Document:

Exhibit
10.9

 

TORREYPINES THERAPEUTICS, INC.

2000 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)

 

Pursuant to your Stock Option
Grant Notice (“Grant Notice”) and this Stock
Option Agreement, TorreyPines Therapeutics, Inc. (the “Company”)
has granted you an option under its 2000 Equity Incentive Plan, as amended (the
“Plan”), to purchase the number of
shares of the Company’s Common Stock indicated in your Grant Notice at the
exercise price indicated in your Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.

 

The details of your option are
as follows:

 

1.             VESTING. Subject to the limitations contained herein,
your option will vest as provided in your Grant Notice, provided that vesting
will cease upon the termination of your Continuous Service.

 

2.             NUMBER OF SHARES
AND EXERCISE PRICE. The
number of shares of Common Stock subject to your option and your exercise price
per share referenced in your Grant Notice may be adjusted from time to time for
Capitalization Adjustments, as provided in the Plan.

 

3.             EXERCISE PRIOR TO
VESTING (“EARLY EXERCISE”).
If permitted in your Grant Notice (i.e., the “Exercise Schedule” indicates that
“Early Exercise” of your option is permitted) and subject to the provisions of
your option, you may elect at any time that is both (i) during the period of
your Continuous Service and (ii) during the term of your option, to exercise
all or part of your option, including the nonvested portion of your option;
provided, however, that:

 

(a)           a partial exercise of your option shall be deemed
to cover first vested shares of Common Stock and then the earliest vesting
installment of unvested shares of Common Stock;

 

(b)           any shares of Common Stock so purchased from
installments that have not vested as of the date of exercise shall be subject
to the purchase option in favor of the Company as described in the Company’s
form of Early Exercise Stock Purchase Agreement;

 

(c)           you shall enter into the Company’s form of Early
Exercise Stock Purchase Agreement with a vesting schedule that will result in
the same vesting as if no early exercise had occurred; and

 

(d)           if your option is
an incentive stock option, then, as provided in the Plan, to the extent that
the aggregate Fair Market Value (determined at the time of grant) of the shares
of Common Stock with respect to which your option plus all other incentive
stock options you hold are exercisable for the first time by you during any
calendar year (under all plans of the Company and its Affiliates) exceeds one
hundred thousand dollars ($100,000), your option(s) or 

 

1

 

portions thereof that
exceed such limit (according to the order in which they were granted) shall be
treated as nonstatutory stock options.

 

4.             METHOD OF PAYMENT. Payment of the exercise price is due in full
upon exercise of all or any part of your option. You may elect to make payment
of the exercise price in cash or by check or in any other manner permitted by your Grant Notice,
which may include one or more of the following:

 

(a)           In the Company’s sole discretion at the time your
option is exercised and provided that at the time of exercise the Common Stock
is publicly traded and quoted regularly in The Wall Street Journal,
pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of Common Stock, results in
either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company
from the sales proceeds.

 

(b)           Provided that at the time of exercise the Common
Stock is publicly traded and quoted regularly in The Wall Street
Journal, by delivery of already-owned shares of Common Stock either
that you have held for the period required to avoid a charge to the Company’s
reported earnings (generally six months) or that you did not acquire, directly
or indirectly from the Company, that are owned free and clear of any liens,
claims, encumbrances or security interests, and that are valued at Fair Market
Value on the date of exercise. “Delivery” for these purposes, in the sole
discretion of the Company at the time you exercise your option, shall include
delivery to the Company of your attestation of ownership of such shares of
Common Stock in a form approved by the Company. Notwithstanding the foregoing,
you may not exercise your option by tender to the Company of Common Stock to
the extent such tender would violate the provisions of any law, regulation or
agreement restricting the redemption of the Company’s stock.

 

5.             WHOLE SHARES. You may exercise your option only for whole
shares of Common Stock.

 

6.             SECURITIES LAW
COMPLIANCE. Notwithstanding
anything to the contrary contained herein, you may not exercise your option
unless the shares of Common Stock issuable upon such exercise are then
registered under the Securities Act or, if such shares of Common Stock are not
then so registered, the Company has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act. The
exercise of your option must also comply with other applicable laws and
regulations governing your option, and you may not exercise your option if the
Company determines that such exercise would not be in material compliance with
such laws and regulations.

 

7.             TERM. You may not exercise your option before the
commencement of its term or after its term expires. The term of your option
commences on the Date of Grant and expires upon the earliest
of the following:

 

(a)           three (3) months after the termination of your
Continuous Service for any reason other than your Disability or death, provided
that if during any part of such three- (3-) month period your option is not
exercisable solely because of the condition set forth in the 

 

2

 

preceding
paragraph relating to “Securities Law Compliance,” your option shall not expire
until the earlier of the Expiration Date or until it shall have been
exercisable for an aggregate period of three (3) months after the termination
of your Continuous Service;

 

(b)           twelve (12) months after the termination of your
Continuous Service due to your Disability;

 

(c)           eighteen (18) months after your death if you die
either during your Continuous Service or within three (3) months after your
Continuous Service terminates;

 

(d)           the Expiration Date indicated in your Grant
Notice; or

 

(e)           the day before the tenth (10th) anniversary of
the Date of Grant.

 

If your option is an incentive
stock option, note that, to obtain the federal income tax advantages associated
with an “incentive stock option,” the Code requires that at all times beginning
on the date of grant of your option and ending on the day three (3) months
before the date of your option’s exercise, you must be an employee of the
Company or an Affiliate, except in the event of your death or Disability. The
Company has provided for extended exercisability of your option under certain
circumstances for your benefit but cannot guarantee that your option will
necessarily be treated as an “incentive stock option” if you continue to
provide services to the Company or an Affiliate as a Consultant or Director
after your employment terminates or if you otherwise exercise your option more
than three (3) months after the date your employment terminates.

 

8.             EXERCISE.

 

(a)           You may exercise the vested portion of your
option (and the unvested portion of your option if your Grant Notice so
permits) during its term by delivering a Notice of Exercise (in a form
designated by the Company) together with the exercise price to the Secretary of
the Company, or to such other person as the Company may designate, during regular
business hours, together with such additional documents as the Company may then
require.

 

(b)           By exercising your option you agree that, as a
condition to any exercise of your option, the Company may require you to enter
into an arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.

 

(c)           If your option is an incentive stock option, by
exercising your option you agree that you will notify the Company in writing
within fifteen (15) days after the date of any disposition of any of the shares
of the Common Stock issued upon exercise of your option that occurs within two
(2) years after the date of your option grant or within one (1) year after such
shares of Common Stock are transferred upon exercise of your option.

 

(d)           By exercising your option you agree that the
Company (or a representative of the underwriter(s)) may, in connection with the
first underwritten registration of the offering 

 

3

 

of
any securities of the Company under the Securities Act, require that you not
sell, dispose of, transfer, make any short sale of, grant any option for the
purchase of, or enter into any hedging or similar transaction with the same
economic effect as a sale, any shares of Common Stock or other securities of
the Company held by you, for a period of time specified by the underwriter(s)
(not to exceed one hundred eighty (180) days) following the effective date of
the registration statement of the Company filed under the Securities Act. You
further agree to execute and deliver such other agreements as may be reasonably
requested by the Company and/or the underwriter(s) that are consistent with the
foregoing or that are necessary to give further effect thereto. In order to enforce
the foregoing covenant, the Company may impose stop-transfer instructions with
respect to your shares of Common Stock until the end of such period. The
underwriters of the Company’s stock are intended third party beneficiaries of
this Section 8(d) and shall have the right, power and authority to enforce the
provisions hereof as though they were a party hereto.

 

9.             TRANSFERABILITY. Your option is not transferable, except by will
or by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.

 

10.          RIGHT OF FIRST
REFUSAL.

 

(a)           Shares of Common Stock that you acquire upon
exercise of your option are subject to any right of first refusal that may be
described in the Company’s bylaws in effect at such time the Company elects to
exercise its right.

 

(b)           If there is no right of first refusal described
in the Company’s bylaws in effect at such time the Company elects to exercise
its right, then you may not validly transfer (as hereinafter defined)
any shares of Common Stock that you acquire
upon exercise of your option, or any interest in such shares, unless
such transfer is solely for cash consideration and is made in compliance with
the following provisions (the Company’s “Right of First Refusal”):

 

(i)            Before there can
be a valid transfer of any shares or any interest therein, the record holder of
the shares to be transferred (the “Offered Shares”)
shall give written notice (by registered or certified mail) to the Company. Such
notice shall specify the identity of the proposed transferee, the cash price offered
for the Offered Shares by the proposed transferee and the other terms and
conditions of the proposed transfer. The date such notice is mailed shall be
hereinafter referred to as the “notice date,”
and the record holder of the Offered Shares shall be hereinafter referred to as
the “Offeror.”  If, from time to time, there is any stock
dividend, stock split or other change in the character or amount of any of the
outstanding stock of the corporation the stock of which is subject to the
provisions of your option, then in such event any and all new, substituted or
additional securities to which you are entitled by reason of your ownership of
the shares acquired upon exercise of your option shall be immediately subject
to the Company’s Right of First Refusal with the same force and effect as the
shares subject to the Company’s Right of First Refusal immediately before such
event.

 

4

 

(ii)           For a period of
thirty (30) calendar days after the notice date, the Company shall have the
option to purchase all (but not less than all) of the Offered Shares at the
purchase price and on the terms set forth in subsection 10(b)(iii). The Company
may exercise its Right of First Refusal by mailing (by registered or certified
mail) written notice of exercise of its Right of First Refusal to the Offeror
prior to the end of said thirty (30) days. The Company may assign its rights
hereunder.

 

(iii)         The price at which
the Company may purchase the Offered Shares pursuant to the exercise of its
Right of First Refusal shall be the cash price offered for the Offered Shares
by the proposed transferee (as set forth in the notice required under
subsection 10(b)(i). The Company’s notice of exercise of its Right of First
Refusal shall be accompanied by full payment for the Offered Shares and, upon
such payment by the Company, the Company shall acquire full right, title and
interest to all of the Offered Shares.

 

(iv)          If, and only if, the
option given pursuant to subsection 10(b)(ii) is not exercised, the transfer
proposed in the notice given pursuant to subsection 10(b)(i) may take place;
provided, however, that such transfer must, in all respects, be exactly as
proposed in said notice except that such transfer may not take place either
before the tenth (10th) calendar day after the expiration of said 30-day option
exercise period or after the ninetieth (90th) calendar day after the expiration
of said 30-day option exercise period, and if such transfer has not taken place
prior to said ninetieth (90th) day, such transfer may not take place without
once again complying with subsection 10(b).

 

(v)            As used in this
subsection 10(b), the term “transfer”
means any sale, encumbrance, pledge, gift or other form of disposition or
transfer of shares of the Company’s stock or any legal or equitable interest
therein; provided, however,
that the term “transfer” does not include a transfer of such shares or
interests by will or by the applicable laws of descent and distribution or a
gift of such shares if the donee agrees to be bound by the provisions of this
subsection 10(b).

 

(vi)          None of the shares
of the Company’s stock purchased on exercise of your option shall be
transferred on the Company’s books nor shall the Company recognize any such
transfer of any such shares or any interest therein unless and until all
applicable provisions of this subsection 10(b) have been complied with in all
respects. The certificates of stock evidencing shares of stock purchased on
exercise of your option shall bear an appropriate legend referring to the
transfer restrictions imposed by this subsection 10(b).

 

(vii)         The Company’s Right of First Refusal shall expire
on the first date upon which any security of the Company is listed (or
approved for listing) upon notice of issuance on any securities exchange or
designated (or approved for designation) upon notice of issuance as a national
market security on an interdealer quotation system if such securities exchange
or interdealer quotation system has been certified in accordance with the
provisions of Section 25100(o) of the California Corporate Securities Law of
1968.

 

11.          RIGHT OF REPURCHASE. To the extent provided in the Company’s bylaws
as amended from time to time, the Company shall have the right to repurchase
all or any part of the shares of Common Stock you acquire pursuant to the
exercise of your option.

 

5

 

12.          OPTION NOT A SERVICE
CONTRACT. Your option is
not an employment or service contract, and nothing in your option shall be
deemed to create in any way whatsoever any obligation on your part to continue
in the employ of the Company or an Affiliate, or of the Company or an Affiliate
to continue your employment. In addition, nothing in your option shall obligate
the Company or an Affiliate, their respective stockholders, Boards of
Directors, Officers or Employees to continue any relationship that you might
have as a Director or Consultant for the Company or an Affiliate.

 

13.          WITHHOLDING
OBLIGATIONS.

 

(a)           At the time you exercise your option, in whole or
in part, or at any time thereafter as requested by the Company, you hereby
authorize withholding from payroll and any other amounts payable to you, and
otherwise agree to make adequate provision for (including by means of a “cashless
exercise” pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.

 

(b)           Upon your request and subject to approval by the
Company, in its sole discretion, and compliance with any applicable conditions
or restrictions of law, the Company may withhold from fully vested shares of
Common Stock otherwise issuable to you upon the exercise of your option a
number of whole shares of Common Stock having a Fair Market Value, determined
by the Company as of the date of exercise, not in excess of the minimum amount
of tax required to be withheld by law. If the date of determination of any tax
withholding obligation is deferred to a date later than the date of exercise of
your option, share withholding pursuant to the preceding sentence shall not be
permitted unless you make a proper and timely election under Section 83(b)
of the Code, covering the aggregate number of shares of Common Stock acquired
upon such exercise with respect to which such determination is otherwise
deferred, to accelerate the determination of such tax withholding obligation to
the date of exercise of your option. Notwithstanding the filing of such
election, shares of Common Stock shall be withheld solely from fully vested
shares of Common Stock determined as of the date of exercise of your option
that are otherwise issuable to you upon such exercise. Any adverse consequences
to you arising in connection with such share withholding procedure shall be
your sole responsibility.

 

(c)           You may not exercise your option unless the tax
withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly,
you may not be able to exercise your option when desired even though your
option is vested, and the Company shall have no obligation to issue a
certificate for such shares of Common Stock or release such shares of Common
Stock from any escrow provided for herein.

 

14.          NOTICES. Any notices provided for in your option or the
Plan shall be given in writing and shall be deemed effectively given upon
receipt or, in the case of notices delivered by mail by the Company to you,
five (5) days after deposit in the United States mail, postage prepaid,
addressed to you at the last address you provided to the Company.

 

6

 

15.          GOVERNING PLAN
DOCUMENT. Your option is
subject to all the provisions of the Plan, the provisions of which are hereby
made a part of your option, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated
and adopted pursuant to the Plan. In the event of any conflict between the
provisions of your option and those of the Plan, the provisions of the Plan
shall control.

 

7Exhibit 10.10

 

LEASE AGREEMENT

 

 

	
  Property Address:

  	
   

  	
  11085 North Torrey Pines Road

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Tenant:

  	
   

  	
  TORREYPINES THERAPEUTICS, INC.

  
	
   

  	
   

  	
   

  
	
  Landlord:

  	
   

  	
  SLOUGH TPSP LLC

  
					

 

 

LEASE AGREEMENT

 

TABLE OF
CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I —
  SCHEDULE OF LEASE TERMS

  	
  1

  
	
   

  	
   

  
	
  Section 1.1 - Schedule

  	
  1

  
	
   

  	
   

  
	
  ARTICLE II —
  PREMISES

  	
  3

  
	
   

  	
   

  
	
  Section 2.1 - Leased Premises

  	
  3

  
	
   

  	
   

  
	
  Section 2.2 - Common Areas and
  Use Thereof

  	
  4

  
	
   

  	
   

  
	
  Section 2.3 - Reservations

  	
  4

  
	
   

  	
   

  
	
  ARTICLE III
  — RENT AND TENANT’S CHARGES

  	
  5

  
	
   

  	
   

  
	
  Section 3.1 - Definitions

  	
  5

  
	
   

  	
   

  
	
  Section 3.2 - Base Rent

  	
  5

  
	
   

  	
   

  
	
  Section 3.3 - Additional Rent

  	
  5

  
	
   

  	
   

  
	
  ARTICLE IV —
  TERM

  	
  6

  
	
   

  	
   

  
	
  Section 4.1 - Initial Term

  	
  6

  
	
   

  	
   

  
	
  Section 4.2 – Renewal Term

  	
  6

  
	
   

  	
   

  
	
  ARTICLE V –
  POSSESSION; TENANT IMPROVEMENTS

  	
  6

  
	
   

  	
   

  
	
  Section 5.1 - Possession

  	
  6

  
	
   

  	
   

  
	
  ARTICLE VI —
  USE AND CONDITION OF LEASED PREMISES; QUIET ENJOYMENT

  	
  6

  
	
   

  	
   

  
	
  Section 6.1 - Use

  	
  6

  
	
   

  	
   

  
	
  Section 6.2 - Compliance With
  Law

  	
  7

  
	
   

  	
   

  
	
  Section 6.3 - Condition of
  Leased Premises

  	
  8

  
	
   

  	
   

  
	
  Section 6.4 - Signs: Exterior
  Windows

  	
  8

  
	
   

  	
   

  
	
  Section 6.5 - Quiet Enjoyment

  	
  8

  
	
   

  	
   

  
	
  Section 6.6 - Encumbrances

  	
  8

  

 

i

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE VII
  — TAXES AND OPERATING COSTS

  	
  9

  
	
   

  	
   

  
	
  Section 7.1 - Taxes

  	
  9

  
	
   

  	
   

  
	
  Section 7.1.1 – General Property
  Taxes

  	
  9

  
	
   

  	
   

  
	
  Section 7.1.2 – Personal
  Property Taxes

  	
  10

  
	
   

  	
   

  
	
  Section 7.2 - Operating Costs

  	
  10

  
	
   

  	
   

  
	
  Section 7.2.1 - Defined

  	
  10

  
	
   

  	
   

  
	
  Section 7.2.2 - Payment

  	
  11

  
	
   

  	
   

  
	
  Section 7.3 - Landlord’s
  Statement: Inspection of Records

  	
  12

  
	
   

  	
   

  
	
  ARTICLE VIII
  — INSURANCE

  	
  12

  
	
   

  	
   

  
	
  Section 8.1 - Liability and
  Property Insurance

  	
  12

  
	
   

  	
   

  
	
  Section 8.2 - Quality Of
  Policies; Certificates

  	
  14

  
	
   

  	
   

  
	
  Section 8.3 - Waiver Of
  Subrogation; Release

  	
  14

  
	
   

  	
   

  
	
  Section 8.4 - Increase In
  Premiums

  	
  14

  
	
   

  	
   

  
	
  Section 8.5 - Indemnification

  	
  15

  
	
   

  	
   

  
	
  Section 8.6 - Blanket Policy

  	
  15

  
	
   

  	
   

  
	
  ARTICLE IX —
  ALTERATIONS, MAINTENANCE, REPAIRS AND REPLACEMENTS

  	
  16

  
	
   

  	
   

  
	
  Section 9.1 - Alterations

  	
  16

  
	
   

  	
   

  
	
  Section 9.2- Maintenance,
  Repairs and Replacements of the Leased Premises

  	
  16

  
	
   

  	
   

  
	
  Section 9.3 - Mechanics’ Liens

  	
  17

  
	
   

  	
   

  
	
  Section 9.4 – Roof: Other
  Systems

  	
  17

  
	
   

  	
   

  
	
  ARTICLE X —
  DAMAGE, DESTRUCTION AND EMINENT DOMAIN

  	
  17

  
	
   

  	
   

  
	
  Section 10.1 - Fire, Explosion
  or Other Casualty

  	
  17

  
	
   

  	
   

  
	
  Section 10.2 - Eminent Domain

  	
  18

  
	
   

  	
   

  
	
  ARTICLE XI —
  LIMITATION OF LANDLORD’S LIABILITY

  	
  19

  
	
   

  	
   

  
	
  Section 11.1 – Indemnification
  By Tenant

  	
  19

  

 

ii

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  Section 11.2 - Limitation of
  Landlord’s Liability

  	
  19

  
	
   

  	
   

  
	
  ARTICLE XII
  — ASSIGNMENT AND SUBLETTING

  	
  20

  
	
   

  	
   

  
	
  Section 12.1 - By Tenant

  	
  20

  
	
   

  	
   

  
	
  Section 12.2 - By Landlord

  	
  21

  
	
   

  	
   

  
	
  ARTICLE XIII
  — DEFAULT AND LANDLORD’S REMEDIES

  	
  22

  
	
   

  	
   

  
	
  Section 13.1 - Defaults

  	
  22

  
	
   

  	
   

  
	
  Section 13.2 - Landlord’s
  Remedies

  	
  22

  
	
   

  	
   

  
	
  Section 13.3 - Holdover by
  Tenant

  	
  24

  
	
   

  	
   

  
	
  Section 13.4 - Storage of
  Tenant’s Property

  	
  25

  
	
   

  	
   

  
	
  ARTICLE XIV—
  ASBESTOS AND HAZARDOUS SUBSTANCES

  	
  25

  
	
   

  	
   

  
	
  Section 14.1 - Hazardous
  Substance

  	
  25

  
	
   

  	
   

  
	
  ARTICLE XV —
  UTILITIES

  	
  29

  
	
   

  	
   

  
	
  Section 15.1 - Utilities

  	
  29

  
	
   

  	
   

  
	
  ARTICLE XVI
  — RIGHTS RESERVED TO LANDLORD; RULES AND REGULATIONS

  	
  30

  
	
   

  	
   

  
	
  Section 16.1 - Rights Reserved
  to Landlord

  	
  30

  
	
   

  	
   

  
	
  Section 16.2 — Rules and
  Regulations

  	
  31

  
	
   

  	
   

  
	
  ARTICLE XVII
  — NOTICES

  	
  33

  
	
   

  	
   

  
	
  Section 17.1 - Notices

  	
  33

  
	
   

  	
   

  
	
  ARTICLE
  XVIII — PARKING

  	
  34

  
	
   

  	
   

  
	
  Section 18.1 - Parking

  	
  34

  
	
   

  	
   

  
	
  ARTICLE XIX
  — MISCELLANEOUS

  	
  34

  
	
   

  	
   

  
	
  Section 19.1 - Tenant’s
  Statement

  	
  34

  
	
   

  	
   

  
	
  Section 19.2 - Estoppel
  Certificates

  	
  34

  
	
   

  	
   

  
	
  Section 19.3 - Relationship of
  Parties

  	
  34

  
	
   

  	
   

  
	
  Section 19.4 - Landlord’s
  Expenses; Attorneys’ Fees

  	
  34

  

 

iii

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  Section 19.5 - Interest on
  Unpaid Amounts

  	
  35

  
	
   

  	
   

  
	
  Section 19.6 - Applicable Law
  and Construction

  	
  35

  
	
   

  	
   

  
	
  Section 19.7 - Delays

  	
  35

  
	
   

  	
   

  
	
  Section 19.8 - Access by
  Landlord

  	
  35

  
	
   

  	
   

  
	
  Section 19.9 - Brokerage

  	
  36

  
	
   

  	
   

  
	
  Section 19.10 - Execution of
  Lease

  	
  36

  
	
   

  	
   

  
	
  Section 19.11 - Security Deposit

  	
  36

  
	
   

  	
   

  
	
  Section 19.12 - Heirs,
  Successors and Assigns

  	
  37

  
	
   

  	
   

  
	
  Section 19.13 - Subordination

  	
  37

  
	
   

  	
   

  
	
  Section 19.14 - Payments to Affiliates

  	
  37

  
	
   

  	
   

  
	
  Section 19.15 - Meaning of
  “Re-entry” and “Landlord”

  	
  37

  
	
   

  	
   

  
	
  Section 19.16 - Remedies and
  Rights May Be Exercised by Landlord In its Own Name: Authority to Execute
  This Lease

  	
  37

  
	
   

  	
   

  
	
  Section 19.17 - Time of Essence

  	
  38

  

 

iv

 

LEASE AGREEMENT

 

THIS LEASE
AGREEMENT (the “Lease”) is made and entered into this 18th day of July,
2005 by and between the party named below in the Schedule of Lease Terms (the “Schedule”)
as the Landlord (the “Landlord”) and the party named below in the Schedule as
the Tenant (“Tenant”).

 

For and in
consideration of the rents reserved and the covenants and agreements herein
contained on the part of Tenant to be kept, performed and observed, Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord the premises
defined in the Schedule as the Leased Premises for the Term specified in the
Schedule and upon the terms and conditions hereinafter set forth.

 

RECITALS

 

1.             Tenant currently
occupies the Leased Premises pursuant to a Sublease dated August 31, 2000 (the “Sublease”)
between Tenant, as subtenant, and Idun Pharmaceuticals, Inc., as sublandlord (“Sublandlord”).

 

2.             Sublandlord is the
Tenant of the Leased Premises pursuant to a Lease dated December 15, 1995, (the
“Prior Lease”), which lease was assigned to Landlord in conjunction with
Landlord’s acquisition of the Project.

 

3.             Tenant and Landlord
wish Tenant’s use and occupancy of the Leased Premises to continue in
accordance with the terms, provisions and conditions hereof.

 

4.             Tenant’s business is
operating in the Leased Premises, and Tenant has familiarity with the Leased
Premises.

 

ARTICLE I

SCHEDULE OF LEASE TERMS

 

Section 1.1 -
Schedule

 

The following
Schedule of Lease Terms is an integral part of this Lease and is referred to
throughout this Lease.  Each reference in
this Lease to the Schedule or any term therein shall be construed to
incorporate all of the terms provided for under such provision of the Schedule.

 

	
  Landlord:

  	
   

  	
  Slough TPSP
  LLC, a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
  Tenant:

  	
   

  	
  TorreyPines
  Therapeutics, Inc., a Delaware corporation

  

 

Leased Premises:  That certain interior premises located in
Suite 300, 11085 North Torrey Pines Road and designated on attached Exhibit
A.  Any outdoor patio area (“Patio Area”)
is not included in the rentable square footage of the Premises for purposes of
this Lease.  Tenant, however, shall have
exclusive use of said Patio Area.

 

Building:  11085 North Torrey Pines Road, La Jolla,
California, consisting of approximately 85,676 square feet of Building Area.

 

1

 

Term:

 

(a)           Initial Term.

 

Commencement
Date:  February 10, 2006.

 

Termination
Date:  On the last day of the last month
of the 3rd Lease Year, subject to earlier termination as provided in this
Lease.

 

(b)           Renewal Term.  The period of time by which this Lease is
extended, as provided in Rider 101 annexed hereto.

 

Rentable
Area: 
Approximately 20,162 rentable square feet, subject to modification as
provided herein.

 

Tenant’s
Proportionate Share:

 

(a)           Tenant’s Proportionate Share:  A fraction, the numerator of which is the
rentable area of the Leased Premises (20,162 square feet) and the denominator
of which is the Total Rentable Area of the Project (currently 291,817 square
feet).

 

(b)           Tenant’s Share of Taxes:  Tenant’s Proportionate Share
multiplied by Taxes (as defined in Section 7.1 hereof).

 

(c)           Tenant’s Share of Operating Costs:  Tenant’s Proportionate Share
multiplied by Operating Costs (as defined in Section 7.2 hereof).

 

Permitted
Use:  Only for
the uses permitted in accordance with the Scientific Research Zoning Ordinance
of the City of San Diego, and for no other purpose without Landlord’s written
consent.

 

Project
or Property: 
The approximately 17 acres along the south side of North Torrey Pines
Road in La Jolla, California, improved with four buildings commonly known as
11011, 11025, 11077 and 11085 North Torrey Pines Road.  The “Total Rentable Area” of the Project is
approximately 291,817 square feet.

 

Security
Deposit: 
$49,396.90

 

Base
Rent:

 

	
  Portion of Term

  	
   

  	
  Monthly Base Rent

  PSF(1)

  	
   

  	
  Monthly Base Rent(1)

  Based Upon 20,162

  Rentable Square Feet

  	
   

  
	
  From Commencement Date to February 28,
  2007, inclusive

  	
   

  	
  $

  	
  2.45

  	
   

  	
  $

  	
  49,396.90

  	
   

  
	
  From March 1, 2007 to February 29, 2008,
  inclusive

  	
   

  	
  $

  	
  2.52

  	
   

  	
  $

  	
  50,808.24

  	
   

  
	
  From March 1, 2008 to February 28, 2009,
  inclusive

  	
   

  	
  $

  	
  2.60

  	
   

  	
  $

  	
  52,421.20

  	
   

  

 

2

 

(1)   Monthly Base Rent PSF (except for the Initial
Monthly Base Rent) is rounded and is for general illustrative purposes
only.  The actual Rent is calculated in
the Monthly Base Rent column and is an increase of 3.0% over that for the
previous year.

 

Guarantor(s):  None

 

Broker(s):
 Phase 3
Properties, Burnham Real Estate

 

Exhibits:

 

Exhibit A -
Plan (with location of Leased Premises designated))

 

Riders:

 

Rider 101 – Option to Renew

 

Common
Area:

 

As used in
this Lease, “Project Common Areas” shall mean all areas within the Project, not
including Building Common Areas (as hereinafter defined), and “Building Common
Areas” shall mean all the areas within the Building, which are available for
the common use of tenants of the Project and/or the Building and which are not
leased or held for the exclusive use of Tenant or other tenants of the Project
and/or the Building, including, but not limited to, parking areas, driveways,
sidewalks, loading areas, retaining walls, truck service ways, pedestrian
malls, stairs, ramps, restrooms, access roads, corridors, landscaping and
planted areas, and elevators.  The
Project Common Areas and the Building Common Areas may sometimes collectively
be referred to as the “Common Area.” 
Outdoor patio areas, even if reserved for the exclusive use of a single
tenant, are included in Common Areas. Landlord may from time to time reasonably
change the size, location, nature and use of the Common Area, including
converting common areas into leasable areas, constructing additional parking
facilities (including parking structures) in the common areas, and increasing or
decreasing Common Area land and/or facilities. 
Tenant acknowledges that such activities may result in occasional
inconvenience to Tenant from time to time. 
Such activities and changes shall be expressly permitted only if they do
not materially affect Tenant’s use of the Leased Premises, materially increase
Tenant’s Share of Taxes or Tenant’s Share of Operating Costs, and/or
significantly adversely affect Tenant’s access and use of the common areas and
parking.

 

ARTICLE II

PREMISES

 

Section 2.1 -
Leased Premises

 

Landlord is
the owner of the real estate consisting of a building located in the
development designated in the Schedule. 
That portion of the Building consisting of the Leased Premises set forth
in the Schedule and containing the area designated therein is crosshatched on
the plan attached hereto as Exhibit A.

 

3

 

Section 2.2 -
Common Areas and Use Thereof

 

Tenant and
Tenant’s officers, employees, agents, licensees and invitees shall have the
non-exclusive right, in common with Landlord and all tenants and occupants of
the Project or portions thereof and all others to whom Landlord has or may
hereafter grant such right, to use the Common Areas as designated from time to
time by Landlord subject to such reasonable regulations as Landlord may from
time to time impose including the designation of specific times during which
the Common Areas may be utilized and the designation of specific areas in which
trucks, automobiles and/or other vehicles may be parked and in which materials,
including trash and other debris, may be left or stored.  Tenant hereby authorizes Landlord to remove
by whatever means Landlord deems expedient any truck, automobile or other
vehicle parked and/or materials located on the Land outside the areas
designated therefor.  Tenant further
agrees upon demand to reimburse Landlord for the cost to Landlord of each such
removal attributable to Tenant and agrees to indemnify and hold Landlord
harmless with respect thereto.

 

Tenant agrees
to abide by all reasonable regulations respecting the use of the Common Areas
adopted from time to time by Landlord during the term of this Lease and agrees
to cause Tenant’s officers, employees, agents, licensees and invitees to
conform thereto.  Landlord, upon such
advance notice, if any, as is reasonable under the circumstances, may at any
time temporarily close the Common Areas or any portion or portions thereof to
make repairs or changes therein, to prevent the acquisition of public rights
therein, or to discourage use or parking not in conformity with Landlord’s
regulations and may do such other acts in and to the Common Areas as in
Landlord’s judgment may be desirable to improve the convenience thereof.  Such repairs, changes and acts shall be
performed in such reasonable manner as will, to the extent practical, minimize
interference with the conduct of Tenant’s operations.  Tenant, upon request shall furnish to
Landlord the license number and description of each automobile and other
vehicle operated in and around the Project by Tenant and Tenant’s officers and
employees.  Tenant shall not at any time
interfere with the rights of Landlord, its beneficiaries and/or other tenants
or occupants of the Project, its and their officers, employees, agents,
licensees and invitees to use any part of the Common Areas.

 

Section 2.3 -
Reservations

 

Landlord, upon
such advance notice, if any, as may be reasonable under the circumstances,
reserves the right to construct, operate, maintain, test, enlarge, change,
repair and replace within the Leased Premises and Project such sewers, pipes,
drains, conduits, wires, cables, structural members and the like as may be
deemed necessary by Landlord to provide service to Landlord, Tenant, other
tenants or occupants of the Building or Project or to fulfill Landlord’s duties
under this Lease or under any other lease of a portion of the Building or
Project.  Landlord shall have access to
the Leased Premises at all times in the case of an emergency and otherwise at
such times as do not materially and adversely disturb the conduct of Tenant’s
operations for the exercise of the foregoing reserved rights and no such
exercise shall operate as an eviction thereunder.

 

Landlord
reserves that right to perform any future development within the Project.  Landlord shall have the right to make any
reasonable and appropriate changes to the Common Areas and Tenant’s
Proportionate Share to accommodate any such future development.

 

4

 

ARTICLE III

RENT AND TENANT’S CHARGES

 

Section 3.1 -
Definitions

 

For the
purposes of this Lease:

 

(a)           “Building Area” means
the aggregate rentable square foot area of the Building within the outside face
of exterior walls.  At the commencement
of the Term, the Building Area is the square footage set forth in the Schedule;

 

(b)           “Rentable Area” means
the square foot area of the Leased Premises. 
At the commencement of the Term, the Rentable Area is the square footage
set forth in the Schedule;

 

(c)           “Tenant’s Building
Proportionate Share” means the percentage equal to the fraction, the numerator
of which is the number of square feet of Rentable Area and the denominator of
which is the number of square feet of Building Area.  At the commencement of the Term, Tenant’s
Building Proportionate Share is the percentage set forth in the Schedule;

 

(d)           “Tenant’s Project
Proportionate Share” means the percentage equal to the fraction, the numerator
of which is the number of square feet of Rentable Area and the denominator of
which is the number of square feet of Project Area.  At the commencement of the Term, Tenant’s
Project Proportionate Share is the percentage set forth in the Schedule;

 

(e)           “Project Area” means
the aggregate rentable square foot area of the Project.  At the commencement of the Term, the Project
Area is the square footage set forth in the Schedule; and

 

(f)            “Lease Year” means the
12-month period commencing on the Commencement Date set forth in the Schedule
if the Commencement Date is the first day of a month or on the first day of the
first full month after the Commencement Date if the Commencement Date does not
occur on the first day of a month and each 12-month period thereafter during
the Term commencing on the anniversary of the commencement of the first Lease
Year.

 

Section 3.2 -
Base Rent

 

Tenant agrees
to pay to Landlord in advance, without demand or any deduction whatsoever, at
the address of Landlord set forth in the Schedule or to such other person, or
at such other place as Landlord may from time to time in writing direct,
monthly installments of basic rent (the “Base Rent”) as set forth in the
Schedule on or before the first day of every calendar month of the Term and pro
rata, in advance, for any partial month, without demand and without any set off
or deduction whatsoever.  The covenants
to pay rent shall be independent of any other covenant.  In the event that Tenant shall fail to pay
Base Rent or Additional Rent due hereunder within five (5) days after the same
becomes due, then in addition to all rights, powers and remedies provided
herein, by law or otherwise in the case of nonpayment of rent, Landlord shall
be entitled to recover from Tenant and Tenant agrees to pay to Landlord, on
demand, a late payment charge for each such payment due equal to four percent
(4%) of the amount due.  Notwithstanding
the foregoing, Tenant shall not be obligated to pay the late charge pursuant to
this Section 3.2(a) for the first late payment in any Lease Year, provided such
payment is not outstanding more than five (5) days after notice from Landlord.

 

Section 3.3 -
Additional Rent

 

All other
rent, sums, liabilities, obligations and other amounts which Tenant is required
to pay or discharge pursuant to this Lease and any Riders thereto, together
with interest for late

 

5

 

payment thereon, are sometimes
collectively called “Additional Rent.” Additional Rent shall include the
following items:

 

(a)           Tenant’s Share of Taxes
(as defined in Section 7.1), payable at the times set forth in Section 7.3;

 

(b)           Tenant’s Share of
Operating Costs (as defined in Section 7.2), payable at the time set forth in
Section 7.3;

 

(c)           Except to the extent
reimbursed by insurance proceeds, the cost of any maintenance, repairs and
replacements performed by Landlord at Tenant’s cost pursuant to the provisions
of Sections 6.2 or 9.2 within ten (10) days after receipt of Landlord’s
statement therefor;

 

(d)           Any rent escalations
due pursuant to this Lease and any Rider hereto; and

 

(e)           Any other amounts due
Landlord from Tenant pursuant to this Lease Agreement.

 

ARTICLE IV

TERM

 

Section 4.1 -
Initial Term

 

The Initial
Term of this Lease shall commence and terminate as provided in the Schedule.

 

Section 4.2 –
Renewal Term

 

Tenant is
hereby granted the option, pursuant to the terms and conditions set forth in
Rider 1.01 attached hereto to renew this lease for a period of five (5)
years.  Notwithstanding any provision
herein to the contrary such renewal option shall lapse and become null and void
if Tenant does not deliver to Landlord written notice of such renewal before
February 29, 2008.

 

ARTICLE V

POSSESSION

 

Section 5.1 -
Possession

 

Tenant is
currently in possession of the Leased Premises pursuant to the Sublease.  Tenant accepts the Leased Premises in their “as
is” condition and acknowledges that no improvements, maintenance or repair is
required, that the Leased Premises are complete and in good order and
satisfactory condition.

 

ARTICLE VI

USE AND CONDITION OF LEASED PREMISES; QUIET ENJOYMENT

 

Section 6.1 -
Use

 

Tenant shall
use the Leased Premises solely for the uses permitted in accordance with the
Scientific Research Zoning Ordinance of the City of San Diego, and for no other
purpose without

 

6

 

Landlord’s written consent.  Tenant may, subject to the terms and
conditions of this Lease, use the Premises and all Common Areas 24 hours per
day, 7 days per week, every day of the year.

 

Tenant shall
not injure, overload, deface or otherwise damage the Leased Premises or Common
Areas, nor commit any nuisance, nor unreasonably annoy other tenants in the
Building or in the Project or owners or occupants of neighboring property, nor
install or use any sign or other advertising device on the exterior of the
Leased Premises other than signs complying with the provisions of Section 6.4,
nor use or permit the use of any portion of the Leased Premises as living
quarters, sleeping apartments or lodging rooms. 
Tenant shall not use the Leased Premises or the Common Areas for any
purpose or in any manner nor keep, use, or store therein any hazardous
substance or chemical or any inflammable or explosive liquid or material if
such use, conduct or storage (a) will suspend, void or make inoperative any
policy or policies of insurance carried by Landlord or Tenant on any
improvement which is part of the Project or on any business thereon or on any
property of Landlord, Tenant or others therein or (b) will increase the
insurance rating of any such improvement or will increase the cost of any of Landlord’s
insurance.

 

Section 6.2 -
Compliance With Law and Condition of Building and Premises

 

Landlord
warrants and represents that, as of the Commencement Date, (a) Landlord has not
received written notice that the Project or Leased Premises are in violation of
any laws as in effect on said date, (b) the electrical, mechanical, HVAC,
plumbing, sewer, elevator and other systems serving the Building or the Leased
Premises are in good operating condition and repair, provided that Landlord and
Tenant acknowledge that the HVAC system serving the Leased Premises may be
beyond its useful life and in need of repair and replacement, (c) to Landlord’s
actual knowledge, no underground storage tanks are present under the Building,
and (d) no action, proceeding or claim is pending or threatened regarding the
Property concerning hazardous material or pursuant to any environmental
law.  Any cost incurred due to a breach
of the foregoing warranties or the replacement of the HVAC system and equipment
shall be Landlord’s responsibility and shall not be included in Operating
Expenses or Additional Rent payable by Tenant. 
Subject to the foregoing, Tenant is accepting the Premises AS IS and
WITH ALL FAULTS.  Subject to Landlord’s
representations, warranties and obligations expressly set forth herein, Tenant
shall at its sole cost and expense comply or cause compliance with all present
and future laws, ordinances and regulations of duly constituted public
authorities now or hereafter in any manner affecting its specific use, occupancy,
and modification of the Leased Premises, and its use of the Common Areas, the
Project, the sidewalks adjacent thereto or any buildings thereon or the use
thereof, whether or not any such laws, ordinances or regulations which may be
hereafter enacted involve a change of policy on the part of the governmental
authority enacting the same, and Tenant shall promptly remove or cure at Tenant’s
sole cost and expense any of Tenant’s violation of any of said laws, ordinances
and regulations. Tenant shall not permit any unlawful occupation, business or
trade to be conducted on the Leased Premises or any use to be made thereof
contrary to any law, ordinance or regulation. 
Tenant shall be entitled to such opportunity as is reasonable under all
circumstances to contest the validity of any such law, ordinance or regulation
adversely affecting Tenant’s use of the Leased Premises.  Tenant, however, shall hold Landlord
financially harmless and indemnify and defend Landlord from and against the
consequences of any violation of any such law, ordinance or regulation, whether
financial or otherwise.  If any
alterations, repairs or other work shall be required by Tenant to satisfy its
obligations hereunder then same shall be in compliance with the Article IX of
the Lease.  If Tenant shall fail to
satisfy its obligations under this Section 6.2, Landlord may take any

 

7

 

steps or action and undertake
and perform any work required of the Tenant under this Section 6.2, but shall
not be required to do so and the cost thereof shall be paid by Tenant as
provided in Section 3.3(c).

 

Section 6.3 -
Condition of Leased Premises

 

Tenant has
examined and knows the condition of the Leased Premises (excepting any
uncompleted work as Landlord may be obligated to construct hereunder) and
acknowledges that no representation as to the condition and repair thereof has
been made by or on behalf of Landlord prior to or at the execution of this
Lease that is not herein expressed. 
Tenant agrees to take good care of the Leased Premises, subject to the
provisions of this Lease, at the termination of this Lease, by lapse of time or
otherwise, shall deliver the Leased Premises to Landlord in the same condition
and repair as when delivered to Tenant at the commencement of the Term, loss by
fire or other insured casualty and ordinary wear and tear excepted.

 

Section 6.4 -
Signs: Exterior Windows

 

Tenant shall
not install, paint or place nor permit the installation, painting or placement
of any signs or other advertising media, any window ventilation, any air
conditioners, any awnings, any aerials or the like within the Leased Premises,
the Building or the Project, and that will be visible from outside the Leased
Premises, without the prior written consent of Landlord.  Landlord reserves the right to designate the
type, composition and color of all window coverings visible from the outside of
the Building and the dimensions and other requirements of any sign which
Landlord may authorize Tenant to install on the Leased Premises or the
Property.  The cost of Tenant’s signs,
the installation thereof and all governmental permits therefor, including
renewals, shall be paid by Tenant. 
Landlord shall perform all maintenance of Tenant’s signs during the Term
and the entire cost thereof shall be paid by Tenant as Additional Rent.  Notwithstanding the foregoing, Tenant shall
be allowed to keep existing signage without any charge or expense to Tenant.

 

Section 6.5 -
Quiet Enjoyment

 

Provided that
no uncured Default exists, Tenant shall have the peaceful and quiet enjoyment
of the Leased Premises without hindrance on the part of Landlord and Landlord
shall warrant and defend Tenant in such peaceful and quiet enjoyment of the
Leased Premises against the lawful claims of all persons claiming by, through
or under Landlord, but named Landlord shall not be liable for any breach of the
above covenants occurring subsequent to the transfer of title of the Project;
however, the subsequent Landlord shall be responsible for such covenants accruing
after the date of such transfer.

 

Section 6.6 -
Encumbrances

 

Tenant shall
not do any act which shall in any way encumber the Leased Premises, the
Building or the Project or create any claim against the interest or estate of
Landlord in the Leased Premises, the Building or the Project, whether by
operation of law or by virtue of any express or implied contract by
Tenant.  Any claim to, or lien upon, the
Leased Premises, the Building or the Project arising from any act or omission
of Tenant shall accrue only against the leasehold estate of Tenant and shall be
subject and subordinate to the paramount title and rights of Landlord in and to
the Leased Premises, the Building and the Project.

 

8

 

ARTICLE VII

TAXES AND OPERATING COSTS

 

Section 7.1 -
Taxes

 

Section 7.1.1 –
General Property Taxes

 

(a)           Definition.  The term “Taxes” shall mean any taxes or fees
levied, assessed or charged, directly or indirectly, upon the Project and all
portions thereof (including, but not limited to Building), based upon the
ownership, leasing, renting or operating of the Project.  Taxes include, without limitation, real
estate taxes, personal property taxes, sewer rents, water rents, assessments
(special or otherwise), transit taxes, any tax or charge for fire protection,
streets, sidewalks, road maintenance, refuse or other service, any tax imposed
upon this transaction, any tax or
excise or rent or any other tax or fee (however described) on account of rental
received for use and occupancy of any or all of the Project, whether any such
taxes are imposed by the United States, the state, any local governmental
municipality, county or authority or agency, or any other political subdivision
of any thereof.  Taxes shall also include
all reasonable costs and expenses (including, without limitation, legal fees
and court costs) charged for the protest or the reduction of any of the
aforesaid taxes, whether such protest or reduction is ultimately successful or
not.  Upon the request of Landlord,
Tenant will cooperate with Landlord and will execute any document which may be
reasonably necessary and proper for any such protest or contest
proceeding.  Landlord shall have the
right, but not the obligation, to withhold the payment of any Taxes, in
connection with any such protest or contest.

 

If at any time
during the Term, a tax or excise on rents or income or other tax however
described (herein called “Rent Tax”) is levied or assessed by the State of
California, or any political subdivision thereof or other governmental
authority, on account of the rents hereunder or the interest of Landlord (or of
Landlord’s beneficiaries) under this Lease, and if such Rent Tax is in lieu of,
in addition to or as a substitute for, in whole or in part, real estate taxes
or other ad valorem taxes, such Rent Tax shall be included in Taxes.

 

(b)           Payment.  Tenant’s Share of Taxes during the Term
hereof shall be paid in monthly installments on or before the first day of each
calendar month during the Term, in advance, in an amount estimated in writing
by Landlord from time to time.  Upon
receipt of all tax bills and assessment bills attributable to any calendar year
during the Term, Landlord shall furnish Tenant with a written statement of the
actual amount of Tenant’s Share of Taxes for such year.  If the total amount paid by Tenant under this
Section for any calendar year during the Term of this Lease shall be less than
the actual amount due from Tenant for such year as shown on such statement,
Tenant shall pay to Landlord the difference between the amount paid by Tenant
and the actual amount due; such deficiency to be paid within ten (10) days
after demand therefor by Landlord; and if the total amount paid by Tenant
hereunder for any such calendar year shall exceed such actual amount due from
Tenant for such calendar year, such excess shall be credited against payments
hereunder next due, or, if no payments are next due, refunded by Landlord.  All amounts due hereunder shall be payable in
the manner and at such place as the rent payments provided for herein.  Landlord’s and Tenant’s obligations under
this Article shall survive the expiration of the Term.

 

Taxes shall
not include (a) any net income, capital, stock, succession, transfer,
franchise, gift, estate, sales or inheritance taxes or (b) any fine, penalty or
interest that results from Landlord’s failure to pay any Tax in a timely
fashion.

 

9

 

Section 7.1.2 –
Personal Property Taxes

 

(a)           Tenant shall pay prior
to delinquency, all taxes charged against trade fixtures, furnishings,
equipment and all other personal property belonging to Tenant.  Tenant shall attempt to have such personal
property taxed separately from the Premises.

 

(b)           If any such taxes on
Tenant’s personal property are levied against Landlord or the Project, or if
the assessed value of the Project is increased by the inclusion therein of a
value placed upon such personal property or trade fixtures of Tenant, then
Landlord after written notice to Tenant, shall have the right to pay the taxes
based on such increased assessments, regardless of the validity thereof, but
only under proper protest if requested by Tenant in writing.  If Landlord shall do so, then Tenant shall,
upon demand, repay to Landlord the taxes levied against Landlord, where the
proportion of such taxes resulting from such increase in the assessment.  In any such event, however, Tenant, at Tenant’s
sole cost and expense, shall have the right, in the name of Landlord and with
Landlord’s cooperation, to bring suit in any court of competent jurisdiction to
recover the amount of any such taxes so paid under protest; any amount so
recovered shall belong to Tenant.

 

(c)           If any of Tenant’s
personal property is taxed with the Project, Tenant shall pay Landlord the
taxes for the personal property within fifteen (15) days after Tenant receives
a written statement from Landlord for such personal property taxes.

 

Section 7.2 -
Operating Costs

 

Section 7.2.1
- Defined

 

As used in
this Lease the term “Operating Costs” shall mean and refer to all reasonable
costs and expenses of every kind and nature, paid or incurred by Landlord
during the Term in operating, insuring, managing, equipping, policing,
protecting, heating, cooling, lighting, repairing, replacing and maintaining
the Leased Premises, the Building and the Project [including, but not limited
to, periodic maintenance and repair of the exterior, roof, structural elements
and mechanical systems of the Leased Premises, the Building and the Project, the
cost of any maintenance contracts for HVAC units and for other mechanical
systems, the repair of HVAC units and components and of the mechanical systems
thereof, the cost of insurance in such amounts and against such risks as
Landlord shall require (including, without limitation, casualty, comprehensive,
general liability, excess single limit liability and rent insurance); fees for
management and supervision not to exceed 3.5% of all base rent, additional rent
and other charges collected by Landlord at the Project, landscaping,
accounting, lighting, refuse removal, maintenance of signs, and compliance with
government laws, ordinance, rules, regulations and the like applicable to the
Project, repair and maintenance of parking areas and Common Areas; provided,
however, that Operating Costs shall not include the following: (a) costs of
alterations of any tenant’s premises, except for repairs to the Project or
capital improvements otherwise includable in Operating Costs; (b) principal and
interest payments on loans secured by mortgages or trust deeds encumbering the
Project or the leasehold, ground lease rent, and any costs, fees or payments in
connection therewith; (c) costs of capital improvements, except that Operating
Costs shall include the cost during the Term, as reasonably amortized by
Landlord with interest at then current rates for construction financing on the
unamortized amount, of all capital improvements made during the Term (i) to
comply with applicable laws that are enacted after the date hereof, or (ii)
that are reasonably expected to result in a net reduction in Operating Costs;
(d) costs for which Landlord receives direct reimbursement from tenants of the
Project other than by reason

 

10

 

of operating cost clauses; (e)
brokerage and leasing commissions, advertising and marketing costs and other
expenses; (f) depreciation charges; (g) wages and salaries of executive
personnel above the level of “building manager”; (h) costs of financing or
refinancing; (i) any sums paid to a person, corporation, partnership or other
legal entity related to Landlord or its beneficiaries (including partners of
such beneficiaries) which exceed normal and competitive rates otherwise
available for the services or goods in question; and (j) costs and expenses for
which Landlord is solely responsible in Section 9.2.  If during all or any portion of any calendar
year the Project is not fully rented and occupied, Landlord may elect to make an
appropriate adjustment of Operating Costs for such calendar year, employing
sound accounting and management principles, to determine the Operating Costs
that would have been paid or incurred by Landlord had the Project been fully
entered and occupied for the entire calendar year and the amount so determined
shall be deemed to have been the Operating Costs for such calendar year.  Notwithstanding anything contained herein to
the contrary, the provisions of this paragraph with respect to adjustment of
Operating Costs for vacancy shall apply only to Operating Costs which are
variable and which increase as occupancy in the Project increases and shall not
apply to any Operating Costs which do not vary with the amount of occupancy in
the Project.

 

Section 7.2.2
- Payment

 

(a)           Tenant shall pay Tenant’s
Share of Operating Costs, in advance, in monthly installments on the first day
of each month during the Term hereof (prorated for any fractional month), based
upon Landlord’s reasonable estimate of Operating Costs for the then current
year.  Landlord may reasonably adjust
such estimates at any time and from time to time based on Landlord’s experience
and reasonable anticipation of such Operating Costs.  Such adjustment shall be effective as of the
first day of the month following the month during which such modified estimate
is provided to Tenant in writing; Tenant’s monthly payment shall be adjusted so
that the entirety of Landlord’s revised estimate shall have been fully paid by
the end of the then current calendar year.

 

(b)           One Hundred Eighty
(180) days following the end of each calendar year, Landlord shall notify
Tenant in writing (“Landlord’s Statement”) of such Operating Costs for such
calendar year.  If the Tenant’s Share of
Operating Costs due for such calendar year exceeds the payments on account
thereof made during such calendar year, then Tenant, within thirty (30) days
after the date of Landlord’s Statement, shall pay to the Landlord the amount by
which Tenant’s Share of Operating Costs exceeds the payments on account thereof
made during such calendar year.  If the
payments on account of Tenant’s Share of Operating Costs made during such
calendar year exceed the amount thereof owed for such calendar year, then
Landlord shall credit such excess to any rentals then due and owing from
Tenant, until such excess has been exhausted. 
If this Lease shall expire prior to full application of such excess, or
if there is any excess for the calendar year during which this Lease
terminates, then Landlord shall pay to Tenant the balance thereof not
previously applied against the rental and not reasonably required for payment
of Additional Rent for the calendar year in which the Lease expires.

 

No interest or
penalties shall accrue on any amounts which Landlord or Tenant is obligated to
credit or pay to the other by reason of this Section 7.3(b) if paid on time.

 

(c)           With respect to any
calendar year which does not fall entirely within the Term, Tenant shall be
obligated to pay as Additional Rent for such calendar year only a pro rata
share of Additional Rent as hereinabove determined, based upon the number of
days of the term of this Lease falling within the calendar year.  Following expiration or termination of this
Lease,

 

11

 

Tenant shall pay any Additional
Rent due to the Landlord within fifteen (15) days after the date of Tenant’s
receipt of Landlord’s Statement.  Without
limitation on other obligations of Tenant or Landlord which shall survive the
expiration of the term of this Lease, the obligations of Tenant or Landlord to
pay or rebate Additional Rent provided for in this Section 7.2 shall survive
the expiration or termination of this Lease.

 

Section 7.3 -
Landlord’s Statement: Inspection of Records

 

Landlord shall
cause to be kept books and records showing Operating Costs during each calendar
year during the Term in accordance with an appropriate system of accounts and
accounting practices consistently maintained from year to year.  Landlord shall deliver the Landlord’s
Statement to Tenant as promptly as practical following the close of each
calendar year.  The Landlord’s Statement
shall certify the amount of Operating Costs for such calendar year and that the
Landlord’s Statement has been prepared in accordance with the applicable
provisions of this Lease and in accordance with generally accepted property
management accounting principles.  Tenant
shall have the right, on five (5) days notice to Landlord, to examine the
Landlord’s books and records showing the Operating Costs at any time during
normal business hours within sixty (60) days following the receipt of each
Landlord’s Statement.  Unless Tenant
shall notify Landlord of its exception to any items in such Landlord’s
Statement within such period, such Landlord’s Statement shall be deemed
accepted by Tenant.  Tenant shall not be
entitled to defer or withhold any payment of Rent or Additional Rent due
pending the examination of Landlord’s books and records or the resolution of
any dispute with respect thereto.

 

ARTICLE VIII

INSURANCE

 

Section 8.1 -
Liability and Property Insurance.

 

(a)           Landlord shall procure
and maintain in full force and effect at all times during the Term of this
Lease, at Landlord’s cost and expense (but reimbursable as part of the
Operating Costs under Section 7.2 hereof), with such deductibles as Landlord
elects, commercial general liability insurance to protect against liability
arising out of or related to the use of or resulting from any accident
occurring in, upon or about the Property, with combined single limit of
liability of not less than Four Million Dollars ($4,000,000) per occurrence for
bodily injury and property damage.

 

(b)           Landlord shall procure
and maintain in full force and effect at all times during the Term of this
Lease, at Landlord’s cost and expense (but reimbursable as part of the
Operating Costs under Section 7.2 hereof), fire and extended coverage insurance
for the Building and the Project on a full replacement cost basis or any other
basis Landlord may elect.  Landlord’s
insurance may include, earthquake, flood, environmental, excess umbrella
liability, brush fire and land slide coverage to the extent Landlord in its
discretion elects to carry such coverage, and shall have such deductibles and
other terms as Landlord in its discretion determines to be appropriate.  Except as expressly set forth in this
paragraph (b), Landlord shall have no obligation to insure the Tenant
Improvements and shall, in all events, have no obligation to insure any other
alterations, additions or improvements installed by Tenant on or about the
Property.  In addition to the foregoing,
and not by way of limitation, Landlord shall have the right in its sole
discretion to procure and maintain any additional insurance coverage Landlord
deems appropriate at any time during the Term of the Lease (including, but not
limited to, rent

 

12

 

loss, earthquake, flood,
environmental, brush fire and landslide), at Landlord’s cost and expense (but
reimbursable as part of the Operating Costs under Section 7.2 hereof).

 

(c)           Tenant, at Tenant’s
sole cost and expense, shall obtain and keep in force during the Term:

 

(i)            commercial general
liability insurance, including contractual liability, covering the legal
liability of Tenant against claims for bodily injury, death or property damage,
occurring on, in or about the Property and the adjoining land, in the minimum
combined single limit amount of $1,000,000 with respect to any one occurrence.

 

(ii)           worker’s compensation
insurance and employer’s liability insurance (with a minimum limit of $500,000)
covering all liability imposed under the provisions of any worker’s
compensation law, employer’s liability act or similar laws of the State of
California that may at any time or from time to time be enacted;

 

(iii)          insurance covering
Tenant Improvements, all contents, and Tenant’s trade fixtures, machinery,
equipment, furniture and furnishing in the Property for their full replacement
cost under Special Form standard fire and extended coverage insurance,
including, without limitation, vandalism and malicious mischief and sprinkler
leakage endorsements, and shall provide for a deductible not to exceed
$25,000.00;

 

(iv)          special form, business
interruption or extra expense insurance; and

 

(v)           umbrella liability
insurance in the amount of $10,000,000 with respect to the risks referred to in
Section 8.1(c)(i).

 

Tenant’s
insurance shall name Landlord, its beneficiaries, agents and employees as
additional insureds.  Tenant’s insurance
shall be primary and shall be exhausted before Landlord’s insurance is
invoked.  All proceeds from insurance
claims shall name Landlord as Loss Payee.

 

(d)           All policies of
property insurance carried under paragraphs (b) and (c) of this Section 8.1
shall provide protection against “all perils of direct physical damage” (as
defined by the Insurance Services Office) on all insured property.  Tenant shall cause Landlord to be named as an
additional insured on such policy. 
Replacement cost for purposes hereof shall be determined according to
insurance industry standards.  Such
insurance policies: (i) shall be written by companies rated A or better, with a
financial rating of not less than Class VII, in Best’s Insurance Guide, and
authorized to do business in California; (ii) shall be written to apply to
covered property damage and other covered loss occurring during the policy
term, or the onset of which occurred or arose during such policy term; (iii)
shall be endorsed, in the case of the insurance covering Tenant’s Improvements,
to name Landlord’s lender (“Lender”), if any, holding the lien of a mortgage or
deed of trust on the Building from time to time as a loss payee; and (iv) shall
provide that the respective coverages shall be primary and not contributing
with or in excess of any coverage that the other party may carry; (v) shall be
endorsed to Landlord with not less than thirty (30) days’ notice of
cancellation (ten (10) days in the case of cancellation for nonpayment); and
(vi) in the case of policies carried or required to be carried by Tenant, shall
provide for a deductible of not to exceed $25,000 (except in the case of
earthquake coverage).  Each party shall
deliver to the other party, on or before the Commencement Date, and thereafter
at least ten (10) days before the expiration dates of expiring policies,
certificates of insurance or

 

13

 

other satisfactory evidence of
the continuation of such property insurance coverage for the period indicated
therein.  If either party fails to
procure property insurance or to deliver certificates or other evidence thereof
as required hereunder, the other party may, at its option and in addition to
the other party’s other remedies in the event of a default hereunder, procure
the same for the benefit of such party. 
If, pursuant to the foregoing sentence, Tenant secures such insurance on
Landlord’s behalf, Tenant shall be entitled to reimbursement of the cost
thereof; if Landlord secures such insurance on Tenant’s behalf, Tenant shall
reimburse Landlord for the cost thereof within ten (10) business days after
receipt of Landlord’s invoice therefor.

 

Section 8.2 -
Quality Of Policies; Certificates.

 

All policies
of insurance required hereunder shall meet the requirements set forth in
Section 8.1(d) above, and shall otherwise be issued by responsible insurers
and, in the case of policies carried or required to be carried by Tenant, shall
be written as primary policies not contributing with and not in excess of any
coverage that Landlord may carry.  Each
party shall deliver to the other party certificates of insurance showing that
the insuring party’s required policies are in effect.  If either party fails to acquire, maintain or
renew any insurance required to be maintained by it under this Section 8 or to
pay the premium therefor, then the other party, at its option and in addition
to its other remedies, but without obligation so to do, may procure such
insurance, and any sums expended to procure any such insurance on behalf of or
in place of the other shall be repaid upon demand, with interest as provided in
Section 19.5 hereof.  Tenant shall obtain
written undertakings from each insurer under policies required to be maintained
by it to notify all insureds thereunder at least thirty (30) days prior to
cancellation.

 

Section 8.3
-Waiver Of Subrogation; Release.

 

Notwithstanding
any provisions hereto to the contrary, to the extent permitted by law and
without affecting the coverage provided by insurance required to be maintained
hereunder, Landlord and Tenant each waive any right to recover against, and
release the other for (i) damage to property, (ii) damage to the Property or
any part thereof, or (iii) claims arising by reason of any of the foregoing,
but only to the extent that any of the foregoing damages and claims under subparts
(i)-(iii) hereof are covered, and only to the extent of such coverage, by
insurance actually carried or required to be carried hereunder by either
Landlord or Tenant.  This provision is
intended to waive fully, and for the benefit of each party, any rights and
claims which might give rise to a right of subrogation in any insurance
carrier.  Each party shall procure a
clause or endorsement on any property insurance policy denying to the insurer
rights of subrogation against the other party to the extent rights have been
waived by the insured prior to the occurrence of injury or loss.  Coverage provided by insurance maintained by
Tenant and Landlord shall not be limited, reduced or diminished by virtue of
the subrogation waiver herein contained.

 

Section 8.4 -
Increase In Premiums.

 

Tenant shall
do all acts and pay all expenses necessary to insure that the Leased Premises
are not used for purposes prohibited by any applicable fire insurance, and that
Tenant’s use of the Leased Premises complies with all requirements necessary to
obtain any such insurance.  If Tenant
uses or permits the Leased Premises to be used in a manner which increases the
existing rate of any insurance on the Leased Premises carried by Landlord,
Tenant shall pay the amount of the increase in premium caused thereby, and
Landlord’s costs of obtaining other

 

14

 

replacement insurance policies,
including any increase in premium, within ten (10) days after demand therefor
by Landlord.

 

Section 8.5 -
Indemnification.

 

(a)           Subject at all times to
the waiver of subrogation provided in Section 8.3 hereof, Tenant shall
indemnify, defend by counsel reasonably acceptable to Landlord and hold
Landlord, its members, partners, shareholders, officers, directors, agents and
employees (the “Landlord Group”) harmless from and against any and all
liability, loss, suits, penalties, fees, actions, injuries, claims, demands,
costs (including, but not limited to, reasonable attorneys’ fees), damages,
expenses or the like of any and every kind, nature and description whatsoever (“Claims”),
in any way involving, arising from, related to or in connection with any act or
omission of, or the use, occupancy and enjoyment of the Leased Premises by
Tenant or any sublessees, officers, directors, shareholders, agents or
employees of Tenant or holding under Tenant from any cause whatsoever
(including, but not limited to, bodily injury to, or death of, any person, or
loss of or damage to the property of persons, any failure on the part of Tenant
to perform or comply with any of the terms of this Lease, the condition of the
Leased Premises for which Tenant is responsible, or the performance of any
labor or services or the furnishing of any materials or other property in respect
of the Leased Premises or any part thereof for Tenant), other than any Claim
arising due to the gross negligence or willful misconduct by Landlord or any of
the Landlord Group.  Except to the extent
caused by the gross negligence or willful misconduct of Landlord or any of the
Landlord Group, but subject at all times to the waiver of subrogation provided
in Section 8.3 hereof, Landlord, its partners, shareholders, officers,
directors, agents and employees shall not be liable for, and Tenant hereby
waives all claims against such persons for damages to goods, wares and
merchandise in or upon the Property, or for injuries to Tenant, its agents or
third persons in or upon the Property. 
Tenant shall give prompt notice to Landlord of any casualty or accident
in, on or about the Leased Premises.

 

(b)           Subject at all times to
the waiver of subrogation provided in Section 8.3 hereof, Landlord shall
indemnify, defend and hold Tenant, its shareholders, officers directors, agents
and employees (the “Tenant Group”) harmless from liability for personal or
bodily injury to or death of any person, or loss of or damage to the property
of persons, and all actions, claims, demands, costs (including, but not limited
to, reasonable attorneys’ fees), damages or expenses arising therefrom which
may be brought or made against Tenant or any of the Tenant Group or which
Tenant or any of the Tenant Group may pay or incur, to the extent such
liabilities or other Claims arise by reason of any gross negligence or willful
misconduct or omission by Landlord or any of the Landlord Group.

 

Section 8.6 -
Blanket Policy.

 

Any policy
required to be maintained hereunder by Landlord or Tenant may be maintained
under a so-called “blanket policy” insuring other parties and other locations
so long as the amount of insurance required to be provided hereunder is not
thereby diminished.

 

15

 

ARTICLE IX

ALTERATIONS, MAINTENANCE, REPAIRS AND REPLACEMENTS

 

Section 9.1 -
Alterations

 

Tenant shall
make no alteration in or addition to the Leased Premises in excess of $15,000
nor permit the making of any hole or in the walls, partitions, ceilings or
floors thereof without on each occasion obtaining the prior written consent of
Landlord (which approval shall not be unreasonably withheld, unless the same
affects the structure or utility or other systems of the Building, in which
event Landlord may withhold its approval in its sole and absolute
discretion).  The construction and installation
of any permitted alteration or addition shall be performed in a good and
workmanlike manner and pursuant to plans and specifications and utilizing
contractors approved by Landlord, which approval shall not be unreasonably
withheld.  Promptly after completion of
any such alterations or additions, Tenant shall provide Landlord with such
documents and/or “as built” working drawings as Landlord may reasonably
request.  Any alteration and/or addition
made by Tenant in or to the Leased Premises, whether or not made with the
consent of Landlord, shall remain on the Leased Premises and without
compensation to Tenant shall become the property of Landlord upon the
termination of this Lease by lapse of time or otherwise; provided, however,
that if Landlord so elects by written notice to Tenant delivered at the time
Landlord consents to such alteration, Tenant shall remove all such alterations
and/or additions and restore the Leased Premises to a condition comparable to
that existing at the time such alterations and/or additions were made.  Nothing herein contained shall prevent the
installation of Tenant’s trade fixtures in the Leased Premises, provided that
such trade fixtures can be installed and removed upon termination of this Lease
without structural damage to the Leased Premises and provided that Tenant shall
remove all such trade fixtures and restore the Leased Premises to a condition
comparable to that existing at the time such installation was made.  Tenant shall make all alterations and
additions to the Leased Premises as are required by governmental authority and
which arise by reason of Tenant’s specific use of the Leased Premises and all
alterations and additions which are made necessary by the act or neglect of
Tenant or any of the Tenant Group.

 

Section 9.2-
Maintenance, Repairs and Replacements of the Leased Premises

 

Subject to the
provisions of Section 10.1, and except as are obligations of Tenant, Landlord
shall perform or cause to be performed all maintenance, repairs and
replacements of the Common Areas and of the exterior, roof and structural
elements of the Building and of the heating, air conditioning and ventilating
systems that do not exclusively serve the Leased Premises, keeping the same in
good repair.  In addition, Landlord shall
be responsible for the replacement, if necessary, of the heating, ventilating
and air conditioning systems that serve the Leased Premises, the cost of which
shall not be included in Operating Costs. 
Except as set forth below and in the immediately preceding sentence, the
cost of all such maintenance, repairs and replacements (other than to the
structural elements, exterior or roof of the Building) shall be a part of the
Operating Costs to the extent otherwise permitted pursuant to Section 7.2.1
hereof; provided, however, that any maintenance, repairs or replacements
(including maintenance, repairs and replacements to the exterior, roof,
structural elements and mechanical systems of the Building), the need for which
arises by reason of any act, negligence or omission of Tenant or any officer,
employee, agent, licensee of Tenant, shall be performed by Landlord, but the
entire cost thereof (as reduced by any applicable insurance proceeds) shall be
paid by Tenant as Additional Rent. 
Landlord shall maintain all Common Areas in an attractive and first class
manner.

 

Tenant shall
be responsible for, and shall perform or cause to be performed at Tenant’s sole
cost and expense in a first class manner and to the reasonable satisfaction of
Landlord, all repairs and maintenance of the Leased Premises, including plumbing
fixtures, the heating,

 

16

 

ventilating and air
conditioning distribution system exclusively serving the Leased Premises
(subject to Landlord’s obligation for repair and replacement as set forth above),
electrical fixtures, bulbs and tubes, interior windows, all cranes, truck
doors, “man doors”, utility doors, elevators and hydraulic lifts located within
the Leased Premises or exclusively serving the Leased Premises and all other
fixtures and equipment of Landlord located therein or exclusively serving the
Leased Premises, keeping the same in good order, condition and repair and in a
clean and tenantable condition and in compliance with all laws, ordinances and
regulations applicable to the repair and maintenance thereof.  If Tenant shall fail so to maintain and
repair the Leased Premises, Landlord may perform such maintenance, but shall
not be required to do so, and the cost thereof shall be paid by Tenant as provided
in Section 3.3(c).

 

Section 9.3 -
Mechanics’ Liens

 

Within ten
(10) days after Tenant receives notice thereof, Tenant shall cause to be
discharged any mechanic’s, laborer’s, materialman’s or other lien to stand
against the Leased Premises for any labor or material furnished to Tenant or
claimed to have been furnished to Tenant in connection with work of any
character performed or claimed to have been performed on or about the Leased
Premises by or at the direction or sufferance of Tenant, whether or not such
work was performed or materials furnished with the consent of Landlord.  Tenant, however, may contest the validity of
any such lien or claim provided that Tenant shall deposit with Landlord a cash
deposit of at least 150% of such lien or claim (or such other security as
Landlord shall reasonably require) and shall take all steps which may be
reasonably required to prevent any sale, foreclosure or forfeiture of the
Leased Premises, the Building or the Project by reason of nonpayment, and shall
diligently prosecute the defense thereof. 
Upon a final determination of the validity of any such lien or claim,
Tenant shall immediately pay any judgment or decree rendered, with all proper
costs and charges, and shall cause any such lien to be released of record
without cost to Landlord.  If Tenant, in
Landlord’s opinion, shall fail or cease to diligently prosecute such action or
if Tenant shall fail to pay any judgment or decree rendered (including all
interest, penalties, costs, charges and Landlord’s expenses, including court
costs and attorneys’ fees), and Tenant shall fail to cure such failure within
ten (10) days after written notice from Landlord, Landlord may pay the entire
amount of such claim or lien, or such judgment or decree rendered and other
amounts set forth above, out of such deposit and shall return the remainder of
such amount, if any, to Tenant.

 

Section 9.4 –
Roof: Other Systems

 

Tenant shall
not permit, nor take any action which will cause, the termination or reduction
in scope of any guaranty or warranty of any portion of the Project (including,
but not limited to the Leased Premises, the Building, the roof of the Building
or any system).  In this regard, but
without limitation, Tenant shall perform no acts on, place any equipment on nor
cause any penetrations of the roof of the Building; nor shall Tenant place any
excessive use on any Building System.

 

ARTICLE X

DAMAGE, DESTRUCTION AND EMINENT DOMAIN

 

Section 10.1 -
Fire, Explosion or Other Casualty

 

In the event
the Leased Premises are damaged by fire, explosion or any other casualty and
this Lease is not terminated as hereafter provided, then, subject to the other
provisions of this

 

17

 

Lease, the damage shall be
diligently repaired by Landlord; provided, however, that in no event shall
Landlord be required to repair or replace Tenant’s stock, fixtures, furniture,
furnishings, floor coverings, equipment or the like, or alterations or
additions to the Leased Premises made by Tenant.  In the event of any such damage and (a) if
the Leased Premises shall be damaged to the extent of fifty percent (50%) or
more of the cost of replacement, (b) if the Building is damaged to the extent
of twenty-five percent (25%) or more of the cost of replacement, or (c) if the
casualty shall render the Leased Premises untenantable or the damage cannot in
Landlord’s reasonable judgment be repaired within one hundred eighty (180) days
after the happening thereof, then Landlord may terminate this Lease by written
notice to Tenant.  The cost of
replacement for purposes hereof shall be determined by a licensed architect
selected by Landlord.  In the event of
any damage to the Leased Premises by fire, explosion or any other casualty,
Landlord shall deliver its reasonable estimate of the time required to restore
the Leased Premises to a tenantable condition (i.e., such that Tenant
can reasonably carry on its normal business operations in the Leased Premises)
within sixty (60) days after the occurrence thereof.  If such estimate exceeds one hundred eighty
(180) days, either party may terminate this Lease by written notice to the
other given if at all within thirty (30) days after Tenant’s receipt of
Landlord’s estimate.  Notwithstanding
anything to the contrary contained herein, if the repair of the Leased Premises
is not substantially completed within a period of one hundred eighty (180) days
after the date of the occurrence of such damage, then Tenant may terminate this
Lease by written notice to the other party given within fifteen (15) days after
the expiration of such one hundred eighty (180) day period.  In the event of any termination pursuant to
this Section 10.1, all obligations of the parties accruing after such
termination, including the obligation to pay rent and other charges, shall
cease upon delivery of such notice.

 

If such
casualty shall render the Leased Premises or any portion thereof unsuitable for
Tenant’s use there as conducted immediately prior to such casualty, then the
Base Rent and Additional Rent shall be abated as hereinafter set forth.  Any abatement or rent hereunder shall be on a
per diem basis in an amount bearing the same ratio to such rent for the period
of unsuitability as the unsuitable portion of the Leased Premises bears to the
entire Leased Premises.

 

Section 10.2 -
Eminent Domain

 

If the whole
of the Leased Premises shall be taken by any public authority under the power
of eminent domain, this Lease shall cease as of the day possession shall be
taken by such public authority and Tenant shall pay rent up to that date with
an appropriate refund by Landlord of any rent which has been paid in advance
for a period of subsequent to the date possession is so taken.  If ten percent (10%) or less of the area of
the Leased Premises shall be so taken and if the remainder thereof and of the
Common Areas is tenantable by Tenant for the purposes for which the Leased
Premises were used immediately prior thereto and Tenant’s parking rights are
not materially affected, then this Lease shall cease only as to the parts so
taken as of the day possession shall be so taken by such public authority and
Tenant shall pay rent for such parts up to that day with an appropriate refund
by Landlord of any rent which has been paid in advance for a period subsequent
to the date possession is so taken, and thereafter the Base Rent and Additional
Rent shall be equitably adjusted. 
Landlord, at Landlord’s expense, shall make all necessary repairs or
alterations to the Leased Premises and Common Areas so as to constitute the
remaining premises a complete architectural unit; provided, that if the
reasonable cost of such repairs or alterations (as determined by a licensed
architect selected by Landlord) will exceed the amount of the award or if such
repairs or alterations cannot in Landlord’s reasonable judgment

 

18

 

be completed within sixty (60)
days, then either Tenant or Landlord may terminate this Lease as of the day of
possession by written notice to the other party and Tenant shall pay rent and
other charges to such termination.  If
more than ten percent (10%) of the area of the Leased Premises shall be so
taken or if such portion of the Common Areas is so taken that the remainder is
not reasonably suitable for the purposes for which the Leased Premises were
used immediately prior to such taking, then either party shall have the right
to terminate this Lease upon notice in writing to the other delivered on or
before the day of surrendering possession to the public authority.  If neither party so terminates, all of the
provisions of this Lease shall continue to effect, except that the rent and
other charges payable by Tenant shall be equitably adjusted, and Landlord shall
make all necessary repairs or alterations to the Leased Premises and Common
Areas so as to constitute the remaining premises a complete architectural
unit.  If more than ten percent (10%) of
the aggregate floor area of the Building or more than ten percent (10%) of the
area of the Land shall be taken under the power of eminent domain then
Landlord, by notice in writing to Tenant delivered on or before the day of
surrendering possession to public authority, may terminate this Lease and rent
shall be paid or refunded as of the date of possession.  All compensation awarded for any taking under
the power of eminent domain, whether for the whole or a part of the Leased
Premises, the Building or any part of the Project shall be the property of
Landlord, whether awarded as compensation for diminution in the value of the
leasehold or to the fee of the Leased Premises or otherwise, and Tenant hereby
assigns to Landlord all of the Tenant’s right, title and interest in and to any
and all such compensation; provided, however, that Landlord shall not be
entitled to any award made expressly to Tenant for the taking of Tenant’s trade
fixtures or furniture or for Tenant’s moving costs.

 

ARTICLE XI

INDEMNIFICATION AND WAIVER; LIMITATION OF LANDLORD’S LIABILITY

 

Section 11.1 –
Indemnification By Tenant – See Section 8.5 above

 

Section 11.2 -
Limitation of Landlord’s Liability

 

Except to the
extent any Claims arise due to the gross negligence or willful misconduct of
Landlord or anyone claiming by, through or under Landlord, Tenant, as a
material part of the consideration to be rendered to Landlord under this Lease,
to the extent permitted by law, hereby waives all claims against Landlord
caused by or resulting in any way, directly or indirectly, from any action or
failure to act of Landlord, its agents, servants or employees, which Tenant or
Tenant’s successor or assigns may have against Landlord, its agents, servants
and employees, for loss, theft or damage to property and for injuries to
persons in, upon or about the Leased Premises, the Building or the Project from
any cause whatsoever. Neither Landlord nor its agents, servants or employees
shall be liable to Tenant for any damage by or from any act or failure to act
of any tenant or other occupant of the Project or the Building, or by any owner
or occupant of adjoining or contiguous property.  Subject to the waiver of subrogation herein,
Tenant agrees to pay for all damage to the Project, the Building and the Leased
Premises, as well as all damage to tenants or occupants thereof caused by
Tenant (including, but not limited to, Tenant’s misuse or neglect of the Leased
Premises, its apparatus or appurtenances), or caused by any licensee,
contractor, agent or employee of Tenant.

 

Particularly,
but not in limitation of the foregoing paragraph, all property belonging to
Tenant or any occupant of the Leased Premises that is on the Project, in the
Building or the Leased Premises shall be there at the risk of Tenant or such
other person only, and Landlord and its agents or employees shall not be
liable, unless the same results from the gross negligence or

 

19

 

willful misconduct of Landlord,
its agents, servants or employees, for any damage to or theft of or
misappropriation of such property; nor for any damage to property entrusted to
Landlord, its agents or employees, if any; nor for the loss of or damage to any
property by theft or otherwise, by any means whatsoever; nor for any injury or
damage to person or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, snow, water or rain which may leak from any part of the
Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface or from any other place or resulting from dampness
or from any other cause whatsoever; nor for interference with light or any
other incorporeal hereditaments, nor for any latent defect in the Leased
Premises or in the Building or the Land. 
It is intended, and is a requirement of this Lease, that Tenant insure
all of such items and against all of such risks.  Tenant shall give prompt notice to Landlord
in case of fire, casualty or accidents in the Leased Premises or in the
Building or in case of defects therein or in the fixtures or equipment therein.

 

ARTICLE XII

ASSIGNMENT AND SUBLETTING

 

Section 12.1 -
By Tenant

 

Except as
provided below, Tenant shall not assign this Lease or any interest herein and
shall not sublet the Leased Premises or any part thereof or any right or
privilege appurtenant thereto, or suffer any other person to occupy or use the
Leased Premises or any portion thereof, without first obtaining the written
consent of Landlord, which consent shall not be unreasonably withheld,
conditioned or delayed.  Landlord agrees
not to withhold consent to any such assignment of this Lease or subletting of
the entire Leased Premises provided that Tenant requests the same in writing
and provided that (i) at the time thereof, Tenant is not in Default under this
Lease, (ii) Landlord, in its sole discretion reasonably exercised, determines
that the reputation, business, proposed use of the Leased Premises and
financial responsibility of the proposed assignee or sublessee, are
satisfactory to Landlord, (iii) any assignee or sublessee shall expressly
assume all the obligations of this Lease on Tenant’s part to be performed, or
in the case of a sublease of less than all of the Leased Premises, assume such
obligations with respect to the relevant portion of the Leased Premises, (iv)
such consent, if given, shall not release Tenant or any guarantor of Tenant’s
obligation hereunder of any of its obligations under this Lease, including
without limitation, its obligation to pay rent, (v) Tenant agrees specifically
to pay over to Landlord, as Additional Rent, 50% of all sums provided to be
paid under the terms and conditions of such assignment or sublease which are in
excess of the sum of the amounts otherwise required to be paid pursuant to this
Lease after deduction of reasonable commissions, legal fees and improvement
costs paid by Tenant in connection with such assignment or sublease, (vi) a
consent to one assignment or subletting shall not be deemed to be a consent to
any subsequent assignment or subletting, (vii) Tenant shall indemnify and hold
Landlord harmless from any brokerage commissions due in connection with such
assignment or subletting, (viii) Tenant shall remain responsible for the
performance of all covenants and provisions of this Lease, and (ix) Tenant
reimburses Landlord for all of Landlord’s actual out-of-pocket expenses
incurred in connection with such assignment or subletting which shall be no
more than $2,000.00.  Whether or not such
conditions to assignment or subletting are met, Landlord, at its sole option,
may elect to (x) terminate this Lease in the case of an assignment, or, (y) in
the event of a sublease, the term of which ends during the last year of the
Term and which covers all or substantially all the Leased Premises, terminate
this Lease as of the date of the proposed assignment or commencement date of
the proposed sublease, to be effective unless Tenant elects to withdraw its
request to sublease or assign, which election, if exercised by Landlord, shall
be

 

20

 

by written notice to Tenant
given within twenty (20) days of receipt by Landlord of Tenant’s request for
such consent to assign or sublet.  If
Landlord elects to terminate this Lease in accordance with the foregoing
sentence, then Landlord may lease the relevant portion of the Leased Premises
to the sublessee or assignee proposed by Tenant or any other person or
entity.  Any assignment or subletting or
occupancy without Landlord’s prior written consent shall be void and, at the
option of Landlord, shall constitute a Default under this Lease.  If the Lease is not terminated, then Landlord
shall deliver to Tenant, within twenty (20) days following Tenant’s request,
its consent to such assignment, sublease or occupancy or its disapproval (if
reasonable).  Except as provided below,
neither this Lease nor any interest herein shall be assignable as to the
interest of Tenant by operation of law without consent of Landlord, which
consent shall be subject to each of the standards set forth in this Section
12.1.

 

Tenant agrees
that in the event Landlord withholds its consent to any assignment, subletting
or occupancy contrary to the provisions of this Section 12.1, then Tenant’s
sole remedy shall be to seek an injunction in equity to compel Landlord to give
its consent and Tenant expressly waives any right to damages in the event of
such withholding by Landlord of its consent.

 

Notwithstanding
the foregoing, Tenant may, without Landlord’s consent, sublet all or any
portion of the Leased Premises or assign the Lease to: (a) a parent,
subsidiary, affiliate, division or corporation controlling, controlled by or
under common control with Tenant; (b) a successor corporation related to Tenant
by merger, consolidation, reorganization or governmental action; or (c) a
purchaser of Tenant’s leasehold interest in the Leased Premises; provided that
(i) the transferee or assignee or transferor, shall remain liable for
performance of all obligations under this Lease, (ii) Tenant, as assignor or
transferor, shall remain liable for performance of all obligations under the
Lease, (iii) as of the date of such transfer, the purchaser, assignee,
sublessee or transferee shall have the financial ability to perform (in
Landlord’s reasonable business judgment) its obligations with respect to this
Lease and/or Leased Premises and (iv) at the time of the transfer, sublease or
assignment, Tenant shall not be in default of any of its obligations under the
Lease (each of the foregoing is a “Permitted Transfer”).  For the purpose of this Lease, any (w) sale
or transfer of Tenant’s capital stock through any nationally recognized public
exchange, (x) redemption or issuance of additional stock of any class, (y)
transaction which causes Tenant, or its successor in interest, to be traded on
a nationally recognized public exchange, or (z) transaction that occurs when
Tenant, or its successor in interest, is traded on a nationally recognized
public exchange, shall not be deemed an assignment, subletting or any other
transfer of the Lease of the Leased Premises.

 

Section 12.2 -
By Landlord

 

In the event
of sale or conveyance or transfer by Landlord of its interest in the Building,
in the Project or in this Lease and the assumption of this Lease by the
transferee, the same shall operate to release Landlord from any future
liability under all of the covenants and conditions, express or implied,
contained in this Lease in favor of Tenant, and in such event Tenant agrees to
look solely to the responsibility of the successor in interest of Landlord in
and to this Lease.  This Lease shall not
be affected by any such sale, conveyance or transfer.

 

21

 

ARTICLE XIII

DEFAULT AND LANDLORD’S REMEDIES

 

Section 13.1 -
Defaults

 

The occurrence
of any of the following shall constitute a default (“Default”) hereunder:

 

(a)           if Tenant defaults in
the payment of rent (whether Base Rent or Additional Rent) or any other sum
required to be paid pursuant to this Lease and if the default is not remedied
within five (5) days after written notice thereof by Landlord to Tenant which
notice shall satisfy, and not be in addition to, the notice requirement in
Section 791 of the California Civil Code; or

 

(b)           if Tenant defaults in
the prompt and full performance of any term, covenant or provisions of this
Lease (except the other subparagraphs of this Section 13.1) and if such default
is not remedied within twenty (20) days after notice thereof by the Landlord;
provided, however, that if such default is susceptible of being cured but
cannot by its nature be cured within twenty (20) days, then Tenant shall have
such longer period as is reasonably necessary to cure such default provided
Tenant has promptly commenced and is diligently pursuing such cure; or

 

(c)           if the leasehold
interest of Tenant is levied upon under execution or is attached under process
of law, which levy or attachment continues for a period of thirty (30) days; or

 

(d)           if Tenant shall
generally not pay its debts as they become due or shall admit in writing its
inability to pay its debts or shall make a general assignment for the benefit
of creditors; or

 

(e)           if Tenant shall
commence any case, proceeding or other action seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of Tenant or
its debts under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking appointment of a receiver, trustee, custodian or
other similar official for Tenant or for all or any substantial part of its
property; or

 

(f)            if any case,
proceeding or other action against Tenant shall be commenced seeking to have an
order for relief entered against Tenant as debtor or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of Tenant or
its debts under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking appointment of a receiver, trustee, custodian or
other similar official for Tenant or for all or any substantial part of its
property, and such case, proceeding or other action (i) results in the entry of
an order for relief against Tenant which is not fully stayed within seven (7)
days after the entry thereof or (ii) remains undismissed for a period of sixty
(60) days; or

 

(g)           Tenant fails to comply
with the provisions of Section 9.3 of this Lease.

 

Section 13.2 -
Landlord’s Remedies

 

(a)           Upon the occurrence of
any one or more Defaults by Tenant, Landlord may elect to terminate this Lease
and Tenant’s right to possession of the Leased Premises.  Upon any termination of this Lease, whether
by lapse of time or otherwise, Tenant shall surrender possession and vacate the
Leased Premises and deliver possession thereof to Landlord, and Tenant hereby
grants to Landlord full and free license to enter into and upon the Leased
Premises with or without process of law in the event of any such termination of
this Lease and to repossess

 

22

 

Landlord of the Leased Premises
and of Landlord’s former estate and to expel or remove Tenant and any others
who may be occupying or be within the Leased Premises and to remove any and all
property therefrom without being deemed in any manner guilty of trespass,
eviction or forcible entry or detainer, and without relinquishing Landlord’s
rights to rent or any other right given to Landlord hereunder or by operation
of law.

 

(b)           In the event of any
such Default by Tenant, in addition to any other remedies available to Landlord
under this Lease, at law or in equity, Landlord shall have the immediate option
to terminate this Lease and all rights of Tenant hereunder.  In the event that Landlord shall elect to so
terminate this Lease, then Landlord may recover from Tenant:

 

(i)            the worth at the time
of award of any unpaid rent which had been earned at the time of such
termination; plus

 

(ii)           the worth at the time
of the 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 term after
the time of award exceeds the amount of such rental loss that Tenant proves
could be 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.

 

As used in this Sections 13.2(b) and
(c) above, the “worth at the time of award” is computed by allowing interest at
the prime rate of Wells Fargo Bank as in effect from time to time.  As used in Section 13.2(c) above, the “worth
at the time of award” is 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%).

 

(c)           Landlord shall have the
remedy described in California Civil Code Section 1951.4 (Landlord 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, in
the event of any such Default by Tenant, in addition to any other remedies
available to Landlord under this Lease, at law or in equity, Landlord shall
have the right to continue this Lease in full force and effect, whether or not
Tenant shall have abandoned the Premises. 
The foregoing remedy shall also be available to Landlord pursuant to
California Civil Code Section 1951.4 and any successor statute thereof in
the event Tenant has abandoned the Premises. 
In the event Landlord elects to continue this Lease in full force and
effect pursuant to this Section 13(c), then Landlord shall be entitled to
enforce all of its rights and remedies under this Lease, including the right to
recover rent as it becomes due.  Landlord’s
election not to terminate this Lease pursuant to this Section 13(c) or
pursuant to any other provision of this

 

23

 

Lease, at law or in equity,
shall not preclude Landlord from subsequently electing to terminate this Lease
or pursuing any of its other remedies.

 

(d)           Landlord may, but shall
not be obligated to, cure, at any time and without notice, any Default by
Tenant under this Lease, and the cost and amount thereof shall be Rent and
shall be immediately due and payable.

 

(e)           With respect to
enforcement of any provision of this Lease, Landlord or Tenant may collect from
the other, provided it has been ordered by a court of law, all costs and
expenses thereby incurred including, without limitation, court costs and
reasonable attorneys’ fees, together with interest thereon from the date
incurred to the date paid at the rate set forth in Section 19.5 shall be paid
on demand.

 

(f)            Notwithstanding
anything in this Lease to the contrary, any and all remedies set forth in this
Lease (i) shall be in addition to any and all other remedies Landlord or Tenant
may have at law or in equity, (ii) shall be cumulative and (iii) may be pursued
successively or concurrently as the Landlord or Tenant may elect.  The waiver by Landlord or Tenant of any
breach of any term, covenant or condition herein contained shall not be deemed
to be a waiver of such term, covenant or condition or any subsequent breach of
the same, or any other term, covenant or condition herein contained.  The acceptance of rent hereunder shall not be
construed to be a waiver of any breach by Tenant of any term, covenant or
condition of this Lease.

 

(g)           Notwithstanding any
provision in this Lease permitting Tenant to cure any default within a
specified period of time, if Tenant shall default (i) in the timely payment of
rent (whether any or all of Base Rent or Additional Rent) three (3) or more
times in any period of twelve (12) consecutive months, or (ii) in the
performance of any particular term, condition or covenant of this Lease three
(3) or more times in any period of six (6) consecutive months, then,
notwithstanding that such defaults shall have each been cured within any
applicable cure period after notice, as provided in this Lease, any further
similar default (including, without limitation, with respect to non-payment of
rent, the further non-payment of any kind of rent payable under this Lease)
shall not be curable by Tenant and Landlord shall have all of the remedies
provided in this Lease (including, without limitation, any and all remedies at
law and in equity) for a Default hereunder.

 

Section 13.3 -
Holdover by Tenant

 

If the Tenant
retains possession of the Leased Premises or any part thereof after the
termination of the Term or any extension thereof, by lapse of time or
otherwise, Tenant shall become a tenant from month-to-month only upon all of
the terms and conditions herein provided as may be applicable to a
month-to-month tenancy and any such holdover shall not constitute an extension
of this Lease; provided, however that during such holding over Tenant shall pay
the Base Rent at 150% of the rate payable for the month immediately preceding
said holding over plus Tenant’s Share of Operating Costs and Taxes which
Landlord may reasonably estimate, computed on a per-month basis for each month
or part thereof (with reduction for any partial month) that the Tenant thus
remains in possession, and in addition thereto, Tenant shall pay to Landlord
all damages, consequential as well as direct, sustained by reason of the Tenant’s
retention of possession.

 

24

 

Section 13.4 -
Storage of Tenant’s Property

 

If, upon
termination of this Lease by lapse of time or otherwise, Tenant shall fail to
remove any of Tenant’s property from the Leased Premises, Tenant hereby
authorizes Landlord, at Landlord’s option, to cause such property to be removed
and placed in storage for the account of and at the expense of Tenant, or on
such termination, to sell such property at public or private sale, with ten
(10) days’ prior notice to Tenant, and to apply the proceeds thereof, after
payment of all expenses of removal, storage and sale, to the satisfaction of
any obligation of Tenant to Landlord, the excess, if any, to be paid to Tenant
upon demand.

 

ARTICLE XIV

HAZARDOUS SUBSTANCES

 

Section 14.1 -
Hazardous Substance

 

(a)           For purposes of this
Section, “hazardous substance” shall mean the substances included within the
definitions of the term “hazardous substance” under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. §§ 9601 et seq., and the regulations promulgated thereunder, as amended,
(ii) the California Carpenter-Presley-Tanner Hazardous Substance Account Act,
California Health & Safety Code §§ 25300 et seq., and regulations
promulgated thereunder, as amended, (iii) the Hazardous Materials Release
Response Plans and Inventory Act, California Heath & Safety Code §§ 25500
et seq., and regulations promulgated thereunder, as amended, and (iv) petroleum;
“hazardous waste” shall mean (i) any waste listed as or meeting the identified
characteristics of a “hazardous waste” under the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. §§ 6901 et seq., and regulations promulgated
pursuant thereto, as amended (collectively, “RCRA”), (ii) any waste meeting the
identified characteristics of “hazardous waste;” “extremely hazardous waste” or
“restricted hazardous waste” under the California Hazardous Waste Control Law,
California Health & Safety Code §§ 25100 et seq., and regulations
promulgated pursuant thereto, as amended (collectively, the “CHWCL”), and/or
(iii) any waste meeting the identified characteristics of “medical waste” under
California Health & Safety Code §§ 25015-25027.8, and regulations
promulgated thereunder, as amended; and “hazardous waste facility” shall mean a
hazardous waste facility as defined under the CHWCL.

 

(b)           Without limiting the
generality of the obligations set forth in Section 14.1 of this Lease:

 

(i)            Tenant covenants not
to cause or permit any hazardous substance or hazardous waste to be brought
upon, kept, stored or used in or about the Leased Premises without the prior
written consent of Landlord, which consent shall not be unreasonably withheld
or delayed, except that Tenant, in connection with its permitted use of the
Leased Premises as provided in Section 14.1, may keep, store and use materials
that constitute hazardous substances which are customary for such permitted
use; provided, however, that such hazardous substances must be kept, stored and
used in quantities which are customary for such permitted use, must be kept,
stored and used in full compliance with clauses (ii) and (iii) immediately
below, and a list of such substances along with a statement of the maximum
amount which may be on the Leased Premises at any time must be delivered to
Landlord.

 

(ii)           Tenant covenants that
it will comply with all applicable laws, rules, regulations, orders, permits,
licenses and operating plans of any governmental authority with respect to the
receipt, use, handling, generation, transportation, storage, treatment and/or
disposal of hazardous substances or wastes by Tenant or its agents or
employees, and Tenant will

 

25

 

provide Landlord with copies of
all permits, licenses, registrations and other similar documents that authorize
Tenant to conduct any such activities in connection with its authorized use of
the Property from time to time.

 

(iii)          Tenant agrees that it
shall not (A) operate on or about the Property any facility required to be
permitted or licensed as a hazardous waste facility or for which interim status
as such is required, nor (B) store any hazardous wastes on or about the
Property, nor (C) conduct any other activities on or about the Property that
could result in the Property being deemed to be a “hazardous waste facility”
(including, but not limited to, any storage or treatment of hazardous
substances or hazardous wastes which could have such a result).

 

(iv)          Tenant agrees to comply
with all applicable laws, rules, regulations, orders and permits relating to
underground storage tanks installed by Tenant or its agents or employees
(including any installation, monitoring, maintenance, closure and/or removal of
such tanks) as such tanks are defined in California Health & Safety Code §
25281(x), including, without limitation, complying with California Health &
Safety Code §§ 25280-25299.7 and the regulations promulgated thereunder, as
amended.  Tenant shall furnish to Landlord
copies of all registrations and permits issued to or held by Tenant from time
to time for any and all underground storage tanks.

 

(v)           Tenant shall provide
Landlord in writing the following information and/or documentation at the
commencement of this Lease and within sixty (60) days of any change in or
addition to the required information and/or documentation:

 

(A)          A list of all hazardous
substances and/or wastes that Tenant receives, uses, handles, generates,
transports, stores, treats or disposes of from time to time in connection with
its operations on the Property.

 

(B)           All MSDS’s, if any,
required to be completed with respect to operations of Tenant at the Property
from time to time in accordance with Title 26, California Code of Regulations §
8-5194 or 42 U.S.C. § 11021, or any amendments thereto, and any Hazardous
Materials Inventory Sheets that detail the MSDS’s.

 

(C)           All hazardous waste
manifests (as defined in Title 26, California Code of Regulations § 22-66481),
if any, that Tenant is required to complete from time to time in connection
with its operations at the Property.

 

(D)          A copy of any Hazardous
Materials Management Plan required from time to time with respect to Tenant’s
operations at the Property, pursuant to California Health & Safety Code §§
25500 et seq., and any regulations promulgated thereunder, as amended.

 

(E)           Copies of any
Contingency Plans and Emergency Procedures required of Tenant from time to time
due to its operations in accordance with Title 26, California Code of Regulations
§§ 22-67140 et seq., and any amendments thereto, and copies of any Training
Programs and Records required under Title 26, California Code of Regulations, §
22-67105, and any amendments thereto.

 

(F)           Copies of any biennial
reports required to be furnished to the California Department of Health
Services from time to time relating to hazardous substances

 

26

 

or wastes, pursuant to Title
26, California Code of Regulations, § 22-66493, and any amendments thereto.

 

(G)           Copies of all
industrial wastewater discharge permits issued to or held by Tenant from time
to time in connection with its operations on the Property.

 

(H)          Copies of any other
lists or inventories of hazardous substances and/or wastes on or about the
Property that Tenant is otherwise required to prepare and file from time to
time with any governmental or regulatory authority.

 

(vi)          Tenant shall secure
Landlord’s prior written approval for any proposed receipt, storage,
possession, use, transfer or disposal of “radioactive materials” or “radiation,”
as such materials are defined in Title 26, California Code of Regulations
§17-30100, and/or any other materials possessing the characteristics of the
materials so defined, which approval Landlord may withhold in its sole and
absolute discretion; provided, that such approval shall not be required for any
radioactive materials for which Tenant has secured prior written approval of
the Nuclear Regulatory Commission and delivered to Landlord a copy of such approval.  Tenant, in connection with any such
authorized receipt, storage, possession, use, transfer or disposal of
radioactive materials or radiation, shall:

 

(A)          Comply with all federal,
state and local laws, rules, regulations, orders, licenses and permits;

 

(B)           Maintain, to such
extent and for such periods as may be required by applicable law, and permit
Landlord or its representatives to inspect during normal business hours at any
time and from time to time upon reasonable notice to Tenant, a list of all
radioactive materials or radiation received, stored, possessed, used,
transferred or disposed of from time to time; and

 

(C)           Maintain, to such
extent and for such periods as may be required by applicable law, and permit
Landlord or its representatives to inspect during normal business hours at any
time and from time to time upon reasonable notice to Tenant, all licenses,
registration materials, inspection reports, governmental orders and permits in
connection with the receipt, storage, possession, use, transfer or disposal of
radioactive materials or radiation from time to time.

 

(vii)         Tenant agrees to comply
with any and all applicable laws, rules, regulations and orders of any
governmental authority with respect to the release into the environment of any
hazardous wastes or substances or radiation or radioactive materials by Tenant
or its agents or employees.  Tenant
agrees to give Landlord immediate verbal notice of any unauthorized release of
any such hazardous wastes or substances or radiation or radioactive materials
into the environment, and to follow such verbal notice with written notice to
Landlord of such release within twenty-four (24) hours of the time at which
Tenant became aware of such release.

 

(viii)        Tenant shall indemnify,
defend and hold Landlord harmless from and against any and all claims, losses
(including, but not limited to, loss of rental income and loss due to business
interruption), damages, liabilities, costs, legal fees and expenses of any sort
arising out of or relating to (A) any failure by Tenant to comply with any
provisions of Section 14.1 of this Lease, or (B) any receipt, use handling,
generation, transportation, storage, treatment,

 

27

 

release and/or disposal of any
hazardous substance or waste or any radioactive material or radiation on or
about the Leased Premises in connection with Tenant’s use or occupancy of the
Leased Premises or as a result of any acts or omissions of Tenant or of any
agent or employee of Tenant whether discovered prior to or after the expiration
or earlier termination of this Lease.

 

(ix)           Tenant agrees to
cooperate with Landlord in furnishing Landlord with complete information
regarding Tenant’s receipt, handling, use, storage, transportation, generation,
treatment and/or disposal of any hazardous substances or wastes or radiation or
radioactive materials.  Upon request,
Tenant agrees to grant Landlord reasonable access at reasonable times to the
Leased Premises to inspect Tenant’s receipt, handling, use, storage,
transportation, generation, treatment and/or disposal of hazardous substances
or wastes or radiation or radioactive materials, without being deemed guilty of
any disturbance of Tenant’s use or possession and without being liable to
Tenant in any manner.

 

(x)            Notwithstanding
Landlord’s rights of inspection and review under this paragraph (b), Landlord
shall have no obligation or duty to so inspect or review, and no third party
shall be entitled to rely on Landlord to conduct any sort of inspection or
review by reason of the provisions of this paragraph (b).

 

(xi)           Within thirty (30) days
after termination or expiration of this Lease, Tenant at its sole cost and
expense shall obtain and deliver to Landlord an environmental study, of the
scope and performed by an expert reasonably satisfactory to Landlord,
evaluating the presence or absence of hazardous substances and wastes,
radiation and radioactive materials on and about the Leased Premises.  Such study shall be based on a reasonable and
prudent level of tests and investigations of the Leased Premises which tests
shall be conducted no earlier than the date of termination or expiration of
this Lease.  Liability for any remedial
actions required or recommended on the basis of such study shall be immediately
effected by Tenant.  In addition to the
foregoing, Tenant shall obtain all certificates, clearances and approvals, if
any, required by any governmental agency verifying compliance by Tenant with
any laws, rules or regulations governing Tenant’s use and vacancy of the Leased
Premises.

 

(c)           In the event of any
third party claims, losses, damages, liabilities, costs, legal fees and
expenses of any sort (including, but not limited to, costs incurred with
respect to any government mandated remediation), against either Landlord or
Tenant or both, arising out of or relating to any release into the environment
by Tenant, its agents, contractors or employees (including, but not limited to,
the Property) of any hazardous substances or wastes or radiation or radioactive
materials then (x) Landlord and Tenant shall cooperate reasonably and in good
faith in the defense of such third party claims, liabilities and related
matters and, (y) Tenant shall bear one hundred percent (100%) of the total
claims, losses, damages, liabilities, costs, legal fees and expenses incurred
by Landlord and/or Tenant in connection with matters covered by this Section
14.1(c).  Tenant shall surrender
possession of the Leased Premises in the same condition as when delivered to
Tenant at the Commencement Date, ordinary wear and tear and damage from
casualty not caused by Tenant excepted (including, without limitation,
receiving any clearances, approvals and/or certifications, if any, required by
any government agency verifying compliance with all federal, state and local
laws, rules, regulations and orders governing Tenant’s use and vacancy of the
Leased Premises); without limiting the generality of the foregoing or any
provision of this Lease concerning condition of the upon termination or expiration
of this Lease, Tenant shall cause to be removed from the Leased Premises any
and all hazardous substances wherever located so that the Leased Premises can
be sold, or delivered to a new tenant, in an environmentally clean condition.  In addition to the foregoing and not by way
of limitation,

 

28

 

Tenant shall have performed the
following:  (i) an exit site assessment,
by an environmental consultant selected by Landlord; and (ii) an assessment to
verify the Leased Premises is free of residual radioactive contamination, by a
nuclear specialist selected by Landlord. 
In the event Tenant does not comply with the provisions of this Section
14.1(d) and deliver any necessary results and/or certifications to Landlord and
to any required governmental body, on the expiration or earlier termination of
this Lease, Tenant shall be held to the terms of this Lease and required to pay
Rent and shall be otherwise subject to the holdover provisions in Section 13.3
hereof.  Further, Tenant shall indemnify,
defend and hold Landlord harmless from and against any and all claims, losses,
damages, liabilities, costs, legal fees and expenses of any sort arising out of
or relating to Tenant’s failure to effect the clean up, and assessments, and to
obtain the clearances and certifications required by this Section.  If Tenant shall vacate the Leased Premises
without having effected such clean up and obtained such clearances and
certifications, then Landlord may obtain same at Tenant’s cost; Landlord’s
action in such regard shall not eliminate Tenant’s liability to pay for same or
to pay Rent as a holdover hereunder.

 

ARTICLE XV

UTILITIES

 

Section 15.1 -
Utilities

 

(a)           Tenant shall pay for
the use of all electrical, gas, water, sewer and other utility service to the
Leased Premises.  Tenant shall be billed
directly by each such utility (except water which may at Landlord’s election be
separately metered and billed to Tenant) and Tenant agrees to pay each such
bill promptly in accordance with its terms. 
In the event that for any reason Tenant cannot be billed directly,
Landlord shall forward each bill with respect to the Leased Premises to Tenant
and Tenant shall pay it promptly in accordance with its terms.  Notwithstanding anything contained herein to
the contrary, if Tenant cannot be separately metered for any reason, Tenant
shall pay Landlord as Additional Rent and in monthly installments at the time
prescribed for monthly installments of Base Rent, an annual amount, as
estimated by Landlord from time to time, which Tenant would pay for such
utility service if the same were separately metered to the Leased Premises by
the local utility company and billed to Tenant at such company’s current rates
(including applicable taxes).  The cost
of any utility service supplied to the Project or Common Areas by Landlord
shall be included in Operating Costs.

 

(b)           In the event Tenant
does not directly pay the bills for water used in the Leased Premises, Tenant
shall not waste or permit the wasting of water, nor shall Tenant use water for
purposes other than drinking, lavatory, laboratory or toilet purposes through
fixtures installed by Landlord or by Tenant, with Landlord’s consent.  Tenant shall pay Landlord for domestic water
and hot water furnished or used for any other purpose as Additional Rent, at
reasonable rates fixed by Landlord, and, in connection therewith, Landlord may
require tenant at Tenant’s cost to install a submeter to measure Tenant water
usage.  Tenant shall not introduce into
the sewer system any harmful or dangerous substances and shall not overload the
sewer system by abnormal usage.

 

(c)           Tenant agrees that
Landlord shall not be liable in damages, by abatement of rent or otherwise, for
failure to furnish or for a delay in furnishing any service or utility, whether
the responsibility of Landlord or others, if such failure or delay is
occasioned, in whole or in part, by repairs, renewals or improvements
authorized by this Lease, by any strike, lockout or other labor trouble, by inability
to secure electricity, gas, water or other fuel at the Building or Project
after

 

29

 

reasonable effort so to do, by
any accident or casualty whatsoever, by the act or default of Tenant or other
parties, or by any other cause beyond the reasonable control of Landlord; and
such failures or delays shall never be deemed to constitute an eviction or
disturbance of the Tenant’s use and possession of the Leased Premises or
relieve the Tenant from paying rent or performing any of its obligations under
this Lease.  Notwithstanding the
foregoing: (i) in the event that Landlord is unable to supply any of the
Building’s sanitary, electrical, heating, air conditioning, water, elevator,
life safety or other essential systems serving the Premises (collectively, the “Essential
Services”), and such inability is the result of an occurrence within Landlord’s
reasonable control and materially impairs Tenant’s ability to carry on its
business in the Leased Premises for a period of five (5) consecutive business
days, the Base Rent shall be abated commencing with the sixth (6th) business
day of such material interference with Tenant’s business, based upon the extent
to which such inability to supply Essential Services materially impairs Tenant’s
ability to carry on its business in the Leased Premises.  Such abatement shall continue until the
Essential Services have been restored to such extent that the lack of any
remaining services no longer materially impairs Tenant’s ability to carry on
its business in the Leased Premises. 
Tenant shall not be entitled to such an abatement to the extent that
Landlord’s inability to supply Essential Services to Tenant is caused by
Tenant, its employees, contractors, agents, licensees or invitees.

 

ARTICLE XVI

RIGHTS RESERVED TO LANDLORD; RULES AND REGULATIONS

 

Section 16.1 -
Rights Reserved to Landlord

 

Without
limiting any other rights reserved or available to Landlord under this Lease,
at law, or in equity, Landlord reserves the following rights to be exercised at
Landlord’s election without liability to Tenant and without effecting an
eviction or disturbance of Tenant’s use or possession and without giving rise
to any claim for setoff or abatement of rent or affecting any of Tenant’s
obligations under this Lease:

 

(a)           to change the street
address and/or name of the Building or of the Project;

 

(b)           to inspect the Leased
Premises, and to make repairs, whether structural or otherwise, to the Leased
Premises, and repairs, additions or alterations to the Building or the Project,
or to any parts thereof including, without limitation, to make repairs within
the Leased Premises to mechanical, electrical, and other facilities serving the
Leased Premises or the Project, to shore the foundations and walls thereof, to
erect scaffolding and/or protective barricades around and about the same, to
relocate or change corridors or entrances in and to the Building, to close
entrances, stairways and corridors, if any, and to interrupt or temporarily
suspend services or facilities;

 

(c)           to show the Leased
Premises to prospective purchasers, mortgagees, or other persons having a
legitimate interest in viewing the same, and, at any time within one year prior
to the expiration of the Term, to brokers or persons wishing to rent the Leased
Premises; during the last year of the Term, to place and maintain a “For Rent”
sign in or on the Leased Premises, Building or the Project; and to place or
maintain “For Sale” signs on the Project and the exterior of the Building;

 

30

 

(d)           to install, affix and
maintain signs on the exterior and interior of the Building (except signs
within the Leased Premises, unless required by any applicable laws, ordinances,
rules, or regulations);

 

(e)           to grant to anyone the
exclusive right and privilege to conduct any business in the Building or the
Project and such exclusive right and privilege will be binding upon Tenant,
provided such exclusive right shall not operate to exclude Tenant or its
affiliates, assignees or sublessees from any use expressly permitted herein;

 

(f)            to reasonably approve
the weight, size and location of heavy equipment and articles in and about the
Leased Premises and the Building including, by way of example but not of
limitation, safes, vaults, cages, printing machinery, computers, filing
cabinets or libraries;

 

(g)           to establish and
require Tenant to comply with reasonable security controls for the Building and
Project and to otherwise take such action or preventive measures for the safety
or security of the Building and the Project and its occupants; and

 

(h)           to promulgate and
establish reasonable rules and regulations of uniform application governing the
use and operation of the Project, the Building and the Leased Premises as are
reasonably necessary for the orderly operation thereof, and Tenant agrees, for
itself, its employees, agents and invitees to comply with such rules and
regulations.

 

Landlord may
enter upon the Leased Premises for any and all of said purposes and may exercise
any and all of the foregoing rights hereby reserved, at any time and from time
to time, without being deemed guilty or any eviction or disturbance of Tenant’s
use or possession of the Leased Premises, and without being liable in any
manner to Tenant.

 

Section 16.2 –
Rules and Regulations

 

The Tenant
agrees as follows:

 

(1)           Landlord shall arrange
for a trash collection service which will provide and periodically empty trash
containers placed in designated areas for use by Tenant and other tenants in the
Project.  Tenant shall be responsible for
placing all of its garbage and trash in such containers.

 

(2)           No aerial shall be
erected on the roof or exterior walls of the Premises, or on the grounds,
without in each instance, the written consent of the Landlord.  Any aerial so installed without such written
consent shall be subject to removal without notice at any time.

 

(3)           No loud speakers,
televisions, phonographs, radios, or other devices shall be used in a manner so
as to be heard or seen outside of the Premises without the prior written
consent of the Landlord.

 

(4)           The outside areas
immediately adjoining the Premises shall be kept clean and free from dirt and
rubbish by the Tenant to the satisfaction of the Landlord and Tenant shall not
place or permit any obstruction or materials in such areas.  No exterior storage shall be allowed without
permission in writing from Landlord.

 

(5)           The plumbing facilities
may be used in any manner consistent with all governmental rules, regulations,
ordinances, and statutes, and shall not be used for any other

 

31

 

purpose than that for which
they are constructed, and the expense of any breakage, stoppage, or damage
resulting from a violation of this provision shall be borne by the tenant who
has, or whose employees, agents or invitees have caused it.

 

(6)           Tenant shall not burn
any trash or garbage of any kind in or about the Premises, or the Project.

 

(7)           The sidewalks, halls,
passages, exits, entrances, and stairways in and about the Project shall not be
obstructed by any of the tenants or used by them for any purpose other than for
ingress to and egress from their respective premises.  The halls, passages, exits, entrances,
stairways, balconies and roof are not for the use of the general public and the
Landlord shall in all cases retain the right to control and prevent access
thereto by all persons whose presence in the judgment of the Landlord shall be
prejudicial to the safety, character, reputation and interests of the Project
and its tenants, provided that nothing herein contained shall be constructed to
prevent such access to persons with whom the Tenant normally deals in the
ordinary course of Tenant’s business unless such persons are engaged in illegal
activities.  No tenant and no employees
or invitees of any tenant shall go upon the roof of the Building except in case
of an emergency.

 

(8)           No additional locks or
bolts of any kind shall be placed upon any of the doors or windows by Tenant,
nor shall any changes be made in existing locks or the mechanisms thereof,
without the prior written consent of Landlord which shall not be unreasonably
withheld or delayed.  Tenant must, upon
the termination of Tenant’s tenancy, restore to Landlord all keys of stores,
offices and toilet rooms either furnished to or otherwise procured by Tenant,
and in the event of the loss of any keys so furnished Tenant shall pay to
Landlord the cost thereof.

 

(9)           No Tenant shall lay
linoleum or other similar floor covering so that the same shall be affixed to
the floor of the Premises in any manner except by a paste, or other material,
which may easily be removed with water, the use of cement or other similar
adhesive materials being expressly prohibited. 
The method of affixing any such linoleum or other similar floor covering
to the floor, as well as the method of affixing carpets or rugs to the
Premises, shall be subject to approval by Landlord, which approval shall not be
unreasonably withheld or delayed.  The
expense of repairing any damage resulting from a violation of this rule shall
be borne by Tenant by whom, or by whose agents, clerks, employees, or visitors,
the damage shall have been caused.

 

(10)         Tenant will not install
blinds, shades, awnings, or other form of inside or outside window covering, or
window ventilators or similar devices without the prior written consent of
Landlord.

 

Landlord
reserves the right from time to time to amend or supplement the foregoing rules
and regulations, and to adopt and promulgate additional rules and regulations
applicable to the Premises, provided that any such change shall be reasonable
and shall not affect Tenant’s rights under this Lease.  Notice of such rules and regulations and
amendments and supplements thereto, if any, shall be given to the Tenant and
Tenant agrees to comply with all such rules and regulations upon receipt of
notice to Tenant from Landlord.  Landlord
shall not be liable in any way to Tenant for any damage or inconvenience caused
by any other tenant’s non-compliance with these rules and regulations.

 

32

 

ARTICLE XVII

NOTICES

 

Section 17.1 -
Notices

 

All notices,
consents, waivers and other communications which this Lease requires or permits
either party to give to the other shall be in writing and shall be deemed given
when:  (a) delivered personally
(including delivery by private courier or express delivery service); (b) the
next business day after delivery of a facsimile, return receipt of which is
evidenced by the sender’s facsimile machine; or (c) or four (4) days after
deposit in the United States mail, registered or certified mail, postage
prepaid, addressed to the parties at their respective addresses as follows:

 

	
  To Tenant:

  	
   

  	
  Torreypines Therapeutics, Inc.

  
	
   

  	
   

  	
  11085 Torrey Pines Road

  
	
   

  	
   

  	
  La Jolla, California 92037

  
	
   

  	
   

  	
  Attn: Craig Johnson

  
	
   

  	
   

  	
  858/623-5665  (phone)

  
	
   

  	
   

  	
  858/623-5666  (fax)

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Cooley Godward LLP

  
	
   

  	
   

  	
  4400 Eastgate Mall

  
	
   

  	
   

  	
  San Diego, CA 92121

  
	
   

  	
   

  	
  Attn: Kay Chandler, Esq.

  
	
   

  	
   

  	
  858/550-6000 (Phone)

  
	
   

  	
   

  	
  858/550-6420 (Fax)

  
	
   

  	
   

  	
   

  
	
  To Landlord:

  	
   

  	
  Slough TPSP LLC

  
	
   

  	
   

  	
  c/o Slough Estates USA Inc.

  
	
   

  	
   

  	
  444 N. Michigan Ave., Suite 3230

  
	
   

  	
   

  	
  Chicago, IL 60611

  
	
   

  	
   

  	
  Attn: Randall W. Rohner

  
	
   

  	
   

  	
  312/755-0700 (Phone)

  
	
   

  	
   

  	
  312/755-0717 (Fax)

  
	
   

  	
   

  	
   

  
	
  with copy to:

  	
   

  	
  Bell, Boyd & Lloyd LLC

  
	
   

  	
   

  	
  70 West Madison, Suite 3300

  
	
   

  	
   

  	
  Chicago, IL 60602

  
	
   

  	
   

  	
  Attn: Andrew R. Andreasik, Esq.

  
	
   

  	
   

  	
  312/372-1121 (Phone)

  
	
   

  	
   

  	
  312/372-2098 (Fax)

  

 

or to such
other address as may be contained in a notice at least fifteen (15) days prior
to the address change from either party to the other given pursuant to this
Section.  Rental payments and other sums
required by this Lease to be paid by Tenant shall be delivered to Landlord at
Landlord’s address provided in this Section, or to such other address as
Landlord may from time to time specify in writing to Tenant, and shall be
deemed to be paid only upon actual receipt.

 

33

 

ARTICLE XVIII

PARKING

 

Section 18.1 –
Parking

 

Landlord shall
provide unreserved parking spaces at the Project for use by Tenant, its
employees, invitees and guests based on a parking ratio of 4 parking spaces per
1,000 gross square feet of Rentable Area and otherwise subject to any
applicable governmental regulations.  All
expenses incurred by Landlord in maintaining or repairing any of such parking
spaces shall be considered an Operating Cost hereunder and reimbursable by
Tenant to Landlord subject to the provisions of Section 7.2 above.

 

ARTICLE XIX

MISCELLANEOUS

 

Section 19.1 -
Tenant’s Statement

 

Tenant shall
furnish to Landlord from time to time, within ten (10) days after request
therefor from Landlord, a copy of Tenant’s then most recent audited and
certified financial statements.  If
Tenant does not ordinarily have audited and certified financial statements prepared,
then the foregoing obligation shall be satisfied by the delivery of Tenant’s
most recent financial statements, certified as true and correct by a duly
authorized officer, general partner or owner of Tenant.  Tenant agrees that Landlord may deliver a
copy of such statements to any purchaser of the Building or Project.

 

Section 19.2 -
Estoppel Certificates

 

Tenant agrees
at any time and from time to time, upon not less than ten (10) days’ prior
request from Landlord, to execute, acknowledge and deliver to Landlord and to
any other party designated by Landlord, in form reasonably satisfactory to
Landlord, a written statement certifying (if true) that Tenant has accepted the
Leased Premises, that this Lease is unmodified and in full force and effect (or,
if there have been modifications), that, to Tenant’s knowledge, Landlord is not
in default hereunder (or stating any defaults claimed by Tenant), the date to
which the rental and other charges due hereunder have been paid and such other
accurate certifications as may reasonably be required by Landlord.  It is intended that any such statement may be
relied upon by any prospective purchaser or mortgagee of the Leased Premises,
Building or Project and their respective successors and assigns.

 

Section 19.3 -
Relationship of Parties

 

Nothing
contained herein shall be deemed or construed to create the relationship of
principal and agent or of partnership or of joint venture, it being understood
and agreed that no provision in this Lease or any acts of the parties hereto
shall be deemed to create any relationship other than the relationship of
landlord and tenant

 

Section 19.4 -
Landlord’s Expenses; Attorneys’ Fees

 

Tenant and
Landlord shall pay on demand the other’s reasonable expenses, including
attorneys’ fees, expenses and administrative hearing and court costs incurred
either directly or indirectly in enforcing any obligation of the other under
this Lease, in curing any default by the other, in connection with appearing,
defending or otherwise participating in any action or

 

34

 

proceeding arising from the
filing, imposition, contesting, discharging or satisfaction of any lien or
claim for lien, in defending or otherwise participating in any legal
proceedings initiated by or on behalf of the other wherein the other is not
adjudicated to be in default under this Lease, or in connection with any
investigation or review of any conditions or documents in the event one party
requests the other’s approval or consent to any action of the other which may
be desired or required hereunder. 
Attorneys’ fees payable by Landlord or Tenant shall be at market rates
(including customary discounts) for attorneys providing the required services
in the San Diego area of a competence which would normally be utilized by
Landlord and Tenant; Landlord shall assign to Tenant rights to sue attorneys
whose fees are charged to Tenant for over billing and/or malpractice.

 

Section 19.5 -
Interest on Unpaid Amounts

 

All amounts
owed by Tenant to Landlord hereunder shall be deemed to be Additional Rent and,
unless otherwise provided herein, shall be paid within thirty (30) days from
the date the Landlord renders a statement of account therefore.  Any amounts owed by either party to the other
shall bear interest from the date due until the date paid at the rate
equivalent to the greater of (a) three percent (3%) above the rate then most
recently announced by Chase Manhattan Bank, Citibank N.A., or Bank of America,
or their successors, as its corporate lending base rate, as such corporate
lending base rate may change from time to time during the Term, and (b) ten
percent (10%) per annum.  The payment of
such interest shall not excuse or cure any default under this Lease.  In no event, however, shall the changes
permitted under this Section 19.5 or elsewhere in this Lease, to the extent
they are considered interest under law, exceed the maximum lawful rate of
interest.

 

Section 19.6 -
Applicable Law and Construction

 

The laws of
the State of California shall govern the validity, performance and enforcement
of this Lease.  The invalidity or
unenforceability of any provision of this Lease shall not affect or impair any
other provision.  The headings of the
several Articles and Sections contained herein are for convenience only and do
not define, limit or construe the contents of such Articles or Sections.

 

Section 19.7 -
Delays

 

Whenever a
period of time is provided in this Lease for Landlord or Tenant to do or
perform any act or thing (other than the satisfaction of a monetary obligation,
including without limitation Tenant’s payment of Base Rent and Additional
Rent), Landlord or Tenant shall not be liable or responsible for any delays due
to strikes, lockouts, casualties, material shortages, acts of God, war,
governmental regulation or control or any other causes beyond the reasonable
control of Landlord or Tenant and the time for performance specified herein
shall be extended for the amount of time Landlord or Tenant is so delayed,
provided that Landlord or Tenant shall use all reasonable efforts to remove the
cause of such delay and to resume the performance of any such act or thing.

 

Section 19.8 -
Access by Landlord

 

Tenant shall
permit Landlord and its agents, employees and contractors to enter the Leased
Premises upon such advance notice, if any, as is reasonable under the
circumstances for the purposes of inspecting the same, of performing
maintenance thereon, of making repairs,

 

35

 

replacements, additions or
alterations thereto or to the Building, of shoring the foundations and walls
thereof, of erecting scaffolding and/or protective barricades around and about
the same, of showing the Leased Premises to prospective purchasers, lenders and
tenants, and of placing “For Sale” or “For Rent” signs and notices
therein.  Such repairs, replacements,
additions and alterations shall be performed in such reasonable manner as will
minimize interference with the conduct of Tenant’s operations.  Landlord shall retain pass keys for all doors
providing access to the Leased Premises or portions thereof, and Tenant shall
change no lock without the prior written consent of Landlord.

 

Section 19.9 -
Brokerage

 

Each party
warrants that it has had no dealings with any broker or agent in connection
with this Lease, other than Brokers. 
Each party covenants to pay, hold harmless and indemnify the other party
from and against any and all cost, expense or liability for any compensation,
commissions or charges claimed by any other agent or broker with which it has
had dealings or otherwise by reason of any breach of said warranty.  Landlord shall pay the Brokers all
commissions due on account of this Lease.

 

Section 19.10
- Execution of Lease

 

No employee or
agent of Landlord’s agent or of Landlord’s broker, if any, has authority to
make or agree to make any agreement or undertaking in connection with this
Lease not set forth in this written Lease. 
The submission of this document for examination does not constitute an
offer to lease, or reservation for, or option for, the Leased Premises, and
this document will become effective and binding only upon execution and
delivery by both the Landlord and the Tenant. 
All negotiations, considerations, representations and understandings
between Landlord and Tenant are incorporated herein and may be modified or
altered only by agreement in writing between Landlord and Tenant and no act or
omission of any employee or agent of Landlord or of Landlord’s broker, if any,
if any, shall alter, change or modify any of the provisions hereof.

 

Section 19.11
- Security Deposit

 

Prior to the
Commencement Date, Tenant shall deposit with Landlord the sum set forth in the
Schedule as “Security Deposit” as security for the faithful performance and
observance by Tenant of the provisions of this Lease and at all times during
the Term of this Lease said sum shall equal no less than one month’s Base
Rent.  If Tenant shall default in respect
of any such provision, Landlord may use, apply or retain the whole or any part
of the security deposit to the extent required for the payment of any rent
and/or other charge or any other sum as to which Tenant is in default or for
any sum which Landlord may have expended or may be required to expend by reason
of Tenant’s default, including, but not limited to, any damages or deficiency
in the reletting of the Leased Premises. 
In the case of any such application by Landlord, Tenant shall deposit
with Landlord from time to time within five (5) days after Landlord’s written
demand therefor sufficient additional funds to restore such security deposit to
the amount set forth above.  Any
unapplied portion of the Security Deposit shall be returned to Tenant after the
date fixed as the end of the Term and after delivery to Landlord of entire possession
of the Leased Premises.  In no event
shall the security deposit be applied by Tenant to reduce any rent or other
charge payable by Tenant.

 

36

 

Section 19.12
- Heirs, Successors and Assigns

 

The covenants,
agreements and obligations herein contained, except as herein otherwise
specifically provided, shall extend to, bind and inure to the benefit of the
parties hereto and their respective personal representatives, heirs, successors
and assigns.

 

Section 19.13
- Subordination

 

This Lease is
and shall always be subject to the lien of any mortgage, including a trust deed
in the nature of a mortgage, which may now or hereafter affect the Project, the
Building or the Leased Premises, and to all renewals, consolidations,
replacements and extensions thereof; provided however, with respect to any such
mortgage executed after the date hereof, that the holder of such mortgage
agrees, in the event of foreclosure and so long as no default exists or other
event has occurred which would entitle the Landlord to terminate this Lease or
Tenant’s right to possession, that such holder shall recognize this Lease and
not disturb the possession of the Tenant hereunder.  Tenant agrees to and does hereby attorn to
the holder of any such mortgage, or any purchaser upon foreclosure, or their
successors and assigns, which attornment shall be effective and self-operative
without the execution of any further instruments.  Tenant hereby further agrees to execute such
instruments and assurances as Landlord or the holder of any such mortgage may
deem reasonably necessary to evidence the subordination of this Lease and
Tenant’s attornment to such holder or purchaser.  Landlord represents to Tenant that, to the
best of Landlord’s knowledge, none of the Project, the Building or the Leased
Premises are subject to a mortgage or other monetary lien.

 

Section 19.14
- Payments to Affiliates

 

Nothing in
this Lease shall be construed to prevent Landlord from paying for bona fide
services rendered or materials delivered with respect to the Building, to the
Project or to the Leased Premises (including, without limitation, management
services and contracting of capital improvements or other capital repairs or
construction items) by affiliates of Landlord of its beneficiary or of the
Agent provided that the fees or costs of such services and materials are at the
market rates in the San Diego metropolitan area.  All such fees or costs paid by Landlord to
such parties shall be deemed to constitute Operating Costs on the same terms
and conditions as if such fees and costs were paid to parties without any
affiliation with Landlord.

 

Section 19.15
- Meaning of “Re-entry” and “Landlord”

 

The words “Re-enter”
and “Re-entry”, as used in this Lease are restricted to their technical legal
meaning.  The term “Landlord”, as used in
this Lease, means only the landlord from time to time, and upon conveying or
transferring its interest, such conveying or transferring landlord shall be
relieved from any further obligation or liability pursuant to this Lease.

 

Section 19.16
- Remedies and Rights May Be Exercised by Landlord In its Own Name:  Authority to Execute This Lease

 

All rights and
remedies of Landlord under this Lease, or that may be provided by law, may be
exercised by Landlord in is own name individually, or in its name by Agent or
any other agent of the beneficiary thereof, and all legal proceedings for the
enforcement of any such rights or remedies, may be commenced and prosecuted to
final judgment and executed by Landlord in its own name individually or in its
name by Agent or by any other agent of the beneficiary

 

37

 

thereof.  Tenant represents to Landlord that it has
full power and authority to execute this Lease and to make and perform the
agreements herein contained.  Tenant
shall furnish to Landlord promptly upon demand a corporate resolution or other
appropriate documentation reasonably requested by Landlord evidencing the due
authorization of Tenant to enter into this lease.

 

Section 19.17
- Time of Essence

 

Time is of the
essence of this Lease and all provisions herein relating thereto shall be
strictly construed.

 

IN WITNESS
WHEREOF, the parties have executed this Lease on the day and year first above
written.

 

	
  “Landlord”

  	
  “Tenant”

  
	
   

  	
   

  
	
   

  	
   

  
	
  SLOUGH TPSP LLC,

  a Delaware limited liability company

  	
  TORREYPINES
  THERAPEUTICS, INC.,
a Delaware corporation

  
	
   

  	
   

  
	
  By: Slough Estates USA Inc.

  	
   

  
	
  Its:  Manager

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ R.W. Rohner

  	
   

  	
  By:

  	
  /s/ Craig Johnson

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
  Vice President and Chief Financial Officer

  	
   

  	
  Its:

  	
  Vice President and Chief Financial Officer

  	
   

  
								

 

38

 

EXHIBIT A

 

PLAN (WITH LOCATION OF LEASED PREMISES
DESIGNATED)

 

 

Rider 101

Option To Renew

 

Subject to the
further provisions of this Rider, Tenant shall have the option (the “Renewal
Option”) to renew this Lease for one (1) period of five (5) years the (“Renewal
Term”), commencing on the day immediately following the last day of the Initial
Term, as follows:

 

(a)           Exercise.  Tenant shall exercise the Renewal Option by
giving written notice thereof to Landlord not more than twenty-four (24) months
and not less than twelve (12) months prior to the last day of the Term.  Tenant’s notice of its exercise of the
Renewal Option is the “Renewal Notice.”

 

(b)           Terms.

 

(i)  General. 
All terms and conditions of this Lease shall apply during the Renewal
Term, except that Base Rent for the Renewal Term shall be the “then prevailing
fair market monthly rent” (assuming a fully “net” lease, allowing for
escalations and excluding abatement and any allowance) for non-renewal,
non-affiliate leases for properties of equivalent quality (including age and
type of any improvements in the Leased Premises), size, utility and location in
northern San Diego County, with the length of the lease term, and credit
standing of the Tenant taken into account.

 

(ii)           Determination of
Rent.  With respect to the determination
of the “then prevailing fair market base monthly rent,” the parties shall have
until ninety (90) days following Landlord’s receipt of the Renewal Notice in
which to agree on the prevailing fair market monthly rent as of the
commencement date of the Renewal Term for the uses permitted hereunder.  If the parties agree on such fair market
monthly rental value, they shall execute an amendment to this Lease stating the
amount of the Base Rent.  If the parties
are unable to agree on such prevailing fair market monthly rent within such
ninety (90) day period, then within fifteen (15) days after the expiration of
such period each party, at its cost and by giving notice to the other party,
shall appoint a real estate appraiser who is a member in good standing of the
Appraisal Institute holding an “M.A.I.” designation with at least five years
experience appraising similar commercial properties in northern San Diego
County to appraise and set the then prevailing fair market monthly rent value
at the commencement date of the Renewal Term, in accordance with the standards
specified in subparagraph (c)(i)(B).  If
either party fails to appoint an appraiser within the allotted time, the single
appraiser appointed by the other party shall be the sole appraiser.  If an appraiser is appointed by each party
and the two appraisers so appointed are unable to agree upon such then
prevailing fair market monthly rent within thirty (30) days after the
appointment of the second appraiser, they shall appoint a third qualified
appraiser within ten (10) days after expiration of such thirty (30) day period;
if they are unable to agree upon a third appraiser, either party may, upon not
less than five days notice to the other party, apply to the Presiding Judge of
the San Diego County Superior Court for the appointment of a third qualified
appraiser.  Each party shall bear its own
legal fees in connection with appointment of the third appraiser and shall bear
one-half of any other costs of appointment of the third appraiser and of such
third appraiser’s fee.  The third
appraiser, however selected, shall be a person who has not previously acted for
either party in any capacity.  Within
thirty (30) days after the appointment of the third appraiser, the three
appraisers shall set the then prevailing fair

 

 

market monthly rent as of the
commencement date of the Renewal Term and shall so notify the parties.  If the three appraisers are unable to agree
within the allotted time, the two appraised then prevailing fair market monthly
rents which are closest together shall be added together and divided by two and
the resulting quotient shall be the initial then prevailing fair market monthly
rent, which determination shall be binding on the parties and shall be
enforceable in any further proceedings relating to this Lease.  The appraisers shall have no right to award a
Tenant improvement allowance or other monetary concessions, but shall take into
account any such concessions and other relevant factors.

 

(d)           Tenant Default.  If at the time when Landlord received the
Renewal Notice or on the date of the commencement of the Renewal Term, Tenant
shall be in Default under this Lease, Landlord shall have the right, by giving
written notice thereof to Tenant, to cancel the Renewal Option with respect to
such Renewal Term and any exercise of such Renewal Option by Tenant.  In the event of such cancellation, Tenant
shall have no right, and Landlord shall have no obligation, to renew this Lease
pursuant to such Renewal Option.

 

(e)           Limitations on Renewal
Option.  If Tenant fails to exercise the
Renewal Option within the time required, such failure shall automatically
cancel such Renewal Option, and Tenant shall have no right, and Landlord shall
have no obligation, to renew this Lease pursuant to such Renewal Option.  If Tenant assigns or transfers any interest
in this lease or sublets any part of the Leased Premises, then notwithstanding
anything contained herein to the contrary, such assignment, transfer or
sublease shall automatically cancel any Renewal Option which has not then been
exercised and automatically cancel any previous exercise of the Renewal Option
unless the subject Renewal Term has already then commenced.  In the event of any such cancellation, Tenant
shall have no further rights under this Section.

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