Document:

Exhibit
10.39

 

 

 

 

 

 

 

 

 

LEASE

 

by and between

 

BMR-217TH PLACE LLC,

a Delaware limited
liability company

 

and

 

SONUS PHARMACEUTICALS,
INC.

a Delaware
corporation

 

LEASE

THIS
LEASE (this “Lease”) is entered into as of this 21st day of November, 2006 (the “Execution Date”),
by and between BMR-217TH PLACE LLC, a Delaware limited liability
company (“Landlord”), and SONUS PHARMACEUTICALS, INC., a Delaware
corporation (“Tenant”).

RECITALS

A.            WHEREAS,
Landlord has entered into a purchase agreement to acquire certain real property
(the “Property”) and the improvements thereon located at 1522 217th Place SE in Bothell, Washington, including the
building located thereon (the “Building”) in which the Premises (as
defined below) are located; and

B.            WHEREAS,
provided Landlord acquires the Property, Landlord wishes to lease to
Tenant, and Tenant desires to lease from Landlord, certain premises located in
the Building (the “Premises”), consisting of approximately 37,699
rentable square feet of office and laboratory space, pursuant to the terms and
conditions of this Lease, as detailed below.

AGREEMENT

NOW,
THEREFORE, Landlord and Tenant, in consideration of the mutual promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally
bound, agree as follows:

1.             Lease of Premises.  Landlord hereby leases to Tenant, and Tenant
hereby leases from Landlord, the Premises, as generally shown on Exhibit A
attached hereto.  Tenant and its agents,
servants, employees and invitees shall have
unobstructed access to the Premises (subject to reasonable security measures,
emergencies, casualties and other provisions of this Lease) twenty-four (24)
hours a day, 365 or 366 days a year.  The Property and all landscaping, parking
facilities and other improvements and appurtenances related thereto, including,
without limitation, the Building, are hereinafter collectively referred to as
the “Project.”  All portions of
the Project that are for the non-exclusive use of tenants of the Building,
including, without limitation, driveways, sidewalks, parking areas, landscaped
areas, service corridors, stairways, elevators, public restrooms and public
lobbies, are hereinafter referred to as “Common Area.”  The Property is legally described on Exhibit
F attached hereto.

2.             Basic Lease Provisions.  For  the
convenience of the parties, certain basic provisions of this Lease are set
forth herein.  The provisions set forth
herein are subject to the remaining terms and conditions of this Lease and are
to be interpreted in light of such remaining terms and conditions.

2.1.          This Lease shall take effect upon the
date of execution and delivery hereof by all parties hereto and, except as
specifically otherwise provided within this Lease, each of the provisions
hereof shall be binding upon and inure to the benefit of Landlord and Tenant
from the date of execution and delivery hereof by all parties hereto.

2.2.          In the definitions below, each
Rentable Area (as defined below) is expressed in rentable square footage.  Rentable Area and Tenant’s Pro Rata Share are
all subject to adjustment as provided in this Lease.  

	
  Definition or
  Provision

  	
   

  	
  Means the Following (As of the Term

  Commencement Date)

  
	
  Rentable Area of Premises

  	
   

  	
  37,699 square
  feet

  
	
  Rentable Area of Building

  	
   

  	
  67,340 square
  feet

  
	
  Tenant’s Pro Rata Share of Building

  	
   

  	
  55.98%

  

 

2.3.          Initial
monthly and annual installments of Basic Annual Rent for the Premises (“Basic
Annual Rent”), subject to adjustment under this Lease:

	
  Rentable S.F.

  	
   

  	
  Per Rentable S.F.

  	
   

  	
  Total Annual

  	
   

  	
  Total Monthly

  
	
  37,699

  	
   

  	
  $35

  	
   

  	
  $1,319,465

  	
   

  	
  $109,955.42

  

 

2.4.          [Intentionally
omitted]

2.5.          Estimated
Term Commencement Date:  September 1,
2007

2.6.          Estimated
Term Expiration Date:  September 30, 2017

2.7.          Security
Deposit:  An amount equal to the first (1st) four (4) months of Basic
Annual Rent payable by Tenant, subject to increase or decrease in accordance
with the terms hereof

2.8.          Permitted
Use:  General office, research,
development, all uses reasonably related to the development of pharmaceutical
and biological drug products (including, without limitation, laboratory and
vivarium use), manufacturing, production and distribution use in conformity
with Applicable Laws (as defined below)

	
   

  	
  2.9.

  	
  Address for Rent
  Payment:

  	
   

  	
  BMR-217th Place LLC

  
	
   

  	
   

  	
   

  	
   

  	
  17140 Bernardo
  Center Drive, Suite 222

  
	
   

  	
   

  	
   

  	
   

  	
  San Diego,
  California 92128

  
	
   

  	
   

  	
   

  	
   

  	
  Attn: Chief
  Accounting Officer

  
	
   

  	
  2.10.

  	
  Address for
  Notices to Landlord:

  	
   

  	
  BMR-217th Place LLC

  
	
   

  	
   

  	
   

  	
   

  	
  17140 Bernardo
  Center Drive, Suite 222

  
	
   

  	
   

  	
   

  	
   

  	
  San Diego,
  California 92128

  
	
   

  	
   

  	
   

  	
   

  	
  Attn: General
  Counsel/Real Estate

  

 

 2
 

 

	
  

  	
  2.11.

  	
  Address for
  Notices to Tenant:

  	
   

  	
  Sonus Pharmaceuticals,
  Inc.

  
	
   

  	
   

  	
   

  	
   

  	
  22026 20th
  Avenue, SE

  
	
   

  	
   

  	
   

  	
   

  	
  Bothell,
  Washington  98021

  
	
   

  	
   

  	
   

  	
   

  	
  Attn:  Alan Fuhrman, SVP/CFO

  

2.12.        The
following Exhibits are attached hereto and incorporated herein by reference:

Exhibit A                                               Premises

Exhibit B                                                 Acknowledgement
of Term Commencement Date and Term Expiration Date

Exhibit C                                                 Tenant’s
Personal Property

Exhibit D                                                Rules
and Regulations

Exhibit E                                                  Form
of Estoppel Certificate

Exhibit F                                                  Legal
Description of Property

Exhibit G                                                 Work
Letter

Exhibit H                                                Form
of Letter of Credit

3.             Term.

3.1.          This Lease shall take effect upon the
date of execution and delivery hereof by all parties hereto and, except as
specifically otherwise provided within this Lease, each of the provisions
hereof shall be binding upon and inure to the benefit of Landlord and Tenant
from the date of execution and delivery hereof by all parties hereto.

3.2.          The actual term of this Lease (the “Term”)
shall be that period from the actual Term Commencement Date (as defined in Section 4.2
below) through the last day of the one hundred twentieth (120th) calendar month following the
month during which the actual Term Commencement Date occurs, which last day
shall be the actual Term Expiration Date.

4.             Possession and Commencement Date.

4.1.          Landlord
shall tender possession of the Premises to Tenant on the Estimated Term
Commencement Date, with the work required of Landlord described in the Work
Letter attached hereto as Exhibit G (the “Work Letter”) to be
Substantially Complete (as defined below); provided that such work shall
not be required to be Substantially Complete during the Installation Period (as
defined below).  Tenant agrees that in
the event such work is not Substantially Complete on or before the Estimated
Term Commencement Date for any reason, then (a) this Lease shall not be void or
voidable, (b) Landlord shall not be liable to Tenant for any loss or damage
resulting therefrom, (c) the Term Expiration Date shall be extended accordingly
and (d) Tenant shall not be responsible for the payment of any Rent (as defined
below) until the actual Term Commencement Date as described in Section 4.2
occurs.  The work required of Landlord
described in the Work Letter (both Landlord’s
Work and the Shell and Core Work) shall be deemed Substantially
Complete, as that term is used in this Article 4 and elsewhere in this
Lease, if Landlord has (y) completed all of Landlord’s
Work and the Shell and Core Work (subject only to a punchlist of items
that do not materially and substantially interfere with Tenant’s use of the
Premises) and provided to Tenant a certificate of Substantial Completion from
the architect that

 3
 

includes
a certification to Tenant that the Tenant Improvements are substantially
complete in accordance with the Approved Plans (as defined in the Work Letter),
except for minor punch list items, and (z) received a temporary certificate of
occupancy from the municipality(ies) in which the Property is located, or would
have received the temporary occupancy certificate or certificate of Substantial
Completion but for delays or failure of Tenant or Tenant’s architect to deliver
items in accordance with the Work Letter. 
The term “Substantially Complete” or “Substantial Completion”
means that the Tenants Improvements satisfy the requirements of clauses (y) and
(z) above.

4.2.          The “Term Commencement Date”
shall be the day Landlord tenders possession of the Premises to Tenant, but no
earlier than the later of (a) the date on which
the Tenant Improvements are Substantially Complete and (b) the date Tenant has
had access to the Premises for four (4) weeks (the “Installation Period”)
solely to install furniture, fixtures and equipment in the Premises (during
which period Tenant shall have no obligation to pay any Basic Annual Rent or
Tenant’s Pro Rata Share of Operating Expenses), not to occupy the
Premises.  Tenant shall execute
and deliver to Landlord written acknowledgment of the actual Term Commencement
Date and the Term Expiration Date, in the form attached as Exhibit B
hereto, within forty (40) days after Tenant takes occupancy of the Premises.  Failure to execute and deliver such
acknowledgment, however, shall not affect the Term Commencement Date or
Landlord’s or Tenant’s liability hereunder.

4.3.          During the Installation Period and any other period prior to the Term
Commencement Date that Landlord permits (such permission not to be unreasonably
withheld, conditioned or delayed) Tenant to enter upon the Premises for the
purpose of installing improvements or placing personal property, Tenant shall
furnish to Landlord evidence reasonably  satisfactory
to Landlord that  the insurance coverages required
of Tenant under the provisions of Article 21 are in effect, and
such entry shall be subject to all the terms and conditions of this Lease other
than the payment of Basic Annual Rent or Additional Rent (as defined below),
except as required under Section 4.2.

4.4.          Possession of areas of the Premises
reasonably necessary for utilities, services, safety and operation of the Building
is reserved to Landlord.

5.             Rent and Tenant Improvement
Allowance.

5.1.          Tenant shall pay to Landlord as Basic
Annual Rent for the Premises, commencing on the Term Commencement Date, the
sums set forth in Section 2.3, subject to the rental adjustments
provided in Article 6 hereof. 
Basic Annual Rent and TI Rent (defined below) shall be paid in equal
monthly installments (as set forth in Section 2.3 for Basic Annual
Rent), subject to the rental adjustments provided in Article  6
hereof, each in advance on the first day of each and every calendar month
during the Term.

5.2.          Landlord
shall cause to be constructed the tenant improvements in the Premises (the “Tenant
Improvements”) pursuant to the Work Letter at a cost to Landlord (the “Tenant
Improvement Allowance”) not to exceed Six Million Five Hundred Ninety-Seven
Thousand Three Hundred Twenty-Five Dollars ($6,597,325) (based upon One Hundred
Seventy-Five

 4
 

Dollars
($175) per rentable square foot, as adjusted based on the finally determined
Rentable Area of the Premises), which amount shall include the costs of (a)
construction, (b) project management by Landlord (which fee shall equal three
percent (3%) of the Tenant Improvement Allowance actually paid by
Landlord but not less than 3% of the product of the Rentable Area of the
Premises times One Hundred Twenty-Five Dollars ($125) per rentable square
foot), (c) space planning, architect, engineering and other related services
and (d) building permits and other planning and inspection fees.  The Tenant Improvement Allowance shall
consist of an allowance of (x) One Hundred Twenty-Five Dollars ($125) per
rentable square foot, which shall be expended first, (y) an additional
Twenty-Five Dollars ($25) per rentable square foot, which shall be expended
second (“Tranche 2”), and (z) an additional Twenty-Five Dollars ($25)
per rentable square foot, which shall be expended third (“Tranche 3”).  If the total cost of the Tenant Improvements
exceeds the Tenant Improvement Allowance, then the overage shall be paid
by Tenant to Landlord prior to the Term Commencement Date.  Tenant shall have until December 31, 2007, to
expend the unused portion of the Tenant Improvement Allowance, after
which date Landlord’s obligation to fund such costs shall expire.  Tenant shall pay to Landlord, as Additional
Rent (the “TI Rent”), Tranche 2 or so much thereof as is actually paid
by Landlord amortized over the final one hundred twenty (120) months of the
initial Term at a rate of ten percent (10%) per annum, and Tranche 3 or so much
thereof as is actually paid by Landlord amortized over the final one hundred
twenty (120) months of the initial Term at a rate of twelve percent (12%) per
annum.

5.3.          The Tenant Improvement Allowance shall
be paid by Landlord as provided in the Work Letter.

5.4.          In addition to Basic Annual Rent,
Tenant shall pay to Landlord as additional rent (“Additional Rent”) at
times hereinafter specified in this Lease (a) Tenant’s pro rata share, as set
forth in Section 2.2 (“Tenant’s Pro Rata Share”), of Operating
Expenses as provided in Article 7 and (b) any other amounts that
Tenant assumes or agrees to pay under the provisions of this Lease that are
owed to Landlord, including, without limitation, any and all other sums that
may become due by reason of any default of Tenant or failure on Tenant’s part
to comply with the agreements, terms, covenants and conditions of this Lease to
be performed by Tenant, after notice and the lapse of any applicable cure
periods.

5.5.          Basic Annual Rent, TI Rent and
Additional Rent shall together be denominated “Rent.”  Rent shall be paid to Landlord, without
abatement, deduction or offset, in lawful money of the United States of America
at the office of Landlord as set forth in Section 2.10 or to such
other person or at such other place as Landlord may from time designate in
writing.  In the event the Term commences
or ends on a day other than the first day of a calendar month, then the Rent
for such fraction of a month shall be prorated for such period on the basis of
a thirty (30) day month and shall be paid at the then-current rate for such
fractional month.

6.             Rent Adjustments.  The Basic Annual Rent and TI Rent shall be
subject to an annual upward adjustment of three percent (3%) of the
then-current Basic Annual Rent and TI Rent, respectively.  The first such adjustment shall become
effective commencing with that monthly rental installment that is due on the
first (1st) day
of the 13th calendar month following the month during
which the actual Term Commencement Date occurs, and subsequent adjustments
shall

 5
 

become effective
on every successive annual anniversary of the first adjustment for so long as
this Lease continues in effect.

7.             Operating Expenses.

7.1.          As used herein, the term “Operating
Expenses” shall include:

(a)           Government impositions including,
without limitation, property tax costs consisting of real and personal property
taxes and assessments, including amounts due under any improvement bond upon
the Building or the Project, including the parcel or parcels of real property
upon which the Building and areas serving such Building are located or assessments
in lieu thereof imposed by any federal, state, regional, local or municipal
governmental authority, agency or subdivision (each, a “Governmental
Authority”) are levied; taxes on or measured by gross rentals received from
the rental of space in the Building; taxes based on the square footage of the
Premises, the Building or the Project, as well as any parking charges,
utilities surcharges or any other costs levied, assessed or imposed by, or at
the direction of, or resulting from Applicable Laws (as defined below) or
interpretations thereof, promulgated by any Governmental Authority in
connection with the use or occupancy of the Building or the parking facilities
serving the Building; taxes on this transaction or any document to which Tenant
is a party creating or transferring an interest in the Premises; any fee for a
business license to operate an office building; and any expenses, including the
reasonable cost of attorneys or experts, reasonably incurred by Landlord in
seeking reduction by the taxing authority of the applicable taxes, less tax
refunds obtained as a result of an application for review thereof.  Operating Expenses shall not include any net
income, franchise, capital stock, estate or inheritance taxes, or taxes that
are the personal obligation of Tenant or of another tenant of the Project; and

(b)           All other costs of any kind paid or
incurred by Landlord in connection with the operation or maintenance of the
Building and the Project including, by way of example and not of limitation,
costs of repairs and replacements to improvements within the Project as
appropriate to maintain the Project as required hereunder; costs of utilities
furnished to the Common Areas; sewer fees; cable television; trash collection;
cleaning, including windows; heating; ventilation; air-conditioning;
maintenance of landscaping and grounds; maintenance of drives and parking
areas; maintenance of the roof; security services and devices; building
supplies; maintenance or replacement of equipment utilized for operation and maintenance
of the Project; license, permit and inspection fees; sales, use and excise
taxes on goods and services purchased by Landlord in connection with the
operation, maintenance or repair of the Project or Building systems and
equipment; telephone, postage, stationery supplies and other expenses incurred
in connection with the operation, maintenance or repair of the Project;
accounting, legal and other professional fees and expenses incurred in
connection with the Project; costs of furniture, draperies, carpeting,
landscaping and other customary and ordinary items of personal property
provided by Landlord for use in Common Areas; capital expenditures, provided,
however, that any capital expenditures in excess of One Hundred Thousand
Dollars ($100,000) shall be amortized on a straight line basis over the useful
life thereof in accordance with GAAP (but in no event longer than ten (10)
years);  costs of complying with all federal,
state, municipal and local laws, codes, ordinances, rules and regulations of governmental
authorities, committees, associations, or other regulatory committees, agencies
or governing bodies having jurisdiction

 6
 

over the Property,
the Building, the Premises, Landlord or Tenant, including both statutory and
common law and hazard waste rules and regulations (“Applicable Laws”);
insurance premiums, including premiums for public liability, property casualty,
earthquake and environmental coverages; portions of insured losses paid by
Landlord as part of the deductible portion of a loss pursuant to the terms of
insurance policies up to a maximum deductible amount of Two Hundred Fifty
Thousand Dollars ($250,000) per occurrence for environmental insurance and
Fifty Thousand Dollars ($50,000) per occurrence for all other policies; service
contracts; costs of services of independent contractors retained to do work of
a nature referenced above; and costs of compensation (including employment
taxes and fringe benefits) of all persons who perform regular and recurring
duties connected with the day-to-day operation and maintenance of the Project,
its equipment, the adjacent walks, landscaped areas, drives and parking areas,
including, without limitation, janitors, floor waxers, window washers,
watchmen, gardeners, sweepers and handymen.

Notwithstanding
the foregoing, Operating Expenses shall not include any leasing commissions, finder’s fees, attorneys’ fees, entertainment and travel
expenses and other costs incurred by Landlord in leasing or attempting to lease
space in the Building; expenses that relate to preparation, improvement,
decoration, painting or redecorating of rental space for a tenant or other
occupants of the Building; expenses of initial development and construction,
including, but not limited to, grading, paving, landscaping and decorating (as
distinguished from maintenance, repair and replacement of the foregoing); the
cost of compliance with Applicable Laws in effect as of the Term Commencement
Date to the extent the Building or Project was not in compliance as of the Term
Commencement Date; the cost of compliance with Applicable Laws to the extent
that such cost would not have been incurred but for the construction of
additions to the Building involving the moving of perimeter walls of the
Building, adding additional floors to the Building, or constructing additional
buildings on the Property; expenses for the defense of Landlord’s title to the
Property or Building; the cost of maintenance, repair and replacement of the
foundation and structural walls; any repair, rebuilding or other work
necessitated by condemnation, fire, windstorm, act of terrorism, or other
casualty or hazard, the cost of which exceeds Ten Thousand Dollars ($10,000),
except to the extent of any insurance deductible payable by Tenant under this
Lease; the cost of insurance premiums for insurance coverage not typically
carried on buildings comparable to the Building in the greater Seattle area (provided
that Landlord shall be allowed to include as Operating Expenses the costs of
environmental and earthquake insurance); accounting, legal and other
professional fees and expenses relating to other tenants or the refinance or
sale of the Property; interest upon loans to Landlord or secured by a mortgage
or deed of trust covering the Project or a portion thereof (provided
that interest upon a government assessment or improvement bond payable in
installments shall constitute an Operating Expense under Section 7.1);
costs arising from Landlord’s charitable or political contributions; salaries
of executive officers of Landlord; Landlord’s general corporate overhead,
except as it relates to the specific management of the Building; any ground
lease rental; costs incurred by Landlord with respect to goods and services
other than parking (including utilities sold and supplied to tenants and
occupants of the Building) to the extent that Landlord is reimbursed for such
costs other than through the Operating Expense pass-through provisions of such
tenants’ leases; expenses in connection with services or other benefits that
are not offered to Tenant or for which Tenant is charged directly and that are
provided to another tenant or occupant of the Building; fines or

 7
 

penalties incurred
by Landlord due to the violation by Landlord of (i) any Applicable Laws (provided
that costs of complying with Applicable Laws may be included unless otherwise
specifically excluded herein) or (ii) the terms and conditions of any lease of
space in the Building; overhead and profit increments paid to subsidiaries or
affiliates of Landlord for services provided to the Building to the extent the
cost of such services exceeds the costs that would generally be charged for
such services if rendered on a competitive basis (based upon a standard of
similar office buildings in the general market area of the Premises) by unaffiliated
third parties capable of providing such service; advertising and promotional
expenditures; depreciation of the Building or the improvements therein; costs
resulting from the negligence or willful misconduct of Landlord; and
depreciation claimed by Landlord for tax purposes (provided that this
exclusion of depreciation is not intended to delete from Operating Expenses
actual costs of repairs and replacements and reasonable reserves in regard
thereto that are provided for in Section 7.1).

“Applicable
Laws” means all laws, codes, ordinances, rules and regulations of
governmental authorities having jurisdiction over the Property, the Building,
the Premises, Landlord or Tenant.

7.2.          Tenant shall pay to Landlord on the
first day of each calendar month of the Term, as Additional Rent, (a) the
Property Management Fee (as defined below) and (b) Landlord’s estimate of
Tenant’s Pro Rata Share of Operating Expenses with respect to the Building and
the Project, as applicable, for such month.

(x)            The “Property Management Fee”
shall equal two percent (2%) of the Basic Annual Rent due from Tenant.

(y)           Within ninety (90) days after the
conclusion of each calendar year (or such longer period as may be reasonably
required by Landlord), Landlord shall furnish to Tenant a statement showing in
reasonable detail the actual Operating Expenses and Tenant’s Pro Rata Share of
Operating Expenses for the previous calendar year.  Any additional sum due from Tenant to
Landlord shall be due and payable within thirty (30) days after Tenant’s
receipt of such statement.  If the
amounts paid by Tenant pursuant to this Section 7.2 exceed Tenant’s
Pro Rata Share of Operating Expenses for the previous calendar year, then
Landlord shall credit the difference against the Rent next due and owing from
Tenant; provided that, if the Lease term has expired, Landlord shall
accompany said statement with payment for the amount of such difference.

(z)            Any amount due under this Section 7.2
for any period that is less than a full month shall be prorated (based on a
thirty (30)-day month) for such fractional month.

7.3.          Landlord’s annual statement shall be
final and binding upon Tenant unless Tenant, within sixty (60) days after
Tenant’s receipt thereof, shall contest any item therein by giving written notice
to Landlord, specifying each item contested and the reasons therefor.  If, during such sixty (60)-day period, Tenant
reasonably and in good faith questions or contests the correctness of Landlord’s
statement of Tenant’s Pro Rata Share of Operating Expenses, Landlord shall
provide Tenant with reasonable access to Landlord’s books and records to the
extent

 8
 

relevant to determination
of Operating Expenses, and such information as Landlord reasonably determines
to be responsive to Tenant’s written inquiries. 
In the event that, after Tenant’s review of such information, Landlord
and Tenant cannot agree upon the amount of Tenant’s Pro Rata Share of Operating
Expenses, then Tenant shall have the right to have an independent public
accounting firm hired by Tenant on an hourly basis and not on a contingent-fee
basis (at Tenant’s sole cost and expense) and approved by Landlord (which
approval Landlord shall not unreasonably withhold, condition
or delay) audit and review such of Landlord’s books and records for the year in
question as directly relate to the determination of Operating Expenses for such
year (the “Independent Review”). 
Landlord shall make such books and records available at the location
where Landlord maintains them in the ordinary course of its business.  Landlord need not provide copies of any books
or records but Tenant may copy those portions of the books or records provided
by Landlord to Tenant at Tenant’s expense. 
Tenant shall commence the Independent Review within fifteen (15) days
after the date Landlord has given Tenant access to Landlord’s books and records
for the Independent Review.  Tenant shall
complete the Independent Review and notify Landlord in writing of Tenant’s
specific objections to Landlord’s calculation of Operating Expenses (including
Tenant’s accounting firm’s written statement of the basis, nature and amount of
each proposed adjustment) no later than six (6) months after Landlord has first
given Tenant access to Landlord’s books and records for the Independent
Review.  Landlord shall review the
results of any such Independent Review. 
The parties shall endeavor to agree promptly and reasonably upon
Operating Expenses taking into account the results of such Independent Review.  If, as of 
ninety (90) days after Tenant has submitted the Independent Review to
Landlord, the parties have not agreed on the appropriate adjustments to
Operating Expenses, then the parties shall engage a mutually agreeable
independent third party accountant with at least ten (10) years’ experience in commercial
real estate accounting in Western Washington (the “Accountant”).  If the parties cannot agree on the
Accountant, each shall within ten (10) days after such impasse appoint an
Accountant (different from the accountant and accounting firm that conducted
the Independent Review) and, within ten (10) days after the appointment of both
such Accountants, those two Accountants shall select a third (which cannot be
the accountant and accounting firm that conducted the Independent Review).  If either party fails to timely appoint an
Accountant, then the Accountant the other party appoints shall be the sole
Accountant.  Within ten (10) days after
appointment of the Accountant(s), Landlord and Tenant shall each simultaneously
give the Accountants (with a copy to the other party) its determination of
Operating Expenses, with such supporting data or information as each submitting
party determines appropriate.  Within ten
(10) days after such submissions, the Accountants shall by majority vote select
either Landlord’s or Tenant’s determination of Operating Expenses.  The Accountants may not select or designate
any other determination of Operating Expenses. 
The determination of the Accountant(s) shall bind the parties.  If the parties agree or the Accountant(s) determine
that Tenant’s Pro Rata Share of Operating Expenses actually paid for the
calendar year in question exceeded Tenant’s obligations for such calendar year,
then Landlord shall, at Tenant’s option, either (a) credit the excess to the
next succeeding installments of estimated Additional Rent or (b) pay the excess
to Tenant within thirty (30) days after delivery of such results.  If the parties agree or the Accountant(s)
determine that Tenant’s payments of Tenant’s Pro Rata Share of Operating
Expenses for such calendar year were less than Tenant’s obligation for the
calendar year, then Tenant shall pay the deficiency to the Landlord within
thirty (30) days after delivery of such results.  Tenant agrees to pay the cost of

 9
 

such audit; provided
that, if the audit reveals that Landlord’s determination of Tenant’s Pro Rata
Share of Operating Expenses was at least five percent (5%) in error in Landlord’s
favor, Landlord shall pay the reasonable costs of such audit.

7.4.          Tenant shall not be responsible for
Operating Expenses attributable to the time period prior to the Term
Commencement Date; provided, however, that if Landlord shall
permit Tenant possession of the Premises prior to the Term Commencement Date
(exclusive of the Installation Period),
Tenant shall be responsible for  Tenant’s Pro
Rata Share of Operating Expenses from such earlier date of possession.  Tenant’s responsibility for Tenant’s Pro Rata
Share of Operating Expenses shall continue to the latest of (a) the date of
termination of the Lease or (b) the date Tenant has fully vacated the Premises.

7.5.          Operating Expenses for the calendar
year in which Tenant’s obligation to share therein commences and for the
calendar year in which such obligation ceases shall be prorated on a basis
reasonably determined by Landlord. 
Expenses such as taxes, assessments and insurance premiums that are
incurred for an extended time period shall be prorated based upon the time
periods to which they apply so that the amounts attributed to the Premises
relate in a reasonable manner to the time period wherein Tenant has an
obligation to share in Operating Expenses.

8.             Rentable Area.

8.1.          The
Rentable Area of the Project is determined by making separate calculations of
the Rentable Area of each floor of all buildings and totaling the Rentable Area
of all floors within the buildings. The Rentable Area of a floor is calculated
by measuring to the outside finished surface of each permanent outer building
wall where it intersects the floor. The full area calculated as set forth above
is included as Rentable Area of the Project without deduction for (a) columns
or projections, (b) vertical penetrations (including stairs, elevator shafts,
flues, pipe shafts, vertical ducts, and the like) and their enclosing walls,
(c) corridors, equipment rooms, restrooms, entrance ways, elevator lobbies and
the like, and each of their enclosing walls, and (d) any other unusable area of
any nature.

8.2.          Promptly after Substantial Completion
of the Tenant Improvements, Landlord’s architect shall certify to Tenant the
Rentable Area of the Premises and the Rentable Area of the Building and shall
provide to Tenant a copy of the drawings and calculations upon which such
Rentable Areas are based.  If the
Rentable Area of the Premises determined under this paragraph is different than
the Rentable Area of the Premises set forth in Section 2.2, then the
Basic Annual Rent under Section 2.3, the Security Deposit under Section
2.7 and the Tenant Improvement Allowance under Section 5 shall be
adjusted to reflect the Rentable Area of the Premises determined under this
paragraph.

8.3.          Tenant’s Pro Rata Share shall be
recalculated in the event of any change in the Rentable Area of the Premises or
the total Rentable Area in the Project. 
It is anticipated that Landlord may construct another building on the
Property, in which event Tenant’s Pro Rata Share shall be adjusted with respect
to Operating Expenses benefiting the entire Property (e.g., real property taxes
and insurance) such that all of the Rentable Area in the Project is taken into
account.  If the recalculation of Tenant’s
Pro Rata Share is certified by a licensed architect as

 10
 

being correct,
then Tenant shall be bound by such certification.  Landlord shall provide to Tenant a copy of
the drawings and calculations upon which the recalculation of Tenant’s Pro Rata
Share is based.

9.             Security Deposit.

9.1.          Tenant has deposited with Landlord the
sum set forth in Section 2.7 (the “Security Deposit”), which
sum shall be held by Landlord as security for the faithful performance by
Tenant of all of the terms, covenants and conditions of this Lease to be kept
and performed by Tenant during the Term. 
If Tenant defaults with respect to any provision of this Lease,
including, but not limited to, any provision relating to the payment of Rent,
then Landlord may (but shall not be required to) use, apply or retain all or
any part of the Security Deposit for the payment of any Rent or any other sum
in default, or to compensate Landlord for any other loss or damage that
Landlord may suffer by reason of Tenant’s default.  If any portion of the Security Deposit is so
used or applied, then Tenant shall, within fifteen (15) days following demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to its original amount, and Tenant’s failure to do so shall be
a material breach of this Lease.

9.2.          In the event of bankruptcy or other
debtor-creditor proceedings against Tenant, the Security Deposit shall be
deemed to be applied first to the payment of Rent and other charges due
Landlord for all periods prior to the filing of such proceedings.

9.3.          Landlord may deliver to any purchaser
of Landlord’s interest in the Premises the funds deposited hereunder by Tenant,
and thereupon Landlord shall be discharged from any further liability with
respect to such deposit.  This provision
shall also apply to any subsequent transfers.

9.4.          If Tenant shall fully and faithfully
perform every provision of this Lease to be performed by it, then the Security
Deposit, or any balance thereof, shall be returned to Tenant (or, at Landlord’s
option, to the last assignee of Tenant’s interest hereunder) within thirty (30)
days after the expiration or earlier termination of this Lease.

9.5.          [Intentionally omitted]

9.6.          If the Security Deposit shall be in
cash, Landlord shall deposit the Security Deposit into an interest-bearing
account at a banking organization selected by Landlord.  All interest and dividends, if any, accruing
on the Security Deposit, less a one percent (1%) per annum charge on the
Security Deposit for administrative expenses (but in no event greater than the
amount of interest actually accrued on the Security Deposit during such annual
period), shall be added to, held and included within the term Security Deposit and,
provided that no Default shall have occurred and be continuing,
shall accrue to the account of Tenant and be disbursed to Tenant annually.  Landlord shall not be required to credit
Tenant with any interest for any period during which Landlord does not receive
interest on the Security Deposit.

9.7.          The
Security Deposit may be in the form of cash, a letter of credit or any other
security instrument acceptable to Landlord in its sole discretion.  Tenant may at any time, except

 11
 

during Default, deliver a letter of credit (the “L/C Security”)
as the entire Security Deposit, as follows.

(a)           If
Tenant elects to deliver L/C Security, then Tenant shall provide Landlord, and
maintain in full force and effect throughout the Term, a letter of credit in
the form of Exhibit H, or such other form as is reasonably acceptable to
Landlord, issued by an issuer reasonably satisfactory to Landlord, in the
amount of the Security Deposit, with an initial term of at least one (1)  year. 
If, at the Term Expiration Date, any Rent remains uncalculated or
unpaid, then:  (a) Landlord shall
with reasonable diligence complete any necessary calculations; (b) Tenant
shall extend the expiry date of such L/C Security from time to time as Landlord
reasonably requires; and (c) in such extended period, Landlord shall not
unreasonably refuse to consent to an appropriate reduction of the L/C
Security.  Tenant shall reimburse
Landlord’s legal costs (as estimated by Landlord’s counsel), not to exceed One
Thousand Five Hundred Dollars ($1,500), in handling Landlord’s acceptance of
L/C Security or its replacement or extension.

(b)           If
Tenant delivers to Landlord satisfactory L/C Security in place of the entire
Security Deposit, Landlord shall remit to Tenant any cash Security Deposit
Landlord previously held.

(c)           Landlord
may draw upon the L/C Security, and hold and apply the proceeds in the same
manner and for the same purposes as the Security Deposit, if:  (a) an uncured Default exists;
(b) as of the date thirty (30) days before any L/C Security expires (even
if such scheduled expiry date is after the Term Expiration Date) Tenant has not
delivered to Landlord an amendment or replacement for such L/C Security,
reasonably satisfactory to Landlord, extending the expiry date to the earlier
of (i) one (1) month after the then-current Term Expiration Date or
(ii) the date one year after the then-current expiry date of the L/C
Security; (c) the L/C Security provides for automatic renewals, Landlord
asks Tenant and  the issuer to
confirm the current L/C Security expiry date, and the issuer fails to do so
within thirty (30) business days; (d) Tenant fails to pay (when and as
Landlord reasonably requires) any bank charges for Landlord’s transfer of the
L/C Security; or (e) the issuer of the L/C Security ceases, or announces
that it will cease, to maintain an office in the city where Landlord may
present drafts under the L/C Security. 
This paragraph does not limit any other provisions of this Lease
allowing Landlord to draw the L/C Security under specified circumstances.

(d)           Tenant
shall not seek to enjoin, prevent, or otherwise interfere with Landlord’s draw
under L/C Security, even if it violates this Lease.  Tenant acknowledges that the only effect of a
wrongful draw would be to substitute a cash Security Deposit for L/C Security,
causing Tenant no legally recognizable damage. 
Landlord shall hold the proceeds of any draw in the same manner and for
the same purposes as a cash Security Deposit. 
In the event of a wrongful draw, the parties shall cooperate to allow Tenant
to post replacement L/C Security simultaneously with the return to Tenant of
the wrongfully drawn sums, and Landlord shall upon request confirm in writing
to the issuer of the L/C Security that Landlord’s draw was erroneous.

(e)           If
Landlord transfers its interest in the Premises, then Tenant shall at Tenant’s
expense, within five Business Days after receiving a request from Landlord,
deliver (and, if the issuer requires, Landlord shall consent to) an amendment
to the L/C Security naming

 12
 

Landlord’s grantee as substitute beneficiary.  If the required Security changes while L/C
Security is in force, then Tenant shall deliver (and, if the issuer requires,
Landlord shall consent to) a corresponding amendment to the L/C Security.

10.           Use.

10.1.        Tenant
shall use the Premises for the purpose set forth in Section 2.8 (the “Permitted
Use”), and shall not use the Premises, or permit or suffer the Premises to
be used, for any other purpose without Landlord’s prior written consent, which
consent Landlord may withhold in its sole and absolute discretion.

10.2.        Tenant shall not use or occupy the
Premises in violation of Applicable Laws; zoning ordinances; or the certificate
of occupancy issued for the Building, and shall, upon ten (10) days’ written
notice from Landlord, discontinue any use of the Premises that is declared or
claimed by any Governmental Authority having jurisdiction to be a violation of
any of the above, or that in Landlord’s reasonable opinion violates any of the
above.  Tenant shall comply with any direction
of any Governmental Authority having jurisdiction that shall, by reason of the
nature of Tenant’s use or occupancy of the Premises, impose any duty upon
Tenant or Landlord with respect to the Premises or with respect to the use or
occupation thereof.

10.3.        Tenant shall not do or permit to be done
anything that will invalidate or increase the cost of any fire, environmental,
extended coverage or any other insurance policy covering the Building and the
Project, and shall comply with all rules, orders, regulations and requirements
of the insurers of the Building and the Project, and Tenant shall promptly,
upon demand, reimburse Landlord for any additional premium charged for such
policy by reason of Tenant’s failure to comply with the provisions of this
Article; provided, however, that no action of Tenant that increases the
cost of any insurance shall constitute a Default so long as Tenant pays such
increased cost.

10.4.        Tenant shall keep all doors opening onto
public corridors closed, except when in use for ingress and egress.

10.5.        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 to existing locks or the mechanisms thereof without Landlord’s
prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed.  Tenant shall, upon termination of this Lease,
return to Landlord all keys to offices and restrooms either furnished to or
otherwise procured by Tenant.  In the
event any key so furnished to Tenant is lost, Tenant shall pay to Landlord the
cost of replacing the same or of changing the lock or locks opened by such lost
key if Landlord shall reasonably  deem it
necessary to make such change.

10.6.        No awnings or other projections shall be
attached to any outside wall of the Building. 
No curtains, blinds, shades or screens shall be attached to or hung in,
or used in connection with, any window or door of the Premises other than
Landlord’s standard window coverings. 
Neither the interior nor exterior of any windows shall be coated or
otherwise sunscreened without Landlord’s prior written consent, nor shall any
bottles, parcels or other

 13
 

articles be placed
on the windowsills.  No equipment,
furniture or other items of personal property shall be placed on any exterior
balcony without Landlord’s prior written consent.

10.7.        No
sign, advertisement or notice (“Signage”) shall be exhibited, painted or
affixed by Tenant on any part of the Premises or the Building without Landlord’s
prior written consent,  not to be
unreasonably withheld, conditioned or delayed.  Interior signs on doors and the directory
tablet shall be inscribed, painted or affixed for Tenant by Landlord at Tenant’s
sole cost and expense, and shall be of a size, color and type and be located in
a place  reasonably acceptable to
Landlord.  The directory tablet shall be
provided exclusively for the display of the name and location of tenants
only.  Tenant shall not place anything on
the exterior of the corridor walls or corridor doors other than Landlord’s
standard lettering.  Tenant shall be
entitled to Tenant’s Pro Rata Share of the maximum Building façade Signage
permitted by Applicable Laws, the cost of which shall be at Tenant’s sole
expense (which expense shall be included in the Costs (as defined in the Work
Letter)).  The design and placement of
Tenant’s Building façade Signage shall be reviewed and approved by Landlord and
Tenant as part of Landlord’s Work Plans and
shall, if approved, be made part of the Approved Plans as defined in the Work
Letter.  

10.8.        Tenant shall cause any office equipment
or machinery to be installed in the Premises so as to reasonably prevent sounds
or vibrations therefrom from extending into the Common Areas or other offices
in the Building.  Further, Tenant shall
not place any equipment weighing one hundred (100) pounds or greater per square
foot of equipment footprint within the Premises, other than on the ground floor
thereto, without Landlord’s prior written approval (which approval shall not be
unreasonably withheld, conditioned or delayed), and such equipment shall be
placed in a location designed to carry the weight of such equipment.

10.9.        Tenant shall not (a) do or permit
anything to be done in or about the Premises that shall in any way obstruct or
interfere with the rights of other tenants or occupants of the Building or the
Project, or injure or annoy them, or (b) use or allow the Premises to be used
for immoral, unlawful or objectionable purposes, nor shall Tenant knowingly
cause, maintain or permit any nuisance or waste in, on or about the Premises,
the Building or the Project.

10.10.      Notwithstanding any other provision herein
to the contrary, Landlord shall correct, repair or replace any non-compliance
of the Building exterior, the Tenant Improvements and the Common Area with all
applicable building permits and codes in effect as of the Term Commencement
Date, including, without limitation, the provisions of Title III of the
Americans With Disabilities Act (“ADA”) in effect as of the Term
Commencement Date.  Said costs of
compliance shall be at Landlord’s sole cost and shall not be part of Operating
Expenses, but shall constitute Costs (as defined in the Work Letter) to the
extent that such costs are part of the Approved
Budget (as defined in the Work Letter) for
the Tenant Improvements, as the Approved Budget may be amended pursuant to the
Work Letter.  Landlord shall
correct, repair or replace any non-compliance of the Building exterior and the
Common Area with any revisions or amendments to the ADA that become effective
after the Term Commencement Date, provided that the cost of such repairs
or replacements (amortized over the useful life thereof in accordance with
GAAP, but in no event longer than ten (10) years) shall be included as
Operating Expenses payable by Tenant. 
Tenant shall be responsible, at its sole cost and expense, for all other
ADA compliance for the Premises, including, without limitation, in connection
with Tenant’s

 14
 

construction of
any alterations or other improvements in the Premises and the operation of
Tenant’s business and employment practices in the Premises.  The repairs, corrections or replacements
required of Landlord or of Tenant under the foregoing provisions of this Section
10.10 shall be made promptly following notice of non-compliance from any
Governmental Authority.  The provisions
of this Section 10.10 shall survive the expiration or earlier
termination of this Lease with respect to any obligation accrued under this Section
10.10 before the date of expiration or earlier termination of this Lease.

11.           Brokers.

11.1.        Tenant represents and warrants that it
has had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease other than Flinn Ferguson (“Tenant’s Broker”),
and that it knows of no other real estate broker or agent that is or might be
entitled to a commission in connection with this Lease.  Landlord shall compensate Tenant’s Broker in
relation to this Lease pursuant to a separate agreement between Landlord and
Tenant’s Broker or Landlord’s Broker (as defined below).  Landlord represents and warrants that it has
had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease other than EDG Commercial Real Estate (“Landlord’s
Broker”), and that it knows of no other real estate broker or agent that is
or might be entitled to a commission in connection with this Lease.  Landlord shall compensate Landlord’s Broker
in relation to this Lease pursuant to a separate agreement between Landlord and
Landlord’s Broker.

11.2.        Tenant represents and warrants that no
broker or agent has made any representation or warranty relied upon by Tenant
in Tenant’s decision to enter into this Lease, other than as contained in this
Lease.

11.3.        Tenant acknowledges and agrees that the
employment of brokers by Landlord is for the purpose of solicitation of offers
of leases from prospective tenants and that no authority is granted to any
broker to furnish any representation (written or oral) or warranty from
Landlord unless expressly contained within this Lease.  Landlord is executing this Lease in reliance
upon Tenant’s representations, warranties and agreements contained within Sections
11.1 and 11.2.

11.4.        Tenant
agrees to indemnify, defend and hold Landlord harmless from any and all cost or
liability for compensation claimed by any other broker or agent, other than
Tenant’s Broker, employed or engaged by it or claiming to have been employed or
engaged by it.

11.5.        Landlord
agrees to indemnify, defend and hold Tenant harmless from any and all cost or
liability for compensation claimed by any other broker or agent, other than
Landlord’s Broker, employed or engaged by it or claiming to have been employed
or engaged by it.

12.           Holding Over.

12.1.        If, with Landlord’s prior written
consent, Tenant holds possession of all or any part of the Premises after the
Term, Tenant shall become a tenant from month to month after the expiration or
earlier termination of the Term, and in such case Tenant shall continue to pay
(a) the Basic Annual Rent in accordance with Article 5, as adjusted
in accordance with Article 6, and

 15
 

(b) Tenant’s Pro
Rata Share of Operating Expenses.  Any
such month-to-month tenancy shall be subject to every other term, covenant and
agreement contained herein.

12.2.        Notwithstanding
the foregoing, if Tenant remains in possession of the Premises after the
expiration or earlier termination of the Term without Landlord’s prior written
consent, Tenant shall become a tenant at sufferance subject to the terms and
conditions of this Lease, except that the monthly rent shall be equal to one
hundred fifty percent (150%) of the Rent in effect during the last thirty (30)
days of the Term.

12.3.        Acceptance by Landlord of Rent after the
expiration or earlier termination of the Term shall not result in an extension,
renewal or reinstatement of this Lease.

12.4.        The foregoing provisions of this Article 12
are in addition to and do not affect Landlord’s right of reentry or any other
rights of Landlord hereunder or as otherwise provided by Applicable Laws.

13.           Taxes on Tenant’s Property.

13.1.        Tenant shall pay prior to delinquency
any and all taxes levied against any personal property or trade fixtures placed
by Tenant in or about the Premises.

13.2.        If any such taxes on Tenant’s personal
property or trade fixtures are levied against Landlord or Landlord’s property
or, if the assessed valuation of the Building or the Property is increased by
inclusion therein of a value attributable to Tenant’s personal property or
trade fixtures, and if Landlord, after ten (10) days’  written
notice to Tenant, pays the taxes based upon any such increase in the assessed
valued of the Building or the Project, then Tenant shall, within thirty (30)
days after receipt of a written demand, repay to Landlord such increased
portion of the taxes so paid by Landlord.

13.3.        If
any improvements in or alterations to the Premises, whether owned by Landlord
or Tenant and whether or not affixed to the real property so as to become a
part thereof, are assessed for real property tax purposes at a valuation higher
than the valuation at which improvements conforming to Landlord’s building
standards (the “Building Standard”) in other spaces in the Building are
assessed, then the real property taxes and assessments levied against Landlord
or the Building by reason of such excess assessed valuation shall be deemed to
be taxes levied against personal property of Tenant and shall be governed by
the provisions of Section 13.2 above.  Any such excess assessed valuation due to
improvements in or alterations to space in the Building leased by other tenants
of Landlord shall not be included in the Operating Expenses defined in Article 7,
but shall be treated, as to such other tenants, as provided in this Section 13.3.  If the records of the County Assessor are
available and sufficiently detailed to serve as a basis for determining whether
said Tenant improvements or alterations are assessed at a higher valuation than
the Building Standard, then such records shall be binding on both Landlord and
Tenant.

14.             Condition of Premises.  Tenant acknowledges that neither Landlord nor
any agent of Landlord has made any representation or warranty with respect to
the condition of the Premises,

 16
 

the Building or
the Project, or with respect to the suitability of the Premises, the Building
or the Project for the conduct of Tenant’s business.  Tenant’s taking of possession of the Premises
shall, except as otherwise agreed to in writing by Landlord and Tenant and as
provided by the Work Letter, conclusively establish that the Premises, the
Building and the Project were at such time in good, sanitary and satisfactory
condition and repair.  Notwithstanding
the foregoing, Landlord shall use commercially reasonable efforts to enforce
any warranties for the Core and Shell Work and Landlord’s Work, and, provided
that Tenant shall notify Landlord of deficiencies in the Core and Shell Work
within sixty (60) days after the Term Commencement Date, Landlord shall correct
any such deficiencies that existed as of the Term Commencement Date at Landlord’s
sole cost and expense.

15.           Common Areas and Parking
Facilities.

15.1.        Tenant shall have the non-exclusive
right, in common with others, to use the Common Areas, subject to the rules and
regulations adopted by Landlord and attached hereto as Exhibit D,
together with such other reasonable and nondiscriminatory rules and regulations
as are hereafter promulgated by Landlord in its reasonable discretion (the “Rules
and Regulations”) so long as such Rules and Regulations do not materially
interfere with or prevent Tenant from operating the Premises for the Permitted
Use.  Tenant shall faithfully observe and
comply with the Rules and Regulations. 
Landlord shall not be responsible to Tenant for the violation or
non-performance by any other tenant or any agent, employee or invitee thereof
of any of the Rules and Regulations.

15.2.        Tenant shall have a non-exclusive,
revocable license, without charge, to use Tenant’s Pro Rata Share of parking
facilities serving the Building in common on an unreserved basis with other
tenants of the Building and the Project. 
Landlord shall continuously provide Tenant with parking spaces located
on the Property and sufficient in number to at least satisfy the minimum parking
requirements of Applicable Laws. 
Landlord shall designate visitor parking stalls near the entrance of the
Building for use by visitors of all tenants of the Building or the Property.

15.3.        Tenant agrees not to unreasonably
overburden the parking facilities and agrees to cooperate with Landlord and
other tenants in the use of the parking facilities.  Landlord reserves the right to reasonably  determine that parking facilities are becoming overcrowded
and to limit Tenant’s use thereof.  Upon
such determination, Landlord may reasonably allocate parking spaces among
Tenant and other tenants of the Building or the Project.  Nothing in this Section, however, is intended
to create an affirmative duty on Landlord’s part to monitor parking.

15.4.        Landlord reserves the right to modify
the Common Areas, including the right to add or remove exterior and interior
landscaping and to subdivide real property so long as such modifications do not
materially interfere with or prevent Tenant from operating the Premises for the
Permitted Use or materially increase Tenant’s Pro Rata Share of Operating
Expenses.  Tenant acknowledges that
Landlord specifically reserves the right to allow the exclusive use of
corridors and restroom facilities located on specific floors to one or more
tenants occupying such floors; provided, however, that Tenant
shall not be deprived of the use of the corridors reasonably

 17
 

required to serve the
Premises or of restroom facilities serving the floor upon which the Premises
are located.

16.           Utilities and Services.

16.1.        Tenant shall pay for all water
(including the cost to service, repair and replace reverse osmosis, de-ionized
and other treated water), gas, heat, light, power, telephone, internet service,
cable television, other telecommunications and other utilities supplied to the
Premises, together with any fees, surcharges and taxes thereon.  To the extent permitted by the local
utilities, all utilities serving the Premises shall be separately metered.  All accounts for separately metered utilities
shall be in Tenant’s name, and Tenant shall be responsible for paying for such
utilities directly to the provider thereof. 
If any such utility is not separately metered to Tenant, Tenant shall
pay a reasonable proportion (to be determined by Landlord) of all charges of
such utility jointly metered with other premises as part of Tenant’s Pro Rata
Share of Operating Expenses or, in the alternative, Landlord may, at its
option, monitor the usage of such utilities by Tenant and charge Tenant with
the cost of purchasing, installing and monitoring such metering equipment,
which cost shall be paid by Tenant as Additional Rent.

16.2.        Landlord shall not be liable for, nor
shall any eviction of Tenant result from the failure to furnish any such
utility or service, whether or not such failure is caused by accident;
breakage; repair; strike, lockout or other labor disturbance or labor dispute
of any character; act of terrorism; shortage of materials, which shortage is
not unique to Landlord or Tenant, as the case may be; governmental regulation,
moratorium or other governmental action; or Landlord’s inability, despite the
exercise of reasonable diligence to furnish any such utility or service
(collectively, “Force Majeure”). 
In the event of such failure, Tenant shall not be entitled to any
abatement or reduction of Rent, nor shall Tenant be relieved from the operation
of any covenant or agreement of this Lease.

16.3.        Tenant shall pay for, prior to
delinquency of payment therefor, any utilities and services that may be
furnished to the Premises during or, if Tenant occupies the Premises after the
expiration or earlier termination of the Term, after the Term.

16.4.        Tenant shall not, without Landlord’s
prior written consent (not to be unreasonably withheld, conditioned or
delayed), use any device in the Premises (including, without limitation, data
processing machines) that will in any way (a) increase the amount of
ventilation, air exchange, gas, steam, electricity or water beyond the existing
capacity of the Building as proportionately allocated to the Premises based
upon Tenant’s Pro Rata Share as usually furnished or supplied for the use set
forth in Section 2.8 or (b) exceed Tenant’s Pro Rata Share of the
Building’s capacity to provide such utilities or services.

16.5.        If Tenant shall require utilities or services
in excess of those usually furnished or supplied for tenants in similar spaces
in the Building by reason of Tenant’s equipment or extended hours of business
operations, then Tenant shall first procure Landlord’s consent (not to be
unreasonably withheld, conditioned or delayed) for the use thereof, which
consent Landlord may condition upon the availability of such excess utilities
or services, and Tenant shall pay as Additional Rent an amount equal to the
cost of providing such excess utilities and services.

 

 18

 

16.6.        Utilities and services provided by
Landlord to the Premises that are separately metered shall be paid by Tenant
directly to the supplier of such utility or service.

16.7.        Landlord shall provide water in Common
Areas for drinking and lavatory purposes only; provided, however,
that if Landlord reasonably determines that Tenant requires, uses or consumes
water for any purpose other than ordinary drinking and lavatory purposes,
Landlord may install a water meter and thereby measure Tenant’s water consumption
for all purposes.  Tenant shall pay
Landlord for the actual costs of such meter and the installation thereof and,
throughout the duration of Tenant’s occupancy of the Premises, Tenant shall
keep said meter and installation equipment in good working order and repair at
Tenant’s sole cost and expense.  If
Tenant fails to so maintain such meter and equipment, Landlord may repair or
replace the same and shall collect the costs therefor from Tenant.  Tenant agrees to pay for water consumed, as
shown on said meter (at cost and without any mark-up by Landlord), within
fifteen (15) days after Tenant’s receipt of bills therefor.  If Tenant fails to timely make such payments,
Landlord may pay such charges and collect the same from Tenant.  Any such costs or expenses incurred, or
payments made by Landlord for any of the reasons or purposes hereinabove
stated, shall be deemed to be Additional Rent payment by Tenant and collectible
by Landlord as such.

16.8.        Landlord reserves the right to stop
service of the elevator, plumbing, ventilation, air conditioning and electric
systems, when Landlord deems reasonably necessary or desirable, due to
accident, emergency or the need to make repairs, alterations or improvements,
until such repairs, alterations or improvements shall have been completed, and
Landlord shall further have no responsibility or liability for failure to
supply elevator facilities, plumbing, ventilation, air conditioning or electric
service when prevented from doing so by Force Majeure or a failure by a third
party to deliver gas, oil or another suitable fuel supply, or Landlord’s
inability by exercise of reasonable diligence to obtain gas, oil or another
suitable fuel; provided, however, Landlord shall use commercially
reasonable efforts to minimize interference with Tenant’s use and operation of
the Premises for the Permitted Use. 
Without limiting the foregoing, it is expressly understood and agreed
that any covenants on Landlord’s part to furnish any service pursuant to any of
the terms, covenants, conditions, provisions or agreements of this Lease, or to
perform any act or thing for the benefit of Tenant, shall not be deemed
breached if Landlord is unable to furnish or perform the same by virtue of
Force Majeure.

17.           Alterations.

17.1.        Tenant may make, at its expense and
without Landlord’s prior consent, such cosmetic improvements or alterations to
the Premises (such as carpeting, painting, non-load-bearing partitions, and
installation or relocation of freestanding workstations, and installation of
Tenant’s equipment) (“Cosmetic Improvements”) that do not exceed Fifty
Thousand Dollars ($50,000) in any one instance or Two Hundred Fifty Thousand
Dollars ($250,000) in any twelve (12) month period.  Except in accordance with the preceding
sentence, Tenant shall make no alterations, additions or improvements in or to
the Premises after the Term Commencement Date (“Alterations”) without
Landlord’s prior written approval, which approval Landlord shall not
unreasonably withhold, condition or delay; provided, however,
that in the event any proposed Alteration affects (a) any structural portions
of the Building, including exterior walls, roof, foundation or core of the
Building, (b) the exterior of the Building or (c) any Building systems, 

 

 19
 

 

including
elevator, plumbing, air conditioning, heating, electrical, security, life
safety and power, then Landlord may withhold its approval with respect thereto
in its sole and absolute discretion. 
Tenant shall, in making any such Alterations, use only those architects,
contractors, suppliers and mechanics of which Landlord has given prior written
approval, which approval shall not be unreasonably withheld, conditioned or
delayed.  In seeking Landlord’s approval,
Tenant shall provide Landlord, at least fourteen (14) days in advance of any
proposed construction, with plans, specifications, bid proposals, work
contracts, requests for laydown areas and such other information concerning the
nature and cost of the Alterations as Landlord may reasonably request.

17.2.        Tenant shall not construct or permit to
be constructed partitions or other obstructions that might interfere with free
access to mechanical installation or service facilities of the Building, or
interfere with the moving of Landlord’s equipment to or from the enclosures containing
such installations or facilities.

17.3.        Tenant shall accomplish any work
performed on the Premises or the Building in such a manner as to permit any
fire sprinkler system and fire water supply lines to remain fully operable at
all times.

17.4.        Any work performed on the Premises or
the Building by Tenant or Tenant’s contractors shall be done at such times and
in such manner as Landlord may from time to time reasonably designate.  Tenant covenants and agrees that all work
done by Tenant or Tenant’s contractors shall be performed in full compliance
with Applicable Laws.  Within thirty (30)
days after completion of any Alterations, Tenant shall provide Landlord with
complete “as-built” drawing print sets and electronic CADD files on disc (or
files in such other current format in common use as Landlord reasonably
approves or requires) showing any changes in the Premises.

17.5.        Before commencing any work, Tenant shall
give Landlord at least fourteen (14) days’ prior written notice of the proposed
commencement of such work and shall, if required by Landlord, secure, at Tenant’s
own cost and expense, a completion and lien indemnity bond reasonably
satisfactory to Landlord for said work.

17.6.        All Alterations, attached equipment,
decorations, fixtures, trade fixtures, additions and improvements, subject to Section
17.8, attached to or built into the Premises, made by either of the
parties, including, without limitation, all floor and wall coverings, built-in
cabinet work and paneling, sinks and related plumbing fixtures, laboratory
benches, exterior venting fume hoods and walk-in freezers and refrigerators,
ductwork, conduits, electrical panels and circuits, shall, unless, prior to
such construction or installation, Landlord elects otherwise, become the property
of Landlord upon the expiration or earlier termination of the Term, and shall
remain upon and be surrendered with the Premises as a part thereof; provided, however,
that all business and trade fixtures, machinery and
equipment
purchased at Tenant’s expense (exclusive of those purchased from the Tenant
Improvement Allowance) shall be the property of Tenant and may be removed by
Tenant at the end of the Term.  The Premises shall at all times remain the property of
Landlord and shall be surrendered to Landlord upon the expiration or earlier
termination of this Lease.  All trade
fixtures, equipment, Tenant Improvements, Alterations and Signage installed by
or under Tenant shall be the property of Landlord, except as provided above.

 

 20
 

 

17.7.        Tenant
shall repair any damage to the Premises caused by Tenant’s removal of any
property from the Premises.  During any
such restoration period, Tenant shall pay Rent to Landlord as provided herein
as if said space were otherwise occupied by Tenant.  The provisions of this Section shall survive
the expiration or earlier termination of this Lease.

17.8.        Except as to (a) those items listed on Exhibit
C attached hereto, (b) other business and trade fixtures, machinery and
equipment
that are not affixed to the Building and that Tenant can prove were purchased
at Tenant’s expense, and (c) other business and trade
fixtures, machinery and equipment that are affixed to the Building and that Tenant can
prove were purchased at Tenant’s expense and of which Tenant has delivered
written notice to Landlord at the time the item is affixed to the Building,
all business and trade fixtures, machinery and equipment, built-in furniture
and cabinets, together with all additions and accessories thereto, installed in
and upon the Premises shall be and remain the property of Landlord and shall
not be moved by Tenant at any time during the Term.  Tenant shall complete and deliver Exhibit
C to Landlord within thirty (30) days after the Term Commencement Date, which Exhibit
C shall be subject to Landlord’s reasonable approval.  Exhibit C may include both items
located in the Premises at the time of delivery of Exhibit C and items
which Tenant anticipates it will acquire during the Term.  If Tenant acquires during the Term items
listed (in the case of property affixed to a building, with particularity) in Exhibit
C, then such items shall remain the property of Tenant and may be removed
by Tenant from the Premises even if Tenant does not notify Landlord of the
items at the time the items are affixed to the Building.  If Tenant shall fail to remove any of its
effects from the Premises prior to termination of this Lease, then Landlord
may, at its option, remove the same in any manner that Landlord shall choose
and store said effects without liability to Tenant for loss thereof or damage
thereto, and Tenant shall pay Landlord, within fifteen (15) days after Tenant’s
receipt of a written demand, any costs and expenses incurred due to such
removal and storage or Landlord may, at its sole option and without notice to
Tenant, sell such property or any portion thereof at private sale and without
legal process for such price as Landlord may obtain and apply the proceeds of
such sale against any (a) amounts due by Tenant to Landlord under this Lease
and (b) any expenses incident to the removal, storage and sale of said personal
property.

17.9.        Notwithstanding any other provision of
this Article 17 to the contrary, in no event shall Tenant remove
any improvement from the Premises as to which Landlord contributed payment, including,
without limitation, the Tenant Improvements made pursuant to the Work Letter
without Landlord’s prior written consent, which consent Landlord may withhold
in its sole and absolute discretion.

17.10.      Tenant shall pay to  Landlord an amount equal to three percent
(3%) of the cost to Tenant of all Alterations made by Tenant that require
Landlord’s approval to cover Landlord’s overhead and expenses for plan review,
coordination, scheduling and supervision thereof.  For purposes of payment of such sum, Tenant
shall submit to Landlord copies of all bills, invoices and statements covering
the costs of such Alterations, accompanied by payment to Landlord of the fee
set forth in this Section.  Tenant shall
reimburse Landlord for any extra reasonable expenses incurred by Landlord by
reason of faulty work done by Tenant or its contractors, or by reason of delays
caused by such work, or by reason of inadequate clean-up.

 

 21
 

 

17.11.      Within sixty (60) days after final
completion of any Alterations performed by Tenant with respect to the Premises,
Tenant shall submit to Landlord documentation showing the amounts expended by
Tenant with respect to such Alterations performed by Tenant with respect to the
Premises, together with supporting documentation reasonably acceptable to
Landlord.

17.12.      Tenant
shall require its contractors and subcontractors performing work on the
Premises to name Landlord and its affiliates and lenders as additional insureds
on their respective insurance policies.

18.           Repairs and Maintenance.

18.1.        Landlord shall repair and maintain in
good operating condition the structural and exterior portions and Common Areas
of the Building and the Project, including, without limitation, roofing and
covering materials, foundations, exterior walls, plumbing and plumbing
fixtures, fire sprinkler systems (if any), heating, ventilating, air
conditioning, elevators, and electrical systems, unless installed by Tenant
(Landlord’s Work, even if paid for by Tenant, shall not be deemed to be “installed
by Tenant”).  Except as otherwise
provided under Article 7, any costs related to the repair or
maintenance activities specified in this Section 18.1 shall be included
as a part of Operating Expenses, unless such repairs or maintenance is required
in whole or in part because of any act, neglect, fault or omissions of Tenant,
its agents, servants, employees or invitees, in which case Tenant shall pay to
Landlord the cost of such repairs and maintenance.

18.2.        Except for services of Landlord, if any,
required by Section 18.1, Tenant shall at Tenant’s sole cost and expense
maintain and keep the Premises and every part thereof in good condition and
repair, damage thereto from ordinary wear and tear excepted.  Tenant shall, upon the expiration or sooner
termination of the Term, surrender the Premises to Landlord in as good of a
condition as when received, ordinary wear and tear and casualty damage
excepted.  Landlord shall have no
obligation to alter, remodel, improve, repair, decorate or paint the Premises
or any part thereof, other than pursuant to the terms and provisions of the
Work Letter.

18.3.        Landlord shall not be liable for any
failure to make any repairs or to perform any maintenance that is an obligation
of Landlord unless such failure shall persist for thirty (30) days (or such
shorter time as may be reasonable in case of emergency) after Tenant provides
Landlord with written notice of the need of such repairs or maintenance; provided,
however, that if the nature of Landlord’s obligation is such that more than
thirty (30) days are required for its performance, then Landlord shall not be
deemed to be in default if it commences performance within the thirty (30) day
period and thereafter diligently pursues the cure to completion.

18.4.        Repairs under this Article 18
that are obligations of Landlord are subject to allocation among Tenant and
other tenants as Operating Expenses, except as otherwise provided in this Article 18.

18.5.        This Article 18 relates to
repairs and maintenance arising in the ordinary course of operation of the
Building and the Project and any related facilities.  In the event of fire, 

 

 22
 

 

earthquake, flood,
vandalism, war, terrorism, natural disaster or similar cause of damage or
destruction, Article 22 shall apply in lieu of this Article 18.

19.           Liens.

19.1.        Subject to the immediately succeeding
sentence, Tenant shall keep the Premises, the Building and the Project free
from any liens arising out of work performed, materials furnished or
obligations incurred by Tenant.  Tenant
further covenants and agrees that any mechanic’s lien filed against the
Premises, the Building or the Project for work claimed to have been done for,
or materials claimed to have been furnished to, shall be discharged or bonded
by Tenant within ten (10) days after Tenant’s receipt of written notice of the
filing thereof, at Tenant’s sole cost and expense.

19.2.        Should Tenant fail to discharge or bond
against any lien of the nature described in Section 19.1 in compliance
with such Section, Landlord may, at Landlord’s election, pay such claim or post
a bond or otherwise provide security to eliminate the lien as a claim against
title, and Tenant shall reimburse Landlord for the costs thereof as Additional
Rent within fifteen (15) days after Tenant’s receipt of written notice thereof.

19.3.        In the event that Tenant leases or
finances the acquisition of office equipment, furnishings or other personal
property of a removable nature utilized by Tenant in the operation of Tenant’s
business, Tenant shall ensure that any Uniform Commercial Code financing
statement executed by Tenant shall, upon its face or by exhibit thereto,
indicate that such financing statement is applicable only to removable personal
property of Tenant located within the Premises. 
In no event shall the address of the Building be furnished on a
financing statement without qualifying language as to applicability of the lien
only to removable personal property located in an identified suite leased by
Tenant.  Should any holder of a financing
statement executed by Tenant record or place of record a financing statement
that constitutes a lien against any interest of Landlord or against equipment
that may be located other than within an identified suite leased by Tenant,
Tenant shall, within fifteen (15) days after its receipt of written notice of
the filing of such financing statement, cause (a) a copy of the lender security
agreement or other documents to which the financing statement pertains to be
furnished to Landlord to facilitate Landlord’s ability to demonstrate that the
lien of such financing statement is not applicable to Landlord’s interest and
(b) Tenant’s lender to amend such financing statement and any other documents
of record to clarify that any liens imposed thereby are not applicable to any
interest of Landlord in the Premises, the Building or the Project.

20.           Indemnification and Exculpation.

20.1.        Tenant agrees to indemnify, defend and
save  Landlord harmless from and against
any and all demands, claims, liabilities, losses, costs, expenses, actions,
causes of action, damages or judgments, and all reasonable expenses (including,
without limitation, reasonable attorneys’ fees, charges and disbursements)
incurred in investigating or resisting the same (collectively, “Claims”)
arising from injury or death to any person or injury to any property occurring
within or about the Premises, the Building or the Property arising out of
Tenant’s or Tenant’s employees’, agents’ or guests’ use or occupancy of the
Premises or a breach or default 

 

 23
 

 

by Tenant in the
performance of any of its obligations hereunder, except to the extent, if any,
caused by the willful misconduct or negligence of Landlord, its agents,
employees or contractors.

20.2.        Notwithstanding any provision of Section
20.1 to the contrary, Landlord shall not be liable to Tenant for, and
Tenant assumes all risk of, damage to personal property or scientific research,
including, without limitation, loss of records kept by Tenant within the
Premises and damage or losses caused by fire, electrical malfunction, gas
explosion or water damage of any type (including, without limitation, broken
water lines, malfunctioning fire sprinkler systems, roof leaks or stoppages of
lines), unless any such loss is due to the gross negligence or willful
misconduct of Landlord, its agents or employees.  Tenant further waives any claim for injury to
Tenant’s business or loss of income relating to any such damage or destruction
of personal property as described in this Section 20.2.

20.3.        Landlord shall not be liable for any
damages arising from any act, omission or neglect of any other tenant in the
Building or the Project, or of any other third party.

20.4.        Tenant acknowledges that security
devices and services, if any, while intended to deter crime, may not in given
instances prevent theft or other criminal acts. 
Landlord shall not be liable for injuries or losses caused by criminal
acts of third parties, and Tenant assumes the risk that any security device or
service may malfunction or otherwise be circumvented by a criminal.  If Tenant desires protection against such
criminal acts, then Tenant shall, at Tenant’s sole cost and expense, obtain
appropriate insurance coverage.

20.5.        Notwithstanding anything in this Article
20 to the contrary, in the event of the concurrent negligence of Tenant,
its agents, employees, subtenants, invitees, licensees, or contractors on the
one hand, and that of Landlord, and Landlord’s officers, directors or partners,
contractors, employees and agents (including any management company and its
employees) on the other hand, which concurrent negligence results in injury or
damage to persons or property and relates to the construction, alteration,
repair, addition to, subtraction from, improvement to or maintenance of the
Premises, Common Areas or Building, each party’s obligation to indemnify the
other as set forth in this Article 20 shall be limited to the extent of
the indemnifying party’s negligence and that of its agents, employees,
subtenants, invitees, licensees or contractors, including its proportional
share of costs, reasonable attorneys’ fees, and expenses incurred in connection
with any claim, action or proceeding brought with respect to such injury or
damage.

20.6.        The provisions of this Article 20
shall survive the expiration or earlier termination of this Lease.

21.           Insurance; Waiver of Subrogation.

21.1.        Landlord shall maintain insurance for
the Building and the Project in amounts equal to full replacement cost
(exclusive of the costs of excavation, foundations and footings, and without
reference to depreciation taken by Landlord upon its books or tax returns) or
such lesser coverage as Landlord may elect, provided that such coverage
shall not be less than ninety percent (90%) of such full replacement cost or
the amount of such insurance Landlord’s lender, mortgagee or beneficiary (each,
a “Lender”), if any, requires Landlord to maintain, providing 

 

 24
 

 

protection against
any peril generally included within the classification “Fire and Extended
Coverage,” together with insurance against sprinkler damage (if applicable),
vandalism and malicious mischief. 
Landlord, subject to availability thereof, shall further insure, if
Landlord deems it appropriate, coverage against flood, environmental hazard,
earthquake, loss or failure of building equipment, rental loss during the
period of repairs or rebuilding, workmen’s compensation insurance and fidelity
bonds for employees employed to perform services for the Building or the
Property.  Notwithstanding the foregoing,
Landlord may, but shall not be deemed required to, provide insurance for any
improvements installed by Tenant or that are in addition to the standard
improvements customarily furnished by Landlord, without regard to whether or
not such are made a part of or are affixed to the Building.  Any costs incurred by Landlord pursuant to
this Section 21.1 shall constitute a portion of Operating Expenses,
subject to the limitations of Article 7.

21.2.        In addition, Landlord shall carry public
liability insurance with a single limit of not less than Two Million Dollars
($2,000,000) for death or bodily injury, or property damage with respect to the
Project.  Any costs incurred by Landlord
pursuant to this Section 21.2 shall constitute a portion of Operating
Expenses.

21.3.        Tenant shall, at its own cost and
expense, procure and maintain in effect, beginning on the Term Commencement
Date or the date of occupancy, whichever occurs first, and continuing
throughout the Term (and occupancy by Tenant, if any, after termination of this
Lease) comprehensive general liability insurance with limits of not less than
Five Million Dollars ($5,000,000) per occurrence and Five Million Dollars
($5,000,000) in the aggregate for death or bodily injury and property damage
with respect to the Premises.

21.4.        The insurance required to be purchased and
maintained by Tenant pursuant to this Lease shall name Landlord, BioMed Realty,
L.P., BioMed Realty Trust, Inc., and their respective officers, employees,
agents, general partners, members and Lenders (“Landlord Parties”) as
additional insureds.  Said insurance
shall be with companies having a rating of not less than policyholder rating of
A- and financial category rating of at
least Class VII in “Best’s Insurance Guide.” 
Tenant shall obtain for Landlord from the insurance companies or cause
the insurance companies to furnish certificates of coverage to Landlord.  No such policy shall be cancelable or subject
to reduction of coverage or other modification or cancellation except after
thirty (30) days’ prior written notice to Landlord from the insurer.  All such policies shall be written as primary
policies, not contributing with and not in excess of the coverage that Landlord
may carry.  Tenant’s policy may be a “blanket
policy” that specifically provides that the amount of insurance shall not be
prejudiced by other losses covered by the policy.  Tenant shall, at least ten (10) days prior to
the expiration of such policies, furnish Landlord with renewal certificates of
insurance.  Tenant agrees that if Tenant
does not take out and maintain such insurance, Landlord may (but shall not be
required to) procure said insurance on Tenant’s behalf and at its cost to be
paid by Tenant as Additional Rent.

21.5.        Tenant assumes the risk of damage to any
fixtures, goods, inventory, merchandise, equipment and leasehold improvements,
and Landlord shall not be liable for injury to Tenant’s business or any loss of
income therefrom, relative to such damage, all as more particularly set forth
within this Lease.  Tenant shall, at
Tenant’s sole cost and expense, carry such insurance as 

 

 25
 

 

Tenant desires for
Tenant’s protection with respect to personal property of Tenant or business
interruption.

21.6.        In each instance where insurance is to
name Landlord Parties as additional insureds, Tenant shall, upon Landlord’s
written request, also designate and furnish certificates evidencing such
Landlord Parties as additional insureds to (a) any Lender of Landlord holding a
security interest in the Building or the Project, (b) the landlord under any
lease whereunder Landlord is a tenant of the real property upon which the
Building is located if the interest of Landlord is or shall become that of a
tenant under a ground lease rather than that of a fee owner, and (c) any
management company retained by Landlord to manage the Project.

21.7.        Landlord and Tenant each hereby waive
any and all rights of recovery against the other or against the officers,
directors, employees, agents and representatives of the other on account of
loss or damage occasioned by such waiving party or its property or the property
of others under such waiving party’s control, in each case to the extent that
such loss or damage is insured against under any fire and extended coverage
insurance policy that either Landlord or Tenant may have in force at the time
of such loss or damage or that would have been insured against had the waiving
party carried the insurance required under this Lease.  Such waivers shall continue so long as their
respective insurers so permit.  Any
termination of such a waiver shall be by written notice to the other party,
containing a description of the circumstances hereinafter set forth in this Section
21.7.  Landlord and Tenant, upon
obtaining the policies of insurance required or permitted under this Lease,
shall give notice to the insurance carrier or carriers that the foregoing
mutual waiver of subrogation is contained in this Lease.  If such policies shall not be obtainable with
such waiver or shall be so obtainable only at a premium over that chargeable
without such waiver, then the party seeking such policy shall notify the other
of such conditions, and the party so notified shall have ten (10) days
thereafter to either (a) procure such insurance with companies reasonably
satisfactory to the other party or (b) agree to pay such additional premium
(in Tenant’s case, in the proportion that the area of the Premises bears to the
insured area).  If the parties do not
accomplish either (a) or (b), then this Section 21.7 shall have no
effect during such time as such policies shall not be obtainable or the party
in whose favor a waiver of subrogation is desired refuses to pay the additional
premium.  If such policies shall at any
time be unobtainable, but shall be subsequently obtainable, then neither party
shall be subsequently liable for a failure to obtain such insurance until a
reasonable time after notification thereof by the other party.  If the release of either Landlord or Tenant,
as set forth in the first sentence of this Section 21.7, shall
contravene Applicable Laws, then the liability of the party in question shall
be deemed not released but shall be secondary to the other party’s insurer.

21.8.        Landlord may require insurance policy
limits required under this Lease to be raised to conform with requirements of
Landlord’s Lender or to bring coverage limits to levels then being required of
new tenants within the Project.

22.           Damage or Destruction.

22.1.        In the event of a partial destruction of
the Building or the Project by fire or other perils covered by extended
coverage insurance not exceeding twenty-five percent (25%) of the full
insurable value thereof, and provided that (a) the damage thereto is
such that the Building or 

 

 26
 

 

the Project may be
repaired, reconstructed or restored within a period of six (6) months from the
date of the happening of such casualty and (b) Landlord shall receive insurance
proceeds sufficient to cover the cost of such repairs (except for any
deductible amount provided by Landlord’s policy, which deductible amount, if
paid by Landlord, shall constitute an Operating Expense), Landlord shall
commence and proceed diligently with the work of repair, reconstruction and
restoration of the Building or the Project, as applicable, and this Lease shall
continue in full force and effect.

22.2.        In the event of any damage to or destruction
of the Building or the Project other than as described in Section 22.1,
Landlord may elect to repair, reconstruct and restore the Building or the
Project, as applicable, in which case this Lease shall continue in full force
and effect.  If Landlord elects not to
repair the Building or the Project, as applicable, then this Lease shall
terminate as of the date of such damage or destruction.

22.3.        Landlord shall give written notice to
Tenant within forty-five (45) days following the date of damage or destruction
of its election not to repair, reconstruct or restore the Building or the
Project, as applicable, and if the notice states that Landlord elects to so
repair, reconstruct or restore, the notice shall set forth the anticipated
period for repairing the casualty damage and the date such repair will be
complete.  If the anticipated repair
period will not be completed within a period of twelve (12) months from the
date of the happening of such casualty and if the damage is so extensive as to
reasonably prevent Tenant’s substantial use and enjoyment of the Premises, then
Tenant may elect to terminate this Lease by written notice to Landlord within
ten (10) days following delivery of the written notice from Landlord.

22.4.        Upon any termination of this Lease under
any of the provisions of this Article 22, the parties shall be
released thereby without further obligation to the other from the date
possession of the Premises is surrendered to the Landlord, except with regard
to (a) items occurring prior to the damage or destruction and (b) provisions of
this Lease that, by their express terms, survive the expiration or earlier
termination hereof.

22.5.        In the event of repair, reconstruction
and restoration as provided in this Article 22, all Rent to be paid
by Tenant under this Lease shall be abated proportionately, beginning on the
date of the damage or destruction of the Building or the Project, based on the
extent to which Tenant’s use of the Premises is impaired beginning on such date
and continuing until substantial completion of such repair, reconstruction or
restoration, unless Landlord provides Tenant with other space during the period
of repair that, in Tenant’s reasonable opinion, is suitable for the temporary
conduct of Tenant’s business.

22.6.        Notwithstanding anything to the contrary
contained in this Article 22, should Landlord be delayed or
prevented from completing the repair, reconstruction or restoration of the
damage or destruction to the Premises after the occurrence of such damage or
destruction by Force Majeure, then the time for Landlord to commence or
complete repairs shall be extended on a day-for-day basis; provided, however,
that, at Landlord’s election, Landlord shall be relieved of its obligation to
make such repair, reconstruction or restoration.  Tenant shall be released from any obligations
under this Lease (except with regard to those provisions that, by their express
terms, survive the expiration or earlier termination hereof) if, on the date
that is twelve (12) 

 

 27
 

 

months after the
date of damage or destruction, the repair, reconstruction or restoration
required to be performed by Landlord to provide Tenant use of the Premises is
not then Substantially Complete.

22.7.        If Landlord is obligated to or elects to
repair, reconstruct or restore as herein provided, then Landlord shall be
obligated to make such repair, reconstruction or restoration only with regard
to those portions of the Premises, the Building or the Project that were
originally provided at Landlord’s expense, including, without limitation, the
Landlord’s Work to the extent paid for out of the Tenant Improvement
Allowance.  The repair, reconstruction or
restoration of improvements not originally provided by Landlord or at Landlord’s
expense shall be the obligation of Tenant. 
In the event Tenant has elected to upgrade certain improvements from the
Building Standard, Landlord shall, upon the need for replacement due to an
insured loss, provide only the Building Standard, unless Tenant again elects to
upgrade such improvements and pay any incremental costs related thereto, except
to the extent that excess insurance proceeds, if received, are adequate to
provide such upgrades, in addition to providing for basic repair,
reconstruction and restoration of the Premises, the Building and the Project.

22.8.        Notwithstanding anything to the contrary
contained in this Article 22, Landlord shall not have any
obligation whatsoever to repair, reconstruct or restore the Premises if the
damage resulting from any casualty covered under this Article 22
occurs during the last eighteen (18) months of the Term or any extension
hereof, or to the extent that insurance proceeds are not available
therefor.  Further, if the damage
resulting from any casualty covered under this Article 22 occurs
during the last eighteen (18) months of the Term or any extension hereof and if
the damage is so extensive as to reasonably prevent Tenant’s use and enjoyment
of the Premises for three (3) months or more, Tenant may in its sole discretion
terminate this Lease by written notice delivered to Landlord within thirty (30)
days from the date of the happening of such casualty.

22.9.        Landlord’s
obligation, should it elect or be obligated to repair or rebuild, shall be
limited to the Property and the Building; provided that Tenant shall, at
its expense, replace or fully repair all of Tenant’s personal property and any
alterations installed by Tenant existing at the time of such damage or
destruction.  If the Property or the
Building is to be repaired in accordance with the foregoing, Landlord shall
make available to Tenant any portion of insurance proceeds it receives that are
allocable to the alterations constructed by Tenant pursuant to this Lease, provided
Tenant is not then in default under this Lease.

23.           Eminent Domain.

23.1.        In the event the whole of the Premises,
or such part thereof as shall substantially interfere with the Tenant’s use and
occupancy thereof, shall be taken for any public or quasi-public purpose by any
lawful power or authority by exercise of the right of appropriation,
condemnation or eminent domain, or sold to prevent such taking, Tenant or
Landlord may terminate this Lease effective as of the date possession is
required to be surrendered to said authority.

 

 28
 

 

23.2.        In the event of a partial taking of the
Building or the Project, or of drives, walkways or parking areas serving the
Building or the Project for any public or quasi-public purpose by any lawful
power or authority by exercise of right of appropriation, condemnation, or
eminent domain, or sold to prevent such taking, then, without regard to whether
any portion of the Premises occupied by Tenant was so taken, Landlord may elect
to terminate this Lease as of such taking if such taking is, in Landlord’s
reasonable opinion, of a material nature such as to make it uneconomical to
continue use of the unappropriated portion for purposes of renting office or
laboratory space.

23.3.        Tenant shall be entitled to any award
that is specifically awarded as compensation for (a) the taking of Tenant’s
personal property that was installed at Tenant’s expense, (b) the value of the
loss of Tenant’s goodwill, (c) the costs of Tenant moving to a new location,
and (d) other awards granted to it and not out of or part of Landlord’s
award.  Except as set forth in the previous
sentence, any award for such taking shall be the property of Landlord.

23.4.        If, upon any taking of the nature
described in this Article 23, this Lease continues in effect, then
Landlord shall promptly proceed to restore the Premises, the Building and the
Project, as applicable, to substantially their same condition prior to such
partial taking.  To the extent such
restoration is feasible, as determined by Landlord in its sole and absolute
discretion, the Rent shall be decreased proportionately to reflect the loss of
any portion of the Premises no longer available to Tenant.

24.           Defaults and Remedies.

24.1.        Late payment by Tenant to Landlord of
Rent and other sums due shall cause Landlord to incur costs not contemplated by
this Lease, the exact amount of which shall be extremely difficult and
impracticable to ascertain.  Such costs
include, but are not limited to, processing and accounting charges and late
charges that may be imposed on Landlord by the terms of any mortgage or trust
deed covering the Premises.  Therefore,
if any installment of Rent due from Tenant is not received by Landlord within
five (5) days after the date such payment is due, Tenant shall pay to Landlord
an additional sum of  five percent (5%)
of the overdue Rent as a late charge; provided, however, that with
respect to the first late payment in any twelve (12) month period, no late
charge shall be due unless Tenant fails to pay the overdue amount within three
(3) business days after written notice from Landlord.  The parties agree that this late charge
represents a fair and reasonable estimate of the costs that Landlord shall
incur by reason of late payment by Tenant.

24.2.        No payment by Tenant or receipt by
Landlord of a lesser amount than the Rent payment herein stipulated shall be deemed
to be other than on account of the Rent, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment as Rent be deemed
an accord and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord’s right to recover the balance of such Rent or
pursue any other remedy provided in this Lease or in equity or at law.  If a dispute shall arise as to any amount or
sum of money to be paid by Tenant to Landlord hereunder, Tenant shall have the
right to make payment “under protest,” such payment shall not be regarded as a
voluntary payment, and there shall 

 

 29
 

 

survive the right
on the part of Tenant to institute suit for recovery of the payment paid under
protest.

24.3.        If Tenant fails to pay any sum of money
required to be paid by it hereunder, or shall fail to perform any other act on
its part to be performed hereunder, Landlord may, without waiving or releasing
Tenant from any obligations of Tenant, but shall not be obligated to, make such
payment or perform such act; provided that such failure by Tenant
continues for five (5) days after Landlord delivers notice to Tenant demanding
performance by Tenant; or provided that such failure by Tenant
unreasonably interfered with the use of the Building by any other tenant or
with the efficient operation of the Building, or resulted or could have
resulted in a violation of Applicable Laws or the cancellation of an insurance
policy maintained by Landlord.  In addition
to the late charge described in Section 24.1, Tenant shall pay to
Landlord as Additional Rent all sums so paid or incurred by Landlord, together
with interest thereon, from the date such sums were paid or incurred, at the
annual rate equal to ten percent (10%) per annum or the highest rate permitted
by Applicable Laws, whichever is less.

24.4.        The occurrence of any one or more of the
following events shall constitute a “Default” hereunder by Tenant:

(a)           The abandonment or vacation of the
Premises by Tenant;

(b)           The failure by Tenant to make any
payment of Rent, as and when due, where such failure shall continue for a period
of five (5) days after written notice thereof from Landlord to Tenant;

(c)           The failure by Tenant to observe or
perform any obligation or covenant contained herein (other than described in Subsections
24.4(a) and 24.4(b)) to be performed by Tenant, where such failure
shall continue for a period of thirty (30) days after written notice thereof
from Landlord to Tenant; provided that, if the nature of Tenant’s
default is such that it reasonably requires more than thirty (30) days to cure,
Tenant shall not be deemed to be in default if Tenant shall commence such cure
within said thirty (30) day period and thereafter diligently prosecute the same
to completion; and provided, further, that such cure is completed no
later than ninety (90) days from the date of Tenant’s receipt of written notice
from Landlord;

(d)           Tenant makes an assignment for the
benefit of creditors;

(e)           A receiver, trustee or custodian is
appointed to or does take title, possession or control of all or substantially
all of Tenant’s assets;

(f)            Tenant files a voluntary petition
under the United States Bankruptcy Code or any successor statute (the “Bankruptcy
Code”);

(g)           Any involuntary petition if filed
against Tenant under any chapter of the Bankruptcy Code and is not dismissed
within one hundred twenty (120) days;

(h)           Failure to deliver an estoppel
certificate in accordance with Article 29; or

 

 30

 

(i)            Tenant’s interest in this Lease is
attached, executed upon or otherwise judicially seized and such action is not
released within one hundred twenty (120) days of the action.

Notices
given under this Section 24.4 shall specify the alleged default and shall
demand that Tenant perform the provisions of this Lease or pay the Rent that is
in arrears, as the case may be, within the applicable period of time, or quit
the Premises.  No such notice shall be
deemed a forfeiture or a termination of this Lease unless Landlord elects
otherwise in such notice.

24.5.        In the event of a Default by Tenant, and
at any time thereafter, with or without notice or demand and without limiting
Landlord in the exercise of any right or remedy that Landlord may have,
Landlord shall be entitled to terminate Tenant’s right to possession of the
Premises by any lawful means, in which case this Lease shall terminate and
Tenant shall immediately surrender possession of the Premises to Landlord.  In such event, Landlord shall have the immediate
right to re-enter and remove all persons and property, and such property may be
removed and stored in a public warehouse or elsewhere at the cost and for the
account of Tenant, all without service of notice or resort to legal process and
without being deemed guilty of trespass or becoming liable for any loss or
damage that may be occasioned thereby. 
In the event that Landlord shall elect to so terminate this Lease, then
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant’s default, including, without limitation:

(a)           The worth at the time of award of any
unpaid Rent that had accrued at the time of such termination; plus

(b)           The worth at the time of award of the
amount by which the unpaid Rent that would have accrued during the period
commencing with termination of the Lease and ending at the time of award
exceeds that portion of the loss of Landlord’s rental income from the Premises
that Tenant proves could have been reasonably avoided; plus

(c)           The
worth at the time of award of the amount by which the unpaid Rent for the
balance of the Term after the time of award exceeds that portion of the loss of
Landlord’s rental income from the Premises that Tenant proves could have been
reasonably avoided; plus

(d)           Any other amount necessary to
compensate Landlord for all the detriment caused by Tenant’s failure to perform
its obligations under this Lease or that in the ordinary course of things would
be likely to result therefrom, including, without limitation, the cost of
restoring the Premises to the condition required under the terms of this Lease;
plus

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

As used in Subsections
24.5(a) and 24.5(b), “worth at the time of award” shall be computed
by allowing interest at the rate specified in Section 24.1.  As used in Subsection 24.5(c) above,
the “worth at the time of the award” shall be computed by taking the present value
of such amount, 

 

 31
 

 

using the discount
rate of the Federal Reserve Bank of San Francisco at the time of the award plus
one (1) percentage point.

24.6.        If Landlord does not elect to terminate
this Lease as provided in Section 24.5, then Landlord may, from time to
time, recover all Rent as it becomes due under this Lease.  At any time thereafter, Landlord may elect to
terminate this Lease and to recover damages to which Landlord is entitled.

24.7.        In the event Landlord elects to
terminate this Lease and relet the Premises, Landlord may execute any new lease
in its own name.  Tenant hereunder shall
have no right or authority whatsoever to collect any Rent from such
tenant.  The proceeds of any such
reletting shall be applied as follows:

(a)           First, to the payment of any
indebtedness other than Rent due hereunder from Tenant to Landlord, including,
without limitation, storage charges or brokerage commissions owing from Tenant
to Landlord as the result of such reletting;

(b)           Second, to the payment of the costs and
expenses of reletting the Premises, including (i) alterations and repairs that
Landlord deems reasonably necessary and advisable and (ii) reasonable attorneys’
fees, charges and disbursements incurred by Landlord in connection with the
retaking of the Premises and such reletting;

(c)           Third, to the payment of Rent and
other charges due and unpaid hereunder; and

(d)           Fourth, to the payment of future Rent
and other damages payable by Tenant under this Lease.

24.8.        All of Landlord’s rights, options and
remedies hereunder shall be construed and held to be nonexclusive and
cumulative.  Landlord shall have the
right to pursue any one or all of such remedies, or any other remedy or relief
that may be provided by Applicable Laws, whether or not stated in this Lease.  No waiver of any default of Tenant hereunder
shall be implied from any acceptance by Landlord of any Rent or other payments
due hereunder or any omission by Landlord to take any action on account of such
default if such default persists or is repeated, and no express waiver shall
affect defaults other than as specified in said waiver.

24.9.        Landlord’s termination of (a) this Lease
or (b) Tenant’s right to possession of the Premises shall not relieve Tenant of
any liability to Landlord that has previously accrued or that shall arise based
upon events that occurred prior to the later to occur of (i) the date of Lease
termination or (ii) the date Tenant surrenders possession of the Premises.

24.10.      To
the extent permitted by Applicable Laws, Tenant waives any and all rights of
redemption granted by or under any present or future Applicable Laws if Tenant
is evicted or dispossessed for any cause, or if Landlord otherwise obtains
possession of the Premises due to Tenant’s default hereunder.

 

 32
 

 

24.11.      Landlord
shall not be in default under this Lease unless Landlord fails to perform
obligations required of Landlord within a reasonable time, but in no event
shall such failure continue for more than thirty (30) days after written notice
from Tenant specifying the nature of Landlord’s failure; provided, however,
that if the nature of Landlord’s obligation is such that more than thirty (30)
days are required for its performance, then Landlord shall not be in default if
Landlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the cure to completion.

24.12.      In
the event of any default by Landlord, Tenant shall give notice by registered or
certified mail to any (a) beneficiary of a deed of trust or (b) mortgagee under
a mortgage covering the Premises, the Building or the Project and to any
landlord of any lease of land upon or within which the Premises, the Building
or the Project is located, and shall offer such beneficiary, mortgagee or
landlord a reasonable opportunity to cure the default, including time to obtain
possession of the Building by power of sale or a judicial action if such should
prove necessary to effect a cure; provided that Landlord shall furnish
to Tenant in writing, upon written request by Tenant, the names and addresses
of all such persons who are to receive such notices, and provided, further,
that the terms of this paragraph shall not require Tenant to postpone the
exercise of its remedies under this Lease or otherwise available at law or in
equity in the event that the nature of Landlord’s default materially interferes
with or prevents Tenant from operating the Premises for the Permitted Use.

25.           Assignment
or Subletting.

25.1.        Except as
hereinafter expressly permitted, Tenant shall not, either voluntarily or by
operation of Applicable Laws, directly or indirectly sell, hypothecate, assign,
pledge, encumber or otherwise transfer this Lease, or sublet the Premises or
any part hereof (each, a “Transfer”), without Landlord’s prior written
consent, which consent Landlord may not unreasonably withhold, condition or
delay.

25.2.        In the
event Tenant desires to effect a Transfer, then, at least thirty (30) but not
more than one hundred twenty (120) days prior 
to the date when Tenant desires the assignment or sublease to be
effective (the “Transfer Date”), Tenant shall provide written notice to
Landlord (the “Transfer Notice”) containing information (including
references) concerning the character of the proposed transferee, assignee or
sublessee; the Transfer Date; any ownership or commercial relationship between
Tenant and the proposed transferee, assignee or sublessee; and the
consideration and all other material terms and conditions of the proposed
Transfer, all in such detail as Landlord shall reasonably require.  Tenant shall also tender to Landlord
reasonable attorneys’ fees and other costs or overhead expenses not to exceed
One Thousand Five Hundred Dollars ($1,500) incurred by Landlord in reviewing
Tenant’s request for such Transfer.

25.3.        Landlord,
in determining whether consent should be given to a proposed Transfer, may give
consideration to (a) the financial strength of such transferee, assignee or
sublessee (notwithstanding Tenant remaining liable for Tenant’s performance),
and (b) any change in use that such transferee, assignee or sublessee proposes
to make in the use of the Premises.  In
no event shall Landlord be deemed to be unreasonable for declining to consent
to a Transfer to a transferee, assignee or sublessee of poor reputation,
lacking financial qualifications (provided the 

 33
 

proposed transferee is of lesser creditworthiness than Tenant as of the
Execution Date or the date of the proposed Transfer) or seeking a change in the
Permitted Use.  Notwithstanding anything
contained in this Lease to the contrary, (w) no Transfer shall be consummated
on any basis such that the rental or other amounts to be paid by the occupant,
assignee, manager or other transferee thereunder would be based, in whole or in
part, on the income or profits derived by the business activities of such
occupant, assignee, manager or other transferee; (x) Tenant shall not furnish
or render any services to an occupant, assignee, manager or other transferee
with respect to whom transfer consideration is required to be paid, or manage or operate the Premises or any capital
additions so transferred, with respect to which transfer consideration is being
paid; (y) Tenant shall not consummate a Transfer with any person in which
Landlord owns an interest, directly or indirectly (by applying constructive
ownership rules set forth in Section 856(d)(5) of the Internal Revenue Code
(the “Revenue Code”)); and (z) Tenant shall not consummate a Transfer
with any person or in any manner that could cause any portion of the amounts
received by Landlord pursuant to this Lease or any sublease, license or other
arrangement for the right to use, occupy or possess any portion of the Premises
to fail to qualify as “rents from real property” within the meaning of Section
856(d) of the Revenue Code, or any similar or successor provision thereto, or
agree to perform services for a transferee, assignee or sublessee that would
cause any other income of Landlord to fail to qualify as income described  in Section 856(c)(2) of the Revenue Code.

25.4.        As
conditions precedent to Tenant subleasing the Premises or to Landlord
considering a request by Tenant to Tenant’s transfer of rights or sharing of
the Premises, Landlord may require any or all of the following:

(a)           Tenant
shall remain fully liable under this Lease during the unexpired Term;

(b)           Tenant
shall provide Landlord with evidence reasonably satisfactory to Landlord that
the value of Landlord’s interest under this Lease shall not be diminished or
reduced by the proposed Transfer.  Such
evidence shall include, without limitation, evidence respecting the relevant
business experience and financial responsibility and status of the proposed
transferee, assignee or sublessee;

(c)           Tenant
shall reimburse Landlord for Landlord’s actual costs and expenses, including,
without limitation, reasonable attorneys’ fees, charges and disbursements
incurred in connection with the review, processing and documentation of such
request;

(d)           If Tenant’s
transfer of rights or sharing of the Premises provides for the receipt by, on
behalf of or on account of Tenant of any consideration of any kind whatsoever
(including, without limitation, a premium rental for a sublease or lump sum
payment for an assignment, but excluding Tenant’s reasonable costs in marketing
and subleasing the Premises) in excess of the rental and other charges due to
Landlord under this Lease, Tenant shall pay fifty percent (50%) of all of such
excess to Landlord, after deductions for any transaction costs incurred by
Tenant, including marketing expenses, tenant improvement or refurbishment
allowances actually provided by Tenant, alterations, cash concessions,
brokerage commissions, 

 

 34
 

 

attorneys’ fees and free rent.  If said consideration consists of cash paid
to Tenant, payment to Landlord shall be made upon receipt by Tenant of such
cash payment;

(e)           The
proposed transferee, assignee or sublessee shall agree that, in the event
Landlord gives such proposed transferee, assignee or sublessee notice that
Tenant is in default under this Lease, such proposed transferee, assignee or
sublessee shall thereafter make all payments otherwise due Tenant directly to
Landlord, which payments shall be received by Landlord without any liability
being incurred by Landlord, except to credit such payment against those due by
Tenant under this Lease, and any such proposed transferee, assignee or
sublessee shall agree to attorn to Landlord or its successors and assigns
should this Lease be terminated for any reason; provided, however,
that in no event shall Landlord or its Lenders, successors or assigns be
obligated to accept such attornment;

(f)            Landlord’s
consent to any such Transfer shall be effected on Landlord’s forms;

(g)           Tenant
shall not then be in default hereunder in any respect;

(h)           Such
proposed transferee, assignee or sublessee’s use of the Premises shall be the
same as the Permitted Use;

(i)            Landlord
shall not be bound by any provision of any agreement pertaining to the
Transfer, except for Landlord’s written consent to the same;

(j)            Tenant
shall pay all transfer and other taxes (including interest and penalties)
assessed or payable for any Transfer;

(k)           Landlord’s
consent (or waiver of its rights) for any Transfer shall not waive Landlord’s
right to consent to any later Transfer;

(l)            Tenant
shall deliver to Landlord one executed copy of any and all written instruments
evidencing or relating to the Transfer; and

(m)          A
list of Hazardous Materials (as defined in Section 39.7 below),
certified by the proposed transferee, assignee or sublessee to be true and
correct, that the proposed transferee, assignee or sublessee intends to use or
store in the Premises.  Additionally, Tenant shall deliver to Landlord, on or before the
date any proposed transferee, assignee or sublessee takes occupancy of the
Premises, all of the items relating to Hazardous Materials of such proposed
transferee, assignee or sublessee as described in Section 38.2.

25.5.        Any
Transfer that is not in compliance with the provisions of this Article 25
shall be void and shall, at the option of Landlord, terminate this Lease; provided,
however, that Landlord shall first give Tenant ten (10) days’ notice of the
reason the Transfer is not in compliance and this Lease shall remain in full
force and effect if Tenant, before expiration of such ten (10) days’ notice,
either corrects the reason the Transfer is not in compliance or terminates the
Transfer.

 

 35
 

 

25.6.        The
consent by Landlord to a Transfer shall not relieve Tenant or proposed
transferee, assignee or sublessee from obtaining Landlord’s consent to any
further Transfer, nor shall it release Tenant or any proposed transferee,
assignee or sublessee of Tenant from full and primary liability under this
Lease.

25.7.        Notwithstanding
any Transfer, Tenant shall remain fully and primarily liable for the payment of
all Rent and other sums due or to become due hereunder, and for the full
performance of all other terms, conditions and covenants to be kept and
performed by Tenant.  The acceptance of
Rent or any other sum due hereunder, or the acceptance of performance of any
other term, covenant or condition thereof, from any person or entity other than
Tenant shall not be deemed a waiver of any of the provisions of this Lease or a
consent to any Transfer.

25.8.        [Intentionally
omitted]

25.9.        If
Tenant sublets the Premises or any portion thereof, Tenant hereby immediately
and irrevocably assigns to Landlord, as security for Tenant’s obligations under
this Lease, all rent from any such subletting, and appoints Landlord as
assignee and attorney-in-fact for Tenant, and Landlord (or a receiver for Tenant
appointed on Landlord’s application) may collect such rent and apply it toward
Tenant’s obligations under this Lease; provided that, until the
occurrence of a Default by Tenant, Tenant shall have the right to collect such
rent.

25.10.      Notwithstanding
anything to the contrary in this Article 25, Tenant may engage in the
following Transfers (collectively, “Permitted Transfers”)  without the prior written consent of Landlord
and without regard to the terms of Section 25.4 but subject to the terms
of Section 25.7; provided (i) Tenant is not in default under this
Lease; (ii) such proposed transferee uses the Premises for the Permitted Use;
(iii) such proposed transferee is of equal or greater creditworthiness than
Tenant as of the Execution Date and the date of the proposed Transfer and (iv)
Tenant gives Landlord written notice at least thirty (30) days prior to the
effective date of the proposed assignment or sublease:

(a)           A
Transfer to a parent, subsidiary, affiliate, division or other entity
controlling, controlled by or under common control with Tenant;

(b)           A
Transfer to a successor entity related to Tenant by merger, consolidation,
reorganization or government action; and

(c)           A Transfer to an entity that acquires substantially
all of the assets of Tenant.

25.11.      For the purpose of this Lease, for so long as stock in Tenant
is traded on a nationally recognized stock exchange, any sale or transfer of
Tenant’s capital stock, redemption or issuance of additional stock of any class
shall not be deemed a Transfer of any kind; provided, however, that
transfer of more than fifty percent (50%) of Tenant’s capital stock in a single
transaction or a single series of transactions pursuant to a resolution of the
Board of Directors of Tenant shall be deemed to be a Permitted Transfer subject
to the terms of Section 25.10, except 

 

 36
 

 

that the acquirer of the stock shall be the entity subject to the
creditworthiness test under Section 25.10(iii).

26.           Attorneys’ Fees.  If either party commences an action against
the other party arising out of or in connection with this Lease, then the
substantially prevailing party shall be entitled to have and recover from the
other party reasonable attorneys’ fees, charges and disbursements and costs of
suit.

27.           Bankruptcy.  In the event a debtor, trustee or debtor in
possession under the Bankruptcy Code, or another person with similar rights,
duties and powers under any other Applicable Laws, proposes to cure any default
under this Lease or to assume or assign this Lease and is obliged to provide
adequate assurance to Landlord that (a) a default shall be cured, (b) Landlord
shall be compensated for its damages arising from any breach of this Lease and
(c) future performance of Tenant’s obligations under this Lease shall occur,
then such adequate assurances shall include any or all of the following, as
designated by Landlord in its sole and absolute discretion:

27.1.        Those acts
specified in the Bankruptcy Code or other Applicable Laws as included within
the meaning of “adequate assurance,” even if this Lease does not concern a
shopping center or other facility described in such Applicable Laws;

27.2.        A prompt
cash payment to compensate Landlord for any monetary defaults or actual damages
arising directly from a breach of this Lease;

27.3.        A cash
deposit in an amount at least equal to the then-current amount of the Security
Deposit; or

27.4.        The
assumption or assignment of all of Tenant’s interest and obligations under this
Lease.

28.           Definition of
Landlord.  With regard to obligations
imposed upon Landlord pursuant to this Lease, the term “Landlord,” as
used in this Lease, shall refer only to Landlord or Landlord’s then-current
successor-in-interest.  In the event of
any transfer, assignment or conveyance of Landlord’s interest in this Lease or
in Landlord’s fee title to or leasehold interest in the Property, as
applicable, the Landlord herein named (and in case of any subsequent transfers
or conveyances, the subsequent Landlord) shall be automatically freed and
relieved, from and after the date of such transfer, assignment or conveyance,
from all liability for the performance of any covenants or obligations
contained in this Lease thereafter to be performed by Landlord and, without
further agreement, the transferee, assignee or conveyee of Landlord’s interest
in this Lease or in Landlord’s fee title to or leasehold interest in the
Property, as applicable, shall be deemed to have assumed and agreed to observe
and perform any and all covenants and obligations of Landlord hereunder during
the tenure of its interest in the Lease or the Property.  Landlord or any subsequent Landlord may
transfer its interest in the Premises or this Lease without Tenant’s consent.

29.           Estoppel Certificate.  Tenant shall, within ten (10) business days
of receipt of written notice from Landlord, execute, acknowledge and deliver a
statement in writing substantially in 

 

 37
 

 

the
form attached to this Lease as Exhibit E, or on any other form
reasonably requested by a proposed Lender or purchaser, (a) certifying that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification and certifying that this Lease as so modified
is in full force and effect) and the dates to which rental and other charges
are paid in advance, if any, (b) acknowledging that there are not, to Tenant’s
knowledge, any uncured defaults on the part of Landlord hereunder, or
specifying such defaults if any are claimed, and (c) setting forth such further
information with respect to this Lease or the Premises as may reasonably be
requested thereon.  Any such statement
may be relied upon by any prospective purchaser or encumbrancer of all or any
portion of the real property of which the Premises are a part.  Tenant’s failure to deliver such statement
within such the prescribed time shall, at Landlord’s option, constitute a
Default under this Lease, and, in any event, shall be binding upon Tenant that
the Lease is in full force and effect and without modification except as may be
represented by Landlord in any certificate prepared by Landlord and delivered
to Tenant for execution.

30.           Joint and Several
Obligations.  If more than one entity
executes this Lease as Tenant, then:

30.1.        Each of
them is jointly and severally liable for the keeping, observing and performing
of all of the terms, covenants, conditions, provisions and agreements of this
Lease to be kept, observed or performed by Tenant; and

30.2.        The term “Tenant”
as used in this Lease shall mean and include each of them, jointly and
severally.  The act of, notice from,
notice to, refund to, or signature of any one or more of them with respect to
the tenancy under this Lease, including, without limitation, any renewal,
extension, expiration, termination or modification of this Lease, shall be
binding upon each and all of the persons executing this Lease as Tenant with
the same force and effect as if each and all of them had so acted, so given or
received such notice or refund, or so signed.

31.           Limitation
of Landlord’s Liability.

31.1.        If
Landlord is in default under this Lease and, as a consequence, Tenant recovers
a monetary judgment against Landlord, the judgment shall be satisfied only out
of (a) the proceeds of sale received on execution of the judgment and levy
against the right, title and interest of Landlord in the Building and the
Project of which the Premises are a part, (b) rent or other income from such
real property receivable by Landlord or (c) the consideration received by
Landlord from the sale, financing, refinancing or other disposition of all or
any part of Landlord’s right, title or interest in the Building or the Project
of which the Premises are a part.

31.2.        Subject
to the remainder of this Section 31.2, only Landlord shall be liable for any
deficiency due to Landlord’s default under this Lease.  If Landlord is a partnership or joint
venture, then the partners of such partnership shall not be personally liable
for Landlord’s obligations under this Lease, and no partner of Landlord shall
be sued or named as a party in any suit or action, and service of process shall
not be made against any partner of Landlord except as may be necessary to
secure jurisdiction of the partnership or joint venture.  If Landlord is a corporation, then the
shareholders, directors, officers, employees and agents of such corporation 

 

 38
 

 

shall not be
personally liable for Landlord’s obligations under this Lease, and no
shareholder, director, officer, employee or agent of Landlord shall be sued or
named as a party in any suit or action, and service of process shall not be
made against any shareholder, director, officer, employee or agent of
Landlord.  If Landlord is a limited
liability company, then the members of such limited liability company shall not
be personally liable for Landlord’s obligations under this Lease, and no member
of Landlord shall be sued or named as a party in any suit or action, and
service of process shall not be made against any member of Landlord except as
may be necessary to secure jurisdiction of the limited liability company.  No partner, shareholder, director, employee,
member or agent of Landlord shall be required to answer or otherwise plead to
any service of process, and no judgment shall be taken or writ of execution
levied against any partner, shareholder, director, employee or agent of
Landlord.

31.3.        Each of
the covenants and agreements of this Article 31 shall be applicable to
any covenant or agreement either expressly contained in this Lease or imposed
by Applicable Laws and shall survive the expiration or earlier termination of
this Lease.

32.           Project
Control by Landlord.

32.1.        Landlord
reserves full control over the Building and the Project to the extent not
inconsistent with (a) Tenant’s enjoyment of the Premises as provided by this
Lease and (b) Tenant’s use of the Premises for the Permitted Use.  This reservation includes, without
limitation, Landlord’s right to subdivide the Project, convert the Building and
other potential buildings within the Project to condominium units, grant
easements and licenses to third parties, and maintain or establish ownership of
the Building separate from fee title to the Property.  Landlord shall at all times during
construction activity maintain reasonable access to the Premises and Common
Areas serving the Premises.

32.2.        Tenant
and Landlord shall each, at the other’s reasonable request, promptly execute
such further documents as may be reasonably appropriate and necessary to enable
the other to carry out its obligations under this Lease; provided that
neither party shall have any obligation under this paragraph to execute any
document that creates additional liability or cost for such party or that
deprives Tenant of the quiet enjoyment and use of the Premises as provided by
this Lease.

32.3.        Landlord
may, at any and all reasonable times during non-business hours (or during
business hours if Tenant so requests), and upon twenty-four (24) hours’ prior
notice (provided that no time restrictions shall apply or advance notice
be required if an emergency necessitates immediate entry), enter the Premises
to (a) inspect the same and to determine whether Tenant is in compliance with
its obligations hereunder, (b) supply any service Landlord is required to
provide hereunder, (c) show the Premises to prospective purchasers or tenants
during the final year of the Term, (d) post notices of nonresponsibility, (e)
access the telephone equipment, electrical substation and fire risers and (f)
alter, improve or repair any portion of the Building other than the Premises
for which access to the Premises is reasonably necessary.  In connection with any such alteration,
improvement or repair as described in Subsection 32.3(f) above, Landlord
may erect in the Premises or elsewhere in the Project scaffolding and other
structures reasonably required for the alteration, improvement or repair work
to be performed.  In 

 

 39
 

 

no event shall Tenant’s Rent abate
as a result of Landlord’s activities pursuant to this Section 32.3; provided,
however, that all such activities shall be conducted in such a manner so
as to cause as little interference to Tenant as is reasonably possible.  Landlord shall at all times retain a key with
which to unlock all of the doors in the Premises.  If an emergency necessitates immediate access
to the Premises, Landlord may use whatever force is necessary to enter the Premises,
and any such entry to the Premises shall not constitute a forcible or unlawful
entry to the Premises, a detainer of the Premises, or an eviction of Tenant
from the Premises or any portion thereof.

33.           Quiet Enjoyment.  So long as Tenant is not in default under
this Lease, Landlord or anyone acting through or under Landlord shall not
disturb Tenant’s occupancy of the Premises, except as permitted by this
Lease.  So long as Tenant is not in
default under this Lease, Landlord warrants that Tenant shall hold and enjoy
the Premises peaceably and quietly, except as permitted by this Lease.  The foregoing express covenant shall be in
addition to and not in derogation of any implied or other rights of quiet
enjoyment Tenant may have under Applicable Laws.  Nothing in this Section 33 shall
prohibit Landlord from undertaking construction on the Property (including
construction of additional buildings) in accordance with this Lease

34.           Subordination
and Attornment.

34.1.        This Lease
shall be subject and subordinate to the lien of any mortgage, deed of trust, or
lease in which Landlord is tenant hereafter in force against the Building or
the Project (collectively referred to as “Senior Interests”) and to all
advances made or hereafter to be made upon the security thereof without the
necessity of the execution and delivery of any further instruments on the part
of Tenant to effectuate such subordination, so long as the holders of such
Senior Interests do not disturb Tenant’s possession of the Premises in
violation of this Lease so long as Tenant performs its obligations under this
Lease.  Landlord represents to Tenant
that, as of the Execution Date, there is no mortgage, deed of trust, or lease
in which Landlord is tenant in force against the Building or the Project.

34.2.        Notwithstanding
the foregoing, Tenant shall execute and deliver upon demand such further
instrument or instruments evidencing such subordination of this Lease to the
lien of any such mortgage or mortgages or deeds of trust or lease in which
Landlord is tenant as may be required by Landlord, on condition that the holder
of the Senior Interest agrees to not disturb Tenant’s possession of the
Premises in violation of this Lease so long as Tenant performs its obligations
under this Lease.  However, if any such
mortgagee, beneficiary or Landlord under lease wherein Landlord is tenant so
elects, this Lease shall be deemed prior in lien to any such lease, mortgage,
or deed of trust upon or including the Premises regardless of date and Tenant
shall execute a statement in writing to such effect at Landlord’s request.  If Tenant fails to execute any document
reasonably required from Tenant under this Section within fifteen (15) days
after Tenant’s receipt of written request therefor, Tenant hereby constitutes
and appoints Landlord or its special attorney-in-fact to execute and deliver
any such document or documents in the name of Tenant.  Such power is coupled with an interest and is
irrevocable.

34.3.        [Intentionally
omitted]

 

 40

 

34.4.        In
the event any proceedings are brought for foreclosure, or in the event of the
exercise of the power of sale under any mortgage or deed of trust made by the
Landlord covering the Premises, Tenant’s possession of the Premises under this
Lease shall continue undisturbed so long as Tenant performs its obligations
under this Lease and the Tenant shall at the election of the purchaser at such
foreclosure or sale attorn to the purchaser upon any such foreclosure or sale
and recognize such purchaser as the Landlord under this Lease.

35.           Surrender.

35.1.        No
surrender of possession of any part of the Premises shall release Tenant from
any of its obligations hereunder, unless such surrender is accepted in writing
by Landlord.

35.2.        The
voluntary or other surrender of this Lease by Tenant shall not effect a merger
with Landlord’s fee title or leasehold interest in the Premises, the Building
or the Property, unless Landlord consents in writing, and shall, at Landlord’s
option, operate as an assignment to Landlord of any or all subleases.

35.3.        The
voluntary or other surrender of any ground or other underlying lease that now
exists or may hereafter be executed affecting the Building or the Project, or a
mutual cancellation thereof or of Landlord’s interest therein by Landlord and
its lessor shall not effect a merger with Landlord’s fee title or leasehold
interest in the Premises, the Building or the Property and shall, at the option
of the successor to Landlord’s interest in the Building or the Project, as
applicable, operate as an assignment of this Lease.

36.           Waiver and
Modification.  No provision of this
Lease may be modified, amended or supplemented except by an agreement in
writing signed by Landlord and Tenant. 
The waiver by Landlord of any breach by Tenant of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any subsequent
breach of the same or any other term, covenant or condition herein contained.

37.           Waiver of Jury Trial
and Counterclaims.  The parties waive
trial by jury in any action, proceeding or counterclaim brought by the other
party hereto related to matters arising out of or in any way connected with
this Lease; the relationship between Landlord and Tenant; Tenant’s use or
occupancy of the Premises, the Building or the Project; or any claim of injury
or damage related to this Lease or the Premises, the Building or the Project.

38.           [Intentionally omitted]

39.           Hazardous Materials.

39.1.        Tenant shall not cause or permit any Hazardous
Materials (as hereinafter defined) to be brought upon, kept or used in or about
the Premises, the Building or the Project in violation of Applicable Laws by
Tenant, its agents, employees, contractors or invitees.  If Tenant breaches such obligation, or if the
presence of Hazardous Materials as a result of such a breach results in
contamination of the Premises, the Building, the Project or any adjacent
property, or (only if Tenant leases the entire Building) if contamination of
the Premises by Hazardous Materials otherwise occurs during the term of this
Lease or any extension or renewal hereof or holding over 

 

 41
 

 

hereunder, then
Tenant shall indemnify, save, defend and hold Landlord, its agents and
contractors harmless from and against any and all claims, judgments, damages,
penalties, fines, costs, liabilities and losses (including, without limitation,
diminution in value of the Premises, the Building, the Project or any portion
thereof; damages for the loss or restriction on use of rentable or usable space
or of any amenity of the Premises or Project; damages arising from any adverse
impact on marketing of space in the Premises, the Building or the Project; and
sums paid in settlement of claims, attorneys’ fees, consultants’ fees and
experts’ fees) that arise during or after the Term as a result of such breach
or contamination.  This indemnification
of Landlord by Tenant includes, without limitation, costs incurred in
connection with any investigation of site conditions or any cleanup, remedial,
removal or restoration work required by any Governmental Authority because of
Hazardous Materials present in the air, soil or groundwater above, on or under
the Premises for which Tenant is liable under the terms of this Lease.  Without
limiting the foregoing, if the presence of any Hazardous Materials in, on,
under or about the Premises, the Building, the Project or any adjacent property
caused or permitted by Tenant results in any contamination of the Premises, the
Building, the Project or any adjacent property, then Tenant shall promptly take
all actions at its sole cost and expense as are necessary to return the
Premises, the Building, the Project and any adjacent property to their
respective condition existing as of the Term Commencement Date; provided
that Landlord’s written approval of such action shall first be obtained, which
approval Landlord shall not unreasonably withhold, condition or delay; and provided,
further, that it shall be reasonable for Landlord to withhold its consent if
such actions could have a material adverse long-term or short-term effect on
the Premises, the Building or the Project.

39.2.        Landlord acknowledges that it is not the intent of this Article
39 to prohibit Tenant from operating its business as described in Section
2.8 above.  Tenant may operate its
business according to the custom of Tenant’s industry so long as the use or
presence of Hazardous Materials is strictly and properly monitored according to
Applicable Laws.  As a material
inducement to Landlord to allow Tenant to use Hazardous Materials in connection
with its business, Tenant agrees to deliver to Landlord prior to the Term
Commencement Date a list identifying each type of Hazardous Material to be
present on the Premises (which list may also include Hazardous Materials that
Tenant anticipates may be present on the Premises in future) and setting forth
any and all governmental approvals or permits required in connection with the
presence of such Hazardous Material on the Premises (the “Hazardous
Materials List”).  Tenant shall
deliver to Landlord an updated Hazardous Materials List on or prior to each
annual anniversary of the Term Commencement Date and shall also deliver an
updated Hazardous Materials List before any Hazardous Materials not already
listed on the Hazardous Materials List are brought onto the Premises.  Tenant shall deliver to Landlord true and
correct copies of the following documents (hereinafter referred to as the “Documents”)
relating to the handling, storage, disposal and emission of Hazardous Materials
prior to the Term Commencement Date or, if unavailable at that time, concurrent
with the receipt from or submission to any Governmental Authority:  permits; approvals; reports and
correspondence; storage and management plans; notices of violations of Applicable
Laws; plans relating to the installation of any storage tanks to be installed
in or under the Premises, the Building or the Project (provided that installation of storage tanks shall only be permitted
after Landlord has given Tenant its written consent to do so, which consent
Landlord shall not unreasonably withhold, condition or 

 

 42
 

 

delay); and all closure plans or any other documents required by any and
all Governmental Authority for any storage tanks installed in, on or under the
Premises, the Building or the Project for the closure of any such storage
tanks.  Tenant shall not be required,
however, to provide Landlord with any portion of the Documents containing
information of a proprietary nature that, in and of themselves, do not contain
a reference to any Hazardous Materials
or activities related to Hazardous Materials. 
Upon Landlord’s written request, Tenant agrees that it shall
enter into a written agreement with other tenants of the Building and the
Project concerning the equitable allocation of fire control areas (as defined
in the Uniform Building Code as adopted by the city or municipality(ies) in
which the Project is located (the “UBC”)) within the Building and the
Project for the storage of Hazardous Materials, provided that Tenant shall be
entitled to no less than its Pro Rata Share of such fire control areas based on
Tenant’s Pro Rata Share of the Building or the Project, as applicable.  In the event that Tenant’s use of Hazardous
Materials is such that it utilizes fire control areas in the Building or the
Project in excess of Tenant’s Pro Rata Share of the Building or the Project, as
applicable, as set forth in Section 2.2, or the share to which it is
entitled under any agreement with other tenants (if greater), Tenant agrees
that it shall, at its sole cost and expense and upon Landlord’s written
request, establish and maintain a separate area of the Premises classified by
the UBC as an “H” occupancy area for the use and storage of Hazardous Materials
or take such other action as is necessary to ensure that its share of the fire
control areas of the Building and the Project is not greater than Tenant’s Pro
Rata Share of the Building or the Project, as applicable, or the share to which
it is entitled under any agreement with other tenants (if greater).

39.3.        Notwithstanding the provisions of Section 39.1 above,
if (a) Tenant or any proposed transferee, assignee or sublessee of Tenant has
been required by any prior landlord, Lender or Governmental Authority to take
remedial action in connection with Hazardous Materials contaminating a property
if the contamination resulted from such party’s action or omission or use of
the property in question or (ii) Tenant or any proposed transferee, assignee or
sublessee is subject to an enforcement order issued by any Governmental
Authority in connection with the use, disposal or storage of Hazardous
Materials, then Landlord shall have the right to terminate this Lease (with
respect to any such matter involving Tenant), unless Tenant is diligently
taking all action necessary to comply with all requirements of the applicable
Governmental Authority and promptly achieves compliance, or withhold its
consent to any proposed transfer, assignment or subletting (with respect to any
such matter involving a proposed transferee, assignee or sublessee) unless such
proposed transferee, assignee or sublessee has either already taken or is then
diligently taking all action necessary to comply with all requirements of the
applicable Governmental Authority.

39.4.        Upon at least twenty-four (24) hours’ prior notice to Tenant,
prior to the expiration of the Term, Landlord shall have the right to conduct
appropriate tests of the Premises, the Building and the Project during normal
business hours to demonstrate that Hazardous Materials in violation of
Applicable Laws are present due to Tenant or Tenant’s agents, employees or
invitees.  Only if Hazardous Materials in
violation of Applicable Laws are present due to Tenant or Tenant’s agents,
employees or invitees, Tenant shall pay all reasonable costs of such tests of
the Premises.

 

 43
 

 

39.5.        If
underground or other storage tanks presently located on the Premises or
hereafter placed on the Premises are used by Tenant for the storage of
Hazardous Materials, then Tenant shall monitor such storage tanks, maintain
appropriate records, implement reporting procedures, properly close any such
underground storage tanks, and take or cause to be taken all other steps
necessary or required under the Applicable Laws.

39.6.        Tenant’s
obligations under this Article 39 shall survive the expiration or
earlier termination of the Lease.  During
any period of time needed by Tenant or Landlord after the termination of this
Lease to complete the removal from the Premises of any such Hazardous
Materials, Tenant shall continue to pay Rent in accordance with this Lease,
which Rent shall be prorated daily.

39.7.        As used herein, the term “Hazardous Material” means
any hazardous or toxic substance, material or waste that is or becomes
regulated by any Governmental Authority.   
Landlord represents and warrants to Tenant that Landlord has no
knowledge of any Hazardous Material on or about the Premises, Building or
Property in violation of Applicable Laws except as may be disclosed in (a) that
certain Phase I Environmental Site Assessment prepared by URS and dated as of
September 13, 2006, (b) that certain letter regarding Results of Limited Lead
Wipe Sampling from Environmental Resources Management dated as of October 4,
2006, and (c) that certain letter regarding Results of Limited Confirmation
Lead Wipe Sampling from Environmental Resources Management dated as of November
7, 2006, a true and complete copy of each of which has been delivered to
Tenant.

39.8.        Notwithstanding anything to the contrary in this Lease,
Tenant shall have no liability or responsibility with respect to any Hazardous
Materials that (a) result from violations of Applicable Laws relating to the
Premises, the Building or the Project, which violations existed as of the Term
Commencement Date or (b) were present in, on, under or about any part of the
Premises, Building or Project as of the Term Commencement Date or after the
Term Commencement Date, and, with regards to (a) and (b), were not caused by
Tenant or its agents, employees, consultants, contractors, licenses or invitees
(collectively, “Pre-Existing Matters”).  
Landlord indemnifies Tenant with regard to any Claims related to the
Pre-Existing Matters that arise from an enforcement action by any Governmental
Authority.  There shall not be included
in Operating Expenses any site characterization, investigation,
remediation or other costs relating to any Hazardous Material for which Tenant has no liability or responsibility under
this paragraph.

40.           [Intentionally
omitted]

41.           Miscellaneous.

41.1.        Where
applicable in this Lease, the singular includes the plural and the masculine or
neuter includes the masculine, feminine and neuter.  The section headings of this Lease are not a
part of this Lease and shall have no effect upon the construction or interpretation
of any part hereof.

 

 44
 

 

41.2.        Submission
of this instrument for examination or signature by Tenant does not constitute a
reservation of or option for a lease, and shall not be effective as a lease or
otherwise until execution by and delivery to both Landlord and Tenant.

41.3.        Time
is of the essence with respect to the performance of every provision of this
Lease in which time of performance is a factor.

41.4.        Each
provision of this Lease performable by Tenant or Landlord shall be deemed both
a covenant and a condition.

41.5.        Whenever
consent or approval of either party is required, that party shall not
unreasonably withhold, condition or delay such consent or approval, except as
may be expressly set forth to the contrary.

41.6.        The
terms of this Lease are intended by the parties as a final expression of their
agreement with respect to the terms as are included herein, and may not be
contradicted by evidence of any prior or contemporaneous agreement.

41.7.        Any
provision of this Lease that shall prove to be invalid, void or illegal shall
in no way affect, impair or invalidate any other provision hereof, and all
other provisions of this Lease shall remain in full force and effect and shall
be interpreted as if the invalid, void or illegal provision did not exist.

41.8.        Either
party may, but shall not be obligated to, record a short form memorandum of
this Lease without the other’s consent. 
Neither party shall record this Lease. 
The party recording the memorandum shall be responsible for the cost of
recording any memorandum of this Lease, including any transfer or other taxes
incurred in connection with said recordation.

41.9.        The
language in all parts of this Lease shall be in all cases construed as a whole
according to its fair meaning and not strictly for or against either Landlord
or Tenant.

41.10.      Each
of the covenants, conditions and agreements herein contained shall inure to the
benefit of and shall apply to and be binding upon the parties hereto and their
respective heirs; legatees; devisees; executors; administrators; and permitted
successors, assigns, sublessees.  Nothing
in this Section 40.10 shall in any way alter the provisions of this
Lease restricting assignment or subletting.

41.11.      Any
notice, consent, demand, bill, statement or other communication required or
permitted to be given hereunder shall be in writing and shall be given by
personal delivery, overnight delivery with a reputable nationwide overnight
delivery service, or certified mail (return receipt requested), and if given by
personal delivery, shall be deemed delivered upon receipt; if given by
overnight delivery, shall be deemed delivered one (1) business day after
deposit with a reputable nationwide overnight delivery service; and, if given
by certified mail (return receipt requested), shall be deemed delivered three (3)
business days after the time the notifying party deposits the notice with the
United States Postal Service.  Any
notices given pursuant to this Lease shall be addressed to Tenant at the
Premises, or to Landlord or Tenant at 

 

 45
 

 

the addresses shown in Sections 2.10 and 2.11,
respectively.  Either party may, by
notice to the other given pursuant to this Section, specify additional or different addresses for notice
purposes.

41.12.      This
Lease shall be governed by, construed and enforced in accordance with the laws
of the State in which the Premises are located, without regard to such State’s
conflict of law principles.

41.13.      That
individual or those individuals signing this Lease guarantee, warrant and
represent that said individual or individuals have the power, authority and
legal capacity to sign this Lease on behalf of and to bind all entities,
corporations, partnerships, limited liability companies, joint venturers or
other organizations and entities on whose behalf said individual or individuals
have signed.

41.14.      To
induce Landlord to enter into this Lease, Tenant agrees that it shall promptly
furnish to Landlord the most recent unaudited year-end financial statements
reflecting Tenant’s current financial condition (or audited, if available); provided,
however, that Tenant shall have no obligation to provide such financial
statements so long as Tenant is a publicly held company.  Tenant represents and warrants that all
financial statements, records and information furnished by Tenant to Landlord
in connection with this Lease are true, correct and complete in all
respects.  Landlord shall not disclose
any nonpublic information in such financial statements or give a copy of such
financial statements to any third party, except (a) if required by Applicable
Laws or in any judicial proceeding (provided that Landlord has given
Tenant reasonable notice of such requirement, if feasible) or (b) to Landlord’s
attorneys, accountants and other bona fide consultants or advisers, lenders,
and prospective purchasers of the Property.

41.15.      This
Lease may be executed in one or more counterparts, each of which, when taken
together, shall constitute one and the same document.

41.16.      [Intentionally
omitted]

41.17.      This Lease is subject to any recorded covenants,
conditions or restrictions on the Project or Property (the “CC&Rs”).  Tenant shall comply with the CC&Rs on condition that (a) a copy of such CC&Rs is
provided to Tenant and (b) with respect to CC&Rs entered into after the
date hereof, that such CC&Rs do not materially interfere with Tenant’s use
and enjoyment of the Premises.

42.           Option to Extend
Term.  Tenant shall have the option (“Option”)
to extend the Term of this Lease as to the entire Premises (and no less than
the entire Premises) upon the following terms and conditions.  Any extension of the Term pursuant to any
Option shall be on all the same terms and conditions as this Lease, except as
follows:

42.1.        Tenant
shall have two (2) options to extend the Term of this Lease by five (5) years
(each an “Option Period”) on the same terms and conditions as this
Lease.  Basic Annual Rent for each Option
Period shall equal the fair market rental value (“FMV”) of the Premises
as of the first (1st) day of
each Option Period, taking into account, among other things, base rent, annual
rental rate increases, tenant improvements and leasing commissions for
comparable 

 

 46
 

 

laboratory research buildings in the Bothell, Washington, area; provided,
however, that in no event shall Basic Annual Rent for any Option Period equal
less than one hundred three percent (103%) of the Basic Annual Rent at the
expiration of the then-current Lease term. 
If Landlord and Tenant cannot agree on the FMV for purposes of any
Option Period, then they shall engage a mutually agreeable independent third
party appraiser with at least ten (10) years’ experience in appraising the
rental value of leased commercial premises (for research and development and
laboratory uses) in the Bothell, Washington, area (the “Appraiser”).  If the parties cannot agree on the Appraiser,
each shall within ten (10) days after such impasse appoint an Appraiser and,
within ten (10) days after the appointment of both such Appraisers, those two
Appraisers shall select a third.  If
either party fails to timely appoint an Appraiser, then the Appraiser the other
party appoints shall be the sole Appraiser. 
Within ten (10) days after appointment of all Appraiser(s), Landlord and
Tenant shall each simultaneously give the Appraisers (with a copy to the other
party) its determination of FMV, with such supporting data or information as
each submitting party determines appropriate. 
Within ten (10) days after such submissions, the Appraisers shall by
majority vote select either Landlord’s or Tenant’s FMV.  The Appraisers may not select or designate
any other FMV.  The determination of the
Appraiser(s) shall bind the parties.

42.2.        The
Option is not assignable separate and apart from this Lease.

42.3.        The
Option is conditional upon Tenant giving Landlord written notice of its
election to exercise the Option at least nine (9) months prior to the end of
the expiration of the initial term of this Lease or the prior Option Period, as
applicable.  Time shall be of the essence
as to Tenant’s exercise of any Option. 
Tenant assumes full responsibility for maintaining a record of the
deadlines to exercise any Option.  Tenant
acknowledges that it would be inequitable to require Landlord to accept any
exercise of any Option after the date provided for in this paragraph.

42.4.        Notwithstanding
anything contained in this Article 42, Tenant shall not have the right
to exercise the Option:

(a)           During
the time commencing from the date Landlord delivers to Tenant a written notice
that Tenant is in default under any provisions of this Lease and continuing
until Tenant has cured the specified default to Landlord’s reasonable
satisfaction; or

(b)           At any
time after any Default as described in Article 24 of the Lease (provided,
however, that, for purposes of this Subsection 42.4(b), Landlord shall
not be required to provide Tenant with notice of such Default) and continuing
until Tenant cures any such Default, if such Default is susceptible to being
cured;

(c)           Unless
due to a Permitted Transfer, in the event that
Tenant no longer occupies the entire Premises, or has assigned the Lease with
respect to more than fifty percent (50%) of the Premises, or has sublet more
than fifty percent (50%) of the Premises; or

(d)           In
the event that Tenant has defaulted in the performance of its obligations under
this Lease two (2) or more times and a service or late charge has become
payable under 

 

 47
 

 

Section 24.1
for each of such defaults during the twelve (12)-month period immediately prior
to the date that Tenant intends to exercise the Option, whether or not Tenant
has cured such defaults.

42.5.        The period of time
within which Tenant may exercise an Option shall not be extended or enlarged by
reason of Tenant’s inability to exercise such Option because of the provisions
of Section 42.4.

42.6.        All of Tenant’s rights under the provisions of the
Option shall terminate and be of no further force or effect even after Tenant’s
due and timely exercise of the Option if, after such exercise, but prior to the
commencement date of the new term, (a) Tenant fails to pay to Landlord a
monetary obligation of Tenant for a period of twenty (20) days after written
notice from Landlord to Tenant, (b) Tenant fails to commence to cure a default
(other than a monetary default) within thirty (30) days after the date Landlord
gives notice to Tenant of such default or (c) Tenant has defaulted under this
Lease two (2) or more times and a service or late charge under Section 24.1
has become payable for any such default, whether or not Tenant has cured such
defaults.

43.           Right of First Refusal.  Tenant shall
have a right of first refusal (“ROFR”) as to any rentable premises in
the Building or in any other building that Landlord may construct on the
Property for which Landlord is seeking a tenant (“Available Premises”).  To the extent that Landlord renews or extends
a then-existing lease with any then-existing tenant of any space, or enters
into a new lease with such then-existing tenant for the same premises, the
affected space shall not be deemed to be Available Premises.  In the event Landlord enters into a signed
letter of intent for any Available Premises, Landlord shall provide written
notice thereof to Tenant (the “Notice of Offer”), specifying the terms
and conditions contained in such letter of intent.

43.1.        Within ten (10) business days following its receipt of a Notice of Offer,
Tenant shall advise Landlord in writing whether Tenant elects to lease the
Available Premises on the terms and conditions set forth in the Notice of
Offer.  If Tenant fails to notify
Landlord of Tenant’s election within said ten (10) business day period, then
Tenant shall be deemed to have elected not to lease the Available Premises.

43.2.        If Tenant timely notifies Landlord that Tenant elects to lease the
Available Premises on the terms and conditions set forth in the Notice of
Offer, then Landlord shall lease the Available Premises to Tenant upon the
terms and conditions set forth in the Notice of Offer.

43.3.        If
Tenant notifies Landlord that Tenant elects not to lease the Available Premises
on the terms and conditions set forth in the Notice of Offer, or if Tenant
fails to notify Landlord of Tenant’s election within the ten (10) business day
period described above, then Landlord shall have the right to consummate the
lease of the Available Premises on the same terms as set forth in the Notice of
Offer within one hundred eighty (180) days following Tenant’s election (or
deemed election) not to lease the Available Premises.  If Landlord does not lease the Available
Premises within said one hundred eighty (180)-day period, then Tenant’s ROFR
shall be fully reinstated, and Landlord shall not thereafter lease the
Available Premises without first complying with the procedures set forth in
this Article 43.

 

 48
 

 

43.4.        Notwithstanding anything in this Article 43 to
the contrary, Tenant shall not exercise the ROFR during such period of time
that Tenant is in default under any provision of this Lease.  Any attempted exercise of the ROFR during a
period of time in which Tenant is so in default shall be void and of no
effect.  In addition, Tenant shall not be
entitled to exercise the ROFR if Landlord has given Tenant two (2) or more
notices of default under this Lease, whether or not the defaults are cured,
during the twelve (12) month period prior to the date on which Tenant seeks to
exercise the ROFR.

43.5.        Notwithstanding anything in this Lease to the
contrary, except in connection with a Permitted Transfer, Tenant shall not
assign or transfer the ROFR, either separately or in conjunction with an
assignment or transfer of Tenant’s interest in the Lease, without Landlord’s
prior written consent, which consent Landlord may withhold in its sole and
absolute discretion.

44.           Authority.  Tenant and
each person executing this Lease on behalf of Tenant hereby covenants and warrants
that (a) Tenant is duly incorporated or otherwise established or formed and
validly existing under the laws of its state of incorporation, establishment or
formation, (b) Tenant has and is duly qualified to do business in the
state in which the Property is located, (c) Tenant has full corporate,
partnership, trust, association or other appropriate power and authority to
enter into this Lease and to perform all Tenant’s obligations hereunder and (d)
each person (and all of the persons if more than one signs) signing this Lease
on behalf of Tenant is duly and validly authorized to do so.

45.           Confidentiality.  Tenant shall
not disclose any terms or conditions of this Lease (including Rent) or give a
copy of this Lease to any third party, and Landlord shall not release to any
third party any nonpublic financial information or nonpublic information about
Tenant’s ownership structure that Tenant gives Landlord, except (a) if
required by Applicable Laws or in any judicial proceeding, provided that
the releasing party has given the other party reasonable notice of such
requirement, if feasible, (b) to a party’s attorneys, accountants, brokers
and other bona fide consultants or advisers, provided such third parties
agree to be bound by this paragraph or (c) to bona fide prospective
assignees or subtenants of this Lease, provided they agree in writing to
be bound by this paragraph.  Landlord
agrees that, upon prior (if possible) written notice to Landlord, Tenant may
disclose this Lease and its terms to the extent necessary to comply with
Securities and Exchange Commission disclosure requirements.

46.           Odors and
Exhaust.  Tenant acknowledges that Landlord would not
enter into this Lease with Tenant unless Tenant assured Landlord that under no
circumstances will any other occupants of the Building or Project (including
persons legally present in any outdoor areas of the Project) be subjected to
odors or fumes (whether or not noxious), and that the Building and Project will
not be damaged by any exhaust, in each case from Tenant’s operations, including
in Tenant’s vivarium, if any.  Landlord
and Tenant therefore agree as follows:

46.1.        Tenant
shall not cause or permit (or conduct any activities that would cause) any
release of any odors or fumes of any kind from the Premises.

46.2.        If
the Building has a ventilation system that in Landlord’s reasonable judgment is
adequate, suitable, and appropriate to vent the Premises in a manner that does
not release odors 

 

 49
 

 

affecting any indoor or outdoor part of the Project, Tenant shall vent the
Premises through such system.  If
Landlord at any time determines that any existing ventilation system is
inadequate, or if no ventilation system exists, Tenant shall in compliance with
Applicable Laws vent all fumes and odors from the Premises (and remove odors
from Tenant’s exhaust stream) as Landlord requires.  The placement and configuration of all
ventilation exhaust pipes, louvers and other equipment shall be subject to
Landlord’s approval, not to be unreasonably withheld, conditioned or
delayed.  Tenant acknowledges Landlord’s
legitimate desire to maintain the Project (indoor and outdoor areas) in an
odor-free manner, and Landlord may reasonably require Tenant to abate and
remove all odors in a manner that goes beyond the requirements of Applicable
Laws.

46.3.        Tenant
shall, at Tenant’s sole cost and expense, provide odor eliminators and other
devices (such as filters, air cleaners, scrubbers and whatever other equipment
may in Landlord’s judgment be necessary or appropriate from time to time) to
remove, eliminate and abate any odors, fumes or other substances in Tenant’s
exhaust stream that, in Landlord’s reasonable judgment, emanate from Tenant’s
Premises.  Any work Tenant performs under
this paragraph shall constitute Alterations.

46.4.        Tenant’s
responsibility to remove, eliminate and abate odors, fumes and exhaust shall
continue throughout the Term.  Landlord’s
approval of the Tenant Improvements shall not preclude Landlord from requiring
additional measures to eliminate odors, fumes and other adverse impacts of
Tenant’s exhaust stream (as Landlord may designate in Landlord’s
discretion).  Tenant shall install
additional equipment as Landlord requires from time to time under the preceding
sentence.  Such installations shall
constitute Alterations.

46.5.        If
Tenant fails to install satisfactory odor control equipment within ten (10)
business days after Landlord’s demand made at any time, then Landlord may,
without limiting Landlord’s other rights and remedies, require Tenant to cease
and suspend any operations in the Premises that, in Landlord’s reasonable
determination, cause odors, fumes or exhaust. 
For example, if Landlord determines that Tenant’s production of a
certain type of product causes odors, fumes or exhaust, and Tenant does not
install satisfactory odor control equipment within ten (10) business days after
Landlord’s request, then Landlord may require Tenant to stop producing such
type of product in the Premises unless and until Tenant has installed odor
control equipment satisfactory to Landlord.

47.           HVAC.  For the
Premises, Landlord shall (a) maintain and operate the heating, ventilating
and air conditioning systems (“HVAC”); and (b) furnish HVAC as
reasonably required for reasonably comfortable occupancy and use of the Premises
for the Permitted Use twenty-four (24) hours a day, 365 or 366 days a year.

48.           Excavation.  If any
excavation shall be made upon land adjacent to or under the Building, or shall
be reasonably authorized to be made by Landlord upon no less than five (5) days’
prior written notice to Tenant (except in the event of an emergency), Tenant
shall afford to the person causing or authorized to cause such excavation,
license to enter the Premises for the purpose of performing such work as said
person shall deem necessary or desirable to preserve and protect the Building
from injury or damage and to support the same by proper foundations, without
any 

 

 50
 

 

claim for damages or liability against Landlord and without
reducing or otherwise affecting Tenant’s obligations under this lease.

49.           Names.  Landlord
reserves the right to change the name of the Project or the Building in its
sole discretion.

50.           Acquisition of
Property.  This Lease is subject to the condition
precedent that Landlord successfully acquires fee ownership of the Property no
later than December 15, 2007.  Landlord
shall promptly notify Tenant of the date that Landlord acquires fee ownership
of the Property.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

 51
 

 

IN WITNESS WHEREOF, the parties
hereto have executed this Lease as of the date first above written.

	
  LANDLORD:

  
	
   

  
	
  BMR-217TH PLACE LLC,

  
	
  a Delaware limited
  liability company

  
	
   

  
	
  By:

  	
  /s/ Gary A Kreitzer

  	
   

  
	
  Name:

  	
  Gary A Kreitzer

  	
   

  
	
  Title:

  	
  Executive V.P.

  	
   

  
	
  

  

  TENANT:

  
	
  SONUS PHARMACEUTICALS, INC.,

  
	
  a Delaware corporation

  
	
   

  
	
  By:

  	
  /s/ Michael A. Martino

  	
   

  
	
  Name:

  	
  Michael A. Martino

  	
   

  
	
  Title:

  	
  President & CEO

  	
   

  

 

 

 52
 

 

ACKNOWLEDGEMENT

	
  STATE OF

  	
   

  	
  §

  
	
   

  	
   

  	
  §

  
	
  COUNTY OF

  	
   

  	
  §

  

 

On         
      , 200      , before me, a Notary Public in and for said
state, personally appeared                      ,
personally known to me(or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, in
that by his signature on the instrument the person, or the entity upon behalf
of which the person acted, executed the instrument.

WITNESS my hand
and official seal.

	
  

  	
   

  	
   

  
	
   

  	
  , Notary Public

  
				

 

 

 

 

 

ACKNOWLEDGEMENT

	
  STATE OF

  	
   

  	
  §

  
	
   

  	
   

  	
  §

  
	
  COUNTY OF

  	
   

  	
  §

  

 

On         
      , 200      , before me, a Notary Public in and for said
state, personally appeared                      ,
personally known to me(or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, in
that by his signature on the instrument the person, or the entity upon behalf
of which the person acted, executed the instrument.

WITNESS my hand
and official seal.

	
  

  	
   

  	
   

  
	
   

  	
  , Notary Public

  
				

 

 53

 

EXHIBIT A

PREMISES

 

 A-1

 

EXHIBIT B

ACKNOWLEDGEMENT
OF TERM COMMENCEMENT DATE

AND TERM EXPIRATION DATE

THIS ACKNOWLEDGEMENT OF TERM COMMENCEMENT DATE AND TERM EXPIRATION DATE is
entered into as of [        ],
20[    ], with reference to that certain Lease (the “Lease”)
dated as of November 21, 2006, by SONUS PHARMACEUTICALS, INC., a Delaware
corporation (“Tenant”), in favor of BMR-217TH PLACE LLC, a Delaware
limited liability company (“Landlord”).  All capitalized terms used herein without
definition shall have the meanings ascribed to them in the Lease.

Tenant hereby confirms the
following:

1.             Tenant
accepted possession of the Premises on
[        ], 20[    ].

2.             To Tenant’s knowledge, the Premises
are in good order, condition and repair[, except [        ]].

3.             The Tenant Improvements required to
be constructed by Landlord under the Lease have been substantially completed.

4.             All conditions of the Lease to be
performed by Landlord as a condition to the full effectiveness of the Lease
have been satisfied, and Landlord has fulfilled all of its duties in the nature
of inducements offered to Tenant to lease the Premises [, except [        ]].

5.             In accordance with the provisions
of Section 4.2 of the Lease, the Term Commencement Date is [        ],
20[    ], and,
unless the Lease is terminated prior to the Term Expiration Date pursuant to
its terms, the Term Expiration Date shall be [        ],
20[    ].

6.             Tenant commenced occupancy of the
Premises for the Permitted Use on [        ],
20[    ].

7.             The Lease is in full force and
effect, and the same represents the entire agreement between Landlord and
Tenant concerning the Premises[, except [        ]].

8.             Tenant has no existing defenses against the
enforcement of the Lease by Landlord, and there exist no offsets or credits
against Rent owed or to be owed by Tenant.

9.             The obligation to pay Rent is presently in effect and
all Rent obligations on the part of Tenant under the Lease commenced to or
shall commence to accrue on [        ],
20[    ].

10.           The undersigned
Tenant has not made any prior assignment, transfer, hypothecation or pledge of
the Lease or of the rents thereunder or sublease of the Premises or any portion
thereof.

 B-1
 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 B-2
 

IN WITNESS WHEREOF, the parties hereto have executed this Acknowledgment of
Term Commencement Date and Term Expiration Date as of [        ],
20[    ].

	
  TENANT:

  
	
   

  
	
  SONUS PHARMACEUTICALS, INC.,

  
	
  a Delaware corporation

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

 B-3

 

EXHIBIT C

TENANT’S
PERSONAL PROPERTY

[To be attached]

 C-1

 

EXHIBIT D

RULES AND REGULATIONS

NOTHING IN THESE RULES AND REGULATIONS (“RULES AND REGULATIONS”)
SHALL SUPPLANT ANY PROVISION OF THE LEASE. 
IN THE EVENT OF A CONFLICT OR INCONSISTENCY BETWEEN THESE RULES AND
REGULATIONS AND THE LEASE, THE LEASE SHALL PREVAIL.

1.             Except
as specifically provided in the Lease to which these Rules and Regulations are
attached, no sign, placard, picture, advertisement, name or notice shall be
installed or displayed on any part of the outside of the Premises or the
Building without Landlord’s prior written consent, not
to be unreasonably withheld, conditioned or delayed. Landlord shall have the
right to remove, at Tenant’s sole cost and expense and without notice, any sign
installed or displayed in violation of this rule.

2.             If Landlord objects in writing to
any curtains, blinds, shades, screens or hanging plants or other similar
objects attached to or used in connection with any window or door of the
Premises or placed on any windowsill, which window, door or windowsill is (a) visible
from the exterior of the Premises and (b) not included in plans approved by
Landlord, then Tenant shall promptly remove said curtains, blinds, shades,
screens or hanging plants or other similar objects at its sole cost and
expense.

3.             Tenant shall not obstruct any
sidewalks or entrances to the Building, or any halls, passages, exits,
entrances or stairways within the Premises, in any case that are required to be
kept clear for health and safety reasons.

4.             No deliveries shall be made that
impede or interfere with other tenants in or the operation of the Project.

5.             Tenant
shall not place a load upon any floor of the Premises that exceeds the load per
square foot that (a) such floor was designed to carry or (b) that is allowed by
Applicable Laws.  Fixtures and equipment
that cause noises or vibrations that may be transmitted to the structure of the
Building to such a degree as to be objectionable to other tenants shall be
placed and maintained by Tenant, at Tenant’s sole cost and expense, on
vibration eliminators or other devices sufficient to eliminate such noises and
vibrations to levels reasonably acceptable to Landlord and other tenants of the
Building.

6.             Tenant
shall not use any method of heating or air conditioning other than that shown
in the Tenant Improvement plans.

7.             Tenant
shall not install any radio, television or other antenna, cell or other
communications equipment, or any other devices on the roof or exterior walls of
the Premises except to the extent shown on approved Tenant Improvements
plans.  Tenant shall not interfere with
radio, television or other communications from or in the Premises or elsewhere.

 D-1
 

8.             Canvassing,
peddling, soliciting and distributing handbills or any other written material
within, on or around the Project (other than within the Premises) are
prohibited, and Tenant shall cooperate, at no cost or
expense to Tenant, to prevent such activities.

9.             Tenant
shall store all of its trash, garbage and Hazardous Materials within its
Premises or in designated receptacles outside of the Premises.  Tenant shall not place in any such receptacle
any material that cannot be disposed of in the ordinary and customary manner of
trash, garbage and Hazardous Materials disposal.

10.           The
Premises shall not be used for any improper, immoral or objectionable
purpose.  No cooking shall be done or
permitted on the Premises; provided, however, that Tenant may use
(a) equipment approved in accordance with the requirements of insurance
policies that Landlord or Tenant is required to purchase and maintain pursuant
to the Lease for brewing coffee, tea, hot chocolate and similar beverages, (b)
microwave ovens for employees’ use and (c) equipment shown on Tenant
Improvement plans approved by Landlord; provided, further, that any such
equipment and microwave ovens are used in accordance with Applicable Laws.

11.           Tenant
shall not, without Landlord’s prior written consent, not to be unreasonably
withheld, conditioned or delayed,  use the name
of the Project, if any, in connection with or in promoting or advertising
Tenant’s business except as Tenant’s address.

12.           Tenant
shall comply with all safety, fire protection and evacuation procedures and
regulations established by Landlord or any Governmental Authority.

13.           Tenant
assumes any and all responsibility for protecting the Premises from theft,
robbery and pilferage, which responsibility includes keeping doors locked and
other means of entry to the Premises closed.

14.           Landlord
may waive any one or more of these Rules and Regulations for the benefit of
Tenant or any other tenant, but no such waiver by Landlord shall be construed
as a waiver of such Rules and Regulations in favor of Tenant or any other
tenant, nor prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the tenants of the Project, including Tenant.

15.           These
Rules and Regulations are in addition to, and shall not be construed to in any
way modify or amend, in whole or in part, the terms covenants, agreements and
conditions of the Lease.

16.           Landlord
reserves the right to make such other and reasonable rules and regulations as,
in its judgment, may from time to time be needed for safety and security, the
care and cleanliness of the Project, or the preservation of good order therein;
provided, however, that Landlord shall provide written notice to
Tenant of such rules and regulations prior to them taking effect; and provided,
further, that such rules and regulations do not materially interfere with or
prevent Tenant from operating the Premises for the Permitted Use. Tenant agrees
to abide by these Rules and Regulations and any additional rules and
regulations issued or adopted by Landlord.

 D-2
 

17.           Tenant
shall be responsible for the observance of these Rules and Regulations by
Tenant’s employees, agents, clients, customers, invitees and guests.

 

 D-3

EXHIBIT E

FORM OF ESTOPPEL CERTIFICATE

To:                              BMR-217TH PLACE
LLC

17140 Bernardo Center Drive, Suite 222

San Diego, CA 92128

Attention: General
Counsel/Real Estate

BioMed Realty, L.P.

c/o BioMed Realty Trust, Inc.

17140 Bernardo Center Drive, Suite 222

San Diego, CA 92128

Re:                               Suite [     ]
(the “Premises”) at 1522 217th Place SE, Bothell,
Washington (the “Property”)

The undersigned tenant (“Tenant”) hereby certifies to
you as follows:

1.             Tenant
is a tenant at the Property under a lease (the “Lease”) for the Premises
dated as of November 21, 2006.  The Lease
has not been cancelled, modified, assigned, extended or amended [except as
follows:  [           ]],
and there are no other agreements, written or oral, affecting or relating to
Tenant’s lease of the Premises or any other space at the Property.  The lease term expires on [         ],
20[      ].

2.             Tenant
took possession of the Premises, currently consisting of [           ]
square feet, on [           ],
20[    ], and commenced to pay rent on [        ],
20[     ]. 
Tenant has full possession of the Premises, has not assigned the Lease
or sublet any part of the Premises, and does not hold the Premises under an
assignment or sublease[, except as follows: 
[           ]].

3.             All
base rent, rent escalations and additional rent under the Lease have been paid
through [          ], 20[     ].  There is no prepaid rent[, except $[           ]][,
and the amount of security deposit is $[              ]
[in cash][in the form of a letter of credit]]. 
Tenant currently has no right to any future rent abatement under the
Lease.

4.             Base
rent is currently payable in the amount of $[           ]
per month.

5.             Tenant
is currently paying estimated payments of additional rent of $[             ]
per month on account of real estate taxes, insurance, management fees and
common area maintenance expenses.

6.             All work to be
performed for Tenant under the Lease has been performed as required under the
Lease and has been accepted by Tenant[, except [            ]],
and all allowances to be paid to Tenant, including allowances for tenant
improvements, moving expenses or other items, have been paid.

 E-1
 

7.             The Lease is in
full force and effect, free from default and free from any event that could
become a default under the Lease, and Tenant has no claims against the landlord
or offsets or defenses against rent, and there are no disputes with the
landlord [, except [           ]].
Tenant has received no notice of prior sale, transfer, assignment,
hypothecation or pledge of the Lease or of the rents payable thereunder[,
except [            ]].

8.             [Tenant has the
following expansion rights or options for the Property:  [           ].][Tenant
has no rights or options to purchase the Property.]

9.             To Tenant’s
knowledge, no hazardous wastes have been generated, treated, stored or disposed
of by or on behalf of the Tenant in, on or around the Premises or the Project
in violation of any environmental laws.

10.           The
undersigned has executed this Estoppel Certificate with the knowledge and
understanding that [INSERT NAME OF LANDLORD, PURCHASER OR LENDER, AS
APPROPRIATE] or its assignee is acquiring the Property in reliance on this
certificate and that the undersigned shall be bound by this certificate.  The statements contained herein may be relied
upon by [INSERT NAME OF PURCHASER OR LENDER, AS APPROPRIATE], [LANDLORD],
BioMed Realty, L.P., BioMed Realty Trust, Inc., and any mortgagee of the
Property and their respective successors and assigns.

Any capitalized terms not defined herein shall have
the respective meanings given in the Lease.

Dated this [        ]
day of [          ], 20[    ].

[           ],

a [          ]

	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

 E-2

EXHIBIT F

LEGAL DESCRIPTION OF PROPERTY 

[See attached]

 

 F-1

 

EXHIBIT G

WORK LETTER

This Work Letter (the “Work Letter”) is made and
entered into as of the 21st day of November, 2006, by and between BMR-217TH PLACE LLC, a Delaware
limited liability company (“Landlord”),
and SONUS PHARMACEUTICALS, INC., a Delaware corporation (“Tenant”), and
is attached to and made a part of that certain Lease dated as of November 21,
2006 (the “Lease”), by and between Landlord and Tenant for the Premises
located at 1522 217th Place SE in Bothell, Washington.  All capitalized terms used but not otherwise
defined herein shall have the meanings given them in the Lease.

1.             General
Requirements.

1.1.          Tenant’s
Authorized Representative.  Tenant
designates Alan Fuhrman and Wayne Rebich (each a “Tenant’s Authorized
Representative”) as the persons authorized to initial all plans, drawings,
change orders and approvals pursuant to this Work Letter.  Landlord shall not be obligated to respond to
or act upon any such item until such item has been initialed by one of Tenant’s
Authorized Representatives.  Neither
Tenant nor Tenant’s Authorized Representatives shall be authorized to direct
Landlord’s contractors in the performance of Landlord’s Work (as defined
below).

1.2.          Schedule.  The schedule for design and development of
Landlord’s Work (as defined below), including, without limitation, the time
periods for preparation and review of construction documents, approvals and
performance, shall generally be in accordance with that certain schedule
prepared by Landlord and Tenant attached as Exhibit A to this Work
Letter (the “Schedule”).  The
Schedule shall be subject to adjustment as mutually agreed upon in writing by
the parties, or as provided in this Work Letter.

1.3.          Architects,
Consultants and Contractors.  The
architect, engineering consultants, design team, general contractor and
subcontractors responsible for the construction of Landlord’s Work shall be
selected by Landlord and approved by Tenant. 
Tenant’s approval of the same shall not be unreasonably withheld,
conditioned or delayed.  Tenant hereby
approves of SAB Architects as Landlord’s architect and Sierra Construction as
Landlord’s general contractor.

2.             Landlord’s
Work.

2.1.          Landlord’s
Work Plans.  All Tenant Improvements
shall be performed by Landlord (“Landlord’s Work”) at Tenant’s sole cost
and expense and without cost to Landlord (except for the Tenant Improvement
Allowance) and in accordance with the Approved Plans (as defined below).  Landlord’s Work shall be completed in a good
and workmanlike manner of a nature and character not less than the quality of
tenant improvements in a Class A laboratory research building in the Bothell
area.  The design drawings, plans and
specifications listed on Schedule 2.1 to this Work Letter (the “Landlord’s
Work Plans”) are the initial list of plans that Landlord shall develop and
submit to Tenant for approval.  Landlord
shall prepare and submit to Tenant for approval an initial draft of Landlord’s
Work Plans that are sufficiently complete to

 G-1
 

apply for a building permit for Landlord’s Work (the “Draft
Plans”) no later than February 12, 2007. 
The Draft Plans shall contain sufficient information and detail to
accurately describe Landlord’s proposed design to Tenant and such other
information as Tenant may reasonably request. 
Tenant shall be solely responsible for ensuring that the Landlord’s Work
Plans and the Draft Plans satisfy Tenant’s requirements for the Tenant
Improvements.

2.2.          Tenant
Approval of Plans.  Tenant
shall notify Landlord in writing within five (5) business days after receipt of
the first draft of the Draft Plans whether Tenant approves or objects to the
Draft Plans and of the manner, if any, in which the Draft Plans are
unacceptable.  Tenant shall not object to
any Draft Plans that satisfy the requirements set forth in Section 2.1.  If Tenant properly objects to the Draft
Plans, then Landlord shall revise the Draft Plans and cause Tenant’s objections
to be remedied in the revised Draft Plans (the “Approved
Plans”).  Landlord shall promptly
deliver to Tenant a copy of the Approved Plans with a statement in writing
identifying them as the Approved Plans. 
If Tenant believes that Tenant’s objections to the Draft Plans have not
been appropriately remedied in the Approved Plans, then Tenant shall
notify Landlord in writing within five (5) business days after receipt of the
Approved Plans of the manner in which the Approved Plans are unacceptable.  Landlord shall revise the Approved Plans and
cause Tenant’s proper objections to be remedied.

2.3.          Completion
of Landlord’s Work.  Landlord shall
perform and complete Landlord’s Work (a) in strict conformance with the
Approved Plans, except for Minor Variations (as defined below), (b) otherwise
in compliance with the Lease and (c) in accordance with Applicable Laws,
Landlord’s insurance carriers and the board of fire underwriters having
jurisdiction over the Project and the Premises. 
Landlord shall exercise commercially reasonable efforts to complete
construction of Landlord’s Work within the Approved Budget (defined below),
including, without limitation, competitive bidding by subcontractors and
vendors (when Landlord deems it appropriate), prudent job oversight,
enforcement of the obligations of Landlord’s contractor, and regular reviews of
performance against the Schedule and Approved Budget.  Within thirty (30) days after
completion of Landlord’s Work, Landlord
shall provide Tenant with any available “as-built” or construction (if no
as-built available) drawing print sets and electronic CADD files on disc (or
files in such other current format in common use) showing the Premises.

2.4.          Conditions
to Performance of Landlord’s Work. 
Prior to the commencement of Landlord’s Work, Landlord shall submit to
Tenant for Tenant’s approval (which approval Tenant shall not unreasonably
withhold) a list (the “Contractor List”) of project managers,
contractors and subcontractors that will perform Landlord’s Work.  Tenant shall give Landlord notice in writing
of its approval or disapproval of the Contractor List within five (5) business
days after Tenant’s receipt of the same. 
If Tenant properly disapproves of one or more parties on the Contractor List
within such five (5) business day period, Landlord shall revise the Contractor
List and resubmit the same to Tenant for Tenant’s approval in accordance with
the preceding two sentences.

2.5.          Requests
for Consent.  Unless a different time
period is expressly provided, Tenant and Landlord shall each respond to all
requests for consents, approvals or directions

 G-2
 

pursuant to this Work Letter within five (5) business days following
receipt of such request.  Failure to
respond within such five (5) business day period shall be deemed approval.

2.6.          Shell
and Core Work.  Landlord’s
Work/Tenant Improvements shall not include renovations to be made to the
Building by Landlord before performance of the Landlord’s Work and at Landlord’s
sole cost and expense (“Shell and Core Work”).  The Shell and Core Work is described in Schedule
2.6 to this Work Letter.

3.             Each
Party’s Obligations.  Each of
Landlord and Tenant shall perform promptly such of its obligations contained in
this Work Letter as are to be performed by it. 
Tenant shall also observe and perform all of its obligations under this
Lease from the Term Commencement Date. 
The parties acknowledge that the Approved Budget, the Approved Plans and
the Contractor’s List must be completed and approved not later than April 23,
2007, in order for Landlord’s Work to be Substantially Complete by September 1,
2007.  Landlord shall generally hold a
weekly construction (or pre-construction, as applicable) meeting beginning
promptly after the Execution Date and attended by key personnel (e.g., Landlord
representative, Landlord’s architect, contractor, project manager, consultants,
etc., as may be appropriate from time to time) to discuss and coordinate
matters related to the Tenant Improvements, including, without limitation:  the status of the design work and permit
applications, the status of the contracting and purchasing, the schedule for
the performance of the Tenant Improvements, decisions regarding selection of
contractors and vendors, the status of construction, change order requests,
construction issues, selection of materials, and Costs incurred and estimated
to be incurred compared to the Approved Budget. 
Tenant is invited and encouraged to attend all of the weekly
construction meetings.  Landlord shall
promptly provide to Tenant on Tenant’s request any information reasonably
requested by Tenant concerning the status of construction or any other aspect
of the Tenant Improvements including the Costs (defined below).  Tenant shall diligently and promptly review
all information provided to it concerning the Tenant Improvements, attend
meetings as requested by Landlord, and timely respond to Landlord requests,
including making itself available to Landlord to discuss construction matters
as they arise.

4.             Completion
of Landlord’s Construction Obligations.

4.1.          The
date on which Landlord’s Work is Substantially Complete shall be referred to as
the “TI Substantial Completion Date.” 
Tenant shall accept the Premises in the condition in which they exist as
of the TI Substantial Completion Date.  Tenant’s taking possession and acceptance of the
Premises shall not constitute a waiver of any warranty of any construction
defect in regard to workmanship (including installation of equipment) or
materials (exclusive of equipment provided by manufacturers) of the Premises
completed by or on behalf of Landlord, any noncompliance of Landlord’s Work
with Applicable Laws, or the failure of Landlord’s Work to be completed
substantially in accordance with the Approved Plans (subject to Minor
Variations and such other Changes as are permitted hereunder).  Tenant shall have until twelve (12) months
after the TI Substantial Completion Date within which to notify Landlord of any
such construction defect or non-compliance with Approved Plans discovered by
Tenant, and Landlord shall timely correct the same.  Landlord shall use reasonable efforts to
cause the applicable contractor to remedy any such construction defect or
non-compliance within thirty (30) days thereafter.  Notwithstanding the foregoing, Landlord shall
not be in default under the

 G-3
 

Lease if (a) by the nature of such defect or noncompliance,
more than thirty (30) days are required to correct and remedy such construction
defect or noncompliance and Landlord commences its remedial action within such
thirty (30) day period and thereafter diligently and continuously prosecutes
such curative and remedial action to completion or (b) the applicable
contractor, despite Landlord’s efforts, fails to remedy such defect or
non-compliance within such thirty (30) day period, but Landlord otherwise, at
Landlord’s expense with respect to any such construction defect or
noncompliance with Approved Plans, thereafter commences remedial action
diligently and continuously prosecutes such curative and remedial action to
completion.  Tenant shall be entitled to
receive the benefit of all construction warranties and manufacturer’s equipment
warranties relating to equipment installed in the Premises.  If requested by Tenant, Landlord shall
attempt to obtain extended warranties from manufacturers and suppliers of such
equipment, but the cost of any such extended warranties shall be borne solely by
Tenant.  Landlord shall diligently pursue
any claims arising out of latent defects in the Landlord’s Work.  Landlord shall promptly undertake and
complete, or cause to be completed, all punch list items.  Prior to commencing Landlord’s Work, Landlord
shall provide, or shall cause Landlord’s contractors and subcontractors to
provide, to Tenant, in addition to any insurance required of Landlord pursuant
to the Lease, statutory Workers’ Compensation insurance as required by
Applicable Laws.

5.             Tenant
Improvement Allowance.

5.1.          Application of Tenant
Improvement Allowance.  All costs,
expenses and fees incurred by or on behalf of Landlord to any third party
arising from, out of, or in connection with the Tenant Improvements
(collectively, the “Costs”), including the costs of (a)
construction, (b) space planning, architect, engineering and other related
services and (c) building permits and other planning and inspection fees, shall, subject to the terms of this paragraph
regarding Excess TI Costs, be deducted from the Tenant Improvement
Allowance.  The Costs shall also include a
project management fee payable to Landlord in an amount equal to three percent
(3%) of the Tenant Improvement Allowance, which fee shall be paid monthly in an
amount equal to three percent (3%) of the Tenant Improvement Allowance
disbursed the previous month.  If at any time the Costs exceed the Tenant
Improvement Allowance or if the aggregate amount of the Approved Budget exceeds
the Tenant Improvement Allowance, then Tenant shall deposit in an escrow
account bearing interest in favor of Tenant, pursuant to escrow instructions reasonably  acceptable to Landlord, and as a condition precedent to
Landlord’s obligation to complete the Tenant Improvements, one hundred percent
(100%) of the then-current Costs or Approved Budget, as the case may be, in
excess of the Tenant Improvement Allowance (the “Excess TI Costs”).  If Tenant timely fails to deposit  any sum due to Landlord under this Work Letter, Landlord
shall have all of the rights and remedies set forth in the Lease for nonpayment
of Rent (including, but not limited to, the right to interest at the Default
Rate and the right to assess a late charge), and for purposes of any litigation
instituted with regard to such amounts the same will be considered Rent.  Funds so deposited in escrow by Tenant shall
be disbursed to pay for Costs in excess of the Tenant Improvement Allowance
following disbursement by Landlord of the full amount of the Tenant Improvement
Allowance, and any amount on deposit in escrow that is not required to pay any such
excess Costs following the final completion of the Landlord’s Work

 G-4
 

(including
all punch list items) shall be promptly returned to Tenant.  Landlord shall disburse the Tenant
Improvement Allowance to pay the Costs as such Costs are due.

5.2.          Approval
of Budget for Landlord’s Work. 
Notwithstanding anything to the contrary set forth elsewhere in this
Work Letter or the Lease, Landlord shall not have any obligation to commence
construction of the Tenant Improvements or to advance any portion of the Tenant
Improvement Allowance until Tenant shall have approved in writing the budget
for the Landlord’s Work (the “Approved Budget”) and the Approved
Plans.  Landlord shall not be obligated
to pay for costs or expenses relating to Landlord’s Work that exceed the amount
of the Tenant Improvement Allowance, and all such excess costs and expenses
shall be paid by Tenant pursuant to Section 5.1.  Notwithstanding the foregoing, Landlord shall
pay all excess costs and expenses arising due to a breach by Landlord of construction
contracts or supplier agreements with respect to Landlord’s Work.

5.3.          Cost
Statements.  Each month Landlord
shall prepare, approve and submit to Tenant (a) a statement setting forth
the total amount of Costs expended and the total amount applied against the
Tenant Improvement Allowance and the total amount funded from the escrow (if
any) described in Section 5.1, (b) a detailed summary of the Landlord’s
Work performed, including percentage of Landlord’s Work completed, using AIA
standard form Application for Payment (G 702) executed by the general
contractor and by the architect, and (c) the estimated Costs to complete
Landlord’s Work and the source of funds to pay such Costs.  Landlord shall provide Tenant with copies of
the draw requests from Landlord’s construction loan, if any.

5.4.          Application
of the Tenant Improvement Allowance. 
Landlord may apply the Tenant Improvement Allowance for the payment of
Costs of the Tenant Improvements within the Premises (including, without
limitation, construction of standard laboratory improvements; finishes;
building fixtures; building permits; and architectural, engineering, design and
consulting fees), in each case as reflected in the Approved Budget and the
Approved Plans and for any Minor Variations. 
In no event shall the Tenant Improvement Allowance be applied to any
costs of the Tenant Improvements relating to the purchase of any furniture,
personal property or other non-building system equipment.

6.             Changes.  Any changes to Landlord’s Work (each, a “Change”)
requested by Landlord or Tenant after Tenant approves the Approved Plans in
writing shall be requested and instituted in accordance with the provisions of
this Section 6 and shall be subject to the reasonable written approval
of the other party, except for any Minor Variations.

6.1.          Changes Requested by Landlord.

(a)           Landlord
may request Changes after Tenant approves the Approved Plans by notifying
Tenant thereof in writing in substantially the same form as the AIA standard
change order form (a “Landlord Change Order Request”), which Landlord
Change Order Request shall detail the nature and extent of any requested
Changes.  If the nature of a Change
requires revisions to the Approved Plans, then Landlord shall be solely
responsible for the cost and expense of such revisions (except for Minor
Variations).

 G-5
 

(b)           Tenant
shall reject any Landlord Change Order Requests by written notice to
Landlord within the later of (i) five (5) business days after receipt of the
Landlord Change Order Request and (ii) five (5)
business days after receipt of the information to be provided by Landlord under
Section 6.3, which notice shall detail the manner in which the
Landlord Change Order Request is unacceptable.  If Tenant properly rejects any Landlord Change Order Request, then Landlord shall
revise the Landlord Change Order Request and
cause Tenant’s objections to be remedied. 
If Tenant does not timely reject in
writing a Landlord Change Order Request, then such Landlord Change Order
Request shall be deemed approved by Tenant.

(c)           In
recognition and consideration of the fact that the Premises and Tenant
Improvements have not been constructed as of the date hereof, it is hereby
agreed by the parties hereto that the Landlord may make Minor Variations (as
herein defined) in the size, design, engineering, configuration and siting of
Landlord’s Work, and such Minor Variations shall not render the Lease void or
voidable, nor shall any such Minor Variations entitle the Tenant to any
reduction or abatement in Rent, anything herein contained and any rule
of law or equity to the contrary notwithstanding (except as provided in this Lease with respect to re-measurement of
Rentable Area).  “Minor Variations”
shall mean any non-material modifications to Landlord’s Work which do not
require any material change to the Schedule or Approved Budget, to the extent
such modifications are reasonably required to (i) comply with Applicable Laws
or to obtain or comply with any required permit, (ii) comply with any request
by Tenant for modifications to Landlord’s Work, (iii) comport with good design,
engineering and construction practices (provided such variations are not
material) or (iv) make reasonable adjustments for field deviations encountered
in the construction of Landlord’s Work.

6.2.          Changes
Requested by Tenant.  Tenant may
request Changes after Tenant approves the Approved Plans by notifying Landlord
thereof in writing in substantially the same form as the AIA standard change
order form (a “Tenant Change Order Request”), which Tenant Change Order
Request shall detail the nature and extent of any requested Changes.  If the nature of a Change requires revisions
to the Approved Plans, then Tenant shall be solely responsible for the cost and
expense of such revisions.  To the extent
that the Tenant Improvement Allowance is insufficient to pay for the cost of
such Change, Tenant shall reimburse Landlord for all additional costs and
expenses payable by Landlord to complete Landlord’s Work due to a
Tenant-requested Change in accordance with the payment provisions of this Work
Letter.  Tenant Change Order Requests
shall be signed by Tenant’s Authorized Representative.

6.3.          Preparation
of Estimates.  Landlord shall, before
proceeding with any Change, use commercially reasonable efforts to prepare as soon as is reasonably practicable (but in no
event more than five (5) business days after delivering a Landlord Change Order
Request to Tenant or receipt of a Tenant Change Order Request) an estimate of
the increased costs or savings that would result from such Change, as well as
an estimate of such Change’s effects on the Schedule.  Subject to Section 6.1(c), Tenant
shall have five (5) business days after receipt of such information from
Landlord to (a) in the case of a Landlord Change Order Request, approve or
reject such Landlord Change Order Request in writing or (b) in the case of
a Tenant Change Order Request, notify Landlord in writing of Tenant’s decision
either to proceed with or abandon the Tenant-requested Change.

 G-6
 

7.             Miscellaneous.

7.1.          Headings,
Etc.  Where applicable in this Work
Letter, the singular includes the plural and the masculine or neuter includes
the masculine, feminine and neuter.  The
section headings of this Work Letter are not a part of this Work Letter and
shall have no effect upon the construction or interpretation of any part
hereof.

7.2.          Time
of the Essence.  Time is of the
essence with respect to the performance of every provision of this Work Letter
in which time of performance is a factor.

7.3.          Covenants.  Each provision of this Work Letter
performable by Landlord shall be deemed both a covenant and a condition.

7.4.          Consent.  Whenever consent or approval of either party
is required, that party shall not unreasonably withhold, condition
or delay such consent or approval, except as may be expressly set forth to the
contrary.

7.5.          Entire
Agreement.  The terms of this Work
Letter are intended by the parties as a final expression of their agreement
with respect to the terms as are included herein, and may not be contradicted
by evidence of any prior or contemporaneous agreement, other than the Lease.

7.6.          Invalid
Provisions.  Any provision of this
Work Letter that shall prove to be invalid, void or illegal shall in no way
affect, impair or invalidate any other provision hereof, and all other
provisions of this Work Letter shall remain in full force and effect and shall
be interpreted as if the invalid, void or illegal provision did not exist.

7.7.          Construction.  The language in all parts of this Work Letter
shall be in all cases construed as a whole according to its fair meaning and
not strictly for or against either Landlord or Tenant.

7.8.          Assigns.  Each of the covenants, conditions and
agreements herein contained shall inure to the benefit of and shall apply to
and be binding upon the parties hereto and their respective heirs; legatees;
devisees; executors; administrators; and permitted successors, assigns,
sublessees.  Nothing in this Section
7.8 shall in any way alter the provisions of the Lease restricting
assignment or subletting.

7.9.          Authority.  That individual or those individuals signing
this Work Letter guarantee, warrant and represent that said individual or
individuals have the power, authority and legal capacity to sign this Work
Letter on behalf of and to bind all entities, corporations, partnerships,
limited liability companies, joint venturers or other organizations and
entities on whose behalf said individual or individuals have signed.

7.10.        Counterparts. 
This Work Letter may be executed in one or more counterparts, each of
which, when taken together, shall constitute one and the same document.

 [REMAINDER OF THIS PAGE
INTENTIONALLY LEFT BLANK]

 G-7
 

 

IN WITNESS WHEREOF, Landlord and
Tenant have executed this Work Letter to be effective on the date first above
written.

LANDLORD:

 BMR-217TH PLACE LLC,

a Delaware limited liability company

By:          /s/ Gary A Kreitzer

Name:     Gary A Kreitzer

Title:       Executive V.P.

 

TENANT:

SONUS PHARMACEUTICALS, INC.,

a Delaware corporation

By:          /s/ Michael A. Martino

Name:     Michael A. Martino

Title:       President & CEO

 G-8
 

EXHIBIT A

SCHEDULE

[To be attached]

 G-9
 

SCHEDULE 2.1

LANDLORD’S WORK PLANS

Architectural Drawings

1.               Floor and reflected
ceiling plans

2.               Elevations
(exterior and interior)

3.               Sections (building
and wall)

4.               Details (exterior
and interior)

5.               Schedules (doors,
windows, finishes, etc.)

Engineering Drawings

1.               Mechanical

2.               Plumbing

3.               Electrical

4.               Fire
protection

 G-10
 

SCHEDULE 2.6

SHELL AND CORE WORK

Sitework

·                  The existing interior improvements shall be
completely demolished. This shall include all walls, flooring, and ceilings.
The interior shall be taken back to a broom finish shell condition.

 

·                  The traffic gates and tire device shall be
demolished.

 

·                  Cut-in tilt panels for 4 new windows shall be
added.

 

·                  Landscaping cleanup, tree removal for 15
trees and other visual appealing work shall be performed.

 

·                  The existing parking lot shall be restriped
and seal coated and minor asphalt patching shall occur. Extruded curbs shall be
replaced.

 

·                  The existing sidewalks shall be pressure
washed.

 

·                  A shallow footing drain shall be added along
the south side of building to improve the drainage.

 

·                  Cut & patch for new power upgrade primary service run from
transformer to loading dock shall be installed.

 

·                  The main water service shall be upsized to 3”. 

 

·                  A double detector check valve shall be added to the existing fire water
line if required.

 

·                  A loop fire water line around building shall
be added/improved if required.

Concrete

·                  An
allowance for footings/grade beams for 4 concrete brace frames shall be
included.

Masonry 

·                  Minor
tuck-point and repair of masonry cracks shall occur.

Metals

·                  4
steel brace frames for lateral structural upgrades shall occur.

Carpentry

·                  We will construct a new electrical room
exterior to the building at the loading dock. 
Metal stud framed, exterior plywood covered in EIFS/stucco and a new
door and frame shall be added.

Thermal and Moisture Protection

·                  We
shall remove and replace the built-up roofing. 
This includes increasing roof insulation to R-21.

 

·                  We
shall replace roof cap flashings. 

 

·                  Minor
caulking repair shall occur.

Doors & Windows

·                  4
new cut-in windows shall be added.

 G-11
 

·                  A
framed covered walkway at the main building entry shall be added.

Finishes

·                  We
shall clean and repaint exterior concrete walls and the roof screen.  We shall clean and reseal brick.  This includes epoxy repair of cracking at
loading dock spandrel panels.

·                  Main
entry lobby upgrades, including new stair, flooring, finishes, and lighting
shall be performed.

Elevators

·                  We
shall add a new passenger elevator at main lobby entry area, which includes
pit, shaft walls, and electrical work. 

Mechanical

·                  We
shall demolish two old existing rooftop HVAC units

Electrical

·                  We
shall upgrade the existing electrical service to 3000A, by adding a new 3000A
MDP at the new electrical room (off loading dock), then re-feed the existing
2000A switchboard and 800A switchboard from the new service.

 

 G-12

 

EXHIBIT H

FORM OF LETTER
OF CREDIT

[On
letterhead or L/C letterhead of Issuer.]

LETTER OF CREDIT

Date:           ,
200    

	
  

  	
  (the “Beneficiary”)

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  
	
  L/C. No.:

  	
   

  	
   

  
	
  Loan No. :

  	
   

  	
   

  
				

 

 

Ladies and Gentlemen:

We
establish in favor of Beneficiary our irrevocable and unconditional Letter of
Credit numbered as identified above (the “L/C”) for an aggregate amount
of $       , expiring at
    :00 p.m. on
         or, if such day is not a
Banking Day, then the next succeeding Banking Day (such date, as extended from
time to time, the “Expiry Date”). “Banking Day” means a weekday
except a weekday when commercial banks in
               
are authorized or required to close.

We authorize Beneficiary to draw on us (the “Issuer”)
for the account of          (the “Account
Party”), under the terms and conditions of this L/C.

Funds under this L/C are available by presenting the
following documentation (the “Drawing Documentation”): (a) the original
L/C and (b) a sight draft substantially in the form of Exhibit A, with
blanks filled in and bracketed items provided as appropriate. No other evidence
of authority, certificate, or documentation is required.

Drawing Documentation must be presented at Issuer’s office
at
                   
on or before the Expiry Date by personal presentation, courier or messenger
service, or fax. Presentation by fax shall be effective upon electronic
confirmation of transmission as evidenced by a printed report from the sender’s
fax machine. After any fax presentation, but not as a condition to its
effectiveness, Beneficiary shall with reasonable promptness deliver the
original Drawing Documentation by any other means.  Issuer will on request issue a receipt for
Drawing Documentation.

We agree, irrevocably, and irrespective of any claim by any
other person, to honor drafts drawn under and in conformity with this L/C,
within the maximum amount of this L/C, presented

to us on or before the Expiry Date, provided
we also receive (on or before the Expiry Date) any other Drawing Documentation
this L/C requires.

We shall pay this L/C only from our own funds by check or
wire transfer, in compliance with the Drawing Documentation.

If Beneficiary presents proper Drawing Documentation to us
on or before the Expiry Date, then we shall pay under this L/C at or before the
following time (the “Payment Deadline”): (a) if presentment is made at
or before noon of any Banking Day, then the close of such Banking Day; and (b)
otherwise, the close of the next Banking Day. 
We waive any right to delay payment beyond the Payment Deadline. If we
determine that Drawing Documentation is not proper, then we shall so advise
Beneficiary in writing, specifying all grounds for our determination, within
one Banking Day after the Payment Deadline.

Partial drawings are permitted. This L/C shall, except to
the extent reduced thereby, survive any partial drawings.

We shall have no duty or right to inquire into the validity
of or basis for any draw under this L/C or any Drawing Documentation.  We waive any defense based on fraud or any
claim of fraud.

The Expiry Date shall automatically be extended by one year
(but never beyond          the “Outside
Date”) unless, on or before the date 30 days before any Expiry Date, we
have given Beneficiary notice that the Expiry Date shall not be so extended (a “Nonrenewal
Notice”). We shall promptly upon request confirm any extension of the
Expiry Date under the preceding sentence by issuing an amendment to this L/C,
but such an amendment is not required for the extension to be effective. We
need not give any notice of the Outside Date.

Beneficiary may from time to time without charge transfer
this L/C, in whole but not in part, to any transferee (the “Transferee”).  Issuer shall look solely to Account Party for
payment of any fee for any transfer of this L/C.  Such payment is not a condition to any such
transfer. Beneficiary or Transferee shall consummate such transfer by
delivering to Issuer the original of this L/C and a Transfer Notice
substantially in the form of Exhibit B, purportedly signed by
Beneficiary, and designating Transferee. 
Issuer shall promptly reissue or amend this L/C in favor of Transferee
as Beneficiary. Upon any transfer, all references to Beneficiary shall
automatically refer to Transferee, who may then exercise all rights of
Beneficiary.  Issuer expressly consents
to any transfers made from time to time in compliance with this paragraph.

Any notice to Beneficiary shall be in writing and delivered
by hand with receipt acknowledged or by overnight delivery service such as
FedEx (with proof of delivery) at the above address, or such other address as
Beneficiary may specify by written notice to Issuer. A copy of any such notice
shall also be delivered, as a condition to the effectiveness of such notice, to:
                 
(or such replacement as Beneficiary designates from time to time by written
notice).

No amendment that adversely affects Beneficiary shall be
effective without Beneficiary’s written consent.

This L/C is subject to and incorporates by reference: (a)
the Uniform Customs and Practice for Documentary Credits, International Chamber
of Commerce Publication No. 500 (the “UCP”); and (b) to the extent not
inconsistent with the UCP, Article 5 of the Uniform Commercial Code of the
State of New York.

Very
truly yours,

[Issuer
Signature]

EXHIBIT A

FORM OF
SIGHT DRAFT

[BENEFICIARY LETTERHEAD]

TO:

[Name
and Address of Issuer]

SIGHT DRAFT

AT SIGHT, pay to the Order of
                   ,
the sum of
                 
United States Dollars
($                 ).
Drawn under [Issuer] Letter of Credit No.
                
dated
                .

[Issuer is hereby directed to pay the proceeds of
this Sight Draft solely to the following account:
                                        .]

[Name and signature block, with signature or
purported signature of Beneficiary]

Date:                        

EXHIBIT B

FORM OF
TRANSFER NOTICE

[BENEFICIARY LETTERHEAD]

TO:

[Name and Address of Issuer] (the “Issuer”)

TRANSFER NOTICE

By signing below, the undersigned, Beneficiary (the “Beneficiary”)
under Issuer’s Letter of Credit No.
                  
dated
                  
(the “L/C”), transfers the L/C to the following transferee (the “Transferee”):

[Transferee Name and Address]

The original L/C is enclosed. Beneficiary directs
Issuer to reissue or amend the L/C in favor of Transferee as Beneficiary.
Beneficiary represents and warrants that Beneficiary has not transferred,
assigned, or encumbered the L/C or any interest in the L/C, which transfer,
assignment, or encumbrance remains in effect.

[Name and signature block, with signature or
purported signature of Beneficiary]

Date:
                       ]EXHIBIT
10.40

CLINICAL SUPPLY AGREEMENT

THIS CLINICAL SUPPLY AGREEMENT
(the “Agreement”) is entered into as of the 1st day of June, 2006 (the “Effective Date”) by
and between SCHERING AKTIENGESELLSCHAFT, a German
corporation having a principal place of business at Müllerstraße 178, D-13342
Berlin, Germany (“Schering”) and SONUS PHARMACEUTICALS, INC., a Delaware corporation having a principal place of business at 22026
20th Avenue SE, Bothell, Washington 98021 (“Sonus”).  Schering and Sonus are referred to individually
as a “Party” and collectively as “Parties.”

WHEREAS,
Schering and Sonus have entered into a Collaboration and License Agreement
having an effective date of October 17, 2005 (the “License Agreement”) for the
development and commercialization of the Product in the Territory (each as
defined below);

WHEREAS,
pursuant to the License Agreement, Sonus has granted to Schering exclusive
rights to develop and commercialize the Product in the Territory, which rights
include, among other rights, the right to elect to make the Product and have
the Product made on its behalf;

 WHEREAS, Schering gave written notice of its
election to assume responsibility for manufacture and supply of Product on
March 2, 2006, but has not yet established internal or external manufacturing
capabilities for the Product, and the Parties desire that Sonus supply Schering
with clinical supplies of the  Product pursuant to the MSA (as defined
below) until Schering establishes such manufacturing capabilities; and

WHEREAS,
pursuant to Section 7.02 of the License Agreement, the Parties wish to provide
for each Party’s rights and responsibilities in connection with the clinical
supply of the Product to Schering by Sonus as set forth in the terms and
conditions of this Agreement.

NOW, THEREFORE,
in consideration of the premises and the mutual covenants and agreements
contained herein, the Parties agree as follows:

1.             Definitions.

Capitalized terms used in
this Agreement (other than the headings of the Articles and Sections), whether
used in the singular or plural, shall have the meaning set forth below, or, if
not listed below, the meaning as designated in the text of this Agreement.

“Affiliate” means, with respect to any Person, any other
Person that directly or indirectly controls, is controlled by or is under
common control with such Person.  For the
purposes of this definition, a Person shall be deemed to control another Person
if such Person possesses the power to direct or cause the direction of the
management, business and policies of such Person, whether through ownership of
fifty percent (50%) or more of the voting securities of such Person, by
contract or otherwise.

“API”
or “Active Pharmaceutical Ingredient”
means any component of the Product that is intended to furnish pharmacological
activity or other direct effect in the diagnosis, cure, mitigation, treatment,
or prevention of disease, or to affect the structure or any function of the

 1
 

body of man or animals, but does not include
intermediates used in the synthesis of such ingredients.

“Certificate of Analysis”
means a certificate that accompanies each shipment of Product certifying that
the Product meets the Specifications.

“Certificate of Compliance”
means a certificate that accompanies each shipment of Product certifying that
the Product has been manufactured according to cGMP.

“cGMP” means current Good Manufacturing Practices regulations
promulgated by FDA, as they may be amended from time to time. cGMP also
includes published standards of FDA (or other standards of FDA that are
generally recognized within the United States pharmaceutical industry) that
relate to the testing, manufacturing, processing, packaging, holding or
distribution of drug substances and finished drugs.  cGMP also includes similar standards,
guidelines and regulations promulgated or otherwise required by the European
Commission, and published standards of the European Commission (and other
standards of the European Commission that are generally recognized within the
European pharmaceutical industry), including the Guide to Good Manufacturing
Practices for Medicinal Products as promulgated under European Directive
91/356/EEC, as amended from time to time, that relate to the testing,
manufacturing, processing, packaging, holding or distribution of drug substances
and finished drugs..

“Confidential Information”
means all information and materials regarded by the disclosing Party as
confidential (including, without limitation, information relating to the Sonus
Technology, as defined in the License Agreement) furnished by one Party to the
other pursuant to this Agreement and all information created or developed
during the course of the Parties’ collaboration hereunder, whether in oral,
written, graphic or electronic form. 
Confidential Information shall not include any information which the
receiving party can prove by competent evidence:

(a)           is now or hereafter
becomes, through no fault or failure to act on the part of the receiving Party,
generally known or available,

(b)           is known by the
receiving Party, without obligations of confidentiality, at the time of
receiving such information, as demonstrated by written evidence,

(c)           is hereafter
furnished to the receiving Party by a third party, as a matter of right and
without restriction on disclosure,

(d)           is independently
developed by the receiving Party without the aid, application or use of the
disclosing party’s Confidential Information, as demonstrated by written
evidence, or

(e)           is the subject of
written permission to disclose provided by the disclosing Party.

“Contract Manufacturing Agreement” means an agreement
between Sonus and a Third Party contract manufacturer regarding the manufacture
of all or part of the clinical supply of the

 2
 

Product.  For
the avoidance of doubt, the MSA and the Quality Agreement shall be considered
Contract Manufacturing Agreements.

“EU” means the countries of the European Union as constituted
from time to time.

“FDA” means the United States
Food and Drug Administration or successor agency thereto.

“FD&C Act” means the United States Federal Food, Drug and
Cosmetic Act, as amended.

“Field” means all uses of the
Product for the diagnosis, prevention, treatment, cure or mitigation of all
disease states, conditions, disorders and indications in humans or in animals

“Investigator Sponsored Study” or “ISS”
means any clinical study with respect to the Product in the Field where the
sponsor of the study is a physician or group of physicians acting as
sponsor-investigator(s) and neither of the Parties nor any of their Affiliates
or sublicensees accept the role of sponsor or co-sponsor of such a study.

“MSA” means the Manufacturing and Supply Agreement between
Sonus and Gensia Sicor Pharmaceutical Sales, Inc. (now known as Sicor
Pharmaceuticals, Inc.), effective as of June 26, 2002.

“NDA” means New Drug Application, as described in FDA
regulations, 21 C.F.R. 50, including all amendments and supplements to the
application.

“NDA Support Trial” means any clinical study with respect to
the Product in the Field that will be part of the initial NDA (as defined in
the License Agreement) submission, excluding the Pivotal Trial (as defined in
the License Agreement).

“Product” means
the product known as TOCOSOL® Paclitaxel, as more particularly described in the
License Agreement.

“Quality Agreement” means the Quality Agreement for the
Manufacturing and Supply of Tocosol® Paclitaxel Injectable Emulsion between
Sonus and Sicor Pharmaceuticals, Inc., effective as of February 1, 2005.  A complete copy of the Quality Agreement is attached
hereto as Exhibit A.

“ROW” means all countries, territories and geographical areas
of the world, excluding the United States of America and its territories,
commonwealths and possessions.

“ROW Registrational Trial” means any clinical study with
respect to the Product in the Field that will be part of an application for
approval by any regulatory authority in the ROW.

 3
 

“Schering Sponsored Study” or “CSS”
means any non-registrational clinical study with respect to the Product in the
Field where the sponsor of the study is Schering or its Affiliates.

“Specifications”
means the regulatory, manufacturing, quality control and quality assurance
procedures, processes, practices, standards, instructions and any other
attributes that the Parties agree upon, or that are otherwise required, in
connection with the manufacture of the Product, as may be amended by the
Parties from time to time.  A complete
copy of the Specifications, as agreed by the Parties, is attached hereto as
Exhibit B.

“Term” has the
meaning specified in Section 6.1 of this Agreement.

“Territory”
means the entire world.

“Third Party”
means any entity other than Schering, Sonus or any of their Affiliates.

2.             Supply of Product

2.1          Clinical Supply.  Pursuant to the terms hereof,  Sonus shall, during the term of this Agreement,
manufacture, either by itself of through a Third Party, and supply to
Schering  clinical supply of the Product
necessary to support ISS, CSS, NDA Support Trials, ROW Registrational Trials,
and any other investigational study sponsored or conducted by Schering.

2.2          Quality
of Product. All Product manufactured and supplied to Schering by
Sonus hereunder shall comply with the Quality Agreement.

2.3          Supply
Approval.  Batches of Product
will be manufactured consistent with the MSA and as approved by the Steering
Committee.  Each Party agrees to adhere
to their respective pharmaceutical responsibilities concerning supply of
Product as set forth in the Agreement on Responsibility Defined Regarding
Manufacture and Quality Control attached hereto as Exhibit C.

2.4          Delivery/Risk
of Loss.  Sonus shall deliver
all quantities of the clinical supply of the Product purchased hereunder F.O.B.
the Product manufacturing point.  The
Product shall be packaged, labeled, stored, and shipped in a manner that assures
that the Product meets the Specifications upon delivery.  Each shipment of Product shall be accompanied
by a Certificate of Analysis, a Certificate of Compliance, and copies of the
manufacturing and packaging batch records.

2.5          Testing,
Acceptance and Rejection. 
Upon Schering’s receipt of each batch of clinical supply of the Product,
Schering or its designee shall have thirty (30) days to inspect such batch to
determine its compliance with the Specifications.  If Schering does not notify Sonus of Schering’s
rejection of a batch of said Product within such thirty (30) day period, such
Product shall be deemed accepted subject to Product warranties under Section
7.1.  If Schering rejects any batch of
Product (“Defective Product”), Sonus shall promptly notify Schering in writing
if it either:  (a) agrees with the
rejection, in which event Sonus shall promptly replace such Defective Product
with Product complying with the Specifications to the extent it is able to do
so under the

 4
 

MSA and shall request in writing that Schering either
return or destroy the rejected batch of Product at no additional cost to
Schering; or (b) dispute Schering’s rejection.  If Sonus disputes Schering’s rejection, then
the Parties shall engage a mutually acceptable Third Party laboratory to make a
final and binding determination if the rejection was proper.  The fees and expenses of such laboratory
testing shall be borne entirely by the Party against whom such findings are
made.  If such laboratory determines that
such batch of Product has not been reasonably rejected, then such batch shall
automatically be deemed to have been accepted by Schering, and if it has not
already done so, Schering will pay the amount for the batch of Product
initially rejected by Schering.  If such
laboratory determines that such batch of Product has been reasonably rejected,
or if Sonus agrees with Schering’s rejection, then Sonus shall promptly replace
such Defective Product with Product complying with the Specifications.

2.6          Schering Inspections and Information Rights.  Sonus agrees that Schering will
have access to Sonus’ facilities and any Third Party contract manufacturing
facilities (subject to any restrictions under any agreements between Sonus and
its Third Party contractors) at all reasonable times for purposes of inspecting
such facilities and monitoring activity relating to Sonus’ obligations under
this Agreement.

3.             Price and Payments.

3.1          Price.  The price for each batch of Product shall be
the cost of Product to Sonus for any Product manufactured by a Third Party and
shall include, but not be limited to, the purchase price paid to such Third
Party for Product, any actual costs incurred by Sonus under its Contract
Manufacturing Agreement with such Third Party, and costs incurred by Sonus for
API and excipients.

3.2          Payments.
 Sonus shall invoice Schering quarterly
in arrears for Product released by the manufacturer.  All payments due hereunder to Sonus shall be
paid in U.S. dollars not later than thirty (30) days following the receipt date
of the invoice.  Upon request, Sonus agrees
to promptly provide documentation that reasonably supports any amount invoiced
hereunder.  Schering will pay any and all
taxes (other than taxes based upon Sonus’ income), duties, assessments and
other charges and expenses imposed by any government authority in connection
with the delivery and sale of the Product to Schering.

3.3          Cost
Sharing.  Any cost sharing for
supply of Product provided for under Article V of the License Agreement
shall be reconciled quarterly as provided in the License Agreement.

4.             Regulatory

4.1          Regulatory
Inspections.  If a facility
that manufactures the Product is inspected by representatives of any
supra-national, national, federal, state or local regulatory agency in
connection with manufacture of the Product, Sonus shall notify Schering
promptly (by telephone and in writing) upon learning of such inspection, and
shall supply Schering with copies of any related correspondence or other
documentation, or portions thereof, in the possession of Sonus relating to the
Product.  Schering may send
representatives to such facilities and participate fully

 5
 

in any portion of such inspection, subject to
agreement by the Third Party manufacturer where such agreement by the Third
Party manufacturer is required.  Promptly
upon Sonus’ receipt thereof, Sonus shall provide Schering with a copy of any
regulatory letter or comments from any federal, state or local regulatory
agency in connection with the manufacture of the Product, including any Form
483 (Inspectional Observations) or warning letter.

4.2          Records.  Sonus shall keep complete,
accurate and authentic accounts, notes, data and records of the work performed
under this Agreement (including, without limitation, batch records for the
Product).  All such records relating to
the manufacture of the Product shall be maintained for such period of time as
may be required by applicable laws, rules or regulations and, in any event, for
a period of time not less than seven (7) years. 
Prior to the destruction of any record, Sonus shall give advance written
notice to Schering of Sonus’ intention to destroy any such record; Schering
shall then have the right to request, receive and retain such records with no
further compensation to Sonus.

5.             Confidentiality.  The Parties each agree that
the obligations of confidentiality, non-use and non-disclosure set forth in the
License Agreement are incorporated into this Agreement for purposes of
determining the Parties’ rights and obligations with respect to Confidential
Information disclosed by each Party under this Agreement.

6.             Term
And Termination

6.1          Term.  The term of this Agreement shall commence on
the Effective Date and shall continue until the earlier to occur of (i) Product
Launch (as defined in the License Agreement); or (ii) the effective date of termination
of the MSA.

6.2          Termination
for Cause.  Either Party may terminate this Agreement
(i) if the other Party is in material breach of this Agreement and such
breach is not cured within ninety (90) days following receipt by the breaching
Party of written notice from the other Party specifying the breach in
reasonable detail and demanding its cure; provided, however, that, if said
breach cannot be cured during such ninety (90) day period using diligent
efforts, the breaching Party shall be allowed an additional ninety (90) day
period to cure such breach provided  the breaching Party has commenced a cure promptly
after receipt of the aforementioned written notice from the other party and is
diligently pursuing completion of such cure; or (ii) if the other Party
experiences a Bankruptcy Event (as defined in the License Agreement).

6.3          Automatic
Termination.  This Agreement
shall automatically terminate effective on the effective date of any
termination of the License Agreement.

6.4          Effect
of Early Termination By Schering. 
In the event of a Bankruptcy Event or a material breach of this
Agreement by Sonus under Section 6.2 (which breach is not cured as provided
therein), Schering may elect to either (a) terminate this Agreement in its
entirety, or (b) continue to exercise its rights under this Agreement, in
which case Sonus shall:  (i) at
Schering’s request, assign and transfer to Schering Sonus’ rights and
obligations under any Contract Manufacturing Agreement(s) and take whatever
actions are reasonably required under such agreement(s) to effectuate such
assignment and transfer; (ii) provide Schering with access to

 6
 

Sonus’ facilities and personnel as reasonably required
by Schering to transition all manufacturing activity for the Product to
Schering, its Third Party contract manufacturers or any other designee; and
(iii) use diligent efforts to cooperate with Schering, its Third Party
contract manufacturers and any other designee to effect a prompt and orderly
transition to Schering of any activities being conducted by or on behalf of
Sonus.  Schering shall be entitled to set
off any reasonable expenses Schering incurs as a result of the early transition
of manufacturing responsibilities hereunder first, against any milestone
payments owed to Sonus under the License Agreement and, second, against any
royalties owed to Sonus under the License Agreement.

6.5          Surviving Obligations.  Termination or expiration of this Agreement
shall not affect any rights or obligations of either Party that may have
accrued up to the date of such termination or expiration.  In addition to any other remedies provided in
this Agreement, each Party may institute any other legal action or pursue any
other remedy against the other Party permitted by applicable law.  The rights and obligations set forth in this
Agreement shall extend beyond the expiration or termination of this Agreement
to the extent that the survival of such rights or obligations is necessary to
permit their complete fulfillment or discharge. 
Without limiting in any way the generality of the foregoing, the
following provisions of this Agreement, strictly and only in accordance with
their express terms, shall survive termination or expiration of this
Agreement:  Sections 1, 4.2, 5, 6.4, 6.5,
7.4, 7.5, 8, and 9.

7.             Representations, Warranties and Covenants.

7.1          Product
Warranty.  Sonus represents
and warrants that all Product supplied by it pursuant to this Agreement:  (a) shall be manufactured and packaged
in compliance with cGMP and other applicable laws, rules and regulations;
(b) shall conform to the Specifications in effect at the time of delivery;
(c) shall not be adulterated or misbranded within the meaning of the
FD&C Act, and (d) at the time of delivery, shall be free and clear of
any lien or encumbrance.

7.2          Qualified
Personnel.  Sonus shall engage
and employ only professionally qualified personnel to perform the services
contemplated hereunder.  Sonus represents
and warrants that it shall not use the services of any person in connection
with activities under this Agreement who has either been (a) debarred or
suspended under the FD&C Act, or (b) charged with a violation of any laws
or regulations relating to the regulation of any drug product under the
FD&C Act or any similar law or regulation in force in any country of the
Territory.

7.3          Compliance
with Laws.  Sonus represents
and warrants that it shall comply, and shall contractually require that it’s
Affiliates and Third Party contract manufacturers comply, with all applicable
laws, guidelines, regulations, rules and other requirements of any government
or any regulatory authority in performing its obligations hereunder.

7.4          Disclaimer of Warranties.  EXCEPT
FOR THE WARRANTIES SET FORTH IN SECTIONS 7.1, 7.2, AND 7.3 ABOVE, NEITHER PARTY
GRANTS, AND EACH PARTY HEREBY EXPRESSLY DISCLAIMS, ALL WARRANTIES OF ANY KIND,
EXPRESS, STATUTORY OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF
DESIGN, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT OF THIRD PARTY RIGHTS.

 7
 

7.5          Limitation
of Liability.  Except for
liability for breach of Section 5, neither Party shall be entitled to recover
from the other Party any special, incidental, consequential or punitive damages
in connection with this Agreement or a Parties’ performance of its obligations
hereunder; provided, however, that this Section 7.5 shall not be construed
to limit either Party’s indemnification rights or obligations under Section 8.

8.             Indemnification.

8.1          Indemnification
by Sonus.  Sonus shall
indemnify, defend and hold Schering, its Affiliates and their officers,
directors, employees, and agents (the “Schering Indemnitees”) harmless from and
against any and all Third Party claims, suits, proceedings, damages, expenses
(including court costs and reasonable attorneys’ fees and expenses) and recoveries
(collectively, “Claims”) to the extent that such Claims arise out of, are based
on, or result from:  (a) allegations
by Third Parties that the use of the Product manufactured by or on behalf of
Sonus caused personal injury or death; (b) Sonus’ breach of its
obligations, representations or warranties under this Agreement; or
(c) the willful misconduct or negligent acts of Sonus or its directors,
officers, agents, and employees.  The
foregoing indemnity obligation shall not apply to the extent that any Claim
arises from, is based on, or results from: 
(i) the willful misconduct or negligent acts of any of the Schering
Indemnitees; or (ii) a breach by Schering of its obligations,
representations or warranties under the Agreement.

8.2          Indemnification by Schering.  Schering
shall indemnify, defend and hold Sonus and Sonus’ officers, directors,
employees, and agents (the “Sonus Indemnitees”) harmless from and against any
and all Claims to the extent that such Claims arise out of, are based on, or
result from: (a) Schering’s breach of its obligations, representations or
warranties under the Agreement; or (b) the willful misconduct or negligent
acts of any of the Schering Indemnitees. 
The foregoing indemnity obligation shall not apply to the extent that
any Claim arises from, is based on, or results from: (i) allegations by Third
Parties that the use of the Product manufactured by or on behalf of Sonus
caused personal injury or death; (ii) the willful misconduct or negligent
acts or omissions of any of the Sonus Indemnitees; or (iii) a breach by
Sonus of its obligations, representations or warranties under the Agreement.

8.3          Indemnification
Procedures.  A person or entity that intends to claim
indemnification under this Section 8 (the “Indemnitee”) shall promptly notify
the other Party (the “Indemnitor”) of any Claim in respect of which the
Indemnitee intends to claim such indemnification, and the Indemnitor shall
assume the defense thereof, with counsel reasonably satisfactory to the
Indemnitee, whether or not such Claim is rightfully brought; provided, however,
that an Indemnitee shall have the right to retain its own counsel, at its own
expense.  The indemnity agreement in this
Section 8 shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld or delayed unreasonably. 
The failure to deliver notice to the Indemnitor within a reasonable time
after the commencement of any such Claim, only to the extent prejudicial to its
ability to defend such action, shall relieve such Indemnitor of liability to
the Indemnitee under this Section 8, but the omission so to deliver notice to
the Indemnitor will not relieve it of any liability that it may have to any
Indemnitee otherwise than under this Section 8. 
The Indemnitee under this Section 8, its employees and agents, shall
reasonably cooperate with the Indemnitor

 8
 

and its legal representatives in the
investigations of any Claim covered by this indemnification.  Any actions taken or payments made by an
Indemnitor hereunder shall be without prejudice to the Indemnitor’s right to
contest the Indemnitee’s right to indemnification and subject to refund if the
Indemnitor is ultimately held not to be obligated to indemnify the Indemnitee.

9.             Miscellaneous.

9.1          Assignment.  Schering may assign any of its
rights or obligations under this Agreement in any country to any of its
Affiliates, provided that such assignment does not relieve Schering of its
obligations hereunder or otherwise result in a novation.  Except as expressly provided hereunder,
neither this Agreement nor any rights or obligations hereunder may be assigned
or otherwise transferred by either Party without the prior written consent of
the other Party, which consent shall not be unreasonably withheld.  Notwithstanding the foregoing, either Party
can sell, transfer or assign its rights under the Agreement to any Third Party
as part of a sale of all or substantially all of the assets of such Party or in
connection with a merger or consolidation; provided that such Third Party
expressly agrees in writing to assume and perform all of the duties and
obligations of such Party under this Agreement. The rights and obligations of
the Parties under this Agreement shall be binding upon and inure to the benefit
of the successors and permitted assigns of the Parties.  Any assignment not in accordance with this
Agreement shall be null and void, and of no legal effect.

9.2          Force Majeure.  Neither
Party shall be held liable or responsible to the other Party nor be deemed to
have defaulted under or breached this Agreement for failure or delay in
fulfilling or performing any term of this Agreement (other than non-payment)
when such failure or delay is caused by or results from causes beyond the
reasonable control of the affected Party, including, but not limited to, fire,
floods, embargoes, war, acts of war (whether war be declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, failures of Third Parties to supply materials or Products, acts
of God or acts, omissions or delays in acting by the other Party.

9.3          Governing Law.  This
Agreement shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York, except that no conflict of laws provision
shall be applied to make the laws of any other jurisdiction applicable to this
Agreement.

9.4          Waiver.  Except as specifically provided
for herein, the waiver from time to time by either of the Parties of any of their
rights or their failure to exercise any remedy shall not operate or be
construed as a continuing waiver of same or of any other of such Party’s rights
or remedies provided in this Agreement.

9.5          Severability.  In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

9.6          Notices.  All notices and other
communications provided for hereunder shall be in writing and shall be mailed
by first-class, registered or certified mail, postage paid, or delivered

 9
 

personally, by overnight delivery
service addressed as follows:

	
   

  	
  If to Sonus:

  	
  Sonus Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  22026 20th Avenue, S.E.

  
	
   

  	
   

  	
  Bothell, Washington 98021

  
	
   

  	
   

  	
  Attention: President

  
	
   

  	
   

  	
   

  
	
   

  	
  Copy to:

  	
  K. C. Schaaf, Esq.

  
	
   

  	
   

  	
  Stradling Yocca Carlson & Rauth

  
	
   

  	
   

  	
  660 Newport Center Drive, Suite 1600

  
	
   

  	
   

  	
  Newport Beach, CA 92660

  
	
   

  	
   

  	
  Telephone: (949) 725-4000

  
	
   

  	
   

  	
  Facsimile: (949) 725-4100

  
	
   

  	
   

  	
   

  
	
   

  	
  If to Schering:

  	
  Schering Aktiengesellschaft

  
	
   

  	
   

  	
  Müllerstraße 178

  
	
   

  	
   

  	
  13342 Berlin

  
	
   

  	
   

  	
  Germany

  
	
   

  	
   

  	
  Attn: Head of Legal department

  
	
   

  	
   

  	
   

  
	
   

  	
  Copy to:

  	
  Berlex Pharmaceuticals, an
  Operating Unit of Berlex, Inc.

  
	
   

  	
   

  	
  340 Changebridge Road

  
	
   

  	
   

  	
  Montville, New Jersey 07045

  
	
   

  	
   

  	
  Attn: Head of Oncology Global Business Unit

  
	
   

  	
   

  	
   

  
	
   

  	
  Copy to:

  	
  Berlex Pharmaceuticals, an
  Operating Unit of Berlex, Inc.

  
	
   

  	
   

  	
  340 Changebridge Road

  
	
   

  	
   

  	
  Montville, New Jersey 07045

  
	
   

  	
   

  	
  Attn: General Counsel

  

 

Either Party may by like notice specify or change an address
to which notices and communications shall thereafter be sent.  Notices sent by mail or overnight delivery
service shall be effective upon receipt, and notices given personally shall be
effective when delivered.

9.7          Independent Contractors.  It is expressly
agreed that Sonus and Schering shall be independent contractors and that the
relationship between the two Parties shall not constitute a partnership or
agency of any kind.  Neither Sonus nor
Schering shall have the authority to make any statements, representations or
commitments of any kind, or to take any action, which shall be binding on the
other Party, without the prior written consent of the other Party.

9.8          Affiliates;
Subcontractors.  Each Party
may use Affiliates to perform such Party’s obligations under this Agreement;
provided, however, that such Party contractually binds such Affiliate to the
terms and conditions of this Agreement and the original Party guarantees the

 10
 

performance of its Affiliate.  Each Party shall have the right to engage Third
Party subcontractors or consultants to perform certain of its obligations under
this Agreement; provided, however, that such subcontractors or consultants are
contractually bound to the terms and conditions of this Agreement and the
original Party guarantees the performance of such subcontractor or consultants.

9.9          Rules of Construction.  The Parties
hereto agree that they have been represented by counsel during the negotiation
and execution of this Agreement and, therefore, waive the application of any
law, regulation, holding or rule of construction providing that ambiguities in
an agreement or other document will be construed against the Party drafting
such agreement or document.

9.10        Entire Agreement; Amendment.  This
Agreement (including the Exhibits attached hereto) sets forth all of the
covenants, promises, agreements, warranties, representations, conditions and
understandings between the Parties hereto with respect to the subject matter
hereof.  This Agreement supersedes and
terminates all prior agreements and understandings between the Parties with
respect to the subject matter hereof. 
There are no covenants, promises, agreements, warranties,
representations conditions or understandings, either oral or written, between
the Parties other than as set forth herein. 
No subsequent alteration, amendment, change or addition to this
Agreement shall be binding upon the Parties hereto unless reduced to writing
and signed by the respective authorized officers of the Parties.

9.11        Headings.  The captions contained in this
Agreement are not a part of this Agreement, but are merely guides or labels to
assist in locating and reading the several articles hereof.

9.12        Publicity.  Schering and Sonus shall consult
with each other before issuing any press release with respect to this Agreement
or the transactions contemplated hereby and neither shall issue any such press
release or make any such public statement without the prior consent of the
other, which consent shall not be unreasonably withheld; provided, however, (i)
that a Party may, without the prior consent of the other Party, issue such
press release or make such public statement as may upon the advice of counsel
be required by law or the rules and regulations of the Nasdaq or any stock
exchange, or under applicable securities laws, if it has used reasonable
efforts to consult with the other Party prior thereto, and (ii) such consent
shall be deemed to have been given if the recipient of the press release or
public statement fails to respond to the other Party within forty-eight (48)
hours after the recipient’s receipt of such press release or public statement
delivered in accordance with the terms of Section 9.6.  No such consent of the other Party shall be
required to release information which has previously been made public.

9.13        Counterparts.  This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

9.14        Further Assurances.  Each Party
agrees to execute, acknowledge and deliver such further instructions, and to do
all such other acts, as may be necessary or appropriate in order to carry out
the purposes and intent of this Agreement.

 11
 

IN WITNESS WHEREOF,
the Parties hereto have caused this Agreement to be executed by their duly
authorized representatives on the day and year first above written.

 

	
  SCHERING AKTIENGESELLSCHAFT

  	
   

  	
  SONUS
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Joachim Schmidt 

  	
   

  	
  By:

  	
  /s/ Michael A. Martino

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Joachim Schmidt 

  	
   

  	
  Name: Michael A. Martino 

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Head R&D Quality and Operations

  	
   

  	
  Title: President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Dr. Michael Hildebrand  

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Dr. Michael Hildebrand  

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Head Global Pharmaceutical Development

  	
   

  	
   

  
							

 

 

 12

EXHIBIT A

QUALITY AGREEMENT FOR THE MANUFACTURING AND SUPPLY

OF TOCOSOL® PACLITAXEL INJECTABLE EMULSION

Between

Sonus
Pharmaceuticals, Inc.

And

Sicor
Pharmaceuticals, Inc.

(Effective as of
February 1, 2005)

 13
 

EXHIBIT B

FINISHED
PRODUCT SPECIFICATION

TOCOSOL®
PACLITAXEL INJECTABLE EMULSION, 10 mg/mL

 

	
  Test

  	
   

  	
  Description

  	
   

  	
  Specification

  
	
  Color and Appearance

  	
   

  	
  Visual

  	
   

  	
  White /off-white to pale yellow milky, opalescent
  liquid

  
	
  Paclitaxel ID Assay

  	
   

  	
  HPLC

  	
   

  	
  RT matches reference 

  9.0 — 11.0 mg/mL (90% to 110% of label claim)

  
	
  Paclitaxel Purity

  	
   

  	
  HPLC

  	
   

  	
  

  Degradation Products,% 

  NMT 0.8%                                                                                      Baccatin
  III 

  NMT 0.8%                                                                                      10-Deacetylpaclitaxel
  

  NMT 0.5%                                                                                      10-Deacetyl-7epipaclitaxel
  

  NMT 0.6%                                                                                      7-Epipaclitaxel
  

  For Information Only                                PEG
  Ester Side Chain 

   

  Impurities,% 

  For Information Only                                Cephalamannine
  

  For Information Only                                Paclitaxel
  C 

  For Information Only                                7
  Epi-Cephalomannine 

  For Information Only                                N
  Methyl Taxol C 

   

  NMT 0.1%                                                                                      Any
  Other 

  NMT 3.0%                                                                                      Total
  Degradants + Impurities + Any 

  Other

  
	
  Vitamin E ID Assay (Target)

  	
   

  	
  HPLC

  	
   

  	
  RT matches ref. 

  Report value 

  (70 — 90 mg/mL)

  
	
  TPGS ID Assay (Target)

  	
   

  	
  HPLC

  	
   

  	
  RT matches ref. 

  Report value 

  (40 — 60 mg/mL)

  
	
  Mean Particle Diameter

  	
   

  	
  Polarization
  Intensity

  Differential Scattering

  	
   

  	
  NMT 150 nm

  
	
  Distribution Limits 

  Particle% volume

  	
   

  	
  Diffraction

  	
   

  	
  1.261μm to 4.655μm, NMT 5% 

  > 4.655μm, None Detected

  
	
  pH

  	
   

  	
  H+ Electrode

  	
   

  	
  4.0 — 7.0

  
	
  Particulate Matter

  	
   

  	
  Microscopic
  Count

  	
   

  	
  NMT 3,000 > 10 μm (particles per
  container), and NMT 

  300 > 25 μm (particles per container)

  
	
  Volume in Container

  	
   

  	
  Volumetric

  	
   

  	
  Volume not less than labeled volume

  
	
  Sterility

  	
   

  	
  USP

  	
   

  	
  No microbial growth

  
	
  Endotoxin

  	
   

  	
  LAL

  	
   

  	
  < 0.4 EU/mg

  

 

 14
 

 

EXHIBIT C

Agreement on Responsibility
Defined

Regarding
Manufacture and Quality Control

Attachment C to
the Clinical Supply Agreement

between

SCHERING
AKTIENGESELLSCHAFT

(“SCHERING”)

and

SONUS
Pharmaceuticals Inc.

covering the
clinical supply of

TOCOSOL®
Paclitaxel

 15
 

    

	
   

  	
   

  	
  SONUS

  	
   

  	
  Schering

  
	
  I.  MATERIALS

  	
   

  	
   

  	
   

  	
   

  
	
  1.  STARTING MATERIALS  (without active ingredients)

  	
   

  	
   

  	
   

  	
   

  
	
  ·  Quality Specifications,
  Testing Standards

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Purchase

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Testing and release of starting
  materials supplied by third parties

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Retention of reserve samples

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Shipment responsibility

  	
   

  	
  x

  	
   

  	
   

  
	
  2. ACTIVE PHARMACEUTICAL INGREDIENTS

  	
   

  	
   

  	
   

  	
   

  
	
  ·  Quality Specifications,
  Testing Standards

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Purchase

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Testing and release of active pharmaceutical
  ingredient(s) supplied by third parties

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Retention of batch
  documentation

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Retention of reserve samples

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Shipment responsibility

  	
   

  	
  x

  	
   

  	
   

  
	
  3. PACKAGING MATERIALS

  	
   

  	
   

  	
   

  	
   

  
	
  A. Primary
  Packaging

  	
   

  	
   

  	
   

  	
   

  
	
  ·  Quality Specifications,
  Testing Standards

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Purchase

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Approval of master for printed packaging  materials

  	
   

  	
  x

  	
   

  	
  x

  
	
  ·  Testing and release of packaging
  materials

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Retention of batch
  documentation

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Retention of reserve samples

  	
   

  	
  x

  	
   

  	
   

  
	
  B. Secondary Packaging

  	
   

  	
   

  	
   

  	
   

  
	
  ·  Quality Specifications,
  Testing Standards

  	
   

  	
   

  	
   

  	
  x

  
	
  ·  Purchase

  	
   

  	
   

  	
   

  	
  x

  
	
  ·  Testing and release of packaging
  materials

  	
   

  	
   

  	
   

  	
  x

  
	
  ·  Retention of batch
  documentation

  	
   

  	
   

  	
   

  	
  x

  
	
  ·  Retention of reserve samples

  	
   

  	
   

  	
   

  	
  x

  

 

 16
 

 

	
  4. BULK  PRODUCT

  	
   

  	
   

  	
   

  	
   

  
	
  ·  Quality Specifications,
  Testing Standard

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Retention of reserve samples

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Shipment responsibility

  	
   

  	
  x

  	
   

  	
   

  
	
  5. FINISHED PRODUCT

  	
   

  	
   

  	
   

  	
   

  
	
  ·  Bill of materials

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Quality Specifications,
  Testing Standard

  	
   

  	
   

  	
   

  	
  x

  
	
  ·  Identity testing and release of Bulk product supplied by SONUS

  	
   

  	
   

  	
   

  	
  x

  
	
  ·  Retention of reserve samples

  	
   

  	
   

  	
   

  	
  x

  
	
  ·  Follow-up-Stability

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Certificate of Analysis

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Certificate of Compliance

  	
   

  	
  x

  	
   

  	
   

  
	
  II. PROCESSES, PROCEDURES

  	
   

  	
   

  	
   

  	
   

  
	
  6. BULK PRODUCTION

  	
   

  	
   

  	
   

  	
   

  
	
  ·  Processing Instructions

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  In-process controls

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Testing and release of Bulk
  product

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Retention of original batch
  documentation

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Copy of batch
  documentation

  	
   

  	
   

  	
   

  	
  x

  
	
  7. PACKAGING

  	
   

  	
   

  	
   

  	
   

  
	
  ·  Packaging instructions

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Filling in primary packaging
  materials including IPC

  	
   

  	
  x

  	
   

  	
   

  
	
  ·  Labeling of primary packaging
  materials including IPC

  	
   

  	
  x

  	
   

  	
  x

  
	
  ·  Packaging in secondary packaging
  material including IPC

  	
   

  	
   

  	
   

  	
  x

  
	
  ·  Labeling of secondary packaging
  material including IPC

  	
   

  	
   

  	
   

  	
  x

  
	
  ·  Packaging of
  Product for distribution

  	
   

  	
   

  	
   

  	
  x

  
	
  ·  Testing and final release for clinical
  trials

  	
   

  	
   

  	
   

  	
  x

  
	
  ·  Distribution to clinical trial sites

  	
   

  	
   

  	
   

  	
  x

  

 

 17
 

 

	
  8. COMPLAINTS

  	
   

  	
   

  	
   

  	
   

  
	
  ·  Registration of complaints

  	
   

  	
   

  	
   

  	
  x

  
	
  ·  Investigation of complaints

  	
   

  	
  x

  	
   

  	
  x

  
	
  ·  Corrective actions

  	
   

  	
  x

  	
   

  	
  x

  
	
  ·  Answer to complainant

  	
   

  	
   

  	
   

  	
  x

  
	
  ·  Documentation

  	
   

  	
  x

  	
   

  	
  x

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9. OTHERS

  	
   

  	
   

  	
   

  	
   

  
	
  ·  Shipment instructions

  	
   

  	
   

  	
   

  	
  x

  

 

 

 18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00119-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00119-of-00352.parquet"}]]