Document:

Exhibit 10.23

 

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4)

and 240.24b-2.

 

LEASE AGREEMENT

 

THIS LEASE AGREEMENT is made as of this 12th day of January,
2006, between ARE-NEXUS CENTRE II, LLC, a Delaware limited liability company (“Landlord”), and SENOMYX, INC., a Delaware
corporation (“Tenant”).

 

BASIC LEASE PROVISIONS

 

Address:                                               4767
Nexus Centre Drive, San Diego, California

 

Premises:                                        The
entirety of the Building (as defined below), containing approximately 64,000
rentable square feet, to be constructed by Landlord, including a “basement”
parking structure (the “Basement Parking
Structure”), a service loading dock, ramp and adjacent loading area,
surface parking and a trellis-screened equipment yard (the “Equipment Yard”), on that legal parcel
commonly known as Parcel 2 of Parcel Map 17892, in the City of San Diego,
County of San Diego, State of California, according to a map filed in the
Office of the County Recorder of San Diego County on August 6, 1997, and as
depicted on Exhibit A.

 

Project:                                                     The
real property on which the building (the “Building”)
in which the Premises are located, together with all improvements thereon and
appurtenances thereto as described on Exhibit
B.

 

Base
Rent:                                    Subject
to adjustment of Base Rent (i) as provided in Section 1 of this Lease,
based on the rentable square footage (“RSF”)
Determination procedure set forth therein, as agreed to by Landlord and Tenant,
and (ii) as described in Section 4 of this Lease if Tenant elects to
receive the Additional Tenant Improvement Allowance, the Base Rent payable
following the Rent Commencement Date shall be as follows:

 

$192,000.00 per month for Lease Year one of the Term (based on 64,000
square feet of rentable area), based on the monthly rental rate of $3.00 per
RSF;

$197,760.00 per month for Lease Year two of the Term (based on 64,000 square
feet of rentable area), based on the monthly rental rate of $3.09 per RSF;

$203,520.00 per month for Lease Year three of the Term (based on 64,000 square
feet of rentable area), based on the monthly rental rate of $3.18 per RSF;

$209,920.00 per month for Lease Year four of the Term (based on 64,000 square
feet of rentable area), based on the monthly rental rate of $3.28 per RSF;

$216,320.00 per month for Lease Year five of the Term (based on 64,000 square
feet of rentable area), based on the monthly rental rate of $3.38 per RSF;

$222,720.00 per month for Lease Year six of the Term (based on 64,000 square
feet of rentable area), based on the monthly rental rate of $3.48 per RSF;

$229,120.00 per month for Lease Year seven of the Term (based on 64,000 square
feet of rentable area), based on the monthly rental rate of $3.58 per RSF;

$236,160.00 per month for Lease Year eight of the Term (based on 64,000 square
feet of rentable area), based on the monthly rental rate of $3.69 per RSF;

 

	
  

  	
   

  	
  Copyright © 2005, Alexandria Real Estate Equities,
  Inc.  ALL RIGHTS RESERVED.  Confidential and Proprietary – Do Not Copy
  or Distribute.  Alexandria and the
  Alexandria Logo are registered trademarks of Alexandria Real Estate Equities,
  Inc.

  

 

1

 

$243,200.00 per month for Lease Year nine of the Term (based on 64,000
square feet of rentable area), based on the monthly rental rate of $3.80 per
RSF;

$250,240.00 per month for Lease Year ten of the Term (based on 64,000 square
feet of rentable area), based on the monthly rental rate of $3.91 per RSF.

 

Rentable
Area of Premises:  approximately
64,000 RSF

 

Tenant’s
Share of Operating Expenses: 
100%

 

	
  Security Deposit:  $0.00

  	
   

  	
  Target Commencement Date:  September 1, 2006

  

 

	
  Tenant Improvement Allowance:

  	
   

  	
  Approximately $9,600,000, based on the Landlord’s maximum
  contribution toward Tenant Improvements of $150 per RSF; subject, however, to
  (i) such increased contribution as Landlord may elect pursuant to
  Section 1(c) of the Work Letter, and (ii) Tenant’s right to receive an
  “Additional Tenant Improvement Allowance” of approximately $320,000, based on
  the $5.00 per RSF in accordance with Section 4 below and Section 7(b)
  of the Work Letter.

  
	
   

  	
   

  	
   

  
	
  Rent Commencement Date:

  	
   

  	
  April 1, 2007, subject to adjustment for Landlord Delays, if any, in
  accordance with Section 2(a) of this Lease.

  
	
   

  	
   

  	
   

  
	
  Base Term:

  	
   

  	
  A term beginning on the Commencement Date (as defined below) and
  ending February 28, 2017.

  
	
   

  	
   

  	
   

  
	
  Permitted Use:

  	
   

  	
  Wet laboratory research and development uses, related office and
  other related uses and otherwise in compliance with the provisions of Section
  7 hereof. “Related uses” shall include, without limitation, Tenant’s
  preparation of food and beverage products for testing and marketing
  incidental to Tenant’s research and development of flavors, flavor enhancers,
  and taste modulators for the packaged food and beverage industry.

  
									

 

	
  Address for Rent Payment:

  	
   

  	
  Landlord’s Notice Address:

  
	
  385 E. Colorado
  Boulevard, Suite 299

  Pasadena, CA 91101

  Attention: Accounts Receivable

  	
   

  	
  385 E. Colorado
  Boulevard, Suite 299

  Pasadena, CA 91101

  Attention: Corporate Secretary

  
	
   

  	
   

  	
   

  
	
  Tenant’s Notice Address:

  	
   

  	
   

  
	
  Prior to January
  1, 2007:

  11099 N. Torrey Pines Road

  La Jolla, CA 92037

  Attention:  Chief Financial Officer

  	
   

  	
  After January 1,
  2007:

  4767 Nexus Centre Drive

  San Diego, CA 92121

  Attention:  Chief Financial Officer

  

 

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

 

	
  ý
  EXHIBIT A - PREMISES DESCRIPTION

  	
   

  	
  ý
  EXHIBIT B - DESCRIPTION OF
  PROJECT

  
	
  ý
  EXHIBIT C – WORK LETTER

  	
   

  	
  ý
  EXHIBIT D - COMMENCEMENT DATE

  
	
  ý
  EXHIBIT E - RULES AND REGULATIONS

  	
   

  	
  ý
  EXHIBIT F - TENANT’S PERSONAL
  PROPERTY

  
	
  ý
  EXHIBIT G – PARKING

  	
   

  	
  ý
  EXHIBIT H – SURRENDER PLAN

  
	
  ý
  EXHIBIT I – ENVIRONMENTAL
  REPORTS

  	
   

  	
   

  

 

2

 

1.                                       Lease of Premises.

 

(a)                                  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. The
portions of the Project which are not part of the Premises are collectively
referred to herein as the “Common Areas.”  Landlord reserves the right to modify Common
Areas, provided that such modifications do not materially adversely
affect:  (i) Tenant’s access to the
Premises, the Basement Parking Structure, Building loading dock, or Equipment
Yard; (ii) Tenant’s use of the Premises for the Permitted Use; or (iii)
incorporate the building commonly known as 4757 Nexus Centre Drive, San Diego,
California (“Building 4757”)
or any portion thereof, or any portion of any other building or parcel adjacent
to the Premises into the Common Areas of the Premises. Notwithstanding the
foregoing, Landlord shall not modify (other than required repairs) the Trellis
(as defined in Section 3(k) of the Work Letter) or the Screening Solution (as
defined in Section 3(h) of the Work Letter) without the consent of Tenant, such
consent not to be unreasonably withheld, conditioned or delayed. Throughout the
Term, but subject to the limitations set forth in Section 10 below,
Tenant shall have the right to access the Premises across certain of the
parking areas and driveways located on the real property on which
Building 4757 is located; provided that, neither Tenant nor its agents,
servants, employees, invitees, assigns, subtenants and contractors (each a “Tenant Party” and collectively, “Tenant Parties”) shall have any right to
park any of their vehicles within the parking areas located on the Building
4757 parcel. As a material inducement to Tenant to enter into this Lease,
Landlord made and entered into that certain Road Construction and Dedication
Agreement dated December 22, 2005 (the “Road
Agreement”), with Nexus Science Center University City, LLC, a
California limited liability company (“Nexus”), and
Landlord hereby covenants to perform Landlord’s obligations under the Road
Agreement, and to cooperate with Tenant, at no additional expense to Landlord,
in the event Tenant exercises any of its rights as third party beneficiary of
such Road Agreement. In such event, Tenant shall be solely responsible for
costs and expenses that Tenant elects to incur (and without obligation to do
so) in enforcing its rights thereunder. Landlord covenants that Landlord shall
not modify, amend or terminate the Road Agreement in any manner which adversely
affects Tenant, nor waive any obligation of Nexus under the Road Agreement in
any manner which adversely affects Tenant, without the prior written approval
of Tenant, which shall not be unreasonably withheld, conditioned or delayed by
Tenant.

 

(b)                                 Landlord
shall cause the Premises to be measured by Landlord’s Architect promptly after
the Tenant’s Work (as defined in the Work Letter) is substantially completed
(but not later than the Rent Commencement Date) and shall submit Landlord’s
Architect’s determination of the Rentable Area of the Premises (the “Proposed Determination”) to Tenant for its
review (at Tenant’s sole expense) and approval, which shall not be unreasonably
withheld, conditioned or delayed. If Tenant objects to the Proposed
Determination, Tenant may provide written notice to Landlord of Tenant’s
objection to the Proposed Determination within 10 business days of the receipt
of the Proposed Determination and in such event the Rentable Area of the
Premises will be decided pursuant to the arbitration mechanism described in Section
1(c) (with the Tenant-approved Proposed Determination, or the Rentable Area
of the Premises determined by arbitration, hereinafter referenced to as the “Determination”). If Tenant does not provide
written notice of its objection to the Proposed Determination within such 10
business day time period, Tenant’s right to object to the Proposed
Determination shall be deemed waived. The Rentable Area of the Premises shall
be calculated according to the 1996 Standard Method of Measuring Floor Area in
Office Buildings as adopted by the Building Owners and Managers Association
(ANSI/BOMA Z65.1-1996), provided, however, that no floor area of the Building
(nor of the Basement Parking Structure or Equipment Yard) other than the floor
area of the first and second floors of the Building shall be included in the
determination of the Rentable Area of the Premises (i.e. regardless of whether
any portion of the Basement Parking Structure, roof or the Equipment Yard
includes any storage areas, machinery or electrical rooms or HVAC chiller
facilities, such areas shall not be included in the conversion factor used to
adjust usable area of the Premises to rentable area, but any such areas shall
be included to the extent that they are located within the Building on either
the first or second floor of the Building). Notwithstanding the foregoing, for
purposes of determining Base Rent and regardless of the actual rentable square
footage of the Premises, the Rentable Area of the Premises shall be adjusted as
necessary such that the Determination of the Rentable Area of the Premises for
purposes of Tenant’s Base Rent obligations and Landlord’s Tenant Improvement
Allowance contributions shall not be greater

 

3

 

than 65,280 rentable square feet nor less than 62,720 rentable square
feet, provided that the Premises shall be constructed in material conformance
with the LI Plans (as defined in the Work Letter).

 

(c)                                  Arbitration.

 

(i)                                     Within ten
(10) days of Tenant’s written notice to Landlord of its election to arbitrate
the determination of the Rentable Area of the Premises, each party shall
deliver to the other a proposal containing the Rentable Area of the Premises
that the submitting party believes to be correct (“RSF Proposal”). If either party fails to timely submit an RSF
Proposal, the other party’s submitted proposal shall determine the Rentable
Area of the Premises. If both parties submit RSF Proposals, then Landlord and
Tenant shall meet within seven (7) days after delivery of the last RSF Proposal
and make a good faith attempt to mutually appoint a single Arbitrator (and
defined below) to determine the Rentable Area of the Premises. If Landlord and
Tenant are unable to agree upon a single Arbitrator, then each shall, by
written notice delivered to the other within ten (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 Rentable Area of the Premises. The two (2) Arbitrators so
appointed shall, within five (5) business days after their appointment, appoint
a third Arbitrator. If the two (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 ten (10) days prior
written notice to the other party of such intent.

 

(ii)                                  The decision
of the Arbitrator(s) shall be made within thirty (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
Rentable Area of the Premises is not determined by the Rent Commencement Date,
then Tenant shall pay Landlord Base Rent in an amount equal to the Base Rent
payable if the Rentable Area of the Premises equaled 64,000 rentable square
feet until the final Determination is made. After the Determination of the
Rentable Area of the Premises, the parties shall make any necessary adjustments
to such payments made by Tenant. Landlord and Tenant shall then execute an
amendment recognizing the Rentable Area of the Premises.

 

(iii)                               For purposes
of this Section 1(c), an “Arbitrator”
shall be any person appointed by or on behalf of either party or appointed
pursuant to the provisions hereof and shall (i) be an architect with not less
than ten (10) years of experience who devotes substantially all of his or her
time to architectural work at the time of appointment and (ii) be in all
respects impartial and disinterested.

 

(d)                                 Adjustments. In the event that pursuant to the
procedure described in this Section 1, it is determined that the
Determination of the Rentable Area of the Premises shall be different from the
amount estimated in the Basic Lease Provisions, all amounts, percentages and
figures appearing or referred to in this Lease based upon such estimated amount
(including, without limitation, the amount of the “Base Rent” and Base Rent
adjustment, if applicable pursuant to Section 4 of this Lease, and the
amount of the Tenant Improvement Allowance and any Additional Tenant
Improvement Allowance requested by Tenant, as such terms are defined in the
Work Letter) shall be modified in accordance with the final Determination of
the Rentable Area of the Premises.

 

4

 

2.                                       Delivery; Acceptance of Premises; Commencement Date.

 

(a)                                  Delivery. Subject to the occurrence of Tenant
Delays and Force Majeure Delays, Landlord shall (i) cause Initial Delivery
to occur on or before February 1, 2006, (ii) cause the Building to be in
Water-Tight Delivery condition on or before May 1, 2006, (iii) deliver the
Premises to Tenant on or before the Target Commencement Date, with Substantial
Completion of Landlord’s Work (“Delivery”
or “Deliver”) and (iv) cause
Final Completion of the Landlord’s Finish Work on or before the later of
(a) thirty (30) days following Landlord’s receipt of Tenant’s Finish Work
Notice and (b) the date upon which Tenant shall have completed the Tenant
Improvements in their entirety.

 

If Landlord fails to: (w) cause Initial Delivery to occur on or
before February 1, 2006, (x) cause the Building to be in Water Tight
Delivery condition on or before May 1, 2006, (y) Deliver the Premises on
or before the Target Commencement Date or (z) cause Final Completion of
Landlord’s Finish Work to occur on or before the later of (A) thirty (30) days
following Landlord’s receipt of Tenant’s Finish Work Notice and (B) the
date upon which Tenant shall have completed the Tenant Improvements in their
entirety, Landlord shall not be liable to Tenant for any loss or damage resulting
therefrom, and this Lease shall not be void or voidable except as set forth in Section
2(e) hereof. Notwithstanding
the foregoing, if due to a Landlord Delay (I) Initial Delivery does not
occur on or before February 1, 2006, (II) the Building is not in
Water-Tight Delivery condition on or before May 1, 2006, (III) Substantial
Completion of Landlord’s Work has not occurred on or before the Target
Commencement Date, or (IV) Final Completion of the Landlord’s Finish Work
does not occur on or before the later of (u) thirty (30) days following
Landlord’s receipt of Tenant’s Finish Work Notice and (v) the date upon which
Tenant shall have completed the Tenant Improvements in their entirety, and any
such Landlord Delay, respectively, causes delays in both the commencement of
applicable portions of Tenant’s Work and the completion of Tenant’s Work such
that Tenant is unable to obtain a certificate of occupancy (or its equivalent)
for the Premises by January 1, 2007, as Tenant’s sole and exclusive remedy for such
failure(s) except as set forth in Section 2(e) hereof the Rent
Commencement Date shall be extended by one day for each day of such Landlord
Delay. As a condition to any such extension of the Rent Commencement Date,
Tenant shall be required to provide written notice to Landlord from time to
time and on an ongoing basis of any such delay in the commencement and
completion of the Tenant’s Work due to Landlord Delay. As used herein, the
terms “Tenant Delays,” “Force Majeure Delays,” “Initial Delivery,” “Water-Tight Delivery,” “Substantial Completion of Landlord’s Work,”
“Final Completion of Landlord’s Finish Work,”
“Tenant’s Finish Notice,” “Tenant’s
Finish Work Notice,” “Tenant
Improvements” and “Landlord Delay”
shall have the meanings set forth for such terms in the Work Letter.

 

(b)                                 Commencement Date. The “Commencement Date” shall be the later
of:  (1) the Completion Date (as defined
in the Work Letter); and (2) the Target Commencement Date. Upon request of
Landlord, Tenant shall execute and deliver a written acknowledgment of the
Commencement Date and the Rent
Commencement Date are established in the form of the “Acknowledgement of
Commencement Date” attached to this Lease as Exhibit
D; provided, however, Tenant’s failure to execute and
deliver such acknowledgment shall not affect Landlord’s rights hereunder. The “Term” of this Lease shall be the Base Term,
as defined above in the Basic Lease Provisions and any Extension Terms which
Tenant may elect pursuant to Section 40 hereof. Any occupancy of the Premises prior to the Rent Commencement
Date shall be subject to all of the terms of this Lease, except that Tenant
shall not be obligated to pay any Rent (aside from the cost of any utilities
during such period of occupancy) to Landlord for such occupancy.

 

(c)                                  Acceptance of Premises. Except as set forth
in the Work Letter, Tenant shall accept the Premises in their condition as of
the Commencement Date, subject to Landlord’s Substantial Completion of Landlord’s
Work and Final Completion of Landlord’s Finish Work, and all punch list items
associated therewith, and subject to all applicable Legal Requirements (as
defined in Section 7 hereof) and 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; provided,
however, that the foregoing presumption relates only to Landlord’s construction
and delivery obligations relating to Rent commencement, and shall not limit any
of Landlord’s obligations under Section 7(c), Section 13 or elsewhere in this
Lease, including, without limitation, the Work Letter. Landlord hereby
represents to Tenant that, excluding the documents related to the final
dedication of the portion of Project

 

5

 

to be dedicated for use as part of Executive Drive, Landlord has no
actual knowledge of any recorded restrictions on Landlord’s title to the
Project or restrictions which are pending submission for recording which have
not been delivered by Landlord to Tenant prior to Lease execution. Tenant
agrees and acknowledges that, except as expressly set forth elsewhere in this
Lease, neither Landlord nor any agent of Landlord has made any representation
or warranty with respect to the condition of all or any portion of the Premises
or the Project, and/or the suitability of the Premises or the Project for the
conduct of Tenant’s business, and Tenant waives any implied warranty that the
Premises or the Project are suitable for the Permitted Use. This Lease
constitutes the complete agreement of Landlord and Tenant with respect to the
subject matter hereof and supersedes any and all prior representations,
inducements, promises, agreements, understandings and negotiations which are
not contained herein. Tenant and Landlord in executing this Lease do so in
reliance upon the other party’s representations, warranties, acknowledgments
and agreements contained herein.

 

(d)                                 Determination of Substantial Completion and Final
Completion. If Tenant objects to Landlord’s determination of the
date of Substantial Completion and/or the date of Final Completion (each, a “Completion Determination”), Tenant may
provide written notice to Landlord of Tenant’s objection to the applicable
Completion Determination within 10 business days of the receipt of the
Completion Determination and in such event the date of Substantial Completion
and/or the date of Final Completion as applicable will be decided pursuant to
the arbitration mechanism described in this Section 2(d). If Tenant does
not provide written notice of its objection to the Completion Determination
within such 10 business day time period, Tenant’s right to object to the
Completion Determination shall be deemed waived.

 

(i)                                     Within ten
(10) days of Tenant’s written notice to Landlord of its election to arbitrate
the determination of the Completion Determination, Tenant shall deliver to
Landlord the certification of Tenant’s Architect (as defined in the Work
Letter) containing the date of Substantial Completion and/or Final Completion
that Tenant’s Architect believes to be correct (“Completion Proposal”). If Tenant fails to timely submit a
Completion Proposal, Landlord’s Completion Determination shall determine the
date of Substantial Completion and/or Final Completion as applicable. If Tenant
submits a Completion Proposal, then Landlord and Tenant shall meet within seven
(7) days after delivery of Tenant’s Completion Proposal and make a good faith
attempt to mutually appoint a single Arbitrator (and defined below) to
determine the date of Substantial Completion and/or Final Completion as
applicable. If Landlord and Tenant are unable to agree upon a single
Arbitrator, then each shall, by written notice delivered to the other within
ten (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 date of Substantial Completion and/or
Final Completion as applicable. The two (2) Arbitrators so appointed shall,
within five (5) business days after their appointment, appoint a third
Arbitrator. If the two (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 ten (10) days prior
written notice to the other party of such intent.

 

(ii)                                  The decision
of the Arbitrator(s) shall be made within thirty (30) days after the
appointment of a single Arbitrator or the third Arbitrator, as applicable. The
single Arbitrator shall determine which of the Completion Determination or the
Completion Proposal is closest to being correct. 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. After the determination of the date of Substantial Completion
and/or Final Completion as applicable, the parties shall make any necessary
adjustments to the Rent Commencement Date. Landlord and Tenant shall then
execute an amendment recognizing the Rent Commencement Date.

 

6

 

(iii)                               For purposes
of this Section 2(d), an “Arbitrator”
shall be any person appointed by or on behalf of either party or appointed
pursuant to the provisions hereof and shall (i) be an architect with not less
than ten (10) years of experience who devotes substantially all of his or her
time to architectural work at the time of appointment and (ii) be in all
respects impartial and disinterested.

 

(e)                                  Termination Due to Landlord Delay. Subject
to the occurrence of Tenant Delays and Force Majeure Delays, if Substantial
Completion of Landlord’s Work does not occur on or before December 31, 2007,
then beginning January 1, 2008 until such time as Substantial Completion has
occurred Tenant shall have the right to send Landlord a written notice (the “Late Delivery Termination Notice”) stating
Tenant’s election to terminate this Lease without payment or penalty of any
kind unless Landlord causes Substantial Completion to occur within thirty (30)
days following Landlord’s receipt of the Late Delivery Termination Notice. Failure
of Substantial Completion to occur within thirty (30) days following Landlord’s
receipt of the Late Delivery Termination Notice shall result in the automatic
termination of this Lease without further liability of either party to the
other as of the end of such thirtieth (30th) day. Tenant agrees to execute such
documents as may be reasonably requested by Landlord in order to evidence the
termination of this Lease.

 

3.                                       Rent.

 

(a)                                  Base Rent. 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 after the Rent
Commencement Date, 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
at least thirty (30) days in advance of such change becoming effective. 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; provided
that the foregoing shall not limit Tenant’s rights under applicable law in the
event Landlord breaches Tenant’s covenant of quiet enjoyment or fails to
deliver the Premises as required by the Work Letter. Tenant shall have no right
at any time to abate, reduce, or set-off any Rent (as defined in Section 5)
due hereunder except for any abatement as may be expressly provided in this
Lease. For purposes of this Lease, “Lease
Year” shall mean each period of twelve (12) consecutive months
commencing on the Rent Commencement Date, provided that Lease Year ten shall
expire no later than February 28, 2017, regardless of the actual Commencement
Date.

 

(b)                                 Additional Rent. In addition to Base Rent, Tenant agrees
to pay to Landlord as additional rent (“Additional
Rent”):  (i) Tenant’s Share of
“Operating Expenses” (as defined in Section 5), and (ii) any and all
other amounts Tenant assumes or agrees to pay 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.

 

4.                                       Base Rent Adjustments. Base Rent shall be increased
(a) as of the Rent Commencement Date by an amount equal to $4,270.69 per
month (based on the estimated Rentable Area of the Premises of 64,000 square
feet of rentable area, one hundred eighteen (118) months amortization period
and a ten percent (10%) interest rate, but subject to adjustment in accordance
with Section 1(d) above) if Tenant requests and receives the
Additional Tenant Improvement Allowance (as defined in the Work Letter) in
writing on or before the earlier of (i) substantial completion of the
Tenants’ Work, and (ii) the Rent Commencement Date and (b) as
provided in the Basic Lease Provisions. If Base Rent is increased pursuant to
clause (a) of the preceding sentence such increase shall apply to Base Rent
payable throughout the Term (e.g. if Tenant requests and receives the
Additional Tenant Improvement Allowance, Base Rent for Lease Year two of the
Term would be $202,030.69 per month, Base Rent for Lease Year three of the Term
would be $207,790.69 per month, etc.).

 

7

 

5.                                       Operating Expense Payments. Landlord shall deliver to Tenant
Landlord’s reasonable estimate, in writing, of Operating Expenses for each
ensuing calendar year during the Term (the “Annual
Estimate”), which may be revised by Landlord from time to time, but
no more than twice 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 one-twelfth (1/12th) of Tenant’s Share of the Annual Estimate. Payments
for any fractional calendar month shall be prorated.

 

The term “Operating Expenses”
means all costs and expenses of any kind or description whatsoever incurred or
accrued each calendar year by Landlord with respect to the Project (including, without duplication, Taxes (as
defined in Section 9), capital repairs and improvements which are not
excluded below (amortized over the useful life of such capital items with
interest imputed on the unamortized balance at the rate of the “Prime Rate” as published in the Money Rates
section of The Wall Street Journal plus 2% calculated as of the last business
day of each calendar quarter, as reasonably determined by Landlord), and the
costs of Landlord’s third-party property manager or, if there is no third party
property manager, administration rent, in the amount of two percent (2%) of
Base Rent, excluding only:

 

(a)                                  the original
construction costs of the Project and costs of correcting defects in such
original construction made during the initial seven (7) years of the Term (or
which are required as a result of any defects in such construction discovered
within such seven (7) year period, regardless of Landlord’s failure to make
such repairs or renovations if disclosed to Landlord within such period);

 

(b)                                 intentionally
deleted;

 

(c)                                  the cost of
any capital repairs or improvements made with respect to the Project (i) which
are performed within the first seven (7) years of the Term except for (x) the
cost of capital improvements or replacements intended to effect economies in
the operation or maintenance of the Project, or any portion thereof, and (y)
capital improvements or replacements required under any Legal Requirements
enacted or first enforced after the Compliance Date or pursuant to modified Legal
Requirements if such modifications first become effective or enforced after the
Compliance Date, or (ii) which are required as a result of any defects in the
construction of the Project discovered within such seven (7) year period,
regardless of Landlord’s failure to make such repairs or renovations if
disclosed to Landlord within such period (unless, and except to the extent
that, such capital repairs are attributable to the negligence or willful
misconduct of Tenant or anyone under Tenant’s control in the use, occupancy,
operation, maintenance or alteration of the Premises or the failure of Tenant
to maintain the Premises in accordance with Section 14 hereof, in which
case there shall be no such limitation with respect to that portion of the cost
of any capital repairs attributable to Tenant’s negligence or willful
misconduct);

 

(d)                                 structural
repairs or improvements to the Building roof (i.e. exclusive of the roof
membrane) or the Building (inclusive of the footings and foundations, Basement
Parking Structure pads and ramps, and the structural walls, floors and roof
supports of the Building and the Equipment Yard) (unless, and except to the
extent, attributable to the negligence or willful misconduct of Tenant or
anyone under Tenant’s control in the use, occupancy, operation, maintenance or
alteration of the Premises);

 

(e)                                  interest,
principal payments of Mortgage (as defined in Section 27) debts of
Landlord, financing costs and amortization of funds borrowed by Landlord,
whether secured or unsecured and all payments of base rent (but not taxes or
operating expenses) under any ground lease or other underlying lease of all or
any portion of the Project;

 

(f)                                    depreciation
of the Project (except for the amortization of any capital improvements, the
cost of which are includable in Operating Expenses to the extent permitted
herein);

 

(g)                                 advertising,
legal and space planning expenses and leasing commissions and other costs and
expenses incurred in procuring and leasing space to tenants for the Project,
including any leasing

 

8

 

office maintained in the Project, free rent and construction allowances
for tenants, and any advertising or marketing expenses;

 

(h)                                 legal and
other expenses incurred in the negotiation or enforcement of leases or in
Landlord’s defense of any action brought under this Lease or otherwise pursuant
to Landlord’s defense of Tenant’s quiet enjoyment of the Premises (but subject
to recovery in accordance with the terms of this Lease including pursuant to Section
44(l) hereof);

 

(i)                                     completing,
fixturing, improving, renovating, painting, redecorating or other work, which
Landlord pays for or performs for other tenants within their premises, and
costs of correcting defects in such work;

 

(j)                                     salaries, wages,
benefits and other compensation paid to officers and employees of Landlord
above the level of project engineer, or who are not assigned in whole, to the
operation, management, maintenance or repair of the Project, or if assigned to
the Project as a portion of such person’s employment obligations, in excess of
an equitable share of such person’s compensation based on services rendered to
the Premises;

 

(k)                                  general
organizational, administrative and overhead costs relating to maintaining
Landlord’s existence, either as a corporation, partnership, or other entity,
including general corporate, legal and accounting expenses;

 

(l)                                     costs
(including attorneys’ fees and costs of settlement, judgments and payments in
lieu thereof) incurred in connection with disputes with tenants, other
occupants, or prospective tenants, and costs and expenses, including legal
fees, incurred in connection with negotiations or disputes with employees,
consultants, management agents, leasing agents, purchasers or mortgagees of the
Building;

 

(m)                               costs
incurred by Landlord due to the violation by Landlord, its employees, agents or
contractors or any tenant of the terms and conditions of any lease of space in
the Project or any Legal Requirement;

 

(n)                                 penalties,
fines or interest incurred as a result of Landlord’s inability or failure to
make payment of Taxes and/or to file any tax or informational returns when due,
or from Landlord’s failure to make any payment of Taxes or any payment pursuant
to private assessments or equipment leases, if any, required to be made by
Landlord hereunder before delinquency;

 

(o)                                 overhead and
profit increment paid to Landlord or to subsidiaries or affiliates of Landlord
for goods and/or services in or to the Project to the extent the same exceeds
the costs of such goods and/or services rendered by unaffiliated third parties
on a competitive basis;

 

(p)                                 costs of
Landlord’s charitable or political contributions, or of fine art maintained at
the Project;

 

(q)                                 costs
incurred in the sale or refinancing of the Project;

 

(r)                                    net income
taxes of Landlord or the owner of any interest in the Project, franchise,
capital stock, gift, estate or inheritance taxes or any federal, state or local
documentary taxes imposed against the Project or any portion thereof or interest
therein;

 

(s)                                  any expenses
otherwise includable within Operating Expenses to the extent actually
reimbursed by persons other than tenants of the Project under leases for space
in the Project, including but not limited to Taxes, insurance and maintenance
and repairs related to the parking areas of the Project paid by tenant(s) of
Building 4757 or other third parties with parking rights at the Project from
time to time;

 

9

 

(t)                                    costs or
expenses resulting from the recordation of any covenants or restrictions
against the title to the Project following the date hereof;

 

(u)                                 any costs or
expenses associated with the maintenance, repair, improvement or alteration of
Building 4757, or any portion of the legal parcel on which Building 4757 is
located, including, but not limited to the parking areas (including any repairs
or resurfacing of the existing parking areas of Building 4757), landscaped
areas and driveways located on such parcel;

 

(v)                                 Any costs or
expenses which are duplicative of maintenance and repair costs and expenses
incurred by Tenant in satisfaction of Tenant’s maintenance and repair
obligations under this Lease, as long as Tenant is not in default for its
failure to perform such obligations;

 

(w)                               Operating
Expense reserves (including reserves for Taxes);

 

(x)                                   Costs or
expenses for the acquisition of sculpture, paintings or other works of art, but
not the reasonable expenses of maintaining, repairing and insuring same if
works of art are required to be installed by any Legal Requirement;

 

(y)                                 The costs of
any “tap fees” or one time lump sum sewer, water or other utility connection
fees for the Project;

 

(z)                                   Costs or
fees relating to the defense of Landlord’s title to or interest in the Building
and/or the Project, or any part thereof;

 

(aa)                            Rentals and
other related expenses, if any, incurred in leasing air conditioning systems or
other equipment ordinarily considered to be of a capital nature to the extent
such costs exceed the amount otherwise includable in Operating Expenses
hereunder if purchased rather than leased by Landlord;

 

(bb)                          Costs
incurred in connection with environmental testing, clean up, response action or
remediation on, in or under or about the Project (other than the Premises),
except to the extent the responsibility of Tenant pursuant to the express terms
of this Lease in which case Tenant shall be solely responsible for the costs
thereof;

 

(cc)                            Costs which
would be recoverable by Landlord pursuant to its insurance policies for which
Landlord seeks payment from Tenant as an Operating Expense (provided, however,
that nothing contained within this clause (cc) is intended to require Landlord
to submit claims for matters which Landlord does not reasonably believe are
covered by its insurance policies); and

 

(dd)                          Any costs,
fees or expenses for management, supervision, overhead or administration which
are in addition to or which are duplicative of Landlord’s management fee or
administration rent described above.

 

Within ninety (90) days after the end of each calendar year (or such
longer period as may be reasonably required but not more than one hundred
eighty (180) days), Landlord shall furnish to Tenant a statement (an “Annual Statement”) showing in reasonable
detail:  (a) the total and Tenant’s Share
of 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 Tenant’s
Share of 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 thirty (30) days after delivery of such Annual Statement to
Tenant. If Tenant’s payments of Operating Expenses for such year exceed Tenant’s
Share of actual Operating Expenses for such year Landlord shall pay the excess
to Tenant within thirty (30) days after delivery of such Annual Statement,
except that after the expiration, or earlier termination of the Term or if
Tenant is

 

10

 

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 thirty (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. If, during such thirty (30) day period,
Tenant reasonably and in good faith questions or contests the accuracy of Landlord’s
statement of Tenant’s Share of Operating Expenses, Landlord will provide Tenant
with access to Landlord’s books and records relating to the operation of the
Project and such information as Landlord reasonably determines to be responsive
to Tenant’s questions (the “Expense
Information”). If after Tenant’s review of such Expense Information,
Landlord and Tenant cannot agree upon the amount of Tenant’s Share of Operating
Expenses, then Tenant shall have the right to have an independent public
accounting firm selected by Tenant from among the five (5) largest in the
United States, with offices in San Diego County, working pursuant to a fee
arrangement other than a contingent fee (at Tenant’s sole cost and expense) and
approved by Landlord (which approval shall not be unreasonably withheld or
delayed), audit and/or review the Expense Information for the year in question
(the “Independent Review”). The
results of any such Independent Review shall be binding on Landlord and Tenant.
If the Independent Review shows that the payments actually made by Tenant with
respect to Operating Expenses for the calendar year in question exceeded Tenant’s
Share of Operating Expenses for such calendar year, Landlord shall at Landlord’s
option either (i) credit the excess amount to the next succeeding installments
of estimated Operating Expenses or (ii) pay the excess to Tenant within thirty
(30) days after delivery of such statement, except that after the expiration or
earlier termination of this Lease 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. If the Independent Review shows that Tenant’s payments
with respect to Operating Expenses for such calendar year were less than Tenant’s
Share of Operating Expenses for the calendar year, Tenant shall pay the
deficiency to Landlord within thirty (30) days after delivery of such statement.
If the Independent Review shows that Tenant has overpaid with respect to
Operating Expenses by more than five percent (5%) then Landlord shall reimburse
Tenant for all costs incurred by Tenant for the Independent Review. Operating
Expenses for the calendar years in which Tenant’s obligation to share therein
begins and ends shall be prorated.

 

“Tenant’s Share” shall be
the percentage set forth in the Basic Lease Provisions as Tenant’s Share. Base
Rent, Tenant’s Share of Operating Expenses and all other amounts payable by
Tenant to Landlord hereunder are collectively referred to herein as “Rent.”

 

6.                                       Additional Improvements.

 

(a)                                  Subject to Section
12 hereof and to all Legal Requirements (as defined below), Tenant shall
have the right to construct, from time to time, Hazardous Materials (as defined
below) storage areas, equipment rooms, and general storage facilities within
the Basement Parking Structure and the other Tenant Parking Spaces (as defined
in Section 10 below) of the Project, and within the boundaries of the
Equipment Yard depicted on Exhibit A,
which may be used by Tenant for Hazardous Materials storage (including, but not
limited to, hazardous safety structures within the Equipment Yard), equipment
rooms and other storage facilities associated with Tenant’s occupancy of the
Building, at no additional Base Rent for the use of such facilities (nor shall
such storage areas in the Basement Parking Structure or in the other Tenant
Parking Spaces of the Project or in the Equipment Yard be incorporated into any
conversion factor used in the determination of Rentable Area of the Premises). Landlord
shall have the right to be exercised at the time of Tenant’s request for
Landlord’s consent to construct such Hazardous Materials storage areas,
equipment rooms and general storage facilities, in its sole and absolute
discretion, to require Tenant to remove any such improvements installed by
Tenant as part of such storage area rights and restore all such areas to their
intended use upon the expiration or earlier termination of the Term. Tenant
shall not be entitled to any additional Tenant Parking Spaces should any such
improvements made by Tenant eliminate any parking spaces otherwise made
available to Tenant at the Project.

 

11

 

(b)                                 Subject to Section
12 and Section 42 of this Lease, all Legal Requirements and to the
requirements of Landlord’s warranties relating to the roof of the Building, the
Basement Parking Structure and the Equipment Yard (if any), at no cost to
Tenant, for so long as Tenant leases the entire Building, Tenant shall have the
exclusive right during the Term to use the roof of the Building, the Basement
Parking Structure and the Equipment Yard for the purpose of installing,
operating and maintaining an antennae, supplemental air-conditioning units, air
handlers, de-ionized water equipment and other mechanical and electrical
equipment (the “Supplemental Equipment”).
In addition to the Equipment Yard, Landlord shall make available for the for
the exclusive use of Tenant (A) a portion of the Project which may be
designated by Tenant as a screened trash enclosure and (B) a portion of the
Project in close vicinity to the Building loading dock which may be designated
by Tenant for the storage of Tenant’s liquid nitrogen tanks or other liquid
storage tanks. The cost for constructing any such improvements shall be payable
by Tenant, subject to reimbursement from the TI Fund (as defined in the Work
Letter).

 

7.                                       Use.

 

(a)                                  Permitted 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, Title III of the Americans With Disabilities Act (“ADA”) 
and any requirements of the Planned Industrial District (collectively, “Legal Requirements” and each, a “Legal Requirement”) provided, however, that
Landlord shall not consent to any restrictive covenants on the Project that materially
restrict Tenant’s Permitted Use or which cause Tenant to incur any additional
costs otherwise excluded from Operating Expenses. Tenant shall, upon five (5)
days’ written notice from Landlord, discontinue any use of the Premises which
is declared by any Governmental Authority having jurisdiction to be a violation
of a Legal Requirement. 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 or increase the insurance risk (unless the use associated with such
increased risk is consistent with the Permitted Use, including, without
limitation, the controlled use of volatile chemical compounds and biological
reagents in Tenant’s research and development activities, consistent with good
laboratory practices). Tenant shall not permit any part of the Premises to be
used as a “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 7 or otherwise
caused by Tenant’s use and/or occupancy of the Premises. 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 damage the Premises or obstruct or interfere with the rights of
Landlord or tenants of Building 4757, including conducting or giving notice of
any auction, liquidation, or going out of business sale on the Premises, or
using or allowing the Premises to be used for any unlawful purpose. Tenant
shall cause any equipment or machinery to be installed in the Premises so as to
reasonably prevent sounds or vibrations from the Premises from extending into
Common Areas, or other space in the Project. Tenant shall not place any
machinery or equipment in or upon the Premises whose weight exceeds 1,000
pounds of live load per square foot or transport or move such items through the
Common Areas of the Project or in the Project elevators in excess of the
elevator weight capacity rating, without the prior written consent of Landlord.
Except as may be provided under the Work Letter, Tenant shall not, without the
prior written consent of Landlord, use the Premises in any manner which will
require ventilation, air exchange, heating, gas, steam, electricity or water
beyond the then-existing capacity of the Project.

 

(b)                                 Tenant Improvements and Alterations. Tenant at
its sole expense shall make all alterations or modifications to the Premises
which may be imposed by Legal Requirements pursuant to Tenant’s construction or
installation of the Tenant Improvements (other than to the extent required as a
result of any non-compliance of Landlord’s Work with such Legal Requirements in
effect at the time the applicable portion of the Landlord’s Work was
Substantially Completed or the applicable portion of Landlord’s Finish Work was
Finally Completed in accordance with the Work Letter, which alterations or
modifications shall be Landlord’s obligation at its sole cost and expense) or
imposed pursuant to any

 

12

 

subsequent alterations to the Premises made by Tenant, or that are
required by Legal Requirements first imposed, modified or supplemented after
the applicable portion of the Landlord’s Work was Substantially Completed or
the applicable portion of Landlord’s Finish Work was Finally Completed,
respectively, in accordance with the Work Letter (including, without
limitation, compliance of the Premises with modifications to the accessibility
requirements ADA).

 

(c)                                  Compliance with Legal Requirements. Landlord
shall correct, repair or replace any non-compliance of the Landlord’s Work,
including, but not limited to the Building shell, Building Systems and the
Common Areas, with all applicable Legal Requirements in effect as of the date
of Substantial Completion of Landlord’s Work, and with respect to Landlord’s
Finish Work, the date of Final Completion thereof (as applicable, the “Compliance Date”), including, without
limitation, the provisions of ADA in effect as of the Compliance Date. Said
costs of compliance shall be Landlord’s sole cost and shall not be included as
part of Operating Expenses. Landlord shall correct, repair or replace any
non-compliance of the Building structure or Common Areas with any changes or
amendments to the ADA in effect after the Compliance Date, provided that
(subject to the limitations of Section 5 above) the cost of such repairs
or replacements (amortized over the useful life thereof using Landlord’s market
cost of funds if capital in nature) shall be included as Operating Expenses
payable by Tenant in accordance with Section 5 above. All other ADA
compliance issues which pertain to the Premises, including, without limitation,
in connection with Tenant’s construction of the Tenant Improvements or any
alterations or other improvements to the Premises (and any resulting ADA
compliance requirements in the Common Areas), and the operation of Tenant’s
business and employment practices in the Premises, shall be the responsibility
of Tenant at its sole cost and expense. The repairs, corrections or
replacements required of Landlord or of Tenant under the foregoing provisions
of this Section 7(c) shall be made promptly by Landlord or Tenant, as
applicable, following notice of non-compliance from any applicable Governmental
Authority (as defined in Section 9 below).

 

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 4 hereof) shall remain
in full force and effect (excluding any expansion or renewal 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 (x) one hundred percent (100%)
of Rent in effect during the last thirty (30) days of the Term (payable on a
per diem basis) for the first sixty (60) days that Tenant is a tenant at
sufferance (y) one hundred fifty percent (150%) of Rent in effect during the
last thirty (30) days of the Term commencing upon the sixty-first (61st)
day that Tenant is a tenant at sufferance, and (B) Tenant shall be responsible
for all damages suffered by Landlord resulting from or occasioned by Tenant’s
holding over, including for consequential damages; provided, however, that
Landlord shall not be entitled to consequential damages resulting from any
holdover by Tenant of sixty (60) days or less from the end of the Term. 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 of this Lease.

 

9.                                       Taxes. Landlord shall pay, as part of
Operating Expenses, 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 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

 

13

 

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. Landlord may contest by
appropriate legal proceedings the amount, validity, or application of any Taxes
or liens securing Taxes. Taxes shall not include any 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, higher than the base valuation on which Landlord from
time-to-time allocates Taxes to all tenants in the Project, Landlord shall have
the right, but not the obligation, to pay such Taxes. Landlord’s determination
of any excess assessed valuation shall be binding and conclusive; provided that
such determination is reasonable and made in good faith. The amount of any such
payment by Landlord shall constitute Additional Rent due from Tenant to
Landlord immediately upon demand. Tax refunds, if any, shall be credited
against Taxes for the year paid, including any interest which may be received
thereon from the taxing authority, and Landlord shall refund to Tenant within
thirty days (30) after receipt of any such tax refund, the amount to which
Tenant is entitled plus its pro-rata share of any interest corresponding to
such amount to the extent received from the Governmental Authority, provided Tenant
paid Taxes for the year relating to such refund. Any assessment of Taxes shall
be deemed imposed in the maximum number of installments permitted by applicable
Legal Requirement, whether or not actually paid.

 

Provided that Tenant is
not in Default, if Tenant reasonably believes that the amount of any Tax is
improper for any reason, Tenant may notify Landlord in writing of Tenant’s
desire that such Tax amount be contested or challenged and thereafter at Tenant’s
sole cost and expense and in Tenant’s own name or, whenever necessary in the
name of Landlord (provided that Tenant has first received the prior written
consent of Landlord which consent shall not be unreasonably withheld) contest
such Tax with the applicable Governmental Authority. Tenant shall indicate the
basis for Tenant’s contention that such Tax amount is improper in Tenant’s
notice to Landlord. Upon receipt of any such request from Tenant, Landlord
shall promptly meet with Tenant to discuss whether or not it is appropriate to
initiate a challenge or contest of such Tax amount or to take no action with
respect thereto; provided however, that if Tenant is liable for the Tax amount,
Landlord agrees to reasonably cooperate with Tenant’s legal challenge to such
Tax obligation at Tenant’s sole cost and expense.

 

Landlord shall not
voluntarily issue any assessments or bonds for the Project which would increase
Tenant’s payment of Taxes without Tenant’s prior written consent, which may be
withheld in Tenant’s sole and absolute discretion; provided that the foregoing
limitation shall in no way limit Tenant’s obligation to pay any Taxes owed on
account of assessments or bonds for the Project that are initiated or issued by
any Governmental Authority or person other than Landlord.

 

10.                                 Parking; Vehicular Access.

 

(a)                                  Subject to
all matters of record, Force Majeure, a Taking (as defined in Section 19
below), and a reduction of parking spaces pursuant to Section 6(a)
hereof, Landlord shall make available to Tenant during the Term not less than
one hundred seventy-six (176) parking spaces (before any Tenant Alterations
which may reduce the number of spaces available) identified on Exhibit G hereto (the “Tenant Parking Spaces”), subject in each
case to Landlord’s reasonable rules and regulations, which shall not be
discriminatorily enforced by Landlord. As long as Tenant is the sole tenant of
the Building, Tenant shall have the right, at Tenant’s sole cost, to designate
Tenant Parking Spaces in the vicinity of

 

14

 

the Building entrance and identified on Exhibit G, as reserved for Tenant’s guests, visitors, or
employees. Landlord will not charge Tenant any parking rent for the use of the
Project’s parking spaces. Tenant shall not Overburden the parking areas of the
Project. For purposes hereof Tenant shall be deemed to “Overburden” the parking areas of the
Project if Tenant allows any Tenant Parties to utilize parking spaces on the
Project in excess of the combination of the Tenant Parking Spaces and the
number of other parking spaces at the Project which have been assigned to third
parties other than Tenant (such other parking spaces being referred to as the “Excess Parking Spaces”) without the consent of Landlord or
the third parties holding such parking rights. Landlord and Tenant acknowledge
that as of the date hereof 57 unreserved parking spaces have been assigned to
the Building 4757 tenant. If Tenant Overburdens the parking area of the Project
in violation of this Section 10, Landlord may require Tenant to obtain
alternative off-Project parking for such excess use. If any of the Tenant
Parking Spaces are eliminated during the Term solely as a result of the matters
within Landlord’s reasonable control (as opposed to matters not within Landlord’s
reasonable control such as condemnation or casualty) and not in connection with
a benefit being provided by Landlord specifically for Tenant (e.g., at Tenant’s
request), Landlord shall make reasonable substitute parking (for the number of
spaces eliminated) available for use by Tenant, which shall be located on
either the Building 4757 parcel or any other adjacent parcel unless Landlord
provides reasonable accommodations for Tenant’s employees in the form of
regular shuttle service during Tenant’s normal business hours in the Premises. Tenant
shall not permit any Tenant Party to park on the real property on which
Building 4757 is located.

 

(b)                                 Landlord
shall promulgate reasonable non-discriminatory rules and regulations to Tenant
and the tenant(s) of Building 4757 and any other third party who may have
parking rights at the Project from time to time regarding shared parking at the
Project as well as ingress and egress to the Project from Building 4757 and to
Building 4757 from the Project. Specifically, such rules and regulations will
provide that, except as may otherwise be agreed to by Tenant and the tenant(s)
of Building 4757, (i) commencing upon the date that Executive Drive is open to
public use to the point which is adjacent to the Project, during normal
business hours (x) neither Tenant nor any Tenant Party shall access the Project
through the real property on which Building 4757 is located and that all
ingress and egress shall occur via Executive Drive and (y) no tenant of
Building 4757 or any other third party who may have parking rights at the
Project or in the parking areas of Building 4757 from time to time nor any of
such tenants or third party’s employees, guests, invitees or visitors shall
access Building 4757 or the Excess Parking Spaces of the Project via Executive
Drive and that all ingress and egress to Building 4757 shall occur through the
real property on which Building 4757 is located, and (ii) the tenant(s) of
Building 4757 or any other third party who may have parking rights at the
Project or in the parking areas of Building 4757 from time to time shall not
utilize any of the Tenant Parking Spaces.

 

(c)                                  Landlord
shall not be responsible for enforcing Tenant’s parking rights or access rights
against any third parties. Notwithstanding the foregoing, following written
notice from Tenant to Landlord disclosing with reasonable detail the manner in
which Tenant’s parking rights have been violated, Landlord agrees to use
commercially reasonable efforts to enforce the rights of Tenant to the Tenant
Parking Spaces as against the tenant(s) of Building 4757 and any other third
party who may have parking rights at the Project or in the parking areas of
Building 4757 from time to time. Tenant shall have the right to directly
enforce its parking rights as to the Tenant Parking Spaces at no cost or
expense to Landlord, including, without limitation, the designation of those
Tenant Parking Spaces in the vicinity of the Excess Parking Spaces as for the
Exclusive Use of Tenant and the Tenant Parties if the tenant(s) of Building
4757 or any other third party who may have parking rights at the Project or in
the parking areas of Building 4757 from time to time consistently utilize any
of the Tenant Parking Spaces. If the Building 4757 tenant(s) or any other third
party who may have parking rights at the Project or in the parking areas of
Building 4757 from time to time consistently utilize Executive Drive as a
manner of ingress and egress, following written notice to Landlord and a
reasonable period of time for Landlord to attempt to correct the misuse of
ingress and egress by such Building 4757 tenant(s) or any other third party who
may have parking rights at the Project or in the parking areas of Building 4757
from time to time, Tenant shall have the right at Tenant’s sole cost and
expense and subject to the requirements of Section 12 hereof, to
implement such reasonable traffic control and reduction measures as Tenant
reasonably deems necessary to preclude the use of Executive Drive as a manner
of ingress and egress by Building 4757

 

15

 

tenant(s) or any other third party who may have parking rights at the
Project or in the parking areas of Building 4757 from time to time, including,
without limitation, the right to install traffic control improvements in the
Project, such as speed bumps, rumble strips, card-activated arm bars and the
like, only to the extent permitted by applicable Legal Requirements.

 

11.                                 Utilities, Services. Subject to the terms of this Section 11,
Landlord shall provide refuse and trash collection and shall provide hook-ups
with respect to 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, water, electricity,
heat, light, power, telephone, sewer and other utilities collectively, the “Utilities”). Landlord shall pay, as
Operating Expenses (to the extent not excluded therefrom), all maintenance
charges for Utilities, and any storm sewer charges or other similar charges for
Utilities imposed by any Governmental Authority or Utility provider, and any
taxes, penalties, surcharges or similar charges thereon. Landlord, at its sole
cost and expense and not as an Operating Expense, shall be solely responsible
for and shall pay all tie-in costs, meter deposits and any other hook-up fees
and initial service deposits required to initially connect the public Utilities
to the Project; and Landlord shall, at Landlord’s sole cost and expense, cause
the public Utilities to be separately metered and demised from the
Building 4757 parcel. The cost of all applicable Utilities provided to the
Premises during the Term of this Lease shall be paid by Tenant, prior to
delinquency, directly to the applicable utility provider, and Landlord shall
provide for the initial transfer of all such Utilities into Tenant’s name at
the Premises on or about the Commencement Date. Any utility deposit made by
Tenant shall be Tenant’s sole and separate property. No interruption or failure
of Utilities shall result in eviction or constructive eviction of Tenant,
termination of this Lease or, unless attributable to Landlord’s gross
negligence or willful misconduct, the abatement of Rent. Notwithstanding the
foregoing, if as a result of any interruption or failure of Utilities that is
due to Landlord’s gross negligence or willful misconduct and not as a result of
a failure by any utility service provider or the actions of any other party not
under the control of Landlord, the Premises or a portion of the Premises is
rendered untenantable (meaning that Tenant is unable to use the Premises in the
normal course of it business and does not in fact use that portion of the
Premises) (a “Service Failure”),
then Tenant shall be entitled to an abatement of Base Rent with respect to the
portion of the Premises Tenant is prevented from using by reason of the Service
Failure if the Service Failure is not remedied within five (5) days following
the Tenant’s provision of written notice to Landlord of the occurrence of a
Service Failure or if Service Failures for any twelve (12) month period total
more than ten (10) days (whether or not consecutive) (the “Service Failure Threshold”). Base Rent
shall be abated commencing on the first day following the passage of the
Service Failure Threshold and continue until Tenant is no longer so prevented
from using such portion of the Premises. In no event shall Tenant be charged
any mark up or premium for overtime or after hours operation of the Building
heating, ventilating and air-conditioning (“HVAC”)
systems.

 

Landlord’s sole obligation for either providing emergency generators or
providing emergency back-up power to Tenant shall be: (i) to provide emergency
generators with not less than the stated capacity of the emergency generators
provided as part of Landlord’s Work (the “Emergency
Generators”), and (ii) to obtain all necessary permits and licenses
for the installation of the Emergency Generators (including any air quality
permits for the initial operation thereof). Tenant shall be solely responsible
for maintaining (a) the Emergency Generators which maintenance
responsibility shall include contracting with a third-party to maintain the
Emergency Generators as per the manufacturer’s standard maintenance guidelines
and (b) all necessary permits and licenses relating to the Emergency
Generators (including any air quality permits) including those initially
obtained by Landlord. Following initial delivery of the Emergency Generators in
good operating condition and in compliance with all Legal Requirements and free
of construction defects, Landlord shall have no additional obligation to
maintain the Emergency Generators in operational condition, or to provide any
replacement emergency generators or back-up power or to supervise, oversee or
confirm that the third-party maintaining the Emergency Generators is
maintaining the Emergency Generators as per the manufacturer’s standard
guidelines or otherwise; provided, however, that if the Emergency Generators are
not operational for any reason other than Tenant’s negligent maintenance,
repair or operation of the Emergency Generator, Tenant shall be permitted, in
Tenant’s sole discretion, to cause the Emergency Generators to be replaced with
Tenant-owned emergency generators and/or supplemental back-up power supplies as
a Notice-Only Alteration

 

16

 

(as defined in Section 12 below), which equipment shall be removed by
Tenant from the Project upon the expiration or earlier termination of this
Lease provided that Tenant restores the pad on which the Emergency Generators
were located to a condition capable of receiving a replacement generator, caps
all conduits and otherwise restores the area surrounding the Emergency Generators
to its condition prior to the original installation thereof. During any period
of replacement, repair or maintenance of the Emergency Generators when the
Emergency Generators are not operational, including any delays thereto due to
the inability to obtain parts or replacement equipment, Landlord shall have no
obligation to provide Tenant with an alternative back-up generator or
generators or alternative sources of back-up power. Tenant expressly
acknowledges and agrees that Landlord does not guarantee that the Emergency
Generators will be operational at all times or that emergency power will be
available to the Premises when needed. Except as provided above, all permits
for the operation of the Emergency Generators or any other emergency
generator(s) shall be the responsibility of Tenant.

 

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, foundation, roof, load bearing walls or safety of the Building, but
which shall otherwise not be unreasonably withheld or delayed. Landlord shall
approve or disapprove of any such request within ten (10) business days of its
receipt of such request consent. Notwithstanding the foregoing, Tenant may
construct nonstructural Alterations that do not affect the watertight integrity
of the Building, do not place any unreasonable load on the Building Systems,
are not visible from outside the Premises and do not detract from the exterior
appearance of the Building (with the exception of rooftop antennae, which shall
be approved by Landlord if appropriately screened in accordance with Legal
Requirements) in the Premises without Landlord’s prior approval if the cost of
such Alteration on an individual basis does not exceed $25,000 (a “Notice-Only Alteration”), provided Tenant
notifies Landlord in writing of such intended Notice-Only Alteration, and such
notice shall be accompanied by plans and specifications (if such Alterations
require plans and 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. In addition, with respect to any nonstructural
Alterations that do not affect the watertight integrity of the Building, do not
place any unreasonable load on the Building systems, are not visible from
outside the Premises and do not detract from the exterior appearance of the
Building (with the exception of rooftop antennae, which shall be approved by
Landlord if appropriately screened in accordance with Legal Requirements) the
cost of which, on an individual basis, will exceed $25,000 but not $50,000
(collectively with the Notice-Only Alterations, “Permitted Alterations”), Tenant shall request Landlord’s
consent for such Alterations, which consent shall not be unreasonably withheld
by Landlord, and if Landlord fails to respond to Tenant’s request for consent
within ten (10) business days following such request, Landlord’s consent shall
be deemed to have been granted to Tenant with respect to the Alteration(s)
described therein. Notwithstanding the foregoing, Permitted Alterations subject
to the foregoing rights of Tenant shall not exceed $250,000 in the aggregate
over the Term. 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 fifteen (15) business days in advance of any proposed
construction, and accompanied by plans and specifications (if such Alterations
require plans and 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. Tenant shall
also deliver “as-built” plans for all Alterations if the same are customarily
available. 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

 

17

 

comply with reasonable 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, Landlord’s actual out of
pocket costs of plan review. 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 keep all Alterations work free and clear of liens, and
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 reasonably 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) the names of all contractors and subcontractors who did the
work and final lien waivers from all such contractors and subcontractors, and
(ii) “as built” plans for any such Alterations if “as built” plans are
customarily prepared in connection with the applicable Alterations.

 

Other than (A) the items, if any, listed on Exhibit F attached hereto, (B) any items agreed by Landlord in
writing to be included on Exhibit F
in the future, and (C) any trade fixtures, machinery, equipment and other
personal property not paid for out of the TI Fund (as defined in the Work
Letter) which may be removed without material damage to the Premises, which
damage shall be repaired (including capping or terminating utility hook-ups
behind walls) by Tenant during the Term (collectively, “Tenant’s Property”), all property of any
kind paid for with the TI Fund, all Alterations, 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 such as fume hoods which penetrate the roof or
plenum area, built-in cold rooms, built-in warm rooms, walk-in cold rooms,
walk-in warm rooms, deionized water systems, glass washing equipment,
autoclaves, chillers, built-in plumbing, electrical and mechanical equipment
and systems, and any power generator and transfer switch (collectively, “Installations”) 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 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 or at the
time it receives notice of a Notice-Only Alteration notify Tenant if it has elected to cause Tenant to remove
such Installation upon the expiration or earlier termination of this Lease; provided,
further, that Landlord shall not be permitted to request that Tenant
remove any specific Installation unless in Landlord’s reasonable judgment such
Installation is either (x) not consistent with standard office/laboratory
construction or (y) has customized or unique features (other than features
consistent with standard lab and research and development facilities with
related office use) which would detract from the value or utility of the
Building and are required to be removed by Landlord as a condition to Landlord’s
approval of such Installation. 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 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 (including pursuant to Section 8 hereof to the extent such period
extends beyond the expiration or earlier termination of this Lease) as if said
space were otherwise occupied by Tenant.

 

13.                                 Landlord’s Repairs. Landlord shall maintain all of the
structural elements of the Building roof (i.e. exclusive of the roof membrane)
and Building (inclusive of the footings and foundations, Basement Parking
Structure pads and ramps, and the structural walls, floors and roof supports of
the Building and the Equipment Yard), and all capital repairs, replacements or
improvements to the Project (including, but not limited to, capital items
relating to the Building Systems described in Section 14 below), and
subject to Tenant’s rights under Section 14 below, shall maintain
the roof membrane, the exterior of the Building, the parking areas and other
Common Areas of the Project, in good repair, reasonable wear

 

18

 

and tear and uninsured losses and damages caused by Tenant, or by any
of the Tenant Parties excluded. Losses and damages caused by Tenant or any
Tenant Party shall be repaired by Landlord, and to the extent such
Tenant-caused damages are not covered by insurance policies for which Landlord
seeks payment from Tenant as an Operating Expenses (provided, however, that
nothing contained herein is intended to require Landlord to submit claims for
matters which Landlord does not reasonably believe are covered by its insurance
policies), such uninsured repair costs shall be made at Tenant’s sole cost and
expense; provided that the foregoing shall not be deemed to supersede the
Landlord’s waiver of subrogation in Section 17 below. Landlord
reserves the right to stop Building Systems services when necessary (i) by reason
of accident or emergency, or (ii) for planned repairs, alterations or
improvements, which are, in the judgment of Landlord, desirable or necessary to
be made, until said repairs, alterations or improvements shall have been
completed; provided any cessation of services shall be scheduled with Tenant
following a reasonable amount of notice under the circumstances, unless an
emergency situation requires immediate interruption. Subject to Landlord’s
obligation in the preceding sentence, Landlord shall have no responsibility or
liability for failure to supply Building Systems services during any such
period of interruption. Tenant shall promptly give Landlord written notice of
any repair required by Landlord pursuant to this Section 13, after which
Landlord shall have a reasonable opportunity to effect such repair. Landlord
shall not be liable for any failure to make any repairs or to perform any
maintenance unless such failure shall persist for an unreasonable time after
Tenant’s written notice of the need for such repairs or maintenance. Tenant
waives its rights under any state or local law to terminate this Lease or to
make such repairs at Landlord’s expense and agrees that the parties’ respective
rights with respect to such matters shall be solely as set forth herein. Repairs
required as the result of fire, earthquake, flood, vandalism, war, or similar
cause of damage or destruction shall be controlled by Section 18.

 

14.                                 Tenant’s Repairs.

 

(a)                                  Subject to Section
13 hereof, Tenant, at its expense, shall repair, replace and maintain in
good condition all portions of the Premises and the Project, including, without
limitation, entries, doors, ceilings, interior windows, interior walls, the
interior side of demising walls, HVAC, plumbing, fire sprinklers, elevators and
all other building systems serving the Premises, the Common Areas and all other
portions of the Project (“Building Systems”).
Such repair and replacement shall exclude any and all structural repairs or
replacements to the Building and the Project, which shall be performed by
Landlord as an Operating Expense subject to the limitations of Section 5
above. 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 fifteen (15) 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 thirty
(30) 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 Sections 17 and 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 and
any repair that benefits only the Premises.

 

(b)                                 Notwithstanding
anything to the contrary herein, Tenant shall manage the Premises and Project
at its sole cost and expense (excluding, however, repairs required by casualty
and any items for which Landlord is responsible pursuant to this Lease),
provided that Landlord shall have the right to take over responsibility for
managing any aspect of the Premises that Landlord reasonably believes is not
being properly maintained by Tenant, provided, however, that Tenant first
receives notice of such deficiency and thereafter fails to cure such deficiency
within fifteen (15) days of notice thereof. If Landlord takes over management
of the Premises the management fee set forth in Section 5 hereof shall
be increased to three percent (3%) of Base Rent. Tenant shall submit all
service contracts with janitors, gardeners, contractors and vendors required
for Tenant’s repair and maintenance of the Building to Landlord for its
approval, not to be unreasonably withheld, conditioned or delayed. Tenant shall
deliver Landlord promptly after receipt copies of all other contracts or
invoices related to Tenant’s maintenance of the Project. Tenant agrees that, in
its maintenance of the landscaping and parking areas of the Project, it

 

19

 

will reasonably consider, without obligation, opportunities proposed by
Landlord for the provision of efficient common services to the landscaped and
parking areas of the Project and the project on which Building 4757 is located.
If requested by Tenant in writing, Landlord shall use commercially reasonable
efforts to obtain for the benefit of Tenant reimbursement from tenant(s) of
Building 4757 of an equitable share of Tenant’s costs to maintain the parking
areas of the Project used by tenant(s) of Building 4757, excluding however
costs or expenses for items which are not separately metered or assessed, such
as the costs of electricity or irrigation. Tenant shall submit with any such
request for reimbursement such reasonable documentation as Landlord or the
Building 4757 tenant(s) require, including but not limited to contracts and
invoices and the manner for determining the share of such costs and expenses
requested to be paid by the Building 4757 tenant(s).

 

15.                                 Liens.

 

(a)                                  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 fifteen (15) 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 office equipment, furnishings, or other 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.

 

(b)                                 Notwithstanding
the foregoing, Tenant shall have the right, from time to time, to grant and
assign security interests in that portion of Tenant’s Property (exclusive of
Installations) located in or at the Premises that Tenant specifically describes
on a written list submitted to Landlord that is the sole property of Tenant and
not Landlord (the “Tenant’s Lien Property”).
Landlord agrees to execute, at Tenant’s sole cost and expense,
commercially-reasonable waiver forms but which are not blanket lien waivers
releasing Landlord’s interest in the Tenant’s Lien Property in favor of any
purchase money seller, lessor or lender who has financed the Tenant’s Lien
Property. Without limiting the effectiveness of the foregoing, provided that no
Default shall have occurred and be continuing, Landlord shall, upon the request
of Tenant, and at the Tenant’s sole cost and expense, execute and deliver any
instruments reasonably necessary or appropriate to confirm any such grant,
release, dedication, transfer, annexation or amendment to any person or entity
permitted under this paragraph including Landlord waivers with respect to any
of the foregoing, and such acknowledgment shall include, if requested by the
person holding such security interest, the right to enter upon the Premises
following a Tenant Default for a period not to exceed thirty (30) days, for the
limited purpose of removing any portion of the Tenant’s Lien Property which is
so secured, provided that the secured party agrees to repair any damages
resulting from the exercise of such right. Tenant shall indemnify and hold
Landlord harmless from and against any and all Claims in any manner directly or
indirectly related to any security interests in Tenant’s Lien Property.

 

16.                                 Indemnification. Tenant hereby indemnifies and agrees to
defend, save and hold Landlord harmless from and against any and all demands,
claims, liabilities, losses, costs, expenses, actions, causes of action,
damages or judgments, and all reasonable expenses incurred in investigating or
resisting the same (including, without limitation, reasonable attorneys’ fees,
charges and disbursements and costs of suit) (collectively, “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 by Tenant or its employees,
agents or guests, for Tenant’s violation of any Legal Requirements with respect
to the Project or a breach or default by Tenant in the performance of any of
its

 

20

 

obligations hereunder, except to the extent attributable to the willful
misconduct or gross negligence of Landlord, Landlord’s violation of any Legal
Requirements with respect to the Building, or a material breach of Landlord’s
obligations or representations under this Lease. Notwithstanding anything to
the contrary in this Lease, Landlord shall not be released from, and shall
indemnify, defend, save and hold Tenant harmless from and against all Claims
and all and all reasonable expenses incurred in investigating or resisting the
same (including, without limitation, reasonable attorneys’ fees and
disbursements) arising from the gross negligence or willful misconduct of
Landlord or its agents or guests, Landlord’s violation of any Legal
Requirements with respect to the Building, or a material breach of Landlord’s
obligations or representations under this Lease. Landlord shall not be liable
to Tenant for, and Tenant assumes all risk of damage to, personal property
(including loss of records kept within the Premises) if the cause of such
damage is of a nature which, if Tenant had elected to maintain fire and theft
insurance with extended coverage and business records endorsement available on
a commercially reasonable basis, would be a loss subject to settlement by the
insurance carrier including, but not limited to, damage or losses caused by fire,
electrical malfunctions, gas explosion, and water damage of any type including,
but not limited to, broken water lines, malfunction of fire sprinkler system,
roof leakage or stoppages of lines unless and except if such loss is due to the
gross negligence or willful misconduct of Landlord, its agents or guests,
Landlord’s violation of any Legal Requirements with respect to the Building, or
a material breach of Landlord’s obligations or representations under this Lease.
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
relating to any such damage or destruction of personal property including 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 or of any other
third-party. Security devices and services, if any, while intended to deter
crime may not in given instances prevent theft or other criminal acts of third
parties and the risk than any security device or service may malfunction or
otherwise be circumvented by a criminal is assumed by Tenant. Tenant shall at
Tenant’s sole cost obtain insurance coverage to the extent Tenant desires
protection against such criminal acts.

 

17.                                 Insurance; Waiver of Subrogation.

 

(a)                                  Landlord, as
part of Operating Expenses, shall carry insurance upon the Building (including
but not limited to the Tenant Improvements, Alterations and Building Systems),
in an amount equal to full replacement cost (exclusive of the costs of
excavation, foundations and footings, and without reference to depreciation
taken by Landlord upon its books or tax returns) providing protection against
any peril generally included within the classification “Fire and Extended
Coverage” together with insurance against sprinkler damage (if applicable),
vandalism and malicious mischief. Landlord, subject to availability and cost
thereof and, as part of Operating Expenses (but not to be deemed as being
required of Landlord) shall further carry as Landlord deems appropriate
coverage against flood, environmental hazard and earthquake, loss or failure of
Building equipment, rental loss during the period of repair or rebuild, workmen’s
compensation insurance and fidelity bonds for employees employed to perform
services. Landlord, as part of Operating Expenses, shall carry public liability
insurance with single limit of not less than $1,000,000.00 for death or bodily
injury, or property damage with respect to the Building.

 

(b)                                 Tenant, at
its sole cost and expense, shall maintain during the Term commercial general
liability insurance, with a minimum limit of not less than $2,000,000 per
occurrence with respect to the Premises. The commercial general liability
insurance policy shall name Landlord, without liability for premiums, as
additional insureds; 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 XII in “Best’s Insurance Guide”; shall not be cancelable (i) for
reasons other than nonpayment of premium unless at least thirty (30) days prior
written notice shall have been given to Landlord from the insurer, and (ii) for
nonpayment of premium unless at least ten (10) days prior written notice shall
have been given to Landlord from the insurer; and shall be written as primary
policies, not contributing with and not in excess of the coverage which
Landlord may carry. Certificates of insurance showing the limits of coverage
required hereunder and showing Landlord as an additional insured, 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

 

21

 

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, at least twenty (20) days prior to the
expiration of such policies, furnish Landlord with renewal certificates. Tenant
agrees that if Tenant does not take out and maintain such insurance, Landlord
may (but shall not be required to) procure said insurance on Tenant’s behalf
and at its cost to be paid as Additional Rent.

 

(c)                                  Tenant
assumes the risk of damage to any fixtures, goods, inventory, merchandise,
equipment, and leasehold improvements, and Landlord shall not be liable for
injury to Tenant’s business or any loss of income therefrom relative to such
damage, subject to the other provisions of this Lease. Tenant at Tenant’s cost
shall carry such insurance as Tenant desires for protection with respect to
personal property of Tenant or business interruption.

 

(d)                                 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 Building 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.

 

(e)                                  Notwithstanding
anything to the contrary in this Lease, Landlord and Tenant each hereby waive
any and all rights of recovery against the other or against officers,
directors, employees, agents, and representatives of the other, on account of
loss or damage occasioned to such waiving party or its property or the property
of others under the control of the waiving party that is caused by or results
from a risk which is actually or required to be insured against under this
Lease without regard to the negligence or willful misconduct of the entity so
released. The property insurance obtained by Landlord and Tenant shall include
the foregoing 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, which shall not be modified or
terminated without prior written notice to the other party as set forth below. Neither
party nor its respective Related Parties shall be liable to the other for 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. Such waivers
shall continue as long as the parties’ respective insurers so permit. Any
termination of such a waiver shall be by written notice of circumstances as
hereinafter set forth. Landlord and Tenant upon obtaining the policies of
insurance required or permitted under this Lease shall give notice to the
insurance carrier or carriers that the foregoing mutual waiver of subrogation
is contained in this Lease. If such policies shall not be obtainable with such
waiver or shall be so obtainable only at a premium over that chargeable without
such waiver, the party seeking such policy shall notify the other thereof, and
the latter shall have ten (10) days thereafter to (a) procure such
insurance with companies reasonably satisfactory to the other party or
(b) agree to pay such additional premium. If neither (a) nor (b) are done,
this waiver of subrogation shall have no effect during such time as such
policies shall not be obtainable or the party in whose favor a waiver of
subrogation is desired refuses to pay the additional premium. If such policies
shall be unobtainable, but shall be subsequently obtainable, neither party
shall be subsequently liable for a failure to obtain such insurance until a
reasonable time after notification thereof by the other party. If the 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 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.

 

22

 

(f)                                    Landlord may
require insurance policy limits to be raised to conform with requirements of
Landlord’s lender and/or to bring coverage limits to levels then being
generally required of new tenants within the Project.

 

18.                                 Restoration. If, at any time during the Term, any
portion of the Project or the Premises are damaged or destroyed by a fire or
other insured casualty, Tenant shall immediately notify Landlord of the
occurrence thereof and 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 commencing upon Tenant’s
receipt of all applicable Hazardous Materials Clearances (as defined below), as
applicable (the “Restoration Period”).
If the Restoration Period is estimated to exceed nine (9) months (the “Maximum Restoration Period”), Landlord may,
in such notice, elect to terminate this Lease as of the date that is seventy-five
(75) days after the date of discovery of such damage or destruction; provided,
however, that notwithstanding Landlord’s election to restore, Tenant may
elect to terminate this Lease by written notice to Landlord delivered within
ten (10) days of receipt of a notice from Landlord estimating a Restoration
Period for the Premises longer than the Maximum Restoration Period. Unless either Landlord or Tenant 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 the improvements installed
by Tenant or by Landlord and paid for 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 in, on or
about the Premises (collectively referred to herein as “Hazardous Materials Clearances”); provided,
however, 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, Landlord may, in its sole and absolute discretion, elect
not to proceed with such repair and restoration, or Tenant may by written
notice to Landlord delivered within ten (10) business days of the expiration of
the Maximum Restoration Period or, if longer, the Restoration Period, elect to
terminate this Lease, 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 seventy-five (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 or Tenant.

 

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. Tenant shall use diligent efforts to obtain all necessary
Hazardous Materials Clearances. Notwithstanding the foregoing, either Landlord
or Tenant may terminate this Lease if (a) the Premises are damaged during
the last one (1) year of the Term and Landlord reasonably estimates that it
will take more than two (2) months to repair such damage following receipt of
all necessary Hazardous Materials Clearances, or (b) if insurance proceeds
are not available for such restoration; provided, however, that the party
electing to terminate this Lease provides written notice of such election to
the other party within ten (10) days after Landlord notifies Tenant of the
amount of time required to repair such damage. Subject to receipt of sufficient
insurance proceeds (with any deductible to be treated as a current Operating
Expense) Rent shall be abated from the date of the casualty until the Premises
are repaired and restored, in the proportion which the area of the Premises, if
any, which is not usable by Tenant bears to the total area of the Premises,
unless Landlord provides Tenant with other space during the period of repair
that is suitable for the temporary conduct of Tenant’s business and pays for
Tenant’s relocation costs and expenses, and in such event Tenant’s rent shall
reflect the fair market rent of the replacement premises. Such abatement shall
be the sole remedy of Tenant, and except as provided in this Section 18,
Tenant and Landlord waive any right either of them may have to terminate the
Lease by reason of damage or casualty loss.

 

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

 

23

 

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 (which expressly includes the parking rights of
Tenant and the Equipment Yard usage pursuant to this Lease) 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 in Landlord’s reasonable
judgment either prevent or materially interfere with Tenant’s use of the
Premises (“Material Taking”), then
upon written notice by Tenant to Landlord this Lease shall terminate and Rent
shall be apportioned as of said date. Notwithstanding the foregoing, if Tenant
reasonably disputes Landlord’s determination that the Taking would or would
not, as the case may be, constitute a Material Taking and the parties are not
able to resolve such dispute, either Landlord or Tenant by written notice to
the other (a “Condemnation Arbitration Notice”)
may require that the matter to be resolved in accordance with the arbitration
method described in Section 43.

 

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 (including, but not limited to,
providing reasonable replacement parking spaces and storage facilities if such
Common Areas Improvements are affected) and the rentable square footage of the
Building, the rentable square footage of the Premises, Tenant’s Share of
Operating Expenses and the Rent payable hereunder 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, without limitation, 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 moving expenses and to seek a
separate award for damage to Tenant’s trade fixtures. 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 when due; provided that no
more than once per any consecutive twelve (12) month period and no more than
three (3) times total throughout the Term, Tenant shall have a three (3)
business day grace period following notice of such failure from Landlord to pay
such overdue amounts; provided that such notice shall be satisfied by delivery
of a notice to pay rent or quit as required under California law.

 

(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, or Landlord shall receive a
notice of nonrenewal of any such insurance and Tenant shall fail to obtain
replacement insurance at least fifteen (15) days before the expiration of the
current coverage.

 

(c)                                  Abandonment. Tenant shall abandon the Premises
except in the event that Tenant has performed all of its obligations under Section
28 prior to such abandonment and continues to perform all of its other
obligations under this Lease during such abandonment.

 

(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, or
Tenant’s interest in this Lease shall be attached, executed upon, or otherwise
judicially seized and such action is not released within ninety (90) days of
the action.

 

24

 

(e)           Liens. Tenant shall fail to discharge or
otherwise obtain the release of any lien placed upon the Premises in violation
of this Lease within thirty (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 ninety (90) 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 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 five (5) 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 thirty (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 thirty (30) days to cure,
then Tenant shall not be deemed to be in default if Tenant commences such cure
within said thirty (30) day period and thereafter diligently prosecutes the
same to completion; provided, however, that such cure shall be completed
no later than ninety (90) days from the date of Landlord’s notice.

 

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 twelve percent
(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 five (5)
days after the date such payment is due, Tenant shall pay to Landlord an
additional sum equal to five percent (5%) of the overdue Rent as a late charge;
provided that such late charge shall not accrue upon the first late payment in
any twelve (12) month period if Tenant provides the full amount due within five
(5) days after receipt of notice from Landlord that such amount was not
received when due. The parties agree that this late charge represents a fair
and reasonable estimate of the costs Landlord

 

25

 

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
fifth (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.

 

(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 21(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)           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.

 

26

 

(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 or except as provided in Section 41
of this Lease. 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 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.

 

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. Except in the case of a Permitted Assignment (as
defined below), if Tenant is a corporation, partnership or limited liability
company, with respect to shares or other ownership interests thereof which are
not actively traded upon a stock exchange or in the over-the-counter market,
any transfer or series of transfers whereby forty-nine percent (49%) or more of
such issued and outstanding shares or other ownership interests of such
corporation are, or voting control is, transferred (but excepting transfers on
any national exchange as long as Tenant is publicly traded or upon deaths of
individual owners) from a person or persons or entity or entities which were
owners thereof at time of the execution of this Lease to persons or entities
who were not owners of shares or other ownership interests of the corporation,
partnership or limited 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.

 

(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 fifteen
(15) days, but not more than forty-five (45) 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

 

27

 

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 fifteen (15) days after receipt
of the Assignment Notice:  (i) grant such
consent or (ii) refuse such consent (which consent will not be unreasonably
withheld or delayed) (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). Tenant shall reimburse Landlord for all
of Landlord’s reasonable out-of-pocket expenses in connection with its
consideration of any Assignment Notice. Notwithstanding the foregoing, Tenant
shall be permitted to assign its interest in this Lease or sublet all or a
portion of the Premises upon thirty (30) days prior written notice to Landlord
but without Landlord’s prior written consent to an entity which (A) (1)
controls, is controlled by, or is under common control with Tenant; (2) results
from a merger of, reorganization of, or consolidation with Tenant; or (3)
acquires substantially all of the stock or assets of Tenant, as a going
concern, with respect to the business that is being conducted in the Premises;
and (B) has a tangible net worth (as determined in accordance with generally
accepted accounting principles (“GAAP”))
following such transfer which is equal to or greater than the tangible net
worth (as determined in accordance with GAAP) of Tenant as of the same date,
and (C) such assignee shall agree in writing to assume all of the terms,
covenants and conditions of this Lease arising after the effective date of the
assignment (each a “Permitted Assignment”).
In addition, a sale or transfer of the capital stock or interests in or
memberships in Tenant shall be deemed a Permitted Assignment if such sale or
transfer occurs in connection with any bona fide financing or capitalization
for the benefit of Tenant. Any assignment or sublease pursuant to a Permitted
Assignment shall not relieve the assigning Tenant of any liability under this
Lease. For all purposes of this Lease, the term “Tenant” shall mean Tenant and
any transferee pursuant to a Permitted Assignment assuming Tenant’s interest in
this Lease. Landlord acknowledges and agrees that Landlord’s right under this
paragraph to receive notice in the case of a Permitted Assignment is not intended
to create a consent right in favor of Landlord as to the transaction
constituting the Permitted Assignment but rather the right to receive prior
notice of a Permitted Assignment and Landlord shall keep all non-public
information made available by Tenant to Landlord regarding the proposed
Permitted Assignment confidential until the effective date of said Permitted
Assignment.

 

(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 by
such assignee or subtenant (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, by such assignee or subtenant, for the closure of any such tanks. Neither
Tenant nor any such proposed assignee or

 

28

 

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.

 

(d)           No Release of Tenant, Sharing of Excess Rents. Notwithstanding
any assignment or subletting, Tenant and any guarantor or surety of Tenant’s
obligations under this Lease 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 the case of a Permitted
Assignment, if the rental amount received by Tenant from a sublessee or
assignee (or a combination of the rental received pursuant to such sublease or
assignment plus any bonus or other consideration therefor in any form,
exclusive of the reasonable sales price of Tenant’s Property) exceeds the sum
of the
Rent payable by Tenant under this Lease (which shall exclude, however, any Rent
payable under this Section 22(d)) and actual and reasonable brokerage
fees, legal costs, costs paid to Landlord pursuant to its consent to such
subletting or assignment, and any design or construction fees and costs
directly related to and required pursuant to the terms of any such sublease),
then Tenant shall be bound and obligated to pay Landlord as Additional Rent
hereunder fifty percent (50%) of such net rental amount received by Tenant in
excess of Tenant’s Rent (“Excess Rent”)
within ten (10) days following receipt thereof by Tenant. Notwithstanding the
foregoing, upon and after a Default Tenant shall be bound and obligated to pay
Landlord as Additional Rent hereunder one hundred percent (100%) of Excess Rent
within 10 days following receipt thereof by Tenant. Notwithstanding the
foregoing, the calculation of Excess Rent shall be determined by the aggregate
income and expense attributable to all subleases and assignments of Tenant at
the Property at the time of such determination. If Tenant shall sublet the
Premises or any part thereof, Tenant hereby immediately and irrevocably assigns
to Landlord, as security for Tenant’s obligations under this Lease, all rent
from any such subletting, and 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; provided that, Tenant shall use commercially reasonable
efforts to collect the contract rents due from any such transferee.

 

(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.

 

23.           Estoppel Certificate. Tenant shall, within ten (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, (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, to Tenant’s actual knowledge, any uncured
defaults on the part of Landlord hereunder, or specifying such defaults if any
are claimed, and (iii) setting forth such further factual information with
respect to the status of this Lease or the Premises as may be reasonably
requested thereon; provided that Tenant shall not be required to provide
proprietary information pursuant to such request. 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 is not in Default
under this Lease, Tenant shall, subject to the terms of this Lease, at all
times during the Term, have peaceful and quiet enjoyment of the

 

29

 

Premises against any person claiming by, through or under Landlord, or
otherwise claiming an interest in the Project.

 

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

 

26.           Rules and Regulations. Tenant shall, at all times during the
Term, comply with all reasonable rules and regulations at any time or from time
to time established by Landlord covering use of the Premises and the Project. The
current rules and regulations are attached hereto as Exhibit E. If there is any conflict between said rules and
regulations and other provisions of this Lease, the terms and provisions of
this Lease shall control. Landlord shall not have any liability or obligation
for the breach of any rules or regulations by other tenants in the Project and
shall not enforce such rules and regulations in a discriminatory manner.

 

27.           Subordination. Landlord represents and warrants that
as of the date of this Lease, the Project is not encumbered by a mortgage, deed
of trust or ground lease. This Lease and Tenant’s interest and rights hereunder
are hereby made and shall be subject and subordinate at all times to the lien
of any Mortgage now existing or hereafter created on or against the Project or
the Premises, and all amendments, restatements, renewals, modifications,
consolidations, refinancing, assignments and extensions thereof, without the
necessity of any further instrument or act on the part of Tenant; provided,
however that Landlord shall use commercially reasonable efforts to obtain for
the benefit of Tenant from any Holder of a future Mortgage a commercially
reasonable non-disturbance agreement which provides, among other things, that
so long as there is no Default hereunder, this Lease shall not be terminated
and Tenant’s right to possession of the Premises shall not be disturbed by the
Holder of any such Mortgage. Notwithstanding the foregoing, Tenant shall
execute and deliver, upon ten (10) business days prior written notice, such
further instrument or instruments evidencing such subordination of this Lease
to the lien of any such Mortgage or Mortgages as may be required by Landlord. However,
if any such Holder so elects, this Lease shall be deemed prior in lien to any
such Mortgage or Mortgages regardless of the date and Tenant will execute a
statement in writing to such effect at Landlord’s request. In the event any
proceedings are brought for foreclosure, or in the event of the exercise of the
power of sale under an Mortgage, Tenant shall at the election of the purchaser
at such foreclosure or sale attorn to the purchaser upon any such foreclosure
or sale and recognize such purchaser as the Landlord under this Lease, so long
as such purchaser executes a written recognition agreement in form reasonably
satisfactory to Landlord and Tenant providing that, so long as Tenant is not in
Default hereunder, Tenant’s rights of occupancy shall not be disturbed and
Tenant shall receive all of the rights and services provided for under this
Lease. Notwithstanding anything to the contrary in this Section 27, as a
condition to Tenant’s obligation to subordinate its leasehold interest to the
interests of a Holder, Landlord shall obtain from any such Holder a written
recognition agreement in form reasonably satisfactory to Landlord, Tenant and
the Holder providing that Tenant’s rights of occupancy shall not be disturbed
in the event of a termination of the Mortgage, and that in the event of such termination
or foreclosure, so long as Tenant is not in Default hereunder, Tenant shall
receive all of the rights and services provided under this Lease. 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.

 

(a)           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
received, subject to any Alterations or Installations permitted 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 Landlord and its Related Parties
(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 18 and 19
excepted. At least three (3) months prior to the surrender of the Premises,
Tenant shall deliver to Landlord a narrative description of the

 

30

 

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, which
actions shall be generally consistent with the surrender plan attached hereto
as Exhibit H (the “Surrender Plan”). Such Surrender Plan shall
be accompanied by a current listing of (i) all Hazardous 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 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. Landlord shall be permitted to require reasonable modifications
to account for changes in Legal Requirements following the date of this Lease
or resulting from any change in the nature or quantity of the chemical,
biological or radiological materials or substances utilized by Tenant during
the Term as compared to materials or substances utilized by Tenant at the
premises located at 11099 North Torrey Pines Road which Tenant occupies as of
the date of this Lease, including but not limited to changes in the types of
experiments being conducted by Tenant, the presence of any storage tanks
whether above or below ground and the introduction of radioactive materials by
Tenant. 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 (which
approval shall not be unreasonably withheld or conditioned) and to visit the
Premises and verify satisfactory completion of the same, which cost shall not
exceed Five Thousand Dollars ($5,000). Landlord shall have the unrestricted right
to deliver such Surrender Plan and any report by Landlord’s environmental
consultant with respect to Tenant’s surrender of the Premises to any subsequent
tenant, or to any purchaser of Landlord’s interest in the Project, any Holder
of a Mortgage on the Premises, any ground lessor holding fee title to the
Project parcel or any other third party who Landlord reasonably determines has
a need to review the Surrender Plan.

 

(b)           If Tenant
shall fail to complete the requirements of the 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.

 

(c)           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. If the Premises security system is installed at
Landlord’s sole cost and expense, and any such access card or key is lost,
Tenant shall pay to Landlord, at Landlord’s election, either the cost of
replacing such lost access card or key or the cost of reprogramming the access
security system in which such access card was used or changing the lock or
locks opened by such lost key. 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 Landlord and Tenant hereunder not fully performed as of the
termination of the Term, including the obligations of Tenant under Section
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.

 

31

 

(d)           Notwithstanding
anything to the contrary herein, (i) Tenant shall be required to remove
any cabling it installs in the Building upon the expiration or earlier
termination of this Lease to the extent required by applicable building code or
other governmental requirement or any governmental official and
(ii) Tenant shall not be obligated to remove any of the Tenant Improvements
(except for Tenant’s Building-top signage) or other telecommunication or
security systems (other than Tenant’s rooftop antennae, if any, or as provided
in clause (i) of this sentence) upon the expiration or earlier termination of
this Lease unless in Landlord’s reasonable judgment any Tenant Improvements are
either (1) not consistent with standard office/laboratory construction or
(2) have customized or unique features (other than features consistent
with standard lab and research and development facilities with related office
use) which would detract from the value or utility of the Building and are
required to be removed by Landlord as a condition to Landlord’s approval of the
TI Construction Drawings (as defined in the Work Letter).

 

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, as to any Tenant Party, permit any Hazardous Materials (as
hereinafter defined) to be brought upon, kept, used, stored, handled, 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 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 shall indemnify, 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, 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, except to the extent the
Hazardous Materials are present as the result of the acts of Landlord or
Landlord’s employees, agents and contractors. 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 Building, the Project
or any adjacent property caused or permitted by Tenant or any Tenant Party
results in any contamination of the Premises, the Building, the Project or any
adjacent property, Tenant shall promptly take all actions at its sole expense,
except to the extent the Hazardous Materials are present as the result of the
acts of Landlord or Landlord’s employees, agents and contractors, and in
accordance with applicable Environmental Requirements as are necessary to
return the Premises, the Building, the Project or any adjacent property to the
condition existing prior to the time of such contamination, provided that
Landlord’s approval of such action shall first be obtained, which approval
shall not unreasonably be withheld so long as such actions would not potentially
have any material adverse long-term or short-term effect on the Premises, the
Building or the Project.

 

32

 

Notwithstanding anything to the contrary contained in this Section
30, Tenant shall not be responsible for, and the indemnification and hold
harmless obligation set forth in this paragraph shall not apply to, the
presence of Hazardous Materials in, on or about the Project (other than within
the Premises) unless the presence of such Hazardous Materials (i) is the
result of a breach by Tenant of any of its obligations under this Lease,
(ii) was caused by Tenant or any Tenant Party, (iii) was contributed
to by Tenant or any Tenant Party (but Tenant’s responsibility and
indemnification and hold harmless obligation shall be limited to the extent
that Tenant or any Tenant Party contributed to the presence of Hazardous
Materials), (iv) was exacerbated by Tenant or any Tenant Party (except if
Tenant or the Tenant Party had no prior knowledge (and can reasonably demonstrate
that they had no prior knowledge) of the existence of such Hazardous Materials,
or (v) originates from the Premises during Tenant’s (or any assignee’s or
sublessee’s) occupancy of the Premises (or any portion thereof).

 

(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 one additional
time per year following the written request of Landlord. Tenant shall deliver
to Landlord true and correct copies of the following documents (the “Haz Mat Documents”), if any, 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, 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 three (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
30 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, (i) neither Tenant nor any of
its legal corporate predecessors has been required by any prior landlord (other
than ARE 11099 North Torrey Pines Road, LLC), 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 of such
predecessor or resulted from Tenant’s or such predecessor’s action or use of
the property in question, and (ii) Tenant is not 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). If Landlord determines that
this representation and warranty was not true as of the date of this lease
Landlord shall have the right to terminate this Lease in Landlord’s sole and
absolute discretion.

 

(d)           Testing. Landlord shall have the right to
conduct annual tests of the Premises to determine whether any contamination of
the Premises or the Project has occurred as a result of Tenant’s use. Such
tests shall be conducted at Landlord’s sole cost and expense (and not included
as an

 

33

 

Operating Expense), unless such tests are conducted pursuant to Section
21 hereof or reveal that Tenant has not complied with any Environmental
Requirement, in which case Tenant shall reimburse Landlord for the reasonable
cost of such tests. Landlord and Tenant shall cooperate with one another to
schedule such testing at a mutually acceptable time. Tenant shall have the
right to have a representative present during such testing. If Tenant, at
Tenant’s expense, conducts its own tests of the Premises using third-party
contractors and test procedures reasonably acceptable to Landlord which tests
are certified to Landlord, Landlord shall accept such tests in lieu of the
annual tests. 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 appropriate tests of the Premises and the Project to determine if
contamination has occurred as a result of Tenant’s use of the Premises. In
connection with 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 for which Tenant is liable 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)           Tanks. Tenant shall have no right to install
or use any underground storage tanks at the Premises or the Project. If 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 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
30 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 which Tenant is required under this Lease to remove
(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.

 

34

 

(h)           Landlord Representation and Warranty; Baseline Environmental Reports. Landlord
hereby represents and warrants that, to Landlord’s actual knowledge as of the
time of the execution of this Lease, and subject to the contents of the
documents, reports or other written information regarding the environmental
condition of the Project described on Exhibit
I hereto, the Project does not contain any pre-existing Hazardous
Materials in violation of any Environmental Requirements. Tenant hereby
acknowledges receipt of all items set forth on Exhibit I hereto and accepts the Project in the condition
described therein.

 

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 thirty (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 thirty (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 period of sixty (60) days to cure the default (unless such
performance will, due to the nature of the obligation, require a period of time
in excess of sixty (60) days, in which case such Holder and/or Landlord shall
have such period of time as is reasonably necessary to effect a cure provided
that Holder and/or Landlord is diligent in attempting to effect such cure),
including time to obtain possession of the Project, whether by power of sale,
judicial action or other legal means reasonably available to such Holder, to
the extent such means are necessary to effect a cure; 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 (regardless of the cure period set forth in the first sentence of
this Section 31), 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 two (2) business days
of obtaining knowledge of such claimed Material Landlord Default, give Landlord
written notice of such claim and telephonic notice to Tenant’s principal
contact with Landlord. Such written notice shall specifically state in bold
face type that Tenant claims that a “Material Landlord Default” has occurred. Landlord
shall then have two (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 two
(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. Notwithstanding the
foregoing, to the extent the Landlord originally named in this Lease (the “Original Landlord”) assigns or otherwise
transfers its interest in the Project prior to Landlord’s completion of all of
(i) the Landlord’s Work pursuant to the Work Letter and (ii) the
distribution of the entire TI Allowance timely requested by Tenant
(collectively, the “Original LL Requirements”),
then the Original Landlord shall remain personally responsible for such
Original LL Requirements following such assignment or transfer.

 

35

 

32.           Inspection and Access. Except in the case of an emergency,
Landlord and its agents, representatives, and contractors may enter the
Premises during normal business hours of Tenant’s business operations in the
Premises, subject to Tenant’s reasonable security and safety requirements
(including, but not limited to, escorted access in any laboratory facilities),
to inspect the Premises (including, without limitation, the state of the
maintenance, repairs, decorations and order of the Premises) and to make such
repairs as may be required or permitted pursuant to this Lease and for any
other business purpose. Landlord and Landlord’s representatives may enter the
Premises during business hours on not less than forty-eight (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 such repairs, inspecting the Premises, or, subject to a
commercially reasonable non-disclosure agreement, if required by Tenant from
any such third parties, for the purpose of showing the Premises to prospective
purchasers or other third parties required due to Landlord’s ownership or
operation of the Project and, during the last year of the Term, to prospective
tenants. Landlord may erect a suitable sign on the Building stating
(i) the Premises are available to let during the last twelve (12) months
of the Term and/or (ii) that the Project is available for sale. Landlord
shall not otherwise allow any broker or Landlord signs to be erected or
installed on the Building. Subject to the limitation of Section 1(a)
above, and subject to Landlord’s obligations under Section 10 relating
to parking spaces, 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 or materially increase Tenant’s cost of occupying or operating or
maintaining the Premises. At Landlord’s request, Tenant shall execute such
instruments as may be necessary for such permitted 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 Tenant in connection with any unauthorized entry into
the Premises or any other breach of security with respect to the Premises by
any person other than Landlord or any of its Related Parties; provided that the
foregoing shall not be deemed to supersede the waiver of subrogation in Section
17 above. 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. Except for the payment of Rent or
reimbursement of any allowance or overpayment by Tenant to Landlord, neither
Landlord nor Tenant shall be held responsible or liable for delays in the
performance of its obligations hereunder to the extent caused by or arising out
of, any acts of God, strikes, lockouts, labor troubles or disputes not within
Landlord’s reasonable control, embargoes, quarantines, failure of, or inability
to obtain, power or utilities to the Project, delay in transportation of
construction materials or inability to obtain labor or materials (or reasonable
substitutes therefor) not attributable to the other party’s (or its employees’,
agents’ or contractors’) negligence or willful failure, fire, vandalism,
accident, flood, weather or other casualty, governmental restrictions, orders,
limitations, regulations, controls, or requirements not attributable to the
other party’s (or its employees’, agents’ or contractors’) negligence or
willful failure, riot, insurrection, civil commotion, sabotage, explosion, war,
terrorism, national or local emergency, national, regional, or local disasters,
calamities, or catastrophes, and other causes or events beyond the reasonable
control of the other party (collectively, “Force
Majeure”). Claims of Force Majeure Delay due to weather shall be
substantiated by delivery to the party not claiming the Force Majeure Delay of
notices or other documents affirming the existence and length of such weather
related delay claimed as a Force Majeure Delay, including industry standard
documentation.

 

36

 

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 Phase 3 Properties who Landlord shall pay a
commission to per the terms of a separate commission agreement between Landlord
and Broker. 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 THE OPERATION OR LEASE THEREOF, OR ANY
SALE OR CONDEMNATION, OR THE FINANCING 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. NOTWITHSTANDING ANYTHING TO THE
CONTRARY HEREIN, TENANT SHALL NOT BE OBLIGATED TO REPAIR OR REPLACE, NOR SHALL
LANDLORD NOR ANY MORTGAGEE OF LANDLORD HAVE ANY INTEREST IN, ANY TRADE
FIXTURE(S) OR EQUIPMENT OWNED BY TENANT, HOWEVER CHARACTERIZED, TO THE EXTENT
SUCH PERSONAL PROPERTY IS DAMAGED OR DESTROYED AS A RESULT OF LANDLORD’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT AND SUCH LOSS IS NOT COVERED BY TENANT’S
INSURANCE.

 

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.

 

38.           Signs; Exterior Appearance.

 

(a)           Tenant shall
not, except as otherwise permitted in this Section 38, without the prior
written consent of Landlord, which shall not be unreasonably withheld by
Landlord:  (i) attach any awnings,
exterior lights, decorations, balloons, flags, pennants, banners, painting or
other projection to any outside wall of the Project, (ii) use any curtains,
blinds, shades or screens other than Landlord’s standard window coverings,
(iii) coat or otherwise sunscreen the interior or exterior of any windows,
(iv) place any equipment, furniture or other items of personal property on
any exterior balcony, or (v) paint, affix or exhibit on any part of the
Premises or the Project any signs, notices, window or door lettering, placards,
decorations, or advertising media of any type which can be viewed from the
exterior of

 

37

 

the Premises. Interior signs on doors and the directory tablet shall be
inscribed, painted or affixed by Tenant at the sole cost and expense of Tenant.

 

(b)           Notwithstanding
the foregoing, as long as Tenant continues to lease the entire Premises and is
not in uncured Default, Tenant may install external signage as follows:  (i) Building top in one or more locations
consistent with applicable City of San Diego sign ordinances, (ii) adequate
visitor parking and directional signage, (iii) shared space on the existing
monument sign at the main entrance to the Project, until the monument sign
described in clause (iv) is completed and (iv) subject to the approval of the
City of San Diego and compliance with all Legal Requirements, at Landlord’s
sole cost and expense as part of Landlord’s Work, subject to Tenant’s approval
as to the design of its lettering and logo thereon (which Tenant shall not
unreasonably withhold, condition or delay), one (1) monument sign (the “Monument Sign”) at the entrance to the
existing Project from Executive Drive, consistent in style and scale with the
existing Project monument sign, promptly upon completion of the extension of
Executive Drive. Notwithstanding the foregoing, Tenant’s rights with respect to
the Monument Sign may be transferred to permitted subtenants and assigns. Tenant,
at Tenant’s sole cost and expense, shall also have the right to install and
display other corporate or product signage or video displays within the
Premises.

 

(c)           The signage
described in clause (iv) of Section 38(b) shall be provided at Landlord’s
sole cost and expense except with respect to lettering and logo of the
permitted occupants of the Premises which shall be at Tenant’s sole cost and
expense (such expense shall be reimbursable out of the TI Fund, but subject to
the $25,000 cap described below). The signage described in clauses (i) through
(iii) of Section 38(b) shall be at Tenant’s sole cost and expense
including, (x) the cost of such signage; (y) the cost of obtaining
permits and approvals for such signage, if any; and (z) the cost of
installing such signage; which expenses shall be reimbursable out of the TI
Fund; provided that the reimbursement out of the TI Fund for Tenant’s signage
shall not exceed $25,000.

 

(d)           Except as
otherwise provided for herein, Tenant shall bear all expenses relating to the
cost of maintaining, repairing and replacing Tenant’s signage and costs
associated with the removal of Tenant’s signage, repair of any damage caused by
such removal, and restoration of the site of Tenant’s signage on the Building
or the Project to the condition in which those portions of the Building or
Project existed before the installation of Tenant’s signage.

 

(e)           On
termination or expiration of the Term or on expiration of Tenant’s signage
rights under this Section 38, Landlord shall have the right to
permanently remove Tenant’s signage, repair any damage caused by such removal,
and restore those parts of the Building on which Tenant’s signage was located
to the condition that existed before the installation of Tenant’s Sign.

 

(f)            Tenant shall
at all times during the Term maintain Tenant’s signage in working order and in
a condition consistent with the quality and character of the Project and the
Building exterior.

 

(g)           Tenant shall
have the right to change the signage to conform to changes in Tenant’s name and
logo provided that with respect to the Building top signage such changes do not
require that the original sign undergo any changes other than the change in
Tenant’s name and logo, as permitted under this Lease, and that Tenant gives
Landlord not less than fifteen (15) business days advance notice of such
proposed changes. In addition, with respect to the Monument Sign, Tenant shall
have the right to change the Monument Sign to conform to changes in Tenant’s
name and logo and the name and logos of other occupants of the Premises, as
permitted under this Lease, provided that Tenant gives Landlord with not less
than 15 business days advance notice of such proposed changes.

 

(h)           Subject to
conformance with all applicable City of San Diego ordinances and other Legal
Requirements and otherwise in accordance with this Section 38, beginning
as of the date of execution of this Lease through and including the date upon
which removal of such sign is necessary to complete the external skin of the
Building in the normal course of construction, Tenant shall be permitted to
hang one

 

38

 

temporary banner sign on the Building identifying the Premises as the
future premises of Tenant. The cost for such temporary signage shall not be
subject to reimbursement by Landlord pursuant to the TI Allowance (as defined
in the Work Letter). The location and content of such banner sign shall be
subject to the prior written approval of Landlord, such approval not to be
unreasonably withheld.

 

39.           Notice of Availability

 

(a)           Expansion in Building 4757. If at any time any Available Space (as
defined below) in Building 4757 becomes available for lease or if Landlord
expects to engage in efforts to market Building 4757 for sale to anyone other
than the existing tenant of Building 4757, Landlord shall give notice of such
availability or anticipated marketing efforts to Tenant (the “Notice Right”). For purposes of this Section 39(a),
“Available Space” shall mean any
space in Building 4757 which is not occupied by a tenant or which is occupied
by an existing tenant whose lease is expiring within six (6) months or less and
such tenant does not wish to renew (whether or not such tenant has a right to
renew) its occupancy of such space. Notwithstanding the foregoing, Tenant
hereby acknowledges that it does not have any right of first offer, right of
first refusal, option or similar right with respect to Building 4757.

 

(b)           Consent to Sublease or Assignment. Notwithstanding
anything to the contrary in the current lease of Building 4757 or any other
lease of Building 4757, as long as Tenant is not in default under this Lease
(beyond the expiration of notice and cure periods), Landlord shall not refuse
to consent to the subletting or assignment of such lease to Tenant (nor
recapture such premises in Building 4757) if Tenant and the tenant of Building
4757 agree to commercially reasonable terms of a sublease, or the assignment of
the lease, of Building 4757; provided, however, that in no event shall Landlord
be obligated to consent to (i) any modification of the terms and provisions of
such lease; (ii) any release of the existing tenant of Building 4757, any
guarantor or any other party holding liability under such lease; or (iii)
substantive terms and provisions of such sublease or assignment. Landlord shall
not be permitted to withhold its consent to any substantive terms or provisions
of the sublease or assignment which do not impose any additional obligation or
liability on Landlord.

 

(c)           Exceptions. Notwithstanding the above, the Notice
Right shall not be in effect:

 

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

 

(ii)           if Tenant
has been in Default under any provision of the Lease three (3) or more times,
whether or not the Defaults are cured, during the twelve (12) month period
prior to the date on which Tenant seeks to exercise the Expansion Right;

 

(iii)          with respect
to a sale of the Building to any entity which controls, is controlled by, or is
under common control with Landlord or Alexandria Real Estate Equities, Inc.; or

 

(iv)          with respect
to a sale of the Building in conjunction with the sale of any other property or
properties held by Alexandria Real Estate Equities, Inc.

 

(d)           Rights Personal. The Notice Right is personal to
Senomyx, Inc. 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 except
that it may be assigned in connection with any Permitted Assignment of this
Lease.

 

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

 

(a)           Extension Rights. Tenant shall have the right (each, the “Extension Right”) to extend the term of
this Lease for one (1) five (5) year period (the “Extension Term”) on the same terms and

 

39

 

conditions as this Lease (other than Base Rent) by giving Landlord
written notice (the “Extension Notice”)
of its election to exercise the Extension Right no later than twelve (12)
months prior to the expiration of the Base Term of the Lease. Upon the commencement
of the Extension Term, Base Rent shall be payable:  (i) Ninety-five Percent (95%) of the Market
Rate (as defined below), but not less than (ii) one hundred three percent
(103%) of the Base Rent Payable in Lease Year ten (10). On each annual anniversary
of the first day of the first full month during the Extension Term, Base Rent
shall increase by multiplying Base Rent payable immediately before such date by
the CPI Adjustment Percentage (as defined below) and adding the resulting
amount to the Base Rent payable immediately before such adjustment date. For
purposes hereof, “CPI Adjustment Percentage”
means (a) a fraction, stated as a percentage, the numerator of which shall be
the Index for the calendar month three (3) months before the month in which the
adjustment date occurs, and the denominator of which shall be the Index for the
calendar month three (3) months before the last adjustment date or, if no prior
Base Rent adjustment has been made, three (3) months before the first day of
the first full month during the Extension Term, less (b) 1.00; provided,
however, that in no event shall the CPI Adjustment Percentage in any year be
less than three percent (3%) or more than six percent (6%). “Index” means the “Consumer Price Index-All
Urban Consumers San Diego-Carlsbad-San Marcos Metropolitan Statistical Area,
All Items” compiled by the U.S. Department of Labor, Bureau of Labor
Statistics, (1982-84 = 100). If a substantial change is made in the Index, the
revised Index shall be used, subject to such adjustments as Landlord may
reasonably deem appropriate in order to make the revised Index comparable to
the prior Index. If the Bureau of Labor Statistics ceases to publish the Index,
then the successor or most nearly comparable index, as reasonably determined by
Landlord, shall be used, subject to such adjustments as Landlord may reasonably
deem appropriate in order to make the new index comparable to the Index. Landlord
shall give Tenant written notice indicating the Base Rent, as adjusted pursuant
to this Section 40, and the method of computation and Tenant shall pay
to Landlord an amount equal to any underpayment of Base Rent by Tenant within
fifteen (15) days of Landlord’s notice to Tenant. Failure to deliver such
notice shall not reduce, abate, waive or diminish Tenant’s obligation to pay
the adjusted Base Rent. As used herein, “Market
Rate” shall mean the then market rental rate (including annual
increases, if applicable) for similar buildings with similar improvements in
similar condition (based on normal wear and tear) at the expiration of the Base
Term as reasonably determined by Landlord and agreed to by Tenant. The Market
Rate may, at Tenant’s written election, incorporate a $10.00 per rentable
square foot refurbishment fee payable by Landlord for cosmetic refurbishment of
the Premises during the Extension Term. There shall be no Landlord supervisory
fee for such refurbishment which shall be funded in the form of cash on the
commencement of the Extension Term regardless of whether or not such refurbishment
is completed on such date. Between the date of Landlord’s receipt of the
Extension Notice and that date which is two hundred seventy (270) days prior to
the expiration of the Base Term of this Lease (the “Extension Rent Negotiation Period”), the parties shall attempt
in good faith to determine the Market Rate for the Premises during the
Extension Term if Landlord and Tenant are unable in good faith to agree, in
their respective sole discretion, upon a mutually satisfactory Market Rate
(including annual Base Rent increases) by the expiration of the Extension Rent
Negotiation Period, then the Market Rate will be determined in accordance with
the arbitration method as described in Section 43.

 

(b)           Right Personal. The Extension Right is personal to Senomyx,
Inc. 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 except that it may be assigned in
connection with any Permitted Assignment of this Lease; and, provided that if
Tenant extends the Term hereunder any subtenancies of the Premises may be
extended to include some or all of the Extension Term without Landlord’s prior
consent.

 

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

 

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

 

40

 

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

 

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

 

(e)           Termination. The Extension Right shall terminate and
be of no further force or effect even after Tenant’s due and timely exercise of
the Extension Right, if, after such exercise, but prior to the commencement
date of the Extension Term, (i) Tenant fails to timely cure any default by
Tenant under this Lease; or (ii) Tenant has Defaulted three (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.

 

41.           Termination Right.

 

(a)           Tenant will
have the one-time right, by written notice to Landlord delivered no later than
June 30, 2013, to terminate this Lease (the “Termination
Right”) effective as of March 31, 2014, subject to Tenant paying a
termination fee in an amount equal to the sum of the following:  (a) the unamortized amount of the TI
Allowance (amortized at an eight percent (8%) annual rate of interest over the
Base Term), plus (b) the
unamortized amount of leasing commissions paid by Landlord in connection with
this Lease (amortized at an eight percent (8%) annual interest rate over the
Base Term), plus (c) six (6)
times the monthly Base Rent payable in March 2014 (the “Termination Fee”). Such fee shall be
payable fifty percent (50%) in immediately available funds upon Tenant’s
delivery of written notice of termination (the “First Installment”) and the remaining fifty percent (50%) in
immediately available funds on or before March 31, 2014 (the “Second Installment”). If Tenant fails to
timely pay the Second Installment in accordance with the preceding sentence,
Landlord may give Tenant notice of such payment default (the “Second Installment Default Notice”). Upon
receipt of the Second Installment Default Notice Tenant shall have two (2)
business days to pay the Second Installment. If Tenant fails to pay the Second
Installment within such two (2) business day period, Tenant shall have no
further right to notice or cure, such failure shall be a Default hereunder and,
in addition to any other rights and remedies available to Landlord, Landlord
may retain the First Installment. In addition, if Tenant fails to timely pay
either installment of the Termination Fee in accordance with this Section 41
the Termination Right shall immediately terminate and be of no further force
and effect.

 

(b)           Right Personal. The Termination Right is personal to
Senomyx, Inc. 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 except that it may be assigned in
connection with any Permitted Assignment of this Lease.

 

(c)           Exceptions. Notwithstanding anything set forth
above to the contrary, the Termination Right shall not be in effect and Tenant
may not exercise the Termination Right:

 

(i)            during any
period of time that Tenant is in Default under any provision of this Lease,
unless, with respect to monetary defaults only, the Termination Fee is
increased to reimburse Landlord all amounts owed by Tenant as a result of such
Default; or

 

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

 

41

 

42.           Roof Equipment.

 

(a)           Except as
set forth in Section 42(f) below, Tenant shall have the sole and
exclusive right to install and operate any Roof Equipment on the roof of the
Building as long as Tenant is the sole tenant of the Premises. The precise
specifications and a general description of the Roof Equipment (as defined
below) along with all documents Landlord reasonably requires to review the
installation of the Roof Equipment (the “Roof
Equipment Plans and Specifications”) shall be submitted to Landlord
for Landlord’s written approval no later than 20 days before Tenant commences
to install the Roof Equipment. Tenant shall be solely responsible for obtaining
all necessary governmental and regulatory approvals and for the cost of
installing, operating, maintaining and removing the Roof Equipment. Tenant
shall notify Landlord upon completion of the installation of the Roof Equipment.
If Landlord determines that the Roof Equipment does not comply with the
approved Roof Equipment Plans and Specifications, that the Building has been
damaged during installation of the Roof Equipment or that the installation was
defective, Landlord shall notify Tenant of any noncompliance or detected
problems and Tenant immediately shall cure the defects. If the Tenant fails to
immediately cure the defects, Tenant shall pay to Landlord upon demand the
cost, as reasonably determined by Landlord, of correcting any defects and
repairing any damage to the Building caused by such installation. If at any
time Landlord, in its sole discretion, deems it necessary, Tenant shall provide
and install, at Tenant’s sole cost and expense, appropriate aesthetic
screening, reasonably satisfactory to Landlord, for the Roof Equipment (the “Aesthetic Screening”).

 

(b)           Landlord
agrees that the roof rights granted herein shall be deemed appurtenant to
Tenant’s leasehold rights in the Premises throughout the Lease Term, and Tenant
shall have access to the roof of the Building for the purpose of installing,
maintaining, repairing, replacing and removing the Roof Equipment, the appurtenances
thereto and any Aesthetic Screening, all of which shall be performed by Tenant
at Tenant’s sole cost and risk. It is agreed, however, that only authorized
engineers, employees or properly authorized contractors of Tenant, FCC (defined
below) inspectors, or persons under their direct supervision will be permitted
to have access to the roof of the Building. Tenant further agrees to exercise
firm control over the people requiring access to the roof of the Building in
order to keep to a minimum the number of such people having access to the roof
of the Building and the frequency of their visits.

 

(c)           Prior to
Substantial Completion of Landlord’s Work, Landlord shall use commercially
reasonable efforts to cause Landlord’s roof contractor to cooperate with Tenant’s
Architect and any contractor retained by Tenant for the installation of any
antennae, satellite dishes or other communication equipment ( as such equipment
may be modified or supplemented from time to time during the Term, the “Communications Equipment”) and any
supplemental air-conditioning units, air handlers, de-ionized water stills and
related equipment, and any other mechanical and electrical equipment included
in the Tenant Improvements which are to be installed on the roof of the
Building (collectively with the Communication Equipment, and as modified or
supplemented from time to time during the Term, the “Roof Equipment”), in the design and installation thereof,
provided that Tenant can provide all necessary construction information in
connection with such design and installation in accordance with Landlord’s
construction schedule for completion of Landlord’s Work. Tenant agrees to
contract with Landlord’s roof contractor for the installation of any Roof
Equipment. It is further understood and agreed that the installation,
maintenance, operation, replacement and removal of the Roof Equipment, the
appurtenances and the Aesthetic Screening, if any, is not permitted to damage
the Building or the roof thereof, or interfere with the use of the Building and
roof by Landlord. Tenant agrees to be responsible for any damage caused to the
roof or any other part of the Building, caused by Tenant or any of its agents
or representatives.

 

(d)           Tenant
shall, at its sole cost and expense, and at its sole risk, install, operate and
maintain the Communications Equipment in a good and workmanlike manner, and in
compliance with all Building, electric, communication, and safety codes,
ordinances, standards, regulations and requirements, now in effect or hereafter
promulgated, of the Federal Government, including, without limitation, the
Federal Communications Commission (the “FCC”),
the Federal Aviation Administration (“FAA”)
or any successor agency of either the FCC or FAA having jurisdiction over radio
or telecommunications, and of the state, city and county in which the Building
is located. Under this Lease,

 

42

 

Landlord and its agents assume no responsibility for the licensing,
operation and/or maintenance of the Roof Equipment. Tenant has the
responsibility of carrying out the terms of its FCC license, if any, in all
respects. The Roof Equipment shall be connected to the power supply in strict
compliance with all applicable Building, electrical, fire and safety codes. Except
as expressly provided for herein, neither Landlord nor its agents shall be
liable to Tenant for any stoppages or shortages of electrical power furnished
to the Roof Equipment or the roof because of any act, omission or requirement
of the public utility serving the Building, or the act or omission of any other
tenant, invitee or licensee or their respective agents, employees or
contractors, or for any other cause beyond the reasonable control of Landlord,
and Tenant shall not be entitled to any rental abatement for any such stoppage
or shortage of electrical power. Neither Landlord nor its agents shall have any
responsibility or liability for the conduct or safety of any of Tenant’s
representatives, repair, maintenance and engineering personnel while in or on
any part of the Building or the roof.

 

(e)           Except as
otherwise provided for herein, the Communications Equipment, the appurtenances
thereto and the Aesthetic Screening, if any, shall remain the personal property
of Tenant, and shall be removed by Tenant at its own expense at the expiration
or earlier termination of this Lease or Tenant’s right to possession hereunder.
Tenant shall repair any damage caused by such removal, including the patching
of any holes to match, as closely as possible, the color surrounding the area
where the equipment and appurtenances were attached. Tenant agrees to maintain
all of the Roof Equipment placed on or about the roof or in any other part of
the Building in proper operating condition and maintain same in satisfactory
condition as to appearance and safety in Landlord’s sole discretion unless such
Roof Equipment is blocked from eye-level view within the Project by Aesthetic
Screening. Such maintenance and operation shall be performed in a manner to
avoid any interference with any other tenants of the Project or Landlord’s
maintenance and repairs of the Building. Tenant agrees that at all times during
the Term, it will keep the roof of the Building free of all trash or waste
materials produced by Tenant or Tenant’s agents, employees or contractors.

 

(f)            Tenant shall
not allow any provider of telecommunication, video, data or related services (a
“Telecom Provider”) to locate any
equipment on the roof of the Building for any purpose whatsoever. Subject to
Tenant’s prior written approval of the terms and conditions of each such
contract with a Telecom Provider, including, without limitation, the location,
screening, appearance and technical parameters of such Telecom Provider’s
equipment, such Telecom Provider’s rights of access to the roof of the Building
through the Premises, and the coverage of such Telecom Provider’s insurance
with respect to its activities on or about the Project, Landlord shall have the
right to contract with Telecom Providers to lease or license a portion of the
roof of the Building for the purpose of locating equipment thereon; provided,
however, that Landlord shall be solely responsible for any costs and expenses
associated with entering into any such contract or installing improvements to
support the separately-metered use of the Building roof by any Telecom
Providers, including, without limitation, the cost of equipment screening,
electrical meters, brokerage or legal fees and any other legitimate
transactional costs (which shall not be included as Operating Expenses, but
which may be passed through directly to the respective Telecom Provider as
additional rent and if not paid by such Telecom Provider shall be considered in
determining Telecom Excess Rent). Tenant shall refer any Telecom Providers who
contact Tenant regarding use of the roof of the Building to Landlord, and with
respect to any such referred Telecom Provider Landlord shall determine whether
to permit such Telecom Provider to locate its equipment on the roof of the
Building in its reasonable discretion. If Landlord elects to contract with any
Telecom Provider with respect to the use of the roof of the Building, such
election to be in Landlord’s sole discretion except as set forth in the prior
sentence, Landlord and Tenant shall split that portion of the lease rent or
license fee actually received by Landlord in excess of Landlord’s costs and
expenses incurred pursuant to such lease or license with respect to such
Telecom Provider as reasonably determined by Landlord (“Telecom Excess Rent”), as if such Telecom
Excess Rent was paid to Tenant as Excess Rent pursuant to Section 22(d)
of this Agreement, except that any Telecom Excess Rent payable by Landlord to
Tenant shall be paid quarterly in arrears within thirty (30) days following the
end of each calendar quarter throughout the Term. Landlord shall use
commercially reasonable efforts to collect the contract rents due from any such
Telecom Provider. In no event shall any equipment of the Telecom

 

43

 

Provider cause any disturbance or interference to the Communications
Equipment or any other equipment of Tenant or of any of its subtenants or
assigns in the Premises or on the roof of the Building.

 

(g)           If Tenant
defaults under any of the terms and conditions of this Section 42 or
this Lease, and Tenant fails to cure said Default within the time allowed by Section
20 of this Lease if Landlord exercises its remedy of terminating this
Lease, Landlord shall be permitted to remove the Communications Equipment, the
appurtenances and the related Aesthetic Screening, if any, and to repair at
Tenant’s sole cost and expense any damage caused to the roof or any other part
of the Building as a result of such removal, to the extent such damage is not
attributable to the gross negligence or willful misconduct of Landlord or its
employees, agents or contractors. Tenant shall be liable for all reasonable
costs and expenses Landlord incurs in removing the Tenant’s Roof Equipment, the
appurtenances thereto and the Aesthetic Screening associated therewith, if any.

 

43.           Arbitration.

 

(a)           Condemnation.

 

(i)            Within ten
(10) days of the delivery of a Condemnation Arbitration Notice, each party
shall deliver to the other a proposal in support of that party’s position as to
whether or not the Taking (or proposed Taking, as the case may be) constitutes
a Material Taking (“Condemnation Proposal”).
If either party fails to timely submit a Condemnation Proposal, the other party’s
position shall be binding on Landlord and Tenant. If both parties submit
Condemnation Proposals, then Landlord and Tenant shall meet within seven (7)
days after delivery of the last Condemnation Proposal and make a good faith
attempt to mutually appoint a single Arbitrator (defined below) to determine whether
or not the Taking (or proposed Taking, as the case may be) constitutes a
Material Taking. If Landlord and Tenant are unable to agree upon a single
Arbitrator, then each shall, by written notice delivered to the other within
ten (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 Condemnation Proposal shall determine whether or not the Taking (or
proposed Taking, as the case may be) constitutes a Material Taking. The two (2)
Arbitrators so appointed shall, within five (5) business days after their
appointment, appoint a third Arbitrator. If the two (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 ten (10) days prior written notice to the other party of such intent.

 

(ii)           The decision
of the Arbitrator(s) shall be made within thirty (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.

 

(b)           Right to Extend Term.

 

(i)            Within ten
(10) days of the expiration of the Extension Rent Negotiation Period, 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
seven (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 ten

 

44

 

(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
Extension Proposal shall determine the Base Rent for the Extension Term. The
two (2) Arbitrators so appointed shall, within five (5) business days after
their appointment, appoint a third Arbitrator. If the two (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 ten (10) days prior written notice to the other party of such intent.

 

(ii)           The decision
of the Arbitrator(s) shall be made within thirty (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. Notwithstanding the foregoing, within thirty (30) days of
the determination of the Market Rate and escalations, Landlord, in Landlord’s
sole and exclusive discretion, may provide Tenant with written notice that Base
Rent for the Extension Term will be equal to one hundred three percent (103%)
of the Base Rent payable in Lease Year 10 in which case Base Rent for the
Extension Term shall be payable at one hundred three percent (103%) of the Base
Rent payable in Lease Year 10 (subject to increase in accordance with Section 40(a).)

 

(c)           For purposes
of this Section 43, 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 ten (10) years of experience in the appraisal of
improved office and biotech R&D 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 fifteen (15) years experience representing
landlords and/or tenants in the leasing of biotech R&D 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.

 

44.           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)           [Intentionally Deleted]

 

(d)           Recordation. Neither this Lease nor a memorandum of
lease shall be filed by or on behalf of Tenant in any public record (except as
required as part of Tenant’s filing obligations by the

 

45

 

Securities & Exchange Commission or any other Governmental
Authority). Landlord may prepare and file, and upon request by Landlord Tenant
will execute, a memorandum of lease.

 

(e)           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.

 

(f)            Not Binding Until Executed. The submission by Landlord or Tenant of
this Lease to the other party shall have no binding force or effect, shall not
constitute an option for the leasing of the Premises, nor confer any right or
impose any obligations upon either party until execution of this Lease by both
parties.

 

(g)           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.

 

(h)           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.

 

(i)            Time. Time is of the essence as to the
performance of all obligations of the parties under this Lease.

 

(j)            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.

 

(k)           Certain Repairs and Services. 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 Landlord is required to perform under the terms of this
Lease, and 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, and Landlord shall, to the
extent required, equitably adjust Tenant’s Share of Operating Expenses in
respect of such repairs or services to reflect that Landlord is not providing
such repairs or services to Tenant.

 

(l)            Attorneys’ Fees. If a dispute of any type arises, or an
action is filed under this Lease based in contract, tort or equity, or this
Lease gives rise to any other legal proceeding between any of the parties
hereto, the prevailing party shall be entitled to recover from the losing party
reasonable attorneys’ fees, costs and expenses, including, but not limited to,
expert witness fees, accounting and engineering fees, and any other
professional fees incurred in connection with the prosecution or defense of
such action, whether the action is prosecuted to a final judgment. For purposes
of this Lease, the terms “attorneys’ fees,” “costs” and “expenses” shall also
include the fees and expenses incurred by counsel to

 

46

 

the parties hereto for photocopies, duplications, deliveries, postage,
telephone and facsimile communications, transcripts of proceedings relating to
the action and all other costs not ordinarily recoverable under California Code
of Civil Procedure § 1033.5(b), and all fees billed for law clerks, paralegals,
librarians, secretaries and others not admitted to the bar but performing
services under the supervision of an attorney. The terms “attorneys’ fees,” “costs”
and “expenses” shall also include, without limitation, fees and costs incurred
in the following proceedings:  (a)
mediations; (b) arbitrations; (c) bankruptcy proceedings; (d) appeals; (e)
post-judgment motions and collection actions; and (f) garnishment, levy and
debtor examinations. The prevailing party shall also be entitled to attorneys’
fees and costs after any dismissal of an action.

 

[ Signatures on next page ]

 

47

 

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

 

 

	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  SENOMYX,
  INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kent Snyder

  
	
   

  	
  Its:

  	
  Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ARE-NEXUS
  CENTRE II, 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:

  	
  /s/
  Jennifer Pappas

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Jennifer
  Pappas

  
	
   

  	
   

  	
   

  	
  Title:

  	
  V.P.
  and Assistant Secretary

  
	
   

  	
   

  	
   

  	
  Date:

  	
  January
  12, 2006

  
								

 

48

 

EXHIBIT A TO LEASE

 

DESCRIPTION OF PREMISES

 

1

 

EXHIBIT B TO LEASE

 

DESCRIPTION OF PROJECT

 

1

 

EXHIBIT C TO LEASE

 

WORK LETTER

 

THIS WORK LETTER dated as of January 12, 2006 (this “Work Letter”) is made and entered into by
and between ARE-NEXUS CENTRE II, LLC, a Delaware limited liability company (“Landlord”), and SENOMYX, INC., a Delaware
corporation (“Tenant”), and is
attached to and made a part of the Lease dated as of January 12, 2006 (the “Lease”), by and between Landlord and Tenant.
Any initially capitalized terms used but not defined herein shall have the
meanings given them in the Lease.

 

1.             General Requirements.

 

(a)           Tenant’s Authorized Representative. Tenant
designates Tony Rogers and Gary Ghio (either such individual acting alone, “Tenant’s Representative”) as the only
persons authorized to act for Tenant pursuant to this Work Letter. Landlord
shall not be obligated to respond to or act upon any request, approval, inquiry
or other communication (“Communication”)
from or on behalf of Tenant in connection with this Work Letter unless such
Communication is in writing from Tenant’s Representative. Tenant may change
either Tenant’s Representative at any time upon not less than five (5) business
days advance written notice to Landlord. No period set forth herein for any
approval of any matter by Tenant’s Representative shall be extended by reason
of any change in Tenant’s Representative. Neither Tenant nor Tenant’s
Representative shall be authorized to direct Landlord’s contractors in the
performance of Landlord’s Work (as hereinafter defined).

 

(b)           Landlord’s Authorized Representative. Landlord
designates Jeff Ryan and Vin Ciruzzi (either such individual acting alone, “Landlord’s Representative”) as the only
persons authorized to act for Landlord pursuant to this Work Letter. Tenant
shall not be obligated to respond to or act upon any request, approval, inquiry
or other Communication from or on behalf of Landlord in connection with this
Work Letter unless such Communication is in writing from Landlord’s
Representative. Landlord may change either Landlord’s Representative at any
time upon not less than five (5) business days advance written notice to Tenant.
No period set forth herein for any approval of any matter by Landlord’s
Representative shall be extended by reason of any change in Landlord’s
Representative. Landlord’s Representative shall be the sole persons authorized
to direct Landlord’s contractors in the performance of Landlord’s Work.

 

(c)           Architects, Consultants and Contractors.

 

(i)            Landlord and
Tenant hereby acknowledge and agree that: 
(a) Architects Delawie, Wilkes, Rodrigues, Barker shall be the
architect (“Landlord’s Architect”)
for the Landlord Improvements, and (b) Pacific Cornerstone Architects shall be
the architect (“Tenant’s Architect”)
for the Tenant Improvements. Notwithstanding the foregoing, (A) Landlord shall
have the right at any time in Landlord’s sole discretion to designate as its
architect a different architect which architect shall thereafter be “Landlord’s Architect” and (B) Tenant shall
have the right at any time, but subject to Landlord’s prior approval (which
shall not be unreasonably withheld, conditioned or delayed) to designate a
different architect which architect shall thereafter be “Tenant’s Architect”.

 

(ii)           The Tenant
Improvements general contractor shall be selected by Tenant (subject to
Landlord’s prior approval which shall not be unreasonably withheld, conditioned
or delayed) pursuant to a competitive negotiated bid of the general conditions
and fee from DPR Construction, Inc. (“DPR”)
based on competitive negotiated bids from DPR and two (2) other general
contractors reasonably acceptable to Landlord with substantial experience in
the engineering design of wet lab research and development facilities. If DPR
is not willing to match Tenant’s selected competitive negotiated bid pursuant
to the bid process, Landlord shall have the right to cause DPR to be the Tenant
Improvements general contractor if Landlord increases the

 

1

 

TI
Allowance in the amount by which DPR’s general conditions and fee negotiated
bid exceeds the competitive negotiated bid of the tenant-selected general
contractor. Landlord shall participate in Tenant’s general contractor
negotiated and competitive bid process and Tenant shall share copies of the
competitive negotiated bids received with Landlord on an “open book” basis. Landlord
shall have the right to pre-approve all subcontractors retained by the Tenant
Improvements general contractor for the major trades, which approval shall not
be unreasonably withheld, conditioned or delayed.

 

(iii)          Tenant’s
mechanical, electrical and plumbing engineer shall be retained by Tenant as a
subconsultant to Tenant’s Architect, and shall be selected by Tenant (subject
to Landlord’s prior approval which shall not be unreasonably withheld,
conditioned or delayed) pursuant to a competitive negotiated bid of the fee for
engineering services from TKG Consulting Engineers (“TKG”) based on competitive negotiated bids from TKG and two
(2) other qualified engineers reasonably acceptable to Landlord with
substantial experience in the construction of wet lab research and development
facilities. If TKG is not willing to match Tenant’s selected competitive
negotiated bid pursuant to the bid process, Landlord shall have the right to
cause TKG to be the Tenant’s mechanical, electrical and plumbing engineer if
Landlord increases the TI Allowance in the amount by which TKG’s negotiated fee
bid exceeds the competitive negotiated bid of the tenant-selected engineer,
taking into account any differences in the scope of services of Tenant’s
selected engineer as compared with TKG. Landlord shall participate in Tenant’s
mechanical, electrical and plumbing engineer negotiated and competitive bid
processes and Tenant shall share copies of all competitive negotiated bids
received with Landlord on an “open book” basis.

 

2.             Definitions.

 

(a)           “Base Building Systems” shall mean all
mechanical, electrical, plumbing, and HVAC equipment and systems included in
the Landlord Improvements that serve the Premises.

 

(b)           “Design Problem” shall mean that the Tenant
Improvements shown in the TI Design Drawings or the TI Construction Drawings,
as the case may be, will either: (i) have an adverse effect on Landlord’s Work;
(ii) cause the cancellation of Landlord’s insurance on the Building; (iii)
result in non-compliance of the Landlord Improvements or Tenant Improvements
with Legal Requirements or (iv) not comport to good design and engineering
practices.

 

(c)           “Final Completion” shall mean certification
from Landlord’s Architect that (i) the punch list items that existed on the
date of Substantial Completion of Landlord’s Work have been completed and (ii)
that the Landlord’s Finish Work has been completed in substantial accordance
with the LI Plans, except for minor “punch-list” items associated with such
finish work, which do not materially affect Tenant’s ability to occupy and
operate its business in the Premises, and Minor Variations.

 

(d)           “Force Majeure Delay” shall mean any delay
in Landlord’s Work or Tenant’s Work to the extent caused by or arising out of
Force Majeure. Delays in Tenant’s ability to obtain the necessary permits and
licenses for the Tenant Improvements not attributable to the negligence or
willful failure of Tenant or any of its agents, employees or contractors, or
negligence or willful failure of Landlord or any of its agents, employees or contractors,
shall be considered a Force Majeure Delay as long as Tenant is diligently
working with the applicable governmental authority to obtain such permits and
licenses.

 

(e)           “Initial Delivery” shall mean the date that
Landlord first grants Tenant continuous access to the Building for the purpose
of commencing Tenant’s Work, subject to Tenant’s satisfaction of the safety and
insurance requirements set forth herein.

 

(f)            “Landlord Delay” shall mean any delay in
performance of Landlord’s Work to the extent caused by or attributable to any
cause other than a Tenant Delay or a Force Majeure Delay.

 

2

 

(g)           “Landlord’s Finish Work” shall mean the
Building lobby improvements, bathroom improvements and any other portions of
Landlord’s Work set forth on Schedule C or mutually agreed upon by Landlord and
Tenant following approval of the Tenant Improvement Plans and schedule.

 

(h)           “Landlord Improvements” shall mean the
improvements set forth in the LI Plans.

 

(i)            “Landlord’s Work” shall mean the work of
constructing the Landlord Improvements in substantial conformance to the LI
Plans (subject only to Minor Variations and any other changes that are
permitted hereunder).

 

(j)            “LI Plans” shall mean the plans attached
hereto as Schedule A.

 

(k)           “Minor Variations” shall mean any
modifications which do not materially affect the appearance of the Building or
the Premises and which are reasonably required: 
(i) to comply with all applicable Legal Requirements and/or to obtain or
to comply with any building permit required for Landlord’s Work; (ii) to comply
with any request by Tenant for modifications to Landlord’s Work; (iii) to
comport with good design, engineering, and construction practices that are not
material; or (iv) to make reasonable adjustments for field deviations or
conditions encountered during the construction of Landlord’s Work.

 

(l)            “Substantial Completion of Landlord’s Work”
shall mean completion of Landlord’s Work such that: (i) the Base Building
Systems have been delivered to Tenant in good working order; (ii) 
Landlord’s Architect has certified that the Landlord Improvements are completed
in accordance with the LI Plans (with the exception of Final Completion of the
Landlord’ Finish Work), except for minor “punch-list” items which do not
materially affect Tenant’s ability to install the Tenant Improvements in the
Premises; (iii) Tenant has been provided with the number of parking spaces to
which it is entitled under the Lease, subject to any reduction in spaces by
Tenant for construction or other purposes, including, without limitation, as
contemplated pursuant to Section 6 of the Lease; and (iv) Tenant
has been tendered continuous and uninterrupted access to the Project and the
Premises.

 

(m)          “Tenant Delay” shall mean delays in
completion of Landlord’s Work or Tenant’s Work to the extent attributable to or
arising out of:  (i) Tenant’s failure to
comply with any time deadlines in this Work Letter, or any other breach by
Tenant of the terms of this Work Letter; (ii) Changes (as hereinafter defined)
made or associated with reasonable consideration of Changes requested by Tenant
to the LI Plans after approval of the same by Landlord, whether or not such
changes are actually performed; (iii) Tenant’s request for materials,
components, finishes, installations or improvements if Tenant requires such
items notwithstanding Landlord’s notice of the lack of availability of such
items, unless such items are designated in the LI Plans or pursuant to the
Building 4757 screening requirement, in which case any changes shall be deemed
Force Majeure Delays; (iv) Tenant’s delay in providing information critical to
the normal progression of Landlord’s Work within a reasonable period of time
following Landlord’s written request to Tenant’s designated representative for
such information; or (v) Tenant’s failure to deposit with Landlord the
Excess TI Costs (as defined below) within ten (10) days following the
determination of such excess amount pursuant to the Budget, or within five (5) days
following an increase in such budgeted amount due to a Change Request or any
other reason.

 

(n)           “Tenant Improvements” shall mean all
improvements that are not included in Landlord’s Work and which Tenant requires
for its use and occupancy of the Premises.

 

(o)           “Tenant’s Work” shall mean the work of
constructing the Tenant Improvements.

 

(p)           “Water-Tight Delivery” shall mean that
Landlord’s Work shall have been constructed by Landlord to a condition where
the roof, exterior walls, windows and doors of the Building are in a
water-tight condition and are sealed against leakage due to rain and other
normal weather conditions, and the

 

3

 

Building has been delivered to Tenant in a condition reasonably
permitting Tenant to install the Tenant Improvements without interfering with
the Substantial Completion of Landlord’s Work.

 

3.             Performance of Landlord’s Work.

 

(a)           Permitting of Landlord’s Work. All
permits required for the construction of Landlord’s Work shall be obtained and
paid for by Landlord at its sole cost and expense. If any Governmental
Authority having jurisdiction over the construction of Landlord’s Work or any
portion thereof shall impose terms or conditions upon the construction thereof
which:  (i) are inconsistent with
Landlord’s obligations hereunder, (ii) increase the cost of constructing
Landlord’s Work, or (iii) will materially delay the construction of
Landlord’s Work, Landlord and Tenant shall reasonably and in good faith seek
means by which to mitigate or eliminate any such adverse terms and conditions.

 

(b)           Completion of Landlord’s Work. Landlord
shall cause Substantial Completion of the Landlord’s Work to occur on or before
the Target Commencement Date (subject to Tenant Delays and Force Majeure
Delays). Upon the Substantial Completion of Landlord’s Work, Landlord shall
require Landlord’s Architect and the general contractor performing Landlord’s
Work to execute and deliver, for the benefit of Tenant and Landlord, a
Certificate of Substantial Completion in the form of the American Institute of
Architects document G704. Landlord shall act in a commercially reasonable
manner in its construction of the Landlord Improvements to accommodate Tenant’s
construction of the Tenant Improvements.

 

(c)           Delivery of the Premises. When Substantial Completion of Landlord’s
Work shall have occurred, subject to the remaining terms and provisions of this
Section 3(c), Tenant shall accept the Premises. Tenant’s taking
possession and acceptance of the Premises shall not constitute a waiver
of:  (i) Tenant’s ability to require
Landlord to correct (A) any defect in Landlord’s Work, whether or not covered
by any warranty with respect to workmanship (including installation of
equipment) or material (exclusive of equipment provided directly by
manufacturers), or (B) any non-compliance of Landlord’s Work with Code, or (ii)
any claim that Landlord’s Work was not completed substantially in accordance
with the LI Plans (subject to Minor Variations and such other changes as are permitted
hereunder) (collectively, a “Construction
Defect”). Tenant shall have one (1) year after Substantial
Completion of Landlord’s Work within which to notify Landlord of any such
Construction Defect discovered by Tenant which Landlord is required to correct
(at Landlord’s sole cost and expense, and not as Operating Expense) regardless
of whether such defect is covered by any warranty, and Landlord shall use
reasonable efforts to remedy or cause the responsible contractor to remedy any
such Construction Defect within thirty (30) days thereafter. Notwithstanding
the foregoing, Landlord shall not be in default under the Lease if the applicable contractor, despite
Landlord’s reasonable efforts, fails to remedy such Construction Defect within
such thirty (30) day period, but Landlord, within thirty (30) days thereafter,
commences and diligently and continuously prosecutes such remedial action to
completion. If Landlord fails to timely perform any repair or replacement of
any Construction Defect which will immediately and adversely affect Tenant’s
ability to conduct its business in the Premises within thirty (30) days after
delivery of Tenant’s notice that such defective condition exists (or such
longer period as may be required if Landlord is diligently pursuing remedial
action within such 30-day period), Tenant shall have the right to replace or
repair such Construction Defect in accordance with the requirements of Section
31 of the Lease. Notwithstanding the foregoing, if Landlord disputes an
item in question, any reimbursement shall be subject to reconciliation
following the final determination of the disputed item.

 

(d)           Construction Warranties. Landlord shall obtain customary
warranties and guaranties from the contractor(s) performing the Landlord’s Work
and/or the manufacturers of equipment installed as part of the Landlord’s Work,
and shall cooperate with Tenant in obtaining any extended warranties requested
by Tenant, but Landlord shall be under no obligation to incur additional
expense in order to obtain extended warranties. Landlord shall, upon request by
Tenant, use its good faith efforts to pursue its rights under any such
warranties obtained by Landlord for the benefit of Tenant, and unless such
efforts are required to comply with Landlord’s compliance obligations under
Section 7(c) or its repair obligations under Section 13 of the Lease, Landlord
shall be under no obligation to incur any expense in

 

4

 

connection with asserting rights under such warranties or guaranties
against either the contractor or the manufacturer. Tenant shall be named as a
third-party beneficiary under all construction and equipment warranties
(including without limitation, the roof and all mechanical, electrical and
plumbing equipment, which Landlord shall endeavor to obtain for a minimum
warranty term of ten (10) years from the date of Substantial Completion of
Landlord’s Work), with the right to enforce such warranties directly against
the obligor named therein; provided that Tenant shall not enforce any such
warranties as long as the work associated with such warranties is not required
for Tenant’s quiet enjoyment of the Premises for the Permitted Uses and
Landlord is diligently acting to cause the work associated with such warranties
to be performed within any applicable notice and cure period for such
performance; and notwithstanding the foregoing, if Tenant takes any action
pursuant to its self-help rights under the Lease, Tenant shall have the right
to seek performance of any warranty obligations pursuant thereto. The cost of
causing the construction and equipment warranties to have terms in excess of
one (1) year shall be at Tenant’s sole discretion, and if so elected by Tenant,
at Tenant’s sole cost and expense (but subject to reimbursement out of the TI
Fund).

 

(e)           Commencement Date Delay. The “Completion
Date” shall occur upon Substantial Completion of Landlord’s Work,
except to the extent that Substantial Completion of Landlord’s Work shall have
been actually delayed by a Tenant Delay. If Substantial Completion of Landlord’s
Work is delayed due to a Tenant Delay, then Landlord shall cause Landlord’s
Architect to certify the date on which Landlord’s Work would have been
completed but for such Tenant Delay and such certified date shall be the
Completion Date.

 

(f)            Changes. Landlord shall be permitted to make
Minor Variations to the LI Plans without Tenant’s consent, but shall notify
Tenant of any Minor Variations that may have an effect on Tenant’s remaining
construction of the Tenant Improvements or that materially change Tenant’s use
or occupancy of the Premises. All other modifications to the LI Plans shall be
subject to Tenant’s prior consent, which consent shall not be unreasonably
withheld, conditioned or delayed.

 

(g)           Landlord’s Finish Work. Landlord shall cause Final Completion
of Landlord’s Finish Work to occur no later than the later of (i) thirty
(30) days after Landlord’s receipt of written notice from Tenant to Landlord
requesting Landlord’s performance of Landlord’s Work necessary to achieve Final
Completion of Landlord’s Finish Work (which notice shall be given at that point
in the construction of the Tenant Improvements when Tenant is reasonably
satisfied that Landlord’s Finish Work is not likely to be damaged by Tenant’s
Work) (“Tenant’s Finish Work Notice”)
and (ii) the date upon which Tenant shall have completed all of the Tenant
Improvements. Provided that Tenant has delivered the Tenant’s Finish Work
Notice, Landlord shall not be liable for damage to or replacement of Landlord’s
Finish Work resulting from the concurrent completion of Landlord’s Finish Work
and Tenant’s Work, except to the extent attributable to Landlord’s or any of
its employees’ or contractors’ active negligence or willful failure to perform
such work in accordance with good construction practices.

 

(h)           Screening Solution; Separate Metering. Subject to
the consent of the Building 4757
tenant, which Landlord shall use commercially reasonable efforts to obtain, as
part of Landlord’s Work, Landlord shall install reasonable screening of the
hazardous materials storage containers associated with Building 4757 from
visibility from the Building (the “Screening
Solution”) and shall cause all utilities and services including,
without limitation, irrigation and electricity to the Project to be separately
metered from the adjacent parcel on which Building 4757 is located. The design
for and materials to be used in connection with the Screening Solution are more
specifically described in Schedule B
hereto.

 

(i)            Equipment Yard. As part of the construction of the
Equipment Yard, Landlord shall install (as part of the Landlord’s Work)
electrical conduits and water supply piping between the Building and the
Equipment Yard in accordance with the LI Plans, and storm drains within the
Equipment Yard shall be installed in accordance with the existing building
permits and the LI Plans. Any proposed and permitted storm drains requiring
relocation by Tenant’s Architect shall be treated as a Change, with permit
approval to be obtained as part of the approval for the TI Construction
Drawings (as defined below) and paid for by Tenant, subject to reimbursement
from the TI Fund (as defined below).

 

5

 

(j)            Hazardous Materials Storage Area. Landlord
has obtained permitted approval from the City of San Diego for the location of
a hazardous materials storage area (as shown more specifically on the LI Plans)
(“Hazardous Materials Storage Area”),
and shall be responsible as part of Landlord’s Work for completing only those
improvements relating to the Hazardous Materials Storage Area shown on the LI
Plans. If the location of the Hazardous Materials Storage Area as shown on the
LI Plans is required to be moved to a different part of the Project by the City
of San Diego or requested to be moved to a different part of the Project by
Tenant, Tenant shall be responsible for obtaining the approval of the City of
San Diego for the alternate location of the Hazardous Materials Storage Area
and shall pay Landlord from the TI Fund the difference in expense to Landlord
in completing the applicable portion of Landlord’s Work at the new location as
compared to the current location, if any (the presently anticipated expense to
Landlord for completing the applicable portion of Landlord’s Work is Three
Thousand Dollars ($3,000). Landlord will cooperate with Tenant in Tenant’s
efforts to obtain approvals for any locations outside the current permitted and
approved location for the Hazardous Materials Storage Area shown on the LI
Plans. Tenant shall be responsible for any governmental approvals required for
installation of hazardous materials storage container(s) within the Hazardous
Materials Storage Area following Landlord’s construction thereof.

 

(k)           Trellis. Landlord agrees to include as part of
the Landlord’s Work, a central plant enclosures screening trellis (the “Trellis”). The Trellis shall be installed
pursuant to plans, specifications and drawings drafted by Landlord’s Architect
and approved by Tenant (which approval shall not be unreasonably withheld,
conditioned or delayed). Notwithstanding the foregoing, the Trellis may be
installed as part of Landlord’s Finish Work, provided that Landlord causes the
Trellis to be completed no later then January 1, 2007.

 

4.             Tenant Improvements.

 

(a)           Tenant Improvements. Other than funding the TI Allowance as
provided herein and delivering the Landlord’s Work in accordance with the time
requirements of Section 2 of the Lease, and otherwise in accordance with
the Work Letter in order to permit Tenant to construct the Tenant Improvements,
Landlord shall not have any obligation whatsoever with respect to Tenant’s
Work, except as expressly provided in this Work Letter. Subject to Landlord’s
timely satisfaction of its delivery obligations set forth in Section 2 of the
Lease, Tenant shall use its commercially reasonable efforts to cause the Tenant
Improvements to be constructed to a condition permitting Tenant to be issued a
certificate of occupancy or its equivalent on or before January 1, 2007.

 

(b)           Tenant’s Space Plans. Tenant shall deliver to Landlord
schematic drawings and outline specifications (the “TI Design Drawings”) detailing Tenant’s requirements for the
Tenant Improvements by February 1, 2006. The TI Design Drawings shall be
subject to the prior approval of Landlord and Landlord’s Architect, which
approval shall not be unreasonably withheld, conditioned or delayed more than
five (5) business days after receipt thereof, and then only if the TI Design
Drawings would cause a Design Problem. Landlord shall deliver to Tenant the
written objections, questions or comments of Landlord and the Landlord’s
Architect, if any, with regard to the TI Design Drawings within such time
period. Tenant shall cause the TI Design Drawings to be revised to address such
written comments and shall resubmit said drawings to Landlord for approval in
accordance with the preceding requirements. Such process shall continue until
Landlord has approved the TI Design Drawings. If Landlord fails to respond
within the five (5) business days for Landlord’s approval or reasonable
disapproval of the TI Design Drawings, Tenant may provide a second notice to
Landlord requesting such approval, and if such second notice does not result in
Tenant’s receipt within five (5) business days of Landlord’s approval or the
Design Problem cited by Landlord for its disapproval, then such failure to
respond shall be deemed Landlord’s approval of the submitted TI Design
Drawings.

 

(c)           Working Drawings. Not later than seventy-five (75)
business days following the approval of the TI Design Drawings by Landlord,
Tenant shall cause Tenant’s Architect to prepare and deliver to Landlord for
review and comment construction plans, specifications and drawings for the
Tenant Improvements (“TI Construction
Drawings”), which TI Construction Drawings shall be prepared

 

6

 

substantially in accordance with the TI Design Drawings. Tenant shall
be solely responsible for ensuring that the TI Construction Drawings reflect
Tenant’s requirements for the Tenant Improvements; provided that Landlord shall
keep Tenant’s Architect apprised of any Minor Variations to the LI Plans, and
shall defend and hold Tenant harmless from any and all increased costs of
Tenant’s Work and the redesign of the Tenant Improvements arising from Landlord’s
failure to provide Tenant’s Architect with notice of such Minor Variations
within ten (10) days following the date on which any such Minor Variation is
made. The TI Construction Drawings shall be subject to the prior approval of
Landlord and Landlord’s Architect, which approval shall not be unreasonably
withheld, conditioned or delayed more than five (5) business days after receipt
thereof, and then only if the TI Construction Drawings would cause a Design
Problem. Landlord shall, within such five (5) business day period following
Landlord’s receipt of all of the TI Construction Drawings, either (i) approve
the TI Construction Drawings, (ii) approve the TI Construction Drawings subject
to specified conditions which must be stated in a reasonably clear and complete
manner to be satisfied by Tenant prior to submitting the Landlord-approved TI
Construction Drawings for TI Permits as set forth in Section 5(a) below, to the
extent the TI Construction Drawings contain a Design Problem, or (iii)
disapprove and return the TI Construction Drawings to Tenant with requested
revisions to the extent the TI Construction Drawings contain a Design Problem;
provided, however, that Landlord may not disapprove any matter that is
consistent with the TI Design Drawings. Tenant and Tenant’s Architect shall
consider all such comments in good faith and shall, within five (5) business
days after receipt, notify Landlord how Tenant proposes to respond to such
comments. Provided that the design reflected in the TI Construction Drawings is
consistent with the TI Design Drawings, Landlord shall approve the TI
Construction Drawings submitted by Tenant. Once approved by Landlord, subject
to the provisions of Section 7(d) below, Tenant shall not materially
modify the TI Construction Drawings except as may be reasonably required in
connection with the issuance of the TI Permit (as defined in Section 5(a)
below). If Landlord fails to respond within the five (5) business days for
Landlord’s approval or reasonable disapproval of the TI Construction Drawings,
Tenant may provide a second notice to Landlord requesting such approval, and if
such second notice does not result in Tenant’s receipt within five (5) business
days of Landlord’s approval or the Design Problem cited by Landlord for its
disapproval, then such failure to respond shall be deemed Landlord’s approval
of the submitted TI Construction Drawings. Any changes to the TI Construction
Drawings following Landlord’s and Tenant’s approval of same requested by Tenant
shall be processed as provided in Section 6 hereof.

 

(d)           Progress Prints. Tenant shall provide Landlord with
progress prints as modified during each stage of the review and approval
process.

 

(e)           Warranty. Landlord shall be named as a
third-party beneficiary under all construction and equipment warranties related
to any Tenant Improvements, with the right to enforce such warranties directly
against the obligor named therein; provided that Landlord shall not enforce any
such warranties as long as Tenant is not in Default under the Lease.

 

5.             Performance of Tenant’s Work.

 

(a)           Commencement and Permitting of Tenant’s Work. Tenant
shall commence construction of the Tenant Improvements following Tenant’s receipt
of a building permit (the “TI Permit”)
authorizing the construction of the Tenant Improvements consistent with the TI
Construction Drawings approved by Landlord (and Tenant shall provide Landlord
with a copy of the TI Permit, promptly following receipt. Notwithstanding the
foregoing, Tenant, at Tenant’s sole and exclusive risk and otherwise in
accordance with the terms hereof and the TI Construction Drawings, may commence
certain Tenant Improvements Work prior to receipt of the TI Permit. Tenant, at
its sole cost and expense (but subject to reimbursement out of the TI Fund),
shall be responsible for the filing of plans for the Tenant Improvements
including all fees and related costs and for securing all permits and licenses
required therefore provided that the cost of obtaining the TI Permit shall be
payable from the TI Fund. Landlord shall assist Tenant in obtaining the TI
Permit. Notwithstanding the foregoing, prior to commencing construction of the
Tenant Improvements, Tenant shall first deliver to Landlord: (i) copies of
each fully executed contract entered into between (A) Tenant and Tenant’s
Architect and (B) Tenant and the Tenant Improvements general contractor,
and pertaining to the Tenant Improvements and (ii) certificates of

 

7

 

insurance from any person performing work on Tenant’s behalf within the
Premises evidencing the following coverage: (1) commercial general
liability coverage with loss limits in industry standard amounts,
(2) workers’ compensation coverage in amounts required by applicable Legal
Requirements, (3) employers liability coverage with loss limits of not
less than $1,000,000 per occurrence, (4) automobile liability coverage in
an amount not less than $1,000,000 per accident, (5) ”Builder’s All Risk”
coverage in an amount approved by Landlord not exceeding the cost of
construction of the Tenant Improvements and (6) as to Tenant’s Architect only,
professional liability coverage in an amount of not less than $1,000,000 per
occurrence (the
“Tenant Improvements Deliveries”).
Tenant, Landlord and Alexandria Real Estate Equities, Inc. will be named as
additional insureds on the commercial general liability policy or policies and
automotive liability policy or policies.

 

(b)           Selection of Materials, Etc. Where more
than one type of material or structure is indicated on the TI Construction
Drawings approved by Tenant and Landlord, the determination shall be made by
Tenant in Tenant’s reasonable discretion, unless the material or structure affects
the structure, foundation, roof, load bearing walls or safety of the Building
in which case determination shall be made by Landlord in Landlord’s reasonable
discretion.

 

6.             Changes. Any changes requested by Tenant to the
Landlord’s Work or the Tenant Improvements after the delivery and approval by
Landlord of the TI Design Drawings, shall be requested and instituted in
accordance with the provisions of this Section 6 and shall be subject to
the written approval of Landlord, such approval not to be unreasonably
withheld, conditioned or delayed.

 

(a)           Tenant’s Right to Request Changes. If Tenant
shall request changes to Landlord’s Work or the TI Construction Drawings (“Changes”), Tenant shall request such
Changes by notifying Landlord in writing in substantially the same form as the
AIA standard change order form AIA G701 (a “Change
Request”), which Change Request shall detail the nature and extent
of any such Change. Such Change Request must be signed by Tenant’s
Representative. Landlord shall review and approve or disapprove such Change
Request within ten (10) business days thereafter, provided that Landlord’s
approval shall not be unreasonably withheld, conditioned or delayed.

 

(b)           Implementation of Changes. If Landlord approves such Change and
Tenant deposits with Landlord any Excess TI Costs (as defined in Section
7(d) below) required in connection with such Change within five (5) days
thereof, Tenant may cause the approved Change to be instituted.

 

8

 

7.             Costs.

 

(a)           Budget For Tenant Improvements. Before the
commencement of construction of the Tenant Improvements, Tenant shall obtain
and deliver to Landlord a detailed breakdown, by trade, of the costs incurred
or which will be incurred, in connection with the design and construction of
Tenant’s Work (the “Budget”). The
Budget shall be based upon the TI Construction Drawings approved by Landlord
and shall include a payment to Landlord of administrative rent (“Administrative Rent”) equal to 1% of the TI
Costs (as hereinafter defined) for monitoring and inspecting the construction
of Tenant’s Work, which sum shall be payable from the TI Fund. Such
Administrative Rent shall include, without limitation, all out-of-pocket costs,
expenses and fees incurred by or on behalf of Landlord arising from, out of, or
in connection with, such monitoring of the construction of the Tenant
Improvements, and shall be payable out of the TI Fund. If the Budget is greater
than the TI Allowance, Tenant shall deposit with Landlord the difference, in
cash, within 10 days following the determination of such excess amount pursuant
to the Budget, for disbursement by Landlord as described in Section 7(d).

 

(b)           TI Allowance. Landlord shall provide to Tenant a
tenant improvement allowance (collectively, the “TI Allowance”) as follows:

 

(i)            a “Tenant Improvement Allowance” in the
maximum amount of $150.00 per rentable square foot in the Premises, or
approximately $9,600,000 in the aggregate, which is included in the Base Rent
set forth in the Lease; and

 

(ii)           an “Additional Tenant Improvement Allowance” in
the amount of $5.00 per rentable square foot in the Premises, or approximately
$320,000 in the aggregate, which shall, to the extent used, result in
adjustments to the Base Rent as set forth in the Lease.

 

At any time prior
to the earlier of (a) substantial completion of the Tenant’s Work and
(b) the Rent Commencement Date, Tenant shall notify Landlord whether it
has elected to receive from Landlord the Additional Tenant Improvement
Allowance. Such election shall be final and binding on Tenant, and may not
thereafter be modified without Landlord’s consent, which may be granted or
withheld in Landlord’s sole and absolute discretion. The TI Allowance shall be
disbursed in accordance with this Work Letter. Except as set forth below,
Tenant shall have no right to the use or benefit (including any reduction to
Base Rent) of any portion of the TI Allowance not required for the construction
of (x) the Tenant Improvements described in the TI Construction Drawings
approved pursuant to Section 4(c) or (y) any Changes pursuant to Section
6. Notwithstanding the foregoing, if Tenant does not use the full amount of
the TI Allowance, the unused portion (subject to a cap of $10.00 per rentable
square foot of the Premises, or approximately $640,000) shall be applied so as
to delay the Rent Commencement Date for the period of time necessary to reflect
an abatement of Rent equal to such unused portion.

 

(c)           Costs Includable in TI Fund. The TI Fund shall be used solely for
the payment of design, permit and construction costs, incurred by Tenant in
connection with the construction of the Tenant Improvements, including, without
limitation, the cost of preparing the TI Design Drawings and the TI
Construction Drawings, the purchase of all fixed equipment and materials
incorporated into the Tenant Improvements, and all related tax obligations, all
other costs set forth in the Budget, including Landlord’s Administrative Rent,
the cost of Changes and those costs associated with construction and design
expenses that do not require a construction permit prior to Tenant’s receipt of
construction permits for the Tenant Improvements, up to $25,000 of Tenant’s
signage costs pursuant to Section 38(c) of the Lease, and any other
costs subject to reimbursement out of the TI Allowance as set forth in this
Work Letter or in the Lease (collectively, “TI
Costs”). As part of the costs covered by the TI Allowance, Tenant
shall also be permitted to retain the services of an independent construction
manager selected by Tenant and reasonably approved by Landlord to supervise the
construction of the Tenant Improvements on behalf of Tenant. Landlord hereby
consents to the hiring of Gary Ghio of G2 Facilities Management Consulting; any
further change of construction manager shall again require Landlord’s approval,
which approval shall not be

 

9

 

unreasonably withheld conditioned or delayed. Landlord shall have the
right to approve the cost and scope of services to be provided by Tenant’s
construction manager, which approval shall not be unreasonably withheld,
conditioned or delayed. Notwithstanding anything to the contrary contained
herein, the TI Fund shall not be used to purchase any furniture, personal property
or other non-Building System materials or equipment, including, but not be
limited to, biological safety cabinets and other scientific equipment not
incorporated into the Improvements.

 

(d)           Excess TI Costs. It is understood and agreed that
Landlord is under no obligation to bear any portion of the cost of any of the
Tenant Improvements except to the extent of the TI Allowance. If at any time
and from time-to-time, the remaining TI Costs under the Budget exceed the
remaining unexpended TI Allowance, Tenant shall deposit with Landlord, as a
condition precedent to Landlord’s obligation to complete the Landlord’s Work,
one hundred percent (100%) of the then current TI Cost in excess of the
remaining TI Allowance (“Excess TI Costs”)
within ten(10) days following the determination of such excess amount pursuant
to an approved Change which results in an increase to the Budget. If Tenant
fails to deposit, or is late in depositing, the amount of the Excess TI Costs
with Landlord, Landlord shall have all of the rights and remedies set forth in
the Lease for nonpayment of Rent (including, but not limited to, the right to
interest at the Default Rate and the right to assess a late charge), and for
purposes of any litigation instituted with regard to such amounts the same will
be considered Rent. Any Excess TI Costs held by Landlord, together with the
remaining TI Allowance, is herein referred to as the “TI Fund.” 
Any Excess TI Costs deposited with Landlord shall be the first funds
disbursed to pay TI Costs. Notwithstanding anything to the contrary set forth
in this Section 7(d), Tenant shall be fully and solely liable for
TI Costs in excess of the TI Allowance. If upon Substantial Completion of the
Tenant Improvements and the payment of all sums due in connection therewith
there remains any undisbursed TI Fund, Tenant shall be entitled to such
undisbursed TI Fund solely to the extent of any Excess TI Costs deposit Tenant
has actually made with Landlord.

 

(e)           Payment for TI Costs. Following delivery of the Budget and
the Tenant Deliveries, Landlord shall pay TI Costs once a month against a draw
request in a commercially reasonable form, containing such certifications, lien
waivers (including a conditional lien release for each progress payment and
unconditional lien releases for the prior month’s progress payment), inspection
reports and other matters as Landlord customarily obtains, to the extent of
Landlord’s approval thereof for payment, no later than 30 days following
receipt of such draw request. Upon completion of the Tenant Improvements,
Tenant shall deliver to Landlord:  (i)
certificates setting forth the names of all contractors and subcontractors who
did the work and final unconditional lien waivers from all such contractors and
subcontractors; (ii) “as built” plans for such Tenant Improvements (1 copy in
print format and two (2) copies in electronic CAD format), (iii) a
certificate of substantial completion in form AIA G704, (iv) a certificate
of occupancy (or its equivalent) and (v) copies of all operating manuals
and warranties. Tenant may begin submitting draw requests for the reimbursement
of costs Tenant incurs in connection with the drafting of the TI Design
Drawings at any time after that date which is thirty (30) days after the date
Lease is executed. In the event that Landlord fails to pay any of the TI
Allowance in the manner and within the time required pursuant to this Work
Letter, following written notice from Tenant to Landlord of such failure, and
provided that Landlord does not cure such failure within ten (10) business days
of such notice, then, in addition to any other rights and remedies at law or
equity, Tenant may credit against Tenant’s next obligations to pay Rent under
the Lease such unfunded amount, plus interest at the Default Rate from the date
such payment was required until the date of the rental credit. The foregoing
right of Tenant to credit against rent due shall not apply if Landlord
reasonably disputes in writing any or all of its obligation to reimburse Tenant
from the TI Allowance.

 

8.             Tenant Access.

 

(a)           Tenant’s Access Rights. Landlord hereby agrees to permit Tenant
access, at Tenant’s sole risk and expense, to the Building without any
obligation to pay Rent: (i) as of the date of Initial Delivery in order to
perform Tenant’s Work provided that such Tenant’s Work is coordinated with
Landlord’s Architect and Landlord’s general contractor, and complies with the
Lease and all other reasonable restrictions and conditions Landlord may impose
and (ii) prior to the completion of Landlord’s Work, to inspect and observe
work in process; all such access shall be during normal business hours or at
such other times as are reasonably designated by Landlord. Landlord shall not
charge directly or

 

10

 

indirectly for the use of elevators, hoists, water, electricity, HVAC,
security, or parking used at the Premises prior to the Commencement Date. Notwithstanding
the foregoing, neither Tenant nor the Tenant Parties shall have any right to
enter onto the Premises or the Project unless and until Tenant has delivered to
Landlord evidence reasonably satisfactory to Landlord demonstrating that the
insurance required to be obtained by Tenant pursuant to Section 5(a)
above, has been placed in connection with such pre-commencement access, and is
in full force and effect. Any entry by Tenant shall comply with all established
safety practices of Landlord’s contractor and Landlord until completion of
Landlord’s Work and acceptance thereof by Tenant.

 

(b)           No Interference. Neither Tenant nor any Tenant Party
shall interfere with the performance of Landlord’s Work, nor with any
inspections or issuance of final approvals by the County of San Diego or the
City of San Diego; provided, however, that Landlord and Tenant shall act
reasonably to cause their respective contractors, service providers, and
workmen involved in the construction of Landlord’s Work and Tenant’s Work to
act in labor harmony with one another.

 

(c)           No Acceptance of Premises. The fact that Tenant may, with Landlord’s
consent, enter into the Project prior to the date of Substantial Completion of
Landlord’s Work for the purpose of performing any Tenant’s Work shall not be
deemed an acceptance by Tenant of possession of the Premises, but in such event
Tenant shall indemnify and hold Landlord harmless from any loss of or damage to
Tenant’s property, completed work, fixtures, equipment, materials or
merchandise, and from liability for death of, or injury to, any person, to the
extent caused by the willful misconduct or negligence of Tenant or any Tenant
Party.

 

(d)           Notification of Delays. Not less than once each calendar month
from the date of this Work Letter through the Commencement Date, Landlord shall
deliver to Tenant written notification of the number of days during the
immediately preceding calendar month Landlord’s performance under this Work
Letter or the Lease was delayed as a result of Tenant Delays. Not less than
once each calendar month from the date of this Work Letter through the
Commencement Date, Tenant shall deliver to Landlord written notification of the
number of days during the immediately preceding calendar month Tenant’s
performance under this Work Letter or the Lease was delayed as a result of
Landlord Delays or Force Majeure Delays. Claims of Force Majeure Delay on
account of weather shall be substantiated by delivery to the party not claiming
the Force Majeure Delay of notices or other documents of the affected party’s
contractor affirming the existence and length of such weather related delay,
including industry standard documentation.

 

9.             Miscellaneous.

 

(a)           Consents. Whenever consent or approval of either
party is required under this Work Letter, that party shall not unreasonably
withhold, condition or delay such consent or approval, except as may be
expressly set forth herein to the contrary.

 

(b)           Modification. No modification, waiver or amendment of
this Work Letter or of any of its conditions or provisions shall be binding
upon Landlord or Tenant unless in writing signed by Landlord and Tenant.

 

(c)           Counterparts. This Work Letter may be executed in any
number of counterparts but all counterparts taken together shall constitute a
single document.

 

(d)           Governing Law. This Work Letter shall be governed by,
construed and enforced in accordance with the internal laws of the state in
which the Premises are located, without regard to choice of law principles of
such State.

 

(e)           Time of the Essence. Time is of the essence of this Work
Letter and of each and all provisions thereof.

 

11

 

(f)            Default. Notwithstanding anything set forth
herein or in the Lease to the contrary, Landlord shall not have any obligation
to perform any work hereunder or to fund any portion of the TI Fund during any
period Tenant is in Default under the Lease.

 

(g)           Severability. If any term or provision of this Work
Letter is declared invalid or unenforceable, the remainder of this Work Letter
shall not be affected by such determination and shall continue to be valid and
enforceable.

 

(h)           Merger. All understandings and agreements, oral
or written, heretofore made between the parties hereto and relating to Tenant’s
Work are merged in this Work Letter, which alone (but inclusive of provisions
of the Lease incorporated herein and the final approved constructions drawings
and specifications prepared pursuant hereto) fully and completely expresses the
agreement between Landlord and Tenant with regard to the matters set forth in
this Work Letter.

 

(i)            Entire Agreement. This Work Letter is made as a part of
and pursuant to the Lease and, together with the Lease, constitutes the entire
agreement of the parties with respect to the subject matter hereof. This Work
Letter is subject to all of the terms and limitation set forth in the Lease, and
neither party shall have any rights or remedies under this Work Letter separate
and apart from their respective remedies pursuant to the Lease.

 

[ Signatures on next page ]

 

12

 

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

 

	
  TENANT:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  SENOMYX,
  INC.

  	
   

  
	
  a
  Delaware corporation

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/
  Kent Snyder

  	
   

  
	
  Its:

  	
    Chief
  Executive Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  LANDLORD

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ARE-NEXUS
  CENTRE II, 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:

  	
    /s/
  Jennifer Pappas

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
    Jennifer
  Pappas

  	
   

  
	
   

  	
  Title:

  	
    V.P.
  and Assistant Secretary

  	
   

  
	
   

  	
  Date:

  	
    January
  12, 2006

  	
   

  

 

1

 

SCHEDULE A TO WORK LETTER

 

LI Plans

 

Shell & Core Plans:  All
improvements per City of San Diego permitted drawings dated 12/20/04 (Issued
for Bid 4/13/05) prepared by architects Delawie Wilkes Rodrigues Barker
entitled Alexandria Technology Center-UTC 2, Core Building – CP1 as adjusted by
the agreed to Value Engineering between Landlord and Tenant and subject to
Minor Variations as more fully described in the Work Letter.

 

Central Plant Plans:  All
improvements per City of San Diego permitted drawings dated 02/14/05 (Issued
for Bid 4/13/05) prepared by architects Delawie Wilkes Rodrigues Barker entitled
Alexandria Technology Center-UTC 2, Core Building – CP2 & Site Enclosure
for Shell Building Central Plant Equipment as adjusted by the agreed to Value
Engineering between Landlord and Tenant and subject to Minor Variations as more
fully described in the Work Letter.

 

1

 

SCHEDULE B TO WORK LETTER

 

Screening Solution

 

A ten foot high chain link fence (see drawing) with privacy slats.

 

[DRAWING OMITTED]

 

1

 

SCHEDULE C TO WORK LETTER

 

Landlord’s Finish Work

 

1. Trellis

 

2. Building Lobby Improvements

 

3. Bathroom Improvements

 

1

 

EXHIBIT D TO LEASE

 

ACKNOWLEDGMENT OF COMMENCEMENT DATE

 

This ACKNOWLEDGMENT OF COMMENCEMENT
DATE is made as of this       day of              ,
                     ,
between ARE-NEXUS CENTRE II, LLC, a Delaware limited liability company (“Landlord”), and SENOMYX, INC., a Delaware
corporation (“Tenant”), and is
attached to and made a part of the Lease dated as of             ,
           (the “Lease”), by and between Landlord and Tenant.
Any initially capitalized terms used but not defined herein shall have the
meanings given them in the Lease.

 

Landlord and Tenant hereby acknowledge and agree, for all purposes of
the Lease, that the Commencement Date of the Base Term of the Lease is             ,
             
, the “Rent
Commencement Date is                 ,
           and the
termination date of the Base Term of the Lease shall be midnight on February
28, 2017.

 

IN WITNESS WHEREOF, Landlord and Tenant have executed this
ACKNOWLEDGMENT OF COMMENCEMENT DATE to be effective on the date first above
written.

 

	
  TENANT:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  SENOMYX, INC.,

  	
   

  
	
  a
  Delaware corporation

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
  LANDLORD:

  	
   

  
	
   

  	
   

  
	
  ARE-NEXUS CENTRE II, 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:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
							

 

1

 

EXHIBIT E TO LEASE

 

Rules and Regulations

 

The sidewalk, entries,
and driveways of the Project shall not be obstructed by Tenant, or any Tenant
Party, or used by them for any purpose other than ingress and egress to and
from the Premises.

 

1.             Tenant shall
not place any objects, including antennas, outdoor furniture, etc., in the
Common Areas, other than the Basement Parking Structure and Equipment Yard.

 

2.             Except for
animals assisting the disabled and associated with Tenant’s research and
development Permitted Uses, no animals shall be allowed in the offices, halls,
or corridors in the Project.

 

3.             Tenant shall
not disturb the occupants of the adjoining buildings by the use of any radio or
musical instrument or by the making of loud or improper noises.

 

4.             If Tenant
desires telegraphic, telephonic or other electric connections in the Premises,
Landlord or its agent will direct the electrician as to where and how the wires
may be introduced; and, without such direction, no boring or cutting of wires
will be permitted. Any such installation or connection shall be made at Tenant’s
expense, subject to reimbursement from the TI Allowance.

 

5.             Tenant shall
not install or operate any steam or gas engine or boiler, or other mechanical
apparatus in the Premises, except as specifically approved in the Lease or in
the TI Design Drawings. The use of oil, gas or inflammable liquids for heating,
lighting or any other purpose is expressly prohibited. Explosives or other
articles deemed extra hazardous shall not be brought into the Project.

 

6.             Parking any
type of recreational vehicles is specifically prohibited on or about the
Project. Except for the overnight parking of operative vehicles, no vehicle of
any type shall be stored in the parking areas at any time. In the event that a
vehicle is disabled, it shall be removed within 48 hours. There shall be no “For
Sale” or other advertising signs on or about any parked vehicle. All vehicles
shall be parked in the designated parking areas in conformity with all signs
and other markings.

 

7.             Tenant shall
maintain the Premises free from infestation by rodents, insects and other
pests.

 

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

 

9.             Tenant shall
not cause any unnecessary labor by reason of Tenant’s carelessness or
indifference in the preservation of good order and cleanliness.

 

10.           Tenant shall
give Landlord prompt notice of any defects in the water, lawn sprinkler,
sewage, gas pipes, electrical lights and fixtures, heating apparatus, or any
other service equipment affecting the Premises.

 

11.           Tenant shall
not permit the dumping of waste or refuse or permit any harmful materials to be
placed in any drainage system or sanitary system in or about the Premises in violation
of any Hazardous Materials Laws.

 

12.           All moveable
trash receptacles provided by the trash disposal firm for the Premises must be
kept in the trash enclosure areas, if any, provided for that purpose.

 

13.           No auction,
public or private, will be permitted on the Premises or the Project.

 

1

 

14.           No awnings
shall be placed over the windows in the Premises except with the prior written
consent of Landlord.

 

15.           The Premises
shall not be used for lodging, sleeping or for any immoral or illegal purposes
or for any purpose other than that specified in the Lease. No gaming devices
shall be operated in the Premises.

 

16.           Tenant shall
ascertain from Landlord the maximum amount of electrical current which can safely
be used in the Premises, taking into account the capacity of the electrical
wiring in the Project and the Premises and the needs of other tenants, and
shall not use more than such safe capacity. Landlord’s consent to the
installation of electric equipment shall not relieve Tenant from the obligation
not to use more electricity than such safe capacity.

 

17.           Tenant
assumes full responsibility for protecting the Premises from theft, robbery and
pilferage.

 

18.           Tenant shall
not install or operate on the Premises any machinery or mechanical devices of a
nature not related to Tenant’s Permitted Use of the Premises and shall keep all
such machinery free of vibration, noise and air waves which may be transmitted
beyond the Premises.

 

2

 

EXHIBIT F TO LEASE

 

TENANT’S PERSONAL PROPERTY

 

[***]

 

***Confidential
Treatment Requested

 

1

 

EXHIBIT G TO LEASE

 

PARKING

 

1

 

EXHIBIT H TO LEASE

 

SURRENDER
PLAN

 

1.     Tenant’s environmental contractor (“Contractor”)
will prepare and send a written 30-day advance notice to Department of Health
Services, Radiological Health Branch in Sacramento, CA regarding Intent to
Vacate facility along with form RH 5314, Certificate of Disposition of
Materials. Landlord hereby consents to the hiring of Occupational Services,
Inc. as the Contractor; any change of Contractor shall require Landlord’s
approval, which approval shall not be unreasonably withheld conditioned or
delayed.

 

Contractor will survey
benches, floors, sinks, work areas, fume hoods, and storage areas in the
radiation laboratories that are to be closed-out using appropriate survey
instruments to determine if fixed contamination is present. Contractor will use
large area gas proportional detectors for beta emitting radionuclides and a low
energy gamma scintillation probe for I-125. Contractor will then collect an
estimated 1,000 wipe test samples from the laboratory surfaces, including
sinks, benches, floors, return air vents, floor drains and adjacent hallways,
to determine if removable surface contamination is present. Wipe test samples
will be analyzed at Contractor’s counting laboratory using Contractor’s Beckman
model LS 6000SE liquid scintillation counter calibrated with NIST traceable H-3
and C- 14 reference sources and Contractor’s Gamma Counter calibrated with an
I-125 reference source. The counting results will be reported in units of
dpm/100 cm2.

 

Contractor will report locations
of elevated contamination to Tenant. A “location of elevated contamination” is
an area where removable or fixed contamination is greater than the Minimum
Detectable Concentration (MDC) of our instruments. Contractor will retest and
resurvey the “locations of elevated contamination” to verify adequate
decontamination. The closeout survey, and accompanying report that documents
the survey, will include the physical survey of the site, preparation of the
wipes for LSC and Gamma counting, preparation of the license amendment request
with survey report (~35 page document including data sheets) and review by a
senior Contractor Health Physicist.

 

The amendment application and
final termination report will be prepared according to guidelines contained in:

 

•      NUREG 1507, Minimum Detectable Concentrations
with Typical Radiation Survey Instruments for Various Contaminants and Field
Conditions (http://techconf.llnl.gov/radcri/1507.html)

•      MARSSIM, the Multi-Agency Radiation Survey and
Site Investigation Manual. (http://www.epa.gov/radiation/marssim/)

 

Areas with elevated
contamination will be cleaned by Contractor. The cleaned area will be
resurveyed by Contractor to confirm that elevated contamination has been
removed by the cleaning.

 

Contractor will prepare a
detailed written amendment to Tenant’s RML requesting the addition of Tenant’s
new facility. The amendment will include electronic maps demarcating the
radioactive materials receipt, package open, use, storage, and disposal
locations (decay in storage and isotope disposal sinks). We will include
detailed tables listing each room name and room number to be listed on the
license. We will include new sewer release limits on discharges to the sanitary
sewer.

 

2.     Contractor will chemically decontaminate
Tenant’s biological safety cabinets and incubators with paraformaldehyde before
they are moved or shipped. The decontamination procedures will

 

	
  

  	
   

  	
  Copyright © 2005, Alexandria Real Estate Equities,
  Inc.  ALL RIGHTS RESERVED.  Confidential and Proprietary – Do Not Copy
  or Distribute.  Alexandria and the
  Alexandria Logo are registered trademarks of Alexandria Real Estate Equities,
  Inc.

  

 

1

 

adhere to the NSF 49
Standard. Contractor will start the work in the evening, between 4:00 p.m. –
6:00 p.m.

 

The decontamination process
takes approximately 14 hours, during which the cabinets will be encapsulated
with plastic sheeting and duct tape. No
persons  are permitted to enter the
entire suite during the decontamination  process. There will be no human access into the suite until
Contractor returns the following morning to remove the encapsulation and
neutralize the agent. At that time the decontamination process is complete and
persons may enter the suite.

 

3.     Contractor will biologically decontaminate
Tenant’s walk-in cold rooms. Contractor will issue a signed certificate of
decontamination for each walk-in cold room. The walk-in cold rooms will be
sprayed down with Sporicidin, a registered disinfectant and cleaner and then fogged
with Actril® Cold Sterilant.

 

4.     Contractor will wipe down the chemical fume
hoods once empty. Only the accessible portions of fumehoods (not ducting or
fans) will be cleaned. Inaccessible areas (i.e., the plenums and duct work
above the fume hood) will not be cleaned. Contractor will issue signed
certificates documenting the cleaning. Contractor is not conducting
confirmatory sampling after cleaning to verify the fume hoods are completely
free of hazardous substances.

 

5.     Contractor will wipe down the flammable
liquid, acid, base, and chemical cabinet storage cabinet once they are empty.

 

6.     Contractor will issue signed certificates
documenting the cleaning. Contractor is not conducting confirmatory sampling
after cleaning to verify the cabinets are completely free of hazardous
substances.

 

7.     Contractor will contact vendors, conduct site
walk, and obtain quotes from qualified vendors for the transportation and
disposal of chemicals.

 

8.     Contractor will request gas supplier(s) to
pick up compressed gas cylinders from facility.

 

9.     Contractor will contact biohazardous waste
hauler and have biohazardous materials and biohazardous waste disposed of using
a registered hauler.

 

10.   Contractor will physically verify that
containers of hazardous materials have been disposed of from the site.

 

11.   Contractor will perform the following steps
associated with Tenant licenses and permitting agreements:

 

•      Send letter to the agency to terminate the San
Diego Industrial Wastewater permit, and attend final inspection, if conducted
by regulator.

 

•      Send letter to the agency to terminate the San
Diego County Health Department permit and attend final inspection, if conducted
by regulator.

 

•      Send letter to the agency to terminate the EPA
Hazardous Waste Identification Number and attend final inspection, if conducted
by regulator.

 

•      Send letter to the agency to terminate the San
Diego Fire Department Permit and attend final inspection, if conducted by
regulator.

 

2

 

•      If follow up correspondence is required by the
Radiological Health Branch in Sacramento, CA after the initial amendment is
submitted, the time spent preparing the response letter will be invoiced at
Contractor’s hourly rate and will be paid for entirely by Tenant.

 

12.   Tenant will contract a janitorial contractor
to conduct cleaning so that the building is “broom clean”.

 

13.   Tenant shall provide a written report of
Contractor documenting that all measures required herein have been completed in
accordance with the requirements hereof.

 

14.   Tenant and its Contractor shall participate in
any measures taken by Landlord to verify the performance of the aforementioned
surrender requirements, including but not limited to, phone interviews and site
visits.

 

15.   Tenant shall remain liable for all of the
obligations and requirements set forth herein notwithstanding its hiring of the
Contractor.

 

3

 

EXHIBIT I TO LEASE

 

LIST
OF ENVIRONMENTAL REPORTS

 

1.     ENVIRON,
2/6/03:  Phase I Environmental
Site Assessment, 4757 Nexus Centre Drive, San Diego, California.

 

2.     ENVIRON,
1/6/06:  Phase I
Environmental Site Assessment Update and Limited Phase II Investigation, 4757
and 4767 Nexus Centre Drive, San Diego, California.

 

1EXHIBIT 10.24

 

SEVENTH AMENDMENT TO EXPANSION LEASE

 

THIS SEVENTH AMENDMENT TO
EXPANSION LEASE (this “Amendment”) is
made and entered into as of the 12th day of January, 2006 by and between ARE-11099 NORTH TORREY PINES, LLC, a
Delaware limited liability company (“Landlord”), and SENOMYX, INC., a Delaware corporation (“Tenant”).

 

RECITALS

 

A.            Health
Sciences Properties, Inc. (“HSP”),
a predecessor-in-interest to Landlord, and Sequana Therapeutics, Inc.,
doing business as AXYS Pharmaceuticals, Inc. (“Original Tenant”), are parties to that certain Expansion Lease
dated November 20, 1995, as amended by that certain letter agreement dated
November 20, 1995, between HSP and Original Tenant, that certain First
Amendment to Expansion Lease dated October, 1996, between HSP and Original
Tenant, that certain Second Amendment to Expansion Lease dated May 20,
1997, between Alexandria Real Estate Equities, Inc. (“ARE”), formerly known as HSP, and Original
Tenant, that certain Third Amendment to Expansion Lease dated August 24,
1998, between Landlord, successor-in-interest to ARE, and Original Tenant, that
certain Fourth Amendment to Expansion Lease dated March 31, 1999, between
Landlord and Original Tenant, that certain Fifth Amendment to Expansion Lease
dated October, 1999, between Landlord and Original Tenant, as assigned pursuant
to that certain Assignment and Assumption of Lease dated July 12, 2000,
between Tenant and Original Tenant, and as further amended by that certain
Consent to Assignment dated July 12, 2000 by and among Landlord, Tenant
and Original Tenant, those certain letter agreements dated March 30, 2001,
and August 31, 2001, between Landlord and Tenant and that certain Sixth
Amendment to Expansion Lease dated April 27, 2002, between Landlord and
Tenant (collectively, the “Lease”).

 

B.            Pursuant
to the terms of the Lease, Tenant leased from Landlord the Demised Premises in
a building located at 11099 North Torrey Pines Road, La Jolla, California, and
more particularly described in the Lease. 
All capitalized terms not otherwise defined herein shall have the
meanings set forth in the Lease unless the context clearly indicates otherwise.

 

C.            Tenant
currently subleases portions of the Premises to certain subtenants whose
sublease rights and interests have been consented to by Landlord (collectively,
the “Subtenants”).

 

D.            ARE-Nexus
Centre II, LLC and Tenant are negotiating a lease (the “Nexus Centre Drive Lease”) for certain
premises located on the property commonly known as 4767 Nexus Centre Drive, San
Diego, California.

 

E.             Landlord
and Tenant now desire to amend the Lease on the terms and conditions set forth
herein.

 

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

 

1.             Effective
Date.

 

a.     The effectiveness of this Amendment shall
be subject to the execution of the Nexus Centre Drive Lease (the “Nexus Centre Drive Lease Condition”) and
the satisfaction of the Nexus Centre Drive Lease Condition shall be a condition
precedent to the effectiveness of this Amendment.  If the parties do not execute the Nexus
Centre Drive Lease, this Amendment shall be null and void and shall be of no
force or effect.  The “Effective Date” shall be deemed to be the
date on which the Nexus Centre Drive Lease Condition is satisfied.

 

1

 

2.             Amendments
to Lease.

 

a.     Landlord hereby consents to Tenant’s
continuing in possession of the Demised Premises following expiration of the
term of the Lease on December 31, 2006 in accordance with Section 12.1
of the Lease.  Notwithstanding the
foregoing or anything in the Lease to the contrary:  (i) Tenant shall not be liable for Basic
Annual Rent or Tenant’s Pro Rata Share of Operating Expenses during the period
commencing upon January 1, 2007 and ending upon February 28, 2007
(the “Restoration Period”) and (ii) following
the expiration of the Restoration Period, Basic Annual Rent and Tenant Pro Rata
Share of Operating Expenses shall once again be payable except that Basic
Annual Rent shall be at a monthly rental rate equal to the monthly rental rate
payable under the Lease for the month of December 2006 (and not subject to
further increase as otherwise provided for in Section 12.1 of the
Lease).  The expiration of the
Restoration Period shall be extended on a day for day basis to the extent of
the occurrence of any “Force Majeure Delays” or “Landlord Delays” (as those
terms are defined in the Nexus Centre Drive Lease) under the Nexus Centre Drive
Lease.  In addition to the aforementioned
extension of the Restoration Period, if Tenant terminates the Nexus Centre
Drive Lease after January 1, 2008 pursuant to Section 2(e) thereof,
the Restoration Period shall expire as of the date which is six (6) months
following the effective date of the termination of the Nexus Centre Drive
Lease.

 

b.     During the Restoration Period, Tenant
shall cause the Demised Premises to be restored to the condition required under
the Lease as modified by this Amendment. 
In addition to Tenant’s surrender obligations relating to the condition
of the Demised Premises under the Lease and any obligations of Tenant which
expressly survive the termination of the Lease, Tenant’s surrender obligations
shall include:  (i) Tenant’s
performance of its surrender obligations relating to the removal of any
Hazardous Materials introduced into the Demised Premises by Tenant or under
Tenant’s auspices, as set forth in the Surrender Plan attached hereto as Exhibit A,
(ii) the capping of any Building systems affected by Tenant’s removal of
any personal property or equipment and (iii) Tenant’s vacating the Demised
Premises with all of Tenant’s personal property removed, and in a broom-clean
condition, but otherwise in its “as-is” condition at the time of the Effective
Date, subject to normal wear and tear (collectively, the “Restoration
Obligations”). 
Notwithstanding the foregoing or the Lease, Tenant shall not be
obligated to (and the Restoration Obligations shall not include any requirement
to):  (A) paint or patch the walls
of the Demised Premises, (B) replace any worn or spotted carpeting or
other flooring materials, (C) replace any discolored ceiling tiles, (D) remove
any existing improvements or alterations made by Tenant to the Demised
Premises, (E) repair any defective lighting fixtures, electrical circuitry
or equipment or (F) except as provided in clause (ii) of the
preceding sentence, correct any defects in the Building mechanical,
ventilation, plumbing or sewer systems. 
To the extent of any conflict between Tenant’s surrender obligations
under the Lease and Tenant’s surrender obligations under this Amendment, the
surrender obligations under this Amendment shall control.

 

c.     Notwithstanding anything to the contrary,
the Lease shall terminate when the Restoration Obligations are Complete (as
herein defined).  When Tenant believes
that the Restoration Obligations have been completed in accordance with the
terms hereof, Tenant shall give written notice thereof (the “Completion Notice”) to Landlord.  Landlord shall have the right to
independently determine whether the Restoration Obligations have been completed
in accordance with the terms hereof.  If
Landlord, in Landlord’s reasonable discretion, determines that the Restoration
Obligations have not been completed in accordance with the terms hereof,
Landlord may, within ten (10) business days following Landlord’s receipt
of the Completion Notice, provide notice to Tenant of such determination
describing in reasonable detail why Landlord does not believe the Restoration
Obligations have been completed in accordance with the terms hereof (a “Disapproval Notice”). 
If Landlord gives a Disapproval Notice to Tenant:  (i) Tenant shall continue to be
obligated to complete the Restoration Obligations in accordance with the terms
hereof, (ii) the Lease shall continue until the Restoration Obligations
are completed, (iii) Tenant shall again be obligated to provide a
Completion Notice when it believes the Restoration Obligations have been
completed in accordance with the terms hereof and (iv) the procedure
described herein shall continue to be repeated until the Restoration
Obligations are Complete.  For purposes
hereof the Restoration Obligations shall be deemed “Complete”
upon Tenant’s provision of a Completion Notice to Landlord that Landlord does
not timely respond to with the provision of a Disapproval Notice.

 

2

 

d.     Notwithstanding anything to the contrary,
Tenant’s performance of the Restoration Obligations pursuant to this Amendment
is subject to Landlord’s and Tenant’s mutual understanding that the Premises
will be surrendered by Tenant free of the Subtenants and their personal
property upon the expiration of the Lease. 
Therefore, Landlord hereby agrees that in the event Landlord enters into
an agreement directly with any of the Subtenants whereby Landlord consents to
the occupancy of any portion of the Premises by a Subtenant after the
expiration of the Restoration Period (a “Direct Agreement”),
then Tenant shall be released from performance of the Restoration Obligations
with respect to that portion of the Premises occupied by the Subtenant who is a
party to a Direct Agreement (a “Successor Tenant”)
unless such Successor Tenant vacates the Premises prior to the commencement of
the Restoration Period.  Additionally,
the continued occupancy of the Premises after the expiration of the Restoration
Period by any Successor Tenant pursuant to a Direct Agreement shall (i) not
be deemed a holdover by Tenant, and (ii) be deemed Landlord’s acceptance
of the portion of the Premises occupied by the Successor Tenant in the
condition required under the relevant terms and conditions of the Lease for the
effective surrender thereof, including, without limitation, its environmental
condition.  The entry of Landlord into
any Direct Agreement shall be in Landlord’s sole and absolute discretion.

 

e.     Tenant’s Option under Section 45 of
the Lease to extend the term of the Lease for an additional period of five (5) years
shall terminate and be of no further force or effect.

 

3.             Representations
and Warranties.

 

a.     As a material inducement to Landlord to
enter into this Amendment, Tenant represents and warrants to Landlord that, as
of the date of date hereof:

 

(1)   The Lease is in full force and effect.
There are no defaults by Tenant under the Lease, and no circumstance has
occurred which, but for the expiration of an applicable grace period, would
constitute an event of default by Tenant under the Lease.  To Tenant’s knowledge, there are no defaults
by Landlord under the Lease, and no circumstance has occurred which, but for
the expiration of an applicable grace period, would constitute an event of
default by Landlord under the Lease.  To
Tenant’s knowledge, Tenant has no defenses or rights of offset under the Lease.

 

(2)   Tenant is the sole lawful tenant under
the Existing Lease, and Tenant has not sublet, assigned, conveyed, encumbered
or otherwise transferred any of the right, title or interest of Tenant under
the Lease or in the Demised Premises, other than the subleases with Subtenants
whose sublease rights and interests have been expressly consented to in writing
by Landlord.

 

(3)   Tenant is a duly formed and existing
entity qualified to do business in the State of California.  Tenant has full right and authority to
execute and deliver this Amendment and each person signing on behalf of Tenant
is authorized to do so and no consent of any party is required on behalf of
Tenant for this Amendment to be in full force and effect.

 

4.             Miscellaneous.

 

a.     This Amendment shall be deemed to have
been executed and delivered within the Sate of California, and the rights and
the obligations of the parties hereto shall be construed and enforced in
accordance with, and governed by, the laws of the State of California.

 

b.     This Amendment is the entire agreement
between the parties with respect to the portions of the Lease amended hereby
and supersedes all other prior and contemporaneous oral and written agreements
and any discussions between the parties hereto relating to the matters
expressly set forth herein.  The Lease as
amended by this Amendment may be further amended only by an agreement in
writing, signed by Landlord and Tenant.

 

3

 

c.     This Amendment is binding upon and shall
inure to the benefit of the parties hereto, their respective agents, employees,
representatives, officers, directors, divisions, subsidiaries, affiliates,
assigns, heirs, successors in interest and shareholders.

 

d.     Each party has cooperated in the drafting
and preparation of this Amendment. 
Hence, in any construction to made of this Amendment, the same shall not
be construed against either party hereto.

 

e.     Each term of this Amendment is contractual
and not merely a recital.

 

f.      This Amendment may be executed in
counterparts, and when each party has signed and delivered at least one such
counterpart, each counterpart shall be deemed an original and, when taken
together with other signed counterparts, shall constitute one Amendment, which
shall be binding upon and effective as to all parties.

 

g.     The unenforceability of a portion of this
Amendment or the Nexus Centre Drive Lease shall not affect the enforceability
of either the remainder of this Amendment or the Nexus Centre Drive Lease.

 

h.     The parties will execute all such further
and additional document as shall be reasonable, convenient, necessary or
desirable to carry out the provisions of this Amendment; provided that the
foregoing shall not be deemed a commitment by either party to enter into the
Nexus Centre Drive Lease, the effect of which failure is addressed in Paragraph
1.a above, and shall not be a breach of this Amendment.

 

i.      This Amendment and the Lease shall be
construed as a whole in order to effectuate the intent of the parties to amend
the Lease in the manner specified in this Amendment.  All provisions of the Lease affected by this
Amendment shall be deemed amended regardless of whether so specified in this
Amendment.  Subject to the foregoing, if
any provision of the Lease conflicts with any provision of this Amendment, the
provision of this Amendment shall control.

 

j.      Except as specifically amended or
modified by this Amendment, the Lease remains in full force and effect.

 

k.     EACH PARTY ACKNOWLEDGES THAT IT HAS HAD
ADEQUATE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL OF ITS CHOOSING IN
CONNECTION WITH THE EXECUTION HEREOF AND HAS DONE SO, OR VOLUNTARILY ELECTED
NOT TO DO SO.

 

[Signatures are on the next page]

 

4

 

IN WITNESS WHEREOF, the
parties have executed this Amendment as of the date first hereinabove set
forth.

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  ARE-11099
  NORTH TORREY PINES, LLC,

  
	
   

  	
  a Delaware
  limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Alexandria Real
  Estate Equities, Inc.,

  
	
   

  	
   

  	
  a Maryland
  corporation, managing member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Jennifer
  Pappas

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  V.P. and
  Assistant Secretary

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  SENOMYX,
  INC.,

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kent Snyder

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Chief Executive Officer

  	
   

  
							

 

5

 

EXHIBIT A

 

SURRENDER PLAN, 

11099 North Torrey Pines Rd.

 

1.     Tenant’s environmental contractor (“Contractor”) will prepare and send a
written 30-day advance notice to Department of Health Services, Radiological
Health Branch in Sacramento, CA regarding Intent to Vacate facility along with
form RH 5314, Certificate of Disposition of Materials.  Landlord hereby consents to the hiring of
Occupational Services, Inc. as the Contractor; any change of Contractor
shall require Landlord’s approval, which approval shall not be unreasonably
withheld conditioned or delayed.

 

Contractor
will survey benches, floors, sinks, work areas, fume hoods, and storage areas
in the radiation laboratories that are to be closed-out using appropriate
survey instruments to determine if fixed contamination is present. Contractor
will use large area gas proportional detectors for beta emitting radionuclides
and a low energy gamma scintillation probe for I-125. Contractor will then
collect an estimated 1,000 wipe test samples from the laboratory surfaces,
including sinks, benches, floors, return air vents, floor drains and adjacent
hallways, to determine if removable surface contamination is present. Wipe test
samples will be analyzed at Contractor’s counting laboratory using Contractor’s
Beckman model LS 6000SE liquid scintillation counter calibrated with NIST
traceable H-3 and C- 14 reference sources and Contractor’s Gamma Counter
calibrated with an I-125 reference source. The counting results will be
reported in units of dpm/100 cm2.

 

Contractor
will report locations of elevated contamination to Tenant. A “location of
elevated contamination” is an area where removable or fixed contamination is
greater than the Minimum Detectable Concentration (MDC) of our instruments.
Contractor will retest and resurvey the “locations of elevated contamination”
to verify adequate decontamination. The closeout survey, and accompanying
report that documents the survey, will include the physical survey of the site,
preparation of the wipes for LSC and Gamma counting, preparation of the license
amendment request with survey report (~35 page document including data
sheets) and review by a senior Contractor Health Physicist.

 

The
amendment application and final termination report will be prepared according
to guidelines contained in:

 

•      NUREG 1507, Minimum Detectable Concentrations with Typical Radiation
Survey Instruments for Various Contaminants and Field Conditions
(http://techconf.llnl.gov/radcri/1507.html)

•      MARSSIM, the Multi-Agency Radiation Survey and Site Investigation
Manual. (http://www.epa.gov/radiation/marssim/)

 

Areas
with elevated contamination will be cleaned by Contractor.  The cleaned area will be resurveyed by
Contractor to confirm that elevated contamination has been removed by the
cleaning.

 

Contractor
will prepare a detailed written amendment to Tenant’s RML requesting the
addition of Tenant’s new facility. The amendment will include electronic maps
demarcating the radioactive materials receipt, package open, use, storage, and
disposal locations (decay in storage and isotope disposal sinks). We will
include detailed tables listing each room name and room number to be listed on
the license. We will include new sewer release limits on discharges to the
sanitary sewer.

 

2.     Contractor will chemically decontaminate Tenant’s biological safety
cabinets and incubators with paraformaldehyde before they are moved or
shipped.  The decontamination procedures
will 

 

1

 

adhere to the NSF 49
Standard. Contractor will start the work in the evening, between 4:00 p.m.
– 6:00 p.m.

 

The
decontamination process takes approximately 14 hours, during which the cabinets
will be encapsulated with plastic sheeting and duct tape. No persons  are permitted to enter the entire suite during the decontamination
process.  There will be no human access into the suite
until Contractor returns the following morning to remove the encapsulation and
neutralize the agent. At that time the decontamination process is complete and
persons may enter the suite.

 

3.     Contractor will biologically decontaminate Tenant’s walk-in cold rooms.
Contractor will issue a signed certificate of decontamination for each walk-in
cold room. The walk-in cold rooms will be sprayed down with Sporicidin, a
registered disinfectant and cleaner and then fogged with Actril® Cold
Sterilant.

 

4.     Contractor will wipe down the chemical fume hoods once empty. Only the
accessible portions of fumehoods (not ducting or fans) will be cleaned.
Inaccessible areas (i.e., the plenums and duct work above the fume hood) will
not be cleaned. Contractor will issue signed certificates documenting the
cleaning. Contractor is not conducting confirmatory sampling after cleaning to
verify the fume hoods are completely free of hazardous substances.

 

5.     Contractor will wipe down the flammable liquid, acid, base, and chemical
cabinet storage cabinet once they are empty.

 

6.     Contractor will issue signed certificates documenting the cleaning.
Contractor is not conducting confirmatory sampling after cleaning to verify the
cabinets are completely free of hazardous substances.

 

7.     Contractor will contact vendors, conduct site walk, and obtain quotes
from qualified vendors for the transportation and disposal of chemicals.

 

8.     Contractor will request gas supplier(s) to pick up compressed gas
cylinders from facility.

 

9.     Contractor will contact biohazardous waste hauler and have biohazardous
materials and biohazardous waste disposed of using a registered hauler.

 

10.   Contractor will physically verify that containers of hazardous materials
have been disposed of from the site.

 

11.   Contractor will perform the following steps associated with Tenant
licenses and permitting agreements for 11099 NTP:

 

•      Send letter to the agency to terminate the San Diego Industrial
Wastewater permit, and attend final inspection, if conducted by regulator.

 

•      Send letter to the agency to terminate the San Diego County Health
Department permit and attend final inspection, if conducted by regulator.

 

•      Send letter to the agency to terminate the EPA Hazardous Waste
Identification Number and attend final inspection, if conducted by regulator.

 

•      Send letter to the agency to terminate the San Diego Fire Department
Permit and attend final inspection, if conducted by regulator.

 

•      If follow up correspondence is required by the Radiological Health
Branch in Sacramento, CA after the initial amendment is submitted, the time
spent preparing the response letter will be invoiced at Contractor’s hourly
rate and will be paid for entirely by Tenant.

 

2

 

12.   Tenant will contract a janitorial contractor to conduct cleaning so that
the building is “broom clean”.

 

13.   Tenant shall provide a written report of Contractor documenting that all
measures required herein have been completed in accordance with the
requirements hereof.

 

14.   Tenant and its Contractor shall participate in any measures taken by
Landlord to verify the performance of the aforementioned surrender
requirements, including but not limited to, phone interviews and site visits.

 

15.   Tenant shall remain liable for all of the obligations and requirements
set forth herein notwithstanding its hiring of the Contractor.

 

3

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