Document:

Exhibit 10.1

 

	
  Purchase
  Agreement

  	
   

  	
  6138-6150 Nancy Ridge Drive

  

 

 

PURCHASE AND SALE AGREEMENT

 

AND JOINT ESCROW INSTRUCTIONS

 

December 22, 2003

 

BY AND BETWEEN

 

ARE – NANCY RIDGE NO. 3, LLC,

a Delaware limited liability company

“Buyer”

 

AND

 

ARENA
PHARMACEUTICALS, INC.,

a Delaware corporation

“Seller”

 

1

 

	
  1

  	
  AGREEMENT TO PURCHASE AND SELL

  	
   

  
	
   

  	
   

  	
   

  
	
  2

  	
  PURCHASE PRICE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Deposit

  	
   

  
	
   

  	
  2.2

  	
  Balance

  	
   

  
	
   

  	
  2.3

  	
  Allocation of Purchase Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3

  	
  DUE DILIGENCE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Property Documents

  	
   

  
	
   

  	
  3.2

  	
  Investigations

  	
   

  
	
   

  	
  3.3

  	
  Intentionally Deleted

  	
   

  
	
   

  	
  3.4

  	
  CC&Rs

  	
   

  
	
   

  	
  3.5

  	
  Property Questionnaire

  	
   

  
	
   

  	
  3.6

  	
  Termination Right

  	
   

  
	
   

  	
  3.7

  	
  Insurance

  	
   

  
	
   

  	
  3.8

  	
  Indemnity and Repair

  	
   

  
	
   

  	
  3.9

  	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
  3.9.1

  	
  Deliveries by Seller

  	
   

  
	
   

  	
   

  	
  3.9.2

  	
  Buyer’s Review of Title

  	
   

  
	
   

  	
   

  	
  3.9.3

  	
  Seller’s Obligations Regarding Title

  	
   

  
	
   

  	
   

  	
  3.9.4

  	
  Condition of Title at Closing

  	
   

  
	
   

  	
   

  	
  3.9.5

  	
  Return of Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
  SELLER’S REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Authority

  	
   

  
	
   

  	
  4.2

  	
  No
  Conflicts

  	
   

  
	
   

  	
  4.3

  	
  Preferential Rights

  	
   

  
	
   

  	
  4.4

  	
  Property
  Documents

  	
   

  
	
   

  	
  4.5

  	
  Possession

  	
   

  
	
   

  	
  4.6

  	
  Construction

  	
   

  
	
   

  	
  4.7

  	
  Material Information

  	
   

  
	
   

  	
  4.8

  	
  Special Assessments or Condemnation

  	
   

  
	
   

  	
  4.9

  	
  Utilities

  	
   

  
	
   

  	
  4.10

  	
  Service Contracts

  	
   

  
	
   

  	
  4.11

  	
  Bankruptcy

  	
   

  
	
   

  	
  4.12

  	
  Insurance

  	
   

  
	
   

  	
  4.13

  	
  Litigation

  	
   

  
	
   

  	
  4.14

  	
  Compliance with Laws

  	
   

  
	
   

  	
  4.15

  	
  Environmental Materials

  	
   

  
	
   

  	
   

  	
  4.15.1

  	
  Definitions

  	
   

  
	
   

  	
   

  	
  4.15.2

  	
  Representations and Warranties

  	
   

  
	
   

  	
   

  	
  4.15.3

  	
  Indemnification

  	
   

  
	
   

  	
  4.16

  	
  Survival

  	
   

  
	
   

  	
  4.17

  	
  Seller’s Knowledge

  	
   

  

 

i

 

	
   

  	
  4.19

  	
  As-Is

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
  BUYER’S REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  No
  Conflicts

  	
   

  
	
   

  	
  5.2

  	
  Consents

  	
   

  
	
   

  	
  5.3

  	
  Buyer’s Authority; Validity of Agreements

  	
   

  
	
   

  	
  5.4

  	
  Bankruptcy

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
  COVENANTS OF SELLER

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Title

  	
   

  
	
   

  	
  6.2

  	
  Notice of Change in Circumstances

  	
   

  
	
   

  	
  6.3

  	
  No Defaults; Maintenance of Property

  	
   

  
	
   

  	
  6.4

  	
  Exclusive Negotiations

  	
   

  
	
   

  	
  6.5

  	
  Development Activities

  	
   

  
	
   

  	
  6.6

  	
  Service,
  Management and Employment Contracts

  	
   

  
	
   

  	
  6.7

  	
  Leases

  	
   

  
	
   

  	
  6.8

  	
  Insurance

  	
   

  
	
   

  	
  6.9

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
  CONDITIONS PRECEDENT TO CLOSING

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Buyer’s Conditions

  	
   

  
	
   

  	
   

  	
  7.1.1

  	
  Title

  	
   

  
	
   

  	
   

  	
  7.1.2

  	
  Seller’s Due Performance

  	
   

  
	
   

  	
   

  	
  7.1.3

  	
  Condition of Property

  	
   

  
	
   

  	
   

  	
  7.1.4

  	
  Bankruptcy

  	
   

  
	
   

  	
   

  	
  7.1.5

  	
  Estoppel Certificates

  	
   

  
	
   

  	
   

  	
  7.1.6

  	
  Property Questionnaire

  	
   

  
	
   

  	
   

  	
  7.1.7

  	
  No
  Moratoria

  	
   

  
	
   

  	
   

  	
  7.1.8

  	
  Repeat
  Representations, Warranties and Agreements

  	
   

  
	
   

  	
  7.2

  	
  Failure of Buyer’s Conditions

  	
   

  
	
   

  	
   

  	
  7.2.1

  	
  Waive
  and Close

  	
   

  
	
   

  	
   

  	
  7.2.2

  	
  Terminate

  	
   

  
	
   

  	
  7.3

  	
  Seller’s Conditions

  	
   

  
	
   

  	
   

  	
  7.3.1

  	
  Buyer’s Due Performance

  	
   

  
	
   

  	
   

  	
  7.3.2

  	
  Repeat Representations, Warranties and
  Agreements

  	
   

  
	
   

  	
   

  	
  7.3.3

  	
  Bankruptcy

  	
   

  
	
   

  	
  7.4

  	
  Failure of Seller’s Conditions

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
  CLOSING

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Closing
  Date

  	
   

  
	
   

  	
  8.2

  	
  Closing
  Costs

  	
   

  

 

ii

 

	
  9

  	
  CLOSING DELIVERIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Deliveries by Seller to Escrow

  	
   

  
	
   

  	
   

  	
  9.1.1

  	
  Deed

  	
   

  
	
   

  	
   

  	
  9.1.2

  	
  Non-foreign Affidavit

  	
   

  
	
   

  	
   

  	
  9.1.3

  	
  California FTB Form 597-W

  	
   

  
	
   

  	
   

  	
  9.1.4

  	
  Lease

  	
   

  
	
   

  	
   

  	
  9.1.5

  	
  Bill of Sale and Assignment

  	
   

  
	
   

  	
   

  	
  9.1.6

  	
  Seller’s Certificate

  	
   

  
	
   

  	
   

  	
  9.1.7

  	
  Memorandum of Lease and Purchase Option

  	
   

  
	
   

  	
   

  	
  9.1.8

  	
  Proof of Authority

  	
   

  
	
   

  	
   

  	
  9.1.9

  	
  Other

  	
   

  
	
   

  	
  9.2

  	
  Deliveries by Buyer

  	
   

  
	
   

  	
   

  	
  9.2.1

  	
  Balance,
  Prorations & Closing Costs

  	
   

  
	
   

  	
   

  	
  9.2.2

  	
  Lease

  	
   

  
	
   

  	
   

  	
  9.2.3

  	
  Buyer’s Certificate

  	
   

  
	
   

  	
   

  	
  9.2.4

  	
  Proof
  of Authority

  	
   

  
	
   

  	
   

  	
  9.2.5

  	
  Memorandum
  of Lease and Purchase Option

  	
   

  
	
   

  	
   

  	
  9.2.6

  	
  Other

  	
   

  
	
   

  	
  9.3

  	
  Deliveries Outside of Escrow

  	
   

  
	
   

  	
   

  	
  9.3.1

  	
  Intangible Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
  PRORATIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  10.1.1

  	
  Expenses

  	
   

  
	
   

  	
   

  	
  10.1.2

  	
  Adjustments
  Closing Statement

  	
   

  
	
   

  	
   

  	
  10.1.3

  	
  Generally

  	
   

  
	
   

  	
  10.2

  	
  Preliminary Closing Statement

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
  ESCROW

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Opening of Escrow

  	
   

  
	
   

  	
  11.2

  	
  Escrow Instructions

  	
   

  
	
   

  	
  11.3

  	
  Actions by Escrow Agent

  	
   

  
	
   

  	
   

  	
  11.3.1

  	
  Recording

  	
   

  
	
   

  	
   

  	
  11.3.2

  	
  Funds

  	
   

  
	
   

  	
   

  	
  11.3.3

  	
  Owner’s Title Policy

  	
   

  
	
   

  	
   

  	
  11.3.4

  	
  Delivery of Documents

  	
   

  
	
   

  	
  11.4

  	
  Conflicting Demands

  	
   

  
	
   

  	
  11.5

  	
  Real Estate Reporting Person

  	
   

  
	
   

  	
  11.6

  	
  Destruction of Documents; Survival

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12

  	
  RISK
  OF LOSS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Condemnation

  	
   

  
	
   

  	
  12.2

  	
  Casualty

  	
   

  

 

iii

 

	
  13

  	
  DEFAULT

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  Default by Buyer

  	
   

  
	
   

  	
  13.2

  	
  Default by Seller

  	
   

  
	
   

  	
   

  	
  13.2.1

  	
  Specific Performance

  	
   

  
	
   

  	
   

  	
  13.2.2

  	
  Actual
  Damages

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14

  	
  BROKERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15

  	
  CONFIDENTIALITY

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Buyer

  	
   

  
	
   

  	
  15.2

  	
  Seller

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17

  	
  MISCELLANEOUS PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  17.1

  	
  Governing
  Law

  	
   

  
	
   

  	
  17.2

  	
  Entire Agreement

  	
   

  
	
   

  	
  17.3

  	
  Modifications; Waiver

  	
   

  
	
   

  	
  17.4

  	
  Notices

  	
   

  
	
   

  	
  17.5

  	
  Expenses

  	
   

  
	
   

  	
  17.6

  	
  Assignment

  	
   

  
	
   

  	
   

  	
  17.6.1

  	
  Seller’s Right to Assign

  	
   

  
	
   

  	
   

  	
  17.6.2

  	
  Buyer’s Right to Assign

  	
   

  
	
   

  	
  17.7

  	
  Severability

  	
   

  
	
   

  	
  17.8

  	
  Successors and Assigns; Third Parties

  	
   

  
	
   

  	
  17.9

  	
  Counterparts

  	
   

  
	
   

  	
  17.10

  	
  Headings

  	
   

  
	
   

  	
  17.11

  	
  Time of the Essence

  	
   

  
	
   

  	
  17.12

  	
  Further Assistance

  	
   

  
	
   

  	
  17.13

  	
  Number and Gender

  	
   

  
	
   

  	
  17.14

  	
  Construction

  	
   

  
	
   

  	
  17.15

  	
  Post-Closing
  Access to Records

  	
   

  
	
   

  	
  17.16

  	
  Exhibits

  	
   

  
	
   

  	
  17.17

  	
  Attorneys’
  Fees

  	
   

  
	
   

  	
  17.18

  	
  Business
  Days

  	
   

  
	
   

  	
  17.19

  	
  Tax-Free Exchange

  	
   

  

 

iv

 

PURCHASE AND SALE AGREEMENT

AND JOINT ESCROW INSTRUCTIONS

 

THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS (this “Agreement”)
is made and entered into as of December 22, 2003 (“Execution Date”), by and
between ARE
– NANCY RIDGE NO. 3, LLC,
a Delaware limited liability (“Buyer”),
and ARENA PHARMACEUTICALS, INC., a
Delaware corporation (“Seller”),
for the purposes of setting forth the agreement of the parties and of
instructing CHICAGO TITLE INSURANCE COMPANY
(“Escrow Agent”), with respect to
the transactions contemplated by this Agreement.

 

RECITALS

 

Upon and
subject to the terms and conditions set forth in this Agreement, Seller desires
to sell and Buyer desires to purchase the following (collectively, the “Property”):

 

(i)            the
fee interest in that certain real property commonly known as 6138-6150 Nancy
Ridge Drive, located in the City and County of San Diego, State of California,
as legally described on Exhibit A attached hereto, together with all of
Seller’s rights, privileges and easements appurtenant thereto or used in
connection therewith, including, without limitation, all minerals, oil, gas and
other hydrocarbon substances thereon, all development rights, air rights,
water, water rights and water stock relating thereto, all strips and gores, and
all of Seller’s right, title and interest in and to any streets, alleys,
easements, rights-of-way, public ways, or other rights appurtenant, adjacent or
connected thereto or used in connection with the land legally described on Exhibit
A attached hereto (collectively, the “Land”);

 

(ii)           all
buildings, improvements, structures and fixtures now or hereafter included or
located on or in the Land (collectively, the “Improvements”),
and all real property fixtures,
built-in machinery and equipment, built-in casework and cabinets and other
similar additions and improvements built into the Premises so as to become an
integral part of the Premises, including without limitation, the items
described on Exhibit B attached hereto, now or hereafter owned by
Seller and located on or about the Land or the Improvements or attached thereto
(collectively, the “Fixtures”), excluding the power generator, security
system, the waste storage building located west of the buildings on the Land
and Seller’s moveable personal property (provided that none of the items on Exhibit
B shall be deemed Seller’s personal property)and all heating, air
conditioning or mechanical systems and facilities used to provide any utility
services, refrigeration, ventilation, waste disposal or other utility services
now or hereafter located on or in the Land or the Improvements (the Land and
the Improvements are sometimes hereinafter collectively referred to as the “Real Property”); and

 

(iii)          architectural,
site, landscaping or other permits specifically relating to the Real Property,
applications, approvals, authorizations and other entitlements, transferable
guarantees and warranties covering the Land and/or Improvements, books,
records, reports, test results, environmental assessments, as-built plans, specifications
and other

 

2

 

similar
documents and materials specifically relating to the Real Property or the
construction or fabrication thereof (collectively, the “Intangible Property”).

 

NOW, THEREFORE, in
consideration of the foregoing Recitals which are incorporated herein by this
reference, the mutual covenants contained in this Agreement and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer and Seller hereby agree, and instruct Escrow Agent, as
follows:

 

1              AGREEMENT TO PURCHASE AND SELL.

 

Subject to all
of the terms and conditions of this Agreement, Seller agrees to sell, transfer
and convey to Buyer, and Buyer agrees to acquire and purchase from Seller, the
Property upon the terms and conditions set forth herein.

 

2              PURCHASE PRICE.

 

The purchase
price for the Property (the “Purchase Price”)
shall be the sum of $13,000,000.00, payable in cash as follows:

 

2.1          Deposit.  Not later than the
date which is 3 Business Days (as hereinafter defined) after the Execution
Date, Buyer shall deposit into Escrow the sum of $250,000.00 (which amount,
together with any and all interest and dividends accrued thereon, shall
hereinafter be referred to as the “Deposit”).

 

Escrow Agent shall deposit the Deposit in a non-commingled trust
account and shall invest the Deposit in insured money market accounts,
certificates of deposit, United States Treasury Bills or such other instruments
as Buyer may instruct from time to time. 
In the event of the consummation of the purchase and sale of the
Property as contemplated hereunder, the Deposit shall be paid to Seller at the
Closing (as defined in Section 8 below) and credited against the
Purchase Price.  In the event the sale
of the Property is not consummated because of the termination of this Agreement
by Buyer in accordance with any right to so terminate provided herein, or the
failure of any Buyer’s Conditions Precedent (hereinafter defined), Buyer shall
notify Escrow Agent in writing of the same, and the Deposit shall be
immediately returned to Buyer.  In the
event the sale of the Property is not consummated because of a default of Buyer
(as more particularly described in Section 13.1) the Deposit shall be
immediately paid to Seller.

 

2.2          Balance.  On the Closing Date
(as defined below), Buyer shall pay to Seller the balance of the Purchase Price
over and above the Deposit paid by Buyer under Section 2.1 above, by
wire transfer of federal funds to Escrow Agent, net of all prorations and
adjustments as provided herein.

 

2.3          Allocation
of Purchase Price.  Buyer and Seller hereby agree to allocate
the Purchase Price among the Property for all tax and non-tax purposes in
accordance with Exhibit C attached hereto (the “Allocation Schedule”).  Buyer and Seller hereby agree that the
Allocation Schedule shall be prepared in a manner consistent with the rules
prescribed under Section 1060 of the Internal Revenue Code of 1986, as amended
(the “Code”).  Buyer and Seller hereby each (a) agree to
utilize the amounts allocated pursuant to the Allocation Schedule in filing all
tax returns (including any amended tax returns) and (b)

 

3

 

agree not to take any position on or in connection with any such tax
return or otherwise that is inconsistent with such allocation.

 

3              DUE DILIGENCE

 

3.1          Property
Documents.  Not later than the Execution Date, Seller
shall, at Seller’s sole cost and expense, deliver or make available to Buyer
(to the extent not already delivered or made available), to the extent such
items are in Seller’s possession or control or in the possession or control of
Seller’s agents, auditors, independent contractors or representatives, copies
of all agreements, contracts, documents, information, reports, books, records
and other materials pertinent to the ownership, operation, occupancy, use, or
management of the Property which would be considered material by a prudent
buyer of commercial real estate in a transaction similar to the one
contemplated by this Agreement, and all certifications, approvals, consents,
authorizations, licenses, permits, easements, rights of way, and all valid,
final and unconditional certificates of occupancy, or the equivalent permitting
required by the applicable licensing agency, or required by any governmental
authority in connection with the ownership, development, use and maintenance of
the Property, including the items described in Exhibit D attached hereto
(the “Property Documents”).

 

3.2          Investigations. 
At all reasonable times from the mutual execution of the Letter of
Intent dated as of October 10, 2003 between Buyer and Seller (“Letter of
Intent”)  until the Closing
or earlier termination of this Agreement and upon reasonable notice to Seller,
Buyer, its agents and representatives shall, during normal business hours, be
entitled at Buyer’s sole cost and expense to (i) enter onto the Property to
perform any inspections, investigations, studies and tests of the Property,
including, without limitation, physical, structural, mechanical, architectural,
engineering, soils, geotechnical and environmental/asbestos tests that Buyer
deems reasonable upon notice to Seller; (ii) cause an environmental assessment
of the Property to be performed; (iii) review all Property Documents and
examine and copy any and all other books and records in the possession or
control of Seller or its agents relating to the Property (including, without
limitation, all documents relating to utilities, zoning, and the access,
subdivision and appraisal of the Property); and (iv) interview Seller’s senior
management regarding the Property and Seller’s finances;  provided, however, that Buyer
shall have no right to examine any of the following documents and materials
which may be in Seller’s possession (collectively,
the “Excluded  Materials”): (i) financial analyses
generated by or made on behalf of Seller; (ii) offers to sell or purchase,
or (iii) any documents which are protected by the attorney-client and/or
attorney work product privileges. 
Notwithstanding the foregoing,
Buyer shall not be permitted to undertake any intrusive or destructive testing
of the Property, including without limitation a “Phase II” environmental
assessment, without in each instance first obtaining Seller’s written consent
thereto, which consent Seller shall not unreasonably withhold or delay.  In conducting any inspections, tests or
studies, Buyer and its authorized agents and representatives shall:
(a) not unreasonably interfere with the operation, use and maintenance of
the Property or unreasonably disturb any business of Seller, (b) provide Seller
with the opportunity to be present at all entries onto the Property,
(c) not damage any part of the Property without repairing such damage upon
completion, (d) not injure or otherwise cause bodily harm to Seller or any
of its

 

4

 

respective agents, contractors and employees
or any other third party, (e) not permit any liens to attach to the
Property by reason of the exercise of their rights under this Section,
(f) fully restore the Property to substantially the same condition in
which the same was found before, and to the extent any change resulted from,
any such inspections, tests or studies were undertaken, and (g) not reveal
or disclose any information obtained prior to the Close of Escrow concerning
the Property to anyone outside Buyer’s organization, except as may otherwise be
required by law and other than Buyer’s outside counsel, accounting firm, other
professional advisors and consultants, and prospective lenders and investors,
and their attorneys and other professional advisors all of whom who, in Buyer’s
reasonable judgment, need to know such information for evaluating a possible
purchase of the Property and all of whom shall be advised and have agreed to
keep such information strictly confidential.  The provisions of the Section 3.2
shall survive the termination of this Agreement.

 

3.3          Intentionally
Deleted.

 

3.4          CC&Rs. 
Buyer may conduct such inquiries and investigations of any and all
declarants or associations created by any covenants, conditions or restrictions
encumbering the Property (“CC&Rs”)
as Buyer, in its sole discretion, deems advisable or necessary.  Not later than the Due Diligence Termination
Date, Seller shall deliver to Buyer an estoppel certificate, in the form
attached hereto as Exhibit E, executed by each declarant or association
under any CC&Rs (collectively, the “CC&Rs
Estoppels”).

 

3.5          Property
Questionnaire.  Seller shall deliver to Buyer a property
questionnaire in the form attached hereto as Exhibit F (the “Property Questionnaire”) completed by
Seller, no later than 6 Business Days prior to expiration of the Due Diligence
Termination Date.  Buyer shall have 5
Business Days after receipt to notify Seller whether the Property Questionnaire
has been completed to Buyer’s reasonable satisfaction.  The Property Questionnaire shall be deemed
to have been completed to the Buyer’s satisfaction if Buyer has not terminated
this Agreement under Section 3.6.

 

3.6          Termination
Right.  Buyer shall have the right at any time on or
before 5:00 p.m. (Los Angeles, California time) on December 19, 2003 (the “Due Diligence Termination Date”) to
terminate this Agreement if, during the course of Buyer’s due diligence investigations
of the Property, Buyer determines in its sole and absolute discretion that the
Property is not acceptable to Buyer. 
Buyer may exercise such termination right by delivering written notice
of termination to Seller and Escrow Agent (a “Due
Diligence Termination Notice”) on or before the Due Diligence
Termination Date.  Upon the timely
delivery of such Due Diligence Termination Notice, (i) Escrow Agent shall
immediately return the Deposit to Buyer, (ii) the parties shall equally share
the cancellation charges of Title Company (as hereinafter defined) and Escrow
Agent (“Cancellation Charges”),
and (iii) this Agreement shall automatically terminate and be of no further
force or effect and neither party shall have any further rights or obligations
hereunder, other than pursuant to any provision hereof which expressly survives
the termination of this Agreement.  If
Buyer has timely delivered to Escrow Agent a Due Diligence Termination Notice,
no notice to Escrow Agent from Seller shall be required for the return of the
Deposit to Buyer.  If Buyer does not
exercise such termination by

 

5

 

delivery of the Due Diligence Termination Notice on or before the Due
Diligence Termination Date, then Buyer’s right to terminate this Agreement
pursuant to this Section shall automatically lapse.

 

3.7          Insurance. 
Buyer agrees that from the Execution Date through the Due Diligence
Termination Date, Buyer shall carry, or cause its agents and representatives
that will enter the Property in connection with the investigations pursuant to Section
3.2 to carry, workers’ compensation and general liability insurance in the
amount of $2,000,000 per occurrence, which insurance shall name Seller as an
additional insured.  Buyer shall provide
Seller with proof of such insurance prior to entry on or commencing Buyer’s
physical inspections of the Property.

 

3.8          Indemnity
and Repair.  Buyer agrees to indemnify and hold harmless
Seller from any losses or mechanic’s liens arising from entry onto the Property
or any injury to persons caused by such entry by Buyer or its agents or
representatives or as a result of the inspections, investigations or tests
performed pursuant to Section 3.2 above, which indemnity shall survive
the termination of this Agreement; provided, however, that
Buyer’s indemnity hereunder shall not include any losses, cost, damage or
expenses resulting from (x) the acts of Seller, its agents or representatives,
or (y) the discovery of any pre-existing condition of the Property.  In addition, if this Agreement is
terminated, Buyer shall repair any damage to the Property caused by its or its
agents or representatives’ entry thereon and shall restore the Property
substantially to the condition in which it existed prior to such entry; provided,
however, that Buyer shall have no obligation to repair any damage caused
by the acts or omissions of Seller or its agents or representatives or to
remediate, contain, abate or control any pre-existing condition of the Property
which existed prior to Buyer’s entry thereon.

 

3.9          Title.

 

3.9.1       Deliveries
by Seller.  Not later than ten (10) days after the
Execution Date, Seller shall have delivered to Buyer (a) Seller’s existing
title policy for the Property, together with legible copies of the underlying
documents referenced therein, and (b) the most recently updated ALTA as-built
survey for the Property, if any.

 

3.9.2       Buyer’s
Review of Title.  Not later than ten (10) days after the
Execution Date, Buyer shall order at its sole cost and expense (a) an ALTA
extended coverage preliminary title report (the “PTR”) issued by Chicago Title Insurance Company (in such
capacity, “Title Company”),
together with legible copies of all documents referenced as exceptions therein,
(b) a current As-Built American Land Title Association survey of the Property
(the “Survey”), in form reasonably
satisfactory to Buyer and the Title Company, prepared by a surveyor licensed in
the State where the Property is located and certified (using a surveyor’s
certificate in substantially the same form as the certificate attached hereto
as Exhibit G) to Buyer and the Title Company, and such other persons or
entities as Buyer may, in its discretion, request; and (c) a UCC search with
regard to Seller and the Property (the “UCC
Search”).  Buyer shall have
until five (5) days prior to the Due Diligence Termination Date to notify
Seller in writing of any objection which

 

6

 

Buyer may have to any exception reported in the PTR or matter shown on
the Survey or the UCC Search or any updates thereof; provided, however,
that if any such updates are received by Buyer, Buyer shall have an additional
5 Business Days, regardless of the Due Diligence Termination Date or Closing
Date, following Buyer’s receipt of such update and legible copies of all
documents referenced therein to notify Seller of objections to items shown on
any such update.  Exceptions reported in
the PTR and matters shown on the Survey or the UCC Search (or any updates
thereof) not objected to by Buyer as provided above shall be deemed to be “Permitted Exceptions.”

 

3.9.3       Seller’s Obligations Regarding Title. 
As a condition to Closing, Seller shall take all reasonable action
necessary to remove from title to the Property (or in the alternative, Seller
shall obtain for Buyer title insurance insuring over such exceptions or
matters, such insurance to be in form and substance satisfactory to Buyer in
its sole discretion) the following matters: (a) all exceptions to title and
survey matters created by Seller on or after the Execution Date without the
prior written consent of Buyer (which consent may be withheld in Buyer’s sole
and absolute discretion); (b) any and all liens and encumbrances affecting the
Property which secure an obligation of Seller to pay money (other than
installments of real estate taxes or assessments not delinquent as of the
Closing); and (c) all taxes and assessments due and payable for any period
prior to the Closing (collectively, the “Obligatory
Removal Exceptions”).  If,
prior to the Closing, Seller is unable or unwilling to remove or satisfactorily
insure over any of the Obligatory Removal Exceptions, then Buyer may (a)
terminate this Agreement by delivering written notice to Seller and Escrow
Agent (in which case Escrow Agent shall return the Deposit to Buyer, and the
parties shall equally share the Cancellation Charges), and thereafter neither
party shall thereafter have any rights or obligations to the other hereunder,
other than pursuant to any provision hereof which expressly survives the
termination of this Agreement; (b) pursue an action for specific performance to
compel Seller to remove the Obligatory Removal Exceptions; or (c) waive Buyer’s
objections to such Obligatory Removal Exceptions and proceed to a timely
Closing whereupon such Obligatory Removal Exceptions shall be deemed “Permitted Exceptions.”  If, prior to the Closing, Seller is unable
or unwilling to remove or satisfactorily insure over any other exceptions or
matters objected to by Buyer (other than Obligatory Removal Exceptions), then
Buyer may (x) terminate this Agreement by delivering written notice to Seller
and Escrow Agent (in which case Escrow Agent shall return the Deposit to Buyer,
and the parties shall equally share the Cancellation Charges), and thereafter
neither party shall thereafter have any rights or obligations to the other
hereunder, other than pursuant to any provision hereof which expressly survives
the termination of this Agreement; or (y) waive Buyer’s objections to such
other exceptions and matters (other than Obligatory Removal Exceptions) and
proceed to a timely Closing whereupon such other exceptions and matters shall
be deemed “Permitted Exceptions.”

 

3.9.4       Condition
of Title at Closing.  Upon the Closing, Seller shall sell,
transfer and convey to Buyer indefeasible fee simple title, as evidenced by the
Title Company

 

7

 

issuing the Owner’s Title Policy (as hereinafter defined), to the Land
and the Improvements thereon by a duly executed and acknowledged deed in the
form of Exhibit H attached hereto (the “Deed”), subject only to the Lease and Purchase Option (as
hereafter defined) and the Permitted Exceptions.

 

3.10        Return
of Documents.  In the event this Agreement is terminated by Buyer pursuant to Section
3.6 or is terminated due to Buyer’s failure to perform hereunder, Buyer
shall promptly return to Seller the Property Documents received from
Seller.  This Section shall survive any
termination of this Agreement.

 

4              SELLER’S REPRESENTATIONS AND
WARRANTIES.

 

Seller
represents and warrants to and agrees with Buyer that, as of the date hereof
and as of the Closing Date:

 

4.1          Authority. 
This Agreement and all other documents delivered prior to or at the
Closing (i) have been duly authorized, executed, and delivered by Seller; (ii)
are binding obligations of Seller; (iii) are collectively sufficient to
transfer all of Seller’s rights to the Property, subject to the Lease; and (iv)
do not violate the formation documents of Seller.  Seller has obtained all required consents, releases, and
approvals necessary to execute this Agreement and consummate the transaction
contemplated by this Agreement.  Seller
further represents that it is a corporation, duly organized and existing in
good standing under the laws of the State of Delaware, with its principal place
of business in San Diego, California, and that it is qualified to transact
business in the State of California.

 

4.2          No Conflicts. 
The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated, and compliance with the terms of this
Agreement will not conflict with, or, with or without notice or the passage of
time or both, result in a breach of any of the terms or provisions of, or constitute
a default under, any indenture, deed of trust, mortgage, loan agreement, or
other document, or instrument or agreement, oral or written, to which Seller is
a party or by which Seller or the Property is bound, or any applicable
regulation of any governmental agency, or any judgment, order or decree of any
court having jurisdiction over Seller or all or any portion of the Property.

 

4.3          Preferential
Rights.  Seller has not granted any options or rights
of first refusal or rights of first offer to third parties to purchase or
otherwise acquire an interest in the Property.

 

4.4          Property Documents.  The Property
Documents delivered by Seller pursuant to the terms hereof constitute all of
the material documents relating to the Property, and to Seller’s Knowledge,
each such Property Document as delivered by Seller constitutes a true, correct
and complete copy of such Property Document. 
To Seller’s Knowledge, there are no material written commitments or
agreements relating to the Property and there are no other commitments or
agreements relating to the Property which would be binding on Buyer after
Closing which have not been disclosed by Seller to Buyer in writing.  To Seller’s Knowledge, Seller is not in
default of Seller’s obligations or liabilities pertaining to the Property or
the Property Documents; nor, to Seller’s Knowledge, are there facts,
circumstances, conditions, or events which, after notice or

 

8

 

lapse of time, would constitute a default.  Seller has not received written notice or information that any
party to any of the Property Documents considers a breach or default to have
occurred.

 

4.5          Possession. 
On the Closing Date, Seller shall deliver exclusive possession of the
Property to Buyer, free and clear of any leases, tenancies or parties in
possession, except for the Lease.

 

4.6          Construction. 
To Seller’s Knowledge, there are no material physical defects in the
construction of the Improvements.

 

4.7          Material
Information.  To Seller’s Knowledge, this Agreement,
together with the Property Documents and any matters heretofore disclosed to
Buyer in writing by Seller, do not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
contained herein not materially misleading.

 

4.8          Special Assessments or Condemnation.  To Seller’s
Knowledge, there are no existing, proposed or contemplated (i) special
assessments, except those shown as exceptions on the PTR, or (ii) condemnation
actions against the Property or any part, and Seller has not received written
notice of any contemplated special assessments or eminent domain proceedings
that would affect the Property.

 

4.9          Utilities. 
To Seller’s Knowledge, all water, sewer, electric, gas, telephone, and
drainage facilities, and all other utilities required by law or for the normal
operation of the Property are installed to the property lines of the Property,
have been connected to the Improvements and Seller has received no written
notices that service will be disconnected or reduced.

 

4.10        Service
Contracts.  To Seller’s Knowledge, there are no service,
maintenance, repair, management, leasing, or supply contracts or other
contracts (including, without limitation, janitorial, elevator and landscaping
agreements) affecting the Property, oral or written, which would be binding on
Buyer after Closing. .

 

4.11        Bankruptcy. 
No attachments, execution proceedings, assignments for the benefit of
creditors, insolvency, bankruptcy, reorganization or other proceedings are
pending, or, to Seller’s Knowledge, threatened, against Seller.

 

4.12        Insurance.  There are currently
in effect such insurance policies as are customarily maintained with respect to
similar properties.  Seller has not
received any written notice or request from any insurance company requesting
the performance of any work or alteration with respect to the Property.  Seller has received no written notice from
any insurance company concerning, nor, to Seller’s Knowledge, are there any
defects or inadequacies in the Property which, if not corrected, would result
in the termination of insurance coverage or increase its cost.

 

4.13        Litigation. 
To Seller’s Knowledge, except as set forth on the schedule attached
hereto as Exhibit R, there are no actions, suits or proceedings before
any judicial or quasi-judicial

 

9

 

body, pending, or to Seller’s Knowledge, threatened, against or
affecting all or any portion of the Property.

 

4.14        Compliance
with Laws.  To Seller’s Knowledge, Seller has received
no written notice of, and has no Knowledge of, any condition currently on the
Property or any portion thereof which may give rise to any violation of any
existing laws, rules, regulations, ordinances and orders of all applicable
federal, state, city and other governmental authorities in effect as of the
date of this Agreement (collectively, “Laws”)
applicable to the Property if it were disclosed to the authorities having
jurisdiction over the Property, except as set forth on Exhibit I.

 

4.15        Environmental Materials.

 

4.15.1     Definitions.

 

(a)           “Environmental Claim” means any and all
actions (including, without limitation, investigatory, remedial or enforcement
actions of any kind, administrative or judicial proceedings, and orders or
judgments arising out of or resulting therefrom), costs, claims, damages
(including, without limitation, punitive damages), expenses (including, without
limitation, attorneys’, consultants’ and experts’ fees, court costs and amounts
paid in settlement of any claims or actions), fines, forfeitures or other
civil, administrative or criminal penalties, injunctive or other relief
(whether or not based upon personal injury, property damage, or contamination
of, or adverse effects upon, the environment, water tables or natural
resources), liabilities or losses arising from or relating to the presence or
suspected presence of any Environmental Materials in, on, under, or about the
Property or properties adjacent thereto.

 

(b)           “Environmental Materials” means chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and petroleum
products or any other chemical, material, or substance that, because of its
quantity, concentration, or physical or chemical characteristics, exposure to
which is limited or regulated for health and safety reasons by any governmental
authority, or which poses a significant present or potential hazard to human
health and safety or to the environment if released into the workplace or the
environment.

 

4.15.2     Representations
and Warranties.  Seller represents and warrants to and agrees
with Buyer that, as of the date hereof, to Seller’s Knowledge: (i) there is no
Environmental Claim pending or threatened with regard to the Property; and (ii)
without in any way limiting the generality of the foregoing, (a) there are no
underground storage tanks located on the Property, (b) there is no asbestos
contained in or forming part of any Improvement, including, without limitation,
any building, building component, structure or office space on the Property,
and (c) no polychlorinated biphenyls (PCBs) are used or stored at the Property.

 

4.15.3     Indemnification. 
Seller hereby indemnifies and agrees to reimburse, defend, and hold
Buyer harmless from, for and against all Environmental Claims arising from,

 

10

 

asserted against, imposed on, or incurred by Buyer, directly or
indirectly, in connection with the breach of any representation or warranty set
forth in Section 4.15.2 of this Agreement.

 

4.16        Survival. 
All of the representations, warranties and agreements of Seller set
forth in this Agreement shall be true upon the execution of this Agreement, and
shall survive the delivery of the Deed and other Closing instruments and
documents for a period of 24 months following the Closing.

 

4.17        Seller’s
Knowledge.  As used in this Agreement, the phrase “to Seller’s Knowledge” and words of similar
import shall mean the best knowledge of the Chief Executive Officer, Chief
Financial Officer, the General Counsel, Adam Chinnock, and the Facilities
Manager of Seller, after reasonable inquiry and investigation of the files and
materials in the possession or control of such persons.  Seller represents and warrants that the
foregoing persons are those persons affiliated with Seller most knowledgeable
regarding the ownership and operation of the Property, possessing the greatest
experience and familiarity with the Property, that no other person presently
affiliated with Seller possesses any equal or greater familiarity and
experience with the Property and that the foregoing persons have been employed
by Seller since July 1, 1997, September 11, 2000, October 24, 2001, September
15, 2002 and August 25, 1997 respectively.

 

4.18        As-Is. 
Buyer acknowledges, represents and
warrants that prior to Close of Escrow, Buyer will have had the opportunity to
thoroughly inspect the Property and to investigate all aspects of the
Property.  Notwithstanding anything to
the contrary contained in this Agreement, Buyer further acknowledges and agrees
that Buyer is purchasing the Property subject to all governmental regulations
and the Lease.  Buyer further
acknowledges and agrees that except for any representations and warranties
expressly made by Seller in this Agreement, neither Seller nor any of Seller’s
employees, agents or representatives have made any representations or
warranties by or on behalf of Seller of any kind whatsoever, whether oral or
written, express or implied, statutory or otherwise, as to any matters
concerning the Property, the condition of the Property, the size of the Real
Property, the size of the Improvements (including without limitation, any
discrepancies in the actual rentable square footage of any leased premises
within the Improvements), the present use of the Property or the suitability of
Buyer’s intended use of the Property. 
Buyer hereby acknowledges, agrees and represents that the Property is to
be purchased, conveyed and accepted by Buyer in its present condition, “AS IS”,
“WHERE IS” AND WITH ALL FAULTS, and that no patent or latent defect or
deficiency in the condition of the Property whether or not known or discovered,
shall affect the rights of either Seller or Buyer hereunder nor shall the
Purchase Price be reduced as a consequence thereof.  Except for any representations and warranties expressly made by
Seller in this Agreement, any and all information and documents furnished to
Buyer by or on behalf of Seller relating to the Property, including, without
limitation, the Property Documents, shall be deemed furnished as a courtesy to
Buyer but without warranty of any kind from or on behalf of Seller regarding
the content thereof except as expressly provided herein.  Buyer hereby represents and warrants to
Seller that Buyer will have an opportunity to perform an independent inspection
and investigation of the Property and also will have an opportunity to
investigate and has knowledge of operative or proposed governmental

 

11

 

regulations. 
Buyer further represents that, except for any representations and
warranties expressly made by Seller in this Agreement, it shall acquire the
Property solely upon the basis of its independent inspection and investigation
of the Property, including without limitation: (i) the quality, nature,
habitability, merchantability, use, operation, value, marketability, adequacy
or physical condition of the Property or any aspect or portion thereof,
including, without limitation, structural elements, foundation, roof,
appurtenances, access, landscaping, parking facilities, electrical, mechanical,
HVAC, plumbing, sewage, and utility systems, facilities and appliances, soils,
geology and groundwater, or whether the Real Property lies within a special
flood hazard area, an area of potential flooding, a very high fire hazard
severity zone, a wildland fire area, an earthquake fault zone or a seismic
hazard zone, (ii) the dimensions or lot size of the Real Property or the
square footage of the Improvements thereon or of any tenant space therein,
(iii) the development or income potential, or rights of or relating to,
the Real Property or its use, habitability, merchantability, or fitness, or the
suitability, value or adequacy of such Real Property for any particular
purpose, (iv) the zoning or other legal status of the Real Property or any
other public or private restrictions on the use of the Real Property,
(v) the compliance of the Real Property or its operation with any
governmental regulations, (vi) the ability of Buyer to obtain any necessary
governmental approvals, licenses or permits for Buyer’s intended use or
development of the Real Property, (vii) the presence or absence of
hazardous materials on, in, under, above or about the Real Property or any
adjoining or neighboring property, (viii) the quality of any labor and
materials used in any Improvements, (ix) the condition of title to the
Real Property, or (x) the economics of, or the income and expenses,
revenue or expense projections or other financial matters, relating to the
operation of the Real Property.  Without
limiting the generality of the foregoing, Buyer expressly acknowledges and
agrees that Buyer is not relying on any representation or warranty of Seller,
nor any member, officer, employee, attorney, property manager, agent or broker
of Seller, whether implied, presumed or expressly provided at law or otherwise,
arising by virtue of any statute, common law or other legally binding right or
remedy in favor of Buyer except as expressly provided in this Agreement.

 

5              BUYER’S REPRESENTATIONS AND
WARRANTIES.

 

Buyer
represents and warrants to and agrees with Seller that, as of the date hereof,
and as of the Closing Date:

 

5.1          No Conflicts.  The execution and
delivery of this Agreement, the consummation of the transactions herein contemplated,
and compliance with the terms of this Agreement will not conflict with, or,
with or without notice or the passage of time or both, result in a breach of
any of the terms or provisions of, or constitute a default under, any
indenture, deed of trust, mortgage, loan agreement, or other document or
instrument to which Buyer is a party or by which Buyer is bound, or any
applicable regulation of any governmental agency, or any judgment, order or
decree of any court having jurisdiction over Buyer or all or any portion of the
Property.

 

5.2          Consents. 
All requisite corporate action has been taken by Buyer in connection
with entering into this Agreement, and will be taken prior to the Closing in
connection with

 

12

 

the execution and delivery of the instruments referenced herein and the
consummation of the transactions contemplated hereby.  No consent of any partner, shareholder, beneficiary, creditor,
investor, judicial or administrative body, governmental authority or other
party is required in connection herewith which has not been obtained.

 

5.3          Buyer’s Authority; Validity of Agreements. 
This Agreement and all other documents delivered prior to or at the
Closing (i) have been or will be before the Closing duly authorized, executed,
and delivered by Buyer; (ii) are binding obligations of Buyer; and (iii) do not
violate the formation documents of Buyer. 
Buyer has obtained all required consents, releases, and approvals necessary
to execute this Agreement and, as of the Closing, to consummate the transaction
contemplated by this Agreement.  Buyer
further represents that it is a limited liability company duly organized and
existing in good standing under the laws of the State of Delaware, with its
principal place of business in the State of California, and that it is
qualified to transact business in the State of California.

 

5.4          Bankruptcy.  No attachments,
execution proceedings, assignments for the benefit of creditors, insolvency,
bankruptcy, reorganization or other proceedings are pending, or, to Buyer’s
Knowledge, threatened, against Buyer.

 

6              COVENANTS OF SELLER.

 

In addition to
the covenants and agreements of Seller set forth elsewhere in this Agreement,
Seller covenants and agrees that between the date hereof and the earlier of (1)
the Closing or (2) termination of this Agreement:

 

6.1          Title. 
Seller shall not (a) directly or indirectly sell, assign or create any
right, title or interest whatsoever in or to the Property, (b) take any action,
create, commit, permit to exist or suffer any acts which would (i) give rise to
a variance from the current legal description of the Land, or (ii) cause the
creation of any lien, charge or encumbrance other than the Permitted
Exceptions, or (c) enter into any agreement to do any of the foregoing without
Buyer’s prior written consent (which consent may be withheld in Buyer’s sole
and absolute discretion).

 

6.2          Notice
of Change in Circumstances.  Seller shall
promptly notify Buyer of any change in any condition with respect to the
Property or any portion thereof or of any event or circumstance of which Seller
has Knowledge subsequent to the date of this Agreement which (a) materially,
adversely affects the Property or any portion thereof or the use or operation
of the Property or any portion thereof, (b) makes any representation or
warranty of Seller to Buyer under this Agreement untrue or misleading, or (c)
makes any covenant or agreement of Seller under this Agreement incapable or
less likely of being performed, it being expressly understood that Seller’s
obligation to provide information to Buyer under this Section shall in no way
relieve Seller of any liability for a breach by Seller of any of its
representations, warranties, covenants or agreements under this Agreement.  Notwithstanding the foregoing, Buyer agrees
that if, at any time prior to the Closing Date, it has knowledge of any
information which would require the qualification of any of the above
representations and warranties for such representation and warranty to be

 

13

 

true, it shall immediately notify Seller in writing of such
information.  If Buyer has knowledge of
the incorrectness of any representation or warranty made by Seller in this
Agreement and fails to so notify Seller prior to the Closing Date, then such
representation or warranty shall be deemed to be modified to the extent of such
knowledge.  Seller shall have the right
to qualify such representations and warranties with any newly discovered
information it receives concerning such representations and warranties after
the date of this Agreement promptly upon discovering such new information
(provided that such new information is not a result of Seller’s actions).  If Seller has notified Buyer in writing that
it will be necessary to qualify any of the above representations and warranties
as provided above (i.e. as a result of new information which is not a result of
Seller’s actions) when they are restated as of the Closing Date, Buyer must
elect, by a writing received by Seller prior to the Closing Date (as same may
be extended on a day for day basis if Seller’s notice was delivered within the
three days preceding the Closing Date), to either (i) terminate this
Agreement and the Escrow, in which event the Deposit shall be returned to Buyer
and neither party shall have any further obligations or liabilities hereunder,
except for the indemnity obligations of Buyer contained herein which
indemnities shall survive any such termination or (ii) proceed with the transaction
contemplated by this Agreement, in which event the above representations and
warranties shall be qualified when remade on the Closing Date as provided
above.  In the event that Seller does
not receive such written notification from Buyer, then Buyer will be deemed to
have elected to proceed with the transaction contemplated by this Agreement,
with the above representations and warranties qualified when remade as of the
Closing Date.

 

6.3          No
Defaults; Maintenance of Property.  Seller shall not
default with respect to the performance of any obligation relating to the
Property which would be binding on Buyer following the Closing or subject Buyer
to liability as the owner of the Property following the Closing.  Subject to Section 12, Seller shall
operate and maintain the Property in its current condition, reasonable wear and
tear excepted, in accordance with all applicable Laws.

 

6.4          Exclusive
Negotiations.  Seller shall (i) remove the Property from
the market and (ii) cease and refrain from any and all negotiations with any
other prospective tenants, optionees or purchasers of the Property, until the
earlier of the termination of this Agreement or the Closing.

 

6.5          Development
Activities.  Seller shall not take any actions with
respect to the development of the Property, including, without limitation,
applying for, pursuing, accepting or obtaining any permits, approvals or other
development entitlements from any governmental or other regulatory entities or
finalizing or entering into any agreements relating thereto without Buyer’s
prior written consent (which consent may be withheld in Buyer’s sole and
absolute discretion).

 

6.6          Service, Management and Employment Contracts. 
Seller shall not enter into, extend, renew or replace any existing
service, property management or employment contracts in respect of the Property
without Buyer’s prior written consent (which consent may be withheld in Buyer’s
sole and absolute discretion), which would be binding on Buyer following the
Closing, unless the same shall be cancelable without penalty or premium,

 

14

 

upon not more than 30 days’ notice from the owner of the Property and
Seller shall immediately notify Buyer of any such new, extended, renewed or
replaced contract.

 

6.7          Leases. 
Seller shall not enter into any new lease or occupancy agreement for the
Property without Buyer’s prior written consent (which consent may be withheld
in Buyer’s sole and absolute discretion).

 

6.8          Insurance.  Seller will maintain
its current insurance on the Property in place from the date hereof through the
Closing Date or earlier termination of this Agreement.

 

6.9          Litigation.  Following the Due
Diligence Termination Date, Seller shall not allow to be commenced on its
behalf any action, suit or proceeding with respect to all or any portion of the
Property without Buyer’s prior written consent (which consent may be withheld
in Buyer’s sole and absolute discretion). 
In the event Seller receives any notice of any proceeding of the
character described in Sections 4.11 or 4.13 which has not been
previously disclosed to Buyer prior to the Closing, Seller shall promptly
advise Buyer in writing.

 

7              CONDITIONS PRECEDENT TO CLOSING.

 

7.1          Buyer’s
Conditions.  The obligation of Buyer to render performance
under this Agreement is subject to the following conditions precedent (and
conditions concurrent, with respect to deliveries to be made by the parties at
Closing) (“Buyer’s Conditions”),
which conditions may be waived, or the time for satisfaction thereof extended,
by Buyer only in a writing executed by Buyer, it being expressly understood
that, subject to Section 6.1, the waiver of any of the following
conditions by Buyer shall prevent Buyer from pursuing any remedy Buyer may have
with respect to any breach hereunder by Seller:

 

7.1.1       Title.  Title Company shall
be prepared and irrevocably committed to issue (a) to Buyer an American Land
Title Association extended coverage owner’s policy of title insurance (Form
B)-1970 (expressly deleting any creditor’s rights exclusion) in favor of Buyer
in an amount equal to the Purchase Price showing indefeasible fee simple title
to the Real Property vested in Buyer, with those endorsements reasonably
requested by Buyer prior to the Due Diligence Termination Date, subject only to
the Lease and the Purchase Option and the Permitted Exceptions (collectively,
the “Owner’s Title Policy”).

 

7.1.2       Seller’s
Due Performance.  All of the representations and warranties of
Seller set forth in Section 4 shall be true and correct as of the
Closing Date, and Seller, on or prior to the Closing Date, shall have complied
with and/or performed all of the obligations, covenants and agreements required
on the part of Seller to be complied with or performed pursuant to the terms of
this Agreement, including, without limitation, the deliveries required to be
made by Seller pursuant to Sections 9.1 and 9.3 hereof.

 

7.1.3       Condition
of Property.  Subject to the provisions of Section 12
below, the condition of the Property shall be substantially the same on the
Closing Date as on

 

15

 

the Execution Date, except for reasonable wear and tear and any damages
due to any act of Buyer or Buyer’s representatives.

 

7.1.4       Bankruptcy.  No action or proceeding
shall have been commenced by or against Seller under the federal bankruptcy
code or any state law for the relief of debtors or for the enforcement of the
rights of creditors and no attachment, execution, lien or levy shall have
attached to or been issued with respect to the Property or any portion thereof.

 

7.1.5       Estoppel
Certificates.  Prior to the Due Diligence Termination Date,
Buyer shall have received and approved a fully executed original of each
CC&Rs Estoppel.

 

7.1.6       Property
Questionnaire. 
Buyer shall have received the Property Questionnaire for the Property,
completed by Seller, within the time frame required by Section 3.5.

 

7.1.7       No Moratoria. 
No moratorium, statute, regulation, ordinance, or federal, state, county
or local legislation, or order, judgment, ruling or decree of any governmental
agency or of any court shall have been enacted, adopted, issued, entered or
pending which would materially and adversely affect Buyer’s intended use of the
Property.

 

7.1.8       Repeat Representations, Warranties and Agreements.  Seller
shall repeat all of its representations, warranties and agreements set forth in
this Agreement as of the Closing Date, by delivery of the Seller’s Certificate
(as defined below).

 

7.2          Failure of
Buyer’s Conditions. 
Subject and without limitation to Buyer’s rights hereunder, including,
without limitation, Section 13.2 hereof, if any of Buyer’s Conditions
have not been fulfilled within the applicable time periods, Buyer may:

 

7.2.1       Waive and Close. 
Waive the Buyer’s Condition and close Escrow in accordance with this
Agreement, with or without adjustment or abatement of the Purchase Price; or

 

7.2.2       Terminate. 
Terminate this Agreement by delivering written notice to Seller and to
Escrow Agent, in which event Escrow Agent shall return the Deposit to Buyer,
the parties shall equally share the Cancellation Charges and neither party
shall thereafter have any rights or obligations to the other hereunder other
than any provisions hereof which expressly survive the termination of this Agreement.

 

7.3          Seller’s
Conditions.  The obligation of Seller to render
performance under this Agreement is subject to the following conditions
precedent (and conditions concurrent with respect to deliveries to be made by
the parties at Closing) (“Seller’s Conditions”),
which conditions may be waived, or the time for satisfaction thereof extended,
by Seller only in a writing executed by Seller:

 

7.3.1       Buyer’s
Due Performance.  All of the representations and warranties of
Buyer set forth in Section 5 hereof shall be true and correct as of the
Closing Date, and

 

16

 

Buyer, on or prior to the Closing Date, shall have complied with and/or
performed all of the obligations, covenants and agreements required on the part
of Buyer to be complied with or performed pursuant to the terms of this
Agreement.

 

7.3.2       Repeat
Representations,
Warranties and Agreements.  Buyer shall repeat all of its
representations, warranties and agreements set forth in this Agreement as of the
Closing Date, by delivery of the Buyer’s Certificate (as defined below).

 

7.3.3       Bankruptcy.  No action or
proceeding shall have been commenced by or against Buyer under the federal
bankruptcy code or any state law for the relief of debtors or for the enforcement
of the rights of creditors.

 

7.4          Failure
of Seller’s Conditions.  In the event of the failure of a Seller’s
Condition, Seller may terminate this Agreement by delivery of written notice to
Buyer and Escrow Agent, in which event Escrow Agent shall return the Deposit to
Buyer, the parties shall equally share the Cancellation Charges, and neither
party shall thereafter have any rights or obligations to the other hereunder,
other than pursuant to any provision hereof which expressly survives the termination
of this Agreement.

 

8              CLOSING.

 

8.1          Closing Date. 
Subject to the provisions of this Agreement, the Closing shall take
place on December 30, 2003, or on such other date as the parties hereto may
agree.  As used herein, the “Closing” shall mean the recordation of the
Deed in the Official Records of the County of San Diego, State of California
(the “Official Records”), and the
“Closing Date” shall mean the date
upon which the Closing actually occurs.

 

8.2          Closing Costs. 
Each party shall pay its own costs and expenses arising in connection
with the Closing (including, without limitation, its own attorneys’ and
advisors’ fees), except the following costs (the “Closing Costs”), which shall be allocated between the parties
as follows:

 

8.2.1       Seller
shall pay all documentary transfer, stamp, sales and other taxes related to the
transfer of the Property, 1⁄2 of Escrow Agent’s escrow fees and costs, and all
premiums, costs and fees related to the delivery of the CLTA portion of Owner’s
Title Policy and the endorsements listed on Exhibit J up to a maximum of
$2,000, and all recording fees related to the transfer of ownership of the
Property.

 

8.2.2       Buyer
shall pay 1⁄2 of Escrow Agent’s escrow fees and costs, the cost of the Survey,
the balance due for Owner’s Title Policy, and the cost of the UCC Search.

 

9              CLOSING DELIVERIES.

 

9.1          Deliveries
by Seller to Escrow. 
Not less than 1 Business Day prior to the Closing Date, Seller, at its
sole cost and expense, shall deliver or cause to be delivered into Escrow the
following documents and instruments, each effective as of the Closing Date and
executed by Seller, in addition to the other items and payments required by
this Agreement to be delivered by Seller:

 

17

 

9.1.1       Deed. 
The original executed and acknowledged Deed conveying the Property to
Buyer or its nominee;

 

9.1.2       Non-foreign
Affidavit.  2 originals of the Non-Foreign Affidavit in
the form of Exhibit M attached hereto, each executed by Seller;

 

9.1.3       California
FTB Form 597-W.  2 originals of a California FTB Form 597-W,
each executed by Seller in the form attached as Exhibit L;

 

9.1.4       Lease. 
3 original executed counterparts of the Lease in the form attached
hereto as Exhibit N (the “Lease”);

 

9.1.5       Bill of
Sale and Assignment.  2 original counterparts of the Bill of Sale
and Assignment in the form of Exhibit P attached hereto, each executed
by Seller, pursuant to which Seller shall transfer to Buyer all the Fixtures
and the Intangible Property, in each case free of all liens and encumbrances;

 

9.1.6       Seller’s
Certificate.  2 originals of a certificate, in the form of
Exhibit K attached hereto (the “Seller’s
Certificate”), each executed by Seller;

 

9.1.7       Memorandum of Lease and Purchase Option.  3
original executed counterparts of the Memorandum of Lease and Purchase Option
in the form attached hereto as Exhibit O (“Memorandum of Lease and Purchase Option”);

 

9.1.8       Proof of
Authority.  Such proof of Seller’s authority and
authorization to enter into this Agreement and the transaction contemplated
hereby, and such proof of the power and authority of the individual(s)
executing or delivering any instruments, documents or certificates on behalf of
Seller to act for and bind Seller as may be reasonably required by Title Company  or Buyer; and

 

9.1.9       Other. 
Such other documents and instruments, signed and properly acknowledged
by Seller, if appropriate, as may be reasonably required by Buyer, Escrow Agent, or otherwise in
order to effectuate the provisions of this Agreement and the Closing of the
transactions contemplated herein, including, without limitation, reasonable or
customary title affidavits and indemnities.

 

9.2          Deliveries by
Buyer.  On or before the Closing, Buyer, at its sole
cost and expense, shall deliver or cause to be delivered into Escrow the
following:

 

9.2.1       Balance, Prorations & Closing Costs. 
The balance of the Purchase Price pursuant to Section 2 hereof
and Buyer’s share of prorations and Closing Costs (as hereinafter defined), as
provided in Sections 10 and 8.2, respectively;

 

9.2.2       Lease.  3 original executed
counterparts of the Lease; and

 

9.2.3       Buyer’s
Certificate.  2 originals of a certificate, in the form of
Exhibit Q attached hereto (the “Buyer’s
Certificate”), each executed by Buyer.

 

18

 

9.2.4       Proof of Authority.  Such proof of
Buyer’s authority and authorization to enter into this Agreement and the
transaction contemplated hereby, and such proof of the power and authority of
the individual(s) executing or delivering any instruments, documents or
certificates on behalf of Buyer to act for and bind Buyer as may be reasonably
required by Title Companyor Seller;

 

9.2.5       Memorandum of Lease and Purchase Option.  3
original executed counterparts of the Memorandum of Lease and Purchase Option.

 

9.2.6       Other.  Such other documents
and instruments, signed and properly acknowledged by Buyer, if appropriate, as
may reasonably be required by Seller and Escrow Agent or otherwise in order to
effectuate the provisions of this Agreement and the closing of the transactions
contemplated herein.

 

9.3          Deliveries
Outside of Escrow. 
Seller shall deliver possession of the Property to Buyer upon the
Closing, subject to Seller’s rights as tenant under the Lease.  Further, Seller hereby covenants and agrees,
at its sole cost and expense, to deliver or cause to be delivered to deliver to
Buyer, on or prior to the Closing, the following items:

 

9.3.1       Intangible
Property.  The original of each document evidencing the
Intangible Property or rights to ownership and use thereof.

 

10           PRORATIONS.

 

10.1.1     Expenses. 
Assessments, improvement bonds and other expenses such as common area
maintenance costs affecting the Property shall be prorated between Buyer and
Seller as of the Closing Date to the extent due and payable for any period
prior to the Closing.

 

10.1.2     Adjustments. 
If any expenses attributable to the Property and allocable to the period
prior to the Closing are discovered or billed after the Closing, the parties
shall make any necessary adjustment after the Closing by cash payment to the
party entitled thereto so that Seller shall have borne all expenses allocable
to the period prior to the Closing and Buyer shall bear all expenses allocable
to the period from and after the Closing.

 

10.1.3     Generally. 
For purposes of calculating prorations, Buyer shall be deemed to be in
title to the Property after 12:01 a.m. (Los Angeles, California time) on the
Closing Date.  All such prorations shall
be made on the basis of the actual number of days of the month which shall have
elapsed as of the day of the Closing and based upon the actual number of days
in the month and a three hundred sixty-five (365) day year.  The provisions of this Section 10
shall survive the Closing for a period of 2 years.

 

10.2        Preliminary
Closing Statement.  10 days prior to the Closing, Escrow Agent
shall deliver to each of the parties for their review and approval a
preliminary closing statement (the “Preliminary
Closing Statement”) setting forth the Closing Costs allocable to
each of the parties pursuant to Section 8.2 hereof.  Based on each of the

 

19

 

party’s comments, if any, regarding the Preliminary Closing Statement,
Escrow Agent shall revise the Preliminary Closing Statement and deliver a
final, signed version of a closing statement to each of the parties at the
Closing (the “Closing Statement”).

 

11           ESCROW.

 

11.1        Opening of
Escrow.  Promptly following the Execution Date, Buyer
and Seller shall each cause a purchase and sale escrow (“Escrow”) to be opened with Escrow Agent by
delivery to Escrow Agent of 2 duplicate partially executed originals of this
Agreement executed by Seller and Buyer. 
Upon receipt of such partially executed originals of this Agreement,
Escrow Agent shall form 2 duplicate original counterparts of this Agreement and
telephonically confirm to Buyer and Seller the date upon which Escrow is opened
(the “Opening of Escrow”).  On or immediately after the Opening of
Escrow, Escrow Agent shall (a) confirm the same by executing and dating the 3
duplicate original counterparts of this Agreement in the space provided for
Escrow Agent, and (b) deliver a fully executed original of this Agreement to
each of Seller and Buyer.

 

11.2        Escrow
Instructions.  This Agreement shall constitute escrow
instructions to Escrow Agent as well as the agreement of the parties.  Escrow Agent is hereby appointed and
designated to act as Escrow Agent and instructed to deliver, pursuant to the
terms of this Agreement, the documents and funds to be deposited into Escrow as
herein provided.  The parties hereto
shall execute such additional escrow instructions, not inconsistent with this
Agreement as determined by counsel for Buyer and Seller, as Escrow Agent shall
deem reasonably necessary for its protection, if any (as may be modified by and
mutually acceptable to Buyer, Seller and Escrow Agent).  In the event of any inconsistency between
this Agreement and such additional escrow instructions, the provisions of this
Agreement shall govern.

 

11.3        Actions by
Escrow Agent.  Provided that Escrow Agent shall not have
received written notice from Buyer or Seller of the failure of any condition to
the Closing or of the termination of the Escrow and this Agreement, when Buyer
and Seller have deposited into Escrow the documents and funds required by this
Agreement, and Title Company is unconditionally and irrevocably committed to
issue the Owner’s Title Policy concurrently with the Closing, Escrow Agent
shall, in the order and manner herein below indicated, take the following
actions:

 

11.3.1     Recording. 
Following Title Company’s acknowledgment that it is prepared and
irrevocably committed to issue the Owner’s Title Policy to Buyer, cause the
Deed, the Memorandum of Lease and Purchase Option and any other documents which
the parties hereto may mutually direct to be recorded in the Official Records
and obtain conformed copies thereof for distribution to Buyer and Seller.

 

11.3.2     Funds. 
Upon receipt of confirmation of the recordation of the Deed and the
Memorandum of Lease and Purchase Option and such other documents as were
recorded pursuant to Section 11.3.1 above, disburse all funds deposited
with it by Buyer as follows:

 

20

 

(a)           Pursuant to the Closing Statement (as
hereinafter defined), retain for Escrow Agent’s own account all escrow fees and
costs, disburse to Title Company the fees and expenses incurred in connection
with the issuance of the Owner’s Title Policy, and disburse to any other persons
or entities entitled thereto the amount of any other Closing Costs;

 

(b)           Disburse to Seller an amount equal to the
Purchase Price, less or plus the net debit or credit to Seller by reason of the
prorations and allocation of Closing Costs provided for in Sections 10
and 8.2.  Seller’s portion (as
provided in Section 8.2) of the escrow fees, title fees and other
Closing Costs shall be paid pursuant to clause (a) above; and

 

(c)           Disburse to Buyer any remaining funds in the
possession of Escrow Agent after payments pursuant to clauses (a) and (b)
above have been completed.

 

11.3.3     Owner’s Title
Policy.  Cause Title Company to issue the Owner’s
Title Policy to Buyer.

 

11.3.4     Delivery of
Documents.  Deliver to Buyer and Seller one original of
each of all documents deposited into Escrow, other than the Deed and any other
recorded documents promptly after the Closing.

 

11.4        Conflicting
Demands.  Upon receipt of a written demand for the
Deposit (a “Deposit Demand”) by
Seller or Buyer (the “demanding party”),
Escrow Agent shall promptly send a copy of such Deposit Demand to the other
party (the “non-demanding party”).  Except in connection with the delivery of a
Due Diligence Termination Notice (in which event the Deposit shall be
immediately returned to Buyer), Escrow Agent shall hold the Deposit for 5
Business Days from the date of delivery by Escrow Agent of the Deposit Demand
to the non-demanding party (“Objection
Period”) or until Escrow Agent receives a confirming instruction
from the non-demanding party.  In the
event the non-demanding party delivers to Escrow Agent written objection to the
release of the Deposit to the demanding party (an “Objection Notice”) within the Objection Period (which
Objection Notice shall set forth the basis under this Agreement for objecting
to the release of the Deposit), Escrow Agent shall promptly send a copy of the
Objection Notice to the demanding party. 
In the event of any dispute between the parties regarding the release of
the Deposit, Escrow Agent, in its good faith business judgment, may disregard
all inconsistent instructions received from either party and may either (a)
hold the Deposit until the dispute is mutually resolved and Escrow Agent is
advised of such mutual resolution in writing by both Seller and Buyer, or Escrow
Agent is otherwise instructed by a final non-appealable judgment of a court of
competent jurisdiction, or (b) deposit the Deposit with a court of competent
jurisdiction by an action of interpleader (whereupon Escrow Agent shall be
released and relieved of any further liability or obligations hereunder from
and after the date of such deposit).  In
the event Escrow Agent shall in good faith be uncertain as to its duties or
obligations hereunder or shall receive conflicting instructions, claims or
demands from the parties hereto (expressly excluding however a conflicting
demand given by Seller after Buyer has delivered a Due

 

21

 

Diligence Termination Notice and demand for the Deposit), Escrow Agent
shall promptly notify both parties in writing and thereafter Escrow Agent shall
be entitled (but not obligated) to refrain from taking any action other than to
keep safely the Deposit until Escrow Agent shall receive a joint instruction
from both parties clarifying Escrow Agent’s uncertainty or resolving such
conflicting instructions, claims or demands, or until a final non-appealable
judgment of a court of competent jurisdiction instructs Escrow Agent to act.

 

11.5        Real
Estate Reporting Person.  Escrow Agent is designated the “real estate
reporting person” for purposes of section 6045 of title 26 of the United States
Code and Treasury Regulation 1.6045-4 and any instructions or settlement
statement prepared by Escrow Agent shall so provide.  Upon the consummation of the transaction contemplated by this
Agreement, Escrow Agent shall file Form 1099 information return and send the
statement to Seller as required under the aforementioned statute and
regulation.

 

11.6        Destruction
of Documents; Survival.  Escrow Agent is hereby authorized to destroy
or otherwise dispose of any and all documents, papers, instructions and other
material concerning the Escrow at the expiration of 6 years from the later of
(a) the Closing, (b) the final disbursement of any funds maintained in Escrow
after the Closing, or (c) the final release of the Deposit following the
termination of this Agreement.  The
provisions of this Section 11 shall survive the Closing or earlier
termination of this Agreement until Escrow Agent’s duties and obligations hereunder
are fully and finally discharged.

 

12           RISK
OF LOSS.

 

12.1        Condemnation. 
If, prior to the Closing Date, all or any material portion of the
Property is taken by condemnation or eminent domain (or is the subject of a
pending or contemplated taking which has not been consummated), Seller shall
immediately notify Buyer of such fact. 
In such event, Buyer shall have the option to terminate this Agreement
by delivering written notice to Seller not later than the earlier of (i) the
Closing Date, and (ii) 10 days after delivery of such notice from Seller.  Upon such termination, Escrow Agent shall
immediately return the Deposit to Buyer, the parties shall equally share the
Cancellation Charges, and neither party shall have any further rights or
obligations hereunder, other than pursuant to any provision hereof which
expressly survives the termination of this Agreement.  If Buyer does not elect to terminate this Agreement,  the terms of the Lease shall govern
distribution of proceeds and restoration regardless of the commencement of the
term thereof.

 

12.2        Casualty. 
Prior to the Closing and notwithstanding the pendency of this Agreement,
the entire risk of loss or damage or destruction of the Property shall be borne
and assumed by Seller.  If, prior to
Closing any part of the Property is damaged or destroyed, Seller shall
immediately notify Buyer of such fact. 
In the event that the amount of the damage caused by such event exceeds
$500,000, Buyer shall have the option to terminate this Agreement by delivering
written notice to Seller not later than the earlier of (i) the Closing Date,
and (ii) 10 days after delivery of such notice from Seller.  If Buyer does not elect to terminate this
Agreement, the terms of the Lease shall govern distribution of proceeds and restoration
regardless of the commencement of the term thereof .

 

22

 

13           DEFAULT.

 

13.1        Default
by Buyer.  IN THE EVENT THAT THE
ESCROW AND THIS TRANSACTION FAIL TO CLOSE AS A RESULT OF THE DEFAULT OF BUYER IN
THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT, PROVIDED THAT SELLER
IS READY, WILLING AND ABLE TO CLOSE, BUYER AND SELLER AGREE THAT SELLER’S
ACTUAL DAMAGES WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX AND THAT
THE AMOUNT OF THE DEPOSIT REPRESENTS THE PARTIES’ REASONABLE ESTIMATE OF SUCH
DAMAGES.  THE PARTIES THEREFORE AGREE
THAT IN THE EVENT THAT ESCROW AND THIS TRANSACTION FAIL TO CLOSE AS A RESULT OF
THE DEFAULT OF BUYER IN THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER AND SELLER
IS READY, WILLING AND ABLE TO PERFORM ITS OBLIGATIONS HEREUNDER, SELLER, AS
SELLER’S SOLE AND EXCLUSIVE REMEDY, IS ENTITLED TO LIQUIDATED DAMAGES IN THE
AMOUNT OF THE DEPOSIT THEN HELD BY ESCROW AGENT.  IN THE EVENT ESCROW FAILS TO CLOSE AS A RESULT OF BUYER’S DEFAULT
AND SELLER IS READY, WILLING AND ABLE TO PERFORM ITS OBLIGATIONS HEREUNDER,
THEN (1) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF BUYER AND SELLER
HEREUNDER AND THE ESCROW CREATED HEREBY SHALL TERMINATE, (2) ESCROW AGENT
SHALL, AND IS HEREBY AUTHORIZED AND INSTRUCTED TO, RETURN PROMPTLY TO BUYER AND
SELLER ALL DOCUMENTS AND INSTRUMENTS TO THE PARTIES WHO DEPOSITED THE SAME, AND
(3) ESCROW AGENT SHALL DELIVER THE DEPOSIT THEN HELD BY ESCROW AGENT TO SELLER
PURSUANT TO SELLER’S INSTRUCTIONS, AND THE SAME SHALL BE THE FULL, AGREED AND
LIQUIDATED DAMAGES.  THE PAYMENT OF SUCH AMOUNT AS LIQUIDATED
DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF
CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE
LIQUIDATED DAMAGES TO SELLER PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671,
1676 AND 1677.  SELLER HEREBY
WAIVES THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389.  SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE
READ AND UNDERSTAND THE PROVISIONS OF THIS SECTION 13.1, AND BY THEIR INITIALS
IMMEDIATELY BELOW AGREE TO BE BOUND BY ITS TERMS.

 

NOTHING
CONTAINED IN THIS SECTION IS INTENDED TO WAIVE OR OTHERWISE LIMIT SELLER’S
REMEDIES OR DAMAGES FOR CLAIMS OF SELLER AGAINST BUYER ARISING OUT OF SECTION
3.7 HEREOF OR WAIVE OR OTHERWISE LIMIT SELLER’S RIGHTS TO OBTAIN FROM BUYER
ALL COSTS AND EXPENSES OF ENFORCING ITS RIGHTS UNDER THIS AGREEMENT, INCLUDING
ATTORNEYS’ FEES AND COSTS.

 

	
   

  	
  /int./ JL

  	
   

  	
   

  	
  /int./ PN

  	
   

  
	
   

  	
  Seller’s Initials

  	
   

  	
  Buyer’s Initials

  

 

23

 

13.2        Default by Seller.  IF SELLER SHALL FAIL TO CONVEY THE PROPERTY TO BUYER
IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, AND SUCH FAILURE
CONSTITUTES A DEFAULT HEREUNDER, THEN BUYER SHALL HAVE THE RIGHT TO  PURSUE THE REMEDY SET FORTH IN EITHER SECTIONS
13.2.1 OR 13.2.2 BELOW, AS ITS SOLE AND EXCLUSIVE REMEDY:

 

13.2.1     SPECIFIC
PERFORMANCE.  THE RIGHT TO
PURSUE AN ACTION FOR THE SPECIFIC PERFORMANCE OF THIS AGREEMENT.  AS A CONDITION PRECEDENT TO BUYER’S RIGHT TO
PURSUE AN ACTION FOR SPECIFIC PERFORMANCE, BUYER MUST BE READY, WILLING AND
ABLE TO PERFORM ALL OF BUYER’S COVENANTS AND OBLIGATIONS THAT THIS AGREEMENT
CONTEMPLATES WILL BE PERFORMED OR DELIVERED ON OR BEFORE THE CLOSE OF ESCROW.

 

13.2.2     ACTUAL
DAMAGES.  THE RIGHT TO THE
RETURN OF THE DEPOSIT AND ALL INTEREST ACCRUED THEREON WHILE IN ESCROW AND TO
PURSUE AN ACTION OR ACTIONS FOR ACTUAL DAMAGES AGAINST SELLER RELATIVE TO SUCH
DEFAULT.  IN THE EVENT SPECIFIC
PERFORMANCE IS AVAILABLE AS A REMEDY TO BUYER AND BUYER CHOOSES INSTEAD THE
REMEDY SET FORTH IN THIS SECTION 13.2.2, THEN SUCH ACTION OR ACTIONS FOR
DAMAGES (INCLUDING ANY ACTION FOR ANY BREACH OF SELLER’S REPRESENTATIONS,
WARRANTIES OR COVENANTS) SHALL NOT SEEK NOR SHALL THE AGGREGATE OF ANY AWARDS
OBTAINED EXCEED THE AMOUNT OF $250,000.

 

BUYER FURTHER AGREES THAT UNLESS BUYER SHALL
BE ENTITLED TO SPECIFIC PERFORMANCE UNDER SECTION 13.2.1 ABOVE, IF BUYER
SEEKS OR FILES OR RECORDS A LIS PENDENS OR ANY OTHER MATTER, CLOUD OR NOTICE
AFFECTING TITLE OF THE PROPERTY, OR SEEKS OR CLAIMS A VENDEE’S LIEN UPON THE
PROPERTY, THEN, UPON PRESENTATION OF A COPY OF THIS AGREEMENT TO THE COURT,
SELLER SHALL BE ISSUED A DISMISSAL OF THE ACTION EX PARTE, THAT THE LIS PENDENS
OR OTHER NOTICES SHALL BE EXPUNGED UPON SELLER’S EX PARTE APPLICATION.

 

NOTHING
CONTAINED IN THIS SECTION IS INTENDED TO WAIVE OR OTHERWISE LIMIT BUYER’S
RIGHTS TO OBTAIN FROM SELLER ALL COSTS AND EXPENSES OF ENFORCING ITS RIGHTS
UNDER THIS AGREEMENT, INCLUDING ATTORNEYS’ FEES AND COSTS.

 

	
   

  	
  /int./ JL

  	
   

  	
  /int./ PN

  	
   

  
	
   

  	
  Seller’s Initials

  	
  Buyer’s Initials

  

 

24

 

14           BROKERS.

 

Seller and
Buyer each hereby represent, warrant to and covenant to each other that it has
not dealt with any third party, other than Cushman & Wakefield (“Brokers”) as Seller’s representative, in a
manner which would obligate the other to pay any brokerage commission, finder’s
fee or other compensation due or payable with respect to the transaction
contemplated hereby other than a commission to be paid to Brokers pursuant to a
separate agreement, which shall be paid by Seller only upon the Closing of the
purchase and sale contemplated hereby. 
Buyer represents and warrants to Seller that Buyer has not paid Brokers
any commission or compensation to Brokers in connection with the transaction
contemplated by this Agreement or otherwise in connection with the Property and
that it has not agreed to do so.  Seller
hereby indemnifies and agrees to protect, defend and hold Buyer harmless from
and against any and all claims, losses, damages, costs and expenses (including
attorneys’ fees, charges and disbursements) incurred by Buyer by reason of any
breach or inaccuracy of the representation, warranty and agreement of Seller
contained in this Section 14. 
Buyer hereby indemnifies and agrees to protect, defend and hold Seller
harmless from and against any and all claims, losses, damages, costs and
expenses (including attorneys’ fees, charges and disbursements) incurred by
Seller by reason of any breach or inaccuracy of the representation, warranty
and agreement of Buyer contained in this Section 14.  The provisions of this Section 14
shall survive the Closing or earlier termination of this Agreement.

 

15           CONFIDENTIALITY.

 

15.1        Buyer. 
Buyer agrees that until 5 years after the Closing (or if this Agreement
is terminated before Closing, 5 years after the termination), except as
otherwise provided herein or required by law and except for the exercise by
Buyer of any remedy hereunder, Buyer shall (a) keep confidential the pendency
of this transaction with Seller, the terms and conditions contained in the
Agreement and the identity of Seller and the documents and information supplied
by Seller to Buyer, (b) disclose such information only to Buyer’s agents,
employees, contractors, consultants or attorneys, as well as lenders (if any),
investment bankers, venture capital groups, investors, title company personnel,
auditors,  and prospective tenants, with
a need to know such information , provided that Buyer shall inform all persons
receiving such information from Buyer of the confidentiality requirement and
(to the extent within Buyer’s control) cause such confidence to be maintained,
and (c) upon the termination of this Agreement prior to the Closing, return to
Seller promptly upon request all copies of documents and materials supplied by
Seller.  Disclosure of information by
Buyer shall not be prohibited if that disclosure is of information that is or
becomes a matter of public record or public knowledge as a result of the Closing
of this transaction or from sources other than Buyer or its agents, employees,
contractors, consultants or attorneys or if disclosure is required under law or regulation.  Notwithstanding anything to the contrary
contained herein, Seller acknowledges that Buyer is a public company and that
Buyer may disclose the pendency and/or Closing of the transaction contemplated
by this Agreement in its public company filings.  Notwithstanding the foregoing, after the
Closing, and in connection with Buyer’s operation of the Property, Buyer shall
have the right to use and disclose the

 

25

 

Property Documents and information therein, except Property Documents
and information therein related to Seller’s financial position and
environmental conditions at the Property, which shall be subject to the
limitations set forth above.

 

15.2        Seller. 
Seller agrees that until 5 years after the Closing (or if this Agreement
is terminated before Closing, 5 years after the termination), except as
otherwise provided herein or required by law or regulation, and except for the
exercise by Seller of any remedy hereunder, Seller shall (a) keep confidential
the pendency of this transaction with Buyer, the terms and conditions contained
in the Agreement and the identity of Buyer and the relationship between Buyer
and the entity to which Buyer may assign this Agreement or which Buyer
designates as the party to whom Seller shall convey the Property at the
Closing, and (b) disclose such information only to Seller’s agents, employees,
contractors, consultants or attorneys, as well as Tenants and title company
personnel, with a need to know such information in connection with effecting
this transaction, provided that Seller shall inform all such persons receiving
such confidential information from Seller of the confidentiality requirement
and (to the extent within Seller’s control) cause such confidence to be
maintained.  Disclosure of information
by Seller shall not be prohibited if that disclosure is of information that is
or becomes a matter of public record or public knowledge as a result of the
Closing of this transaction or from sources other than Seller or its agents,
employees, contractors, consultants or attorneys, or if disclosure is required under law or regulation.  Notwithstanding anything to the contrary
contained herein, Buyer acknowledges that Seller is a public company and that
Seller may disclose the pendency and/or Closing of the transaction contemplated
by this Agreement in its public company filings.

 

16           INDEMNIFICATION.

 

Seller hereby
indemnifies and agrees to defend and hold Buyer harmless from and against any
claims, demands, obligations, losses, costs, damages, liabilities, judgments or
expenses (including reasonable attorneys’ fees, charges and disbursements)
arising out of or in connection with the ownership, operation or maintenance of
the Property prior to the Closing. 
Promptly after receipt by Buyer of notice of the commencement of any
action for which a claim for indemnification is to be made against Seller,
Buyer shall notify Seller in writing of such commencement, but the
omission to so notify Seller will not relieve Seller from any liability
that it may have to Buyer hereunder except to the extent that failure to
notify causes prejudice to Seller.  If any action is brought against
Buyer, and it notifies Seller of the commencement thereof, Seller will be
entitled to participate therein and, to the extent that it may elect by written
notice delivered to Buyer promptly after receiving the aforesaid notice of
commencement, to assume the defense thereof with counsel satisfactory to Buyer
in its discretion.  In the event Seller has so assumed the
defense of any action against Buyer, Buyer shall not settle such action without
Seller’s prior written consent, which consent shall not be unreasonably
withheld or delayed.  In the event
Seller, after notice from Buyer as set forth above, has not elected to assume
the defense in such action, Buyer may settle such action in its sole and absolute
discretion, provided that such settlement shall not waive any claims by Buyer
against Seller hereunder.  Seller
shall do, execute and deliver, or shall cause to be done, executed and
delivered, all such further acts and instruments which Buyer may reasonably
request in order to

 

26

 

more fully effectuate the
indemnifications provided for in this Agreement.  The provisions of this Section 16 shall survive the
Closing for a period of 24 months.

 

17           MISCELLANEOUS PROVISIONS.

 

17.1        Governing Law. 
This Agreement and the legal relations between the parties hereto shall
be governed by and construed and enforced in accordance with the laws of the
State of California, without regard to its principles of conflicts of law.

 

17.2        Entire
Agreement.  This Agreement, including the exhibits and
schedules attached hereto, constitutes the entire agreement between Buyer and
Seller pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, letters of intent, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements, express or implied, made to either party
by the other party in connection with the subject matter hereof except as
specifically set forth herein or in the documents delivered pursuant hereto or
in connection herewith.  Without
limiting the foregoing, upon the execution of this Agreement, the Letter of
Intent shall terminate and be of no further force or effect.

 

17.3        Modifications;
Waiver.  No supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by
the party to be bound thereby.  No
waiver of any provision of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.

 

17.4        Notices. 
All notices, consents, requests, reports, demands or other
communications hereunder (collectively, “Notices”)
shall be in writing and may be given personally, by reputable overnight
delivery service or by facsimile transmission (with in the case of a facsimile
transmission, with a copy by reputable overnight delivery service) to each of
the parties at the following addresses:

 

27

 

	
  To Buyer:

  	
  ARE - Nancy Ridge No. 3, LLC

  
	
   

  	
  Alexandria Real Estate Equities, Inc.

  
	
   

  	
  135 N. Los Robles Ave.

  
	
   

  	
  Suite 250

  
	
   

  	
  Pasadena, California 91101

  
	
   

  	
  Attention:

  	
  Corporate Secretary

  
	
   

  	
   

  	
  Re: 6138-6150
  Nancy Ridge Drive

  
	
   

  	
  Telephone:

  	
  (626) 578-0777

  
	
   

  	
  Facsimile:

  	
  (626) 578-0770

  
	
   

  	
   

  	
   

  
	
  With A Copy To:

  	
  Teel, Palmer & Roeper, LLP

  
	
   

  	
  11455 El Camino Real, Suite 300

  
	
   

  	
  San Diego, California  92130

  
	
   

  	
  Attention:

  	
  Elizabeth A. Willes, Esq.

  
	
   

  	
  Telephone:

  	
  (858) 794-2900

  
	
   

  	
  Facsimile:

  	
  (858) 794-2909

  
	
   

  	
   

  	
   

  
	
  To Seller:

  	
  Arena Pharmaceuticals, Inc.

  
	
   

  	
  6166 Nancy Ridge Drive

  
	
   

  	
  San Diego, California 92121

  
	
   

  	
  Attention:

  	
  Chief Financial Officer

  
	
   

  	
  Telephone:

  	
  (858) 453-7200

  
	
   

  	
  Facsimile:

  	
  (858) 677-0065

  
	
   

  	
   

  	
   

  
	
  With A Copy To:

  	
  Arena Pharmaceuticals, Inc.

  
	
   

  	
  6166 Nancy Ridge Drive

  
	
   

  	
  San Diego, California 92121

  
	
   

  	
  Attention:

  	
  General Counsel

  
	
   

  	
  Telephone:

  	
  (858) 453-7200

  
	
   

  	
  Facsimile:

  	
  (858) 677-0065

  
	
   

  	
   

  	
   

  
	
  To Escrow Agent:

  	
  Chicago Title Insurance Company

  
	
   

  	
  700 South Flower Street

  
	
   

  	
  Suite 900

  
	
   

  	
  Los Angeles, California  90017

  
	
   

  	
  Attention:  Maggie Watson

  
	
   

  	
  Telephone:

  	
  (213) 488-4337

  
	
   

  	
  Facsimile:

  	
  (213) 488-4388

  

 

or to such other address or such other person as the addressee party
shall have last designated by written notice to the other party.  Notices given by facsimile transmission
shall be deemed to be delivered as of the date and time of transmission; and
all other Notices shall have been deemed to have been delivered on the date of
delivery or refusal to accept delivery.

 

28

 

17.5        Expenses.  Subject to the
allocation of Closing Costs provided in Section 8.2 hereof, whether or
not the transactions contemplated by this Agreement shall be consummated, all
fees and expenses incurred by any party hereto in connection with this
Agreement shall be borne by such party.

 

17.6        Assignment.

 

17.6.1     Seller’s
Right to Assign.  Seller shall not have the right, power, or
authority to assign, pledge or mortgage this Agreement or any portion of this
Agreement, or to delegate any duties or obligations arising under this
Agreement, voluntarily, involuntarily, or by operation of law.

 

17.6.2     Buyer’s
Right to Assign.  Buyer shall not have the right, power, and
authority to assign this Agreement or to delegate any duties or obligations
arising under this Agreement, voluntarily, involuntarily or by operation of
law, to any person or entity without Seller’s prior written consent (which
consent shall not be unreasonably withheld or delayed).  Upon such assignment, Buyer shall be
relieved of all obligations under this Agreement and the Escrow.

 

17.7        Severability. 
Any provision or part of this Agreement which is invalid or
unenforceable in any situation in any jurisdiction shall, as to such situation
and such jurisdiction, be ineffective only to the extent of such invalidity and
shall not affect the enforceability of the remaining provisions hereof or the
validity or enforceability of any such provision in any other situation or in
any other jurisdiction, unless the absence of the invalid or unenforceable
provision(s) or part(s) adversely affects the substantive rights of one or both
of the parties.

 

17.8        Successors and Assigns; Third Parties. 
Subject to and without waiver of the provisions of Section 17.6
hereof, all of the rights, duties, benefits, liabilities and obligations of the
parties shall inure to the benefit of, and be binding upon, their respective
successors and assigns.  Except as
specifically set forth or referred to herein, nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person
or entity, other than the parties hereto and their successors or assigns, any
rights or remedies under or by reason of this Agreement.

 

17.9        Counterparts. 
This Agreement may be executed in as many counterparts as may be deemed
necessary and convenient, and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same instrument.

 

17.10      Headings. 
The section headings of this Agreement are for convenience of reference
only and shall not be deemed to modify, explain, restrict, alter or affect the
meaning or interpretation of any provision hereof.

 

17.11      Time of the
Essence.  Time shall be of the essence with respect to
all matters contemplated by this Agreement.

 

29

 

17.12      Further
Assistance.  In addition to the actions recited herein
and contemplated to be performed, executed, and/or delivered by Seller and
Buyer, Seller and Buyer agree to perform, execute and/or deliver or cause to be
performed, executed and/or delivered at the Closing or after the Closing any
and all such further acts, instruments, deeds and assurances as may be
reasonably required to consummate the transactions contemplated hereby.

 

17.13      Number and
Gender.  Whenever the singular number is used, and
when required by the context, the same includes the plural, and the masculine
gender includes the feminine and neuter genders.

 

17.14      Construction.  This Agreement shall
not be construed more strictly against one party hereto than against any other
party hereto merely by virtue of the fact that it may have been prepared by
counsel for one of the parties.

 

17.15      Intentionally Deleted.

 

17.16      Exhibits. 
All exhibits attached hereto are hereby incorporated by reference as
though set out in full herein.

 

17.17      Attorneys’ Fees. 
If any action is brought by either party against the other party,
relating to or arising out of this Agreement, the transaction described herein
or the enforcement hereof, the prevailing party shall be entitled to recover
from the other party reasonable attorneys’ fees, costs and expenses incurred in
connection with the prosecution or defense of such action.  For purposes of this Agreement, the term “attorneys’ fees” or “attorneys’ fees and costs” shall mean the
fees and expenses of counsel to the parties hereto, which may include printing,
photostating, duplicating and other expenses, air freight charges, and fees
billed for law clerks, paralegals and other persons not admitted to the bar but
performing services under the supervision of an attorney, and the costs and
fees incurred in connection with the enforcement or collection of any judgment
obtained in any such proceeding.  The
provisions of this Section shall survive the entry of any judgment, and shall
not merge, or be deemed to have merged, into any judgment.

 

17.18      Business Days. 
As used herein, the term “Business
Day” shall mean a day that is not a Saturday, Sunday or legal
holiday under the laws of the State of California.  In the event that the date for the performance of any covenant or
obligation under this Agreement shall fall on a Saturday, Sunday or legal holiday
under the laws of the State of California, the date for performance thereof
shall be extended to the next Business Day.

 

17.19      Tax-Free Exchange.  In the event
that Seller or Buyer desires to effectuate the transaction contemplated by this
Agreement as a tax-free exchange, then upon request made by Seller or Buyer,
the other party shall cooperate fully in effectuating such tax-free exchange,
such cooperation to include, without limitation, executing and delivering all
documents and instruments necessary, for such purpose, provided that the
exchanging party shall reimburse the other party for any costs or expenses
incurred by the other party in connection with such cooperation.  Each party (the “Indemnifying Party”) shall indemnify, protect, defend and hold
harmless the other party and all of the other party’s

 

30

 

Exculpated Parties (the “Indemnified
Party”) from and against any liability, loss, cost or expense
incurred by the Indemnified Party or any of its Exculpated Parties in
connection with the Indemnified Party’s cooperation with the Indemnifying Party
pursuant to this section or otherwise arising out of the Indemnifying Party’s
tax-deferred exchange.

 

[Remainder of page intentionally blank.]

 

31

 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the day and year first
above written.

 

	
  BUYER:

  	
  ARE – NANCY RIDGE NO. 3, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Alexandria Real Estate Equities, L.P.,

  
	
   

  	
   

  	
  a Delaware limited partnership,

  
	
   

  	
   

  	
  its managing member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  ARE-QRS Corp.,

  
	
   

  	
   

  	
   

  	
  a Maryland corporation,

  
	
   

  	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
  Execution Date: December 19, 2003

  	
   

  	
  By:

  	
   /s/ Peter J. Nelson

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Peter J.
  Nelson

  	
   

  
	
   

  	
   

  	
   

  	
  Its: 

  	
  Senior VP
  & Chief Financial Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SELLER:

  	
  ARENA
  PHARMACEUTICALS, INC.,

  a Delaware corporation  

  
	
   

  	
   

  	
   

  
	
  Execution Date: December 18, 2003

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Jack Lief

  
	
   

  	
  Name:

  	
  Jack Lief

  
	
   

  	
  Its:

  	
  President and Chief Executive Officer

  
											

 

ESCROW AGENT:

 

The undersigned Escrow Agent accepts the foregoing Agreement of
Purchase and Sale and Joint Escrow Instructions and agrees to act as Escrow
Agent under this Agreement in strict accordance with its terms.

 

	
  CHICAGO
  TITLE INSURANCE COMPANY

  	
  Date:

  	
  December        , 2003

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
								

 

32

 

EXHIBIT
A

 

LEGAL DESCRIPTION

 

PARCEL A:

 

PARCEL 9 OF PARCEL MAP NO. 17347, IN THE CITY
OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP
THEREOF FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY APRIL
13, 1994 AS DOCUMENT NO. 94-242762 OFFICIAL RECORDS.

 

PARCEL B:

 

A NONEXCLUSIVE EASEMENT FOR INGRESS AND
EGRESS BY VEHICULAR AND PEDESTRIAN TRAFFIC AND VEHICLE PARKING UPON, OVER AND
ACROSS THE “COMMON AREA” FOR THE BENEFIT OF THE OWNERS, PRESENT AND FUTURE, AND
THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, TENANTS, CUSTOMERS AND INVITEES,
TOGETHER WITH A NONEXCLUSIVE EASEMENT UNDER AND THROUGH THE “COMMON AREA” FOR
THE INSTALLATION, MAINTENANCE, REMOVAL AND REPLACEMENT OF WATER DRAINAGE
SYSTEMS OR STRUCTURES, WATER MAINS, SEWERS, WATER SPRINKLER SYSTEM LINES,
TELEPHONE OR ELECTRICAL CONDUITS OR SYSTEMS, GAS MAINS AND ANY OTHER PUBLIC
UTILITIES AND/OR SERVICE EASEMENTS, AS CREATED, SET FORTH, DEFINED, DESCRIBED
AND GRANTED IN THAT CERTAIN “DECLARATION OF RECIPROCAL EASEMENTS OF THE
SORRENTO RIDGE BUSINESS PARK PLANNED INDUSTRIAL DEVELOPMENT” RECORDED APRIL 13,
1994 AS DOCUMENT NO. 94-242763 OFFICIAL RECORDS.

 

(APN:  
343-350-26)

 

A-1

 

EXHIBIT
B

 

INCLUDED
FIXTURES

 

fume hoods, built-in cold rooms, built-in
warm rooms, walk-in cold rooms, walk-in warm rooms, deionized water systems,
glass washing equipment, cage washers, built-in autoclaves, chillers, built-in
plumbing and electrical systems, HVAC systems and equipment, vacuum pumps, air
compressors, and transfer switches.

 

B-1

 

EXHIBIT
C

 

ALLOCATION SCHEDULE

 

	
  Item

  	
   

  	
  Allocation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Real
  Property

  	
   

  	
  100

  	
  %

  
	
  Personal
  Property

  	
   

  	
  0

  	
  %

  
	
  Intangible
  Property

  	
   

  	
  0

  	
  %

  

 

C-1

 

EXHIBIT
D

 

PROPERTY DOCUMENTS

 

 

	
  No.

  	
   

  	
  Item

  	
   

  	
  Delivered

  	
   

  
	
  1.

  	
   

  	
  Other Property Information

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.          A
  list of Fixtures to be sold to Buyer (including any leased personal property)
  and all documentation evidencing the ownership thereof (specifically
  excluding all Fixtures not part of the sale to Buyer.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.          All
  documents evidencing the Intangible Property

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c.          Copies
  of all outstanding labor, service, equipment, supply, management,
  maintenance, concession, utility, construction and operating contracts, and
  any amendments thereto to which Seller is a party (collectively, the “Service
  Contracts”)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  d.          Property
  Sales Contracts (prior purchase and sales agreements with surviving
  representations, warranties, indemnities or preferential rights to purchase
  or lease, first right of negotiation or refusal regarding the same or other
  option rights)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  e.          Copies
  of any Ground Leases and amendments thereto

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  f.          Copies
  of existing Loan Documents, if assumption contemplated

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  g.         Copies
  of all Approvals

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  h.         Property
  Association Documents: including Conditions, Covenants and Restrictions,
  Association Articles of Incorporation and Bylaws, Financial Statements,
  Budgets and Information on Reserves, Reciprocal Easement Agreements

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  i.          Capital
  Improvement and Preventative Maintenance Program

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Drawings and Specifications, Maps, Plans
  and Photographs

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.          All
  as-built plans and specifications, site plans, aerial photographs, floor
  plans, CAD drawing and other similar maps, plans and drawings.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.          American
  Land Title Association (ALTA) Survey sufficient to obtain extended coverage
  Owner’s Policy of Title Insurance

  	
   

  	
   

  	
   

  

 

D-1

 

	
  No.

  	
   

  	
  Item

  	
   

  	
  Delivered

  	
   

  
	
  3.

  	
   

  	
  Financial Information

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.          Year
  end financial and monthly operating statements, and Income and expense
  statements for 2000 through 2002, and for the period from January 1, 2003
  through September 30, 2003

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.          Monthly
  general ledgers for 2002 and for the period from January 1, 2003 through September 30,
  2003

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c.          A
  budget for calendar year 2003

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  d.          A
  copy of the tax bill issued for the prior 3 years for real estate taxes

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  e.          Expense
  Records: including invoice receipts and disbursements

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  f.          Accounts
  Receivable and Payable Records: including current and breakdown of over 30,
  60 and 90 days

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  g.         Bank
  Statements and check registers for all operating accounts: for 2002 and for
  the period from January 1, 2003 through September 30, 2003

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  h.         Most
  recent audited financial statements, if audited within last two years

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  i.          Appraisals

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Insurance Information

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.          Statement
  of insurance coverage and premiums by policy type, and evidence of insurance

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.          Copies
  of all pending insurance claims and insurance-related litigation documents

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Governmental Documents

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.          Development
  Agreements

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.          Building
  Permits

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c.          Certificates
  of Occupancy/Completion

  	
   

  	
   

  	
   

  

 

D-2

 

	
  No.

  	
   

  	
  Item

  	
   

  	
  Delivered

  	
   

  
	
   

  	
   

  	
  d.          Variances

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  e.          Special
  Conditional Use Permits for Building

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  f.          Special
  Agreements with Utilities and Districts

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  g.         Environmental
  Impact Reports (EIR)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  h.         Negative
  declarations

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  i.          Other
  zoning, entitlements and developments rights agreements and information

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  j.          Any
  notices of violation, citations, or compliance orders related to the
  foregoing

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Engineering Reports and Studies

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.          Geological,
  soils, geotechnical, flood zone studies

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.          Mechanical,
  structural, electrical, architectural, engineering and physical inspection
  reports which relate to the physical condition, development and operation of
  the Property or recommended improvements thereto, including any seismic
  retrofit and ADA compliance reports.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c.          All
  reports, studies, audits, assessments and information concerning Material of
  Environmental Concern, if any including any investigation or remediation
  reports.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  d.          Any
  notices of violation, citations, or compliance orders related to the
  foregoing

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Seller Information

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.          Organizational
  Documents

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.          Authority
  Documents or Certificates

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Title Information

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.          Existing
  Title Policy

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.          Current
  Preliminary Title Report or Commitment and legible copies of all underlying
  documents referenced therein, deed

  	
   

  	
   

  	
   

  

 

D-3

 

	
  No.

  	
   

  	
  Item

  	
   

  	
  Delivered

  	
   

  
	
   

  	
   

  	
  vesting Seller
  with title, and any maps referenced in the legal description for the Property

  	
   

  	
   

  	
   

  

 

 

D-4

 

EXHIBIT
E

 

FORM OF ESTOPPEL CERTIFICATE

 

RE:          [Declaration of
Reciprocal Easements
dated                                 ]

 

The undersigned [Association] hereby
certifies
to                                 (“Buyer”)
as follows:

 

1.             As
of the date of this Estoppel Certificate, there exists no breach or default,
nor any state of facts which, with notice, the passage of time, or both, would
result in a breach or default under the Declaration on the part of Arena
Pharmaceuticals, Inc. (“Arena”) or the property located at
6138-6150 Nancy Ridge Drive, San Diego, California (the “Property”).

 

2.             The
owner of the Property is currently obligated to pay common area maintenance
charges of
$                     in
monthly installments and monthly installments of such charges have been paid by
Arena through
                     ,
200    .  Tenant’s
pro rata share of common area maintenance charges under the Declaration
is       %.

 

This Estoppel Certificate is made to Buyer in
connection with the prospective purchase by Buyer, or Buyer’s assignee, of the
Property.  This Estoppel Certificate may
be relied on by Buyer or Buyer’s assignee and any other party who acquires an
interest in the Premises in connection with such purchase or any person or
entity which may finance such purchase.

 

Dated this
                            day
of                     ,          

 

	
   

  	
  “ASSOCIATION”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  a

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:

  	
   

  
						

 

E-1

 

EXHIBIT
F

 

PROPERTY QUESTIONNAIRE

 

Name of Property:                                                                                                    
(the “Property”)

 

 

THIS
QUESTIONNAIRE SHOULD BE COMPLETED BY THE PROPERTY MANAGER OR THE MOST SENIOR
MANAGEMENT PERSON OF THE COMPANY THAT IS FAMILIAR WITH THE DETAILS OF THE
PROPERTY AND ITS OPERATION.

 

 

1.             Which of the following best describes the
Property?  (Check more than one box if
applicable.)

 

o    Scientific research and
development laboratory facility

o    Assembly, distribution, pilot
plant, or full-scale manufacturing facility

o    Headquarters or administrative
offices

o    Build-to-suit or retrofit
project

o    Warehouse facility

o    Raw land

o    Other (please describe):

 

 

2.             How
many different tenants currently lease space at the Property?

 

o    0 - 5

o    6 - 10

o    11 - 15

o    More than 15

 

F-1

 

3.             a              Does
any lease in connection with the Property provide for any rental payments based
upon the net income or profits of the tenant(1) or that are contingent in any
respect, other than rental payments that vary (i) as a percentage or
percentages of the tenant’s gross receipts or sales, or (ii) because of
“escalation clauses”?  If yes, please
explain.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

b.             Do
the terms of any lease contain “escalation clauses” other than standard
escalation provisions requiring adjustments in the amount of rent due based
upon changes in the consumer price index or in the costs of the Owner for
insurance, property taxes or maintenance expenses?  If yes, please list all such items that would potentially require
any adjustment under any escalation clause.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

List:

 

c.             In
connection with the lease of the Property, is any tenant entitled to receive
any economic incentives (e.g., “free” or reduced rent, tenant
improvement allowances, etc.)?  If yes,
please explain.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

d.             Are
the terms of all lease payments and formulas typical and customary for
properties of a character and quality similar to the Property that are located
in the same geographic market, and do these provisions conform with normal
business practice?  If no, please
explain which provisions are not typical or customary, or do not conform with
normal business practice.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

(1)           Responses to any
questions about leases or tenants should take into account, where applicable,
any subleases and sub-tenants.

 

F-2

 

e.             Which
of the following best describes the percentage of the leases that are “triple
net”?

 

	
  o  ALL

  	
   

  	
  o  MOST

  	
   

  	
  o  SOME

  	
   

  	
  o  NONE

  

 

4.             a              Is the percentage of the total rent
attributable to personal property more than 15 percent of the total rent from
any lease?

 

	
  o  YES

  	
   

  	
  o  NO

  

 

 

b.             Are
any temperature-controlled or other specialized rooms located at the Property (e.g., “cold rooms”, “warm rooms”, or
“clean rooms”)?  If yes, please list the
approximate number of such items located in each unit and/or floor.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

List:

 

 

c.             Do
any of the units at the Property contain any individual air conditioning,
heating, refrigeration, or freezer units that are owned or leased by the Owner,
other than centralized HVAC or any specialized rooms described in question
4(b)?  If yes, please describe.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

d.             Do
any of the units at the Property contain any movable lab benches or tables,
furniture (e.g., desks, chairs or
lamps), laboratory equipment (e.g.,
microscopes, centrifuges or glassware), boilers, air compressors, deionizing
apparatus, reverse osmosis apparatus, vacuum pumps, glassware washers, oven
dryers, animal washers, animal caging, incinerators, or other significant items
of specialized equipment that is owned or leased by the Owner?  If yes, please attach a list of such
items (if available).

 

	
  o  YES

  	
   

  	
  o  NO

  

 

 

5.             a.             Does any entity other than the Owner
manage the Property or any portion of the Property (the “Manager”)?  If yes, please identify the Manager:

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Name of
Manager:                                    

 

F-3

 

b.             If
the answer to question 5(a) is yes, are there any arrangements pursuant to
which the Manager refunds, rebates or otherwise provides any credit with
respect to its fee relating to the Property? 
If yes, please explain.

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

Explain:

 

 

c.             Does
the Owner employ any on-site personnel at the Property?  If yes, please name such person(s) and
describe their general duties.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

6.             a.             Are all services provided to tenants of
the Property by the Owner or the Manager (if applicable) typical and customary
for properties of a character and quality similar to the Property that are
located in the same geographic market? 
If no, please describe which services or arrangements are not typical
and customary.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

b.             Are
you aware of any other services provided to tenants by any person hired by the
Owner or the Manager that are not typical and customary for properties of a
character and quality similar to the Property that are located in the same
geographic market?  If yes, please
explain.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

7.             a.             Are there any arrangements for the Owner
or the Manager to provide architectural, construction or engineering services
to any tenant at the Property (e.g.,
“building-out” the Property as part of lease inducements)?

 

	
  o  YES

  	
   

  	
  o  NO

  

 

IF THE ANSWER TO
QUESTION 7(a) IS NO, PLEASE SKIP TO QUESTION 8; OTHERWISE, PLEASE ANSWER
QUESTIONS 7(b) THROUGH 7(d).

 

F-4

 

b.             Are
such arrangements only provided as an inducement to the tenant to enter into or
extend a lease?

 

	
  o  YES

  	
   

  	
  o  NO

  

 

c.             Are
such arrangements typical and customary for properties of a character and
quality similar to the Property that are located in the same geographic market?
 If no, please explain which
arrangements are not typical and customary.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

d.             Does
the Owner or the Manager expect to derive any income (e.g., development fees) from such
arrangements?  If yes, please describe.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

e.             Do
any such arrangements provide for the purchase, funding, or installation by the
Owner of any significant items of property which could be deemed to constitute
“personal property”?  If yes, please
describe any such items of property.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

8.             a.             Please check any utility services that the
Owner or the Manager directly or indirectly plays any role in providing to
tenants at the Property:

 

	
  o  Electric

  	
   

  	
  o  Gas

  	
   

  	
  o  Water

  	
   

  	
  o  Telephone

  	
   

  	
   

  
	
  o  Heat/Air cond.

  	
   

  	
  o  Sewage

  	
   

  	
  o  Facsimile

  	
   

  	
  o  Cable TV

  
	
  o  Other: (Please
  list)                                                                                   

  

 

b.             Are
all such utility services typical and customary for properties of a character
and quality similar to the Property that are located in the same geographic
market?  If no, please list any utility
services that are not typical and customary.

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

List:

 

F-5

 

c.             Are
tenants charged, either as a separate recoverable amount or as part of common
area maintenance costs, for all such utility services?  If no, please explain which services are
provided at no charge and whether this is a typical and customary practice for
properties of a quality and character similar to the Property that are located
in the same geographic market.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

d.             Are
individual units separately metered to measure utility usage, with tenants
charged by the Owner or the Manager, as appropriate, in proportion to
usage?  If no, please briefly explain
how charges for utilities are determined and allocated among the various
tenants (e.g., pro-rata based on
square footage, etc.).

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

Explain:

 

 

e.             If
any tenant is charged by the Owner or the Manager for any utility service, is
the tenant billed without any fee, income, profit or other markup over the
cost?  If no, please explain.

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

Explain:

 

 

f.              Does
the Owner or the Manager derive any income from any utility provider at the
Property?  If yes, please explain.

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

Explain:

 

 

9.             a.             Are pay telephones and vending (e.g., soda, cigarette, candy, etc.)
machines provided at the Property by the Owner, by the Manager, or by
third-party suppliers?  (Check more than
one response if appropriate.)

 

	
  o  OWNER

  	
   

  	
  o  MANAGER

  	
   

  	
  o  THIRD PARTY

  	
   

  	
  o  N/A

  

 

Explain:

 

F-6

 

b.             If
pay telephones or vending machines are provided or operated by a third-party
supplier, does that person pay the Owner or the Manager any rent, fee, or any
other amount?

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

 

c.             If
the answer to question 9(b) is yes, is such amount fixed or based upon a
percentage of gross receipts?  If it is
not fixed or based upon a percentage of gross receipts, please explain.

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

Explain:

 

 

10.           a.             Please check any of the following that
describes the parking provided at or with respect to the Property.  (Check more than one box if applicable.)

 

o    Open lot / no gated entry

o    Open lot / gated entry

o    Single level parking garage

o    Multi-tier parking garage

o    Specific spaces (or group of
spaces) reserved or preferential parking for tenant(s) or their employees

o    Cashier/parking lot attendant
on duty

o    Valet parking available

o    Security guard on duty

 

b.             Is
all parking at or with respect to the Property available to tenants (or to
their or employees or guests) without separate charge and only on an unreserved
basis (i.e., no tenant is
assigned particular space(s)), other than valet parking services (as described
in response to question 11(c) below) or reserved parking for handicapped
persons?  If no, please explain the
parking arrangements between the Owner and the tenants.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

c.             Are
there any attendants or are any additional related services provided (e.g., valet parking, security, car
wash)?  If yes, please describe the
functions of such person(s) and the nature of such services (including any
services indicated in response to question 10(a)).  In addition, please indicate whether any such services are
typical and customary

 

F-7

 

for properties of a similar character and quality as the Property that
are located in the same geographic market.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

d.             For
those persons who pay to park at the Property (including in connection with any
valet parking services), please indicate the period of time, if any, for which
their parking privileges are generally valid (e.g.,
hourly, daily, monthly, etc.).

 

Duration:                               

 

e.             Is
there a person or entity (an “Operator”) that either operates the parking
facilities or provides related services (e.g.,
valet services)?  If yes, please
identify the Operator and attach any separate agreement evidencing those arrangements.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Operator(s):                            

 

IF THE ANSWER TO
QUESTION 10(e) IS NO, PLEASE SKIP TO QUESTION 11; OTHERWISE, PLEASE ANSWER
QUESTIONS 10(f) THROUGH 10(h).

 

f.              Please
briefly explain the manner in which each Operator is compensated for its role
in providing parking (e.g., fixed
fee, percentage of gross parking revenues, etc.).

 

Explain:

 

 

g.             Does
either of the Owner or the Manager bear any portion of any Operator’s costs or
expenses?  If yes, please explain the
arrangement.

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

Explain:

 

F-8

 

h.             Does
either of the Owner or the Manager derive any income from the Operator or from
any parking charges?  If yes, please
explain.

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

Explain:

 

 

11.           Does the Owner or the Manager directly or
indirectly play any role in providing security services to individual
tenants?  Answer no if the only
involvement of these entities in providing security services is with respect to
the Property as a whole or its common areas, and not for individual units or
tenants.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

 

12.           a.             Does the Owner or the Manager directly or
indirectly play any role in providing janitorial services to individual
tenants?  Answer no if the only
involvement of these entities in providing janitorial services is with respect
to the Property as a whole or its common areas, and not for individual units or
tenants.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

IF
THE ANSWER TO QUESTION 12(a) IS NO, PLEASE SKIP TO QUESTION 13; OTHERWISE,
PLEASE ANSWER QUESTIONS 12(b) THROUGH 12(d).

 

b.             Is
the provision of such service typical and customary for properties of a
character and quality similar to the Property that are located in the same
geographic market?  If no, please
explain.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

c.             Does
the Owner or the Manager bear any portion of the cost or expense of providing
janitorial services to tenants?  If yes,
please explain.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

F-9

 

d.             Does
the Owner or the Manager derive any income in connection with the janitorial
services provided to tenants?  If yes,
please explain.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

e.             Are
tenants directly or indirectly charged for any janitorial services provided at
the Property?  If yes, please briefly
explain the manner in which these charges are determined (e.g., pro-rata based on relative square
footage).

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

13.           a.             Is the actual maintenance of the
Property’s common areas performed by employees of the Owner, the Manager, or an
unrelated third-party?  (Check more than
one response if appropriate.)

 

	
  o  OWNER

  	
   

  	
  o  MANAGER

  	
   

  	
  o  THIRD-PARTY

  

 

b.             Does
the Owner or the Manager bear any portion of the cost of common area
maintenance?  If yes, please explain.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

c.             Are
tenants charged for common area maintenance? 
If yes, please explain the manner in which these charges are determined
(e.g., pro-rata based on relative
square footage).

 

	
  o  YES

  	
   

  	
  o  NO

  

 

 

d.             Are
the services and arrangements with respect to the Property’s common area
maintenance typical and customary for properties of a character and quality
similar to the Property that are located in the same geographic market?  If no, please explain.

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

F-10

 

14.           Are any tenants charged by the Owner or the
Manager any fee or other amount that is not typically and customarily charged
in connection with the rental of properties of a character and quality similar
to the Property in the same geographic market?(2) If yes, please explain.

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

Explain:

 

 

15.           a.             Does the Owner or the Manager render any
services to any tenant (or to employees of any tenant) other than as disclosed
above in this questionnaire (e.g.,
glassware cleaning, electron microscopy, animal care or storage, information
services (e.g., Internet or LAN
connections), telecommunication services (e.g.,
voice mail), day care, babysitters, food services, etc.)?

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

b.             Are
all of the services described in the response to question 15(a) above typical
and customary for properties of a character and quality similar to the Property
that are located in the same geographic market?  If no, please describe which services or amenities are not
typical and customary.

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

Explain:

 

 

c.             Does
the Owner or the Manager directly or indirectly derive any income, bear any
costs or expenses, or employ any persons in connection with any atypical or
non-customary services indicated in the response to question 15(b) above?  If yes, please explain.

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

Explain:

 

(2)           Typical
and customary fees might include, in some markets, late payment fees,
subleasing fees, application fees, credit check fees, release fees, etc.

 

F-11

 

16.           Is any space at the Property leased to any
non-commercial tenants (i.e.,
residential tenants)?

 

	
  o  YES

  	
   

  	
  o  NO

  

 

 

17.           a.             Are any services rendered to any tenant by
third-party suppliers hired by the Owner or the Manager, other than as
previously disclosed in this questionnaire?

 

	
  o  YES

  	
   

  	
  o  NO

  

 

 

b.             If
the answer to question 17(a) above is yes, are all of those services typical
and customary for properties of a character and quality similar to the Property
that are located in the same geographic market?  If not, please describe which services are not typical and
customary.

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

Explain:

 

 

18.           Does any of the Owner, an Affiliate or the
Manager share in any income or compensation received by any third-party service
provider with respect to the rendering of services to any tenant, other than as
previously disclosed in this questionnaire? 
If yes, please explain the arrangements.

 

	
  o  YES

  	
   

  	
  o  NO

  	
   

  	
  o  N/A

  

 

Explain:

 

 

19.           Does the Company or the Manager engage in
any revenue-generating activities in connection with the Property not mentioned
previously in this questionnaire (other than the rental of real property or the
investment of excess cash)?

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

20.           a.             Does
the Owner separately lease any storage space at the Property?

 

	
  o  YES

  	
   

  	
  o  NO

  

 

F-12

 

b.             If
the answer to question 19(a) is yes, is such storage space a
temperature-controlled or other specialized room described in question 4(b) (e.g., freezer warehouse)?

 

	
  o  YES

  	
   

  	
  o  NO

  

 

Explain:

 

 

	
   

  	
  Arena
  Pharmaceuticals, Inc., a Delaware 

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Dated: December      , 2003

  	
   

  	
   

  
	
   

  	
  Signature

  
						

 

F-13

 

EXHIBIT
G

 

SURVEYOR’S CERTIFICATE

 

To:          ARE – NANCY RIDGE NO. 3, LLC, a Delaware
limited liability company, its successors and assigns, and Chicago Title
Company.

 

This is to certify that this map or plat and the survey on which it is
based were made on the date shown below of the premises described in Chicago
Title Company’s title commitment dated as
of                   ,
2003, issued under Order No.                   ,
(i) in accordance with the “Minimum Standard Detail Requirements for ALTA/ACSM
Land Title Surveys,” jointly established and adopted by ALTA, ACSM and NSPS in
1999, as defined therein, and includes Items 1, 2, 3, 4, 6, 7(a), 7(b), 7(c),
8, 9, 10, 11, 13, 14, 15 and 16 of Table A thereof and (ii) pursuant to the
Accuracy Standards (as adopted by ALTA and ACSM and in effect on the date of
this certification) of an Urban Survey, as defined therein.  This survey was also made in accordance with
the State of                   Minimum
Standards of Practice for Land Surveyors.

 

The subject property contains                   square
feet or       acres, is located in a zoning
district classification
of          , and contains
          regular parking
spaces
and          handicapped
parking spaces,
totaling          regular and
handicapped parking spaces.

 

The survey correctly shows the zone designation of any area shown as
being within a Special Flood Hazard Area according to current Federal Emergency
Management Agency Maps which make up a part of the National Flood Insurance
Administration Report; Community No.          ,
Panel
No.          dated          
          , 2003.

 

The subject property has ingress and egress to and
from                                       which
is a paved, public right-of-way.

 

The street address of the subject property is
                                                            .

 

[Surveyor’s Name]

 

 

	
  By

  	
   

  	
   

  	
  Date:

  	
   

  
	
                               Registered
  Land Surveyor No.                             

  
	
   

  	
   

  	
   

  
	
  Date of Survey:

  	
   

  	
   

  	
   

  
	
  Date of Last Revision:

  	
   

  	
   

  	
   

  
							

 

G-1

 

EXHIBIT
H

 

DEED

 

RECORDING REQUESTED
BY AND WHEN RECORDED MAIL TO:

 

Teel, Palmer & Roeper

11455 El Camino Real

Suite 300

San Diego, California 92130

Attention:              Elizabeth A. Willes,
Esq.

 

MAIL TAX STATEMENTS
TO:

 

ARE-                                                                     ,

 

 

 

GRANT DEED

 

The undersigned Grantor declares that Documentary Transfer Tax is not
part of the public records.

 

FOR A VALUABLE CONSIDERATION,
receipt of which is hereby acknowledged, Arena
Pharmaceuticals, Inc., a Delaware corporation (“Grantor”), hereby GRANTS to ARE-                                       ,
a                           (“Grantee”), that certain real property
located in the County
of                               ,
State of California and more particularly described in Exhibit A
attached hereto and incorporated herein by this reference (the “Property”), together with (i) all
improvements located thereon, (ii) all rights, privileges, easements and
appurtenances appertaining to the Property, and (iii) all right, title and
interest of Grantor (if any) in, to and under adjoining streets, rights of way
and easements

 

IN WITNESS WHEREOF,
Grantor has caused its duly authorized representatives to execute this
instrument as of
                   ,
2003.

 

	
  GRANTOR:

  	
  Arena
  Pharmaceuticals, Inc.,

  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  
	
  Assessor’s Parcel Number(s): 

  	
   

  	
   

  
							

 

H-1

 

	
  STATE OF CALIFORNIA

  	
  )

  
	
   

  	
  )

  
	
  COUNTY OF SAN DIEGO

  	
  )

  

 

On             ,
2003, before
me,                                         ,
a Notary Public in and for said State, personally appeared
                                         and
                                         ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.

 

	
   

  	
  WITNESS my hand and official seal.

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  (Seal)

  

 

H-2

 

EXHIBIT A

 

Legal Description of the Property

 

A-1

 

STATEMENT OF TAX DUE AND REQUEST

THAT TAX DECLARATION NOT BE MADE A PART

OF THE PERMANENT RECORD

IN THE OFFICE OF THE

COUNTY RECORDER

 

(Pursuant to Cal. Rev. and Tax Code Section
11932)

 

To:          Registrar – Recorder

County of San Diego

 

Request is hereby made in accordance with the provision of the
Documentary Transfer Tax Act that the amount of tax due not be shown on the
original document which names:

 

Arena Pharmaceuticals, Inc.,

a Delaware corporation, as Grantor,

 

and

 

ARE-                                          ,
a                                              ,
as Grantee.

 

The property described in the accompanying document is located in San
Diego County, California.

 

The amount of tax due to the County of San Diego on the accompanying
document is $                      ,
computed on full value of property conveyed.

 

	
  GRANTOR:

  	
   

  	
  Arena
  Pharmaceuticals, Inc.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
						

 

NOTE:    After
the permanent record is made, this form will be affixed to the conveying
document and returned with it.

 

A-2

 

EXHIBIT
I

 

NON-COMPLIANCE WITH LAWS

 

None.

 

I-1

 

EXHIBIT
J

 

ENDORSEMENTS

 

CLTA 100 modified for owner

 

CLTA 103.3 (as to exceptions 12 and 16 of
PTR)

 

CLTA 103.7 (access from physically open
street)

 

CLTA 116 (address)

 

CLTA 116.1 (same as survey)

 

CLTA 116.7 (subdivision map act)

 

CLTA 123.2 (zoning)

 

separate tax lot

 

mechanics’’ liens

 

J-1

 

EXHIBIT
K

 

SELLER’S CERTIFICATE

 

The
undersigned hereby certifies to ARE – NANCY RIDGE NO. 3, LLC (“Buyer”) that, as of the date hereof:

 

1.             all of the representations, covenants and
warranties of Arena Pharmaceuticals, Inc. (“Seller”) made in or pursuant to that certain Purchase and
Sale Agreement and Joint Escrow Instructions dated as of December
   , 2003 (the “Agreement”),
between Seller and ARE – NANCY RIDGE NO. 3, LLC (“ARE”) are true, accurate, correct and complete;

 

2.             all conditions to the Closing (as such
term is defined in the Agreement) that Seller was to satisfy or perform have
been satisfied and performed; and

 

3.             all conditions to the Closing that ARE or
Buyer was to perform have been satisfied and performed.

 

	
  Dated                        ,
  2003

  	
   

  	
  Arena
  Pharmaceuticals, Inc.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
							

 

K-1

 

EXHIBIT
L

 

FORM 597-W

 

L-1

 

EXHIBIT
M

 

NON-FOREIGN AFFIDAVIT

 

1.             Section 1445 of the Internal Revenue Code
of 1986, as amended (the “Code”),
provides that a transferee of a United States real property interest must
withhold tax if the transferor is a foreign person.

 

2.             In order to inform ARE – NANCY RIDGE NO.
3, LLC, a Delaware limited liability company, and its nominees, designees and
assigns (collectively, “Transferee”),
that withholding of tax is not required upon the disposition by Arena
Pharmaceuticals, Inc. (“Transferor”),
of the United States real property more particularly described on Exhibit A
attached hereto and incorporated herein by reference (the “Property”), the undersigned Transferor
certifies and declares by means of this certification, the following:

 

a.             Transferor is not a foreign person,
foreign corporation, foreign partnership, foreign trust or foreign estate (as
such terms are defined in the Code and the Income Tax Regulations).

 

b.             Transferor’s federal taxpayer
identification number
is:                        .

 

c.             Transferor’s address is:

 

 

3.             Transferor understands that this
certification may be disclosed to the Internal Revenue Service by Transferee
and that any false statement contained in this certification may be punished by
fine, imprisonment or both.

 

Under
penalties of perjury, Transferor declares that it has carefully examined this
certification and it is true, correct and complete.

 

Executed
this                day
of                       ,
2003 at San Diego, California.

 

	
  TRANFEROR:

  	
   

  	
  Arena
  Pharmaceuticals, Inc.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
							

 

M-1

 

EXHIBIT A

 

Legal Description

 

Parcel A:

 

Parcel 9 of Parcel Map No.
17347, in the city of san Diego, county of san Diego, state of California, according
to Map thereof filed in the office of the county recorder of san Diego county
April 13, 1994 as document no. 94-242762 official records.

 

Parcel B:

 

A nonexclusive easement for
ingress and egress by vehicular and pedestrian traffic and vehicle parking
upon, over and across the "common area" for the benefit of the
owners, present and future, and their respective successors and assigns,
tenants, customers and invitees, together with a nonexclusive easement under
and through the "common area" for the installation, maintenance,
removal and replacement of water drainage systems or structures, water mains,
sewers, water sprinkler system lines, telephone or electrical conduits or
systems, gas mains and any other public utilities and/or service easements, as
created, set forth, defined, described and granted in that certain
"declaration of reciprocal easements of the Sorrento ridge business park
planned industrial development" recorded April 13, 1994 as document no.
94-242763 official records.

 

(APN:   343-350-26)

 

A-1

 

EXHIBIT
N

 

FORM OF LEASE

 

[Lease filed as Exhibit 10.2 to
this Form 8-K]

 

N-1

 

EXHIBIT
O

 

MEMORANDUM OF LEASE AND PURCHASE OPTION

 

RECORDING REQUESTED
BY AND WHEN RECORDED RETURN TO:

 

Arena Pharmaceuticals, Inc.

6166 Nancy Ridge Drive

San Diego, California 92121

Attention:  Steven W. Spector,
Esq.

 

Space above line for recorder’s use only

 

 

MEMORANDUM
OF LEASE AND PURCHASE OPTION

 

THIS MEMORANDUM OF
LEASE AND PURCHASE OPTION (this “Memorandum”) is made
effective as of
                    ,
2003 by and among ARE – NANCY RIDGE NO. 3, LLC, a Delaware
limited liability company, (“Landlord”), and ARENA PHARMACEUTICALS, INC.,
a Delaware corporation (“Tenant”), who agree as follows:

 

1.             Lease.  Landlord hereby leases to Tenant, and Tenant
hereby hires from Landlord, upon and subject to the terms of that certain
unrecorded Lease Agreement
dated                         ,
2003 (the “Lease”), all of Landlord’s right, title and interest in and to
that certain real property known as 6138-6150 Nancy Ridge Drive, situated in
the City of San Diego, County of San Diego, State of California and more
particularly described in Exhibit A attached hereto and incorporated
herein by reference (the “Premises”).  The terms and provisions of the Lease are incorporated into this
Memorandum by this reference as though fully set forth herein.

 

2.             Term.  The term of the Lease will commence on
December                     ,
2003, and expires on
December                 ,
2018.

 

3.             Purchase
Option.  Landlord hereby grants to
Tenant an option to purchase the Premises, upon and subject to the terms of the
purchase option contained in the Lease (the “Purchase Option”).  The terms and provisions of the Purchase
Option (including a limitation on the amount of liens which may be secured by
deeds of trust or mortgages on the Premises) are incorporated into this
Memorandum by this reference as though fully set forth herein.

 

4.             No
Modification.  This Memorandum has
been executed for purposes of notice and recordation only and shall not modify
the terms and provisions of the Lease or Purchase Option in any manner.

 

O-1

 

5.             Counterparts.  This Memorandum may be executed in multiple
counterparts, and by each party on separate counterparts, each of which shall
be deemed an original and all of which shall constitute one and the same
instrument.

 

O-2

 

IN WITNESS WHEREOF,
the parties have executed this Memorandum of Lease and Purchase Option as of
the day and year first above written.

 

	
   

  	
  “Landlord”

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARE – NANCY RIDGE NO. 3, LLC,
a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Alexandria Real Estate Equities, L.P.,

  a Delaware limited partnership, its managing member 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  ARE-QRS Corp.,

  a Maryland corporation,

  its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “Tenant” 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARENA
  PHARMACEUTICALS, INC.,

  a Delaware corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title: 

  	
   

  	
   

  
														

 

O-3

 

EXHIBIT
P

 

BILL OF SALE AND ASSIGNMENT

 

THIS BILL OF SALE AND ASSIGNMENT (“Bill of Sale”) is made as of
                         ,
2003, by Arena Pharmaceuticals, Inc.,
a Delaware corporation (“Seller”),
to ARE-Nancy Ridge No. 3, LLC, a
Delaware limited liability company (“Buyer”).

 

RECITALS

 

A.            Seller is the owner of
that certain real property located in the County of San Diego, State of
California (the “Real Property”),
as more particularly described on Exhibit A attached hereto and
incorporated herein by reference.

 

B.            Buyer and Seller have
entered into that certain Purchase and Sale Agreement and Joint Escrow
Instructions dated as of December      , 2003
(the “Purchase Agreement”),
with respect to, among other things, the acquisition of the “Fixtures” and the “Intangible Property” (each as defined
below), and certain other property.

 

C.            The Purchase Agreement
requires Seller to convey all of Seller’s right, title and interest in, to and
under the Fixtures and the Intangible Property to Buyer.

 

NOW, THEREFORE, for
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Seller hereby agrees as follows:

 

1.             Unless
the context otherwise requires, all capitalized terms used but not otherwise
defined herein shall have the respective meanings provided therefor in the
Purchase Agreement.

 

a.             Seller
does hereby unconditionally, absolutely, and irrevocably grant, bargain, sell,
transfer, assign convey, set over and deliver unto Buyer all of Seller’s right,
title and interest in and to the Fixtures and Intangible Property, as such
terms are defined in the Purchase Agreement (collectively, the “Property”).

 

2.             Seller
represents and warrants that its title to the Property is free and clear of all
liens, mortgages, pledges, security interests, prior assignments, encumbrances
and claims of any nature other than the Permitted Exceptions.

 

3.             Seller
hereby agrees to indemnify, protect, defend and hold Buyer harmless from and
against any and all claims, losses, damages, costs and expenses (including,
without limitation, reasonable attorney’s fees and disbursements) incurred or
suffered by Buyer in connection with the Property and arising prior to the
Closing.  Buyer hereby agrees to
indemnify, protect, defend and hold Seller harmless from and against any and
all claims, losses, damages, costs and expenses (including, without limitation,
reasonable attorney’s fees and disbursements) incurred or suffered by Seller in
connection with the Property and arising on or after the Closing.

 

P-1

 

4.             This
Bill of Sale shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, legal representatives, successors and
assigns.

 

5.             This
Bill of Sale and the legal relations of the parties hereto shall be governed by
and construed and enforced in accordance with the laws of the State of
California, without regard to its principles of conflicts of law.

 

[Signatures on next page ]

 

P-2

 

IN WITNESS WHEREOF,
this Bill of Sale was made and executed as of the date first above written.

 

	
  SELLER:

  	
   

  	
  Arena
  Pharmaceuticals, Inc.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
						

 

P-3

 

EXHIBIT A

 

Legal Description

 

A-1

 

EXHIBIT
Q

 

BUYER’S CERTIFICATE

 

The
undersigned hereby certifies to ARENA
PHARMACEUTICALS, INC., a Delaware corporation (“Seller”) that, as of the date hereof:

 

1.             all of the representations, covenants and
warranties of ARE – NANCY RIDGE NO. 3, LLC,
a Delaware limited liability (“Buyer”)
made in or pursuant to that certain Purchase and Sale Agreement and Joint
Escrow Instructions dated as of
December       , 2003 (the “Agreement”), between Seller and Buyer
are true, accurate, correct and complete;

 

2.             all conditions to the Closing (as such
term is defined in the Agreement) that Buyer was to satisfy or perform have
been satisfied and performed; and

 

3.             all
conditions to the Closing that Seller was to perform have been satisfied and
performed.

 

	
   

  	
  ARE – NANCY RIDGE NO. 3, LLC,
a Delaware limited liability company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Alexandria Real Estate Equities, L.P.,

  a Delaware limited partnership, its managing member 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  ARE-QRS Corp.,

  a Maryland corporation, its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
											

 

Q-1

 

EXHIBIT
R

 

LITIGATION

 

None.

 

R-1

 

LIST OF EXHIBITS

 

	
  EXHIBIT
  A

  	
   

  	
  Legal
  Description

  
	
  EXHIBIT
  B

  	
   

  	
  Included
  Fixtures

  
	
  EXHIBIT
  C

  	
   

  	
  Allocation
  Schedule

  
	
  EXHIBIT
  D

  	
   

  	
  Property
  Documents

  
	
  EXHIBIT
  E

  	
   

  	
  Form
  of Estoppel Certificate

  
	
  EXHIBIT
  F

  	
   

  	
  Property
  Questionnaire

  
	
  EXHIBIT
  G

  	
   

  	
  Surveyor’s
  Certificate

  
	
  EXHIBIT
  H

  	
   

  	
  Deed

  
	
  EXHIBIT
  I

  	
   

  	
  Non-Compliance
  with Laws

  
	
  EXHIBIT
  J

  	
   

  	
  Endorsements

  
	
  EXHIBIT
  K

  	
   

  	
  Seller’s
  Certificate

  
	
  EXHIBIT
  L

  	
   

  	
  Form
  597-W

  
	
  EXHIBIT
  M

  	
   

  	
  Non-Foreign
  Affidavit

  
	
  EXHIBIT
  N

  	
   

  	
  Form
  of Lease

  
	
  EXHIBIT
  O

  	
   

  	
  Memorandum
  of Lease and Purchase Option

  
	
  EXHIBIT
  P

  	
   

  	
  Bill
  of Sale and Assignment

  
	
  EXHIBIT
  Q

  	
   

  	
  Buyer’s
  Certificate

  
	
  EXHIBIT
  R

  	
   

  	
  Litigation

  

 

vExhibit
10.2

 

LEASE AGREEMENT

 

THIS
LEASE AGREEMENT is made as of this 30th day of December, 2003, between ARE-Nancy
Ridge No. 3, LLC, a Delaware limited liability company (“Landlord”),
and Arena
Pharmaceuticals, Inc., a Delaware corporation, (“Tenant”).

 

BASIC LEASE PROVISIONS

 

Address:                       6138 – 6150 Nancy Ridge
Drive, San Diego, California  92121

 

Premises:                The entirety of the
Project.

 

Project:    The real property and the
buildings (referred to individually and collectively as the “Building”) together with all improvements thereon (collectively, the
“Improvements”) and appurtenances
thereto as described on Exhibit A.

 

Base Rent:            $110,561.10 per month

 

Security Deposit: 6 months’ Base
Rent     Commencement Date:  December 30, 2003

 

Term:              A
term beginning on the Commencement Date and ending December 30, 2018,
unless extended pursuant to Section 41 of this Lease.

 

Permitted Use:               Research
and development laboratory, related office and other related uses consistent
with the character of the Project and otherwise in compliance with the
provisions of Section 7 hereof.

 

	
  Address for Rent
  Payment:

  	
  Landlord’s Notice
  Address:

  
	
  135
  N. Los Robles Avenue, Suite 250

  Pasadena, CA 91101

  Attention: Accounts Receivable

  	
  135
  N. Los Robles Avenue, Suite 250

  Pasadena, CA 91101

  Attention: Corporate Secretary

  
	
   

  	
   

  
	
  Tenant’s Notice
  Address:

  	
   

  
	
  Arena
  Pharmaceuticals, Inc.

  6166 Nancy Ridge Drive

  San Diego, California 92121

  Attention:  Chief Financial Officer

  	
   

  

 

The
following Exhibits and Addenda are attached hereto and incorporated herein by this
reference:

 

EXHIBIT A –  DESCRIPTION
OF PROJECT

 

EXHIBIT B – INCLUDED
INSTALLATIONS

 

1.                                       Lease of Premises.  Upon and subject to all of the terms and
conditions hereof,  Landlord hereby
leases the Premises to Tenant and Tenant hereby leases the Premises from
Landlord.

 

2.                                       Delivery; Acceptance of Premises;
Commencement Date. Tenant has been in occupancy and possession of the Premises since,
with respect to 6138 Nancy Ridge Drive, August 31, 2001 and with respect
to 6150 Nancy Ridge Drive, May 4, 2000. 
Tenant 

 

1

 

acknowledges receipt and delivery of possession of
the Premises and that Tenant has examined title to, and the condition of, the
Premises prior to the execution and delivery of this Lease and has found the
same to be in good order and repair and satisfactory for all purposes
hereunder.  Tenant is renting the
Premises “as is” in its present condition. 
LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PREMISES OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO
COMPLIANCE WITH LEGAL REQUIREMENTS, AS TO QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT, OR AS TO LANDLORD’S TITLE THERETO OR
OTHERWISE, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.  TENANT ACKNOWLEDGES THAT THE PREMISES
(INCLUDING, WITHOUT LIMITATION, THE ENVIRONMENTAL CONDITION THEREOF) HAS BEEN
INSPECTED BY TENANT AND IS SATISFACTORY TO IT. 
TENANT SHALL ACCEPT THE PREMISES IN THEIR CONDITION AS OF THE
COMMENCEMENT DATE, SUBJECT TO ALL APPLICABLE LEGAL REQUIREMENTS (AS DEFINED IN SECTION 7
HEREOF); (II) LANDLORD SHALL HAVE NO OBLIGATION FOR ANY DEFECTS IN THE
PREMISES; AND (III) TENANT’S TAKING POSSESSION OF THE PREMISES SHALL BE
CONCLUSIVE EVIDENCE THAT TENANT ACCEPTS THE PREMISES AND THAT THE PREMISES WERE
IN GOOD CONDITION AT THE TIME POSSESSION WAS TAKEN.

 

3.                                       Rent.

 

(a)                                  Base Rent.  The first month’s Base Rent and the Security
Deposit shall be due and payable on the day immediately prior to the
Commencement Date.  Tenant shall pay to
Landlord in advance, without demand, abatement, deduction or set-off, monthly
installments of Base Rent on or before the first day of each calendar month
during the Term hereof in lawful money of the United States of America, at the
office of Landlord for payment of Rent set forth above, or to such other person
or at such other place as Landlord may from time to time designate in writing.  Payments of Base Rent for any fractional
calendar month shall be prorated.  The
obligation of Tenant to pay Base Rent and other sums to Landlord and the
obligations of Landlord under this Lease are independent obligations.  Tenant shall have no right at any time to
abate, reduce, or set-off any Rent (as defined below) due hereunder except for
any abatement as may be expressly provided in this Lease.

 

(b)                                 Additional Rent.  In addition to Base Rent, Tenant
agrees to pay to Landlord as additional rent (“Additional Rent”):  (i) Operating Expenses (as defined in Section 5),
and (ii) any and all other amounts payable by Tenant under the provisions of
this Lease, including, without limitation, any and all other sums that may
become due by reason of any default of Tenant or failure to comply with the
agreements, terms, covenants and conditions of this Lease to be performed by
Tenant, after any applicable notice and cure period.  Base Rent, Additional
Rent and all other amounts payable by Tenant to Landlord hereunder are
collectively referred to herein as “Rent.”

 

4.                                       Base Rent Adjustments.  Base Rent shall be increased  on each annual anniversary of the first day
of the first full month during the Term of this Lease (each an “Adjustment
Date”) by multiplying the Base Rent payable immediately before such
Adjustment Date by 2.5% and adding the resulting amount to the Base Rent
payable immediately before such Adjustment Date.  Base Rent, as so adjusted, shall thereafter be due as provided
herein.  Base Rent adjustments for any
fractional calendar month shall be prorated.

 

2

 

5.                                       Operating Expense Payments.  Landlord shall deliver to
Tenant a written estimate of Operating Expenses for each calendar year during
the Term (the “Annual Estimate”),
which may be revised by Landlord from time to time during such calendar
year.  During each month of the Term, on
the same date that Base Rent is due, Tenant shall pay Landlord an amount equal
to 1/12th of the Annual Estimate. 
Payments for any fractional calendar month shall be prorated.

 

(c)                                                                                  The
term “Operating
Expenses” means the following costs and expenses incurred or accrued
each calendar year by Landlord: assessments payable pursuant to the CC&R’s
affecting the Premises, insurance costs (including deductibles) for the
insurance carried pursuant to Section 17 and administration rent in
the amount of 2.0% of Base Rent).

 

Within 90 days after the end of each calendar year
(or such longer period as may be reasonably required), Landlord shall furnish
to Tenant a statement (an “Annual Statement”) showing in reasonable detail:  (a) the actual Operating Expenses for the
previous calendar year, and (b) the total of Tenant’s payments in respect of
Operating Expenses for such year.  If
actual Operating Expenses for such year exceeds Tenant’s payments of Operating
Expenses for such year, the excess shall be due and payable by Tenant as Rent
within 30 days after delivery of such Annual Statement to Tenant.  If Tenant’s payments of Operating Expenses
for such year exceed actual Operating Expenses for such year Landlord shall pay
the excess to Tenant within 30 days after delivery of such Annual Statement,
except that after the expiration, or earlier termination of the Term or if
Tenant is delinquent in its obligation to pay Rent, Landlord shall pay the
excess to Tenant after deducting all other amounts due Landlord.

 

The Annual Statement shall be final and binding
upon Tenant unless Tenant, within 30 days after Tenant’s receipt thereof, shall
contest any item therein by giving written notice to Landlord, specifying each
item contested and the reason therefor.

 

6.                                       Security
Deposit.  Tenant
shall deposit with Landlord, upon delivery of an executed copy of this Lease to
Landlord, a security deposit (the “Security Deposit”) for the performance of all of Tenant’s
obligations hereunder in the amount set forth in the Basic Lease Provisions,
which Security Deposit shall be in the form of an unconditional and irrevocable
letter of credit (the “Letter of Credit”): 
(i) in form and substance reasonably satisfactory to Landlord, (ii)
naming Landlord as beneficiary, (iii) expressly allowing Landlord to draw upon
it at any time from time to time by delivering to the issuer a certification
that Landlord is entitled to draw thereunder, (iv) issued by an FDIC-insured
financial institution reasonably satisfactory to Landlord, (v) redeemable by
presentation of a sight draft together with the certification described in
subsection (iii) above,and (vi) with an expiration
date no earlier than 1 year from the date of issue (as extended from time to
time, the “Expiration Date”); provided, however, that the Letter of
Credit shall be automatically extended each year for successive terms of 1 year
each until 60 days after the expiration of the Term unless the issuer notifies
Landlord by certified mail, return receipt requested, at least 60 days before
the then scheduled Expiration Date that issuer has elected not to extend the
Expiration Date.  If Tenant does not
provide Landlord with a substitute Letter of Credit complying with all of the
requirements hereof at least 10 days before the stated expiration date of any
then current Letter of Credit, Landlord shall have the right to draw the full
amount of the current Letter of Credit and hold the funds drawn in cash without
obligation for interest thereon as the Security Deposit.  Tenant shall have the right to substitute a
replacement Letter of Credit that meets the requirements of this Section 6 from time to time, in which case the Letter of Credit then held by
Landlord shall be returned to Tenant or as designated by Tenant in exchange for
such replacement Letter of Credit.  The
Security Deposit shall be held 

 

3

 

by Landlord as security for
the performance of Tenant’s obligations under this Lease.  The Security Deposit is not an advance
rental deposit or a measure of Landlord’s damages in case of Tenant’s
default.  Upon each occurrence of a Default
(as defined in Section 20), Landlord may use all or any part of the
Security Deposit to pay delinquent payments due under this Lease, and the cost
of any damage, injury, expense or liability caused by such Default, without
prejudice to any other remedy provided herein or provided by law.  Upon any such use of all or any portion of
the Security Deposit, Tenant shall pay Landlord on demand the amount that will
restore the Security Deposit to the amount set forth in the Basic Lease
Provisions.  Tenant hereby waives the
provisions of any law, now or hereafter in force, which provide that Landlord
may claim from a security deposit only those sums reasonably necessary to
remedy defaults in the payment of Rent, to repair damage caused by Tenant or to
clean the Premises, it being agreed that Landlord may, in addition, claim those
sums reasonably necessary to compensate Landlord for any other loss or damage,
foreseeable or unforeseeable, caused by the act or omission of Tenant or any
officer, employee, agent or invitee of Tenant. 
Upon 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 periods prior to the filing of such
proceedings.  Upon any such use of all
or any portion of the Security Deposit, Tenant shall, within 5 days after
demand from Landlord, restore the Security Deposit to its original amount.  If Tenant shall fully perform every
provision of this Lease to be performed by Tenant, the Security Deposit, or any
balance thereof (i.e., after deducting therefrom all amounts to which Landlord
is entitled under the provisions of this Lease), shall be returned to Tenant
(or, at Landlord’s option, to the last assignee of Tenant’s interest hereunder)
within 60 days after the expiration or earlier termination of this Lease.

 

If Landlord transfers
its interest in the Project or this Lease, Landlord shall either (a) transfer
any Security Deposit then held by Landlord to a person or entity assuming
Landlord’s obligations under this Section 6, or (b) return to
Tenant any Security Deposit then held by Landlord and remaining after the
deductions permitted herein.  Upon such
transfer to such transferee or the return of the Security Deposit to Tenant,
Landlord shall have no further obligation with respect to the Security Deposit,
and Tenant’s right to the return of the Security Deposit shall apply solely
against Landlord’s transferee.  The
Security Deposit is not an advance rental deposit or a measure of Landlord’s
damages in case of Tenant’s default. 
Landlord’s obligation respecting the Security Deposit is that of a
debtor, not a trustee, and no interest shall accrue thereon.

 

7.                                       Use.  The Premises shall be used solely for the
Permitted Use set forth in the Basic Lease Provisions, and in compliance with
all laws, orders, judgments, ordinances, regulations, codes, directives,
permits, licenses, covenants and restrictions now or hereafter applicable to
the Premises, and to the use and occupancy thereof, including, without
limitation, the Americans With Disabilities Act, 42 U.S.C. § 12101, et
seq. (together with the regulations promulgated pursuant thereto, “ADA”)
(collectively, “Legal Requirements” and each, a “Legal Requirement”). 
Tenant shall, upon 5 business days’ written notice from Landlord,
discontinue any use of the Premises which is declared by any federal, state,
regional, municipal, local or other governmental authority or agency,
including, without limitation, quasi-public agencies (collectively, “Governmental
Authority”) having jurisdiction to be a violation of a Legal
Requirement unless Tenant is contesting such determination by a Governmental
Authority as provided in Section 40(n).  Tenant will not use or permit the Premises to be used for any
purpose or in any manner that would void Tenant’s or Landlord’s insurance,
increase the insurance risk, or cause the disallowance of any sprinkler or
other credits unless Tenant pays any increased cost therefor.  Tenant shall not permit any part of the
Premises to be used as a

 

4

 

“place
of public accommodation”, as defined in the ADA or any similar legal
requirement.  Tenant shall reimburse
Landlord promptly upon demand for any additional premium charged for any such
insurance policy by reason of Tenant’s failure to comply with the provisions of
this Section or otherwise caused by Tenant’s use and/or occupancy of the
Premises.  Subject to Tenant’s
obligations under Section 28, Tenant will use the Premises in a
careful, safe and proper manner and will not commit or permit waste, overload
the floor or structure of the Premises, subject the Premises to use that would
materially damage the Premises or obstruct or use or allow the Premises to be
used for any unlawful purpose.  Tenant
shall not place any machinery or equipment in the Premises that would damage
the structure of the Building.

 

Tenant,
at its sole expense, as soon as reasonably practical, shall make any
alterations or modifications to the Premises that are required by Legal
Requirements (including, without limitation, compliance of the Premises with
the ADA).  Notwithstanding any other
provision herein to the contrary, Tenant shall be responsible for any and all
demands, claims, liabilities, losses, costs, expenses, actions, causes of action,
damages or judgments, and all reasonable expenses incurred in investigating or
resisting the same (including, without limitation, reasonable attorneys’ fees,
charges and disbursements and costs of suit) (collectively, “Claims”)
arising out of or in connection with Legal Requirements, and Tenant shall
indemnify, defend, hold and save Landlord harmless from and against any and all
Claims arising out of or in connection with any failure of the Premises to
comply with any Legal Requirement.

 

8.                                       Holding Over.  If, with Landlord’s express written consent,
Tenant retains possession of the Premises after the termination of the Term,
(i) unless otherwise agreed in such written consent, such possession shall be
subject to immediate termination by Landlord at any time, (ii) all of the other
terms and provisions of this Lease (including, without limitation, the
adjustment of Base Rent pursuant to Section 3 hereof) shall remain
in full force and effect (excluding any expansion or renewal option, purchase
option or other similar right or option) during such holdover period, (iii)
Tenant shall continue to pay Base Rent in the amount payable upon the date of
the expiration or earlier termination of this Lease or such other amount as
Landlord may indicate, in Landlord’s sole and absolute discretion, in such written
consent, and (iv) all other payments shall continue under the terms of this
Lease.  If Tenant remains in possession
of the Premises after the expiration or earlier termination of the Term without
the express written consent of Landlord, (A) Tenant shall become a tenant at
sufferance upon the terms of this Lease except that the monthly rental shall be
equal to 125% of Rent in effect during the last 30 days of the Term for the
first 30 days of holdover, and then 150% thereafter, and (B) Tenant shall be responsible
for all damages suffered by Landlord resulting from or occasioned by Tenant’s
holding over, including consequential damages. 
No holding over by Tenant, whether with or without consent of Landlord,
shall operate to extend this Lease except as otherwise expressly provided, and
this Section 8 shall not be construed as consent for Tenant to
retain possession of the Premises. 
Acceptance by Landlord of Rent after the expiration of the Term or
earlier termination of this Lease shall not result in a renewal or
reinstatement of this Lease.

 

9.                                       Taxes.

 

Tenant shall pay, before any fine, penalty,
interest or cost may be added for non-payment, all taxes, levies, assessments
and governmental charges of any kind (collectively referred to as “Taxes”)
imposed by any federal, state, regional, municipal, local or other governmental
authority or agency, including, without limitation, quasi-public agencies
(collectively, “Governmental Authority”) during the Term, including, without
limitation, all 

 

5

 

Taxes:  (i)
imposed on or measured by or based, in whole or in part, on rent payable to
Landlord under this Lease and/or from the rental by Landlord of the Project or
any portion thereof, or (ii) based on the square footage, assessed value or
other measure or evaluation of any kind of the Premises or the Project, or
(iii) assessed or imposed by or on the operation or maintenance of any portion
of the Premises or the Project, including parking, or (iv) assessed or imposed
by, or at the direction of, or resulting from statutes or regulations, or
interpretations thereof, promulgated by, any Governmental Authority, or (v)
imposed as a license or other fee on Landlord’s business of leasing space in
the Project and will promptly, upon request, furnish to Landlord copies of
official receipts or other satisfactory proof evidencing such payment.  Landlord, upon Tenant’s request, may contest
by appropriate legal proceedings the amount, validity, or application of any
Taxes or liens securing Taxes.  Taxes
shall not include any franchise taxes (however determined) or net income taxes
imposed on Landlord unless such net income taxes are in substitution for any
Taxes payable hereunder.  If any such
Tax is levied or assessed directly against Tenant, then Tenant shall be
responsible for and shall pay the same at such times and in such manner as the
taxing authority shall require.  Tenant
shall pay, prior to delinquency, any and all Taxes levied or assessed against
any personal property or trade fixtures placed by Tenant in the Premises,
whether levied or assessed against Landlord or Tenant.  If any Taxes on Tenant’s personal property
or trade fixtures are levied against Landlord or Landlord’s property, or if the
assessed valuation of the Project is increased by a value attributable to
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, Landlord shall have the right, but not the obligation, to pay such
Taxes.  The amount of any such payment
by Landlord shall constitute Additional Rent due from Tenant to Landlord
immediately upon demand.

 

Tenant shall have the right, after 15 days’ prior
written notice to Landlord, to contest the amount or validity of any Taxes
payable with respect to the Premises, in whole or in part, by appropriate
administrative and legal proceedings, either in its own name, Landlord’s name
or jointly with Landlord (but Landlord shall have no obligation under this Section 9
except to reasonably cooperate with Tenant as hereinafter provided), without
any cost or expense to Landlord, provided that if Landlord reasonably objects to
Tenant’s contest, Tenant shall not have the right to so contest Taxes.  Tenant may postpone payment of any such
contested Taxes pending the prosecution of such proceedings and any appeals so
long as such proceedings shall operate to prevent the collection of such Taxes
(and any fines or penalties) and the sale of the Premises to satisfy any lien
arising out of the nonpayment of the same. 
Tenant, upon the request of Landlord, shall furnish a bond to Landlord
sufficient to secure the payment of all contested Taxes, costs and expenses in
connection therewith as a pre-condition to undertaking any such contest.  In lieu of such bond, Tenant may elect to
pay such Taxes under protest.  Landlord,
at no cost to Landlord, will reasonably cooperate with Tenant in providing relevant
documentation or information pertaining to such contest, such as appraisals or
tax records.

 

10.                                 Parking.  Tenant shall have the exclusive use of all
parking areas of the Project during the Term, subject in all respects to all
covenants, conditions, easements and restrictions now or hereafter affecting
the Project (the “CC&R’s”) which include, without
limitation, easements for parking purposes.

 

11.                                 Utilities,
Services.  Tenant shall provide, and pay all charges for, water, electricity, heat, light,
power, telephone, sewer, and other utilities (including gas and fire sprinklers
to the extent the Project is plumbed for such services), refuse and trash
collection and 

 

6

 

janitorial
services (collectively, “Utilities”) as needed for Tenant’s
operation of the Premises.  Landlord
shall have no obligation to provide any Utilities to the Premises.

 

12.                                 Alterations and Tenant’s Property.  Any alterations, additions, or improvements
made to the Premises by or on behalf of Tenant, including additional locks or
bolts of any kind or nature upon any doors or windows in the Premises, but
excluding installation, removal or realignment of furniture systems (other than
removal of furniture systems owned or paid for by Landlord) not involving any
modifications to the structure or connections (other then by ordinary plugs or
jacks) to Building Systems (as defined in Section 14) (“Alterations”)
shall be subject to Landlord’s prior written consent, which may be given or
withheld in Landlord’s sole discretion if any such Alteration affects the
structure of the Building or Building Systems, but which shall otherwise not be
unreasonably withheld or delayed.  Tenant
may construct nonstructural Alterations in the Premises without Landlord’s
prior approval if the cost of any single Alteration does not exceed $25,000.00
and the aggregate cost of all such work in any 12 month period does not exceed
$150,000.00 (a “Notice-Only Alteration”), provided Tenant notifies Landlord in
writing of such intended Notice-Only Alteration, and such notice shall be
accompanied by plans, specifications, work contracts and such other information
concerning the nature and cost of the Notice-Only Alteration as may be
reasonably requested by Landlord, which notice and accompanying materials shall
be delivered to Landlord not less than 15 business days in advance of any
proposed construction.  Notwithstanding
the foregoing, Tenant shall not be required to notify Landlord in writing of
any Notice-Only Alteration where the cost is equal to or less than
$5,000.00.  If Landlord approves any Alterations,
Landlord may impose such conditions on Tenant in connection with the
commencement, performance and completion of such Alterations as Landlord may
deem appropriate in Landlord’s reasonable discretion.  Any request for approval shall be in writing, delivered not less
than 15 business days in advance of any proposed construction, and accompanied
by plans, specifications, bid proposals, work contracts and such other
information concerning the nature and cost of the alterations as may be
reasonably requested by Landlord, including the identities and mailing
addresses of all persons performing work or supplying materials.  Landlord’s right to review plans and
specifications and to monitor construction shall be solely for its own benefit,
and Landlord shall have no duty to ensure that such plans and specifications or
construction comply with applicable Legal Requirements.  Tenant shall cause, at its sole cost and
expense, all Alterations to comply with insurance requirements and with Legal
Requirements and shall implement at its sole cost and expense any alteration or
modification required by Legal Requirements as a result of any
Alterations.  Tenant shall pay to
Landlord, as Additional Rent, on demand an amount equal to 3% of all charges
incurred by Tenant or its contractors or agents in connection with any
Alteration to cover Landlord’s overhead and expenses for plan review,
coordination, scheduling and supervision. 
Before Tenant begins any Alteration, Landlord may post on and about the
Premises notices of non-responsibility pursuant to applicable law.  Tenant shall reimburse Landlord for, and
indemnify and hold Landlord harmless from, any expense incurred by Landlord by
reason of faulty work done by Tenant or its contractors, delays caused by such
work, or inadequate cleanup.

 

Tenant
shall provide (and cause each contractor or subcontractor to provide)
certificates of insurance for workers’ compensation and other coverage in
amounts and from an insurance company satisfactory to Landlord protecting
Landlord against liability for personal injury or property damage during
construction.  Upon completion of any
Alterations, Tenant shall deliver to Landlord: 
(i) sworn statements setting forth the names of all contractors and
subcontractors who did the work and final lien waivers from all such
contractors and subcontractors; and (ii) “as 

 

7

 

built”
plans for any such Alteration (except that for Notice–Only Alterations “as
built” plans are required only if already prepared by Tenant).

 

All real property
fixtures, built-in machinery and equipment, built-in casework and cabinets and
other similar additions and improvements built into the Premises so as to
become an integral part of the Premises, including without limitation, the
items described on Exhibit B attached hereto, now or hereafter located on or about the Premises or attached thereto (collectively, “Installations”), excluding the power generator, security
system, the waste storage building located west of the buildings on the Land
and Tenant’s personal property (“Tenant’s Personal Property”) (provided that
none of the items on Exhibit B shall be deemed Tenant’s Personal
Property), shall be and shall remain the property of Landlord during the Term
and following the expiration or earlier termination of the Term, shall not be
removed by Tenant at any time during the Term (unless replaced with an equal or
better Installation of the same type) and shall remain upon and be surrendered
with the Premises as a part thereof in accordance with Section 28
following the expiration or earlier termination of this Lease; provided,
however, that Landlord shall, at the time its approval of such
Installation is requested  notify Tenant if it has elected to cause
Tenant to remove such Installation upon the expiration or earlier termination
of this Lease.  If Landlord so elects,
Tenant shall remove such Installation upon the expiration or earlier
termination of this Lease and restore any damage caused by or occasioned as a
result of such removal, including, when removing any of Tenant’s Personal
Property which was plumbed, wired or otherwise connected to any of the Building
Systems, capping off all such connections behind the walls of the Premises and
repairing any holes.  During any such
restoration period, Tenant shall pay Rent to Landlord as provided herein as if
said space were otherwise occupied by Tenant. 
Notwithstanding the foregoing, none of Tenant’s Personal Property shall
be deemed “built-in” if the only method of attachment to the Premises is
bolting or bracing for safety purposes.

 

13.                                 Landlord’s Repairs.  Except as expressly set forth herein,
Landlord shall not under any circumstances be required to build any
improvements on the Premises, or to make any repairs, replacements, alterations
or renewals of any nature or description to the Premises, whether ordinary or
extraordinary, structural or non-structural, foreseen or unforeseen, or to make
any expenditure whatsoever in connection with this Lease, or to maintain the
Premises in any way.  Tenant hereby
waives the right to make repairs at the expense of Landlord pursuant to any law
in effect at the time of the execution this Lease or hereafter enacted.

 

14.                                 Tenant’s Repairs.  Tenant, at its expense, shall repair,
replace and maintain in good condition all portions of the Premises, including,
without limitation, all outside and parking areas, walls, foundation, roof, and
HVAC, plumbing, electrical, fire sprinklers, elevators and all other building
systems serving the Premises (“Building Systems”).  Such repair and replacement may include
capital expenditures and repairs whose benefit may extend beyond the Term.  Should Tenant fail to make any such repair
or replacement or fail to maintain the Premises, Landlord shall give Tenant notice
of such failure.  If Tenant fails to
commence cure of such failure within 30 days of Landlord’s notice, and
thereafter diligently prosecute such cure to completion, Landlord may perform
such work and shall be reimbursed by Tenant within 10 business days after
demand therefor; provided, however, that if such failure by Tenant creates or
could create an emergency, Landlord may immediately commence cure of such
failure and shall thereafter be entitled to recover the costs of such cure from
Tenant.  Subject to Section 18,
Tenant shall bear the full uninsured cost of any repair or replacement to any
part of the Project that results from damage caused by Tenant or any Tenant
Party.

 

8

 

15.                                 Mechanic’s Liens.  Tenant shall discharge, by bond or
otherwise, any mechanic’s lien filed against the Premises or against the
Project for work claimed to have been done for, or materials claimed to have
been furnished to, Tenant within 10 days after the filing thereof, at Tenant’s
sole cost and shall otherwise keep the Premises and the Project free from any
liens arising out of work performed, materials furnished or obligations
incurred by Tenant.  Should Tenant fail
to discharge any lien described herein, Landlord shall have the right, but not
the obligation, to pay such claim or post a bond or otherwise provide security
to eliminate the lien as a claim against title to the Project and the cost
thereof shall be immediately due from Tenant as Additional Rent.

 

If Tenant shall lease or finance the
acquisition of any of Tenant’s Personal Property of a removable nature utilized
by Tenant in the operation of Tenant’s business, Tenant warrants that any
Uniform Commercial Code Financing Statement filed as a matter of public record by
any lessor or creditor of Tenant will 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 Project be furnished on the
statement without qualifying language as to applicability of the lien only to
removable personal property, located in an identified suite held by
Tenant.  Landlord agrees to execute consent and waiver
forms reasonably acceptable to Landlord, consenting to the foregoing and
releasing any liens against specifically enumerated collateral in favor of any
purchase money seller, lessor or lender. 
Tenant acknowledges and agrees that it shall be reasonable for Landlord
to refuse to execute any consent and waiver form that (a) is blanket in nature
(i.e., fails to specifically enumerate the individual items of the subject
personal property), (b) provides for the potential continued presence of
Tenant’s Personal Property in the Premises following the expiration or earlier
termination of this Lease or (c) fails to permit Landlord to dispose of
Tenant’s personal Property if not removed by Tenant or such purchase money
seller, lessor or lender prior to the expiration or termination of this Lease.

 

16.                                 Indemnification.  Tenant hereby indemnifies and agrees to
defend, save and hold Landlord harmless from and against any and all Claims for
injury or death to persons or damage to property occurring within or about the
Premises, arising directly or indirectly out of use or occupancy of the
Premises or a breach or default by Tenant in the performance of any of its
obligations hereunder, unless caused solely by the willful misconduct or gross
negligence of Landlord.  Landlord shall
not be liable to Tenant for, and Tenant assumes all risk of damage to, personal
property (including, without limitation, loss of records kept within the
Premises).  Tenant further waives any
and all Claims for injury to Tenant’s business or loss of income relating to
any such damage or destruction of personal property (including, without
limitation, any loss of records). 
Landlord shall not be liable for any damages arising from any act,
omission or neglect of any tenant in the Project (if any) or of any other third
party.

 

17.                                 Insurance.  Landlord shall maintain all risk property
and, if applicable, sprinkler damage insurance covering the full replacement
cost of the Project or such lesser coverage amount as Landlord may elect provided
such coverage amount is not less than 90% of such full replacement cost.  Landlord shall further procure and maintain
commercial general liability insurance with a single loss limit of not less
than $2,000,000 for bodily injury and property damage with respect to the Project.  Landlord may, but is not obligated to,
maintain such other insurance and additional coverages as it may deem necessary
(provided Landlord has a reasonable basis for maintaining such insurance),
including, but not limited to, flood, environmental hazard and earthquake, loss
or failure of building equipment, errors and omissions, rental loss during the
period of repair or rebuilding, workers’ compensation insurance 

 

9

 

and
fidelity bonds for employees employed to perform services and insurance for any
improvements installed by Tenant or which are in addition to the standard
improvements customarily furnished by Landlord without regard to whether or not
such are made a part of the Project. 
All such insurance shall be included as part of the Operating
Expenses.  The Project may be included
in a blanket policy (in which case the cost of such insurance allocable to the
Project will be determined by Landlord based upon the insurer’s cost
calculations).  Tenant shall also
reimburse Landlord for any increased premiums or additional insurance which
Landlord reasonably deems necessary as a result of Tenant’s use of the
Premises.  Upon Tenant’s request,
Landlord shall provide information on the amounts and deductibles of the
insurance carried by Landlord pursuant to this Section 17.

 

Tenant,
at its sole cost and expense, shall maintain during the Term:  all risk property insurance with business
interruption and extra expense coverage of no less than 24 months, covering the
full replacement cost of all property and improvements owned by Tenant at
Tenant’s expense; workers’ compensation insurance with no less than the minimum
limits required by law; employer’s liability insurance with such limits as
required by law; commercial general liability insurance, with a minimum limit
of not less than $2,000,000 per occurrence for bodily injury and property
damage with respect to the Premises and
pollution legal liability insurance with a minimum limit of not less than
$2,000,000 per occurrence.  The
commercial general liability insurance policy shall name Landlord, its
officers, directors, employees, managers, agents, invitees and contractors
(collectively, “Landlord Parties”), as additional insureds.  The commercial general liability and
pollution legal liability insurance policies shall insure on an occurrence and
not a claims-made basis; shall be issued by insurance companies which have a
rating of not less than policyholder rating of A and financial category rating
of at least Class X in “Best’s Insurance Guide”; shall not be cancelable for
nonpayment of premium unless 30 days prior written notice shall have been given
to Landlord from the insurer; contain a hostile fire endorsement and a
contractual liability endorsement; and provide primary coverage to Landlord (any
policy issued to Landlord providing duplicate or similar coverage shall be
deemed excess over Tenant’s policies). 
Copies of such policies (if requested by Landlord), or certificates of
insurance showing the limits of coverage required hereunder and showing
Landlord as an additional insured, along with reasonable evidence of the
payment of premiums for the applicable period, shall be delivered to Landlord
by Tenant upon commencement of the Term and upon each renewal of said
insurance.  Tenant’s policy may be a
“blanket policy” with an aggregate per location endorsement which specifically
provides that the amount of insurance shall not be prejudiced by other losses
covered by the policy.  Tenant shall,
prior to the expiration of such policies, furnish Landlord with renewal
certificates.

 

In
each instance where insurance is to name Landlord as an additional insured,
Tenant shall upon written request of Landlord also designate and furnish
certificates so evidencing Landlord as additional insured to:  (i) any lender of Landlord holding a
security interest in the Project or any portion thereof, (ii) the landlord
under any lease wherein Landlord is tenant of the real property on which the
Project is located, if the interest of Landlord is or shall become that of a tenant
under a ground or other underlying lease rather than that of a fee owner,
and/or (iii) any management company retained by Landlord to manage the Project.

 

The
property insurance obtained by Landlord and Tenant shall include a waiver of
subrogation by the insurers and all rights based upon an assignment from its
insured, against Landlord or Tenant, and their respective officers, directors,
employees, managers, agents, invitees and contractors (“Related Parties”), in
connection with any loss or damage thereby insured against.  Neither party nor its respective Related
Parties shall be liable to the other for 

 

10

 

loss
or damage caused by any risk insured against under property insurance required
to be maintained hereunder, and each party waives any claims against the other
party, and its respective Related Parties, for such loss or damage.  The failure of a party to insure its
property shall not void this waiver. 
Landlord and its respective Related Parties shall not be liable for, and
Tenant hereby waives all claims against such parties for, business interruption
and losses occasioned thereby sustained by Tenant or any person claiming
through Tenant resulting from any accident or occurrence in or upon the Premises
or the Project from any cause whatsoever. 
If the foregoing waivers shall contravene any law with respect to
exculpatory agreements, the liability of Landlord or Tenant shall be deemed not
released but shall be secondary to the other’s insurer.

 

Landlord
may require insurance policy limits to be raised to conform with requirements
of Landlord’s lender.

 

18.                                 Restoration.  If, at any time during the Term, either Building is
damaged or destroyed by a fire or other insured casualty, Landlord shall notify
Tenant within 60 days after discovery of such damage as to the amount of time
Landlord reasonably estimates it will take to restore the Project or the
Premises, as applicable (the “Restoration Period”).  If the Restoration Period is estimated to
exceed 12 months (the “Maximum Restoration Period”), either
Landlord or Tenant may, by written notice to the other party within 10 days
after Landlord’s notice, elect to terminate this Lease as of the date that is
75 days after the date of discovery of such damage or destruction, subject to Section 39
of this Lease.  Unless  either
party so elects to terminate this Lease, Landlord shall, subject to receipt of
sufficient insurance proceeds (with any deductible to be treated as a current
Operating Expense), promptly restore the Premises (excluding any property or
improvements owned by Tenant), subject to delays arising from the collection of
insurance proceeds, from Force Majeure events or as needed to obtain any
license, clearance or other authorization of any kind required to enter into
and restore the Premises issued by any Governmental Authority having
jurisdiction over the use, storage, handling, treatment, generation, release,
disposal, removal or remediation of Hazardous Materials (as defined in Section 30)
in, on or about the Premises (collectively referred to herein as “Hazardous
Materials Clearances”); provided, however, (A)
that if repair or restoration of the Premises is not substantially complete as
of the end of the Maximum Restoration Period or, if longer, the Restoration
Period in each case due to circumstances outside of Landlord’s control,
Landlord may, in its sole and absolute discretion, elect not to proceed with
such repair and restoration, in which event Landlord shall be relieved of its
obligation to make such repairs or restoration and, subject to Section 39
below, this Lease shall terminate as of the date that is 75 days after the
later of:  (i) discovery of such damage
or destruction, or (ii) the date all required Hazardous Materials Clearances are
obtained, but Landlord shall retain any Rent paid and the right to any Rent
payable by Tenant prior to such election by Landlord, and (B) that if repair or
restoration of the Premises is not substantially complete as of the end of the
Maximum Restoration Period or, if longer, the Restoration Period, Tenant may
elect to terminate this Lease by written notice to Landlord given within 30
days after the end of the Maximum Restoration Period or the Restoration Period,
as the case may be, in which event Landlord shall be relieved of its obligation
to make such repairs or restoration and this Lease shall terminate as of the
date that is 75 days after the later of: 
(i) discovery of such damage or destruction, or (ii) the date all
required Hazardous Materials Clearances are obtained, but Landlord shall retain
any Rent paid and the right to any Rent payable by Tenant prior to such
election by Tenant.

 

11

 

Tenant, at its expense, shall promptly perform,
subject to delays arising from the collection of insurance proceeds, from Force
Majeure (as defined in Section 34) events or to obtain Hazardous
Material Clearances, all repairs or restoration not required to be done by
Landlord and shall promptly re-enter the Premises and commence doing business
in accordance with this Lease.

 

Notwithstanding
the first sentence of this Section 18, within the 60 days after the
occurrence of any damage to a Building where the cost to repair such damage is
equal to or less than $5,000.00, Tenant may elect by written notice to Landlord
to repair such damage, in which case Tenant shall be entitled to the insurance
proceeds therefore if disbursed by Landlord’s lender.

 

(a)                                  Abatement of Rent.  Rent due and payable hereunder
shall equitably abate for the portion of the Building which is unusable or
inaccessible by Tenant for the period commencing with the date all
required Hazardous Material Clearances are obtained until the Premises are
repaired and restored.

 

(b)                                 Uninsured Casualty.  Notwithstanding anything contained herein to
the contrary, in the event the damage or destruction of all or any portion of
either Building is not fully covered by the insurance proceeds, then subject to
Tenant’s right under Section 39, Landlord may within thirty (30)
days of such casualty, terminate this Lease by written notice to Tenant,
effective as of the date of such casualty; provided, however, that if
Landlord’s lender has made insurance proceeds available to Landlord to rebuild
the Premises, Tenant may prevent Landlord from terminating this Lease as set
forth herein by agreeing in writing with Landlord, in form reasonably
satisfactory to Landlord, to provide such shortfall.

 

(c)                                  Damage Near End of Term.  If the entirety of the Building or so much
thereof as to render the balance unusable by Tenant is destroyed or damaged
during the last twelve (12) months of the Term, then subject to Tenant’s right
under Section 39, either Landlord or Tenant may terminate this
Lease as of the date of such casualty and receipt of all Hazardous Materials
Clearances by giving written notice thereof to the other party within thirty
(30) days after the date of the casualty.

 

The
provisions of this Lease, including this Section 18, constitute an
express agreement between Landlord and Tenant with respect to any and all
damage to, or destruction of, all or any part of the Premises, or any other
portion of the Project, and any statute or regulation which is now or may
hereafter be in effect shall have no application to this Lease or any damage or
destruction to all or any part of the Premises or any other portion of the
Project, the parties hereto expressly agreeing that this Section 18
sets forth their entire understanding and agreement with respect to such
matters.

 

19.                                 Condemnation.  If the whole or any material part of the
Premises or the Project is taken for any public or quasi-public use under
governmental law, ordinance, or regulation, or by right of eminent domain, or
by private purchase in lieu thereof (a “Taking” or “Taken”), and the Taking
would either prevent or materially interfere with Tenant’s use of the Premises
or materially interfere with or impair Landlord’s ownership or operation of the
Project (as determined in accordance with Section 40(m) below),
then upon written notice by Landlord this Lease shall terminate and Rent shall
be apportioned as of said date.  In the
event of such termination, Tenant’s rights under Section 39 shall
apply.  If part of the Premises shall be
Taken, and this Lease is not terminated as provided above, Landlord shall
promptly restore the Premises and the Project as nearly as is commercially
reasonable under the circumstances to their condition prior to such partial
Taking and the rentable square footage of the Building, the rentable square
footage of the Premises, Operating Expenses and the Rent payable hereunder 

 

12

 

during the unexpired Term
shall be reduced to such extent as may be fair and reasonable under the
circumstances.  Upon any such Taking,
Landlord shall be entitled to receive the entire price or award from any such
Taking without any payment to Tenant, and Tenant hereby assigns to Landlord
Tenant’s interest, if any, in such award. 
Tenant shall have the right, to the extent that same shall not diminish
Landlord’s award, to make a separate claim against the condemning authority
(but not Landlord) for such compensation as may be separately awarded or
recoverable by Tenant for relocation and moving expenses and damage to Tenant’s
trade fixtures and personal property, if a separate award for such items is
made to Tenant.  Tenant hereby waives
any and all rights it might otherwise have pursuant to any provision of state
law to terminate this Lease upon a partial Taking of the Premises or the Project.

 

20.                                 Events of Default.  Each of the following events shall be a
default (“Default”)
by Tenant under this Lease:

 

(a)                                  Payment Defaults.  Tenant shall fail to pay any installment of
Rent or any other payment hereunder within five (5) days after receipt of
written notice from Landlord (sent on or after the first day of the applicable
month); provided
that for purposes of giving notice to Tenant under California Code
of Civil Procedure (“CCP”) Section 1161, Tenant shall be in
“default” upon Tenant’s failure to pay on the date due, and any such notice
under the first clause of this Section 20(a) will be in lieu of and
not in addition to any notice required under the provisions of California CCP
Section 1161.

 

(b)                                 Insurance.  Any insurance required to be maintained by
Tenant pursuant to this Lease shall be canceled or terminated or shall expire
or shall be reduced or materially changed, so as not to conform to the
insurance requirements under this Lease, or Landlord shall receive a notice of
nonrenewal of any such insurance and in each case Tenant shall fail to obtain
replacement insurance before the expiration of the current coverage.

 

(c)                                  Abandonment.  Tenant shall abandon the Premises and shall
not have reclaimed the Premises within 5 days after written notice from
Landlord.

 

(d)                                 Improper Transfer.  Tenant shall assign, sublease or otherwise
transfer or attempt to transfer all or any portion of Tenant’s interest in this
Lease or the Premises except as expressly permitted herein, and Tenant shall
not have corrected such action or reversed such transfer within 10 days after
written notice from Landlord, or Tenant’s interest in this Lease shall be
attached, executed upon, or otherwise judicially seized and such action is not
released within 90 days of the action.

 

(e)                                  Liens.  Tenant shall fail to discharge or otherwise
obtain the release by bonding or otherwise of any lien placed upon the Premises
in violation of this Lease within 30 days after any such lien is filed against
the Premises.

 

(f)                                    Insolvency
Events.  Tenant or any
guarantor or surety of Tenant’s obligations hereunder shall:  (A) make a general assignment for the
benefit of creditors; (B) commence any case, proceeding or other action seeking
to have an order for relief entered on its behalf as a debtor or to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or of any substantial part of its property (collectively a “Proceeding
for Relief”); (C) become the subject of any Proceeding for Relief
which is not dismissed within 120 days of its filing or entry; or (D) die or
suffer a legal disability (if Tenant, guarantor, or surety is an individual) or
be dissolved or otherwise fail to 

 

13

 

maintain its
legal existence (if Tenant, guarantor or surety is a corporation, partnership
or other entity).

 

(g)                                 Estoppel Certificate or Subordination
Agreement.  Tenant fails to
execute any document required from Tenant under Sections 23 or 27
within 5 business days after a second notice requesting such document.

 

(h)                                 Other Defaults.  Tenant shall fail to comply with any provision
of this Lease other than those specifically referred to in this Section 20,
and, except as otherwise expressly provided herein, such failure shall continue
for a period of 30 days after written notice thereof from Landlord to Tenant.

 

Any
notice given under Section 20(h) hereof shall:  (i) specify the alleged default, (ii) demand
that Tenant cure such default, (iii) be in lieu of, and not in addition to, or
shall be deemed to be, any notice required under any provision of applicable
law, and (iv) not be deemed a forfeiture or a termination of this Lease unless
Landlord elects otherwise in such notice; provided that if the nature of
Tenant’s default pursuant to Section 20(h) is such that it cannot
be cured by the payment of money and reasonably requires more than 30 days to
cure, then Tenant shall not be deemed to be in default if Tenant commences such
cure within said 30 day period and thereafter diligently prosecutes the same to
completion; provided, however, that such cure shall be completed
no later than 120 days from the date of Landlord’s notice unless Tenant is
proceeding in strict compliance with Section 40(n) below.

 

21.                                 Landlord’s Remedies.

 

(a)                                  Payment By Landlord; Interest.  Upon a Default by Tenant hereunder, Landlord
may, without waiving or releasing any obligation of Tenant hereunder, make such
payment or perform such act.  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 12% per annum or
the highest rate permitted by law (the “Default Rate”), whichever is less, shall be
payable to Landlord on demand as Additional Rent.  Nothing herein shall be construed to create or impose a duty on
Landlord to mitigate any damages resulting from Tenant’s Default hereunder.

 

(b)                                 Late Payment Rent.  Late payment by Tenant to Landlord of Rent
and other sums due will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult and impracticable
to ascertain.  Such costs include, but
are not limited to, processing and accounting charges and late charges which
may be imposed on Landlord under any Mortgage covering the Premises.  Therefore, if any installment of Rent due
from Tenant is not received by Landlord within 3 days after the date such
payment is due, then on the second such occasion during any 12 month period
during the Term, Tenant shall pay to Landlord an additional sum equal to 6% of
the overdue Rent as a late charge.  The
parties agree that this late charge represents a fair and reasonable estimate
of the costs Landlord will incur by reason of late payment by Tenant.  In addition to the late charge, Rent not
paid when due shall bear interest at the Default Rate from the 5th day after
the date due until paid.

 

(c)                                  Remedies.  Upon the occurrence of a Default, Landlord,
at its option, without further notice or demand to Tenant, shall have in
addition to all other rights and remedies provided in this Lease, at law or in
equity, the option to pursue any one or more of the following remedies, each
and all of which shall be cumulative and nonexclusive, without any notice or
demand whatsoever.

 

14

 

(i)                                     Terminate
this Lease, or at Landlord’s option, Tenant’s right to possession only, in
which event Tenant shall immediately surrender the Premises to Landlord, and if
Tenant fails to do so, Landlord may, without prejudice to any other remedy
which it may have for possession or arrearages in rent, enter upon and take possession
of the Premises and expel or remove Tenant and any other person who may be
occupying the Premises or any part thereof, without being liable for
prosecution or any claim or damages therefor;

 

(ii)                                  Upon
any termination of this Lease, whether pursuant to the foregoing Section 20(c)(i)
or otherwise, Landlord may recover from Tenant the following:

 

(A)                              The
worth at the time of award of any unpaid rent which has been earned at the time
of such termination; plus

 

(B)                                The
worth at the time of award of the amount by which the unpaid rent which would
have been earned after termination until the time of award exceeds the amount
of such rental loss that Tenant proves could have been reasonably avoided; plus

 

(C)                                Subject
to subdivision (c) of the California Civil Code Section 1951.2, the worth
at the time of award of the amount by which the unpaid rent for the balance of
the Term after the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus

 

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

 

(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 law.

 

The
term “rent”
as used in this Section 21 shall be deemed to be and to mean all
sums of every nature required to be paid by Tenant pursuant to the terms of
this Lease, whether to Landlord or to others. 
As used in Sections 21(c)(ii) (A) and (B), above, the “worth at the
time of award” shall be computed by allowing interest at the Default
Rate.  As used in Section 21(c)(ii)(C)
above, the “worth at the time of award” shall be computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San Francisco
at the time of award plus 1%.

 

(iii)                               Landlord
may continue this Lease in effect after Tenant’s Default and recover rent as it
becomes due (Landlord and Tenant hereby agreeing that Tenant has the right to
sublet or assign hereunder, subject only to reasonable limitations).  Accordingly, if Landlord does not elect to
terminate this Lease following a Default by Tenant, Landlord may, from time to
time, without terminating this Lease, enforce all of its rights and remedies
hereunder, including the right to recover all Rent as it becomes due.

 

15

 

(iv)                              Whether
or not Landlord elects to terminate this Lease following a Default by Tenant,
Landlord shall have the right to terminate any and all subleases, licenses,
concessions or other consensual arrangements for possession entered into by
Tenant and affecting the Premises or may, in Landlord’s sole discretion,
succeed to Tenant’s interest in such subleases, licenses, concessions or
arrangements.  Upon Landlord’s election
to succeed to Tenant’s interest in any such subleases, licenses, concessions or
arrangements, Tenant shall, as of the date of notice by Landlord of such
election, have no further right to or interest in the rent or other
consideration receivable thereunder.

 

(v)                                 Independent
of the exercise of any other remedy of Landlord hereunder or under applicable
law, Landlord may conduct an environmental test of the Premises as generally
described in Section 30(d)  hereof, at Tenant’s expense.

 

(d)                                 Effect of Exercise.  Exercise by Landlord of any remedies
hereunder or otherwise available shall not be deemed to be an acceptance of
surrender of the Premises and/or a termination of this Lease by Landlord, it
being understood that such surrender and/or termination can be effected only by
the express written agreement of Landlord and Tenant.  Any law, usage, or custom to the contrary notwithstanding,
Landlord shall have the right at all times to enforce the provisions of this
Lease in strict accordance with the terms hereof; and the failure of Landlord
at any time to enforce its rights under this Lease strictly in accordance with
same shall not be construed as having created a custom in any way or manner
contrary to the specific terms, provisions, and covenants of this Lease or as
having modified the same and shall not be deemed a waiver of Landlord’s right
to enforce one or more of its rights in connection with any subsequent
default.  A receipt by Landlord of Rent
or other payment with knowledge of the breach of any covenant hereof shall not
be deemed a waiver of such breach, and no waiver by Landlord of any provision of
this Lease shall be deemed to have been made unless expressed in writing and
signed by Landlord.  To the greatest
extent permitted by law, Tenant waives the service of notice of Landlord’s
intention to re-enter, re-take or otherwise obtain possession of the Premises
as provided in any statute, or to institute legal proceedings to that end, and
also waives all right of redemption in case Tenant shall be dispossessed by a
judgment or by warrant of any court or judge. 
Any reletting of the Premises or any portion thereof shall be on such
terms and conditions as Landlord in its sole discretion may determine.  Landlord shall not be liable for, nor shall
Tenant’s obligations hereunder be diminished because of, Landlord’s failure to
relet the Premises or collect rent due in respect of such reletting or
otherwise to mitigate any damages arising by reason of Tenant’s Default.

 

22.                                 Assignment
and Subletting.

 

(a)                                  General Prohibition.  Without Landlord’s prior written consent
subject to and on the conditions described in this Section 22,
Tenant shall not, directly or indirectly, voluntarily or by operation of law,
assign this Lease or sublease the Premises or any part thereof or mortgage,
pledge, or hypothecate its leasehold interest or grant any concession or
license within the Premises, and any attempt to do any of the foregoing shall
be void and of no effect.  If Tenant is
a corporation, partnership or limited liability company, the shares or other
ownership interests thereof which are not actively traded upon a stock exchange
or in the over-the-counter market, a transfer or series of transfers whereby
25% or more of the issued and outstanding shares or other ownership interests
of such corporation are, or voting control is, transferred (but excepting
transfers upon deaths of individual owners) from a person or persons or entity
or entities which were owners thereof at time of execution of this Lease to
persons or entities who were not owners of shares or other ownership interests
of the corporation, partnership or limited 

 

16

 

liability
company at time of execution of this Lease, shall be deemed an assignment of
this Lease requiring the consent of Landlord as provided in this Section 22.  Notwithstanding the foregoing, any public
offering of shares or other ownership interest in Tenant shall not be deemed an
assignment.

 

(b)                                 Permitted Transfers.  If Tenant desires to assign, sublease,
hypothecate or otherwise transfer this Lease or sublet the Premises other than
pursuant to a Permitted Assignment (as defined below), then at least 15 business
days, but not more than 45 business days, before the date Tenant desires the
assignment or sublease to be effective (the “Assignment Date”), Tenant
shall give Landlord a notice (the “Assignment Notice”) containing such
information about the proposed assignee or sublessee, including the proposed
use of the Premises and any Hazardous Materials proposed to be used, stored
handled, treated, generated in or released or disposed of from the Premises,
the Assignment Date, any relationship between Tenant and the proposed assignee
or sublessee, and all material terms and conditions of the proposed assignment
or sublease, including a copy of any proposed assignment or sublease in its
final form, and such other information as Landlord may deem reasonably
necessary or appropriate to its consideration whether to grant its
consent.  Landlord may, by giving
written notice to Tenant within 15 business days after receipt of the
Assignment Notice:  (i) grant such
consent, (ii) refuse such consent, in its sole and absolute discretion, if the
proposed assignment, hypothecation or other transfer or subletting concerns
more than (together with all other then effective subleases) 50% of the
Premises, (iii) refuse such consent, in its reasonable discretion, if the
proposed subletting concerns (together with all other then effective subleases)
50% or less of the Premises (provided that Landlord shall further have the
right to review and approve or disapprove the proposed form of sublease prior
to the effective date of any such subletting), or (iv) terminate this Lease
with respect to the space described in the Assignment Notice as of the
Assignment Date (an “Assignment Termination”).  If Landlord delivers notice of its election
to exercise an Assignment Termination, Tenant shall have the right to withdraw
such Assignment Notice by written notice to Landlord of such election within 5
business days after Landlord’s notice electing to exercise the Assignment
Termination.  If Tenant withdraws such
Assignment Notice, this Lease shall continue in full force and effect.  If Tenant does not withdraw such Assignment
Notice, this Lease, and the term and estate herein granted, shall terminate as
of the Assignment Date with respect to the space described in such Assignment
Notice.  No failure of Landlord to
exercise any such option to terminate this Lease, or to deliver a timely notice
in response to the Assignment Notice, shall be deemed to be Landlord’s consent
to the proposed assignment, sublease or other transfer.  Tenant shall reimburse Landlord for all of
Landlord’s reasonable out-of-pocket expenses in connection with its
consideration of any Assignment Notice, not to exceed $3,000.

 

Notwithstanding the foregoing, Tenant shall have
the right to assign this Lease or sublet all or any part of the Premises, upon
30 days prior written notice to Landlord but without obtaining Landlord’s prior
written consent, to a corporation or other entity which is a
successor-in-interest to Tenant, by way of merger, consolidation or corporate
reorganization, or by the purchase of all or substantially all of the assets or
the controlling ownership interests of Tenant provided that (i) such merger or
consolidation, or such acquisition or assumption, as the case may be, is for a
good business purpose and not principally for the purpose of transferring the
Lease, and (ii) the net worth (as determined in accordance with generally
accepted accounting principles (“GAAP”)) of the assignee is not less than
the net worth (as determined in accordance with GAAP) of Tenant as of the date
of Tenant’s most current quarterly or annual financial statements, and (iii)
such assignee shall agree in writing to assume all of the terms, 

 

17

 

covenants and conditions of this Lease arising
after the effective date of the assignment (a “Permitted Assignment or Subletting”).

 

In addition, Tenant shall have the right to allow
collaborators in Tenant’s business to use portions of the Premises on a
periodic, non-tenancy basis and such use shall not be deemed an assignment or
subletting hereunder which requires Landlord’s consent.

 

(c)                                  Additional Conditions.  As a condition to any such assignment or
subletting, whether or not Landlord’s consent is required, Landlord may
require:

 

(i)                                     that
any assignee or subtenant agree, in writing at the time of such assignment or
subletting, that if Landlord gives such party notice that Tenant is in default
under this Lease, such party shall thereafter make all payments otherwise due
Tenant directly to Landlord, which payments will be received by Landlord
without any liability except to credit such payment against those due under the
Lease, and any such third party shall agree to attorn to Landlord or its
successors and assigns should this Lease be terminated for any reason; provided,
however, in no event shall Landlord or its successors or assigns be
obligated to accept such attornment; and

 

(ii)                                  A
list of Hazardous Materials, certified by the proposed assignee or sublessee to
be true and correct, which the proposed assignee or sublessee intends to use,
store, handle, treat, generate in or release or dispose of from the Premises,
together with copies of all documents relating to such use, storage, handling,
treatment, generation, release or disposal of Hazardous Materials by the
proposed assignee or subtenant in the Premises or on the Project, prior to the
proposed assignment or subletting, including, without limitation:  permits; approvals; reports and
correspondence; storage and management plans; plans relating to the
installation of any storage tanks to be installed in or under the Project
(provided, said installation of tanks shall only be permitted after Landlord
has given its written consent to do so, which consent may be withheld in
Landlord’s sole and absolute discretion); and all closure plans or any other
documents required by any and all federal, state and local Governmental
Authorities for any storage tanks installed in, on or under the Project for the
closure of any such tanks.  Neither
Tenant nor any such proposed assignee or subtenant is required, however, to
provide Landlord with any portion(s) of the such documents containing
information of a proprietary nature which, in and of themselves, do not contain
a reference to any Hazardous Materials or hazardous activities.

 

(iii)                               An
increase in the amount of the Security Deposit.

 

(d)                                 No Release of Tenant, Sharing of Excess
Rents.  Notwithstanding any
assignment or subletting, Tenant shall at all times remain fully and primarily
responsible and liable for the payment of Rent and for compliance with all of
Tenant’s other obligations under this Lease. 
Except in connection with a Permitted Assignment or Subletting, if the
Rent due and payable by a sublessee or assignee (or a combination of the rental
payable under such sublease or assignment plus any bonus or other consideration
therefor or incident thereto in any form) exceeds the sum of  the
rental payable under this Lease, (excluding however, any Rent payable under
this Section) and actual and reasonable brokerage fees, legal costs and any
design or construction fees directly related to and required pursuant to the
terms of any such sublease) (“Excess Rent”), then Tenant shall be bound
and obligated to pay Landlord as Additional Rent hereunder 50% of such Excess
Rent within 10 days following receipt thereof by Tenant.  If Tenant shall sublet the Premises or any
part thereof, Tenant hereby immediately and 

 

18

 

irrevocably
assigns to Landlord, as security for Tenant’s obligations under this Lease, all
rent from any such subletting, and Landlord as assignee and as attorney-in-fact
for Tenant, or a receiver for Tenant appointed on Landlord’s application, may
collect such rent and apply it toward Tenant’s obligations under this Lease;
except that, until the occurrence of a Default, Tenant shall have the right to
collect such rent.

 

(e)                                  No Waiver.  The consent by Landlord to an assignment or
subletting shall not relieve Tenant or any assignees of this Lease or any
sublessees of the Premises from obtaining the consent of Landlord to any
further assignment or subletting nor shall it release Tenant or any assignee or
sublessee of Tenant from full and primary liability under the Lease.  The acceptance of Rent hereunder, or the
acceptance of performance of any other term, covenant, or condition thereof,
from any other person or entity shall not be deemed to be a waiver of any of
the provisions of this Lease or a consent to any subletting, assignment or
other transfer of the Premises.

 

(f)                                    Prior
Environmental History. 
Notwithstanding any other provision of this Section 22, if
(i) the proposed 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, where the
contamination resulted from such party’s action or use of the property in
question, (ii) the proposed assignee or sublessee is subject to an enforcement
order issued by any Governmental Authority in connection with the use, storage,
handling, treatment, generation, release or disposal of Hazardous Materials
(including, without limitation, any order related to the failure to make a
required reporting to any Governmental Authority), or (iii) because of the
existence of a pre-existing environmental condition in the vicinity of or
underlying the Project, the risk that Landlord would be targeted as a
responsible party in connection with the remediation of such pre-existing
environmental condition would be materially increased or exacerbated by the
proposed use of Hazardous Materials by such proposed assignee or sublessee,
Landlord shall have the absolute right to refuse to consent to any assignment
or subletting to any such party.

 

23.                                 Estoppel Certificate.  Tenant shall, within 10 business days of
written notice from Landlord, execute, acknowledge and deliver a statement in
writing in any form reasonably requested by a proposed lender or purchaser and
reasonably acceptable to Tenant, (i) 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 the rental and other charges are paid in
advance, if any, (ii) acknowledging that there are not any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if any are claimed,
and (iii) setting forth such further information with respect to the status of
this Lease or the Premises as may be reasonably 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 time shall, at
the option of Landlord, be conclusive 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.

 

24.                                 Quiet Enjoyment.  So long as Tenant shall perform all of the
covenants and agreements herein required to be performed by Tenant, Tenant
shall, subject to the terms of this Lease, at all times during the Term, have
peaceful and quiet enjoyment of the Premises against any person claiming by,
through or under Landlord.

 

19

 

25.                                 Prorations.  All prorations required or permitted to be
made hereunder shall be made on the basis of a 360 day year and 30 day months.

 

26.                                 Intentionally Deleted.

 

27.                                 Subordination.  Provided that such mortgagee, beneficiary,
purchaser or ground lessor provides Tenant with a non-disturbance agreement
reasonably acceptable to Tenant which recognizes each of Tenant’s rights under
this Lease, at the election of any mortgagee, beneficiary, purchaser or ground
lessor, the rights of Tenant hereunder shall be subject and subordinate to any
mortgage, deed of trust or ground lease now or hereafter in existence, to all
advances made or hereafter to be made upon the security thereof, and to all
modifications and renewals thereof, including, without limitation, any
construction loans obtained by Landlord to finance construction of the Building
and tenant improvements; provided, however, that notwithstanding such
subordination, so long as there is no Default by Tenant under this Lease,
Tenant’s possession under this Lease shall not be disturbed and neither this
Lease nor any of the rights of Tenant hereunder shall be terminated or subject
to termination by any action to enforce the security or by any foreclosure
action or termination of the ground lease. 
Tenant agrees, at the election of the Holder of any such Mortgage, to attorn
to any such Holder.  Tenant agrees upon
demand to execute, acknowledge and deliver such instruments, confirming such
subordination, and such instruments of attornment as shall be requested by any
such Holder, provided any such instruments contain appropriate non-disturbance
provisions assuring Tenant’s quiet enjoyment of the Premises as set forth in Section 24
hereof.  Tenant hereby appoints Landlord
attorney-in-fact for Tenant irrevocably (such power of attorney being coupled
with an interest) to execute, acknowledge and deliver any such instrument and
instruments for and in the name of Tenant and to cause any such instrument to
be recorded.  Notwithstanding the
foregoing, any such Holder may at any time subordinate its Mortgage to this
Lease, without Tenant’s consent, by notice in writing to Tenant, and thereupon
this Lease shall be deemed prior to such Mortgage without regard to their
respective dates of execution, delivery or recording and in that event such
Holder shall have the same rights with respect to this Lease as though this
Lease had been executed prior to the execution, delivery and recording of such
Mortgage and had been assigned to such Holder. 
The term “Mortgage” whenever used in this Lease shall be deemed to
include deeds of trust, security assignments and any other encumbrances, and
any reference to the “Holder” of a Mortgage shall be deemed to
include the beneficiary under a deed of trust.

 

28.                                 Surrender.  Upon the expiration of the Term or earlier
termination of Tenant’s right of possession, Tenant shall surrender the
Premises to Landlord in the same condition as existing on the Commencement Date
(including, without limitation, the structural integrity of the Building),
subject to any Alterations or Installations permitted or required by Landlord
to remain in the Premises, free of Hazardous Materials brought upon, kept,
used, stored, handled, treated, generated in, or released or disposed of from,
the Premises by any person other than a Landlord Party (collectively, “Tenant
HazMat Operations”) and released of all Hazardous Materials
Clearances, broom clean, ordinary wear and tear and casualty loss and
condemnation covered by Sections 17 and 18 excepted.  At least 3 months prior to the surrender of
the Premises, Tenant shall deliver to Landlord a narrative description of the
actions proposed (or required by any Governmental Authority) to be taken by
Tenant in order to surrender the Premises (including any Installations
permitted by Landlord to remain in the Premises) at the expiration or earlier
termination of the Term, free from any residual impact from the Tenant HazMat
Operations and otherwise released for unrestricted use and occupancy (the “Surrender
Plan”).  Such Surrender Plan
shall be accompanied by a current listing of (i) all Hazardous 

 

20

 

Materials
licenses and permits held by or on behalf of any Tenant Party with respect to
the Premises, and (ii) all Hazardous Materials used, stored, handled, treated,
generated, released or disposed of from the Premises, and shall be subject to
the review and reasonable approval of Landlord’s environmental consultant.  In connection with the review and approval
of the Surrender Plan, upon the request of Landlord, Tenant shall deliver to
Landlord or its consultant such additional non-proprietary information
concerning Tenant HazMat Operations as Landlord shall request.  On or before such surrender, Tenant shall
deliver to Landlord evidence that the approved Surrender Plan shall have been
satisfactorily completed and Landlord shall have the right, subject to
reimbursement at Tenant’s expense as set forth below, to cause Landlord’s
environmental consultant to inspect the Premises and perform such additional
procedures as may be deemed reasonably necessary to confirm that the Premises
are, as of the effective date of such surrender or early termination of the
Lease, free from any residual impact from Tenant HazMat Operations.  Tenant shall reimburse Landlord, as Additional
Rent, for the actual out-of pocket expense incurred by Landlord for Landlord’s
environmental consultant to review and approve the Surrender Plan and to visit
the Premises and verify satisfactory completion of the same, which cost shall
not exceed $5,000.  Landlord shall have
the unrestricted right to deliver such Surrender Plan and any report by
Landlord’s environmental consultant with respect to the surrender of the
Premises to third parties.

 

If
Tenant shall fail to prepare or submit a Surrender Plan approved by Landlord,
or if Tenant shall fail to complete the approved Surrender Plan, or if such
Surrender Plan, whether or not approved by Landlord, shall fail to adequately
address any residual effect of Tenant HazMat Operations in, on or about the
Premises, Landlord shall have the right to take such actions as Landlord may
deem reasonable or appropriate to assure that the Premises and the Project are
surrendered free from any residual impact from Tenant HazMat Operations, the
cost of which actions shall be reimbursed by Tenant as Additional Rent, without
regard to the limitation set forth in the first paragraph of this Section 28.

 

Tenant
shall immediately return to Landlord all keys and/or access cards to parking,
the Project, restrooms or all or any portion of the Premises furnished to or
otherwise procured by Tenant, other than access cards for the security system
which is the property of Tenant.  Any
Tenant’s Property, Alterations and property not so removed by Tenant as
permitted or required herein shall be deemed abandoned and may be stored,
removed, and disposed of by Landlord at Tenant’s expense, and Tenant waives all
claims against Landlord for any damages resulting from Landlord’s retention
and/or disposition of such property. 
All obligations of Tenant hereunder not fully performed as of the
termination of the Term, including the obligations of Tenant under Sections
28 and 30 hereof, shall survive the expiration or earlier termination of
the Term, including, without limitation, indemnity obligations, payment
obligations with respect to Rent and obligations concerning the condition and
repair of the Premises.

 

29.                                 Waiver of Jury Trial.  TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL
BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING
OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.

 

30.                                 Environmental
Requirements.

 

(a)                                  Prohibition/Compliance/Indemnity.  Tenant shall not cause or permit any
Hazardous Materials (as hereinafter defined) to be brought upon, kept, used,
stored, handled, 

 

21

 

treated,
generated in or about, or released or disposed of from, the Premises or the
Project in violation of applicable Environmental Requirements (as hereinafter
defined) by Tenant or any Tenant Party. 
If Tenant breaches the obligation stated in the preceding sentence, or
if the presence of Hazardous Materials in the Premises during the Term or any
holding over results in contamination of the Premises, the Project or any
adjacent property or if contamination of the Premises, the Project or any
adjacent property by Hazardous Materials brought into, kept, used, stored,
handled, treated, generated in or about, or released or disposed of from, the
Premises by anyone other than Landlord and Landlord’s employees, agents and
contractors otherwise occurs during the Term or any holding over, Tenant hereby
indemnifies and shall defend and hold Landlord, its officers, directors,
employees, agents and contractors harmless from any and all actions (including,
without limitation, remedial or enforcement actions of any kind, administrative
or judicial proceedings, and orders or judgments arising out of or resulting
therefrom), costs, claims, damages (including, without limitation, punitive
damages and damages based upon diminution in value of the Premises or the
Project, or the loss of, or restriction on, use of the Premises or any portion
of the Project), expenses (including, without limitation, attorneys’,
consultants’ and experts’ fees, court costs and amounts paid in settlement of
any claims or actions), fines, forfeitures or other civil, administrative or
criminal penalties, injunctive or other relief (whether or not based upon
personal injury, property damage, or contamination of, or adverse effects upon,
the environment, water tables or natural resources), liabilities or losses
(collectively, “Environmental Claims”) which arise during or after the Term as
a result of such contamination.  This
indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any
cleanup, treatment, remedial, removal, or restoration work required by any
federal, state or local Governmental Authority because of Hazardous Materials
present in the air, soil or ground water above, on, or under the Premises.  Without limiting the foregoing, if the
presence of any Hazardous Materials on the Premises, the Project or any
adjacent property caused or permitted by Tenant or any Tenant Party results in
any contamination of the Premises, the Project or any adjacent property, Tenant
shall promptly take all actions at its sole expense and in accordance with
applicable Environmental Requirements as are necessary to return the Premises,
the Project or any adjacent property to the condition existing prior to the
time of such contamination, provided that Tenant shall promptly notify Landlord
of such action and upon Landlord’s request shall cooperate with Landlord in
such remediation actions if they could potentially have any material adverse
effect on the Premises or the Project.

 

(b)                                 Business.  Landlord acknowledges that it is not the
intent of this Section 30 to prohibit Tenant from using the
Premises for the Permitted Use.  Tenant
may operate its business according to prudent industry practices so long as the
use or presence of Hazardous Materials is strictly and properly monitored
according to all then applicable Environmental Requirements.  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 Commencement Date a list identifying
each type of Hazardous Materials to be brought upon, kept, used, stored,
handled, treated, generated on, or released or disposed of from, the Premises
and setting forth any and all governmental approvals or permits required in
connection with the presence, use, storage, handling, treatment, generation,
release or disposal of such Hazardous Materials on or from the Premises (“Hazardous
Materials List”).  Tenant
shall deliver to Landlord an updated Hazardous Materials List at least once a
year and otherwise within fifteen (15) days of Landlord’s request (no more than
3 times per calendar year).  Tenant
shall deliver to Landlord true and correct copies of the following documents
(the “Haz
Mat Documents”) relating to the use, storage, handling, treatment,
generation, release or disposal of Hazardous Materials prior to the
Commencement Date, or if unavailable at that time, 

 

22

 

concurrent
with the receipt from or submission to a Governmental Authority:  permits; approvals; reports and
correspondence; storage and management plans, notice of violations of any Legal
Requirements; plans relating to the installation of any storage tanks to be
installed in or under the Project (provided, said installation of tanks shall only
be permitted after Landlord has given Tenant its written consent to do so,
which consent may be withheld in Landlord’s sole and absolute discretion); all
closure plans or any other documents required by any and all federal, state and
local Governmental Authorities for any storage tanks installed in, on or under
the Project for the closure of any such tanks; and a Surrender Plan (to the
extent surrender in accordance with Section 28 cannot be
accomplished in 3 months).  Tenant is
not required, however, to provide Landlord with any portion(s) of the Haz Mat
Documents containing information of a proprietary nature which, in and of
themselves, do not contain a reference to any Hazardous Materials or hazardous
activities.  It is not the intent of
this Section to provide Landlord with information which could be
detrimental to Tenant’s business should such information become possessed by
Tenant’s competitors.

 

(c)                                  Tenant Representation and Warranty.  Tenant hereby represents and warrants to
Landlord that other than as previously disclosed to Landlord in writing (i)
neither Tenant nor any of its legal predecessors has been required by any prior
landlord, lender or Governmental Authority at any time to take remedial action
in connection with Hazardous Materials contaminating a property which
contamination was permitted by Tenant or such predecessor or resulted from
Tenant’s or such predecessor’s action or use of the property in question, and
(ii) Tenant is not presently subject to any enforcement order issued by any Governmental
Authority in connection with the use, storage, handling, treatment, generation,
release or disposal of Hazardous Materials (including, without limitation, any
order related to the failure to make a required reporting to any Governmental
Authority).

 

(d)                                 Testing.  Landlord shall have the right, at Tenant’s
expense, from time to time, to conduct tests of the Premises to determine
whether any contamination of the Premises or the Project has occurred as a
result of Tenant’s use if Landlord has a reasonable basis to believe such
contamination exists.  In addition, at
any time, and from time to time, prior to the expiration or earlier termination
of the Term, Landlord shall have the right to conduct tests of the Premises and
the Project at Landlord’s sole cost and expense.  In connection with any such testing, upon the request of
Landlord, Tenant shall deliver to Landlord or its consultant such
non-proprietary information concerning the use of Hazardous Materials in or
about the Premises by Tenant or any Tenant Party.  If contamination has occurred for which Tenant is liable under
this Section 30, Tenant shall pay all costs to conduct such
tests.  If no such contamination is
found, Landlord shall pay the costs of such tests (which shall not constitute
an Operating Expense).  Landlord shall
provide Tenant with a copy of all third party, non-confidential reports and
tests of the Premises made by or on behalf of Landlord during the Term without
representation or warranty and subject to a confidentiality agreement.  Tenant shall, at its sole cost and expense,
promptly and satisfactorily remediate any environmental conditions identified
by such testing in accordance with all Environmental Requirements.  Landlord’s receipt of or satisfaction with
any environmental assessment in no way waives any rights which Landlord may
have against Tenant.

 

(e)                                  Underground Tanks.  If underground or other storage tanks
storing Hazardous Materials located on the Premises or the Project are used by
Tenant or are hereafter placed on the Premises or the Project by Tenant, Tenant
shall install, use, monitor, operate, maintain, upgrade and manage such storage
tanks, maintain appropriate records, obtain and maintain appropriate insurance,
implement reporting procedures, properly close any underground 

 

23

 

storage tanks,
and take or cause to be taken all other actions necessary or required under
applicable state and federal Legal Requirements, as such now exists or may
hereafter be adopted or amended in connection with the installation, use,
maintenance, management, operation, upgrading and closure of such storage
tanks.

 

(f)                                    Tenant’s
Obligations.  Tenant’s
obligations under this Section 27 shall survive the expiration or
earlier termination of the Lease. 
During any period of time after the expiration or earlier termination of
this Lease required by Tenant or Landlord to complete the removal from the
Premises of any Hazardous Materials (including, without limitation, the release
and termination of any licenses or permits restricting the use of the Premises
and the completion of the approved Surrender Plan), Tenant shall continue to
pay the full Rent in accordance with this Lease for any portion of the Premises
not relet by Landlord in Landlord’s sole discretion, which Rent shall be
prorated daily.

 

(g)                                 Definitions.  As used herein, the term “Environmental
Requirements” means all applicable present and future statutes,
regulations, ordinances, rules, codes, judgments, orders or other similar enactments
of any Governmental Authority regulating or relating to health, safety, or
environmental conditions on, under, or about the Premises or the Project, or
the environment, including without limitation, the following:  the Comprehensive Environmental Response,
Compensation and Liability Act; the Resource Conservation and Recovery Act; and
all state and local counterparts thereto, and any regulations or policies
promulgated or issued thereunder.  As
used herein, the term “Hazardous Materials” means and includes any
substance, material, waste, pollutant, or contaminant listed or defined as
hazardous or toxic, or regulated by reason of its impact or potential impact on
humans, animals and/or the environment under any Environmental Requirements,
asbestos and petroleum, including crude oil or any fraction thereof, natural
gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or
mixtures of natural gas and such synthetic gas).  As defined in Environmental Requirements, Tenant is and shall be
deemed to be the “operator” of Tenant’s “facility” and the “owner”
of all Hazardous Materials brought on the Premises by Tenant or any Tenant
Party, and the wastes, by-products, or residues generated, resulting, or
produced therefrom.

 

31.                                 Tenant’s Remedies/Limitation of
Liability.  Landlord shall not be in
default hereunder unless Landlord fails to perform any of its obligations
hereunder within 30 days after written notice from Tenant specifying such
failure (unless such performance will, due to the nature of the obligation,
require a period of time in excess of 30 days, then after such period of time
as is reasonably necessary).  Upon any
default by Landlord, Tenant shall give notice by registered or certified mail to
any Holder of a Mortgage covering the Premises and to any landlord of any lease
of property in or on which the Premises are located and Tenant shall offer such
Holder and/or landlord a reasonable opportunity to cure the default, including
time to obtain possession of the Project by power of sale or a judicial action
if such should prove necessary to effect a cure but no longer than 90 days; provided
Landlord shall have furnished to Tenant in writing the names and addresses of
all such persons who are to receive such notices.  All obligations of Landlord hereunder shall be construed as
covenants, not conditions; and, except as may be otherwise expressly provided
in this Lease, Tenant may not terminate this Lease for breach of Landlord’s
obligations hereunder.

 

Notwithstanding the foregoing, if any claimed
Landlord default hereunder will immediately, materially and adversely affect
Tenant’s ability to conduct its business in the Premises (a “Material
Landlord Default”), Tenant shall, as soon as reasonably possible,
but in any event within 2 business days of obtaining knowledge of such claimed
Material Landlord 

 

24

 

Default, give Landlord written notice of such claim and telephonic
notice to Tenant’s principal contact with Landlord.  Landlord shall then have 2 business days to commence cure of such
claimed Material Landlord Default and shall diligently prosecute such cure to
completion.  If such claimed Material
Landlord Default is not a default by Landlord hereunder, or if Tenant failed to
give Landlord the notice required hereunder within 2 business days of learning
of the conditions giving rise to the claimed Material Landlord Default,
Landlord shall be entitled to recover from Tenant, as Additional Rent, any
costs incurred by Landlord in connection with such cure in excess of the costs,
if any, that Landlord would otherwise have been liable to pay hereunder.  If Landlord fails to commence cure of any
claimed Material Landlord Default as provided above, Tenant may commence and
prosecute such cure to completion, and shall be entitled to recover the costs
of such cure (but not any consequential or other damages) from Landlord, to the
extent of Landlord’s obligation to cure such claimed Material Landlord Default
hereunder, subject to the limitations set forth in the immediately preceding
sentence of this paragraph and the other provisions of this Lease.

 

All
obligations of Landlord under this Lease will be binding upon Landlord only
during the period of its ownership of the Premises and not thereafter.  The term “Landlord” in this Lease shall
mean only the owner for the time being of the Premises.  Upon the transfer by such owner of its
interest in the Premises, such owner shall thereupon be released and discharged
from all obligations of Landlord thereafter accruing, but such obligations
shall be binding during the Term upon each new owner for the duration of such
owner’s ownership.

 

32.                                 Inspection and Access.  Landlord and its agents, representatives,
and contractors may enter the Premises during business hours on not less than
48 hours advance written notice (except in the case of emergencies in which
case no such notice shall be required and such entry may be at any time) for
the purpose of effecting any repairs required or permitted pursuant to this Lease,
inspecting the Premises, showing the Premises to prospective purchasers and,
during the last year of the Term, to prospective tenants or for any other
business purpose, provided that Tenant shall have the right to have an employee
accompany Landlord, its agents, representatives, and contractors at all times
and to impose reasonable security measures (provided that such security
measures shall not prohibit Landlord from having access to all areas of the
Premises).  Landlord shall use
commercially reasonable efforts to coordinate its access to the Premises
pursuant to this Section 32 with Tenant to avoid interference with
Tenant’s business operations in the Premises. 
Tenant shall not be liable to Landlord for injuries sustained as a
result of Landlord’s or its agents’, representatives’, and contractors’ entry
onto the Premises.  Landlord may erect a
suitable sign on the Premises stating the Premises are available to let or that
the Project is available for sale. 
Landlord may grant easements, make public dedications, designate common
areas and create restrictions on or about the Premises, provided that no
such easement, dedication, designation or restriction materially, adversely
affects Tenant’s use or occupancy of the Premises for the Permitted Use.  At Landlord’s request, Tenant shall execute
such instruments as may be necessary for such easements, dedications or
restrictions.  Tenant shall at all
times, except in the case of emergencies, have the right to escort Landlord or
its agents, representatives, contractors or guests while the same are in the
Premises, provided such escort does not materially and adversely affect
Landlord’s access rights hereunder.

 

33.                                 Security.  Tenant acknowledges and agrees that security
devices and services, if any, while intended to deter crime may not in given
instances prevent theft or other criminal acts and that Landlord is not
providing any security services with respect to the Premises.  Tenant agrees that Landlord shall not be liable
to Tenant for, and Tenant waives any claim against Landlord with respect to,
any loss by theft or any other damage suffered or incurred by 

 

25

 

Tenant
in connection with any unauthorized entry into the Premises or any other breach
of security with respect to the Premises. 
Tenant shall be solely responsible for the personal safety of Tenant’s
officers, employees, agents, contractors, guests and invitees while any such
person is in, on or about the Premises and/or the Project.  Tenant shall at Tenant’s cost obtain
insurance coverage to the extent Tenant desires protection against such
criminal acts.

 

34.                                 Force Majeure.  Neither Landlord nor Tenant shall be held
responsible for delays in the performance of its obligations hereunder when
caused by strikes, lockouts, labor disputes, weather, natural disasters,
inability to obtain labor or materials or reasonable substitutes therefor,
governmental restrictions, governmental regulations, governmental controls,
delay in issuance of permits, enemy or hostile governmental action, civil
commotion, fire or other casualty, and other causes beyond the reasonable
control of such party (“Force Majeure”).  The foregoing shall not apply to any payment of money or monetary
defaults under this Lease.

 

35.                                 Brokers, Entire Agreement,
Amendment.  Landlord and Tenant each
represents and warrants that it has not dealt with any broker, agent or other
person (collectively, “Broker) in connection with this transaction
and that no Broker brought about this transaction, other than Cushman &
Wakefield (“C&W”).  Tenant
shall be solely responsible for payment to C&W of any commission claimed by
C&W in connection with this Lease, and agrees to indemnify and hold
Landlord harmless from any claims for such commission or other compensation by
C&W.  Landlord and Tenant each
hereby agree to indemnify and hold the other harmless from and against any
claims by any Broker, other than the broker, if any named in this Section 35,
claiming a commission or other form of compensation by virtue of having dealt
with Tenant or Landlord, as applicable, with regard to this leasing
transaction.

 

36.                                 Limitation on Landlord’s
Liability.  NOTWITHSTANDING ANYTHING SET
FORTH HEREIN OR IN ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT TO THE
CONTRARY:  (A) LANDLORD SHALL NOT BE
LIABLE TO TENANT OR ANY OTHER PERSON FOR (AND TENANT AND EACH SUCH OTHER PERSON
ASSUME ALL RISK OF) LOSS, DAMAGE OR INJURY, WHETHER ACTUAL OR CONSEQUENTIAL
TO:  TENANT’S PERSONAL PROPERTY OF EVERY
KIND AND DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADE FIXTURES, EQUIPMENT,
INVENTORY, SCIENTIFIC RESEARCH, SCIENTIFIC EXPERIMENTS, LABORATORY ANIMALS,
PRODUCT, SPECIMENS, SAMPLES, AND/OR SCIENTIFIC, BUSINESS, ACCOUNTING AND OTHER
RECORDS OF EVERY KIND AND DESCRIPTION KEPT AT THE PREMISES AND ANY AND ALL
INCOME DERIVED OR DERIVABLE THEREFROM; (B) THERE SHALL BE NO PERSONAL RECOURSE
TO LANDLORD FOR ANY ACT OR OCCURRENCE IN, ON OR ABOUT THE PREMISES OR ARISING
IN ANY WAY UNDER THIS LEASE OR ANY OTHER AGREEMENT BETWEEN LANDLORD AND TENANT
WITH RESPECT TO THE SUBJECT MATTER HEREOF AND ANY LIABILITY OF LANDLORD
HEREUNDER SHALL BE STRICTLY LIMITED SOLELY TO LANDLORD’S INTEREST IN THE
PROJECT OR ANY PROCEEDS FROM SALE OR CONDEMNATION THEREOF AND ANY INSURANCE
PROCEEDS PAYABLE IN RESPECT OF LANDLORD’S INTEREST IN THE PROJECT OR IN
CONNECTION WITH ANY SUCH LOSS; AND (C) IN NO EVENT SHALL ANY PERSONAL LIABILITY
BE ASSERTED AGAINST ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
CONTRACTORS.  UNDER NO CIRCUMSTANCES
SHALL LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
CONTRACTORS BE LIABLE FOR INJURY TO TENANT’S BUSINESS OR FOR ANY LOSS OF INCOME
OR PROFIT THEREFROM.

 

26

 

37.                                 Severability.  If any clause or provision of this
Lease is illegal, invalid or unenforceable under present or future laws, then
and in that event, it is the intention of the parties hereto that the remainder
of this Lease shall not be affected thereby. 
It is also the intention of the parties to this Lease that in lieu of
each clause or provision of this Lease that is illegal, invalid or
unenforceable, there be added, as a part of this Lease, a clause or provision
as similar in effect to such illegal, invalid or unenforceable clause or
provision as shall be legal, valid and enforceable, unless the absence
of the illegal, invalid or unenforceable clauses or provision(s) adversely
affects the substantive rights of one or both of the parties.

 

38.                                 No Termination, Abatement, etc.  Except as otherwise specifically provided
herein, Tenant shall remain bound by this Lease in accordance with its terms
and shall neither take any action to modify, surrender or terminate the same,
nor seek nor be entitled to any abatement, deduction, deferment or reduction of
Rent, or set-off against the Rent, nor shall the respective obligations of
Landlord and Tenant be otherwise affected by reason of (a) any damage to, or
destruction of, the Premises or any portion thereof from whatever cause, or any
Taking of the Premises or any portion thereof, (b) any claim which Tenant has
or might have against Landlord or by reason of any default or breach of any
warranty by Landlord under this Lease or any other agreement between Landlord
and Tenant, or to which Landlord and Tenant are parties, (c) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Landlord or any assignee
or transferee of Landlord, or any action with respect to this Lease that may be
taken by a trustee or receiver of Landlord or any assignee of Landlord or by
any court in any such proceeding, or (d) for any other cause whether similar or
dissimilar to any of the foregoing. 
Tenant hereby specifically waives all rights, arising from any occurrence
whatsoever, which may now or hereafter be available to Tenant by law or in
equity to (i) modify, surrender or terminate this Lease or quit or surrender
the Premises or any portion thereof, or (ii) entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder, except as otherwise specifically provided in this Lease.  The obligations of Landlord and Tenant
hereunder shall be separate and independent covenants and agreements and the
Base Rent and Additional Rent and all other sums payable by Tenant hereunder
shall continue to be payable in all events unless the obligations to pay the
same shall be terminated pursuant to the express provisions of this Lease.

 

39.                                 Purchase Option

 

(a)                                  Grant of Option.  Landlord hereby grants to Tenant an option
(the “Option”)
to purchase the Premises for the Purchase Price (as defined below) upon all the
terms and conditions to be set forth in the Purchase Agreement (as defined
below).

 

(b)                                 Option Exercise Date.  The Option must be exercised by Tenant, if at
all, between the Commencement Date and the last day of the 14th year
of the initial Term (the “Term Expiration Option Period”).  Notwithstanding the foregoing, in the event
that: (1) Tenant receives a copy of a Notice of Sale (as described in Section 39(e)
below), or (2) Landlord elects to terminate the Lease or elects not to proceed
with the repair and restoration of the Premises pursuant to Sections 18 or
19 of this Lease, the Option shall be accelerated to expire 30 days after
receipt of such Notice of Sale or Landlord’s election to terminate this Lease
or Landlord’s election not to repair or restore, as the case may be, (“Accelerated
Option Period”), and the Purchase Price shall be adjusted as set
forth in Section 39(e).

 

(c)                                  Exercise of Option.  Tenant shall notify Landlord of Tenant’s
election to exercise the Option by giving Landlord written notice (the “Notice of
Exercise”) at the 

 

27

 

addresses and
in the manner set forth in this Lease, and within the time frames required by Section 39(b).

 

(d)                                 Purchase and Sale.  Upon exercise of the Option by Tenant,
Landlord agrees to sell the Premises to Tenant, and Tenant agrees to purchase
the Premises from Landlord, on all of the terms, covenants and conditions to be
set forth in a purchase agreement to be negotiated and entered into by Landlord
and Tenant within 30 days after Tenant’s exercise of the Option, which purchase
agreement shall be consistent with the terms of this Section 39
(the “Purchase
Agreement”).  Tenant agrees
that its purchase of the Premises shall be “as-is” (except as expressly
provided herein), without any representation, warranties or indemnities from
Landlord, with no due diligence or inspection rights.  The Purchase Agreement shall provide that (1) Landlord shall
convey the Premises to Tenant by grant deed and shall remove any deeds of trust
and mortgages granted by Landlord, and any mechanic’s liens or monetary
judgment liens caused or suffered by Landlord (provided the same are not the
result of Tenant’s or its subtenants’ actions or Tenant’s or its subtenants’
failure to pay any amounts owed by Tenant or its subtenants) and terminate any
service contracts entered into by Landlord for the Premises upon the sale of
the Premises to Tenant in accordance with the foregoing, subject to Tenant’s
payment of the Purchase Price as provided below, and (2) closing costs shall be
apportioned in the manner customary for San Diego County.  In addition, the Purchase Agreement shall
provide that (A) Landlord shall not have conveyed any air rights which are part
of the Premises to any third party, (B) Landlord shall not have sold any
parking rights to a third party (except in connection with CC&R’s or easements
for the business park of which the Premises is a part) and (C) Landlord shall
not have entered into any leases or other occupancy agreements or purchase
options with any third party which would be binding on Tenant or the Premises
following the closing.  In the event
Landlord and Tenant are unable to agree on the form of Purchase Agreement
within such 30 day period, the purchase transaction shall be consummated
pursuant to the terms of this Section 39 without a Purchase Agreement.  The escrow for the purchase shall be handled
by Chicago Title Company, provided if Chicago Title Company is no longer in
existence, the title company shall be mutually agreeable to Landlord and
Tenant).

 

(e)                                  Purchase Price.  The Purchase Price for the Property shall be
an amount equal to the calculation of (a) the amount of the annual Base Rent
for the last year of the Term, divided by (b) 9% (the “Purchase Price”).  Notwithstanding the foregoing, (i) in the
event Tenant exercises the Option as a result of a Notice of Sale, the Purchase
Price shall be adjusted to the amount the Holder of the Mortgage would declare
as its “full
credit bid” in a non-judicial foreclosure of its lien pursuant to
the Notice of Sale, and (ii) in the event Tenant exercises the Option as a
result of Landlord’s election to terminate the Lease or election not to proceed
with the repair or restoration of the Premises pursuant to Sections 18 or 19,
the Purchase Price shall be adjusted to be the greater of (x) the calculation
of (a) the amount of the Base Rent for the 12 months after the date the Option
is exercised, divided by (b) 9.5%, less the amount of any insurance and
condemnation proceeds received by Landlord or (y) the amount required to
discharge all deeds of trust or mortgages granted by Landlord which encumber
the Premises after application of any insurance and condemnation proceeds
received by Landlord to payment thereof. 
Landlord covenants that during the Term any deeds of trust or mortgages
granted by Landlord shall not secure liens in amounts in excess of the Purchase
Price (as calculated pursuant to the first sentence of this Section 39(e)
as of the date such mortgages or deeds of trust are recorded against the
Premises as if Tenant were exercising the Purchase Option on such date).

 

28

 

(f)                                    Foreclosure.  Tenant shall be entitled to receive a copy
of any Notice of Default and any Notice of Sale recorded by a Holder of a
Mortgage encumbering the Property or by the trustee named therein.  Notwithstanding anything to the contrary
contained in the Section 36, in the event a Holder of a Mortgage
forecloses its lien (judicially or non-judicially), or accepts a deed in lieu
of foreclosure from Landlord, after expiration of the Accelerated Option Period,
then the Option shall terminate and the provisions of this Section 36
shall be null and void, and of no further force and effect.

 

(g)                                 Rights Personal.  The Purchase Option is personal to Tenant
and is not assignable without Landlord’s consent, which may be granted or
withheld in Landlord’s sole discretion separate and apart from any consent by
Landlord to an assignment of Tenant’s interest in the Lease.

 

(h)                                 Exceptions.  Notwithstanding anything set forth above to
the contrary, the Purchase Option shall not be in effect and Tenant may not
exercise the Purchase Option during any period of time that Tenant is in
Default under any provision of this Lease.

 

(i)                                     No
Extensions.  The period of
time within which any Purchase Option may be exercised shall not be extended or
enlarged by reason of Tenant’s inability to exercise the Purchase Option.

 

40.                                 Miscellaneous.

 

(a)                                  Notices.  All notices or other communications between
the parties shall be in writing and shall be deemed duly given upon delivery or
refusal to accept delivery by the addressee thereof if delivered in person, or
upon actual receipt if delivered by reputable overnight guaranty courier,
addressed and sent to the parties at their addresses set forth above.  Landlord and Tenant may from time to time by
written notice to the other designate another address for receipt of future
notices.

 

(b)                                 Joint and Several Liability.  If and when included within the term “Tenant,”
as used in this instrument, there is more than one person or entity, each shall
be jointly and severally liable for the obligations of Tenant.

 

(c)                                  Recordation.  Upon the Commencement Date, Landlord and
Tenant will execute a memorandum of lease and cause the same to be recorded in
the public records of San Diego County. 
At the expiration or earlier termination of this Lease, Tenant agrees to
execute a quitclaim deed or other required document necessary to remove such
memorandum from the public records.

 

(d)                                 Interpretation.  The normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Lease or any exhibits or
amendments hereto.  Words of any gender
used in this Lease shall be held and construed to include any other gender, and
words in the singular number shall be held to include the plural, unless the
context otherwise requires.  The
captions inserted in this Lease are for convenience only and in no way define,
limit or otherwise describe the scope or intent of this Lease, or any provision
hereof, or in any way affect the interpretation of this Lease.

 

(e)                                  Not Binding Until Executed.  The submission by Landlord to Tenant of this
Lease shall have no binding force or effect, shall not constitute an option for
the leasing of the 

 

29

 

Premises, nor
confer any right or impose any obligations upon either party until execution of
this Lease by both parties.

 

(f)                                    Limitations
on Interest.  It is expressly
the intent of Landlord and Tenant at all times to comply with applicable law
governing the maximum rate or amount of any interest payable on or in
connection with this Lease.  If
applicable law is ever judicially interpreted so as to render usurious any
interest called for under this Lease, or contracted for, charged, taken,
reserved, or received with respect to this Lease, then it is Landlord’s and
Tenant’s express intent that all excess amounts theretofore collected by
Landlord be credited on the applicable obligation (or, if the obligation has
been or would thereby be paid in full, refunded to Tenant), and the provisions
of this Lease immediately shall be deemed reformed and the amounts thereafter
collectible hereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder.

 

(g)                                 Choice of Law.  Construction and interpretation of this
Lease shall be governed by the internal laws of the state in which the Premises
are located, excluding any principles of conflicts of laws.

 

(h)                                 Time.  Time is of the essence as to the performance
of Tenant’s obligations under this Lease.

 

(i)                                     Incorporation
by Reference.  All exhibits
and addenda attached hereto are hereby incorporated into this Lease and made a
part hereof.  If there is any conflict
between such exhibits or addenda and the terms of this Lease, such exhibits or
addenda shall control.

 

(j)                                     Hazardous Activities.  Notwithstanding any other provision of this
Lease, Landlord, for itself and its employees, agents and contractors, reserves
the right to refuse to perform any repairs or services in any portion of the
Premises which, pursuant to Tenant’s routine safety guidelines, practices or
custom or prudent industry practices, require any form of protective clothing
or equipment other than safety glasses. 
In any such case, Tenant shall contract with parties who are acceptable
to Landlord, in Landlord’s reasonable discretion, for all such repairs and
services.

 

(k)                                  Signage.  Tenant shall have the right to install
identification signage on the Premises, including without limitation the
exterior of the Building. without Landlord’s consent provided Tenant first
obtains all approvals required pursuant to all Legal Requirements and the CC&R’s.

 

(l)                                     Owners’
Associations.  Tenant, at its
option, may notify Landlord of its position and concerns regarding any issue
coming before an owners’ association established pursuant to the
CC&R’s.  Landlord agrees to take
into consideration Tenant’s position and concerns in voting on such issues as a
member of such owners’ association.

 

(m)                               Arbitration.

 

(i)                                     Within 10 days of Tenant’s notice to
Landlord of its election to arbitrate Landlord’s decision to terminate this
Lease pursuant to Section 19 hereof, Landlord and Tenant shall meet
and make a good faith attempt to mutually appoint a single Arbitrator (as
defined below) to determine whether the applicable Taking shall either
prevent or materially interfere with Tenant’s use of the Premises or materially
interfere with or 

 

30

 

impair
Landlord’s ownership or operation of the Project.  If Landlord and Tenant are
unable to agree upon a single Arbitrator, then each shall, by written notice
delivered to the other within 10 days after the meeting, select an
Arbitrator.  If either party fails to
timely give notice of its selection for an Arbitrator, the other party’s
decision as to termination of this Lease shall be binding.  The 2 Arbitrators so appointed shall, within
5 business days after their appointment, appoint a third Arbitrator.  If the 2 Arbitrators so selected cannot
agree on the selection of the third Arbitrator within the time above specified,
then either party, on behalf of both parties, may request such appointment of
such third Arbitrator by application to any state court of general jurisdiction
in the jurisdiction in which the Premises are located, upon 10 days prior
written notice to the other party of such intent.

 

(ii)                                  The
decision of the Arbitrator(s) shall be made within 30 days after the
appointment of a single Arbitrator or the third Arbitrator, as applicable.  The decision of the single Arbitrator shall
be final and binding upon the parties. 
Each party shall pay the fees and expenses of the Arbitrator appointed
by or on behalf of such party and the fees and expenses of the third Arbitrator
shall be borne equally by both parties.

 

(iii)                               An
“Arbitrator”
shall be any person appointed by or on behalf of either party or appointed
pursuant to the provisions hereof and: 
(i) shall be (A) a member of the American Institute of Real Estate
Appraisers with not less than 10 years of experience in the appraisal of
improved office and high tech industrial real estate in the greater San Diego
metropolitan area, or (B) a licensed commercial real estate broker with not
less than 15 years experience representing landlords and/or tenants in the
leasing of high tech or life sciences space in the greater San Diego
metropolitan area, (ii) devoting substantially all of their time to
professional appraisal or brokerage work, as applicable, at the time of
appointment and (iii) be in all respects impartial and disinterested.

 

(n)                                 Right to Contest.  Notwithstanding any other provision of this
Lease, Tenant shall not be required to comply with a determination by a
Government Authority as required by Section 7 (such non-compliance
referred to collectively as “Permitted Violations”), so long as Tenant
shall contest, in good faith, the existence, amount or validity thereof, the amount
of the damages caused thereby, or the extent of its or Landlord’s liability
therefor by appropriate proceedings which shall operate during the pendency
thereof to prevent or stay (i) the collection of, or other realization
upon, the Permitted Violation so contested, (ii) the sale, forfeiture or
loss of any of the Premises or any Rent to satisfy or to pay any damages caused
by any Permitted Violation, (iii) any interference with the use or
occupancy of any of the Premises, (iv) any interference with the payment
of any Rent, or (v) the cancellation or increase in the rate of any
insurance policy or a statement by the carrier that coverage will be
denied.  Each such contest shall be
promptly and diligently prosecuted by Tenant to a final conclusion, except that
Tenant, so long as the conditions of this Section 40(n) are at all
times complied with, has the right to attempt to settle or compromise such
contest through negotiations.  Tenant
shall pay any and all losses, judgments, decrees and costs reasonably incurred
in connection with any such contest and shall, promptly after the final
determination of such contest, fully pay and discharge the amounts which shall
be levied, assessed, charged or imposed or be determined to be payable therein
or in connection therewith, together with all penalties, fines, interest and
costs thereof or in connection therewith, and perform all acts the performance
of which shall be ordered or decreed as a result thereof.  No such contest shall (1) subject Landlord
to the risk of any civil or 

 

31

 

criminal
liability or (2) result in the imposition of any liens against the Property or
(3) impose any fines, charges or other fees or costs on Landlord.

 

41.                                 Right to Extend Term.  Tenant shall have the right to extend the
Term of the Lease upon the following terms and conditions:

 

(a)                                  Extension Rights.  Tenant shall have 2 consecutive rights
(each, an “Extension Right”) to extend the term of this Lease for 5 years
each (each, an “Extension Term”) on the same terms and conditions as this
Lease (other than Base Rent) by giving Landlord written notice of its election
to exercise each Extension Right at least 12 months prior, and no earlier than
18 months prior, to the expiration of the Base Term of the Lease or the
expiration of any prior Extension Term.

 

Upon the commencement of any Extension Term, Base
Rent shall be payable at the greater of (1) the Market Rate (as defined below)
or (2) 102.5% of the Base Rent in effect for the last year of the Initial
Term.  Base Rent shall thereafter be
adjusted on each annual anniversary of the commencement of such Extension Term
by a percentage as determined by Landlord and agreed to by Tenant at the time
the Market Rate is determined.  As used
herein, “Market
Rate” shall mean the then market rental rate for comparable, fully
improved office/wet laboratory space in the Sorrento Valley and Sorrento Mesa
submarkets of San Diego County as determined by Landlord and agreed to by
Tenant.

 

If, on or before the date which is 270 days prior
to the expiration of the Base Term of this Lease, or the expiration of any
prior Extension Term, Tenant has not agreed with Landlord’s determination of
the Market Rate and the rent escalations during such subsequent Extension Term
after negotiating in good faith, Tenant may by written notice to Landlord not
later than 120 days prior to the expiration of the Base Term of this Lease, or
the expiration of any then effective Extension Term, elect arbitration as
described in Section  41(b) below. 
If Tenant does not elect such arbitration, Tenant shall be deemed to
have waived any right to extend, or further extend, the Term of the Lease and
all of the remaining Extension Rights shall terminate.

 

(b)                                 Arbitration.

 

(i)                                     Within 10 days of Tenant’s notice to
Landlord of its election to arbitrate Market Rate and escalations, each party
shall deliver to the other a proposal containing the Market Rate and
escalations that the submitting party believes to be correct (“Extension
Proposal”).  If either party
fails to timely submit an Extension Proposal, the other party’s submitted
proposal shall determine the Base Rent and escalations for the Extension
Term.  If both parties submit Extension
Proposals, then Landlord and Tenant shall meet within 7 days after delivery of
the last Extension Proposal and make a good faith attempt to mutually appoint a
single Arbitrator (and defined below) to determine the Market Rate and
escalations.  If Landlord and Tenant are
unable to agree upon a single Arbitrator, then each shall, by written notice
delivered to the other within 10 days after the meeting, select an
Arbitrator.  If either party fails to
timely give notice of its selection for an Arbitrator, the other party’s submitted
proposal shall determine the Base Rent for the Extension Term.  The 2 Arbitrators so appointed shall, within
5 business days after their appointment, appoint a third Arbitrator.  If the 2 Arbitrators so selected cannot
agree on the selection of the third Arbitrator within the time above specified,
then either party, on behalf of both parties, may request such appointment of
such third Arbitrator by application to any state court of general jurisdiction
in the jurisdiction in which the Premises are located, upon 10 days prior
written notice to the other party of such intent.

 

32

 

(ii)                                  The decision of the Arbitrator(s) shall be
made within 30 days after the appointment of a single Arbitrator or the third
Arbitrator, as applicable.  The decision
of the single Arbitrator shall be final and binding upon the parties.  The average of the two closest Arbitrators
in a three Arbitrator panel shall be final and binding upon the parties.  Each party shall pay the fees and expenses
of the Arbitrator appointed by or on behalf of such party and the fees and
expenses of the third Arbitrator shall be borne equally by both parties.  If the Market Rate and escalations are not
determined by the first day of the Extension Term, then Tenant shall pay
Landlord Base Rent in an amount equal to the Base Rent in effect immediately
prior to the Extension Term and increased by the Rent Adjustment Percentage
until such determination is made.  After
the determination of the Market Rate and escalations, the parties shall make
any necessary adjustments to such payments made by Tenant.  Landlord and Tenant shall then execute an
amendment recognizing the Market Rate and escalations for the Extension Term.

 

(iii)                               An “Arbitrator” shall be any person appointed
by or on behalf of either party or appointed pursuant to the provisions hereof
and:  (i) shall be (A) a member of the
American Institute of Real Estate Appraisers with not less than 10 years of
experience in the appraisal of improved office, high tech and wet laboratory
industrial real estate in the greater San Diego metropolitan area, or (B) a
licensed commercial real estate broker with not less than 15 years experience
representing landlords and/or tenants in the leasing of high tech or life
sciences space in the greater San Diego metropolitan area, (ii) devoting
substantially all of their time to professional appraisal or brokerage work, as
applicable, at the time of appointment and (iii) be in all respects impartial
and disinterested.

 

(c)                                  Rights Personal.  Extension Rights are personal to Tenant and
are not assignable without Landlord’s consent, which may be granted or withheld
in Landlord’s sole discretion separate and apart from any consent by Landlord
to an assignment of Tenant’s interest in the Lease.

 

(d)                                 Exceptions.  Notwithstanding anything set forth above to
the contrary, Extension Rights shall not be in effect and Tenant may not
exercise any of the Extension Rights:

 

(i)                                     during
any period of time that Tenant is in Default under any provision of this Lease;
or

 

(ii)                                  if
Tenant has been in Default under any provision of this Lease 3 or more times,
whether or not the Defaults are cured, during the 12 month period immediately
prior to the date that Tenant intends to exercise an Extension Right, whether
or not the Defaults are cured.

 

(e)                                  No Extensions.  The period of time within which any
Extension Rights may be exercised shall not be extended or enlarged by reason
of Tenant’s inability to exercise the Extension Rights.

 

(f)                                    Termination.  The Extension Rights shall terminate and be
of no further force or effect even after Tenant’s due and timely exercise of an
Extension Right, if, after such exercise, but prior to the commencement date of
an Extension Term, (i) Tenant fails to timely cure any default by Tenant under
this Lease; or (ii) Tenant has Defaulted 3 or more times during the period from
the date of the exercise of an Extension Right to the date of the commencement
of the Extension Term, whether or not such Defaults are cured.

 

33

 

IN
WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and
year first above written.

 

	
  LANDLORD:

  	
  ARE – NANCY RIDGE NO. 3, LLC,

  
	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Alexandria Real Estate
  Equities, L.P.,

  
	
   

  	
   

  	
  a Delaware limited
  partnership,

  
	
   

  	
   

  	
  its managing member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  ARE-QRS Corp.,

  
	
   

  	
   

  	
   

  	
  a Maryland corporation,

  
	
   

  	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  	
   

  
	
  Execution Date:
  December 30, 2003

  	
   

  	
   

  	
  By:

  	
  /s/ Peter J. Nelson

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Peter J. Nelson

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
  Senior VP & Chief Financial
  Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TENANT:

  	
  ARENA PHARMACEUTICALS, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
  Execution Date: December
  30, 2003

  	
   

  	
  By:

  	
   /s/ Jack Lief

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jack Lief

  	
   

  
	
   

  	
   

  	
  Its:

  	
  President and Chief
  Executive Officer

  	
   

  
									

 

34

 

EXHIBIT A TO LEASE

 

DESCRIPTION OF PROJECT

 

PARCEL A:

 

PARCEL 9 OF PARCEL MAP NO.
17347, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA,
ACCORDING TO MAP THEREOF FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN
DIEGO COUNTY APRIL 13, 1994 AS DOCUMENT NO. 94-242762 OFFICIAL RECORDS.

 

PARCEL B:

 

A NONEXCLUSIVE EASEMENT FOR
INGRESS AND EGRESS BY VEHICULAR AND PEDESTRIAN TRAFFIC AND VEHICLE PARKING
UPON, OVER AND ACROSS THE “COMMON AREA” FOR THE BENEFIT OF THE OWNERS, PRESENT
AND FUTURE, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, TENANTS, CUSTOMERS AND
INVITEES, TOGETHER WITH A NONEXCLUSIVE EASEMENT UNDER AND THROUGH THE “COMMON
AREA” FOR THE INSTALLATION, MAINTENANCE, REMOVAL AND REPLACEMENT OF WATER
DRAINAGE SYSTEMS OR STRUCTURES, WATER MAINS, SEWERS, WATER SPRINKLER SYSTEM
LINES, TELEPHONE OR ELECTRICAL CONDUITS OR SYSTEMS, GAS MAINS AND ANY OTHER
PUBLIC UTILITIES AND/OR SERVICE EASEMENTS, AS CREATED, SET FORTH, DEFINED,
DESCRIBED AND GRANTED IN THAT CERTAIN “DECLARATION OF RECIPROCAL EASEMENTS OF
THE SORRENTO RIDGE BUSINESS PARK PLANNED INDUSTRIAL DEVELOPMENT” RECORDED APRIL
13, 1994 AS DOCUMENT NO. 94-242763 OFFICIAL RECORDS.

 

(APN:  343-350-26)

 

1

 

EXHIBIT B TO LEASE

 

INCLUDED INSTALLATIONS

 

fume hoods, built-in cold
rooms, built-in warm rooms, walk-in cold rooms, walk-in warm rooms, deionized
water systems, glass washing equipment, cage washers, built-in autoclaves,
chillers, built-in plumbing, and electrical systems, HVAC systems and
equipment, vacuum
pumps, air compressors, and transfer switches.

 

1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00059-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00059-of-00352.parquet"}]]