent necessitated by or resulting from (i) any Alterations installed by or on behalf of Tenant (including, without limitation, the installation of the Telecommunications Equipment and/or the Roof Deck), (ii) any specific act, omission or negligence of tenant or Tenant’s agents, contractors, employees or licensees, and/or (iii) Tenant’s specific manner of use of the Premises (as distinguished from general office use). The judgment of any court of competent jurisdiction or the admission of Tenant in any judicial action, regardless of whether Landlord is a party thereto, that Tenant has violated any of said Laws, shall be conclusive of that fact as between Landlord and Tenant. 

ARTICLE 22 

ENTRY BY LANDLORD 

Landlord reserves the right at all reasonable times and upon at least 48 hours’ advance written notice to Tenant (except no such notice shall be required in emergencies) to enter the Premises to: (i) inspect them; (ii) show the Premises to prospective purchasers, or mortgagees, or to the ground or underlying lessors and, during the last year of the Lease Term, to prospective tenants; (iii) post reasonable and customary notices of nonresponsibility; and/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 which Landlord is required to perform under this Lease. Notwithstanding anything to the contrary contained in this Article 22, Landlord may enter the Premises at any time to (a) perform regularly scheduled services required of Landlord; and (b) 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. Subject to Landlord’s indemnity of Tenant in Section 10.1.2 above, Tenant hereby waives any claims for damages or for any injuries or inconvenience to or interference with 

 

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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. Notwithstanding anything to the contrary set forth above, Landlord agrees to use commercially reasonable efforts to minimize interference with Tenant’s use of and access to the Premises as a result of Landlord’s exercise of its entry rights under this Article 22. 

ARTICLE 23 

ROOFTOP RIGHTS 

23.1 Telecommunications Equipment. Notwithstanding the terms and provisions of the Lease to the contrary, if Tenant requires the use of telecommunications services, including, without limitation, satellite service, Internet access, credit card verification or other data transmission equipment (collectively, the “Telecommunications Equipment”), then upon fifteen (15) days advance written notice to Landlord and subject to available capacity and Tenant’s compliance with all applicable Laws and Landlord’s requirements for property and roof maintenance and repair, Tenant shall have the non-exclusive right to place such Telecommunications Equipment on the roof of the Building in a location approved by Landlord. The Telecommunications Equipment and Tenant’s right to use the roof of the Building for the installation of such equipment shall be for Tenant’s sole use and such right may not be transferred, assigned, subleased or otherwise alienated by Tenant to a third party telecommunications carrier or other third party that does not occupy space in the Premises. Tenant agrees that Tenant shall not sell the use of the Telecommunications Equipment to provide services to any party other than Tenant and its subtenant(s)’ employees and clients in connection with its business, or to transmit to any other location other than the Premises. The installation of the Telecommunications Equipment shall constitute work and shall be performed in accordance with and subject to the provisions of Article 8 above, and the portion of the roof of the Building affected by the Telecommunications Equipment shall be deemed to be a portion of the Premises (provided, however, that no Rent or Additional Rent shall be charged for the use of the roof); consequently, all of the provisions of the Lease with respect to Tenant’s obligations hereunder shall apply to the installation, use and maintenance of the Telecommunications Equipment, including without limitation, provisions relating to compliance with requirements as to insurance, indemnity, repairs and maintenance. The cost of the Telecommunications Equipment and all costs of installing, maintaining and removing the Telecommunications Equipment shall be borne solely by Tenant. Upon the expiration of the Lease Term or upon any earlier termination of this Lease, Tenant shall, at Tenant’s sole cost and expense and subject to the control of and direction from Landlord, remove the Telecommunications Equipment, repair and damage caused thereby, and restore the roof to the condition existing prior to the installation of the Telecommunications Equipment, reasonable wear and tear excepted. 

 

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23.2 Rooftop Deck. Subject to Tenant’s compliance with all applicable Laws and this Section 23.2, Tenant shall have the right to use a portion of the roof of the Building to install a deck (the “Roof Deck”) for the sole purpose of providing outside lounge space and meeting space for Tenant’s employees, invitees, guests, and visitors, and for receptions. Tenant shall not be entitled to use the Roof Deck for any other purpose whatsoever. Landlord makes no representation that necessary permits and approvals to install the Roof Deck can be obtained or that Tenant’s use of the Roof Deck is permitted by governmental laws, rules and regulations. The installation of the Roof Deck, if at all, shall be made after the completion of the Tenant Improvements and shall constitute an Alteration to be performed by Tenant, at Tenant’s sole cost and expense, in accordance with and subject to the provisions of Article 8 above. The portion of the roof of the Building where the Roof Deck is situated shall be deemed to be a portion of the Premises; consequently, all of the provisions of the Lease with respect to Tenant’s obligations hereunder shall apply to the installation, use, maintenance and cleaning of the Roof Deck, including without limitation, provisions relating to compliance with requirements as to insurance, indemnity, repairs and maintenance; provided, however, Tenant shall not be required to pay any Base Rent or Additional Rent for the use of the Roof Deck nor shall such area be included with any rentable area calculations for purposes of this Lease. Landlord may require that Tenant install, at Tenant’s expense, safety fencing or other perimeter boundary improvements to separate the Roof Deck from the remaining areas of the roof. The cost of installing and maintaining the Roof Deck shall be borne solely by Tenant. Tenant shall be responsible for all taxes and charges imposed for any of Tenant’s personal property in the Roof Deck and shall comply with all rules and regulations promulgated by Landlord with regard to Tenant’s use of the Roof Deck. Tenant shall not make any alterations to the Roof Deck without the prior written consent of Landlord, which consent may be withheld by Landlord in its sole and absolute discretion. Unless required as part of the governmental approvals for the installation and use of the Roof Deck, Tenant shall not be required to remove the Roof Deck at the expiration or earlier termination of this Lease. 

ARTICLE 24 

MISCELLANEOUS PROVISIONS 

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

24.2 Binding Effect. Each of the provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective successors or assigns, provided this clause shall not permit any assignment by Tenant contrary to the provisions of Article 14 of this Lease. 

24.3 No Waiver. No waiver of any provision of this Lease shall be implied by any failure of a party 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 a party of any provision of this Lease may only be in writing, and no express waiver shall affect any provision other than 

 

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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. 

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

24.5 Transfer of Landlord’s Interest. Tenant acknowledges that Landlord has the right to transfer all or any portion of its interest in the Real Property, the Building and/or 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; provided that the transferee has executed an assignment and assumption agreement that provides that the transferee assumes all of the obligations of Landlord. The liability of any transferee of Landlord shall be limited to the interest of such transferee in the Real Property and 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, subject to the provisions of Article 18 above, including the delivery of a commercially reasonable subordination, non-disturbance and attornment agreement from the Mortgagee, 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. 

24.6 Prohibition Against Recording. Except as provided in Section 24.4 of this Lease, neither this Lease, nor any memorandum, affidavit or other writing with respect thereto, shall be recorded by Tenant or by anyone acting through, under or on behalf of Tenant, and the recording thereof in violation of this provision shall make this Lease null and void at Landlord’s election. 

24.7 Landlord’s Title; Air Rights. 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; provided, however, that Landlord shall not construct any improvements in its airspace during the pendency of this Lease. 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. 

 

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24.8 Relationship of Parties. Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint-venturer or any association between Landlord and Tenant, it being expressly understood and agreed that neither the method of computation of Rent nor any act of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant. 

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

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

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

24.12 No Warranty. In executing and delivering this Lease, Tenant has not relied on any representation, including, but not limited to, any representation whatsoever as to the amount of any item comprising Additional Rent or the amount of the Additional Rent in the aggregate or that Landlord is furnishing the same services to other tenants, at all, on the same level or on the same basis, or any warranty or any statement of Landlord which is not expressly set forth in Article 4 or in one or more of the Exhibits attached hereto. 

24.13 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 interest of Landlord in the Building, and neither Landlord, nor any of the Landlord Parties shall have any personal liability therefor, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. 

24.14 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 

 

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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 expressly contained in this Lease. 

24.15 Right to Lease. Landlord reserves the absolute right to effect such other tenancies in the Building as Landlord in the exercise of its sole business judgment shall determine to best promote the interests of the Building; provided, however, that Landlord shall not enter into a lease permitting any tenant to engage in any of the uses set forth on Exhibit I attached hereto (the “Prohibited Uses”). Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant, type of use or number of tenants shall, during the Lease Term, occupy any space in the Building. 

24.16 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 therefor, governmental actions, civil commotions, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, delay due to changes in any Laws (including, without limitation, the ADA), or the interpretation thereof, or delay attributable to lightning, earthquake, fire, storm, hurricane, tornado, flood, washout, explosion, or any other similar industry-wide or Building-wide cause beyond the reasonable control of the party from whom performance is required, or any of its contractors or other representative, except with respect to the obligations imposed with regard to Rent and other charges to be paid by Tenant pursuant to this Lease and except with respect to Tenant’s obligations under the Tenant Work Letter (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. 

24.17 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, by nationally recognized overnight courier service or delivered personally (i) to Tenant at the appropriate address set forth in Section 5 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 3 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 24.17 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. 

 

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24.18 Joint and Several. If there is more than one Tenant, the obligations imposed upon Tenant under this Lease shall be joint and several. In such event it is agreed that any one of the named Tenants shall be empowered to execute any amendment to this Lease, or other document ancillary thereto and bind all of the named Tenants, and Landlord may rely on the same as if all of the named Tenants had executed such document. 

24.19 Authority. If Tenant is a corporation or partnership, each individual executing this Lease on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in the state in which the Building is located and that Tenant has full right and authority to execute and deliver this Lease and that each person signing on behalf of Tenant is authorized to do so. 

24.20 Attorneys’ Fees; Landlord Bankruptcy Proceedings. If Landlord or Tenant brings an action to enforce the terms hereof or declare rights hereunder, the prevailing party in any such action, or appeal thereon, shall be entitled to its reasonable attorneys’ fees and court costs to be paid by the losing party as fixed by the court in the same or separate suit, and whether or not such action is pursued to decision or judgment. The attorneys’ fee award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys’ fees and court costs reasonably incurred in good faith. Landlord shall be entitled to reasonable attorneys’ fees and all other costs and expenses incurred in the preparation and service of notices of default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such default. Landlord and Tenant agree that attorneys’ fees incurred with respect to defaults and bankruptcy are actual pecuniary losses within the meaning of Section 365(b)(1)(B) of the Bankruptcy Code or any successor statute. 

24.21 Governing Law. This Lease shall be construed and enforced in accordance with the laws of the state in which the Building is located. 

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

24.23 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 13 of the Summary (the “Brokers”), and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Lease. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and 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 the indemnifying party’s dealings with any real estate broker or agent other than the Brokers. 

24.24 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 

 

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perform any acts hereunder at Landlord’s expense or to any setoff of the Rent or other amounts owing hereunder against Landlord; provided, however, that the foregoing shall in no way impair the right of Tenant to commence a separate action against Landlord for any violation by Landlord of the provisions hereof so long as notice is first given to Landlord and any holder of a mortgage or deed of trust covering the Building, Real Property or any portion thereof, of whose address Tenant has theretofore been notified, and an opportunity is granted to Landlord and such holder to correct such violations as provided above. 

24.25 Confidentiality. Tenant and Landlord each acknowledge that the content of this Lease and any related documents are confidential information. Tenant and Landlord shall each keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than such party’s financial, legal, and space planning consultants. In addition, Landlord shall be permitted to disclose the contents of this Lease and any related documents to its lenders, partners, investors, prospective investors, and prospective purchasers. Each party shall be relieved of its obligations to hold confidential information in strict confidence with respect to any portion of such confidential information that: (i) is or later falls within the public domain without breach of this Lease; (ii) was known to, or independently developed by, such party prior to disclosure by the other party; (iii) becomes known to such party from a third party not owing any obligation of confidence to such party; (iv) such party is subject to banking, insurance or other regulation, or requirements of the Securities Exchange Commission, that would require confidential information to be disclosed to examiners or auditors, government officials, or other parties in accordance with Laws. 

24.26 Property Management. Landlord shall engage a property manager that has experience in managing properties similar to the Building in its improved condition. 

24.27 Landlord Renovations. It is specifically understood and agreed that Landlord has no obligation and has made no promises to alter, remodel, improve, renovate, repair or decorate the Premises, Building, Real Property, or any part thereof and that no representations or warranties respecting the condition of the Premises, the Building or the Real Property have been made by Landlord to Tenant, except as specifically expressly set forth in this Lease or in Exhibit B attached to this Lease. However, Tenant acknowledges that Landlord may from time to time, at Landlord’s sole option, renovate, improve, alter, or modify (collectively, the “Renovations”) the Building, Premises, and/or Real Property, including without limitation, the common areas, systems and equipment, roof, and structural portions of the same, which Renovations may include, without limitation, (i) modifying the common areas and tenant spaces to comply with applicable laws and regulations, including regulations relating to the physically disabled, seismic conditions, and building safety and security, and (ii) installing new carpeting, lighting, and wall coverings in the Building common areas, and in connection with such Renovations, Landlord may, among other things, erect scaffolding or other necessary structures in the Building, limit or eliminate access to portions of the Real Property, including portions of the common areas, or perform work in the Building, which work may create noise, dust or leave debris in the Building. Tenant hereby agrees that such Renovations and Landlord’s actions in connection with such Renovations shall in no way constitute a constructive eviction of Tenant nor entitle Tenant to any abatement of Rent (except to the extent provided under Section 11.5 above). Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or indirect injury to or interference with Tenant’s business arising from the Renovations, nor 

 

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shall Tenant be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises or of Tenant’s personal property or improvements resulting from the Renovations or Landlord’s actions in connection with such Renovations, or for any inconvenience or annoyance occasioned by such Renovations or Landlord’s actions in connection with such Renovations except to the extent provided under Section 11.5 above. All Renovations that are performed during the Business Hours and are reasonably anticipated to disturb Tenant’s use or enjoyment of the Premise shall be done only after Tenant has provided its prior written consent, which shall not be unreasonably withheld or delayed, and provided that Landlord delivers to Tenant detailed information about the nature of the Renovations, including the scope of the Renovations, the times during which construction work will take place, the schedule for the construction, and location of the Renovations. Notwithstanding the foregoing, Tenant’s consent shall not be required with respect to any Renovations that are necessitated for Landlord to comply with its obligations under Article 21 above, but Landlord shall in such event, except in the event of an emergency, provide Tenant with detailed information about the nature of such Renovations, including the scope of the applicable Renovations, the times during which construction work will take place, the schedule for the construction, and location of the applicable Renovations. 

24.28 Prohibited Party Transactions. Tenant represents and warrants to Landlord that (1) Tenant is not acting, directly or indirectly, for or on behalf of any person, group, entity, or nation named by any Executive Order or the United States Treasury Department as a terrorist, “Specially Designated National,” “Blocked Person,” or other banned or blocked person, entity, nation, or transaction pursuant to any law, order, rule, or regulation that is enforced or administered by the Office of Foreign Assets Control; and (2) Tenant is not engaged in this transaction, directly or indirectly on behalf of, or instigating or facilitating this transaction, directly or indirectly on behalf of, any such person, group, entity or nation. Tenant agrees to defend, indemnify, and hold harmless Landlord from and against any and all claims, damages, losses, risks, liabilities, and expenses (including reasonable attorney’s fees and costs) arising or related to any breach of the foregoing representation and warranty. 

24.29 Certified Access Specialist (CASp) Inspection. Please be advised that the Premises has not undergone an inspection by a Certified Access Specialist (CASp). Since compliance with the Americans with Disabilities Act of 1990, the California Building Code and similar legislation and/or codes, all as amended or supplemented from time to time (collectively referred to herein as the “Codes”) is dependent upon Tenant’s specific use of the Premises and Tenant’s intended leasehold improvements and alterations, Landlord makes no warranty or representation as to whether or not the Premises complies with the Codes except as otherwise expressly set forth in this Lease. See also Senate Bill No. 1186, California Civil Code §1938 and §55.53, as amended or supplemented from time to time. 

24.30 Consent and Approvals. Any time the consent or approval of Landlord or Tenant is required under this Lease, such consent or approval shall not be unreasonably withheld, conditioned or delayed, and whenever this Lease grants Landlord or Tenant the right to take action, exercise discretion, establish rules and regulations or make an allocation or other determination, Landlord and Tenant shall act reasonably and in good faith. Notwithstanding the foregoing, (i) Landlord shall be entitled to grant or withhold its consent or approval or exercise its discretion in its sole and absolute discretion with respect to (A) matters which could affect the 

 

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common areas of the Real Property or the exterior appearance of the Building or Real Property, (B) actions taken by Landlord pursuant to Article 19 of this Lease, or (C) matters which could have an adverse effect on the structural components or Systems and Equipment of the Building, and (ii) Landlord and Tenant shall grant or withhold its consent or exercise its discretion with respect to matters for which there is a standard of consent or approval or discretion specifically set forth in this Lease in accordance with such specific standards. 

24.31 Counterparts. This Lease may be executed in counterparts, all of which, when taken together, shall constitute a fully executed original. 

LANDLORD AND TENANT ACKNOWLEDGE THAT THEY HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND TENANT WITH RESPECT TO THE PREMISES. TENANT ACKNOWLEDGES THAT IT HAS BEEN GIVEN THE OPPORTUNITY TO HAVE THIS LEASE REVIEWED BY ITS LEGAL COUNSEL PRIOR TO ITS EXECUTION. PREPARATION OF THIS LEASE BY LANDLORD OR LANDLORD’S AGENT AND SUBMISSION OF SAME TO TENANT SHALL NOT BE DEEMED AN OFFER BY LANDLORD TO LEASE THE PREMISES TO TENANT OR THE GRANT OF AN OPTION TO TENANT TO LEASE THE PREMISES. THIS LEASE SHALL BECOME BINDING UPON LANDLORD ONLY WHEN FULLY EXECUTED BY BOTH PARTIES AND WHEN LANDLORD HAS DELIVERED A FULLY EXECUTED ORIGINAL OF THIS LEASE TO TENANT. THE DELIVERY OF A DRAFT OF THIS LEASE TO TENANT SHALL NOT CONSTITUTE AN AGREEMENT BY LANDLORD TO NEGOTIATE IN GOOD FAITH, AND LANDLORD EXPRESSLY DISCLAIMS ANY LEGAL OBLIGATION TO NEGOTIATE IN GOOD FAITH. 

[SIGNATURES APPEAR ON THE IMMEDIATELY FOLLOWING PAGE.] 

 

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

 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
“Landlord”:
	
 
	
 
	
 
	
1019 MARKET ST. PROPERTY, LLC,

a Delaware limited liability company

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
By:
	
 
	
1019 Market St. Holdings III, LLC,

a Delaware limited liability company Its

Managing Member

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ W. Greg Geiger

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: W. Greg Geiger                                             

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title: Authorized Signer                                                         

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ Sean Armstrong

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: Sean Armstrong                                             

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title: Authorized Signer                                                         

	
 
	
 
	
 

	
“Tenant”:
	
 
	
 
	
 
	
ZENDESK, INC., 

a Delaware corporation

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ Mikkel Svane

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: Mikkel Svane                                                 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title: CEO and President                                                     

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ John Geschke

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: John Geschke                                                 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title: General Counsel and Secretary                                     

 

	
***
	
If Tenant is a corporation, the authorized officers must sign on behalf of the corporation and indicate the capacity in which they are signing. The Lease must be executed by the president or vice president and the secretary or assistant secretary, unless the bylaws or a resolution of the board of directors shall otherwise provide, in which event, the bylaws or a certified copy of the resolution, as the case may be, must be attached to this Lease. 

 

Signature Page 

 

 

EXHIBIT A 

OUTLINE OF FLOOR PLANS OF PREMISES 

Exhibit A to that certain Lease Agreement dated as of September 6, 2013, between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and ZENDESK, INC., a Delaware corporation (“Tenant”). 

The Outline of the Floor Plan of Premises comprising this Exhibit A is attached hereto as the immediately following page and is incorporated herein by this reference. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT B 

TENANT WORK LETTER 

This Tenant Work Letter (“Tenant Work Letter”) shall set forth the terms and conditions relating to the initial construction of Tenant Improvements (as defined in Section 2.1 below) in the Premises. This Tenant Work Letter is essentially organized chronologically and addresses the issues of the construction of the Tenant Improvements, in sequence, as such issues will arise during the actual construction of the Tenant Improvements in the Premises. All references in this Tenant Work Letter to Sections of “this Lease” shall mean the relevant portion of the Lease Agreement to which this Tenant Work Letter is attached as Exhibit B and of which this Tenant Work Letter forms a part. 

SECTION 1 

GENERAL CONSTRUCTION OF THE PREMISES 

1.1 Delivery of Base, Shell and Core. Prior to the Effective Date, Landlord shall construct (a) the base, shell, and core (i) of the Premises and (ii) of the floors of the Building on which the Premises are located, including, without limitation, certain finishes in and to the 5th Floor, (b) certain additional improvements to the Building and its facade (collectively, the “Base, Shell, and Core”), all as further specified in the plans and specifications described on Schedule 1 attached hereto (the “Project Plans”) copies of which have been provided or made available to Tenant. Tenant represents and warrants that it has had an opportunity to review and inspect the Project Plans and the Building, including, without limitation, the Premises as improved pursuant to the Project Plans, and by executing the Lease, Tenant accepts the Building and the Base, Shell and Core, except for those items listed on Schedule 3 attached hereto (the “Storefront Work”), in its current “As-Is” condition existing as of the Lease Date and the Lease Commencement Date, subject to Landlord’s obligations with regard to the Compliance Condition set forth in this Section 1.1. Landlord shall install in the Premises certain “Tenant Improvements” (as defined below) pursuant to the provisions of this Tenant Work Letter. Except for the Tenant Improvement work described in this Tenant Work Letter and except for the Tenant Improvement Allowance set forth below, Landlord shall not be obligated to make any other alterations or improvements to the Premises, the Building or the Real Property. On the Lease Commencement Date, Landlord shall deliver the Base, Shell and Core, the Tenant Improvements and the Systems and Equipment in good working order and condition and in compliance with all Laws (herein the “Compliance Condition”). In the event that as of the Lease Commencement Date (x) the Base, Shell and Core, the Tenant Improvements and/or the Systems and Equipment are not in the Compliance Condition or and (y) Tenant delivers to Landlord written notice of the existence of the Compliance Condition (the “Non-Compliance Notice”) by the date which is one hundred eighty (180) days after the Lease Commencement Date (the “Non-Compliance Outside Date”), then Landlord shall, at Landlord’s sole cost and expense which expense shall not be included in Additional Rent, do that which is necessary to put the applicable components of the Base, Shell and Core, the Tenant Improvements and/or the Systems and Equipment described in the Non-Compliance Notice into the Compliance Condition within a reasonable period of time after Landlord’s receipt of the Non-Compliance Notice or such shorter period as is required by Law; provided, further, that to the extent any such work is required or triggered by Tenant’s proposed 

 

Exhibit B 

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use of the Premises or the Tenant Improvements to be constructed therein, then Landlord shall perform such work, but Tenant shall pay Landlord for the cost of such work within thirty (30) days after invoice by Landlord or (as to the interior area of the Premises only) Tenant shall perform such work at Tenant’s sole cost and expense. If Tenant fails to deliver the Non-Compliance Notice to Landlord on or prior to the Non-Compliance Outside Date, Landlord shall have no obligation to perform the work described in the foregoing provisions of this Section 1; provided that Landlord shall remain responsible for making all alterations and improvements which are Landlord’s responsibility to make pursuant to Section 7.2 and Article 21 of the Lease. 

1.2 Termination Right. If Landlord fails to cause the Substantial Completion of the Storefront Work to occur by the date that is one hundred fifty (150) days after the Lease Date (the “Outside Date”), as such date may be extended as provided hereinbelow, then the sole remedy of Tenant for such failure shall be the right to deliver a notice to Landlord (a “Termination Notice”) electing to terminate this Lease effective upon the date occurring five (5) business days following Landlord’s receipt of the Termination Notice (the “Termination Effective Date”). The effectiveness of any such Termination Notice delivered by Tenant to Landlord shall be governed by the terms of this Section 1.2. The Termination Effective Date and the Outside Date shall be extended to the extent of any delays beyond the reasonable control of Landlord, including any delay or delays caused by “Force Majeure,” as that term is defined in Section 24.16 of the Lease. Upon any termination of this Lease as set forth in this Section 1.2, Landlord and Tenant shall be relieved from any and all liability to each other resulting hereunder except that Landlord shall return to Tenant any prepaid rent. Tenant’s rights to terminate this Lease, as set forth in this Section 1.2, shall be Tenant’s sole and exclusive remedy at law or in equity for the failure of the Substantial Completion of the Storefront Work to occur as set forth above. Upon the occurrence of the Substantial Completion of the Storefront Work, Tenant’s rights to terminate this Lease, as set forth in this Section 1.2, shall be null and void. 

SECTION 2 

TENANT IMPROVEMENTS 

2.1 Tenant Improvement Allowance. Tenant shall be entitled to a one-time tenant improvement allowance (the “Tenant Improvement Allowance”) in the amount of up to, but not exceeding Forty-Eight Dollars ($48.50) per rentable square foot of the Premises (i.e., up to Three Million Five Hundred Thirty-seven Thousand Two Hundred Fifty and 50/100ths Dollars ($3,537,250.50), based on 72,933 rentable square feet in the Premises), for the costs relating to the initial design and construction of Tenant’s improvements which are permanently affixed to the Premises (the “Tenant Improvements”) over and above the items included in the Base, Shell, and Core. Tenant shall not be responsible for nor shall Tenant fund any construction to the Base, Shell, and Core and to any of the structural components of the Building. In no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a total amount which exceeds the Tenant Improvement Allowance. Tenant shall not be entitled to receive any cash payment or credit against Rent or otherwise for any portion of the Tenant Improvement Allowance which is not used to pay for the Tenant Improvement Allowance Items (as such term is defined below); provided, however, upon the completion of the Tenant Improvements, and provided that Tenant completed the Tenant Improvements in a manner substantially consistent with the Final Space Plans, as amended from time to time by mutual 

 

Exhibit B 

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consent of Landlord and Tenant, to the extent that any portion of the Tenant Improvement Allowance is unused, then Tenant shall have the right, exercisable by written notice to Landlord (the “Unused Allowance Exercise Notice”), to elect to use such unused amount of the Tenant Improvement Allowance (the “Unused Allowance Amount”), if any, to receive a credit against consecutive future installments of Base Rent next coming due under the Lease immediately following the Abatement Period, and for no other purpose. Notwithstanding anything in this Section 2.1 to the contrary, in no event shall the aggregate of any Base Rent credit received by Tenant exceed the amount of the Unused Allowance Amount. 

2.2 Allowable Items Eligible for Disbursement from the Tenant Improvement Allowance. Except as otherwise set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall be disbursed by Landlord (each of which disbursement shall be made pursuant to Landlord’s standard disbursement process), only for the following items and costs (collectively, the “Tenant Improvement Allowance Items”): 

2.2.1 payment of the fees of the “Architect” and the “Engineers,” as those terms are defined in Section 3.1 of this Tenant Work Letter, Tenant’s project coordinator, construction consultant or similar consultant providing actual and direct services to Tenant with respect to the construction of the Tenant Improvements; provided, however, that only an amount not to exceed $7.00 per rentable square foot of the Premises (i.e., up to Five Hundred Ten Thousand Five Hundred Thirty-One Dollars ($510,531.00)) may be deducted from the Tenant Improvement Allowance to pay for such fees, and payment of the fees incurred by, and the cost of documents and materials supplied by, Landlord and Landlord’s consultants in connection with the preparation and review of the “Construction Drawings,” as that term is defined in Section 3.1 of this Tenant Work Letter and such work as may be undertaken by such consultants; 

2.2.2 the payment of plan check, permit and license fees relating to construction of the Tenant Improvements, including, any utility connection fees or subcharges assessed based upon Tenant’s use of the Premises; 

2.2.3 the cost of construction of the Tenant Improvements, including, without limitation, contractors’ fees and general conditions, testing and inspection costs, costs of utilities, trash removal, parking and hoists, and the costs of after-hours freight elevator usage; 

2.2.4 the cost of any changes in the Base, Shell and Core when such changes are required by the Construction Drawings (including if such changes are due to the fact that such work is prepared on an unoccupied basis), such cost to include all direct architectural and/or engineering fees and expenses incurred in connection therewith; 

2.2.5 the cost of any changes to the Construction Drawings or Tenant Improvements required by applicable laws and building codes (collectively, “Code”); 

2.2.6 sales and use taxes and Title 24 fees; 

2.2.7 the Landlord Supervision Fee, as that term is defined in Section 4.3.2 of this Tenant Work Letter; and 

 

Exhibit B 

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2.2.8 All other costs to be expended by Landlord in connection with the construction of the Tenant Improvements. 

2.2.9 [Intentionally deleted] 

2.3 Disbursement of the Tenant Improvement Allowance. During the design and construction of the Tenant Improvements, Landlord shall make monthly disbursements of the Tenant Improvement Allowance for Tenant Improvement Allowance Items for the benefit of Tenant and shall authorize the release of monies for the benefit of Tenant pursuant to Landlord’s standard disbursement process; provided, however, that Landlord shall have no obligation to disburse any portion of the Tenant Improvement Allowance until after Landlord’s receipt of (i) an application and certification for payment of the “Contractor,” as that term is defined in Section 4.1 of this Tenant Work Letter, showing the schedule, by trade of percentage of completion of the Tenant Improvements in the Premises, detailing the portion of the work completed and the portion not completed, (ii) appropriate executed progress mechanics’ lien releases which comply with the applicable provisions of California Civil Code Sections 8132¬8138 (although Landlord (and not Tenant) shall be responsible for obtaining such lien releases, and in connection therewith Landlord shall use commercially reasonable efforts to promptly obtain such lien releases), (iii) if there is an Over-Allowance Amount required to be paid by Tenant pursuant to Section 4.3 below for such disbursement, Landlord shall only be required to make a disbursement equal to Landlord’s pro rata share of the Tenant Improvement Allowance and only after Tenant has paid its pro rata share of the Over-Allowance Amount. For purposes hereof, Landlord’s pro rata share for each such disbursement amount of the Tenant Improvement Allowance shall equal the percentage resulting from dividing the Tenant Improvement Allowance (less sums already disbursed for any Non-Construction Allowance Items, as defined below), by the total cost of the Tenant Improvement Allowance Items (less sums already disbursed for any Non-Construction Allowance Items) as estimated in the Cost Proposal (defined below) delivered pursuant to Section 4.2 (as may be revised from time to time), and Tenant’s pro rata share for each such disbursement of the Over-Allowance Amount shall equal the Over-Allowance Amount divided by such total cost of the Tenant Improvement Allowance Items (less sums already disbursed for any Non-Construction Allowance Items, as defined below). Notwithstanding the foregoing, with respect to fees and expenses of the Architect or Engineers or any other pre-construction items for which the payment scheme set forth in items (i) and (ii) of the immediately preceding sentence is not applicable (collectively, the “Non-Construction Allowance Items”), Landlord shall make disbursements of the Tenant Improvement Allowance therefor on a monthly basis following Landlord’s receipt of invoices and other reasonable evidence that Tenant has incurred the cost for the applicable Non-Construction Allowance Items (unless Landlord has received a preliminary notice in connection with such costs, in which event conditional lien releases must be submitted in connection with such costs) and such other information and documentation reasonably required by Landlord. 

2.4 Other Terms. Landlord shall only be obligated to make disbursements from the Tenant Improvement Allowance following the occurrence of the Effective Date and to the extent costs are incurred by Tenant for Tenant Improvement Allowance Items. All Tenant Improvement Allowance Items for which the Tenant Improvement Allowance has been made available shall be deemed Landlord’s property under the terms of the Lease, as amended, provided that Landlord, at the time of Landlord’s approval of the Final Working Drawings (defined in Section 3.3 

 

Exhibit B 

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below), may require that Tenant, at Tenant’s expense, at the end of the Lease Term, remove such non-general office Tenant Improvements (including any vertical (not horizontal) cabling, wiring and/or conduit installed by or on behalf of Tenant) from the Premises and repair any damage to the Premises and Building caused by such removal in accordance with the terms of the Lease, as amended. 

SECTION 3 

CONSTRUCTION DRAWINGS 

3.1 Selection of Architect/Construction Drawings. Tenant shall retain Blitz Architecture, or such other architect as may be reasonably approved by Landlord and Tenant, (the “Architect”) to prepare the Construction Drawings. Tenant shall retain engineering consultants designated by Tenant, subject to the reasonable approval of Landlord (the “Engineers”) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC, lifesafety, and sprinkler work in the Premises. The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the “Construction Drawings.” All Construction Drawings shall comply with the drawing format and specifications determined by Landlord, and shall be subject to Landlord’s approval. Landlord shall approve, or disapprove, the Construction Drawings, or such portion as has from time to time been submitted, within five business (5) days after receipt of same or designate by notice given within such time period to Tenant the specific changes reasonably required to be made to the Construction Drawings in order to correct any issues and shall return the Construction Drawings to Tenant. Tenant shall make the changes necessary in order to correct any such issue and shall return the Construction Drawings to Landlord, which Landlord shall approve, or disapprove, within three (3) business days after Landlord receives the revised Construction Drawings. This procedure shall be repeated until all of the Construction Drawings are approved by Landlord and written approval has been delivered to and received by Tenant. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the base building plans, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. Landlord’s review of the Construction Drawings as set forth in this Section 3, shall be for its sole purpose and shall not imply Landlord’s review of the same, or obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord’s space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings. 

3.2 Final Space Plan. On or before the date set forth in Schedule 2, attached hereto, Tenant and Architect shall prepare the final space plan for Tenant Improvements in the Premises (the “Final Space Plan”), which Final Space Plan shall include a layout and designation of all offices, rooms and other partitioning, their intended use, and equipment to be contained therein, and shall deliver the Final Space Plan to Landlord for Landlord’s approval. Tenant shall submit to Landlord the Space Plan for Landlord’s review and approval. Within five (5) business days after Landlord receives the Space Plan, Landlord shall either approve or disapprove the Space 

 

Exhibit B 

-5- 

 

 

Plan for reasonable and material reasons (which shall be limited to the following: (i) adverse effect on the Building; (ii) possible damage to the Systems and Equipment; (iii) non¬compliance with applicable codes; (iv) effect on the exterior appearance of the Building, (v) reduction of the scope of the Tenant Improvements resulting in a failure to construct Tenant Improvements in the entire Premises (for the avoidance of doubt, it shall be reasonable for Landlord to disapprove a change to the Final Space Plan if such change contemplates the elimination of Tenant’s construction of certain floor(s) within the Premises), or (vi) unreasonable interference with the normal and customary business operations of other tenants in the Building (each, a “Design Problem”)) and return the Space Plan to Tenant. In such event, Landlord shall require, and Tenant shall make the changes necessary in order to correct the Design Problems and shall return the Space Plan to Landlord, which Landlord shall approve or disapprove within three (3) business days after Landlord receives the revised Space Plan. This procedure shall be repeated until the Space Plan is finally approved by Landlord and written approval has been delivered to and received by Tenant. The Space Plan may be submitted by Tenant in one or more stages and at one or more times, and the time periods for Landlord’s approval shall apply with respect to each such portion submitted. 

3.3 Final Working Drawings. On or before the date set forth in Schedule 2, Tenant, Architect and the Engineers shall complete the architectural and engineering drawings for the Premises, and Architect shall compile a fully coordinated set of architectural, structural, mechanical, electrical and plumbing working drawings in a form which is complete to allow subcontractors to bid on the work and to obtain all applicable permits (collectively, the “Final Working Drawings”), and shall submit the same to Landlord for Landlord’s approval. Landlord shall approve, or disapprove, the Final Working Drawings, or such portion as has from time to time been submitted, within five business (5) days after receipt of same or designate by notice given within such time period to Tenant the specific changes reasonably required to be made to the Final Working Drawings in order to correct any issues and shall return the Final Working Drawings to Tenant. Tenant shall make the changes necessary in order to correct any such issue and shall return the Final Working Drawings to Landlord, which Landlord shall approve within three (3) business days after Landlord receives the revised Final Working Drawings. 

3.4 Approved Working Drawings. On or before the date set forth therefor in Schedule 2, Tenant shall cause the Architect to submit the Final Working Drawings approved by Landlord (the “Approved Working Drawings”) to the applicable local governmental agency for all applicable building permits necessary to allow “Contractor,” as that term is defined in Section 4.1 of this Tenant Work Letter, to commence and fully complete the construction of the Tenant Improvements (collectively, the “Permits”), and, in connection therewith, Tenant shall coordinate with Landlord in order to allow Landlord, at Landlord’s option, to take part in all phases of the permitting process, and shall supply Landlord, as soon as possible, with all plan check numbers and dates of submittal. Landlord shall cooperate with Tenant in executing permit applications and performing other ministerial acts reasonably necessary to enable Tenant to obtain any such permit or certificate of occupancy. No changes, modifications or alterations in the Approved Working Drawings may be made without the prior written consent of Landlord. 

3.5 Time Deadlines. Tenant shall cooperate with Architect, the Engineer, and Landlord to complete all phases of the Construction Drawings and the permitting process and to receive the permits, and with Contractor, for approval of the “Cost Proposal,” as that term is 

 

Exhibit B 

-6- 

 

 

defined in Section 4.2, below, in accordance with the dates set forth in Schedule 2. Tenant shall meet with Landlord on a weekly basis to discuss Tenant’s progress in connection with the same. Certain of applicable dates for approval of items, plans and drawings as described in this Section 3, Section 4, below, and in this Tenant Work Letter are set forth and further elaborated upon in Schedule 2 (the “Time Deadlines”), attached hereto. Tenant agrees to comply with the Time Deadlines. 

SECTION 4 

CONSTRUCTION OF THE TENANT IMPROVEMENTS 

4.1 Contractor. Following the parties’ approval of the Approved Working Drawings, Landlord shall submit the Approved Working Drawings for competitive bidding to at least three (3) contractors from a list approved by Landlord and Tenant in their respective reasonable discretion, but which list shall include Howard S. Wright. The contractor with the lowest sealed fixed price qualified bid shall be selected by Landlord, unless otherwise mutually approved by Tenant and Landlord, and shall serve as the general contractor (the “Contractor”) to construct the Tenant Improvements. Once the Contractor is selected, the Contractor shall submit the Approved Working Drawings for competitive bidding to at least three (3) subcontractors per trade selected by the Contractor and Landlord. The subcontractor bids shall be submitted promptly to Landlord and a reconciliation shall be performed by Landlord to adjust inconsistent or incorrect assumptions so that a like-kind comparison can be made and a low bidder determined for such subcontract. The subcontractors with the lowest qualified bids per trade shall be selected, unless otherwise mutually approved by Tenant and Landlord. Notwithstanding anything to the contrary contained in this Tenant Work Letter: (a) Landlord and the Contractor shall not be required to solicit bids from subcontractors relating to the structural, mechanical, electrical, plumbing, HVAC, life safety and sprinkler work of the Tenant Improvements (it being agreed that Landlord shall be entitled to designate and select such subcontractors without going through a bidding process, but in such case, the costs charged by such subcontractors shall not exceed generally competitive rates); (b) Landlord may require the Contractor bid certain trades to union affiliated subcontractors, and (c) Landlord may require Contractor to use union affiliated subcontractors for certain trades irrespective of whether such subcontractors were the lowest bidder for such trade. 

4.2 Cost Proposal. After the Approved Working Drawings are signed by Landlord and Tenant, Landlord shall provide Tenant with a cost proposal in accordance with the Approved Working Drawings, which cost proposal shall include, as nearly as possible, the cost of all Tenant Improvement Allowance Items to be incurred by Tenant in connection with the construction of the Tenant Improvements (the “Cost Proposal”). Notwithstanding the foregoing, portions of the cost of the Tenant Improvements may be delivered to Tenant as such portions of the Tenant Improvements are priced by Contractor (on an individual item-by-item or trade-by-trade basis), even before the Approved Working Drawings are completed (the “Partial Cost Proposal”). Tenant shall approve and deliver the Cost Proposal to Landlord within five (5) business days of the receipt of the same (or, as to a Partial Cost Proposal, within five (5) business days of receipt of the same). The date by which Tenant must approve and deliver the Cost Proposal, or the last Partial Cost Proposal to Landlord, as the case may be, shall be known hereafter as the “Cost Proposal Delivery Date.” The total of all Partial Cost Proposals, if any, shall be known as the Cost Proposal. 

 

Exhibit B 

-7- 

 

 

4.3 Construction of Tenant Improvements by Landlord’s Contractor under the Supervision of Landlord. 

4.3.1 Over-Allowance Amount. On the Cost Proposal Delivery Date, Tenant shall deliver to Landlord cash in an amount (the “Over-Allowance Amount”) equal to the difference, if any, between (i) the amount of the Cost Proposal and (ii) the amount of the Tenant Improvement Allowance (less any portion thereof already disbursed by Landlord, or in the process of being disbursed by Landlord, on or before the Cost Proposal Delivery Date). The Over-Allowance Amount shall be disbursed by Landlord prior to the disbursement of any then remaining portion of the Tenant Improvement Allowance, and such disbursement shall be pursuant to the same procedure as the Tenant Improvement Allowance. In the event that, after the Cost Proposal Date, any revisions, changes, or substitutions shall be made to the Construction Drawings or the Tenant Improvements, any additional costs which arise in connection with such revisions, changes or substitutions shall be added to the last Proposal and shall be paid by Tenant to Landlord immediately upon Landlord’s request to the extent such additional costs increase any existing Over-Allowance Amount or result in an Over-Allowance Amount. 

4.3.2 Cost Increases. In the event that the cost of the Tenant Improvements increases following Tenant’s approval of the Cost Proposal due to the requirements of any governmental agency imposed with respect to the construction of the Tenant Improvements or due to any other circumstances, Tenant shall pay to Landlord the amount of such increase within five (5) business days of Landlord’s written notice; provided, however, that Landlord shall first apply toward such increase any remaining balance in the Tenant Improvement Allowance. 

4.3.3 Change Orders. In the event that Tenant requests any changes to the Approved Working Drawings, Landlord shall not unreasonably withhold its consent to any such changes so long as such changes do not constitute a Design Problem and will not materially delay the Substantial Completion of the Tenant Improvements, and shall grant its consent to such changes within one (10) business day after Landlord’s receipt of the same, provided, that the changes do not create any design problems. If such changes increase the costs to Landlord of constructing the Tenant Improvements shown on the Approved Working Drawings, Landlord shall provide Tenant with invoices documenting and evidencing such increased costs, and Tenant shall pay Landlord for such increases prior to the commencement of such work. The costs charged by Landlord to Tenant pursuant to this Section shall be an amount equal to the actual construction costs incurred by Landlord to implement the requested changes and revise the Approved Working Drawings. 

4.3.4 Landlord Supervision. After Landlord selects the Contractor, Landlord shall independently retain Contractor to construct the Tenant Improvements in accordance with the Approved Working Drawings and the Cost Proposal and Landlord shall supervise the construction by Contractor, and Tenant shall pay a construction supervision and management fee (the “Landlord Supervision Fee”) to Landlord in an amount (a) equal to the product of (i) three percent (3%) and (ii) an amount equal to the Tenant Improvement Allowance; and (b) equal to the product of (i) two percent (2%) and (ii) the amount of costs of the hard Tenant Improvements in excess of the Tenant Improvement Allowance, if any, including, without limitation, hard costs to be paid from the Over-Allowance Amount. 

 

Exhibit B 

-8- 

 

 

4.3.5 Contractor’s Warranties and Guarantees. Landlord hereby assigns to Tenant all warranties and guarantees by Contractor relating to the Tenant Improvements, which assignment shall be on a non-exclusive basis such that the warranties and guarantees may be enforced by Landlord and/or Tenant, and Tenant hereby waives all claims against Landlord relating to, or arising out of the construction of, the Tenant Improvements. 

4.3.6 Tenant’s Indemnity; Landlord’s Covenants. From and after the Effective Date, Tenant hereby indemnifies Landlord for any loss, claims, damages or delays arising from the actions of Architect and the Engineers on the Premises or in the Building. Within ten (10) days after completion of construction of the Tenant Improvements, Landlord shall cause Contractor and Architect to cause a Notice of Completion to be recorded in the office of the Recorder of the County in which the Building is located in accordance with Section 8182 of the Civil Code of the State of California or any successor statute and furnish a copy thereof to Landlord upon recordation. In addition, Landlord, following the Substantial Completion of the Premises, shall have prepared and delivered to the Building management office, with a copy to Tenant, a copy of the “as built” plans and specifications (including all working drawings) for the Tenant Improvements. 

SECTION 5 

SUBSTANTIAL COMPLETION; 

LEASE COMMENCEMENT DATE 

5.1 Substantial Completion. For purposes of this Lease, “Substantial Completion” of the Premises shall mean (1) Landlord has substantially completed the Tenant Improvements in accordance with the Approved Working Drawings (with the exception of any punch-list items which will not materially and adversely interfere with Tenant’s ability to commence its business operations in the Premises), such that Tenant can install its freestanding work stations, fixtures, furniture, equipment, and telecommunication and cabling systems and to move into the Premises; (2) Landlord has obtained a certificate of occupancy for the Building and Premises, or its equivalent; and (3) Tenant has been delivered complete and uninterrupted access to the Premises (and other required portions of the Building) sufficient to allow Tenant to install its freestanding work stations, fixtures, furniture, equipment, and telecommunication and cabling systems and to move into the Premises. For purposes of this Lease, “Substantial Completion” of the Storefront Work shall mean that Landlord has substantially completed the Storefront Work in accordance with the Project Plans (with the exception of any minor punch-list items which will not materially and adversely interfere with Landlord’s ability to commence construction of the Tenant Improvements and do not otherwise constitute structural components of the Base, Shell and Core). Landlord shall promptly notify Tenant in writing of the Substantial Completion of the Storefront Work (and the occurrence of the Effective Date), and within two (2) days of such notice, Landlord shall cause its contractor to inspect the Premises with a representative of Tenant and complete a punch list of unfinished items to the Storefront Work. Authorized representatives for Landlord and Tenant shall execute said punch list to indicate their approval thereof. The items listed on such punch list shall be completed by the Contractor within thirty (30) days after the approval of such punch list or as soon thereafter as reasonably practicable. 

 

Exhibit B 

-9- 

 

 

5.2 Landlord Delays. If Tenant contends that a Landlord Caused Delay has occurred (as defined below), Tenant shall notify Landlord in writing within five (5) business days of each of (i) the date upon which such Landlord Caused Delay becomes known to Tenant, Architect, or Contractor and (ii) the date upon which such Landlord Caused Delay ends (the “Delay Termination Date”). Tenant’s failure to deliver both of such notices to Landlord within the required time period shall be deemed to be a waiver by Tenant of the contended Landlord Caused Delay to which such notices would have related. If such actions, inaction or circumstances described in the notice set forth in clause (i) above (the “Delay Notice”) are not cured by Landlord within five (5) business days following Landlord’s receipt of the Delay Notice and if such actions, inaction or circumstances otherwise qualify as a Landlord Caused Delay, then a Landlord Caused Delay shall be deemed to have occurred commencing as of the date of Landlord’s receipt of the Delay Notice and ending as of the Delay Termination Date. 

5.2.1 Abatement of Base Rent for a Landlord Caused Delay. The Lease Commencement Dates shall occur as provided in Section 7.2 of Summary attached to the Lease; provided that the one hundred fifty (150) day component of the Lease Commencement Date (as set forth in Section 7.2 of the Summary) shall be extended on a day-for-day basis for each day of Landlord Caused Delay which actually delays the Substantial Completion of the Tenant Improvements. 

5.2.2 Definition of Landlord Caused Delay. The term “Landlord Caused Delay” as used in the Lease or this Agreement shall mean any delay in the design of the Tenant Improvements or Tenant’s move-in into the Premises during the move-in period which is due to any act or omission of Landlord (wrongful, negligent or otherwise), its agents or contractors (including acts or omissions while acting as agent or contractor for Tenant). The term Landlord Delay shall include, but shall not be limited to any: (1) delay in the giving of authorizations or approvals by Landlord, including, but not limited to the approval of the Construction Drawings; (2) delay attributable to the acts or failures to act, whether willful, negligent or otherwise, of Landlord, its agents or contractors; (3) delay attributable to the interference of Landlord, its agents or contractors with the design of the Tenant Improvements or the failure or refusal of any such party to permit Tenant, its agents or contractors, access to and priority use of the Building or any Building facilities or services, including freight elevators, passenger elevators, and loading docks, which access and use are required for the orderly and continuous performance of the work necessary for Tenant to complete its move-in into the Premises during the move-in period; (4) delay attributable to Landlord giving Tenant incorrect or incomplete Project Plans, or revisions made to such Project Plans subsequent to the delivery of such items to Tenant (collectively, “Incomplete Plans”) in either case, in addition to such delay being deemed a Landlord Delay, any increased costs incurred by Landlord as a result of such Incomplete Plans shall not be deducted from the Tenant Improvement Allowance; (6) delay attributable to Landlord’s failure to allow Tenant sufficient access to the Building and/or the Premises during the move-in period to move into the Premises over one (1) weekend; (7) delay by Landlord in administering and paying when due the Tenant Improvement Allowance; and (8) delay caused by the failure of the Base Core and Shell to comply with the ADA (in which case, in addition to such delay being deemed a Landlord Delay, any increased costs incurred by Landlord as a result 

 

Exhibit B 

-10- 

 

 

of such non-compliance shall not be deducted from the Tenant Improvement Allowance). In no event shall Tenant’s remedies or entitlements for the occurrence of a Landlord Delay be abated, deferred, diminished or rendered inoperative because of a prior, concurrent, or subsequent delay resulting from any action or inaction of Tenant. 

5.2.3 Determination of Landlord Caused Delay. If Tenant contends that a Landlord Caused Delay has occurred, Tenant shall notify Landlord in writing within two (2) business days of each of (i) the date upon which such Landlord Caused Delay becomes known to Tenant, Architect, or Contractor and (ii) the date upon which such Landlord Caused Delay ends (the “Delay Termination Date”). Tenant’s failure to deliver both of such notices to Landlord within the required time period shall be deemed to be a waiver by Tenant of the contended Landlord Caused Delay to which such notices would have related. If such actions, inaction or circumstances described in the notice set forth in clause (i) above (the “Delay Notice”) are not cured by Landlord within two (2) business days following Landlord’s receipt of the Delay Notice and if such actions, inaction or circumstances otherwise qualify as a Landlord Caused Delay, then a Landlord Caused Delay shall be deemed to have occurred commencing as of the date of Landlord’s receipt of the Delay Notice and ending as of the Delay Termination Date. 

5.3 Inspection. After the Tenant Improvements to the Premises are Substantially Completed (excepting punch list items) and prior to Tenant’s move-in into the Premises (“First Time”), and within thirty (30) days after Tenant’s move-in period (“Second Time”), in each case following two (2) days’ advance written notice from Tenant to Landlord, Landlord shall cause the Contractor to inspect the Premises with a representative of Tenant and complete a punch list of unfinished items to the Tenant Improvements. Authorized representatives for Landlord and Tenant shall execute said punch list to indicate their approval thereof. The items listed on such punch list shall be completed by the Contractor within thirty (30) days after the approval of such punch list or as soon thereafter as reasonably practicable. 

SECTION 6 

MISCELLANEOUS 

6.1 Tenant’s Entry Into the Premises Prior to Substantial Completion. Subject to the terms hereof and provided that Tenant and its agents do not interfere with, or delay, Contractor’s work in the Building and the Premises, at Landlord’s reasonable discretion, Contractor shall allow Tenant access to the Premises prior to the Substantial Completion of the Premises for the purpose of Tenant installing overstandard equipment or fixtures (including Tenant’s data and telephone equipment) in the Premises. Prior to Tenant’s entry into the Premises as permitted by the terms of this Section 6.1, Tenant shall submit a schedule to Landlord and Contractor, for their approval, which schedule shall detail the timing and purpose of Tenant’s entry. In connection with any such entry, Tenant acknowledges and agrees that Tenant’s employees, agents, contractors, consultants, workmen, mechanics, suppliers and invitees shall fully cooperate, work in harmony and not, in any manner, interfere with Landlord or Landlord’s Contractor, agents or representatives in performing work in the Building and the Premises, or interfere with the general operation of the Building and/or the Real Property. If at any time any such person representing Tenant shall not be cooperative or shall otherwise cause or threaten to cause any such disharmony or interference, including, without limitation, labor disharmony, and Tenant 

 

Exhibit B 

-11- 

 

 

fails to immediately institute and maintain corrective actions as directed by Landlord, then Landlord may revoke Tenant’s entry rights upon twenty-four (24) hours’ prior written notice to Tenant. Tenant acknowledges and agrees that any such entry into and occupancy of the Premises or any portion thereof by Tenant or any person or entity working for or on behalf of Tenant shall be deemed to be subject to all of the terms, covenants, conditions and provisions of the Lease, excluding only the covenant to pay Rent (until the occurrence of the Lease Commencement Date). Tenant further acknowledges and agrees that Landlord shall not be liable for any injury, loss or damage which may occur to any of Tenant’s work made in or about the Premises in connection with such entry or to any property placed therein prior to the Lease Commencement Date, the same being at Tenant’s sole risk and liability. Tenant shall be liable to Landlord for any damage to any portion of the Premises, including the Tenant Improvement work, caused by Tenant or any of Tenant’s employees, agents, contractors, consultants, workmen, mechanics, suppliers and invitees. In the event that the performance of Tenant’s work in connection with such entry causes extra costs to be incurred by Landlord or requires the use of any Building services, Tenant shall promptly reimburse Landlord for such extra costs and/or shall pay Landlord for such Building services at Landlord’s standard rates then in effect. In addition, Tenant shall hold Landlord harmless from and indemnify, protect and defend Landlord against any loss or damage to the Building or Premises and against injury to any persons caused by Tenant’s actions pursuant to this Section 6.1. Notwithstanding the foregoing or anything in this Tenant Work Letter to the contrary, prior to the Effective Date the foregoing liability and indemnity shall apply only to Tenant’s actions pursuant to this Section 6.1. In addition, should any of Tenant’s agents, contractors, consultants, workmen, mechanics, suppliers and invitees desire to enter the Premises or Building prior to the Effective Date, prior to any such entry such agents, contractors, consultants, workmen, mechanics, suppliers and invitees shall enter into a access agreement, in form and substance reasonably acceptable to Landlord, whereby such agents, contractors, consultants, workmen, mechanics, suppliers and invitees agree to hold Landlord harmless from and indemnify, protect and defend Landlord against any loss or damage to the Building or Premises and against injury to any persons caused by such party’s actions. 

6.2 Tenant’s Representative. Tenant has designated AINSLEY HILL (Telephone No.: (415) 940-7897 ext. 328, E-Mail: ahill@zendesk.com) as its sole representative with respect to the matters set forth in this Tenant Work Letter, who shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter. 

6.3 Landlord’s Representative. Landlord has designated ERIC CLAPP (Telephone No.: (310) 294-1239, E-Mail: eclapp@westportcp.com) as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter. 

6.4 Time of the Essence in This Tenant Work Letter. Unless otherwise indicated, all references herein to a “number of days” shall mean and refer to calendar days. In all instances where Tenant is required to approve or deliver an item, if no written notice of approval is given or the item is not delivered within the stated time period, at Landlord’s sole option, at the end of said period the item shall automatically be deemed approved or delivered by Tenant and the next succeeding time period shall commence. 

 

Exhibit B 

-12- 

 

 

6.5 Tenant’s Lease Default. Notwithstanding any provision to the contrary contained in the Lease, if an event of default by Tenant as described in Section 19.1 of the Lease or any uncured default by Tenant under this Tenant Work Letter has occurred at any time on or before the Substantial Completion of the Premises, then (i) in addition to all other rights and remedies granted to Landlord pursuant to the Lease, at law or in equity, Landlord shall have the right to withhold payment of all or any portion of the Tenant Improvement Allowance and/or Landlord may cause Contractor to cease the construction of the Premises, and (ii) all other obligations of Landlord under the terms of this Tenant Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of the Lease. In addition, if the Lease is terminated prior to the Lease Commencement Date, for any reason due to a default by Tenant as described in Section 19.1 of the Lease or under this Tenant Work Letter, in addition to any other remedies available to Landlord under the Lease, at law and/or in equity, Tenant shall pay to Landlord, as Additional Rent under the Lease, within five (5) days of receipt of a statement therefor, any and all costs incurred by Landlord (including any portion of the Tenant Improvement Allowance disbursed by Landlord) and not reimbursed or otherwise paid by Tenant through the date of such termination in connection with the Tenant Improvements to the extent planned, installed and/or constructed as of such date of termination, including, but not limited to, any costs related to the removal of all or any portion of the Tenant Improvements and restoration costs related thereto. 

6.6. Tenant’s Early Occupancy Rights. Notwithstanding anything to the contrary in this Tenant Work Letter or any other provision of this Lease, but subject to the provisions of this grammatical paragraph, Tenant may require that Landlord accelerate the construction of the Tenant Improvements on two (2) floors of the Premises (the “Early Access Floors”) in order to accommodate Tenant’s desire to commence business in those floors prior to Substantial Completion of the Tenant Improvements for the entire Premises. The particular floors that will constitute the Early Access Floor shall be subject to Landlord’s reasonable approval. All costs arising from the acceleration of construction on the Early Access Floors shall be at Tenant’s expense (although the Tenant Improvement Allowance may be applied to such costs) [subject to Tenant’s Construction Period Maximum Liability set forth in Section 4.3.4. above.] Promptly following the identification of the Early Access Floors, Landlord and Tenant shall amend the Time Deadlines to reflect the revised construction schedule. Without limitation of the foregoing, any delays in the Substantial Completion of the Tenant Improvements on floors other than the Early Access Floors caused by the acceleration of the construction on the Early Access Floors shall be attributed to Tenant and shall not be deemed a Landlord Caused Delay. After Substantial Completion of the Early Access Floors, Tenant may have access to such floors and may commence doing business therefrom. Tenant shall be bound to all of the terms of the Lease with respect to the Early Access Floors as of the date Tenant commence occupancy therein and shall pay Base Rent for the Early Access Floors based on the below schedule (provided, that Tenant’s presence on the Early Access Floors does not trigger the Abatement Period as set forth in Section 3.2 of the Lease and does not trigger the Lease Commencement Date). Prior to commencing occupancy of the Early Access Floors, Tenant shall deliver to Landlord the insurance certificates required under Section 10.3 of the Lease. 

 

Exhibit B 

-13- 

 

 

Rent Schedule for Early Access Floors: 

 

	
 
	
 
	
 

	
Floor
	
  
	
Monthly Installment of Base Rent

	
B
	
  
	
$36,603.02

	
G
	
  
	
$17,933.44

	
2
	
  
	
$38,059.90

	
3
	
  
	
$37,308.33

	
4
	
  
	
$37,555.00

	
5
	
  
	
$37,805.52

	
6
	
  
	
$37,878.75

	
7
	
  
	
$37,951.98

By way of example, if Tenant occupies the third (3rd) and fourth (4th) floors as Early Access Floors, then Tenant’s total monthly Base Rent for such floors would be $74,863.33 per month. 

 

Exhibit B 

-14- 

 

 

SCHEDULE 1 TO TENANT WORK LETTER 

DESCRIPTION OF PROJECT PLANS 

1). Storefront and Window Renovations – 

a). Storefront & Window Renovation, prepared by Petra Structural Engineers, Dated 8.22.13. 

b). Storefront & Window Renovation, prepared by Studio TMT Architects, Dated 8.29.3 

c). Eastern Outfitting Building Exterior & Structural Alterations—Specifications, Prepared by Studio TMT Architects, Dated 1.22.13. 

d). PCO #18 between Howard S. Wright and Weber Electric. Restoration of Marquee Lighting, Dated 3.26.13. 

2). Mechanical, Electrical, Plumbing and Fire As-Built Drawings - 

a). Mechanical Shell As-Built Drawings, Prepared by AMI, Dated 8.19.13. 

b). Mechanical As-Built Drawings—5th Floor TI, Prepared by AMI, Dated 8.19.13. 

c). Electrical As-Built Drawings—Complete Building, Prepared by Weber Electric, Dated 3.8.13 

d). Plumbing As-Built Drawings—Complete Building, Prepared by Ayoob Mechanical, Inc., Dated 8.23.13. 

e). Fire Sprinkler As-Built Drawings, Prepared by AAA Fire Protection, Dated 2.7.13. 

3). 5th Floor Market Ready Tenant Improvement - 

a). Tenant Improvement Drawings, Prepared by Studio TMT, Dated 5.28.13. 

b).Tenant Improvement Drawings, Prepared by Studio TMT, Dated 5.13.13. 

4). Interior Core Improvements - 

a). Interior Core Improvement Drawings, Prepared by Studio TMT, Dated 12.5.12. 

b). Eastern Outfitting Building Exterior & Structural Alterations—Specifications, Prepared by Studio TMT Architects, Dated 12.14.13. 

c). Minor Permit Submittal—1017-1019 Location, Prepared by KC Glass, Dated 11.27.13 

d). Elevator Cab Finish Submittal, Prepared by Howard S. Wright, Dated 6.25.13 

5). Interior and Structural Alterations - 

a). Interior Floor Alterations, Prepared by Studio TMT, Dated 2.19.13. 

b). Eastern Outfitting Building Exterior & Structural Alterations—Specifications, Prepared by Studio TMT Architects and Petra Structural Engineers, Dated 1.22.13. 

 

Schedule 1 to Tenant 

Work Letter 

-1- 

 

 

SCHEDULE 2 TO TENANT WORK LETTER 

TIME DEADLINES 

 

	
 
	
 
	
 

	
Dates
	
  
	
Actions to be Performed

	
 
	
 

	
1. October 28, 2013
	
  
	
Final Space Plan to be completed by Tenant and delivered to Landlord.

	
 
	
 

	
2. February 24, 2014
	
  
	
Tenant to deliver Final Working Drawings to Landlord.

	
 
	
 

	
3. March 3, 2014
	
  
	
Tenant to submit Approved Working Drawings to the City of San Francisco for all applicable building permits.

 

Schedule 2 to Tenant 

Work Letter 

-1- 

 

 

SCHEDULE 3 TO TENANT WORK LETTER 

DESCRIPTION OF STOREFRONT WORK 

(All based on the Minor Permit to Alter set of drawings) 

Market Street - 

 

	
 
	
•
	
 
	
Extend 2nd floor decking to meet new storefront assembly. 

 

	
 
	
•
	
 
	
Erect steel frame work for new storefront system at 1st and 2nd floor. 

 

	
 
	
•
	
 
	
Install new aluminum storefront system, doors and glazing. 

 

	
 
	
•
	
 
	
Install replacement light bulbs on Market Street window mullions, floors 3 thru 7. 

 

	
 
	
•
	
 
	
Repair Terra Cotta and Sheet Metal per Page and Turnbull Specifications. 

 

	
 
	
•
	
 
	
Install new stone surround at Market Street storefront. 

Stevenson Street - 

 

	
 
	
•
	
 
	
Cut low wall at Stevenson Elevation to accommodate new glass line at 1st floor, which will run from floor level to underside of 2nd floor decking. 

 

	
 
	
•
	
 
	
Install new storefront system and glazing to match floors above. 

 

	
 
	
•
	
 
	
Paint to match above. 

 

	
 
	
•
	
 
	
Install 3 wall mounted light fixtures on exterior. 

 

Schedule 3 to Tenant 

Work Letter 

-1- 

 

 

EXHIBIT C 

AMENDMENT TO LEASE 

This AMENDMENT TO LEASE (“Amendment”) is made and entered into effective as of             , 20    , by and between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and ZENDESK, INC., a Delaware corporation (“Tenant”) 

R E C I T A L S : 

A. Landlord and Tenant entered into that certain Lease Agreement dated as of September 6, 2013 (the “Lease”) pursuant to which Landlord leased to Tenant and Tenant leased from Landlord certain “Premises”, within the Building located at 1019 Market Street, San Francisco, California. 

B. Except as otherwise set forth herein, all capitalized terms used in this Amendment shall have the same meaning given such terms in the Lease. 

C. Landlord and Tenant desire to amend the Lease to confirm the commencement and expiration dates of the term, as hereinafter provided. 

NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

1. Confirmation of Dates. The parties hereby confirm that the term of the Lease commenced as of                      (the “Lease Commencement Date”) for a term of approximately one hundred one (101) months ending on                      (unless sooner terminated as provided in the Lease. 

2. No Further Modification. Except as set forth in this Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect. 

IN WITNESS WHEREOF, this Amendment to Lease has been executed as of the day and year first above written. 

 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
“Landlord”: 
	
 
	
 
	
 
	
1019 MARKET ST. PROPERTY, LLC,

a Delaware limited liability company

 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
1019 Market St. Holdings III, LLC,

a Delaware limited liability company

Its Managing Member

 

	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
 

	
 
	
 
	
Printed Name:
	
 
	
 

 

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

 

Exhibit C 

-1- 

 

 

 

	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
 

	
 
	
 
	
Printed Name:
	
 
	
 

 

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
Title:
	
 
	
 

 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
“Tenant”: 
	
 
	
 
	
 
	
ZENDESK, INC.,

a Delaware corporation

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name:
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title:
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name:
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title:
	
 
	
 

 

Exhibit C 

-2- 

 

 

EXHIBIT D 

RULES AND REGULATIONS 

Tenant shall faithfully observe and comply with the following Rules and Regulations. Landlord shall not be responsible to Tenant for the nonperformance of any of said Rules and Regulations by or otherwise with respect to the acts or omissions of any other tenants or occupants of the Building. 

1. Tenant shall not alter any lock or install any new or additional locks or bolts on any doors or windows of the Premises without obtaining Landlord’s prior written consent. Tenant shall bear the cost of any lock changes or repairs required by Tenant. Two keys will be furnished by Landlord for the Premises, and any additional keys required by Tenant must be obtained from Landlord at a reasonable cost to be established by Landlord. 

2. All doors opening to public corridors shall be kept closed at all times except for normal ingress and egress to the Premises, unless electrical hold backs have been installed. 

3. Landlord reserves the right to close and keep locked all entrance and exit doors of the Building during such hours as are customary for comparable buildings in the vicinity of the Building. Tenant, its employees and agents must be sure that the doors to the Building are securely closed and locked when leaving the Premises if it is after the normal hours of business for the Building. Any tenant, its employees, agents or any other persons entering or leaving the Building at any time when it is so locked, or any time when it is considered to be after normal business hours for the Building, may be required to sign the Building register when so doing. Access to the Building may be refused unless the person seeking access has proper identification or has a previously arranged pass for access to the Building. Landlord and its agents shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. In case of invasion, mob, riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the Building during the continuance of same by any means it deems appropriate for the safety and protection of life and property. 

4. Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy property brought into the Building. Safes and other heavy objects shall, if considered necessary by Landlord, stand on supports of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such safe or property in any case. All damage done to any part of the Building, its contents, occupants or visitors by moving or maintaining any such safe or other property shall be the sole responsibility of Tenant and any expense of said damage or injury shall be borne by Tenant. 

5. Other than furniture, packages, supplies, and equipment delivered in the ordinary course of Tenant’s business, no furniture, freight, packages, supplies, equipment or merchandise will be brought into or removed from the Building or carried up or down in the elevators, except upon prior notice to Landlord, and in such manner, in such specific elevator, and between such hours as shall be designated by Landlord. Tenant shall provide Landlord with not less than 24 hours prior notice of the need to utilize an elevator for any such purpose, so as to provide Landlord with a reasonable period to schedule such use and to install such padding or take such other actions or prescribe such procedures as are appropriate to protect against damage to the elevators or other parts of the Building. 

 

Exhibit D 

-1- 

 

 

6. Landlord shall have the right to control and operate the public portions of the Building, the public facilities, the HVAC, and any other facilities furnished for the common use of tenants, in such manner as is customary for comparable buildings in the vicinity of the Building. 

7. The requirements of Tenant will be attended to only upon application at the management office of the Building or at such office location designated by Landlord. Employees of Landlord shall not perform any work or do anything outside their regular duties unless under special instructions from Landlord. 

8. Tenant shall not disturb, solicit, or canvass any occupant of the Building and shall cooperate with Landlord or Landlord’s agents to prevent same. 

9. The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed, and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or agents, shall have caused it. 

10. Tenant shall not overload the floor of the Premises, nor mark, drive nails or screws, or drill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof without Landlord’s consent first had and obtained. 

11. Except for vending machines intended for the sole use of Tenant’s employees and invitees, no vending machine or machines of any description other than fractional horsepower office machines shall be installed, maintained or operated upon the Premises without the written consent of Landlord. 

12. Tenant shall not use any method of HVAC other than that which may be supplied by Landlord, without the prior written consent of Landlord. 

13. Tenant shall not use or keep in or on the Premises or the Building any kerosene, gasoline or other inflammable or combustible fluid or material. Tenant shall not use, keep or permit to be used or kept, any foul or noxious gas or substance in or on the Premises, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors, or vibrations, or interfere in any way with other tenants or those having business therein. 

14. Tenant shall not bring into or keep within the Building or the Premises any animals, birds, fish or reptiles. Bicycles, but no other electric or motorized vehicles may be kept in the Building in the areas designated by Landlord. 

15. 16. Landlord will approve where and how telephone and telegraph wires are to be introduced to the Premises. No boring or cutting for wires shall be allowed without the consent of Landlord. The location of telephone, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Landlord. 

 

Exhibit D 

-2- 

 

 

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

18. Tenant, its employees and agents shall not loiter in the entrances or corridors, nor in any way obstruct the sidewalks, lobby, halls, stairways or elevators, and shall use the same only as a means of ingress and egress for the Premises. 

19. Tenant shall not waste electricity, water or air conditioning and agrees to cooperate fully with Landlord to ensure the most effective operation of the Building’s HVAC system, and shall refrain from attempting to adjust any controls. 

20. Tenant shall store all its trash and garbage within the interior of the Premises. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the city in which the Building is located without violation of any law or ordinance governing such disposal. All trash, garbage and refuse disposal shall be made only through entry-ways and elevators provided for such purposes at such times as Landlord shall designate. 

21. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency. 

22. Tenant shall assume any and all responsibility for protecting the Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed, when the Premises are not occupied. 

23. No awnings or other projection shall be attached to the outside walls of the Building without the prior written consent of Landlord. No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Premises without the prior written consent of Landlord. The sashes, sash doors, skylights, windows, and doors that reflect or admit light and air into the halls, passageways or other public places in the Building shall not be covered or obstructed by Tenant, nor shall any bottles, parcels or other articles be placed on the windowsills. All electrical ceiling fixtures hung in offices or spaces along the perimeter of the Building must be fluorescent and/or of a quality, type, design and bulb color approved by Landlord. 

24. The washing and/or detailing of or, the installation of windshields, radios, telephones in or general work on, automobiles shall not be allowed on the Real Property. 

25. Food vendors shall be allowed in the Building upon receipt of a written request from the Tenant. The food vendor shall service only the tenants that have a written request on file in the Building’s management office. Under no circumstance shall the food vendor display their products in a public or common area including corridors and elevator lobbies. Any failure to comply with this rule shall result in immediate permanent withdrawal of the vendor from the Building. 

 

Exhibit D 

-3- 

 

 

26. Tenant must comply with requests by the Landlord concerning the informing of their employees of items of importance to the Landlord. 

27. Tenant shall comply with any non-smoking ordinance adopted by any applicable governmental authority. 

Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant or tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant or tenants, nor prevent Landlord from thereafter enforcing any such Rules or Regulations against any or all tenants of the Building. The Rules and Regulations shall not supersede any provision of the Tenant’s Lease and to the extent of any inconsistency between Tenant’s Lease and the Rules and Regulations, the Lease shall govern. Any of the Rules and Regulations that Landlord reserves the right at any time to change or rescind any one or more of these Rules and Regulations, or to make such other and further reasonable Rules and Regulations as in Landlord’s judgment may from time to time be necessary for the management, safety, care and cleanliness of the Premises and Building, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein. Landlord shall not be responsible to Tenant or to any other person for the nonobservance of the Rules and Regulations by another tenant or other person. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them as a condition of its occupancy of the Premises. 

 

Exhibit D 

-4- 

 

 

EXHIBIT E 

FORM OF ESTOPPEL CERTIFICATE 

The undersigned, as Tenant/Landlord under that certain Lease Agreement (the “Lease”) made and entered into as of                     ,                     and between                     , a                     as Landlord, and the undersigned as Tenant, for Premises on the                     (                     ) floor(s) of the Building located at                                                              hereby 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 has commenced occupancy of the Premises described in the Lease, currently occupies the Premises, and the Lease Term commenced on             . 

3. 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. 

4. 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: 

5. The Lease Term expires on             . 

6. All conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in default thereunder. 

7. No rental has been paid in advance and no security has been deposited with Landlord except as provided in the Lease. 

8. To Tenant’s actual knowledge (without inquiry or investigation), as of the date hereof, there are no existing defenses or offsets that the undersigned has, which preclude enforcement of the Lease by Landlord. 

9. 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 $            . 

10. The undersigned acknowledges that this Estoppel certificate may be delivered to Landlord’s prospective mortgagee, or a prospective purchaser, and acknowledges that it recognizes that if same is done, said mortgagee, 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 in accepting an assignment of the Lease as collateral security, and that receipt by it of this certificate is a condition of making of the loan or acquisition of such property. 

 

Exhibit E 

-1- 

 

 

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 the state in which the Building is located and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf of Tenant is authorized to do so. 

Executed at             on the             day of             ,             . 

 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
“Tenant”: 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
a

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name:
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title:
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name:
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title:
	
 
	
 

 

Exhibit E 

-2- 

 

 

EXHIBIT F-1 

APPOXIMATE LOCATION OF TENANT’S BUILDING EXTERIOR SIGNS 

Exhibit F-1 to that certain Lease Agreement dated as of September 6, 2013, between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and ZENDESK, INC., a Delaware corporation (“Tenant”). 

The depictions of the approximate locations of Tenant’s Building Exterior Signs comprising this Exhibit F-1 are attached hereto as the immediately following pages and is incorporated herein by this reference. 

 

Exhibit F-1 

-1- 

 

 

 

 

 

 

 

 

EXHIBIT F-2 

RETAIL SIGNAGE LOCATION 

Exhibit F-2 to that certain Lease Agreement dated as of September 6, 2013, between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and ZENDESK, INC., a Delaware corporation (“Tenant”). 

The depictions of the Retail Signage Location comprising this Exhibit F-2 are attached hereto as the immediately following pages and is incorporated herein by this reference. 

 

Exhibit F-2 

-1- 

 

 

 

 

EXHIBIT G TO LEASE 

JANITORIAL SCHEDULE 

Janitorial Specifications 

1019 Market Street 

Tenant Premises 

Office Areas 

Nightly (five days/week): 

 

	
 
	
1.
	
Sweep non-carpeted areas with chemically treated dust mop 

 

	
 
	
2.
	
Empty all waste paper containers, spot clean, replace liners 

 

	
 
	
3.
	
Clean telephone handsets 

 

	
 
	
4.
	
Turn off lights ASAP each night 

 

	
 
	
5.
	
Remove all trash from floors, return waste baskets and chairs to proper positions 

 

	
 
	
6.
	
Spot mop any spillage off non-carpeted areas 

Every other night: 

 

	
 
	
1.
	
Vacuum all carpeted areas 

 

	
 
	
a.
	
Carpet sweep any visible debris on non-vacuuming days 

Weekly: 

 

	
 
	
1.
	
Dust all horizontal surfaces including ledges, window sills, pictures, shelves and furniture 

 

	
 
	
2.
	
Spot clean doors, door frames, and counters 

 

	
 
	
3.
	
Spot clean around light switches 

 

	
 
	
4.
	
Spot clean partition door glass 

 

	
 
	
5.
	
Clean telephone handsets 

Monthly: 

 

	
 
	
1.
	
Perform high dusting beyond normal reach 

Quarterly: 

 

	
 
	
1.
	
Scrub, re-seal and refinish all VCT flooring 

 

	
 
	
2.
	
Thoroughly vacuum upholstered furniture 

 

	
 
	
3.
	
Edge vacuum all carpeted areas 

 

Exhibit G 

-1- 

 

 

Conference Rooms 

Nightly (five days/week): 

 

	
 
	
1.
	
Polish table tops 

 

	
 
	
2.
	
Empty all waste paper containers 

 

	
 
	
3.
	
Vacuum carpets 

 

	
 
	
4.
	
Spot clean walls 

 

	
 
	
5.
	
Arrange chairs in an orderly manner 

Weekly: 

 

	
 
	
1.
	
Dust tables, chairs and cabinets 

Monthly: 

 

	
 
	
1.
	
Vacuum all chairs 

Kitchenettes, Coffee Bars & Vending Areas 

Nightly (five days/week): 

 

	
 
	
1.
	
Clean table tops 

 

	
 
	
2.
	
Clean sinks and counter tops 

 

	
 
	
3.
	
Clean chairs as required to maintain a neat appearance 

 

	
 
	
4.
	
Damp mop non-carpeted areas 

 

	
 
	
5.
	
Empty all waste containers and replace liners 

 

	
 
	
6.
	
Spot clean outside of refrigerators 

 

	
 
	
7.
	
Wipe clean exterior surface of cabinets and drawers 

Tenant Restrooms 

Nightly (five days/week): 

 

	
 
	
1.
	
Empty and wipe out all waste paper containers 

 

	
 
	
2.
	
Empty feminine dispensers and replace liner 

 

	
 
	
3.
	
Clean and polish all metal and mirrors 

 

	
 
	
4.
	
Clean and polish all dispensers 

 

	
 
	
5.
	
Clean and disinfect wash basins, urinals, and toilets including both top and underside of toilet seat 

 

	
 
	
6.
	
Spot clean tile walls and toilet partitions (inside/outside) 

 

	
 
	
7.
	
Spot clean walls around wash basins 

 

	
 
	
8.
	
Clean floors with germicidal solution 

 

	
 
	
9.
	
Refill soap, towels, tissue, and seat covers 

 

	
 
	
10.
	
Check all fixtures, flush valves, etc. and report non-working or leaking items to Maintenance and Engineering 

Weekly: 

 

	
 
	
1.
	
Dust all low reach and high reach areas including but not limited to structural ledges, mirror tops and ledges, A/C diffusers, return air grills and light fixtures 

Monthly: 

 

	
 
	
1.
	
Wash down all partitions inside and outside 

 

Exhibit G 

-2- 

 

 

Bimonthly (6 times a year): 

 

	
 
	
1.
	
Machine scrub floors INCLUDING corners and cove base 

Landlord Responsibilities for Common Area 

Entrance Lobbies 

Nightly (five days/week): 

 

	
 
	
1.
	
Sweep and spot clean tile flooring 

 

	
 
	
2.
	
Damp mop all spillage 

 

	
 
	
3.
	
Vacuum carpets 

 

	
 
	
4.
	
Spot clean carpets 

 

	
 
	
5.
	
Dust ledges within reach 

 

	
 
	
6.
	
Dust all horizontal surfaces 

 

	
 
	
7.
	
Empty all waste containers, spot clean, and replace liners 

 

	
 
	
8.
	
Spot clean walls 

 

	
 
	
9.
	
Clean chrome and painted hand rails 

 

	
 
	
10.
	
Clean entrance door glass, frames, and thresholds 

 

	
 
	
11.
	
Police sidewalks immediately outside entrance areas 

 

	
 
	
12.
	
Spot clean all glass including low partitions, mirrors and the corridor side of all windows and glass to tenant premises 

 

	
 
	
13.
	
Thoroughly clean all door thresholds of dirt and debris 

 

	
 
	
14.
	
Spot clean and dust directory board glass and ledges 

Weekly: 

 

	
 
	
1.
	
Dust all high ledges 

 

	
 
	
2.
	
Edge vacuum all carpets 

 

	
 
	
3.
	
Damp sponge clean all baseboards 

 

	
 
	
4.
	
Vacuum all chairs and sofas 

Monthly: 

 

	
 
	
1.
	
Dust and vacuum air supply and exhaust diffusers 

 

	
 
	
2.
	
Machine scrub guard station 

Freight Car Lobbies 

Nightly (five days/week): 

 

	
 
	
1.
	
Damp mop and spot clean VCT flooring if applicable 

Monthly: 

 

	
 
	
1.
	
Machine scrub, re-seal and refinish floors 

 

Exhibit G 

-3- 

 

 

Passenger Elevator Cleaning 

Nightly (five days/week): 

 

	
 
	
1.
	
Clean elevator cab floor 

 

	
 
	
2.
	
Vacuum and clean all elevator thresholds 

 

	
 
	
3.
	
Wipe down walls 

 

	
 
	
4.
	
Polish stainless steel doors 

Monthly: 

 

	
 
	
1.
	
Clean elevator cab lights 

 

	
 
	
2.
	
Clean entire cab ceiling 

 

	
 
	
3.
	
Clean and polish all wood surfaces 

 

	
 
	
4.
	
Polish elevator thresholds with #000—steel wool 

 

	
 
	
5.
	
Clean carpet in elevator lobby floors 

Exterior 

Windows 

 

	
 
	
1.
	
Exterior portion of windows washed twice per year 

Sidewalks 

 

	
 
	
1.
	
Power washed between at least two times per month 

 

Exhibit G 

-4- 

 

 

EXHIBIT H TO LEASE 

HVAC DEPRECIATION SCHEDULE 

 

	
 
	
 
	
 

	
25
	
  
	
years

	
 
	
 

	
52
	
  
	
weeks per year

	
 
	
 

	
55
	
  
	
Hours per week

	
 
	
 

	
71,500
	
  
	
- Useful Life in terms of hours

	
 
	
 

	
(
	
  
	
$290,000 Central Plant Replacement +(# of Heat Pumps * $80,000) ) / Overtime Hours

	
 
	
 

	
$290,000
	
  
	
Central

Plant $20,000 Heat Pump Cost

	
 
	
 

	
40
	
  
	
# of Heat Pumps

	
 
	
 

	
$15.24
	
  
	
Cost Per Hour of Overtime HVAC assuming 40 Heat Pumps (5 per floor)

 

Exhibit H 

-1- 

 

 

EXHIBIT I TO LEASE 

PROHIBITED USES 

 

	
1.
	
A facility for any use which is illegal or would reasonably be determined to cause a threat of imminent harm to persons or property, constitutes a public or private nuisance or emits an obnoxious odor, noise, or sound which can be heard or smelled (in either event to more than a de minimus extent) outside of the Building. 

 

	
2.
	
Any medical marijuana facility, or similar use whether it is styled as a collective or otherwise. 

 

	
3.
	
Establishment providing nude or topless entertainment or wait-staff, or any establishment selling or exhibiting pornographic materials (including, without limitation, adult books or videos). Materials shall be considered “adult” or “pornographic” under this paragraph if the same are not available for sale or rental to children under 18 years old because they explicitly deal with or depict sexuality). Any company or business that engages in the business of providing any of the foregoing materials or services at locations other than the Building shall also be prohibited. 

 

	
3.
	
Any operation primarily used as a storage warehouse operation (except incidental to Tenant’s primary retail business) and any assembling, manufacturing, distilling, refining, smelting, agricultural, or mining operation. 

 

	
4.
	
Any pawn shop, “second hand” store, schlock store, or “surplus” store. 

 

	
5.
	
Any fire sale, bankruptcy sale (unless pursuant to a court order) or auction house operation (but this provision shall not restrict the absolute freedom of an occupant to determine its own selling prices nor shall it preclude the conduct of any seasonal sales, promotional or clearance sales or legitimate going out of business sales in compliance with applicable Laws). 

 

	
6.
	
Any central laundry, dry cleaning plant, or laundromat; including, nominal supportive facilities for on-site service oriented to pickup and delivery by the ultimate consumer. 

 

	
7.
	
Any bar, pub, tavern or night club, where the sale of beer, wine and/or alcohol is more than 70% of the facilities annual revenue. 

 

	
8.
	
Any flea market, amusement, video arcade, children’s play center (including, without limitation, any business primarily providing physical play activities for children, kiddie rides or games), pinball, computer or other gamerooms, pool or billiard hall, dance or music hall, disco or nightclub or any other facility operated solely for entertainment purposes, such as a “laser tag” or “virtual reality” theme operation. 

 

	
9.
	
Any training or educational facility. 

 

	
10.
	
Any gambling facility or operation, including but not limited to: off-track or sports betting parlor; table games such as blackjack or poker; slot machines, video poker/blackjack keno machines or similar devices; or bingo hall. 

 

Exhibit I 

-1- 

 

 

 

	
11.
	
Any tattoo parlor. 

 

	
12.
	
Any house of worship 

 

	
13.
	
Any liquor store (provided, however, that the foregoing shall not be deemed to prohibit the sale of beer, wine and/or alcohol by any occupant ancillary to its primary use of the premises, or the sale of beer, wine or alcohol for on-premises consumption at any restaurant or bar permitted hereunder). 

 

Exhibit I 

-2- 

 

 

EXTENSION OPTION RIDER 

1. This EXTENSION OPTION RIDER (this “Extension Rider”) is made and entered into by and between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and ZENDESK, INC., a Delaware corporation (“Tenant”), and is dated as of the date of the Lease Agreement (“Lease”) by and between Landlord and Tenant to which this Extension Rider is attached. The agreements set forth in this Extension Rider shall have the same force and effect as if set forth in the Lease. To the extent the terms of this Extension Rider are inconsistent with the terms of the Lease, the terms of this Extension Rider shall control. 

1. Option Right. Landlord hereby grants Tenant one (1) option to extend the Lease Term for a period of five (5) years (the “Option Term”), which option shall be exercisable only by written Exercise Notice (as defined below) delivered by Tenant to Landlord as provided below. Upon the proper exercise of such option to extend, the Lease Term shall be extended for the Option Term. 

2. Option Rent. The annual Base Rent payable by Tenant during the Option Term (the “Option Rent”) shall be equal to the Fair Market Rental Rate for the Premises. As used herein, the “Fair Market Rental Rate” shall mean the annual Base Rent at which non-affiliated parties from new, non-expansion, non-renewal and non-equity tenants, as of the commencement of the Option Term, will be leasing non-sublease, non-equity, unencumbered space comparable in size, location, and quality to the Premises for a comparable term, with comparable tenant improvement allowances, if any, and other generally applicable conditions of tenancy, which comparable space is located in the Building and in other comparable recently renovated office buildings located in the area bordered by Market Street to the north, 3rd Street to the east, Brannan Street to the south, and 11th Street to the west, including buildings located immediately on both sides of each of the aforementioned streets, in San Francisco, California (the “Market Area”), taking into consideration all base rent and other out-of-pocket concessions generally being granted at such time for such comparable space for the Option Term (including, without limitation, any tenant improvement allowance provided for such comparable space, with the amount of such tenant improvement allowance to be provided for the Premises during the Option Term to be determined after taking into account the age, quality and layout of the tenant improvements in the Premises as of the commencement of the Option Term). All other terms and conditions of the Lease shall apply throughout the Option Term; however, Tenant shall, in no event, have the option to extend the Lease Term beyond the Option Term described in Section 1 above. 

3. Exercise of Option. The option contained in this Extension Rider shall be exercised by Tenant, if at all, only in the following manner: (i) Tenant shall deliver written notice (“Interest Notice”) to Landlord not more than fifteen (15) months nor less than twelve (12) months prior to the expiration of the initial Lease Term stating that Tenant may be interested in exercising its option; (ii) Landlord, after receipt of Tenant’s notice, shall deliver notice (the “Option Rent Notice”) to Tenant within thirty (30) days after Landlord’s receipt of the Interest Notice setting forth Landlord’s determination of the Option Rent; and (iii) if Tenant wishes to exercise such option, Tenant shall, on or before the date (the “Exercise Date”) which is thirty (30) days after Tenant’s receipt of the Option Rent Notice, exercise the option by delivering written notice (“Exercise Notice”) thereof to Landlord. Concurrently with Tenant’s delivery of 

 

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the Exercise Notice, Tenant may object, in writing, to Landlord’s determination of the Fair Market Rental Rate set forth in the Option Rent Notice, in which event such Fair Market Rental Rate shall be determined pursuant to Section 4 below. Tenant’s failure to deliver the Exercise Notice on or before the Exercise Date, shall be deemed to constitute Tenant’s waiver of its extension right hereunder. If Tenant timely delivers the Exercise Notice but fails to timely object in writing to Landlord’s determination of the Fair Market Rental Rate set forth in the Option Rent Notice, Tenant shall be deemed to have accepted Landlord’s determination of the Option Rent and the following provisions of Section 4 shall not apply. 

4. Determination of Fair Market Rental Rate. In the event Tenant timely and appropriately objects in writing to the Fair Market Rental Rate initially determined by Landlord in the Option Rent Notice, Landlord and Tenant shall thereafter attempt in good faith to agree upon such Fair Market Rental Rate, using their best good faith efforts. If Landlord and Tenant fail to reach agreement on such Fair Market Rental Rate within twenty (20) days following Tenant’s objection to such Fair Market Rental Rate (the “Outside Agreement Date”) then each party shall submit to the other party a separate written determination of the Option Rent within ten (10) business days after the Outside Agreement Date, and such determinations shall be submitted to arbitration in accordance with Sections 4.1 through 4.7 below. If Landlord’s and Tenant’s determinations do not differ by an amount in excess of five (5%) percent, the two determinations shall be averaged and the resulting figure shall be conclusively deemed to be the Fair Market Rental Rate. If the two determinations differ by an amount in excess of five (5%) percent, then such determinations shall be submitted to arbitration in accordance with Sections 4.1 through 4.7 below. Failure of Tenant or Landlord to submit a written determination of the Option Rent within such ten (10) business day period shall conclusively be deemed to be the non-determining party’s approval of the Option Rent submitted within such ten (10) business day period by the other party. 

4.1 Landlord and Tenant shall each appoint one (1) appraiser who shall by profession be a real estate appraiser who shall have been active over the five (5) year period ending on the date of such appointment in the appraisal of office buildings in Market Area. The determination of the appraisers shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted Fair Market Rental Rate is the closer to the actual Fair Market Rental Rate as determined by the appraisers, taking into account the requirements with respect thereto set forth in Section 2 above. Each such appraiser shall be appointed within thirty (30) days after the Outside Agreement Date. 

4.2 The two (2) appraisers so appointed shall, within ten (10) days of the date of the appointment of the last appointed appraiser, agree upon and appoint a third appraiser who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two (2) appraisers. 

4.3 The three (3) appraisers shall, within thirty (30) days of the appointment of the third appraiser, reach a decision as to which of Landlord’s or Tenant’s submitted Fair Market Rental Rate is closer to the actual Fair Market Rental Rate and shall select such closer determination as the Fair Market Rental Rate and notify Landlord and Tenant thereof. 

4.4 The decision of the majority of the three (3) appraisers shall be binding upon Landlord and Tenant. 

 

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4.5 If either Landlord or Tenant fails to appoint an appraiser within the time period specified in Section 4.1 hereinabove, the appraiser appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such appraiser’s decision shall be binding upon Landlord and Tenant. 

4.6 If the two (2) arbitrators fail to agree upon and appoint a third arbitrator within the time period provided in Section 4.3 above, then the parties shall mutually select the third arbitrator. If Landlord and Tenant are unable to agree upon the third arbitrator within ten (10) days, then either party may, upon at least five (5) days prior written notice to the other party, request the Presiding Judge of the San Francisco County Superior Court, acting in his private and nonjudicial capacity, to appoint the third arbitrator. Following the appointment of the third arbitrator, the panel of arbitrators shall within thirty (30) days thereafter reach a decision as to whether Landlord’s or Tenant’s submitted Option Rent shall be used and shall notify Landlord and Tenant thereof. 

4.7 Each party shall pay the fees and expenses of the appraiser appointed by or on behalf of it, and each shall pay one-half of the fees and expenses of the third appraiser, if any. 

5. Suspension of Right to Extend Lease Term. Notwithstanding anything in the foregoing to the contrary, at Landlord’s option, and in addition to all of Landlord’s remedies under the Lease, at law or in equity, the right to extend the Lease Term hereinabove granted to Tenant shall not be deemed to be properly exercised if, as of the date Tenant delivers the Exercise Notice or as of the end of the initial Lease Term, Tenant is in default under this Lease. In addition, Tenant’s right to extend the Lease Term is personal to the Original Tenant, and any Affiliate to which Tenant’s entire interest in this Lease has been assigned pursuant to Section 14.7 of the Lease, and may not be assigned or exercised, voluntarily or involuntarily, by or to, any person or entity other than the Original Tenant, or such Affiliate assignee, as the case may be, and shall only be available to and exercisable by the Tenant, or such Affiliate assignee, when the Original Tenant, or such Affiliate assignee, is in actual and physical possession of the entire Premises. 

[SIGNATURES APPEAR ON THE IMMEDIATELY FOLLOWING PAGE.] 

 

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Extension Rider to be executed the day and date of the Lease. 

 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
“Landlord”:
	
 
	
 
	
 
	
1019 MARKET ST. PROPERTY, LLC,

a Delaware limited liability company

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
By:
	
 
	
1019 Market St. Holdings III, LLC,

a Delaware limited liability company Its Managing Member

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ W. Greg Geiger

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: W. Greg Geiger                                             

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title: Authorized Signer                                                         

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ Sean Armstrong

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: Sean Armstrong                                             

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title: Authorized Signer                                                         

 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
“Tenant”:
	
 
	
 
	
 
	
ZENDESK, INC.,

a Delaware corporation

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ Mikkel Svane

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: Mikkel Svane                                                     

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title: CEO and President                                                         

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ John Geschke

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: John Geschke                                                     

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title: General Counsel and Secretary                                     

Signature Page 

 

 

LETTER OF CREDIT RIDER 

This LETTER OF CREDIT RIDER (this “LC Rider”) is made and entered into by and between by and between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and ZENDESK, INC., a Delaware corporation (“Tenant”), and is dated as of the date of the Lease Agreement (“Lease”) by and between Landlord and Tenant to which this Extension Rider is attached. The agreements set forth in this LC Rider shall have the same force and effect as if set forth in the Lease. To the extent the terms of this LC Rider are inconsistent with the terms of the Lease, the terms of this LC Rider shall control. 

1. Concurrently upon execution of the Lease, Tenant shall deliver to Landlord, as collateral for the full and faithful performance by Tenant of all of its obligations under the Lease and for all losses and damages Landlord may suffer as a result of any default by Tenant under the Lease, subject to Tenant’s rights to notice and cure pursuant to Article 19 of the Lease, an irrevocable and unconditional negotiable letter of credit (the “Letter of Credit”), in the form attached hereto as Exhibit 1 and containing the terms required herein, payable in the County of San Francisco, California, running in favor of Landlord issued by a solvent bank under the supervision of the Superintendent of Banks of the State of California, or a National Banking Association, in the amount of THREE MILLION SIX HUNDRED EIGHT THOUSAND THREE HUNDRED FORTY-FOUR AND 90/100 DOLLARS ($3,608,344.90) (“LC Amount”), as the same may be reduced pursuant to Paragraph 5 below. Should Tenant fail to deliver the original Letter of Credit to Landlord by September 10, 2013, such failure shall constitute an immediate event of default under the Lease without further notice or cure rights. The Letter of Credit shall be (i) at sight and irrevocable, (ii) subject to the terms of this LC Rider, maintained in effect, whether through replacement, renewal or extension, for the entire period from the date of execution of this Lease through the date which is sixty (60) days after the Lease Expiration Date (subject, however, to the reduction and termination provisions of Paragraph 5 below), and Tenant shall deliver a new Letter of Credit or certificate of renewal or extension to Landlord at least fifteen (15) days prior to the expiration of the Letter of Credit, without any action whatsoever on the part of Landlord, (iii) subject to the International Standby Practices 1998, International Chamber of Commerce Publication No. 590, and (iv) fully assignable by Landlord in connection with a transfer of Landlord’s interest in the Lease and permit partial draws. In addition to the foregoing, the form and terms of the Letter of Credit (and the bank issuing the same) shall be acceptable to Landlord, in Landlord’s reasonable discretion, and shall provide, among other things, in effect that: (A) Landlord, or its then managing agent, shall have the right to draw down an amount up to the face amount of the Letter of Credit upon the presentation to the issuing bank of Landlord’s (or Landlord’s then managing agent’s) of a written statement certifying that such amount is due to Landlord under the terms and conditions of the Lease, it being understood that if Landlord or its managing agent be a corporation, partnership or other entity, then such statement shall be signed by an officer (if a corporation), a general partner (if a partnership), or any authorized party (if another entity); (B) the Letter of Credit will be honored by the issuing bank without inquiry as to the accuracy thereof and regardless of whether the Tenant disputes the content of such statement; and (C) in the event of a transfer of Landlord’s interest in the Building, Landlord shall transfer the Letter of Credit, in whole or in part (or cause a substitute letter of credit to be delivered, as applicable) to the transferee and thereupon the Landlord shall, without any further agreement between the parties, be released by Tenant from all liability therefor, and it is agreed that the provisions hereof shall apply to every transfer or assignment of the whole or any portion of said Letter of Credit to a new Landlord. The bank issuing the Letter of Credit shall at all times remain solvent and open for business. 

 

-1- 

 

 

2. If, as result of any application or use by Landlord of all or any part of the Letter of Credit (or any “Cash Collateral,” as that term is defined, below), the amount of the Letter of Credit and Cash Collateral shall collectively be less than the LC Amount, Tenant shall, within ten (10) days thereafter, provide Landlord with either (i) cash (the “Cash Collateral”) to be held and applied by Landlord as collateral in the same manner as if Landlord held such amount as part of the Letter of Credit, or (ii) additional letter(s) of credit in an amount equal to the deficiency (or a replacement letter of credit in the total amount of the LC Amount) and any such additional (or replacement) letter of credit shall comply with all of the provisions of this LC Rider, and if Tenant fails to comply with the foregoing, the same shall constitute an uncurable default by Tenant. Tenant further covenants and warrants that it will neither assign nor encumber the Letter of Credit or Cash Collateral, as the case may be, or any part thereof and that neither Landlord nor its successors or assigns will be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. Without limiting the generality of the foregoing, if the Letter of Credit expires earlier than the date which is sixty (60) days after the Lease Expiration Date and the conditions for the release of the Letter of Credit set forth in Paragraph 5, below, have not been satisfied, and Tenant has not provided Landlord with cash in lieu of the entire LC amount then outstanding pursuant to Paragraph 1 above, Landlord will accept Cash Collateral, a renewal letter of credit or substitute letter of credit (such renewal or substitute letter of credit or Cash Collateral to be in effect and delivered to Landlord, as applicable, not later than fifteen (15) days prior to the expiration of the Letter of Credit), which with respect to any letter of credit shall be irrevocable and automatically renewable as above provided through the date which is sixty (60) days after the Lease Expiration Date upon the same terms as the expiring Letter of Credit or such other terms as may be acceptable to Landlord in its reasonable discretion. In the event that Tenant provides Cash Collateral pursuant to the foregoing provisions of this Paragraph 2, Landlord shall have no obligation to maintain such Cash Collateral in a separate account, and Tenant shall not be entitled to receive any interest accruing thereon. However, if Cash Collateral is not timely delivered or the Letter of Credit is not timely renewed or a substitute Letter of Credit is not timely received, or if Tenant fails to maintain the Letter of Credit and/or the Cash Collateral in the amount and in accordance with the terms set forth in this LC Rider, Landlord shall have the right to present the Letter of Credit to the bank in accordance with the terms of this LC Rider, and the entire sum evidenced thereby shall be paid to and held by Landlord as Cash Collateral for performance of all of Tenant’s obligations under the Lease and for all losses and damages Landlord may suffer as a result of any default by Tenant under the Lease, subject to Tenant’s rights to notice and cure pursuant to Article 19 of the Lease. 

3. If there shall occur a default under the Lease as set forth in Article 19 of the Lease and such default remains uncured beyond the applicable notice and cure periods set forth in Article 19, Landlord may, but without obligation to do so, draw upon the Letter of Credit and/or utilize the Cash Collateral, in part or in whole, to cure any default of Tenant and/or to compensate Landlord for any and all damages of any kind or nature sustained or which may be sustained by Landlord resulting from Tenant’s default. Tenant agrees not to interfere in any way with payment to Landlord of the proceeds of the Letter of Credit, either prior to or following a “draw” by Landlord of any portion of the Letter of Credit, regardless of whether any dispute exists between Tenant and Landlord as to Landlord’s right to draw from the Letter of Credit. No condition or term of the Lease shall be deemed to render the Letter of Credit conditional to justify the issuer of the Letter of Credit in failing to honor a drawing upon such Letter of Credit in a timely manner. 

 

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4. Landlord and Tenant acknowledge and agree that in no event or circumstance shall the Letter of Credit or any renewal thereof or substitute therefor or Cash Collateral be (i) deemed to be or treated as a “security deposit” within the meaning of California Civil Code Section 1950.7, (ii) subject to the terms of such Section 1950.7, or (iii) intended to serve as a “security deposit” within the meaning of such Section 1950.7. The parties hereto (A) recite that the Letter of Credit and/or Cash Collateral, as the case may be, is not intended to serve as a security deposit and such Section 1950.7 and any and all other laws, rules and regulations applicable to security deposits in the commercial context (“Security Deposit Laws”) shall have no applicability or relevancy thereto and (B) waive any and all rights, duties and obligations either party may now or, in the future, will have relating to or arising from the Security Deposit Laws. 

5. Notwithstanding anything to the contrary set forth in this LC Rider, but subject to the provisions of Paragraphs 5(a) and (b) below, it is hereby agreed that the LC Amount shall be reduced by and to the amounts on the dates set forth on the schedule below: 

 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Reduction Date
	
  
	
Amount of Reduction
	
 
	
  
	
Revised LC Amount
	
 

	
First day of 37th month of initial Lease Term
	
  
	
$
	
601,390.82
	
  
	
  
	
$
	
3,006,954.08
	
  

	
First day of 49th month of initial Lease Term
	
  
	
$
	
601,390.82
	
  
	
  
	
$
	
2,405,563.27
	
  

	
First day of 61st month of initial Lease Term
	
  
	
$
	
601,390.82
	
  
	
  
	
$
	
1,804,172.45
	
  

Further, in the event that Tenant successfully completes an initial public offering of stock in Tenant through the New York Stock Exchange or other nationally recognized stock exchange that raises a minimum of One Hundred Million Dollars ($100,000,000) in gross proceeds for Tenant in the primary offering, then it is hereby agreed that the LC Amount shall be reduced by and to the amounts on the dates set forth on the schedule below: 

 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Reduction Date
	
  
	
Amount of Reduction
	
 
	
  
	
Revised LC Amount
	
 

	
First day of 25th month of initial Lease Term
	
  
	
$
	
902,086.23
	
  
	
  
	
$
	
2,706,258.68
	
  

	
First day of 36th month of initial Lease Term
	
  
	
$
	
902,086.23
	
  
	
  
	
$
	
1,804,172.45
	
  

(a) Notwithstanding the foregoing provisions of this Paragraph 5 to the contrary, there shall be no reduction in the LC Amount, or waiver of the Letter of Credit requirement and/or return of the Letter of Credit to Tenant, at any time while Tenant is in default of any of its obligations under the Lease. 

(b) Any such reductions in the LC Amount pursuant this Paragraph 5 shall be accomplished through an amendment or replacement Letter of Credit, to be provided by Tenant to Landlord at Tenant’s sole cost and expense. 

[SIGNATURES APPEAR ON THE IMMEDIATELY FOLLOWING PAGE.] 

 

-3- 

 

 

IN WITNESS WHEREOF, Landlord and Tenant have caused this Letter of Rider to be executed the day and date of the Lease. 

 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
“Landlord”:
	
 
	
 
	
 
	
1019 MARKET ST. PROPERTY, LLC,
a Delaware limited liability company

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
By:
	
 
	
1019 Market St. Holdings III, LLC,
a Delaware limited liability company Its Managing Member

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:  
	
 
	
/s/ W. Greg Geiger

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: W. Greg Geiger                                              

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title: Authorized Signer                                                       

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ Sean Armstrong

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: Sean Armstrong                                         

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
Title: Authorized Signer                                                     

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
“Tenant”:
	
 
	
 
	
 
	
ZENDESK, INC.,
a Delaware corporation

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ Mikkel Svane

	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: Mikkel Svane                                                     

	
 
	
 
	
 
	
 
	
 
	
 
	
Title: CEO and President                                                           

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ John Geschke

	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: John Geschke                                                     

	
 
	
 
	
 
	
 
	
 
	
 
	
Title: General Counsel and Secretary                                    

Signature Page

 

 

 

 

 

AMENDMENT TO LEASE 

This AMENDMENT TO LEASE (“Amendment”) is made and entered into effective as of May 9, 2014, by and between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and ZENDESK, INC., a Delaware corporation (“Tenant”) 

R E C I T A L S: 

A. Landlord and Tenant entered into that certain Lease Agreement dated as of September 6, 2013 (the “Lease”) pursuant to which Landlord leased to Tenant and Tenant leased from Landlord certain “Premises”, within the Building located at 1019 Market Street, San Francisco, California. 

B. Except as otherwise set forth herein, all capitalized terms used in this Amendment shall have the same meaning given such terms in the Lease. 

C. Landlord and Tenant desire to amend the Lease to confirm the commencement and expiration dates of the term, as hereinafter provided. 

NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

1. Confirmation of Dates. The parties hereby confirm that the term of the Lease commenced as of March 5, 2014 (the “Lease Commencement Date”) for a term of approximately one hundred one (101) months ending on August 31, 2022 (unless sooner terminated as provided in the Lease. 

2. No Further Modification. Except as set forth in this Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect. 

IN WITNESS WHEREOF, this Amendment to Lease has been executed as of the day and year first above written. 

 

	
“Landlord”:
	
 
	
1019 MARKET ST. PROPERTY, LLC,

a Delaware limited liability company

	
 
	
 
	
 

	
 
	
 
	
By:
	
 
	
1019 Market St. Holdings III, LLC,

a Delaware limited liability company

Its Managing Member

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ W. Greg Geiger 

	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: W. Greg Geiger

	
 
	
 
	
 
	
 
	
 
	
 
	
Title: Authorized Signer

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ Peter Aronson 

	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: Peter Aronson

	
 
	
 
	
 
	
 
	
 
	
 
	
Title: Authorized Signer

 

 

 

	
“Tenant”:
	
 
	
ZENDESK, INC.,

	
 
	
 
	
a Delaware corporation

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
By:
	
 
	
/s/ John Geschke

	
 
	
 
	
 
	
 
	
Printed Name: John Geschke

	
 
	
 
	
 
	
 
	
Title: SVP, General Counsel

	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
By:
	
 
	
/s/ Alan Black 

	
 
	
 
	
 
	
 
	
Printed Name: Alan Black

	
 
	
 
	
 
	
 
	
Title: CFO

 

 

 

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SECOND AMENDMENT TO LEASE 

This SECOND AMENDMENT TO LEASE (“Amendment”) is made and entered into effective as of September 18, 2014, by and between 1019 MARKET ST. PROPERTY, LLC, a Delaware limited liability company (“Landlord”), and ZENDESK, INC., a Delaware corporation (“Tenant”). 

R E C I T A L S : 

A. Landlord and Tenant entered into that certain Lease Agreement dated as of September 6, 2013, as amended by that certain Amendment to Lease effective as of May 9, 2014 (collectively, the “Lease”) pursuant to which Landlord leased to Tenant and Tenant leased from Landlord certain “Premises”, within the Building located at 1019 Market Street, San Francisco, California. 

B. Except as otherwise set forth herein, all capitalized terms used in this Amendment shall have the same meaning given such terms in the Lease. 

C. Landlord and Tenant desire to amend the Lease to provide that Landlord assume responsibility for payment of certain utilities subject to reimbursement by Tenant, as set forth below. 

NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

1. Utility Charges. Notwithstanding Section 6.1.2 of the Lease to the contrary, Landlord shall contract for and pay directly for electrical service to the Premises; provided, however, Tenant shall promptly reimburse to Landlord, as Additional Rent, 100% of the cost of such electrical service to the Premises; provided, further, that such reimbursement shall be deemed to be a direct payment by Tenant of such electrical service for purposes of Section 4.2.10 of the Lease, such that the cost of such electrical service shall be excluded from the definition of “Utility Costs”. 

2. No Further Modification. Except as specifically set forth in this Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect. In the event of any conflict between the terms and conditions of the Lease and the terms and conditions of this Amendment, the terms and conditions of this Amendment shall prevail. 

3. Counterparts: Facsimile and Electronic Execution. This Amendment may be executed in counterparts, all of which shall constitute the same Amendment, notwithstanding that all parties to this Amendment are not signatories to the same or original counterpart. Delivery of an executed counterpart of this Amendment by facsimile or electronic mail shall be equally as effective as delivery of an original executed counterpart. Any party delivering an executed counterpart of this Amendment by facsimile or electronic mail also shall deliver an original executed counterpart of this Amendment, but the failure to deliver an original executed 

1

 

counterpart shall not affect the validity, enforceability and binding effect of this Amendment. Signature and acknowledgement pages may be detached from the counterparts and attached to a single copy of this Amendment to physically form one (1) document. 

4. Voluntary Consent; Reasonable Terms. Landlord and Tenant have carefully read and reviewed this Amendment and, by affixing their respective signatures hereto, each acknowledge their informed and voluntary consent to the terms of this Amendment. The parties hereby agree that, at the time of this Amendment is executed, the terms of this Amendment are commercially reasonable and effectuate the intent and purpose of Landlord and the Tenant with respect to the matters addressed herein. 

[SIGNATURE PAGE TO AMENDMENT FOLLOWS] 

 

 

 

2

 

IN WITNESS WHEREOF, this Amendment to Lease has been executed as of the day and year first above written. 

 

	
“Landlord”:
	
 
	
1019 MARKET ST. PROPERTY, LLC,

Delaware limited liability company

	
 
	
 
	
 

	
 
	
 
	
By:
	
 
	
1019 Market St. Holdings III, LLC,

a Delaware limited liability company

Its Managing Member

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ W. Greg Geiger 

	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: W. Greg Geiger

	
 
	
 
	
 
	
 
	
 
	
 
	
Title: Authorized Signer

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
By:
	
 
	
/s/ Sean Armstrong 

	
 
	
 
	
 
	
 
	
 
	
 
	
Printed Name: Sean Armstrong

	
 
	
 
	
 
	
 
	
 
	
 
	
Title: Authorized Signer

	
 
	
 

	
“Tenant”:
	
 
	
ZENDESK, INC.,

a Delaware corporation

	
 
	
 
	
 

	
 
	
 
	
By:
	
 
	
/s Alan Black 

	
 
	
 
	
 
	
 
	
Alan Black (Sep 18, 2014)

	
 
	
 
	
 
	
 
	
Printed Name: Alan Black

	
 
	
 
	
 
	
 
	
Title: Chief Financial Officer

	
 
	
 
	
 

	
 
	
 
	
By:
	
 
	
/s/ John Geschke 

	
 
	
 
	
 
	
 
	
John Geschke (Sep 18, 2014)

	
 
	
 
	
 
	
 
	
Printed Name: John Geschke

	
 
	
 
	
 
	
 
	
Title: General Counsel

 

3

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