Document:

Promissory Note

 PROMISSORY NOTE 
  

			
	U.S. $26,800,000.00	 	December 16, 2005

 FOR VALUE RECEIVED, and at the times hereinafter specified, RANCON REALTY FUND V SUBSIDIARY LLC, a Delaware
limited liability company (“Maker”), whose address is 400 South El Camino Real, 11th Floor,
San Mateo, California 94402, hereby promises to pay to the order of THE VARIABLE ANNUITY LIFE INSURANCE COMPANY, a Texas corporation (hereinafter referred to, together with each subsequent holder hereof, as “Holder”), at c/o AIG
Global Investment Corp., 1 SunAmerica Center, 38th Floor, Century City, Los Angeles,
California 90067-6022, or at such other address as may be designated from time to time hereafter by any Holder, the principal sum of TWENTY SIX MILLION EIGHT HUNDRED THOUSAND AND NO/100THS DOLLARS ($26,800,000.00), together with interest on the
principal balance outstanding from time to time, as hereinafter provided, in lawful money of the United States of America. 
 By its execution and delivery of this promissory note (this “Note”), Maker covenants and agrees as follows: 
 1.
Interest Rate and Payments. 
 (a) The balance of principal outstanding from time to time under this Note shall bear interest at the
rate of five and forty-six one-hundredths percent (5.46%) per annum (the “Original Interest Rate”), based on a three hundred sixty (360) day year composed of twelve (12) months of thirty (30) days each; however,
interest for partial months shall be calculated by multiplying the principal balance of this Note by the applicable interest rate (i.e., the Original Interest Rate or the New Rate (hereinafter defined)), dividing the product by three hundred sixty
(360), and multiplying that result by the actual number of days elapsed. 
 (b) Interest only shall be payable on the date the loan
evidenced by this Note (the “Loan”) is funded by Holder, in advance, for the period from and including the date of funding through and including December 31, 2005. 
 (c) Commencing on February 1, 2006 and on the first day of each month thereafter through and including December 1, 2015 combined payments of
principal and interest shall be payable, in arrears, in the amount of $151,495.55 each (such amount representing an amount sufficient to fully amortize the original principal amount of this Note over a three hundred sixty (360) month period
(the “Amortization Period”)). 
 (d) The entire outstanding principal balance of this Note, together with all accrued and unpaid
interest and all other sums due hereunder, shall be due and payable in full on January 1, 2016 (the “Original Maturity Date”). 
 2. Holder’s Extension Option; Net Operating Income. 
 (a) If Maker shall fail to pay the outstanding principal balance
of this Note and all accrued interest and other charges due hereon at the Original Maturity Date, Holder 

 
shall have the right, at Holder’s sole option and discretion, to extend the term of the Loan for an additional period of five (5) years (the
“Extension Term”). If Holder elects to extend the term of the Loan, Maker shall pay all fees of Holder incurred in connection with such extension, including, but not limited to, attorneys’ fees and title insurance premiums. Maker
shall execute all documents reasonably requested by Holder to evidence and secure the Loan, as extended, and shall obtain and provide to Holder any title insurance policy or endorsement requested by Holder. 
 (b) Should Holder elect to extend the term of the Loan as provided above, Holder shall (i) reset the interest rate borne by the then-existing
principal balance of the Loan to a rate per annum (the “New Rate”) equal to the greater of (A) the Original Interest Rate, or (B) Holder’s (or comparable lenders’, if Holder is no longer making such loans)
then-prevailing interest rate for five (5) year loans secured by properties similar to the Property (hereinafter defined), as determined by Holder in its sole discretion; (ii) re-amortize the then-existing principal balance of the Loan
over the remaining portion of the Amortization Period (the “New Amortization Period”); (iii) have the right to require Maker to enter into modifications of the non-economic terms of the Loan Documents as Holder may request (the
“Non-Economic Modifications”); and (iv) notwithstanding any provision set forth in the Loan Documents to the contrary, have the right to require Maker to make monthly payments into escrow for insurance premiums and real property
taxes, assessments and similar governmental charges. Hence, monthly principal and interest payments during the Extension Term shall be based upon the New Rate, and calculated to fully amortize the outstanding principal balance of the Loan over the
New Amortization Period. 
 (c) If Holder elects to extend the term of the Loan, Holder shall advise Maker of the New Rate within fifteen
(15) days following the Original Maturity Date. 
 (d) In addition to the required monthly payments of principal and interest set forth
above, commencing on the first day of the second month following the Original Maturity Date and continuing on the first day of each month thereafter during the Extension Term (each an “Additional Payment Date”), Maker shall make monthly
payments to Holder in an amount equal to all Net Operating Income (hereinafter defined) attributable to the Property for the calendar month ending on the last day of the month that is two months preceding each such Additional Payment Date. For
example, assuming the Original Maturity Date is January 1, then Net Operating Income for the period from January 1 through January 31 shall be payable to Holder on March 1; Net Operating Income for the period from February 1
through February 28 shall be payable to Holder on April 1, and so on. 
 (e) Holder shall deposit all such Net Operating Income
received from Maker into an account or accounts maintained at a financial institution chosen by Holder or its servicer in its sole discretion (the “Deposit Account”) and all such funds shall be invested in a manner acceptable to Holder in
its sole discretion. All interest, dividends and earnings credited to the Deposit Account shall be held and applied in accordance with the terms hereof. 
 (f) On the third Additional Payment Date and on each third Additional Payment Date thereafter, Holder shall apply all Excess Funds (hereinafter defined), if any, to prepayment of amounts due under this Note, without
premium or penalty. 

 (g) As security for the repayment of the Loan and the performance of all other obligations of Maker
under the Loan Documents, Maker hereby assigns, pledges, conveys, delivers, transfers and grants to Holder a first priority security interest in and to: all Maker’s right, title and interest in and to the Deposit Account; all rights to payment
from the Deposit Account and the money deposited therein or credited thereto (whether then due or in the future due and whether then or in the future on deposit); all interest thereon; any certificates, instruments and securities, if any,
representing the Deposit Account; all claims, demands, general intangibles, choses in action and other rights or interests of Maker in respect of the Deposit Account; any monies then or at any time thereafter deposited therein; any increases,
renewals, extensions, substitutions and replacements thereof; and all proceeds of the foregoing. 
 (h) From time to time, but not more
frequently than monthly, Maker may request a disbursement (a “Disbursement”) from the Deposit Account for capital expenses, tenant improvement expenses, leasing commissions and special contingency expenses. Holder may consent to or deny
any such Disbursement in its sole discretion. 
 (i) Upon the occurrence of any Event of Default (hereinafter defined) (i) Maker shall
not be entitled to any further Disbursement from the Deposit Account; and (ii) Holder shall be entitled to take immediate possession and control of the Deposit Account (and all funds contained therein) and to pursue all of its rights and
remedies available to Holder under the Loan Documents, at law and in equity. 
 (j) All of the terms and conditions of the Loan shall apply
during the Extension Term, except as expressly set forth above, and except that no further extensions of the Loan shall be permitted. 
 (k)
For the purposes of the foregoing: 
 (i) “Excess Funds” shall mean, on any Additional Payment Date, the amount of
funds then existing in the Deposit Account (including any Net Operating Income due on the applicable Additional Payment Date), less an amount equal to the sum of three regularly scheduled payments of principal and interest due on this Note;

 (ii) “Net Operating Income” shall mean, for any particular period of time, Gross Revenue for the relevant
period, less Operating Expenses for the relevant period; provided, however, that if such amount is equal to or less than zero (0), Net Operating Income shall equal zero (0); 
 (iii) “Gross Revenue” shall mean all payments and other revenues (exclusive, however, of any payments attributable to sales
taxes) received by or on behalf of Maker from all sources related to the ownership or operation of the Property, including, but not limited to, rents, room charges, parking fees, interest, security deposits (unless required to be held in a
segregated account), business interruption insurance proceeds, operating expense pass-through revenues and common area maintenance charges, for the relevant period for which the calculation of Gross Revenue is being made; and 

 (iv) “Operating Expenses” shall mean the sum of all ordinary and necessary
operating expenses actually paid by Maker in connection with the operation of the Property during the relevant period for which the calculation of Operating Expenses is being made, including, but not limited to, (a) payments made by Maker for
taxes and insurance required under the Loan Documents, and (b) monthly debt service payments as required under this Note. 
 3.
Budgets During Extension Term. 
 (a) Within fifteen (15) days following the Original Maturity Date and on or before
December 1 of each subsequent calendar year, Maker shall deliver to Holder a proposed revenue and expense budget for the Property for the remainder of the calendar year in which the Original Maturity Date occurs or the immediately succeeding
calendar year (as applicable). Such budget shall set forth Maker’s projection of Gross Revenue and Operating Expenses for the applicable calendar year, which shall be subject to Holder’s reasonable approval. Once a proposed budget has been
reviewed and approved by Holder, and Maker has made all revisions requested by Holder, if any, the revised budget shall be delivered to Holder and shall thereafter become the budget for the Property hereunder (the “Budget”) for the
applicable calendar year. If Maker and Holder are unable to agree upon a Budget for any calendar year, the budgeted Operating Expenses (excluding extraordinary items) provided in the Budget for the Property for the preceding calendar year shall be
considered the Budget for the Property for the subject calendar year until Maker and Holder agree upon a new Budget for such calendar year. 
 (b) During the Extension Term, Maker shall operate the Property in accordance with the Budget for the applicable calendar year, and the total of expenditures relating to the Property exceeding one hundred and five percent (105%) of the
aggregate of such expenses set forth in the Budget for the applicable time period shall not be treated as Operating Expenses for the purposes of calculating “Net Operating Income,” without the prior written consent of Holder except for
emergency expenditures which, in the Maker’s good faith judgment, are reasonably necessary to protect, or avoid immediate danger to, life or property. 
 4. Reports During Extension Term. 
 (a) During the Extension Term, Maker shall deliver to Holder all
financial statements reasonably required by Holder to calculate Net Operating Income, including, without limitation, a monthly statement to be delivered to Holder concurrently with Maker’s payment of Net Operating Income that sets forth the
amount of Net Operating Income accompanying such statement and Maker’s calculation of Net Operating Income for the relevant calendar month. Such statements shall be certified by an executive officer of Maker or Maker’s manager, managing
member or general partner (as applicable) as having been prepared in accordance with the terms hereof and to be true, accurate and complete in all material respects. 

 (b) In addition, on or before February 1 of each calendar year during the Extension Term, Maker
shall submit to Holder an annual income and expense statement for the Property which shall include the calculation of Gross Revenue, Operating Expenses and Net Operating Income for the preceding calendar year and shall be accompanied by Maker’s
reconciliation of any difference between the actual aggregate amount of the Net Operating Income for such calendar year and the aggregate amount of Net Operating Income for such calendar year actually remitted to Holder. All such statements shall be
certified by an executive officer of Maker or Maker’s manager, managing member or general partner (as applicable) as having been prepared in accordance with the terms hereof and to be true, accurate and complete in all material respects. If any
such annual financial statement discloses any inconsistency between the calculation of Net Operating Income and the amount of Net Operating Income actually remitted to Holder, Maker shall immediately remit to Holder the amount of any underpayment of
Net Operating Income for such calendar year or, in the event of an overpayment by Maker, such amount may be withheld from any subsequent payment of Net Operating Income required hereunder. 
 (c) Holder may notify Maker within ninety (90) days after receipt of any statement or report required hereunder that Holder disputes any
computation or item contained in any portion of such statement or report. If Holder so notifies Maker, Holder and Maker shall meet in good faith within twenty (20) days after Holder’s notice to Maker to resolve such disputed items. If,
despite such good faith efforts, the parties are unable to resolve the dispute at such meeting or within ten (10) days thereafter, the items shall be resolved by an independent certified public accountant designated by Holder within fifteen
(15) days after such ten (10) day period. The determination of such accountant shall be final. All fees of such accountant shall be paid by Maker. Maker shall remit to Holder any additional amount of Net Operating Income found to be due
for such periods within ten (10) days after the resolution of such dispute by the parties or the accountant’s determination, as applicable. The amount of any overpayment found to have been made for such periods may be withheld from any
required future remittance of Net Operating Income. 
 (d) Maker shall at all times keep and maintain full and accurate books of account and
records adequate to reflect correctly all items required in order to calculate Net Operating Income. 
 5. Loan Prepayment.

 (a) During the first two (2) years after the date of this Note, Maker shall have no right to prepay all or any part of this Note.

 (b) At any time after the second (2nd) anniversary of the date of this Note, Maker shall have the right to prepay the full principal amount of this Note and all accrued but unpaid interest hereon as of the date of prepayment, and
Maker shall, subject to the terms and conditions set forth in that certain Loan and Partial Release Agreement of even date herewith by and between Maker and Holder (the “Loan Agreement”), be permitted to make one or more principal
reduction payments in the amount of the Allocated Release Price in connection with a Permitted Release (as such terms are defined in the Loan Agreement), provided, in each case, that 

 
(i) Maker gives not less than thirty (30) days’ prior written notice to Holder of Maker’s election to prepay this Note, and (ii) Maker
pays a prepayment premium to Holder (A) in the case of prepayment in full, in an amount equal to the greater of one percent (1%) of the outstanding principal balance of this Note or the Present Value of this Note (hereinafter defined),
less the amount of principal being prepaid, calculated as of the prepayment date, and (B) in the case of a partial prepayment in connection with a Permitted Release, in an amount equal to the percentage that such Allocated Release Price so
applied to this Note bears to the entire then-existing principal balance of this Note, multiplied by the prepayment premium that would be due if this Note were prepaid in full on such date. In connection with any Permitted Release, Holder shall
re-amortize the then-outstanding principal balance of this Note over the remainder of the Amortization Period and give notice to Maker in accordance with the terms of the Deed of Trust of such revised amortization schedule. 
 (c) Holder shall notify Maker of the amount and basis of determination of the prepayment premium. Holder shall not be obligated to accept any prepayment
of the principal balance of this Note unless such prepayment is accompanied by the applicable prepayment premium and all accrued interest and other sums due under this Note. Maker may not prepay the Loan on a Friday or on any day preceding a public
holiday, or the equivalent for banks generally under the laws of the State in which the Property is located (the “State”). 
 (d)
Except for (i) making payments of Excess Funds as described above, (ii) the application of insurance proceeds or condemnation awards to the principal balance of this Note, as provided in the Deed of Trust (hereinafter defined), and
(iii) partial prepayments made in connection with a Permitted Release (as defined in the Loan Agreement), in no event shall Maker be permitted to make any partial prepayments of this Note. 
 (e) If Holder accelerates this Note upon an Event of Default, then in addition to Maker’s obligation to pay the then outstanding principal balance
of this Note and all accrued but unpaid interest thereon, Maker shall pay an additional amount equal to the prepayment premium that would be due to Holder if Maker were voluntarily prepaying this Note at the time that such acceleration occurred, or
if under the terms hereof no voluntary prepayment would be permissible on the date of such acceleration, Maker shall pay a prepayment premium calculated as set forth in the Deed of Trust. 
 (f) For the purposes of the foregoing: 
 (i) The “Present Value of this Note” with respect to any prepayment of this Note, as of any date, shall be determined by discounting all scheduled payments of principal and interest remaining to maturity of
this Note, attributed to the amount being prepaid, at the Discount Rate. If prepayment occurs on a date other than a regularly scheduled payment date, the actual number of days remaining from the prepayment date to the next regularly scheduled
payment date will be used to discount within such period. 
 (ii) The “Discount Rate” is the rate which, when
compounded monthly, is equivalent to the Treasury Rate, when compounded semi-annually. 

 (iii) The “Treasury Rate” is the semi-annual yield on the Treasury Constant
Maturity Series with maturity equal to the remaining weighted average life of this Note, for the week prior to the prepayment date, as reported in Federal Reserve Statistical Release H.15–Selected Interest Rates, conclusively determined by
Holder on the prepayment date. The rate will be determined by linear interpolation between the yields reported in Release H.15, if necessary. In the event Release H.15 is no longer published, Holder shall select a comparable publication to determine
the Treasury Rate. 
 (g) Holder shall not be obligated actually to reinvest the amount prepaid in any treasury obligations as a condition
precedent to receiving any prepayment premium. 
 (h) Notwithstanding the foregoing, (i) at any time during the ninety (90) day
period immediately prior to the Original Maturity Date and during the Extension Term, Maker shall have the right to prepay the full principal amount of this Note and all accrued but unpaid interest thereon as of the date of prepayment, without
prepayment premium thereon, and (ii) no prepayment premium shall be due in connection with the application of any insurance proceeds or condemnation awards to the principal balance of this Note, as provided in the Deed of Trust. 
 6. Payments. Whenever any payment to be made under this Note shall be stated to be due on a Saturday, Sunday or public holiday or the equivalent
for banks generally under the laws of the State (any other day being a “Business Day”), such payment may be made on the next succeeding Business Day. 
 7. Default Rate. 
 (a) The entire balance of principal, interest, and other sums due upon the
maturity hereof, by acceleration or otherwise, shall bear interest from the date due until paid at the greater of (i) eighteen percent (18%) per annum and (ii) a per annum rate equal to five percent (5%) over the prime
rate (for corporate loans at large United States money center commercial banks) published in The Wall Street Journal on the first business day of each month (the “Default Rate”); provided, however, that such rate shall not
exceed the maximum permitted by applicable state or federal law. In the event The Wall Street Journal is no longer published or no longer publishes such prime rate, Holder shall select a comparable reference. 
 (b) If any payment under this Note is not made when due, interest shall accrue at the Default Rate from the date such payment was due until payment is
actually made. 
 8. Late Charges. In addition to interest as set forth herein, Maker shall pay to Holder a late charge equal to four
percent (4%) of any amounts due under this Note in the event any such amount is not paid when due. 
 9. Application of Payments. All
payments hereunder shall be applied first to the payment of late charges, if any, then to the payment of prepayment premiums, if any, then to the repayment of any sums advanced by Holder for the payment of any insurance premiums, 

 
taxes, assessments, or other charges against the property securing this Note (together with interest thereon at the Default Rate from the date of advance
until repaid), then to the payment of accrued and unpaid interest, and then to the reduction of principal. 
 10. Immediately Available
Funds. Payments under this Note shall be payable in immediately available funds without setoff, counterclaim or deduction of any kind, and shall be made by electronic funds transfer from a bank account established and maintained by Maker for
such purpose. 
 11. Security. This Note is secured by a Deed of Trust, Security Agreement, Fixture Filing, Financing Statement and
Assignment of Leases and Rents of even date herewith granted by Maker for the benefit of the named Holder hereof (the “Deed of Trust”) encumbering certain real property and improvements thereon comprising seven office and retail buildings
in the Tri-City Corporate Center, San Bernardino, California, as more particularly described in such Deed of Trust (the “Property”). 
 12. Certain Definitions. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Deed of Trust. 
 13. Event of Default. Each of the following events will constitute an event of default (an “Event of Default”) under this Note and under the Deed of Trust and each other Loan Document, and any Event
of Default under any Loan Document shall constitute an Event of Default hereunder and under each of the other Loan Documents: 
 (a) any
failure to pay when due any sum under Section 1 of this Note; 
 (b) any failure to pay when due any other sum hereunder, provided,
however, that such failure shall not constitute an Event of Default unless such failure continues for ten (10) days beyond the date that Holder delivers to Maker notice that such payment is due; 
 (c) any failure of Maker to properly perform any obligation contained herein or in any of the other Loan Documents (other than the obligation to make
payments under this Note or the other Loan Documents) and the continuance of such failure for a period of ten (10) days following written notice thereof from Holder to Maker; provided, however, that if such failure is not curable within such
ten (10) day period, then, so long as Maker commences to cure such failure within such ten (10) day period and is continually and diligently attempting to cure to completion, such failure shall not be an Event of Default unless such
failure remains uncured for ninety (90) days after such written notice to Maker; or 
 (d) if, at any time during the Extension Term,
Gross Revenue for any calendar month shall be less than ninety-three percent (93%) of the amount of projected Gross Revenue for such month set forth in the applicable Budget. 
 14. Acceleration. Upon the occurrence of any Event of Default, the entire balance of principal, accrued interest, and other sums owing hereunder
shall, at the option of Holder, become at once due and payable without notice or demand. Upon the occurrence of an Event of Default described in Section 13(d) hereof, Holder shall have the option, in its sole 

 
discretion, to either (a) exercise any remedies available to it under the Loan Documents, at law or in equity, or (b) require Maker to submit a new
proposed budget for Holder’s approval. If Holder agrees to accept such new proposed budget, then such budget shall become the Budget for all purposes hereunder. 
 15. Conditions Precedent. Maker hereby certifies and declares that all acts, conditions and things required to be done and performed and to have happened precedent to the creation and issuance of this Note, and
to constitute this Note the legal, valid and binding obligation of Maker, enforceable in accordance with the terms hereof, have been done and performed and happened in due and strict compliance with all applicable laws. 
 16. Certain Waivers and Consents. Maker and all parties now or hereafter liable for the payment hereof, primarily or secondarily, directly or
indirectly, and whether as endorser, guarantor, surety, or otherwise, hereby severally (a) waive presentment, demand, protest, notice of protest and/or dishonor, and all other demands or notices of any sort whatever with respect to this Note, (b)
consent to impairment or release of collateral, extensions of time for payment, and acceptance of partial payments before, at, or after maturity, (c) waive any right to require Holder to proceed against any security for this Note before proceeding
hereunder, (d) waive diligence in the collection of this Note or in filing suit on this Note, and (e) agree to pay all costs and expenses, including reasonable attorneys’ fees, which may be incurred in the collection of this Note or any part
thereof or in preserving, securing possession of, and realizing upon any security for this Note. 
 17. Usury Savings Clause. The
provisions of this Note and of all agreements between Maker and Holder are, whether now existing or hereinafter made, hereby expressly limited so that in no contingency or event whatever, whether by reason of acceleration of the maturity hereof,
prepayment, demand for payment or otherwise, shall the amount paid, or agreed to be paid, to Holder for the use, forbearance, or detention of the principal hereof or interest hereon, which remains unpaid from time to time, exceed the maximum amount
permissible under applicable law, it particularly being the intention of the parties hereto to conform strictly to the laws of the State and Federal law, whichever is applicable. If from any circumstance whatever, the performance or fulfillment of
any provision hereof or of any other agreement between Maker and Holder shall, at the time performance or fulfillment of such provision is due, involve or purport to require any payment in excess of the limits prescribed by law, then the obligation
to be performed or fulfilled is hereby reduced to the limit of such validity, and if from any circumstance whatever Holder should ever receive as interest an amount which would exceed the highest lawful rate, the amount which would be excessive
interest shall be applied to the reduction of the principal balance owing hereunder (or, at Holder’s option, be paid over to Maker) and shall not be counted as interest. To the extent permitted by applicable law, determination of the legal
maximum amount of interest shall at all times be made by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of this Note, all interest at any time contracted for, charged, or received from Maker
in connection with this Note and all other agreements between Maker and Holder, so that the actual rate of interest on account of the indebtedness represented by this Note is uniform throughout the term hereof. 

 18. Non-Recourse; Exceptions to Non-Recourse. Nothing contained in this Note or any of the other
Loan Documents shall be deemed to impair or limit Holder’s rights: in foreclosure proceedings or in any ancillary proceedings brought to facilitate Holder’s foreclosure on the Property or any portion thereof or to exercise any specific
rights or remedies afforded Holder under any other provisions of the Loan Documents or by law or in equity, subject to the non-recourse provisions set forth below; to recover under any guarantee given in connection with the Loan; or to pursue any
personal liability of Maker or any Guarantor under the Environmental Indemnity Agreement or Section 5.10 of the Deed of Trust. Except as expressly set forth in this Section 18, the recourse of Holder with respect to the obligations evidenced by this
Note shall be solely to the Property, Chattels and Intangible Personalty (as defined in the Deed of Trust) and any other collateral given as security for the Loan: 
 (a) Notwithstanding anything to the contrary contained in this Note or in any Loan Document, nothing shall be deemed in any way to impair, limit or prejudice the rights of Holder to collect or recover from Maker and
Guarantor: (i) damages or costs (including without limitation reasonable attorneys’ fees) incurred by Holder as a result of waste by Maker; (ii) any condemnation or insurance proceeds attributable to the Property which were not paid
to Holder or used to restore the Property in accordance with the terms of the Deed of Trust; (iii) any rents, profits, advances, rebates, prepaid rents or other similar sums attributable to the Property collected by or for Maker following an
Event of Default (as defined in the Deed of Trust) and not properly applied to the reasonable fixed and operating expenses of the Property, including payments of this Note and other sums due under the Loan Documents; (iv) any security deposits
collected by or for Borrower and not applied in accordance with applicable leases; (v) the amount of any accrued taxes, assessments, and/or utility charges affecting the Property (whether or not the same have been billed to Maker) that are
either unpaid by Maker or advanced by Holder under the Deed of Trust; (vi) any sums expended by Holder in fulfilling the obligations of Maker, as lessor, under any leases affecting the Property; (vii) the amount of any loss suffered by
Holder (that would otherwise be covered by insurance) as a result of Maker’s failure to maintain the insurance required under the terms of any Loan Document; (viii) the amount of any loss suffered by Holder as a result of any amendment,
modification or termination of the lease to Paychex, Inc., the State of California (with respect to the lease of space at One Carnegie Plaza, only), Evergreen Pharmaceutical of California, Inc., Holiday Spa Health Clubs of California, San Bernardino
Steakhouse, L.P., FFPE, LLC, and Lewis, D’Amato, Brisbois, & Bisgaard, LLP (collectively, the “Major Tenants”) or execution or subsequent amendment, modification or termination of any lease for any space currently occupied by
the Major Tenants without the prior written consent of Holder, if such consent is required under Section 5.3 of the Deed of Trust; 
 (b) The agreement set forth in the introductory paragraph of this Section 18 to limit the personal liability of Maker shall become null and void and be of no further force and effect, and Maker and each Guarantor shall be personally
liable for the obligations evidenced by this Note, in the event (i) that the Property, or any part thereof or any interest therein, or any interest in Maker, shall be further encumbered by a voluntary lien securing any obligation upon which
Maker, any direct or indirect general partner, manager or managing member of Maker, any guarantor of the Loan, or any principal or affiliate of Maker shall be personally liable for repayment, either as obligor or guarantor; (ii) of any breach
or violation of Section 5.4, 5.5 or 5.7 of the Deed of Trust; (iii) of any fraud or material misrepresentation by 

 
Maker in connection with the Property, the Loan Documents or the application made by Maker for the Loan; (iv) that Maker forfeits the Property or
Chattels or any portion of the Property or Chattels due to criminal activity; and (v) of any attempt by Maker, any Guarantor, or any other person directly or indirectly responsible for the management of Maker or liable for repayment of
Maker’s obligations under the Loan (whether as maker, endorser, guarantor, surety, general partner or otherwise) to materially delay any foreclosure against the Property, Chattels and/or Intangible Personalty or any other exercise by Holder of
its remedies under the Loan Documents, which attempts shall include, without limitation, (A) any claim that any Loan Document is invalid or unenforceable to an extent that would preclude any such foreclosure or other exercise of remedies,
(B) Maker filing a petition in bankruptcy, Maker failing to oppose in good faith the entry of an order for relief pursuant to any involuntary bankruptcy petition filed against it or Maker seeking any reorganization, liquidation, dissolution or
similar relief under the bankruptcy laws of the United States or under any other similar federal, state or other statute relating to relief from indebtedness, or (C) the appointment of a receiver, trustee or liquidator with respect to Maker or
the Property or any part thereof. For purposes of the foregoing, “affiliate” shall mean any individual, corporation, trust, partnership or any other person or entity controlled by, controlling or under common control with Maker. A person
or entity of any nature shall be presumed to have control when it possesses the power, directly or indirectly, to direct, or cause the direction of, the management or policies of another person or entity, whether through ownership of voting
securities, by contract, or otherwise. 
 19. Severability. If any provision hereof or of any other document securing or related to
the indebtedness evidenced hereby is, for any reason and to any extent, invalid or unenforceable, then neither the remainder of the document in which such provision is contained, nor the application of the provision to other persons, entities, or
circumstances, nor any other document referred to herein, shall be affected thereby, but instead shall be enforceable to the maximum extent permitted by law. 
 20. Transfer of Note. Each provision of this Note shall be and remain in full force and effect notwithstanding any negotiation or transfer hereof and any interest herein to any other Holder or participant.

 21. Governing Law. Regardless of the place of its execution, this Note shall be construed and enforced in accordance with the laws
of the State. 
 22. Time of Essence. Time is of the essence with respect to all of Maker’s obligations under this Note.

 23. Remedies Cumulative. The remedies provided to Holder in this Note, the Deed of Trust, and the other Loan Documents are
cumulative and concurrent and may be exercised singly, successively or together against Maker, the Property, and other security, or any guarantor of this Note, at the sole and absolute discretion of the Holder. 
 24. No Waiver. Holder shall not by any act or omission be deemed to waive any of its rights or remedies hereunder unless such waiver is in writing
and signed by the Holder and then only to the extent specifically set forth therein. A waiver of one event shall not be construed as continuing or as a bar to or waiver of any right or remedy granted to Holder hereunder in connection with a
subsequent event. 

 25. Joint and Several Obligation. If Maker is more than one person or entity, then (a) all persons
or entities comprising Maker are jointly and severally liable for all of the Maker’s obligations hereunder; (b) all representations, warranties, and covenants made by Maker shall be deemed representations, warranties, and covenants of each of
the persons or entities comprising Maker; (c) any breach, Default or Event of Default by any of the persons or entities comprising Maker hereunder shall be deemed to be a breach, Default, or Event of Default of Maker; and (d) any reference herein
contained to the knowledge or awareness of Maker shall mean the knowledge or awareness of any of the persons or entities comprising Maker. 
 26. WAIVER OF JURY TRIAL. MAKER AND HOLDER KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS NOTE, OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, THE DEED OF TRUST, OR ANY OTHER LOAN DOCUMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR TO ANY LOAN DOCUMENT. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR MAKER AND HOLDER TO ENTER INTO THE LOAN TRANSACTION EVIDENCED BY THIS NOTE. 
 27. WAIVER OF PREPAYMENT RIGHT
WITHOUT PREMIUM. MAKER HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE UNDER APPLICABLE LAW (INCLUDING, WITHOUT LIMITATION, CALIFORNIA CIVIL CODE SECTION 2954.10) TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT PREPAYMENT PREMIUM, UPON
ACCELERATION OF THE MATURITY DATE OF THIS NOTE, AND AGREES THAT, IF FOR ANY REASON A PREPAYMENT OF ALL OR ANY PART OF THIS NOTE IS MADE, WHETHER VOLUNTARILY OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THIS NOTE BY HOLDER ON ACCOUNT OF THE
OCCURRENCE OF ANY EVENT OF DEFAULT ARISING FOR ANY REASON, INCLUDING, WITHOUT LIMITATION, AS A RESULT OF ANY PROHIBITED OR RESTRICTED TRANSFER, FURTHER ENCUMBRANCE OR DISPOSITION OF THE PROPERTY OR ANY PART THEREOF SECURING THIS NOTE, THEN MAKER
SHALL BE OBLIGATED TO PAY, CONCURRENTLY WITH SUCH PREPAYMENT, THE PREPAYMENT PREMIUM PROVIDED FOR IN THIS NOTE OR, IN THE EVENT OF PREPAYMENT FOLLOWING ACCELERATION OF THE MATURITY DATE HEREOF WHEN THIS NOTE IS CLOSED TO PREPAYMENT, AS PROVIDED IN
THE DEED OF TRUST. MAKER HEREBY DECLARES THAT HOLDER’S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY MAKER, FOR THIS WAIVER AND AGREEMENT.

 MAKER             
 [Balance of Page Intentionally Left Blank] 

 IN WITNESS WHEREOF and intending to be legally bound, Maker has duly executed this Note as of the date first above
written. 
  

			
	MAKER:
	
	RANCON REALTY FUND V SUBSIDIARY LLC, a Delaware limited liability company
		
	By:	 	  

	Name:	 	Daniel Lee Stephenson
	Title:	 	Manager

 STATE OF CALIFORNIA 
 COUNTY OF SAN BERNARDINO 
 Recording requested by: 
 And when recorded mail to: 
 Otten, Johnson, Robinson, Neff & Ragonetti, P.C. 
 950 Seventeenth Street 
 Suite 1600 
 Denver, Colorado 80202 
 Attention: Aaron J. Hill, Esq. 
 DEED OF TRUST, SECURITY AGREEMENT, FIXTURE FILING, FINANCING 
 STATEMENT AND ASSIGNMENT OF LEASES AND RENTS

  

			
	TRUSTOR:	  	RANCON REALTY FUND V SUBSIDIARY LLC,
		  	 a Delaware limited liability company

		  	 400 South El Camino Real, 11th Floor

		  	 San Mateo, California 94402

		  	 Attention: Mr. Stephen R. Saul

		
	BENEFICIARY:	  	THE VARIABLE ANNUITY LIFE INSURANCE COMPANY,
		  	 a Texas corporation

		  	 c/o AIG Global Investment Corp.

		  	 1 SunAmerica Center, 38th Floor

		  	 Century City

		  	 Los Angeles, California 90067-6022

		  	 Attention: Director-Mortgage Lending and Real Estate

		
	TRUSTEE:	  	CHICAGO TITLE INSURANCE COMPANY
		  	 700 South Flower Street, Suite 900

		  	 Los Angeles, California 90017

		
	AMOUNT SECURED:	  	 $26,800,000.00

 GOVERNING LAW: CALIFORNIA 

 DEED OF TRUST, SECURITY AGREEMENT, FIXTURE FILING, FINANCING 
 STATEMENT AND ASSIGNMENT OF LEASES AND RENTS 
 THIS DEED OF TRUST, SECURITY AGREEMENT, FIXTURE FILING, FINANCING STATEMENT AND ASSIGNMENT OF LEASES AND RENTS (this “Deed of Trust”) is given as of December 16, 2005, by RANCON REALTY FUND V SUBSIDIARY LLC, a Delaware
limited liability company (“Trustor”), to CHICAGO TITLE INSURANCE COMPANY (“Trustee”), for the use and benefit of THE VARIABLE ANNUITY LIFE INSURANCE COMPANY, a Texas corporation (“Beneficiary”). 
 ARTICLE 1 
 PARTIES, PROPERTY, AND
DEFINITIONS 
 The following terms and references shall have the meanings indicated: 
 1.1 Beneficiary: The Beneficiary named in the introductory paragraph of this Deed of Trust, whose legal address is c/o AIG Global Investment
Corp., 1 SunAmerica Center, 38th Floor, Century City, Los Angeles, California 90067-6022,
together with any future holder of the Note. 
 1.2 Chattels: All goods, fixtures, inventory, equipment, building and other materials,
supplies, and other tangible personal property of every nature, whether now owned or hereafter acquired by Trustor, used, intended for use, or reasonably required in the construction, development, or operation of the Property, together with all
accessions thereto, replacements and substitutions therefor, and proceeds thereof. 
 1.3 Controlling Persons: Collectively,
(a) if Trustor is a partnership or joint venture, all general partners or joint venturers of Trustor, (b) Guarantor, (c) any other party directly or indirectly liable for payment of the Secured Obligations, whether as maker, endorser,
guarantor, surety, general partner, or otherwise, and (d) any successor to any of the foregoing. 
 1.4 Default: Any matter
which, with the giving of notice, passage of time, or both, would constitute an Event of Default. 
 1.5 Environmental Indemnity
Agreement: The Environmental Indemnity Agreement of even date herewith made by Trustor and Guarantor for the benefit of Beneficiary. 
 1.6 ERISA: The Employee Retirement Income Security Act of 1974, as amended, together with all rules and regulations issued thereunder. 
 1.7 Event of Default: As defined in Article 6. 
 1.8 Guarantor: Rancon Realty Fund V, a
California limited partnership. 
 1.9 Guaranty Agreement: The Guaranty Agreement of even date herewith made by Guarantor for the
benefit of Beneficiary. 

 1.10 Insurance Agreement: The Agreement Concerning Insurance Requirements of even date herewith
executed by Trustor for the benefit of Beneficiary. 
 1.11 Intangible Personalty: All of Trustor’s right, title and interest in
the right to use all trademarks and trade names and symbols or logos used in connection therewith, or any modifications or variations thereof, in connection with the operation of the improvements existing or to be constructed on the Property,
together with all accounts, deposit accounts, letter of credit rights, investment property, monies in the possession of Beneficiary (including, without limitation, proceeds from insurance, retainages and deposits for taxes and insurance), Permits,
contract rights (including, without limitation, rights to receive insurance proceeds) and general intangibles (whether now owned or hereafter acquired, and including proceeds thereof) relating to or arising from Trustor’s ownership, use,
operation, leasing, or sale of all or any part of the Property, specifically including but in no way limited to any right which Trustor may have or acquire to transfer any development rights from the Property to other real property, and any
development rights which may be so transferred. 
 1.12 Lease Certificate: The Certificate of even date herewith made by Trustor to
Beneficiary concerning Leases of the Property. 
 1.13 Leases: Any and all leases, subleases and other like rental agreements, other
than any subleases to which Trustor is not a party, under the terms of which any person other than Trustor has or acquires any right to occupy or use the Property, or any part thereof. 
 1.14 Loan: The loan from Beneficiary to Trustor evidenced by the Note. 
 1.15 Loan Documents: The Note, all of the deeds of trust, mortgages, security agreements and other documents securing or executed and delivered in
connection with the Note, including this Deed of Trust, the Insurance Agreement, the Environmental Indemnity Agreement, the Guaranty Agreement, the Lockbox Agreement, the Pledge Agreement, the Lease Certificate, the Partial Release Agreement and
each other document executed or delivered in connection with the transaction pursuant to which the Note has been executed and delivered. The term “Loan Documents” also includes all modifications, extensions, renewals, and replacements of
each document referred to above. 
 1.16 Lockbox Agreement: The Lockbox Deposit Service Agreement of even date herewith among Trustor,
Beneficiary, the “Servicer” referenced therein and the “Depository Bank” referenced therein. 
 1.17 Note:
Trustor’s promissory note of even date herewith, payable to the order of Beneficiary in the principal face amount of $26,800,000.00, the last payment under which is due on January 1, 2016, or, if extended by Beneficiary pursuant to its
terms, January 1, 2021, unless such due date is accelerated, together with all renewals, extensions and modifications of such promissory note. All terms and provisions of the Note are incorporated by this reference in this Deed of Trust.

  

 2 

 1.18 Partial Release Agreement: The Loan and Partial Release Agreement of even date herewith among
Trustor and Beneficiary. 
 1.19 Permits: All permits, licenses, certificates and authorizations necessary for the beneficial
development, ownership, use, occupancy, operation and maintenance of the Property. 
 1.20 Permitted Exceptions: The matters
(excluding matters of survey) set forth in Schedule B-I of the title insurance policy insuring the lien created by this Deed of Trust, in form and substance satisfactory to, and accepted by, Beneficiary, that Trustor has caused to be delivered
to Beneficiary in connection with the Loan. 
 1.21 Pledge Agreement: The Pledge and Cash Collateral Agreement of even date herewith
among Trustor, Beneficiary and the “Servicer” referenced therein. 
 1.22 Property: The tract or tracts of land described in
Exhibit A attached, together with all of Trustor’s right, title and interest in and to the following: 
 (a) All buildings,
structures, and improvements now or hereafter located on such tract or tracts, as well as all rights-of-way, easements, and other appurtenances thereto; 
 (b) Any land lying between the boundaries of such tract or tracts and the center line of any adjacent street, road, avenue, or alley, whether opened or proposed; 
 (c) All of the rents, income, receipts, revenues, issues and profits of and from such tract or tracts and improvements; 
 (d) All (i) water and water rights (whether decreed or undecreed, tributary, nontributary or not nontributary, surface or underground, or
appropriated or unappropriated); (ii) ditches and ditch rights; (iii) spring and spring rights; (iv) reservoir and reservoir rights; and (v) shares of stock in water, ditch and canal companies and all other evidence of such
rights, which are now owned or hereafter acquired by Trustor and which are appurtenant to or which have been used in connection with such tract or tracts or improvements; 
 (e) All minerals, crops, timber, trees, shrubs, flowers, and landscaping features now or hereafter located on, under or above such tract or tracts;

 (f) All machinery, apparatus, equipment, fittings, fixtures (whether actually or constructively attached, and including all trade,
domestic, and ornamental fixtures) now or hereafter located in, upon, or under such tract or tracts or improvements and used or usable in connection with any present or future operation thereof, including but not limited to all heating,
air-conditioning, freezing, lighting, laundry, incinerating and power equipment; engines; pipes; pumps; tanks; motors; conduits; switchboards; plumbing, lifting, cleaning, fire prevention, fire extinguishing, refrigerating, ventilating, cooking, and
communications apparatus; boilers, water heaters, ranges, furnaces, and burners; appliances; vacuum cleaning systems; elevators; escalators; shades; awnings; screens; storm doors and windows; stoves; refrigerators; attached cabinets; partitions;
ducts and compressors; rugs and carpets; draperies; and all additions thereto and replacements therefor; 
  

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 (g) All development rights associated with such tract or tracts, whether previously or subsequently
transferred to such tract or tracts from other real property or now or hereafter susceptible of transfer from such tract or tracts to other real property; 
 (h) All awards and payments, including interest thereon, resulting from the exercise of any right of eminent domain or any other public or private taking of, injury to, or decrease in the value of, any of such
property; and 
 (i) All other and greater rights and interests of every nature in such tract or tracts and in the possession or use thereof
and income therefrom, whether now owned or subsequently acquired by Trustor. 
 1.23 Secured Obligations: All present and future
obligations of Trustor to Beneficiary evidenced by or contained in the Note, this Deed of Trust and all other Loan Documents (excluding the Environmental Indemnity Agreement, which is not secured by this Deed of Trust), whether stated in the form of
promises, covenants, representations, warranties, conditions, or prohibitions or in any other form. If the maturity of the Note secured by this Deed of Trust is accelerated, the Secured Obligations shall include an amount equal to any prepayment
premium which would be payable under the terms of the Note as if the Note were prepaid in full on the date of the acceleration. If under the terms of the Note no voluntary prepayment would be permissible on the date of such acceleration, then the
prepayment fee or premium to be included in the Secured Obligations shall be equal to one hundred fifty percent (150%) of the highest prepayment fee or premium set forth in the Note, calculated as of the date of such acceleration, as if
prepayment were permitted on such date. 
 1.24 Trustee: The Trustee named in the introductory paragraph of this Deed of Trust,
whose address is 700 South Flower Street, Suite 900, Los Angeles, California 90017. 
 1.25 Trustor: The Trustor
named in the introductory paragraph of this Deed of Trust (Organizational I.D. No. 4061721), whose legal address is 400 South El Camino Real, 11th Floor, San Mateo, California 94402, together with any future owner of the Property or any part thereof or interest therein. 
 ARTICLE 2 
 GRANTING CLAUSE

 2.1 Grant to Trustee. As security for the Secured Obligations, Trustor hereby grants, bargains, sells, warrants and conveys the
Property to Trustee, in trust, with power of sale, for the use and benefit of Beneficiary, and subject to all provisions hereof. 
 2.2
Security Interest to Beneficiary. As additional security for the Secured Obligations, Trustor hereby grants to Beneficiary a security interest in the Property, Chattels and Intangible Personalty. To the extent any of the Property, Chattels or
Intangible Personalty may 

  

 4 

 
be or have been acquired with funds advanced by Beneficiary under the Loan Documents, this security interest is a purchase money security interest. This Deed
of Trust constitutes a security agreement under the Uniform Commercial Code of the state in which the Property is located (the “Code”) with respect to any part of the Property, Chattels and Intangible Personalty that may or might now or
hereafter be or be deemed to be personal property, fixtures or property other than real estate (all collectively hereinafter called “Collateral”); all of the terms, provisions, conditions and agreements contained in this Deed of Trust
pertain and apply to the Collateral as fully and to the same extent as to any other property comprising the Property, and the following provisions of this Section shall not limit the generality or applicability of any other provisions of this Deed
of Trust but shall be in addition thereto: 
 (a) The Collateral shall be used by Trustor solely for business purposes, and all Collateral
(other than the Intangible Personalty) shall be installed upon the real estate comprising part of the Property for Trustor’s own use or as the equipment and furnishings furnished by Trustor, as landlord, to tenants of the Property; 

(b) The Collateral (other than the Intangible Personalty) shall be kept at the real estate comprising a part of the Property, and shall not be
removed therefrom without the consent of Beneficiary (being the Secured Party as that term is used in the Code); and the Collateral (other than the Intangible Personalty) may be affixed to such real estate but shall not be affixed to any other real
estate; 
 (c) No financing statement covering any of the Collateral or any proceeds thereof is on file in any public office; and Trustor
will, at its cost and expense, upon demand, furnish to Beneficiary such further information and will execute and deliver to Beneficiary such financing statements and other documents in form satisfactory to Beneficiary and will do all such acts and
things as Beneficiary may at any time or from time to time reasonably request or as may be necessary or appropriate to establish and maintain a perfected first-priority security interest in the Collateral as security for the Secured Obligations,
subject to no adverse liens or encumbrances; and Trustor will pay the cost of filing the same or filing or recording such financing statements or other documents and this instrument in all public offices wherever filing or recording is deemed by
Beneficiary to be necessary or desirable; 
 (d) The terms and provisions contained in this Section and in Section 7.6 of this Deed of
Trust shall, unless the context otherwise requires, have the meanings and be construed as provided in the Code; and 
 (e) This Deed of
Trust constitutes a financing statement under the Code with respect to the Collateral. As such, this Deed of Trust covers all items of the Collateral that are or are to become fixtures. The filing of this Deed of Trust in the real estate records of
the county where the Property is located shall constitute a fixture filing in accordance with the Code. Information concerning the security interests created hereby may be obtained at the addresses set forth in Article 1 of this Deed of Trust.
Trustor is the “Debtor” and Beneficiary is the “Secured Party” (as those terms are defined and used in the Code) insofar as this Deed of Trust constitutes a financing statement. 
  

 5 

 ARTICLE 3 
 TRUSTOR’S REPRESENTATIONS AND WARRANTIES 
 3.1 Warranty of Title. Trustor represents and
warrants to Beneficiary that: 
 (a) Trustor has good, marketable and indefeasible fee simple title (or easement interest if so indicated on
Exhibit A) in and to the Property, and such interest is free and clear of all liens, encumbrances, security interests and other claims whatsoever, subject only to the Permitted Exceptions; 
 (b) Trustor is the sole and absolute owner of the Chattels and the Intangible Personalty, free and clear of all liens, encumbrances, security interests
and other claims whatsoever, subject only to the Permitted Exceptions; 
 (c) This Deed of Trust is a valid and enforceable first lien and
security interest on the Property, Chattels and Intangible Personalty, subject only to the Permitted Exceptions; 
 (d) Trustor, for itself
and its successors and assigns, hereby agrees to warrant and forever defend, all and singular of the property and property interests granted and conveyed pursuant to this Deed of Trust, against every person whomsoever lawfully claiming, or to claim,
the same or any part thereof; and 
 The representations, warranties and covenants contained in this Section shall survive foreclosure of
this Deed of Trust, and shall inure to the benefit of and be enforceable by any person who may acquire title to the Property, the Chattels, or the Intangible Personalty pursuant to any such foreclosure. 
 3.2 Due Authorization. If Trustor is other than a natural person, then each individual who executes this document on behalf of Trustor represents
and warrants to Beneficiary that such execution has been duly authorized by all necessary corporate, partnership, limited liability company or other action on the part of Trustor. Trustor represents that Trustor has obtained all consents and
approvals required in connection with the execution, delivery and performance of this Deed of Trust. 
 3.3 Other Representations and
Warranties. Trustor represents and warrants to Beneficiary as follows: 
 (a) Trustor is a limited liability company, duly organized,
validly existing and in good standing under the laws of the State of Delaware. Trustor is duly authorized to transact business in and is in good standing under the laws of the State of California. The sole Controlling Person of Trustor is Guarantor;

 (b) The execution, delivery and performance by Trustor of the Loan Documents are within Trustor’s power and authority and have been
duly authorized by all necessary action; 
  

 6 

 (c) This Deed of Trust is, and each other Loan Document to which Trustor or Guarantor is a party will,
when delivered hereunder, be valid and binding obligations of Trustor and/or Guarantor, as applicable, enforceable against Trustor and/or Guarantor, as applicable, in accordance with their respective terms, except as limited by equitable principles
and bankruptcy, insolvency and similar laws affecting creditors’ rights; 
 (d) The execution, delivery and performance by Trustor and
Guarantor of the Loan Documents will not contravene any contractual or other restriction binding on or affecting Trustor or any Controlling Person and will not result in or require the creation of any lien, security interest, other charge or
encumbrance (other than pursuant hereto) upon or with respect to any of its properties; 
 (e) The execution, delivery and performance by
Trustor and Guarantor of the Loan Documents does not contravene any applicable law; 
 (f) No authorization, approval, consent or other
action by, and no notice to or filing with, any court, governmental authority or regulatory body is required for the due execution, delivery and performance by Trustor and Guarantor of any of the Loan Documents or the effectiveness of any assignment
of any of Trustor’s rights and interests of any kind to Beneficiary; 
 (g) No part of the Property, Chattels, or Intangible Personalty
is in the hands of a receiver, no application for a receiver is pending with respect to any portion of the Property, Chattels, or Intangible Personalty, and no part of the Property, Chattels, or Intangible Personalty is subject to any foreclosure or
similar proceeding; 
 (h) Neither Trustor nor any Controlling Person has made any assignment for the benefit of creditors, nor has Trustor
or any Controlling Person filed, or had filed against it, any petition in bankruptcy; 
 (i) There is no pending or, to the best of
Trustor’s knowledge, threatened, litigation, action, proceeding or investigation against Trustor, any Controlling Person or the Property before any court, governmental or quasi-governmental, arbitrator or other authority, which could have a
materially adverse effect on Trustor, any such Controlling Person or the Property. There is no pending or, to the best of Trustor’s knowledge, threatened, condemnation proceeding against the Property before any court, governmental or
quasi-governmental, arbitrator or other authority; 
 (j) Trustor is a “non-foreign person” within the meaning of
Sections 1445 and 7701 of the United States Internal Revenue Code of 1986, as amended, and the regulations issued thereunder; 
 (k)
Access to and egress from the Property are available and provided by public streets, and Trustor has no knowledge of any federal, state, county, municipal or other governmental plans to change the highway or road system in the vicinity of the
Property or to restrict or change access from any such highway or road to the Property; 
  

 7 

 (l) All public utility services necessary for the operation of all improvements constituting part of the
Property for their intended purposes are available at the boundaries of the land constituting part of the Property, including water supply, storm and sanitary sewer facilities, and natural gas, electric, telephone and cable television facilities;

 (m) The Property is located in a zoning district designated CR-3, by the County of San Bernardino, California. Such designation permits
the development, use and operation of the Property as it is currently operated as a permitted, and not as a non-conforming use. The Property complies in all respects with all zoning ordinances, regulations, requirements, conditions and restrictions,
including but not limited to deed restrictions and restrictive covenants, applicable to the Property; 
 (n) Except as disclosed to
Beneficiary in writing, there are no special or other assessments for public improvements or otherwise now affecting the Property, nor does Trustor know of any pending or threatened special assessments affecting the Property or any contemplated
improvements affecting the Property that may result in special assessments. There are no tax abatements or exceptions affecting the Property; 
 (o) Trustor and each Controlling Person has filed all tax returns it is required to have filed, and has paid all taxes as shown on such returns or on any assessment received pertaining to the Property; 
 (p) Trustor has not received any notice from any governmental body having jurisdiction over the Property as to any violation of any applicable law, or
any notice from any insurance company or inspection or rating bureau setting forth any requirements as a condition to the continuation of any insurance coverage on or with respect to the Property or the continuation thereof at premium rates existing
at present which have not been remedied or satisfied; 
 (q) Neither Trustor nor any Controlling Person is in default, in any manner which
would adversely affect its properties, assets, operations or condition (financial or otherwise), in the performance, observance or fulfillment of any of the obligations, covenants or conditions set forth in any agreement or instrument to which it is
a party or by which it or any of its properties, assets or revenues are bound; 
 (r) Except as set forth in the Lease Certificate and/or
the Permitted Exceptions, there are no occupancy rights (written or oral), Leases or tenancies presently affecting any part of the Property. The Lease Certificate contains a true and correct description of all Leases presently affecting the
Property. No written or oral agreements or understandings exist between Trustor and the tenants under the Leases described in the Lease Certificate that grant such tenants any rights greater than those described in the Lease Certificate or that are
in any way inconsistent with the rights described in the Lease Certificate; 
 (s) There are no purchase options, purchase contracts or
other similar agreements of any type (written or oral) presently affecting any part of the Property; 
  

 8 

 (t) Other than with respect to the leasing brokerage agreement with CB Richard Ellis disclosed to
Beneficiary, there exists no brokerage agreement with respect to any part of the Property; 
 (u) Except as otherwise disclosed to
Beneficiary in writing prior to the date hereof, (i) there are no contracts presently affecting the Property (“Contracts”) having a term in excess of one hundred eighty (180) days or not terminable by Trustor (without penalty) on
thirty (30) days’ notice; (ii) Trustor has heretofore delivered to Beneficiary true and correct copies of each of the Contracts together with all amendments thereto; (iii) Trustor is not in default of any obligations under any of
the Contracts; and (iv) the Contracts represent the complete agreement between Trustor and such other parties as to the services to be performed or materials to be provided thereunder and the compensation to be paid for such services or
materials, as applicable, and except as otherwise disclosed herein, such other parties possess no unsatisfied claims against Trustor. Trustor is not in default under any of the Contracts and no event has occurred which, with the passing of time or
the giving of notice, or both, would constitute a default under any of the Contracts; 
 (v) Trustor has obtained all Permits necessary for
the operation, use, ownership, development, occupancy and maintenance of the Property as retail and office buildings, as it is currently being operated. None of the Permits has been suspended or revoked, and all of the Permits are in full force and
effect, are fully paid for, and Trustor has made or will make application for renewals of any of the Permits prior to the expiration thereof; 
 (w) All insurance policies held by Trustor relating to or affecting the Property are in full force and effect and shall remain in full force and effect until all Secured Obligations are satisfied. Trustor has not received any notice of
default or notice terminating or threatening to terminate any such insurance policies. Trustor has made or will make application for renewals of any of such insurance policies prior to the expiration thereof; 
 (x) Trustor currently complies with ERISA. Neither the making of the Loan nor the exercise by Beneficiary of any of its rights under the Loan Documents
constitutes or will constitute a non-exempt, prohibited transaction under ERISA; and 
 (y) Trustor’s exact legal name is correctly set
out in the introductory paragraph of this Deed of Trust. Trustor’s organizational identification number is correctly set forth in the definition of “Trustor” set forth in Article 1 hereof. Trustor’s location (as such
term is used in Section 5.8 hereof) is the State of Delaware. 
 3.4 Continuing Effect. Trustor shall be liable to Beneficiary
for any damage suffered by Beneficiary if any of the foregoing representations are inaccurate as of the date hereof, regardless when such inaccuracy may be discovered by, or result in harm to, Beneficiary. Trustor further represents and warrants
that the foregoing representations and warranties, as well as all other representations and warranties of Trustor to Beneficiary relative to the Loan Documents, shall remain true and correct during the term of the Note and shall survive termination
of this Deed of Trust. 
  

 9 

 ARTICLE 4 
 TRUSTOR’S AFFIRMATIVE COVENANTS 
 4.1 Payment of Note. Trustor will pay all principal,
interest, and other sums payable under the Note, on the date when such payments are due, without notice or demand. 
 4.2 Performance of
Other Obligations. Trustor will promptly and strictly perform and comply with all other covenants, conditions, and prohibitions required of Trustor by the terms of the Loan Documents. 
 4.3 Other Encumbrances. Trustor will promptly and strictly perform and comply with all covenants, conditions, and prohibitions required of Trustor
in connection with any other encumbrance affecting the Property, the Chattels, or the Intangible Personalty, or any part thereof, or any interest therein, regardless of whether such other encumbrance is superior or subordinate to the lien hereof.

 4.4 Payment of Taxes. 
 (a) Property Taxes. Unless Trustor is depositing money into escrow pursuant to Section 4.4(b), Trustor will (i) pay, before delinquency, all taxes and assessments, general or special, which may be levied or imposed at any
time against Trustor’s interest and estate in the Property, the Chattels, or the Intangible Personalty, and (ii) within ten days after each payment of any such tax or assessment, Trustor will deliver to Beneficiary, without notice or
demand, an official receipt for such payment (or as soon thereafter as it is available). At Beneficiary’s option, Beneficiary may retain the services of a firm to monitor the payment of all taxes and assessments relating to the Property, the
cost of which shall be borne by Trustor. 
 (b) Deposit for Taxes. Upon demand made by Beneficiary following the occurrence of a
Default or an Event of Default, Trustor shall deposit with Beneficiary an amount equal to 1/12th of the amount which Beneficiary estimates will be required to make the next annual payment of taxes, assessments, and similar governmental charges
referred to in this Section, multiplied by the number of whole or partial months that have elapsed since the date one month prior to the most recent due date for such taxes, assessments and similar governmental charges. Thereafter, with each monthly
payment under the Note, Trustor shall deposit with Beneficiary an amount equal to 1/12th of the amount which Beneficiary estimates will be required to pay the next annual payment of taxes, assessments, and similar governmental charges referred to in
this Section. The purpose of these provisions is to provide Beneficiary with sufficient funds on hand to pay all such taxes, assessments, and other governmental charges thirty (30) days before the date on which they become past due. If the
Beneficiary, in its sole discretion, determines that the funds escrowed hereunder are, or will be, insufficient, Trustor shall upon demand pay such additional sums as Beneficiary shall determine necessary and shall pay any increased monthly charges
requested by Beneficiary. Provided no Default or Event of Default exists hereunder, Beneficiary will apply the amounts so deposited to the payment of such taxes, assessments, and other charges when due, but in no event will Beneficiary be liable for
any interest on any amount so deposited, and any amount so deposited may be held and commingled with Beneficiary’s own funds. 
  

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 (c) Intangible Taxes. If by reason of any statutory or constitutional amendment or judicial
decision adopted or rendered after the date hereof, any tax, assessment, or similar charge is imposed against the Note, against Beneficiary, or against any interest of Beneficiary in any real or personal property encumbered hereby, Trustor will pay
such tax, assessment, or other charge before delinquency and will indemnify Beneficiary against all loss, expense, or diminution of income in connection therewith. In the event Trustor is unable to do so, either for economic reasons or because the
legal provisions or decisions creating such tax, assessment or charge forbid Trustor from doing so, then the Note will, at Beneficiary’s option, become due and payable in full upon ninety (90) days’ notice to Trustor. 
 (d) Right to Contest. Notwithstanding any other provision of this Section, Trustor will not be deemed to be in default solely by reason of
Trustor’s failure to pay any tax, assessment or similar governmental charge so long as, in Beneficiary’s judgment, each of the following conditions is satisfied: 
 (i) Trustor is engaged in and diligently pursuing in good faith administrative or judicial proceedings appropriate to contest the validity or amount of
such tax, assessment, or charge; and 
 (ii) Trustor’s payment of such tax, assessment, or charge would necessarily and materially
prejudice Trustor’s prospects for success in such proceedings; and 
 (iii) Nonpayment of such tax, assessment, or charge will not
result in the loss or forfeiture of any property encumbered hereby or any interest of Beneficiary therein; and 
 (iv) Trustor deposits with
Beneficiary, as security for such payment which may ultimately be required, a sum equal to the amount of the disputed tax, assessment or charge plus the interest, penalties, advertising charges, and other costs which Beneficiary estimates are likely
to become payable if Trustor’s contest is unsuccessful. 
 If Beneficiary determines that any one or more of such conditions is not satisfied or is no
longer satisfied, Trustor will pay the tax, assessment, or charge in question, together with any interest and penalties thereon, within ten days after Beneficiary gives notice of such determination. 
 4.5 Maintenance of Insurance. 
 (a)
Coverages Required. Trustor shall maintain or cause to be maintained, with financially sound and reputable insurance companies or associations satisfactory to Beneficiary, all insurance required under the terms of the Insurance Agreement, and
shall comply with each and every covenant and agreement contained in the Insurance Agreement. 
 (b) Renewal Policies. Not less than
thirty (30) days prior to the expiration date of each insurance policy required pursuant to the Insurance Agreement, Trustor will deliver to Beneficiary an appropriate renewal policy (or a certified copy thereof), together with evidence
satisfactory to Beneficiary that the applicable premium has been prepaid. 
  

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 (c) Deposit for Premiums. Upon demand made by Beneficiary following the occurrence of a Default
or an Event of Default, Trustor shall deposit with Beneficiary an amount equal to 1/12th of the amount which Beneficiary estimates will be required to make the next annual payments of the premiums for the policies of insurance referred to in this
Section, multiplied by the number of whole and partial months which have elapsed since the date one month prior to the most recent policy anniversary date for each such policy. Thereafter, with each monthly payment under the Note, Trustor will
deposit an amount equal to 1/12th of the amount which Beneficiary estimates will be required to pay the next required annual premium for each insurance policy referred to in this Section. The purpose of these provisions is to provide Beneficiary
with sufficient funds on hand to pay all such premiums thirty (30) days before the date on which they become past due. If the Beneficiary, in its sole discretion, determines that the funds escrowed hereunder are, or will be, insufficient,
Trustor shall upon demand pay such additional sums as Beneficiary shall determine necessary and shall pay any increased monthly charges requested by Beneficiary. Provided no Default or Event of Default exists hereunder, Beneficiary will apply the
amounts so deposited to the payment of such insurance premiums when due, but in no event will Beneficiary be liable for any interest on any amounts so deposited, and the money so received may be held and commingled with Beneficiary’s own funds.

 (d) Application of Hazard Insurance Proceeds. Trustor shall promptly notify Beneficiary of any damage or casualty to all or any
portion of the Property or Chattels. Beneficiary may participate in all negotiations and appear and participate in all judicial arbitration proceedings concerning any insurance proceeds which may be payable as a result of any casualty or damage in
excess of $200,000.00 (the “Insurance Threshold”). Any insurance proceeds relating to any casualty in excess of the Insurance Threshold shall be paid to Beneficiary and shall be applied first to reimburse Beneficiary for all costs and
expenses, including attorneys’ fees, incurred by Beneficiary in connection with the collection of such insurance proceeds. The balance of any insurance proceeds received by Beneficiary with respect to an insured casualty may, in
Beneficiary’s sole discretion, either (i) be retained and applied by Beneficiary toward payment of the Secured Obligations, or (ii) be paid over, in whole or in part and subject to such conditions as Beneficiary may impose, to Trustor
to pay for repairs or replacements necessitated by the casualty; provided, however, that if all of the Secured Obligations have been performed or are discharged by the application of less than all of such insurance proceeds, then any remaining
proceeds will be paid over to Trustor. Notwithstanding the preceding sentence, if (A) no Default or Event of Default shall exist hereunder, and (B) the proceeds received by Beneficiary (together with any other funds delivered by Trustor to
Beneficiary for such purpose) shall be sufficient, in Beneficiary’s reasonable judgment, to pay for any restoration necessitated by the casualty, and (C) either (1) the damage involves a loss of less than fifty percent (50%) of
the rentable square footage at the damaged building, or (2) Trustor is required to restore the Property pursuant to the terms of the Lease or Leases of that portion of the Property affected by the casualty, and (D) such restoration can be
completed, in Beneficiary’s reasonable judgment, by the earliest of (x) the 180th day following
Trustor’s receipt of the insurance proceeds, (y) the 180th day prior to the maturity date of the Note, or
(z) the expiration 

  

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of the payment period on the rental-loss insurance coverage in respect of such casualty, then Beneficiary shall apply such proceeds as provided in
clause (ii) of the preceding sentence. Beneficiary will have no obligation to see to the proper application of any insurance proceeds paid over to Trustor, nor will any such proceeds received by Beneficiary bear interest or be subject to any
other charge for the benefit of Trustor. Beneficiary may, prior to the application of insurance proceeds, commingle them with Beneficiary’s own funds and otherwise act with regard to such proceeds as Beneficiary may determine in
Beneficiary’s sole discretion. 
 (e) Successor’s Rights. Any person who acquires title to the Property or the Chattels
upon foreclosure hereunder will succeed to all of Trustor’s rights under all policies of insurance maintained pursuant to this Section. 
 4.6 Maintenance and Repair of Property and Chattels. Trustor will at all times maintain the Property and the Chattels in good condition and repair, will diligently prosecute the completion of any building or other improvement which
is at any time in the process of construction on the Property, and will, subject to Beneficiary’s releasing the insurance or condemnation proceeds applicable thereto and subject to applicable legal restrictions, promptly repair, restore,
replace, or rebuild any part of the Property or the Chattels which may be affected by any casualty or any public or private taking or injury to the Property or the Chattels. All costs and expenses arising out of the foregoing shall be paid by
Trustor whether or not the proceeds of any insurance or eminent domain shall be sufficient therefor. Trustor will comply with all statutes, ordinances, and other governmental or quasi-governmental requirements and private covenants relating to the
ownership, construction, use, or operation of the Property, including but not limited to any environmental or ecological requirements; provided, that so long as Trustor is not otherwise in default hereunder, Trustor may, upon providing Beneficiary
with security reasonably satisfactory to Beneficiary, proceed diligently and in good faith to contest the validity or applicability of any such statute, ordinance, or requirement. Beneficiary and any person authorized by Beneficiary may enter and
inspect the Property at all reasonable times, and may inspect the Chattels, wherever located, at all reasonable times. 
 4.7 Leases.
Trustor shall timely pay and perform each of its obligations under or in connection with the Leases, and shall otherwise pay such sums and take such action as shall be necessary or required in order to maintain each of the Leases in full force and
effect in accordance with its terms. Trustor shall immediately furnish to Beneficiary copies of any notices given to Trustor by the lessee under any Lease, alleging the default by Trustor in the timely payment or performance of its obligations under
such Lease and any subsequent communication related thereto. Trustor shall also promptly furnish to Beneficiary copies of any notices given to Trustor by the lessee under any Lease, extending the term of any Lease, requiring or demanding the
expenditure of any sum by Trustor (or demanding the taking of any action by Trustor), or relating to any other material obligation of Trustor under such Lease and any subsequent communication related thereto. Trustor agrees that Beneficiary, in its
reasonable discretion, may advance any sum or take any action which Beneficiary believes is necessary or required to maintain the Leases in full force and effect, and all such sums advanced by Beneficiary, together with all costs and expenses
incurred by Beneficiary in connection with action taken by Beneficiary pursuant to this Section, shall be due and payable by Trustor to Beneficiary upon demand, shall bear interest until paid at the Default Rate (as defined in the Note), and shall
be secured by this Deed of Trust. 
  

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 4.8 Eminent Domain; Private Damage. If all or any part of the Property is taken or damaged by
eminent domain or any other public or private action, Trustor will notify Beneficiary promptly of the time and place of all meetings, hearings, trials, and other proceedings relating to such action. Beneficiary may participate in all negotiations
and appear and participate in all judicial or arbitration proceedings concerning any award or payment which may be due as a result of such taking or damage in excess of $200,000.00 (the “Condemnation Threshold”), and may, in
Beneficiary’s reasonable discretion, compromise or settle, in the names of both Trustor and Beneficiary, any claim for any such award or payment in excess of the Condemnation Threshold. Any such award or payment is to be paid to Beneficiary and
will be applied first to reimburse Beneficiary for all costs and expenses, including attorneys’ fees, incurred by Beneficiary in connection with the ascertainment and collection of such award or payment. The balance, if any, of such award or
payment may, in Beneficiary’s sole discretion, either (a) be retained by Beneficiary and applied toward the Secured Obligations, or (b) be paid over, in whole or in part and subject to such conditions as Beneficiary may impose, to
Trustor for the purpose of restoring, repairing, or rebuilding any part of the Property affected by the taking or damage. Notwithstanding the preceding sentence, if (i) no Default or Event of Default shall have occurred and be continuing
hereunder, and (ii) the proceeds received by Beneficiary (together with any other funds delivered by Trustor to Beneficiary for such purpose) shall be sufficient, in Beneficiary’s reasonable judgment, to pay for any restoration
necessitated by the taking or damage, and (iii) either (1) the condemnation involves a loss of less than fifty percent (50%) of the rentable square footage at the condemned building, or (2) Trustor is required to restore the
Property pursuant to the terms of the Lease or Leases of that portion of the Property affected by the condemnation, and (iv) such restoration can be completed, in Beneficiary’s reasonable judgment, by the earliest of (x) the
180th day following Trustor’s receipt of the condemnation proceeds, or (y) the 180th day prior to the maturity date of the Note, and (v) the remaining Property shall constitute, in Beneficiary’s sole
judgment, adequate security for the Secured Obligations, then Beneficiary shall apply such proceeds as provided in clause (b) of the preceding sentence. Trustor’s duty to pay the Note in accordance with its terms and to perform the other
Secured Obligations will not be suspended by the pendency or discharged by the conclusion of any proceedings for the collection of any such award or payment, and any reduction in the Secured Obligations resulting from Beneficiary’s application
of any such award or payment will take effect only when Beneficiary receives such award or payment. If this Deed of Trust has been foreclosed prior to Beneficiary’s receipt of such award or payment, Beneficiary may nonetheless retain such award
or payment to the extent required to reimburse Beneficiary for all costs and expenses, including attorneys’ fees, incurred in connection therewith, and to discharge any deficiency remaining with respect to the Secured Obligations. 

4.9 Mechanics’ Liens. Trustor will keep the Property free and clear of all liens and claims of liens by contractors, subcontractors,
mechanics, laborers, materialmen, and other such persons, and will cause any recorded statement of any such lien to be released of record within thirty (30) days after the recording thereof. Notwithstanding the preceding sentence, however,
Trustor will not be deemed to be in default under this Section if and so long as Trustor (a) contests in good faith the validity or amount of any asserted lien and diligently 

  

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prosecutes or defends an action appropriate to obtain a binding determination of the disputed matter, and (b) provides Beneficiary with such security as
Beneficiary may require to protect Beneficiary against all loss, damage, and expense, including attorneys’ fees, which Beneficiary might incur if the asserted lien is determined to be valid. 
 4.10 Defense of Actions. Trustor will defend, at Trustor’s expense, any action, proceeding or claim which affects any property encumbered
hereby or any interest of Beneficiary in such property or in the Secured Obligations, and will indemnify and hold Beneficiary harmless from all loss, damage, cost, or expense, including attorneys’ fees, which Beneficiary may incur in connection
therewith. 
 4.11 Expenses of Enforcement. Trustor will pay all costs and expenses, including attorneys’ fees, which Beneficiary
may incur in connection with any effort or action (whether or not litigation or foreclosure is involved) to enforce or defend Beneficiary’s rights and remedies under any of the Loan Documents, including but not limited to all attorneys’
fees, appraisal fees, consultants’ fees, and other expenses incurred by Beneficiary in securing title to or possession of, and realizing upon, any security for the Secured Obligations. All such costs and expenses (together with interest thereon
at the Default Rate from the date incurred) shall constitute part of the Secured Obligations, and may be included in the computation of the amount owed to Beneficiary for purposes of foreclosing or otherwise enforcing this Deed of Trust. 

4.12 Financial Reports. During the term of the Loan, Trustor shall supply to Beneficiary (a) within thirty (30) days following the
end of each quarter, Trustor’s quarterly and annual operating statements for the Property as of the end of and for the preceding quarter and fiscal year, as applicable, in each case prepared against the budget for such year;
(b) contemporaneously with Trustor’s delivery of each of such operating statements, a certified rent roll signed and dated by Trustor detailing the names of all tenants under the Leases, the portion of the improvements on the Property
occupied by each tenant, the rent and any other charges payable under each Lease, and the term of each Lease; and (c) within ninety (90) days following the end of each year, an annual balance sheet and profit and loss statement of Trustor
and each Guarantor. The financial statements and reports described in (a) and (c) above shall be in such detail as Beneficiary may require, shall be prepared in accordance with generally accepted accounting principles consistently applied,
and shall be certified as true and correct by Trustor or the applicable Guarantor (or, if required by Beneficiary, by an independent certified public accountant acceptable to Beneficiary). Trustor shall also furnish to Beneficiary within thirty
(30) days of Beneficiary’s request, any other financial reports or statements of Trustor as Beneficiary may request. Upon Beneficiary’s demand after any Default or Event of Default, or if Beneficiary securitizes the Loan, Trustor
shall supply to Beneficiary the items required in (a) and (b) above on a monthly basis. 
 4.13 Priority of Leases. To the
extent Trustor has the right, under the terms of any Lease, to make such Lease subordinate to the lien hereof, Trustor will, at Beneficiary’s request and Trustor’s expense, take such action as may be required to effect such subordination.
Conversely, Trustor will, at Beneficiary’s request and Trustor’s expense, take such action as may be necessary to subordinate the lien hereof to any future Lease designated by Beneficiary. 
  

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 4.14 Inventories; Assembly of Chattels. Trustor will, from time to time at the request of
Beneficiary, supply Beneficiary with a current inventory of the Chattels and the Intangible Personalty, in such detail as Beneficiary may require. Upon the occurrence of any Event of Default hereunder, Trustor will at Beneficiary’s request
assemble the Chattels and make them available to Beneficiary at any place designated by Beneficiary which is reasonably convenient to both parties. 
 4.15 Compliance with Laws, Etc. Trustor shall comply in all material respects with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, maintaining all Permits and paying before the same
become delinquent all taxes, assessments and governmental charges imposed upon Trustor or the Property. 
 4.16 Records and Books of
Account. Trustor shall keep accurate and complete records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions
relating to the Property. 
 4.17 Inspection Rights. At any reasonable time, and from time to time, upon not less than ten
(10) days’ prior notice, Trustor shall permit Beneficiary, or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the Property and to discuss with Trustor
the affairs, finances and accounts of Trustor. 
 4.18 Change of Trustor’s Address or State of Organization. Trustor shall
promptly notify Beneficiary if changes are made in Trustor’s address from that set forth in Section 9.10 hereof, or if Trustor shall either change its “location” (as such term is used in Section 5.8 hereof), its state of
organization or if Trustor shall organize in any state other than the State of Delaware. 
 4.19 Further Assurances; Estoppel
Certificates. Trustor will execute and deliver to Beneficiary upon demand, and pay the costs of preparation and recording thereof, any further documents which Beneficiary may request to confirm or perfect the liens and security interests created
or intended to be created hereby, or to confirm or perfect any evidence of the Secured Obligations. Trustor will also, within ten days after any request by Beneficiary, deliver to Beneficiary a signed and acknowledged statement certifying to
Beneficiary, or to any proposed transferee of the Secured Obligations, (a) the balance of principal, interest, and other sums then outstanding under the Note, and (b) whether Trustor claims to have any offsets or defenses with respect to
the Secured Obligations and, if so, the nature of such offsets or defenses. 
 4.20 Costs of Closing. Trustor shall on demand pay
directly or reimburse Beneficiary for any costs or expenses pertaining to the closing of the Loan, including, but not limited to, fees of counsel for Beneficiary, costs and expenses for which invoices were not available at the closing of the Loan,
or costs and expenses which are incurred by Beneficiary after such closing. All such costs and expenses shall constitute a part of the Secured Obligations, and may be included in the computation of the amount owed to Beneficiary for purposes of
foreclosing or otherwise enforcing this Deed of Trust. 
  

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 4.21 Fund for Electronic Transfer. All monthly payments of principal and interest on the Note, and
escrow deposits under this Deed of Trust, shall be made by Trustor by electronic funds transfer from a bank account established and maintained by Trustor for such purpose. Trustor shall establish and maintain such an account until the Note is fully
paid and shall direct the depository of such account in writing to so transmit such payments on or before the respective due dates to the account of Beneficiary as shall be designated by Beneficiary in writing. 
 4.22 Use. Trustor shall use the Property solely for the operation of retail and office buildings, and for no other use or purpose. 
 4.23 Management. The Property shall be managed by Glenborough Properties, LP (“Property Manager”) under a management agreement
previously delivered to, and approved, by Beneficiary (the “Management Agreement”). Trustor shall not permit any amendment to or modification of the Management Agreement, or management of the Property by any person or entity other than
Property Manager, without the prior written consent of Beneficiary. 
 ARTICLE 5 
 TRUSTOR’S NEGATIVE COVENANTS 
 5.1 Waste and Alterations. Trustor will not commit or permit any waste with respect to the Property or the Chattels. Trustor shall not cause or permit any part of the Property, including but not limited to any building, structure,
parking lot, driveway, landscape scheme, timber, or other ground improvement, to be removed, demolished, or materially altered without the prior written consent of Beneficiary. 
 5.2 Zoning and Private Covenants. Trustor will not initiate, join in, or consent to any change in any zoning ordinance or classification, any
change in the “zone lot” or “zone lots” (or similar zoning unit or units) presently comprising the Property, any transfer of development rights, any change in any private restrictive covenant, or any change in any other public or
private restriction limiting or defining the uses which may be made of the Property or any part thereof, without the prior written consent of Beneficiary. If under applicable zoning provisions the use of all or any part of the Property is or becomes
a nonconforming use, Trustor will not cause such use to be discontinued or abandoned without the prior written consent of Beneficiary, and Trustor will use its best efforts to prevent the tenant under any Lease from discontinuing or abandoning such
use. 
 5.3 Interference with Leases. 
 (a) Subject to Section 5.3(c) Trustor will neither do, nor neglect to do, anything which may cause or permit the termination of any Lease of all or any part of the Property, or cause or permit the withholding or
abatement of any rent payable under any such Lease. 
  

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 (b) Without Beneficiary’s prior written consent, which may be granted or withheld in
Beneficiary’s sole discretion, Trustor shall not enter into or modify any Lease of all or any part of the Property. Notwithstanding the foregoing, Trustor may, without Beneficiary’s prior consent, enter into or modify any Lease other than
(i) Leases with a Major Tenant (as defined in the Note); (ii) Leases concerning office space previously leased to a Major Tenant demising greater than 15,000 square feet, and (iii) Leases concerning retail space previously leased to a
Major Tenant. Any submission by Trustor for Beneficiary’s approval of a Lease or modification thereof shall be accompanied by a copy of such Lease or modification, a Lease abstract, a then-current rent roll for the Property, year-to-date and
prior year operating statements for the Property, and a cover letter requesting Beneficiary’s approval (an “Approval Request”) which contains a signature line on which Beneficiary may evidence its approval of such Lease or
modification and a statement (a “Reminder Notice”) which provides “LENDER’S FAILURE TO RESPOND TO BORROWER’S REQUEST FOR APPROVAL WITHIN FIFTEEN (15) DAYS SHALL CONSTITUTE LENDER’S APPROVAL OF SUCH REQUESTED
ACTION.” If Beneficiary shall fail to respond within fifteen (15) days following receipt of any submission for approval, then such Lease or modification shall be deemed approved; provided, however, if the Approval Request does not include
the Reminder Notice, then Beneficiary shall not be deemed to have approved the request of Trustor, and Beneficiary’s consent to any such action may only be obtained by written notice thereof by Beneficiary to Trustor. 
 (c) Except with the prior written consent of Beneficiary, which may be granted or withheld in Beneficiary’s sole discretion, Trustor will not
(i) collect rent from all or any part of the Property for more than one month in advance, (ii) assign the rents from the Property or any part thereof, or (iii) consent to the premature cancellation or surrender of all or any part of
any Lease, except that Trustor may in good faith terminate any Lease for nonpayment of rent or other material breach by the tenant. 
 (d)
Without limiting the generality of the foregoing, whether or not Beneficiary’s consent to the cancellation or surrender of any Lease is required hereunder, Beneficiary may (i) require that Trustor deposit into an escrow account acceptable
to Beneficiary in its reasonable discretion all cancellation penalties or other consideration paid to Trustor in connection with any cancellation or surrender of any Lease to a Major Tenant (the “Termination Fees”), and (ii) require
that vacant space previously leased to a Major Tenant be relet in accordance with the provisions of Section 5.3(b), above (an “Approved Lease”). Upon execution of an Approved Lease, Beneficiary shall refund a pro rata portion of the
Termination Fees equal to the ratio of the number of square feet of newly leased space under the Approved Lease divided by the total square feet of space vacated pursuant to the subject Major Tenant Lease. If the Property and the amount of the debt
service payments then becoming due under the Note; or (B) provided that the Property is at least 87% occupied and the income from the Property is sufficient, in Trustor’s determination, to pay all operating expenses of the Property and
debt service payments due under the Note, then Beneficiary shall deliver any Termination Fees then held in escrow to Trustor. 
  

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 5.4 Transfer or Further Encumbrance of Property. 
 (a) Subject to the Partial Release Agreement, without Beneficiary’s prior written consent, which consent may be granted or withheld in
Beneficiary’s sole and absolute discretion, Trustor shall not (i) sell, assign, convey, transfer or otherwise dispose of any legal, beneficial or equitable interest in all or any part of the Property, (ii) permit or suffer any owner,
directly or indirectly, of any beneficial interest in the Property or Trustor to transfer such interest, whether by transfer of partnership, membership, stock or other beneficial interest in any entity or otherwise, or (iii) mortgage,
hypothecate or otherwise encumber or permit to be encumbered or grant or permit to be granted a security interest in all or any part of the Property or Trustor or any beneficial or equitable interest in either the Property or Trustor. The provisions
of this Section shall not prohibit transfers of title or interest under any will or testament or applicable law of descent. 
 (b)
Notwithstanding the provisions of Section 5.4(a) to the contrary, Beneficiary shall permit a one-time transfer of the Property in its entirety provided that all of the following conditions are satisfied: (i) no Default has occurred and is
continuing and no Event of Default has occurred; (ii) Trustor has paid to Beneficiary an assumption fee of one percent (1%) of the outstanding principal balance of the Loan; (iii) if the proposed transferee is a land trust,
Beneficiary has received a first-lien collateral assignment of all beneficial interest therein; (iv) Beneficiary has received and has had a reasonable opportunity to review all documents and agreements executed or to be executed in connection
with the proposed transfer; (v) the non-economic terms (e.g., those terms other than interest rate, payment schedule, principal balance, and non-recourse nature (subject to exceptions thereto customarily included by Beneficiary in loan
documents)) of the Loan Documents have been modified as Beneficiary may request in good faith; (vi) the proposed transferee has assumed all of Trustor’s obligations under the Loan Documents; (vii) Beneficiary has received at least
thirty (30) days’ prior written notice of the proposed transfer; (viii) the proposed transferee and, if applicable, its general partners or managing members have, in the sole judgment of Beneficiary exercised in good faith, a net
worth equal to the net worth of Trustor as of the date hereof or otherwise satisfactory to Beneficiary, and a satisfactory history of owning, operating and leasing property similar to the Property; (ix) the proposed transferee and, if
applicable, its general partners or managing members have, in the sole judgment of Beneficiary exercised in good faith, a satisfactory credit history and professional reputation and character; (x) the Debt Service Coverage Ratio (as hereinafter
defined) is not less than 1.20, and Beneficiary receives satisfactory evidence that such ratio will be maintained for the succeeding twelve (12) months; (xi) the Loan-to-Value Ratio (as hereinafter defined), taking into account all
obligations secured by liens on the Property does not exceed 65%; (xii) Trustor pays all costs and expenses incurred by Beneficiary in connection with such transfer, including, without limitation, all legal, processing, accounting, title
insurance, and appraisal fees, whether or not such transfer is actually consummated; (xiii) Beneficiary has received an endorsement to its mortgagee’s title insurance policy at Trustor’s expense, which endorsement states that the lien
of this Deed of Trust remains a first and prior lien against the Property subject to no exceptions other than as approved by Beneficiary; (xiv) principals of the proposed transferee acceptable to Beneficiary in its sole discretion execute a
guaranty agreement in the form of the Guaranty Agreement and an environmental indemnity agreement in the form of the Environmental Indemnity Agreement; and (xv) proposed transferee shall deliver an opinion 

  

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of counsel to Beneficiary regarding the due authorization, execution, delivery and enforceability of all of the loan documents executed in connection with
such assumption and the continued enforceability of the Loan Documents. Upon the satisfaction of the foregoing conditions, Beneficiary shall release Trustor and Guarantor from liability under the Loan Documents except to the extent that, prior to
such release, any full-recourse liability has arisen under any of the Loan Documents. The foregoing right to transfer the Property shall terminate upon conveyance of the Property by the initial Trustor named herein. 
 (c) The term “Debt Service Coverage Ratio” shall mean the ratio, as reasonably determined by Beneficiary, of (i) Net Operating Income for
the Property for the preceding twelve (12) calendar months, to (ii) the annual debt service payments due under the loan evidenced by the Note (the “Loan”) and on all other indebtedness secured, or to be secured, by a lien on all
or any part of the Property, where “Net Operating Income” shall mean all gross revenues generated by the Property (excluding loans or contributions to capital), less operating expenses (other than debt service payments due under the Loan),
as determined on a cash accounting basis, as of the date of such calculation for the period in question, adjusted, however, so that (A) operating expenses shall be deemed to include (1) a management fee equal to the greater of the actual
management fee for the Property or three percent (3%) of gross revenues, and (2) a tenant improvement, leasing commission, and capital improvement reserve equal to $0.75 per rentable square foot in the case of office properties and retail
properties, (B) payments of operating expenses, including property taxes and assessments and insurance expenses, are to be spread out over the period during which they accrued and shall be adjusted for any known future changes to any such
expenses, (C) prepaid rents and other prepaid payments received are to be spread out over the periods during which such rents or payments are earned or applicable, (D) security deposits shall not be included as items of income until duly
applied or earned, (E) gross revenue shall be based on a lease-in-place analysis which reflects then current Leases in place, as determined by Beneficiary, in its reasonable discretion, in accordance with its standard underwriting criteria,
consistently applied, and excluding extraordinary, or one time items, and (F) any refunds or rebates to operating expenses are to be applied and credited against the applicable operating expenses for the period that such operating expenses were
incurred. Debt Service Coverage Ratio shall be calculated on a cash flow basis. The “Loan-to-Value Ratio” shall be the ratio, as determined by Beneficiary, of the aggregate principal balance of the Note and all other indebtedness secured
by liens or encumbrances against the Property to the fair market value of the Property, as such fair market value is determined by an M.A.I. appraisal satisfactory to Beneficiary (the “Appraisal”). Upon Beneficiary’s request, Trustor
shall deliver the Appraisal to Beneficiary at Trustor’s sole cost and expense. 
 (d) Notwithstanding the provisions of
Section 5.4(a) to the contrary, Beneficiary’s consent shall not be required for transfers or encumbrances of limited partnership interests in Guarantor. 
 (e) Notwithstanding the provisions of Section 5.4(a) to the contrary, Beneficiary’s consent shall not be required for transfers of general partnership interests in Guarantor and the stock of Rancon Financial
Corporation (“RFC”) to or among the Stephenson Family (i) for estate planning purposes if, following any such transfer, Daniel Stephenson retains the ultimate authority to control the Guarantor, or (ii) as a result of death or
legal incompetency 

  

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of Daniel Stephenson if, following any transfer described in (i) or (ii) above, Guarantor’s partnership agreement remains in effect and
Guarantor is not dissolved and remains in existence as a limited partnership; however, if at any time thereafter any transferee of such ownership interests in Guarantor or RFC stock, or any beneficial owner of a Permitted Trust as herein defined,
sells, assigns or transfers any portion of its ownership interests in Guarantor, in RFC stock, or any portion of its beneficial interest in a Permitted Trust to a person other than a member of the Stephenson Family or encumbers such ownership
interest or beneficial interest, a change in the beneficial ownership of Trustor shall be deemed to have taken place in violation of this provision (unless undertaken with the written consent of the Beneficiary). For the purposes hereof, the
“Stephenson Family” shall mean Daniel Stephenson, his spouse, his descendants and their spouses, any trust or estates for the benefit of said parties (a “Permitted Trust”), and any entities owned and controlled (ownership and
voting interests in excess of 50%) by said parties. 
 5.5 Further Encumbrance of Chattels. Trustor will neither create nor permit any
lien, security interest or encumbrance against the Chattels or Intangible Personalty or any part thereof or interest therein, other than the liens and security interests created by the Loan Documents, without the prior written consent of
Beneficiary, which may be withheld for any reason. 
 5.6 Assessments Against Property. Trustor will not, without the prior written
approval of Beneficiary, which may be withheld for any reason, consent to or affirmatively act to create any future or additional so-called special districts, special improvement districts, benefit assessment districts or similar districts, or any
other body or entity of any type or any additional taxes (other than annual changes in existing taxes or changes related to additional improvements), assessments or other monetary obligations or burdens on the Property, and this provision shall
serve as RECORD NOTICE to any such district or districts or any governmental entity under whose authority such district or districts exist or are being formed that, should Trustor or any other person or entity include all or any portion of the
Property in such district or districts, whether formed or in the process of formation, without first obtaining Beneficiary’s express written consent, the rights of Beneficiary in the Property pursuant to this Deed of Trust or following any
foreclosure of this Deed of Trust, and the rights of any person or entity to whom Beneficiary might transfer the Property following a foreclosure of this Deed of Trust, shall be senior and superior to any taxes, charges, fees, assessments or other
impositions of any kind or nature whatsoever, or liens (whether statutory, contractual or otherwise) levied or imposed, or to be levied or imposed, upon the Property or any portion thereof as a result of inclusion of the Property in such district or
districts. 
 5.7 Transfer or Removal of Chattels. Trustor will not sell, transfer or remove from the Property all or any part of the
Chattels, unless the items sold, transferred, or removed are simultaneously replaced with similar items of equal or greater value. 
 5.8
Change of Name, Organizational I.D. No. or Location. Trustor will not change its name or the name under which it does business (or adopt or begin doing business under any other name or assumed or trade name), change its organizational
identification number, or change its location, without first notifying Beneficiary of its intention to do so and delivering to Beneficiary such organizational documents of Trustor and executed modifications 

  

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or supplements to this Deed of Trust (and to any financing statement which may be filed in connection herewith) as Beneficiary may require. For purposes of
the foregoing, Trustor’s “location” shall mean (a) if Trustor is a registered organization, Trustor’s state of registration, (b) if Trustor is an individual, the state of Trustor’s principal residence, or
(c) if Trustor is neither a registered organization nor an individual, the state in which Trustor’s place of business (or, if Trustor has more than one place of business, the Trustor’s chief executive office) is located. 

5.9 Improper Use of Property or Chattels. Trustor will not use the Property or the Chattels for any purpose or in any manner which violates any
applicable law, ordinance, or other governmental requirement, the requirements or conditions of any insurance policy, or any private covenant. 
 5.10 ERISA. Trustor shall not engage in any transaction which would cause the Note (or the exercise by Beneficiary of any of its rights under the Loan Documents) to be a non-exempt, prohibited transaction under ERISA (including for
this purpose the parallel provisions of Section 4975 of the Internal Revenue Code of 1986, as amended), or otherwise result in Beneficiary being deemed in violation of any applicable provisions of ERISA. Trustor shall indemnify, protect,
defend, and hold Beneficiary harmless from and against any and all losses, liabilities, damages, claims, judgments, costs, and expenses (including, without limitation attorneys’ fees and costs incurred in the investigation, defense, and
settlement of claims and in obtaining any individual ERISA exemption or state administrative exception that may be required, in Beneficiary’s sole and absolute discretion) that Beneficiary may incur, directly or indirectly, as the result of the
breach by Trustor of any warranty or representation set forth in Section 3.3(x) hereof or the breach by Trustor of any covenant contained in this Section. This indemnity shall survive any termination, satisfaction or foreclosure of this Deed of
Trust and shall not be subject to the limitation on personal liability described in the Note. 
 5.11 Use of Proceeds. Trustor will
not use any funds advanced by Beneficiary under the Loan Documents for household or agricultural purposes, to purchase margin stock, or for any purpose prohibited by law. 
 5.12 Single-Purpose Entity. Trustor will not engage in any business other than the ownership, development, operation and
disposition of the Property. 
 ARTICLE 6 
 EVENTS OF DEFAULT 
 Each of the following events will constitute an event of default (an “Event of
Default”) under this Deed of Trust and under each of the other Loan Documents: 
 6.1 Failure to Pay Note. 
 (a) Trustor’s failure to make any payment when due under Section 1 of the Note or Sections 4.4 or 4.5 of this Deed of Trust. 

 

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 (b) Trustor’s failure to make any payment when due under any other provisions of any Loan Document,
provided, however, that such failure shall not constitute an Event of Default unless such failure continues for ten (10) days beyond the date that Beneficiary delivers to Trustor notice that such payment is due. 
 6.2 Due on Sale or Encumbrance. The occurrence of any violation of any covenant contained in Section 5.4, 5.5 or 5.7 hereof. 
 6.3 Other Obligations. The failure of Trustor to properly perform any obligation contained herein or in any of the other Loan Documents (other
than the obligation to make payments under the Note or the other Loan Documents) and the continuance of such failure for a period of ten (10) days following written notice thereof from Beneficiary to Trustor; provided, however, that if such
failure is not curable within such ten (10) day period, then, so long as Trustor commences to cure such failure within such ten (10) day period and is continually and diligently attempting to cure to completion, such failure shall not be
an Event of Default unless such failure remains uncured for ninety (90) days after such written notice to Trustor. 
 6.4 Levy
Against Property. The levy against any of the Property, Chattels or Intangible Personalty, of any execution, attachment, sequestration or other writ. 
 6.5 Liquidation. The liquidation, termination or dissolution of Trustor or any Controlling Person. 
 6.6 Appointment of Receiver. The appointment of a trustee or receiver for the assets, or any part thereof, of Trustor, or any Controlling Person, or the appointment of a trustee or receiver for any real or personal property, or the
like, or any part thereof, representing the security for the Secured Obligations. 
 6.7 Assignments. The making by Trustor or any
Controlling Person of a transfer in fraud of creditors or an assignment for the benefit of creditors. 
 6.8 Order for Relief. The
entry in bankruptcy of an order for relief for or against Trustor or any Controlling Person. 
 6.9 Bankruptcy. The filing of any
petition (or answer admitting the material allegations of any petition), or other pleading, seeking entry of an order for relief for or against Trustor or any Controlling Person as a debtor or bankrupt or seeking an adjustment of any of such
parties’ debts, or any other relief under any state or federal bankruptcy, reorganization, debtor’s relief or insolvency laws now or hereafter existing, including, without limitation, a petition or answer seeking reorganization or
admitting the material allegations of a petition filed against any such party in any bankruptcy or reorganization proceeding, or the act of any of such parties in instituting or voluntarily being or becoming a party to any other judicial proceedings
intended to effect a discharge of the debts of any such parties, in whole or in part, or a postponement of the maturity or the collection thereof, or a suspension of any of the rights or powers of a trustee or of any of the rights or powers granted
to Beneficiary herein, or in any other document executed in connection herewith. 
  

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 6.10 Misrepresentation. If any representation or warranty made by Trustor or any Controlling
Person, or in any of the other Loan Documents or any other instrument or document modifying, renewing, extending, evidencing, securing or pertaining to the Note is false, misleading or erroneous in any material respect. 
 6.11 Judgments. The failure of Trustor or any Controlling Person to pay any money judgment in excess of $10,000.00 against any such party before
the expiration of thirty (30) days after such judgment becomes final and no longer appealable. 
 6.12 Admissions Regarding
Debts. The admission of Trustor or any Controlling Person in writing of any such party’s inability to pay such party’s debts as they become due. 
 6.13 Assertion of Priority. Other than with respect to the Permitted Exceptions, the assertion of any claim of priority over this Deed of Trust, by title, lien, or otherwise, unless Trustor within thirty
(30) days after such assertion either causes the assertion to be withdrawn or provides Beneficiary with such security as Beneficiary may require to protect Beneficiary against all loss, damage, or expense, including attorneys’ fees, which
Beneficiary may incur in the event such assertion is upheld. 
 6.14 Other Loan Documents. The occurrence of any default by Trustor,
after the lapse of any applicable grace or cure period, or the occurrence of any event or circumstance defined as an Event of Default, under any of the Loan Documents other than this Deed of Trust. 
 6.15 Other Liens. The occurrence of any default by Trustor, after the lapse of any applicable grace or cure period, or the occurrence of any event
or circumstance defined as an Event of Default, under any other consensual lien encumbering the Property, or any part thereof or interest therein, or any document or instrument evidencing obligations secured thereby. 
 6.16 Other Indebtedness. The occurrence of any default by Trustor, after the lapse of any applicable grace or cure period, or the occurrence of
any event or circumstance defined as an Event of Default, under any other indebtedness incurred or owing by Trustor, or any document or instrument evidencing any obligation to pay such indebtedness. 
 ARTICLE 7 
 BENEFICIARY’S
REMEDIES 
 Immediately upon or any time after the occurrence of any Event of Default hereunder, Beneficiary may exercise any remedy available at law or
in equity, including but not limited to those listed below and those listed in the other Loan Documents, in such sequence or combination as Beneficiary may determine in Beneficiary’s sole discretion: 
 7.1 Performance of Defaulted Obligations. Beneficiary may make any payment or perform any other obligation under the Loan Documents or under Leases
which Trustor has failed to make or perform, and Trustor hereby irrevocably appoints Beneficiary as the true and lawful attorney-in-fact for Trustor to make any such payment and perform any such 

  

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obligation in the name of Trustor. All payments made and expenses (including attorneys’ fees and expenses) incurred by Beneficiary in this connection,
together with interest thereon at the Default Rate from the date paid or incurred until repaid, will be part of the Secured Obligations and will be immediately due and payable by Trustor to Beneficiary. In lieu of advancing Beneficiary’s own
funds for such purposes, Beneficiary may use any funds of Trustor which may be in Beneficiary’s possession, including but not limited to insurance or condemnation proceeds and amounts deposited for taxes, insurance premiums, or other purposes.

 7.2 Specific Performance and Injunctive Relief. Notwithstanding the availability of legal remedies, Beneficiary will be entitled to
obtain specific performance, mandatory or prohibitory injunctive relief, or other equitable relief requiring Trustor to cure or refrain from repeating any Default. 
 7.3 Acceleration of Secured Obligations. Beneficiary may, without notice or demand, declare all of the Secured Obligations immediately due and payable in full. 
 7.4 Suit for Monetary Relief. Subject to the non-recourse provisions of the Note, with or without accelerating the maturity of the Secured
Obligations, Beneficiary may sue from time to time for any payment due under any of the Loan Documents, or for money damages resulting from Trustor’s default under any of the Loan Documents. 
 7.5 Possession of Property. Beneficiary may enter and take possession of the Property without seeking or obtaining the appointment of a receiver,
may employ a managing agent for the Property, and may lease or rent all or any part of the Property, either in Beneficiary’s name or in the name of Trustor, and may collect the rents, issues, and profits of the Property. Any revenues collected
by Beneficiary under this Section will be applied first toward payment of all expenses (including attorneys’ fees) incurred by Beneficiary, together with interest thereon at the Default Rate from the date incurred until repaid, and the balance,
if any, will be applied against the Secured Obligations in such order and manner as Beneficiary may elect in its sole discretion. 
 7.6
Enforcement of Security Interests. Beneficiary may exercise all rights of a secured party under the Code with respect to the Chattels and the Intangible Personalty, including but not limited to taking possession of, holding, and selling the
Chattels and enforcing or otherwise realizing upon any accounts and general intangibles. Any requirement for reasonable notice of the time and place of any public sale, or of the time after which any private sale or other disposition is to be made,
will be satisfied by Beneficiary’s giving of such notice to Trustor at least five days prior to the time of any public sale or the time after which any private sale or other intended disposition is to be made. 
 7.7 Foreclosure Against Property. 
 (a) Beneficiary may foreclose this Deed of Trust, insofar as it encumbers the Property, either by judicial action or through Trustee. Should Beneficiary elect to foreclose by exercise of the power of sale herein contained, Beneficiary shall
notify Trustee and shall deposit with Trustee this Deed of Trust and the Note and such receipts and evidence of expenditures made and secured hereby as Trustee may require. 
  

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 (b) Upon receipt of such notice from Beneficiary, Trustee shall cause to be recorded, published and
delivered to Trustor such Notice of Default and Election to Sell as is then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after lapse of such time as may then be required by law and after recordation of such
Notice of Default and after Notice of Sale having been given as required by law, sell the Property at the time and place of sale fixed by it in said Notice of Sale, either as a whole, or in separate lots or parcels or items as Trustee shall deem
expedient, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of Sale. Trustee shall deliver to such purchaser or purchasers thereof its good and
sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including,
without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale and Trustor hereby covenants to warrant and defend the title of such purchaser or purchasers. Trustor hereby constitutes and appoints Trustee as its attorney-in-fact with
full power and authority to execute, deliver, file, record or process on behalf of Trustor any and all instruments or documents or to take any other action on behalf of Trustor reasonably required to accomplish the vesting of the Property, or any
part thereof, in the purchaser or purchasers at any sale conducted hereunder. 
 (c) All fees, costs and expenses of any kind incurred by
Beneficiary in connection with foreclosure of this Deed of Trust, including, without limitation, the costs of any appraisals of the Property obtained by Beneficiary, the cost of any title reports or abstracts, all costs of any receivership for the
Property advanced by Beneficiary, and all attorneys’ and consultants’ fees and expenses incurred by Beneficiary, shall constitute a part of the Secured Obligations and may be included as part of the amount owing from Trustor to Beneficiary
at any foreclosure sale. The proceeds of any sale under this Section shall be applied first to the fees and expenses of the Trustee or other officer conducting the sale, and then to the reduction or discharge of the Secured Obligations; any surplus
remaining shall be paid over to Trustor or to such other person or persons as may be lawfully entitled to such surplus. 
 (d) Subject to
California Civil Code § 2924g, Trustee may postpone sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the
time fixed by the preceding postponement or subsequently noticed sale, and without further notice make such sale at the time fixed by the last postponement, or may in its discretion, give a new notice of sale. 
 (e) A sale of less than the whole of the Property or any defective or irregular sale made hereunder shall not exhaust the power of sale provided for
herein; and subsequent sales may be made hereunder until all obligations secured hereby have been satisfied, or the entire Property sold, without defect or irregularity. 
  

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 7.8 Appointment of Receiver. Beneficiary shall be entitled, as a matter of absolute right and
without regard to the value of any security for the Secured Obligations or the solvency of any person liable therefor, to the appointment of a receiver for the Property upon ex-parte application to any court of competent jurisdiction. Trustor waives
any right to any hearing or notice of hearing prior to the appointment of a receiver. Such receiver and its agents shall be empowered, but shall not be obligated, to (a) take possession of the Property and any businesses conducted by Trustor or
any other person thereon and any business assets used in connection therewith, (b) exclude Trustor and Trustor’s agents, servants, and employees from the Property, (c) collect the rents, issues, profits, and income therefrom,
(d) complete any construction which may be in progress, (e) do such maintenance and make such repairs and alterations as the receiver deems necessary, (f) use all stores of materials, supplies, and maintenance equipment on the
Property and replace such items at the expense of the receivership estate, (g) pay all taxes and assessments against the Property and the Chattels, all premiums for insurance thereon, all utility and other operating expenses, and all sums due
under any prior or subsequent encumbrance, and (h) generally do anything which Trustor could legally do if Trustor were in possession of the Property. All expenses incurred by the receiver or its agents shall constitute a part of the Secured
Obligations. Any revenues collected by the receiver shall be applied first to the expenses of the receivership, including attorneys’ fees incurred by the receiver and by Beneficiary, together with interest thereon at the Default Rate from the
date incurred until repaid, and the balance shall be applied toward the Secured Obligations or in such other manner as the court may direct. Unless sooner terminated with the express consent of Beneficiary, any such receivership will continue until
the Secured Obligations have been discharged in full, or until title to the Property has passed after foreclosure sale and all applicable periods of redemption have expired. 
 7.9 Right to Make Repairs, Improvements. Should any part of the Property come into the possession of Beneficiary, Beneficiary may, but shall not
be obligated to, use, operate, and/or make repairs, alterations, additions and improvements to the Property for the purpose of preserving it or its value. Trustor covenants to promptly reimburse and pay to Beneficiary, at the place where the Note is
payable, or at such other place as may be designated by Beneficiary in writing, the amount of all reasonable expenses (including the cost of any insurance, taxes, or other charges) incurred by Beneficiary in connection with its custody,
preservation, use or operation of the Property, together with interest thereon from the date incurred by Beneficiary at the Default Rate, and all such expenses, costs, taxes, interest, and other charges shall be a part of the Secured Obligations. It
is agreed, however, that the risk of accidental loss or damage to the Property is undertaken by Trustor and Beneficiary shall have no liability whatsoever for decline in value of the Property, for failure to obtain or maintain insurance, or for
failure to determine whether any insurance ever in force is adequate as to amount or as to the risks insured. 
 7.10 Surrender of
Insurance. Beneficiary may surrender the insurance policies maintained pursuant to the terms hereof, or any part thereof, and receive and apply the unearned premiums as a credit on the Secured Obligations and, in connection therewith, Trustor
hereby appoints Beneficiary (or any officer of Beneficiary), as the true and lawful agent and attorney-in-fact for Trustor (with full powers of substitution), which power of attorney shall be deemed to be a power coupled with an interest and
therefore irrevocable, to collect such premiums. 
  

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 7.11 Prima Facie Evidence. Trustor agrees that, in any assignments, deeds, bills of
sale, notices of sale, or postings, given by Beneficiary, any and all statements of fact or other recitals therein made as to the identity of Beneficiary, or as to the occurrence or existence of any Event of Default, or as to the acceleration of the
maturity of the Secured Obligations, or as to the request to sell, posting of notice of sale, notice of sale, time, place, terms and manner of sale and receipt, distribution and application of the money realized therefrom, and without being limited
by the foregoing, as to any other act or thing having been duly done by Beneficiary, shall be taken by all courts of law and equity as prima facie evidence that such statements or recitals state facts and are without further question to be so
accepted, and Trustor does hereby ratify and confirm any and all acts that Beneficiary may lawfully do by virtue hereof. 
 ARTICLE 8

 ASSIGNMENT OF LEASES AND RENTS 
 8.1 Assignment of Leases and Rents. Trustor hereby unconditionally and absolutely grants, transfers and assigns unto Beneficiary all of Trustor’s right, title and interest in all rents, royalties, issues,
profits and income (“Rents”) now or hereafter due or payable for the occupancy or use of the Property, and all Leases, whether written or oral, with all security therefor, including all guaranties thereof, now or hereafter affecting the
Property; on the condition that Beneficiary hereby grants to Trustor a license to collect and retain such Rents prior to the occurrence of any Event of Default hereunder. Such license shall be revocable by Beneficiary without notice to Trustor at
any time after the occurrence of an Event of Default. Trustor represents that the Rents and the Leases have not been heretofore sold, assigned, transferred or set over by any instrument now in force and will not at any time during the life of this
assignment be sold, assigned, transferred or set over by Trustor or by any person or persons whomsoever; and Trustor has good right to sell, assign, transfer and set over the same and to grant to and confer upon Beneficiary the rights, interest,
powers and authorities herein granted and conferred. Failure of Beneficiary at any time or from time to time to enforce the assignment of Rents and Leases under this Section shall not in any manner prevent its subsequent enforcement, and Beneficiary
is not obligated to collect anything hereunder, but is accountable only for sums actually collected. 
 8.2 Further Assignments.
Trustor shall give Beneficiary at any time upon demand any further or additional forms of assignment of transfer of such Rents, Leases and security as may be reasonably requested by Beneficiary, and shall deliver to Beneficiary executed copies of
all such Leases and security. 
 8.3 Application of Rents. Beneficiary shall be entitled to deduct and retain a just and reasonable
compensation from monies received hereunder for its services or that of its agents in collecting such monies. Any monies received by Beneficiary hereunder may be applied when received from time to time in payment of any taxes, assessments or other
liens affecting the Property regardless of the delinquency, such application to be in such order as Beneficiary may determine. The acceptance of this Deed of Trust by Beneficiary or the exercise of any rights by it hereunder shall not be, or be
construed to be, an affirmation by it of any Lease nor an assumption of any liability under any Lease. 
  

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 8.4 Collection of Rents. Upon or at any time after an Event of Default shall have occurred and be
continuing, Beneficiary may declare all sums secured hereby immediately due and payable, and may, at its option, without notice, and whether or not the Secured Obligations shall have been declared due and payable, either in person or by agent, with
or without bringing any action or proceeding, or by a receiver to be appointed by a court, (i) enter upon, take possession of, manage and operate the Property, or any part thereof (including without limitation making necessary repairs,
alterations and improvements to the Property); (ii) make, cancel, enforce or modify Leases; (iii) obtain and evict tenants; (iv) fix or modify Rents; (v) do any acts which Beneficiary deems reasonably proper to protect the
security thereof; and (vi) either with or without taking possession of the Property, in its own name sue for or otherwise collect and receive such Rents, including those past due and unpaid. In connection with the foregoing, Beneficiary shall
be entitled and empowered to employ attorneys, and management, rental and other agents in and about the Property and to effect the matters which Beneficiary is empowered to do, and in the event Beneficiary shall itself effect such matters,
Beneficiary shall be entitled to charge and receive reasonable management, rental and other fees therefor as may be customary in the area in which the Property is located; and the reasonable fees, charges, costs and expenses of Beneficiary or such
persons shall be additional Secured Obligations. Beneficiary may apply all funds collected as aforesaid, less costs and expenses of operation and collection, including reasonable attorneys’ and agents’ fees, charges, costs and expenses, as
aforesaid, upon any Secured Obligations, and in such order as Beneficiary may determine. The entering upon and taking possession of the Property, the collection of such Rents and the application thereof as aforesaid shall not cure or waive any
default or waive, modify or affect notice of default under the Note or this Deed of Trust or invalidate any act done pursuant to such notice. 
 8.5 Authority of Beneficiary. Any tenants or occupants of any part of the Property are hereby authorized to recognize the claims of Beneficiary hereunder without investigating the reason for any action taken by Beneficiary, or the
validity or the amount of indebtedness owing to Beneficiary, or the existence of any default in the Note or this Deed of Trust, or under or by reason of this assignment of Rents and Leases, or the application to be made by Beneficiary of any amounts
to be paid to Beneficiary. The sole signature of Beneficiary shall be sufficient for the exercise of any rights under this assignment and the sole receipt of Beneficiary for any sums received shall be a full discharge and release therefor to any
such tenant or occupant of the Property. Checks for all or any part of the rentals collected under this assignment of Rents and Leases shall be drawn to the exclusive order of Beneficiary. 
 8.6 Indemnification of Beneficiary. Nothing herein contained shall be deemed to obligate Beneficiary to perform or discharge any obligation, duty
or liability of any lessor under any Lease of the Property, and Trustor shall and does hereby indemnify and hold Beneficiary harmless from any and all liability, loss or damage which Beneficiary may or might incur under any Lease of the Property or
by reason of this assignment; and any and all such liability, loss or damage incurred by Beneficiary, together with the costs and expenses, including reasonable attorneys’ fees, incurred by Beneficiary in defense of any claims or demands
therefor (whether successful or not), shall be additional Secured Obligations, and Trustor shall reimburse Beneficiary therefor on demand. 
  

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 ARTICLE 9 
 MISCELLANEOUS PROVISIONS 
 9.1 Time of the Essence. Time is of the essence with respect to all
of Trustor’s obligations under the Loan Documents. 
 9.2 Joint and Several Obligations. If Trustor is more than one person or
entity, then (a) all persons or entities comprising Trustor are jointly and severally liable for all of the Secured Obligations; (b) all representations, warranties, and covenants made by Trustor shall be deemed representations,
warranties, and covenants of each of the persons or entities comprising Trustor; (c) any breach, Default or Event of Default by any persons or entities comprising Trustor hereunder shall be deemed to be a breach, Default or Event of Default of
Trustor; (d) any reference herein contained to the knowledge or awareness of Trustor shall mean the knowledge or awareness of any of the persons or entities comprising Trustor; and (e) any event creating personal liability of any of the
persons or entities comprising Trustor shall create personal liability for all such persons or entities. 
 9.3 Waiver of Homestead and
Other Exemptions. To the extent permitted by law, Trustor hereby waives all rights to any homestead or other exemption to which Trustor would otherwise be entitled under any present or future constitutional, statutory, or other provision of
applicable state or federal law. Trustor hereby waives any right it may have to require Beneficiary to marshal all or any portion of the security for the Secured Obligations. 
 9.4 Non-Recourse; Exceptions to Non-Recourse. Except as expressly set forth in the Note, the recourse of Beneficiary with respect to the
obligations evidenced by the Note and the other Loan Documents shall be solely to the Property, Chattels and Intangible Personalty, and any other collateral given as security for the Note. 
 9.5 Rights and Remedies Cumulative. Beneficiary’s rights and remedies under each of the Loan Documents are cumulative of the right and
remedies available to Beneficiary under each of the other Loan Documents and those otherwise available to Beneficiary at law or in equity. No act of Beneficiary shall be construed as an election to proceed under any particular provision of any Loan
Document to the exclusion of any other provision in the same or any other Loan Document, or as an election of remedies to the exclusion of any other remedy which may then or thereafter be available to Beneficiary. 
 9.6 No Implied Waivers. Beneficiary shall not be deemed to have waived any provision of any Loan Document unless such waiver is in writing and is
signed by Beneficiary. Without limiting the generality of the preceding sentence, neither Beneficiary’s acceptance of any payment with knowledge of a Default by Trustor, nor any failure by Beneficiary to exercise any remedy following a Default
by Trustor shall be deemed a waiver of such Default, and no waiver by Beneficiary of any particular Default on the part of Trustor shall be deemed a waiver of any other Default or of any similar Default in the future. 
  

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 9.7 No Third-Party Rights. No person shall be a third-party beneficiary of any provision of any of
the Loan Documents. All provisions of the Loan Documents favoring Beneficiary are intended solely for the benefit of Beneficiary, and no third party shall be entitled to assume or expect that Beneficiary will waive or consent to modification of any
such provision in Beneficiary’s sole discretion. 
 9.8 Preservation of Liability and Priority. Without affecting the liability
of Trustor or of any other person (except a person expressly released in writing) for payment and performance of all of the Secured Obligations, and without affecting the rights of Beneficiary with respect to any security not expressly released in
writing, and without impairing in any way the priority of this Deed of Trust over the interests of any person acquired or first evidenced by recording subsequent to the recording hereof, Beneficiary may, either before or after the maturity of the
Note, and without notice or consent: (a) release any person liable for payment or performance of all or any part of the Secured Obligations; (b) make any agreement altering the terms of payment or performance of all or any of the Secured
Obligations; (c) exercise or refrain from exercising, or waive, any right or remedy which Beneficiary may have under any of the Loan Documents; (d) accept additional security of any kind for any of the Secured Obligations; or
(e) release or otherwise deal with any real or personal property securing the Secured Obligations. Any person acquiring or recording evidence of any interest of any nature in the Property, the Chattels, or the Intangible Personalty shall be
deemed, by acquiring such interest or recording any evidence thereof, to have agreed and consented to any or all such actions by Beneficiary. 
 9.9 Subrogation of Beneficiary. Beneficiary shall be subrogated to the lien of any previous encumbrance discharged with funds advanced by Beneficiary under the Loan Documents, regardless of whether such previous encumbrance has been
released of record. 
 9.10 Notices. Any notice required or permitted to be given by Trustor or Beneficiary under this Deed of Trust
shall be in writing and will be deemed given (a) upon personal delivery, (b) on the first business day after receipted delivery to a courier service which guarantees next-business-day delivery, or (c) on the third business day after
mailing, by registered or certified United States mail, postage prepaid, in any case to the appropriate party at its address set forth below: 
 If to Trustor: 
 Rancon Realty Fund V Subsidiary LLC 
 c/o Glenborough Properties, L.P. 
 400 South El Camino Real 
 San Mateo, California 94402-1708 
 Attention: G. Lee Burns, Esq. 
  

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 If to Beneficiary: 
 The Variable Annuity Life Insurance Company 
 c/o AIG Global Investment Corp. 
 1 SunAmerica Center, 38th Floor 
 Century City 
 Los Angeles, California 90067-6022 
 Attention: Director-Mortgage Lending and Real Estate 
 with a copy to: 
 Otten, Johnson, Robinson,
Neff & Ragonetti, P.C. 
 950 Seventeenth Street, Suite 1600 
 Denver, Colorado 80202 
 Attention: Aaron J.
Hill, Esq. 
 Either party may change such party’s address for notices or copies of notices by giving notice to the other party in accordance with
this Section. 
 9.11 Release of Lien. Upon payment and performance in full of all of the Secured Obligations, Beneficiary will
execute and deliver to Trustor such documents as may be required to release this Deed of Trust of record. 
 9.12 Illegality. If any
provision of this Deed of Trust is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Deed of Trust, the legality, validity, and enforceability of the remaining provisions of this Deed of
Trust shall not be affected thereby, and in lieu of each such illegal, invalid or unenforceable provision there shall be added automatically as a part of this Deed of Trust a provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable. If the rights and liens created by this Deed of Trust shall be invalid or unenforceable as to any part of the Secured Obligations, then the unsecured portion of the Secured
Obligations shall be completely paid prior to the payment of the remaining and secured portion of the Secured Obligations, and all payments made on the Secured Obligations shall be considered to have been paid on and applied first to the complete
payment of the unsecured portion of the Secured Obligations. 
 9.13 Usury Savings Clause. It is expressly stipulated and agreed to be
the intent of Beneficiary and Trustor at all times to comply with the applicable law governing the highest lawful interest rate. If the applicable law is ever judicially interpreted so as to render usurious any amount called for under the Note or
under any of the other Loan Documents, or contracted for, charged, taken, reserved or received with respect to the Loan, or if acceleration of the maturity of the Note, any prepayment by Trustor, or any other circumstance whatsoever, results in
Trustor having paid any interest in excess of that permitted by applicable law, then it is the express intent of Trustor and Beneficiary that all excess amounts theretofore collected by Beneficiary be credited on the principal balance of the Note
(or, at Beneficiary’s option, paid over to Trustor), and the provisions of the Note and other Loan Documents immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the
execution of any new document, so as to comply with the applicable 

  

 32 

 
law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder. The right to accelerate maturity of the Note does
not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Beneficiary does not intend to collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to
Beneficiary for the use, forbearance or detention of the Secured Obligations evidenced hereby or by the Note shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of such Secured
Obligations until payment in full so that the rate or amount of interest on account of such Secured Obligations does not exceed the maximum rate or amount of interest permitted under applicable law. The term “applicable law” as used herein
shall mean any federal or state law applicable to the Loan. 
 9.14 Obligations Binding Upon Trustor’s Successors. This Deed of
Trust is binding upon Trustor and Trustor’s successors and assigns, and shall inure to the benefit of Beneficiary, and its successors and assigns, and the provisions hereof shall likewise be covenants running with the land. The duties,
covenants, conditions, obligations, and warranties of Trustor in this Deed of Trust shall be joint and several obligations of Trustor and Trustor’s successors and assigns. 
 9.15 Construction. All pronouns and any variations of pronouns herein shall be deemed to refer to the masculine, feminine, or neuter, singular or
plural, as the identity of the parties may require. Whenever the terms herein are singular, the same shall be deemed to mean the plural, as the identity of the parties or the context requires. 
 9.16 Attorneys’ Fees. Any reference in this Deed of Trust to attorneys’ or counsel’s fees paid or incurred by Beneficiary shall be
deemed to include paralegals’ fees and legal assistants’ fees. Moreover, wherever provision is made herein for payment of attorneys’ or counsel’s fees or expenses incurred by Beneficiary, such provision shall include but not be
limited to, such fees or expenses incurred in any and all judicial, bankruptcy, reorganization, administrative, or other proceedings, including appellate proceedings, whether such fees or expenses arise before proceedings are commenced, during such
proceedings or after entry of a final judgment. 
 9.17 Waiver and Agreement. TRUSTOR HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE
UNDER APPLICABLE LAW, INCLUDING, WITHOUT LIMITATION, CALIFORNIA CIVIL CODE SECTION 2954.10, TO PREPAY THE NOTE, IN WHOLE OR IN PART, WITHOUT PREPAYMENT CHARGE, UPON ACCELERATION OF THE MATURITY DATE OF THE NOTE, AND AGREES THAT, IF FOR ANY
REASON A PREPAYMENT OF ALL OR ANY PART OF THE NOTE IS MADE, WHETHER VOLUNTARILY OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THE NOTE BY BENEFICIARY ON ACCOUNT OF THE OCCURRENCE OF ANY EVENT OF DEFAULT ARISING FOR ANY REASON, INCLUDING,
WITHOUT LIMITATION, AS A RESULT OF ANY PROHIBITED OR RESTRICTED TRANSFER, FURTHER ENCUMBRANCE OR DISPOSITION OF THE PROPERTY OR ANY PART THEREOF SECURING THE NOTE, THEN TRUSTOR SHALL BE OBLIGATED TO PAY, CONCURRENTLY WITH SUCH PREPAYMENT, THE
PREPAYMENT PREMIUM PROVIDED FOR IN THE NOTE (OR, IN THE EVENT OF ACCELERATION WHEN THE 

  

 33 

 
NOTE IS CLOSED TO PREPAYMENT, AS PROVIDED IN THE DEFINITION OF “SECURED OBLIGATIONS” SET FORTH IN ARTICLE 1 HEREOF). TRUSTOR HEREBY DECLARES
THAT BENEFICIARY’S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THE NOTE CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY TRUSTOR, FOR THIS WAIVER AND AGREEMENT. 
             Trustor’s Initials 
 9.18 Waiver of Jury Trial. BENEFICIARY AND TRUSTOR KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS DEED OF TRUST, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS DEED OF TRUST OR ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR TO ANY LOAN DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BENEFICIARY AND TRUSTOR TO ENTER INTO THE LOAN. 
 9.19 Governing Laws. The substantive laws of the State of California shall govern the validity, construction, enforcement, and interpretation of this Deed of Trust. 
 9.20 Inconsistency. In the event of any inconsistency between the terms of the Loan Documents and the terms of that certain First Mortgage Loan
Application between Trustor and Beneficiary, as amended, the terms of the Loan Documents shall govern and control in all respects. 
 9.21
Anti-Terrorism. Trustor represents, warrants and covenants to Beneficiary that: 
 (a) None of Trustor, Guarantor or, to the best of
Trustor’s knowledge, any of their respective constituents or affiliates is in violation of any laws relating to terrorism or money laundering, including without limitation, Executive Order No. 13224 on Terrorist Financing, effective
September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism, (as the same has been, or may hereafter be, renewed, extended, amended or replaced, the
“Executive Order”) and the Bank Secrecy Act (31 U.S.C. § 5311 et seq.), as amended by the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Public Law 107-56, as the same has been, or may hereafter be, renewed, extended, amended or replaced, the “Patriot Act”). As used herein, “Anti-Terrorism Laws” shall mean any laws relating to terrorism or money laundering,
including the Executive Order, the Patriot Act, the laws comprising or implementing the Bank Secrecy Act, and the laws administered by the United States Treasury Department’s Office of Foreign Asset Control (as any of the foregoing laws may
from time to time be renewed, extended, amended, or replaced). 
 (b) None of Trustor, Guarantor, or, to the best of Trustor’s
knowledge, their respective constituents or affiliates, any person having a beneficial interest in Trustor or 

  

 34 

 
Guarantor, any person for whom Trustor or Guarantor is acting as agent or nominee, any of their respective brokers or other agents acting in any capacity in
connection with the Loan or Trustor’s predecessor in interest to the Property is a “Prohibited Person,” which is defined as follows: 
 (i) a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; 
 (ii) a
person or entity owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; 
 (iii) a person or entity with whom Beneficiary or any bank or other institutional lender is prohibited from dealing or otherwise engaging in any
Anti-Terrorism Law; 
 (iv) a person or entity who commits, threatens or conspires to commit or supports “terrorism” as defined in
the Executive Order; 
 (v) a person or entity that is named as a “specially designated national” or “blocked person” on
the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official Website, http://www.treas.gov/ofac/t11sdn.pdf or at any replacement Website or other replacement official publication of such list; and

 (vi) a person or entity who is affiliated with a person or entity listed above. 
 (c) None of Trustor, Guarantor, or, to the best of Trustor’s knowledge, any of their respective affiliates or constituents, any of their respective
brokers or other agents acting in any capacity in connection with the Loan or the seller of the Property (if any portion of the Property is being acquired with proceeds of the Loan), does or shall (i) conduct any business or engage in any
transaction or dealing with any Prohibited Person, including making or receiving any contribution of funds, goods or services to or for the benefit of any Prohibited Person or leasing any portion of the Property to any Prohibited Person,
(ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law. 
 (d) Trustor shall
promptly deliver to Beneficiary any certification or other evidence reasonably requested from time to time by Beneficiary confirming Trustor’s compliance with this Section. The representations, warranties and covenants set forth in this Section
shall be deemed repeated and reaffirmed by Trustor as of each date that Trustor makes a payment to Beneficiary under the Note, this Deed of Trust and the other Loan Documents or receives any payment from Beneficiary. Trustor shall promptly notify
Beneficiary in writing should Trustor become aware of any change in the information set forth in these representations, warranties and covenants. 
  

 35 

 [Balance of Page Intentionally Left Blank] 
  

 36 

 IN WITNESS WHEREOF, Trustor has executed and delivered this Deed of Trust as of the date
first mentioned above. 
  

			
	RANCON REALTY FUND V SUBSIDIARY LLC, a Delaware limited liability company
		
	By:	 	  

	Name:	 	Daniel Lee Stephenson
	Title:	 	Manager

			
	State of California	 	)
		 	) ss
	County of                             	 	)

 On
                        , 2005, before me,
                        , personally appeared Daniel Lee Stephenson, personally known to me, or proved to me on the basis
of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 
 WITNESS my
hand and official seal. 
  

	
	  

	Signature of Notary

 EXHIBIT A 
 to 
 DEED OF TRUST 
 (Legal Description) 
 PARCEL A: (281-351-21, Carnegie Business Center II) 
 THOSE PORTIONS OF LOT 12 AND 13 OF TRACT NO. 12034, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 168 OF
MAPS, PAGES 75 THROUGH 87, RECORDS OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS: 
 BEGINNING AT THE NORTHWEST CORNER OF SAID LOT 12; 
 THENCE NORTH 89° 45’ 48” EAST ALONG THE NORTH LINE OF SAID LOTS 12 AND 13, A DISTANCE OF 319.52 FEET; 
 THENCE SOUTH 00° 14’ 12” WEST, A DISTANCE OF 59.36 FEET; 
 THENCE SOUTH 35° 01’ 02” EAST, A DISTANCE OF 49.06 FEET TO A POINT ON A TANGENT CURVE CONCAVE WESTERLY, HAVING A RADIUS OF 150.00 FEET, THROUGH WHICH A RADIAL LINE BEARS NORTH 54° 58’ 58” EAST; 
 THENCE SOUTHWESTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 70° 30’ 28” A DISTANCE OF 184.59 FEET, TO A POINT THROUGH WHICH A RADIAL LINE BEARS SOUTH
54°30’ 34” EAST; 
 THENCE SOUTH 35° 29’ 26” WEST, A DISTANCE OF 261.21 FEET TO A POINT ON ANON-TANGENT CURVE, CONCAVE
SOUTHWESTERLY, HAVING A RADIUS OF 1243.00 FEET, THROUGH WHICH A RADIAL LINE BEARS NORTH 35° 29’ 26” EAST, SAID POINT BEING ON THE NORTH RIGHT-OF-WAY OF CARNEGIE DRIVE, 43.00 FEET HALF-WIDTH; 
 THENCE NORTHWESTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 16° 07’ 54” A DISTANCE OF 349.97 FEET, TO A POINT THROUGH WHICH A RADIAL LINE BEARS NORTH
19° 21’ 32” EAST; 
 THENCE NORTH 19° 21’ 32” EAST, A DISTANCE OF 345.57 FEET TO THE POINT OF BEGINNING. 
 SAID LAND IS DESCRIBED PURSUANT TO A CERTIFICATE OF COMPLIANCE FOR LOT LINE ADJUSTMENT BY THE CITY OF SAN BERNARDINO, RECORDED JULY 2, 1987 AS INSTRUMENT NO. 87-227305
OFFICIAL RECORDS. 
 EXCEPTING THEREFROM THE SIDEWALKS, SEWERS, STORM DRAINS, WATER MAINS, CURBS, GUTTERS, PAVING, ELECTROLLERS, STREET LIGHTS, STREET NAME
SIGNS, TRAFFIC SIGNALS AND ALL APPURTENANCES AND APPURTENANT IMPROVEMENTS AND RIGHTS (COLLECTIVELY, THE “IMPROVEMENTS”) WITHIN ASSESSMENT DISTRICT NO. 961 IN THE CITY OF SAN BERNARDINO, CALIFORNIA, WHICH 

 
ASSESSMENT DISTRICT IS SHOWN AND DESCRIBED IN THE ASSESSMENT DIAGRAM FOR ASSESSMENT DISTRICT NO. 961, RECORDED FEBRUARY 6, 1985, IN BOOK 31 OF ASSESSMENT
DISTRICT MAPS, PAGES 64, 65 AND 66, RECORDS OF SAN BERNARDINO COUNTY, CALIFORNIA, AS DESCRIBED IN THE DEED TO THE CITY OF SAN BERNARDINO RECORDED APRIL 11, 1985 AS INSTRUMENT NO. 85-085510, OFFICIAL RECORDS. 
 PARCEL A-1: 
 ALL EASEMENTS, CONCERNING LOTS 8 THROUGH 14 OF TRACT
12034, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 168 OF MAPS, PAGES 75 THROUGH 87, IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA, THAT ARE APPURTENANT TO
THE REAL PROPERTY DESCRIBED AS PARCEL “A” ABOVE, INCLUDING WITHOUT LIMITATION A RECIPROCAL EASEMENT FOR ACCESS PARKING AND PEDESTRIAN TRAFFIC AS ESTABLISHED BY DOCUMENT ENTITLED, “MAJOR BLOCK DECLARATION, MAJOR BLOCK NO. 3 –
BRIER PLACE, TRI-CITY CORPORATE CENTRE,” RECORDED ON MAY 28, 1992 AS INSTRUMENT NO. 92-223952 IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA. 
 PARCEL B: (281-341-12, One Carnegie Plaza) 
 PARCEL 3 OF PARCEL MAP NO. 13910, IN THE CITY OF SAN BERNARDINO, AS PER PLAT RECORDED IN BOOK 162 OF PARCEL MAPS, PAGES 76 THROUGH 79, RECORDS OF SAID COUNTY. 
 EXCEPTING THEREFROM THE SIDEWALKS, SEWERS, STORM DRAINS, WATER MAINS, CURBS, GUTTERS, PAVING, ELECTROLLERS, STREET LIGHTS, STREET NAME SIGNS, TRAFFIC SIGNALS AND ALL APPURTENANCES AND APPURTENANT IMPROVEMENTS AND
RIGHTS (COLLECTIVELY, THE “IMPROVEMENTS”) WITHIN ASSESSMENT DISTRICT NO. 961 IN THE CITY OF SAN BERNARDINO, CALIFORNIA, WHICH ASSESSMENT DISTRICT IS SHOWN AND DESCRIBED IN THE ASSESSMENT DIAGRAM FOR ASSESSMENT DISTRICT NO. 961, RECORDED
FEBRUARY 6, 1985, IN BOOK 31 OF ASSESSMENT DISTRICT MAPS, PAGES 64, 65 AND 66, RECORDS OF SAN BERNARDINO COUNTY, CALIFORNIA, AS DESCRIBED IN THE DEED TO THE CITY OF SAN BERNARDINO RECORDED APRIL 11, 1985 AS INSTRUMENT NO. 85-085510, OFFICIAL
RECORDS. 
 PARCEL B-1: 
 ALL EASEMENTS, CONCERNING PARCEL
1 OF PARCEL MAP 13708, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 155 OF PARCEL MAPS, PAGES 6 AND 7, AND PARCELS A AND B OF PARCEL MAP 13910 AS PER PLAT RECORDED IN
BOOK 162 OF PARCEL MAPS, PAGES 76 THROUGH 79, IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA, THAT ARE APPURTENANT TO THE REAL PROPERTY DESCRIBED AS PARCEL “B” ABOVE, INCLUDING WITHOUT LIMITATION A RECIPROCAL
EASEMENT FOR ACCESS, PARKING AND PEDESTRIAN 

 
TRAFFIC AS ESTABLISHED BY DOCUMENT ENTITLED “MAJOR BLOCK DECLARATION, MAJOR BLOCK NO. 4 - CARNEGIE PLAZA, TRI-CITY CORPORATE CENTRE,” RECORDED ON
DECEMBER 20, 1990 AS INSTRUMENT NO. 90-501243 OFFICIAL RECORDS IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA, AND ALL EASEMENTS AND RIGHTS CREATED OR GRANTED BY ANY OF THE FOLLOWING INSTRUMENTS: 
 THAT CERTAIN MAJOR BLOCK DECLARATION FOR MAJOR BLOCK NO. 4 - CARNEGIE PLAZA, TRI-CITY CORPORATE CENTRE, DATED DECEMBER 19, 1990 RECORDED ON DECEMBER 20, 1990 AS
INSTRUMENT NO. 90-501244 IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA. 
 THAT CERTAIN FIRST AMENDMENT TO MAJOR BLOCK
DECLARATION, MAJOR BLOCK NO. 4 - CARNEGIE PLAZA, TRI-CITY CORPORATE CENTRE, DATED OCTOBER 3, 1991 AND RECORDED ON OCTOBER 8, 1991 AS INSTRUMENT NO. 91-384835 OFFICIAL RECORDS IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA.

 PARCEL C: (281-371-40, Outback) 
 PARCEL 10 OF PARCEL MAP NO. 13910, IN THE CITY OF SAN BERNARDINO, AS PER PLAT RECORDED IN BOOK 162 OF PARCEL MAPS, PAGES 76 THROUGH 79, RECORDS OF SAID COUNTY. 
 EXCEPTING THEREFROM THE SIDEWALKS, SEWERS, STORM DRAINS, WATER MAINS, CURBS, GUTTERS, PAVING, ELECTROLLERS, STREET LIGHTS, STREET NAME SIGNS, TRAFFIC SIGNALS AND ALL
APPURTENANCES AND APPURTENANT IMPROVEMENTS AND RIGHTS (COLLECTIVELY, THE “IMPROVEMENTS”) WITHIN ASSESSMENT DISTRICT NO. 961 IN THE CITY OF SAN BERNARDINO, CALIFORNIA, WHICH ASSESSMENT DISTRICT IS SHOWN AND DESCRIBED IN THE ASSESSMENT
DIAGRAM FOR ASSESSMENT DISTRICT NO. 961, RECORDED FEBRUARY 6, 1985, IN BOOK 31 OF ASSESSMENT DISTRICT MAPS, PAGES 64, 65 AND 66, RECORDS OF SAN BERNARDINO COUNTY, CALIFORNIA, AS DESCRIBED IN THE DEED TO THE CITY OF SAN BERNARDINO RECORDED APRIL 11,
1985 AS INSTRUMENT NO. 85-085510, OFFICIAL RECORDS. 
 PARCEL C-1: 
 ALL EASEMENTS, CONCERNING PARCEL 1 OF PARCEL MAP 13708, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 155 OF PARCEL MAPS, PAGES 6 AND
7, AND PARCELS A AND B OF PARCEL MAP 13910 AS PER PLAT RECORDED IN BOOK 162 OF PARCEL MAPS, PAGES 76 THROUGH 79, IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA, THAT ARE APPURTENANT TO THE REAL PROPERTY DESCRIBED AS PARCEL
“C” ABOVE, INCLUDING WITHOUT LIMITATION A RECIPROCAL EASEMENT FOR ACCESS, PARKING AND PEDESTRIAN TRAFFIC AS ESTABLISHED BY DOCUMENT ENTITLED “MAJOR BLOCK DECLARATION, MAJOR BLOCK NO. 4 - CARNEGIE PLAZA, TRI-CITY CORPORATE
CENTRE,” RECORDED ON DECEMBER 20, 1990 AS INSTRUMENT NO. 90-501243 

 
OFFICIAL RECORDS IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA, AND ALL EASEMENTS AND RIGHTS CREATED OR GRANTED BY ANY OF THE
FOLLOWING INSTRUMENTS: 
 THAT CERTAIN MAJOR BLOCK DECLARATION FOR MAJOR BLOCK NO. 4 - CARNEGIE PLAZA, TRI-CITY CORPORATE CENTRE, DATED DECEMBER 19, 1990
RECORDED ON DECEMBER 20, 1990 AS INSTRUMENT NO. 90-501244 IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA. 
 THAT CERTAIN FIRST
AMENDMENT TO MAJOR BLOCK DECLARATION, MAJOR BLOCK NO. 4 - CARNEGIE PLAZA, TRI-CITY CORPORATE CENTRE, DATED OCTOBER 3, 1991 AND RECORDED ON OCTOBER 8, 1991 AS INSTRUMENT NO. 91-384835 OFFICIAL RECORDS IN THE OFFICE OF THE COUNTY RECORDER OF SAN
BERNARDINO COUNTY, CALIFORNIA. 
 PARCEL D: (281-371-71, Bally’s) 
 PARCEL 1 OF PARCEL MAP NO. 14712 IN THE CITY OF SAN BERNARDINO, AS PER PLAT RECORDED IN BOOK 178 OF PARCEL MAPS, PAGES 41 THROUGH 44, RECORDS OF SAID COUNTY. 

EXCEPTING THE SIDEWALKS, SEWERS, STORM DRAINS, WATER MAINS, CURBS, GUTTERS, PAVING, ELECTROLLERS, STREET LIGHTS, STREET NAME SIGNS, TRAFFIC SIGNALS AND ALL
APPURTENANCES AND APPURTENANT IMPROVEMENTS AND RIGHTS (COLLECTIVELY, THE “IMPROVEMENTS”) WITHIN ASSESSMENT DISTRICT NO. 961 IN THE CITY OF SAN BERNARDINO, CALIFORNIA, WHICH ASSESSMENT DISTRICT IS SHOWN AND DESCRIBED IN THE ASSESSMENT
DIAGRAM FOR ASSESSMENT DISTRICT NO. 961, RECORDED FEBRUARY 6, 1985, IN BOOK 31 OF ASSESSMENT DISTRICT MAPS, PAGES 64, 65 AND 66, RECORDS OF SAN BERNARDINO COUNTY, CALIFORNIA, AS DESCRIBED IN THE DEED TO THE CITY OF SAN BERNARDINO RECORDED APRIL 11,
1985 AS INSTRUMENT NO. 85-085510, OFFICIAL RECORDS. 
 PARCEL D-1: 
 ALL EASEMENTS, CONCERNING PARCEL 1 OF PARCEL MAP 13708, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 155 OF PARCEL MAPS, PAGES 6 AND
7, 
 AND PARCELS A AND B OF PARCEL MAP 13910 AS PER PLAT RECORDED IN BOOK 162 OF PARCEL MAPS, PAGES 76 THROUGH 79, IN THE OFFICE OF THE COUNTY RECORDER OF
SAN BERNARDINO COUNTY, CALIFORNIA, THAT ARE APPURTENANT TO THE REAL PROPERTY DESCRIBED AS PARCEL “D” ABOVE, INCLUDING WITHOUT LIMITATION A RECIPROCAL EASEMENT FOR ACCESS, PARKING AND PEDESTRIAN TRAFFIC AS ESTABLISHED BY DOCUMENT ENTITLED
“MAJOR BLOCK DECLARATION, MAJOR BLOCK NO. 4 - CARNEGIE PLAZA, TRI-CITY CORPORATE CENTRE,” RECORDED ON DECEMBER 20, 1990 AS INSTRUMENT NO. 90-501243 OFFICIAL RECORDS IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA,
AND ALL EASEMENTS AND RIGHTS CREATED OR GRANTED BY ANY OF THE FOLLOWING INSTRUMENTS: 
 THAT CERTAIN MAJOR BLOCK DECLARATION FOR MAJOR BLOCK NO. 4 - CARNEGIE
PLAZA, TRI-CITY CORPORATE CENTRE, DATED DECEMBER 19, 1990 RECORDED ON DECEMBER 20, 1990 AS INSTRUMENT NO. 90-501244 IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA. 

 THAT CERTAIN FIRST AMENDMENT TO MAJOR BLOCK DECLARATION, MAJOR BLOCK NO. 4 - CARNEGIE PLAZA, TRI-CITY CORPORATE CENTRE,
DATED OCTOBER 3, 1991 AND RECORDED ON OCTOBER 8, 1991 AS INSTRUMENT NO. 91-384835 OFFICIAL RECORDS IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA. 
 PARCEL E: (281-361-14, Palm Court Retail 3) 
 PARCEL 4 OF PARCEL MAP NO. 12902, AS PER PLAT RECORDED IN BOOK 145 OF PARCEL MAPS, PAGES 68 AND 69, INCLUSIVE, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. 
 EXCEPTING THEREFROM THE SIDEWALKS. SEWERS, STORM DRAINS, WATER MAINS, CURBS, GUTTERS, PAVING, ELECTROLLERS, STREET LIGHTS, STREET NAME SIGNS, TRAFFIC SIGNALS AND ALL APPURTENANCES AND APPURTENANT IMPROVEMENTS AND
RIGHTS (COLLECTIVELY, THE “IMPROVEMENTS”) WITHIN ASSESSMENT DISTRICT NO. 961 IN THE CITY OF SAN BERNARDINO, CALIFORNIA, WHICH ASSESSMENT DISTRICT IS SHOWN AND DESCRIBED IN THE ASSESSMENT DIAGRAM FOR ASSESSMENT DISTRICT NO. 961, RECORDED
FEBRUARY 6, 1985, IN BOOK 31 OF ASSESSMENT DISTRICT MAPS, PAGES 64, 65 AND 66, RECORDS OF SAN BERNARDINO COUNTY, CALIFORNIA, AS DESCRIBED IN THE DEED TO THE CITY OF SAN BERNARDINO RECORDED APRIL 11, 1985 AS INSTRUMENT NO. 85-085510, OFFICIAL
RECORDS. 
 PARCEL E-1: 
 ALL EASEMENTS, CONCERNING
PARCELS 1 THROUGH 5, A AND B OF PARCEL MAP 12902 IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 145 OF PARCEL MAPS, PAGES 68 AND 69, IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO
COUNTY, CALIFORNIA, AND PARCELS 1 THROUGH 7 OF PARCEL MAP 11745 AS PER PLAT RECORDED IN BOOK 138 PAGES 26 THROUGH 28 OF PARCEL MAPS, THAT ARE APPURTENANT TO THE REAL PROPERTY DESCRIBED AS PARCEL “E”, INCLUDING WITHOUT LIMITATION A
RECIPROCAL EASEMENT FOR ACCESS, PARKING AND PEDESTRIAN TRAFFIC AS ESTABLISHED BY DOCUMENT ENTITLED “MAJOR BLOCK DECLARATION, MAJOR BLOCK NO. 6 - SOUTH PALM COURT, TRI CITY CORPORATE CENTRE,” RECORDED ON MARCH 30, 1990 AS INSTRUMENT NO.
90-122789, OFFICIAL RECORDS IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA AND ALL EASEMENTS AND RIGHTS CREATED OR GRANTED BY ANY OF THE FOLLOWING INSTRUMENTS: 
 THAT CERTAIN FIRST AMENDMENT TO MAJOR BLOCK DECLARATION, MAJOR BLOCK NO. 6 - SOUTH PALM COURT, TRI-CITY CORPORATE CENTRE, DATED JUNE 21, 1990 AND RECORDED ON JUNE 22, 1990 AS INSTRUMENT NO. 90-246351 OFFICIAL RECORDS
IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA; 

 THAT CERTAIN SECOND AMENDMENT TO MAJOR BLOCK DECLARATION, MAJOR BLOCK NO. 6 - SOUTH PALM COURT, TRI-CITY CORPORATE
CENTRE, DATED JANUARY 1, 1992 AND RECORDED ON MAY 28, 1992 AS INSTRUMENT NO. 92-223951 OFFICIAL RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA; 
 THAT CERTAIN THIRD AMENDMENT TO MAJOR BLOCK DECLARATION, MAJOR BLOCK NO. 6 - SOUTH PALM COURT, TRI-CITY CORPORATE CENTRE, DATED NOVEMBER 5, 1993 AND RECORDED ON NOVEMBER 29, 1993 AS INSTRUMENT NO. 93-514344 OFFICIAL
RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA. 
 THAT CERTAIN FOURTH AMENDMENT TO MAJOR BLOCK DECLARATION, MAJOR BLOCK
NO. 6 - SOUTH PALM COURT, TRI-CITY CORPORATE CENTRE, DATED OCTOBER 9, 1996 AND RECORDED ON DECEMBER 4, 1996 AS INSTRUMENT NO. 96-445159 OFFICIAL RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA. 
 PARCEL F: (281-371-82, Pat & Oscars) 
 PARCEL 16 OF PARCEL MAP NO. 13910 IN THE CITY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 162 OF PARCEL MAPS, PAGES 76 THRU 79 RECORDS OF SAID COUNTY. 
 EXCEPTING THEREFROM THAT PORTION OF SAID PARCEL 16 DESCRIBED AS FOLLOWS: 
 COMMENCING AT THE SOUTHWEST CORNER OF SAID PARCEL 16; 
 THENCE ALONG THE WEST LINE OF SAID PARCEL NORTH 09° 50’ 22” WEST, 132.49 FEET TO THE TRUE POINT OF BEGINNING; 
 THENCE CONTINUING ALONG SAID WEST LINE NORTH 09° 50’ 22” WEST, 43.42 FEET TO AN ANGLE POINT THEREIN; 
 THENCE CONTINUING ALONG SAID
WEST LINE NORTH 44° 56’ 34” EAST, 75.03 FEET TO THE MOST NORTHWEST CORNER OF SAID PARCEL; 
 THENCE ALONG THE NORTH LINE OF SAID PARCEL NORTH
89° 56’ 34” EAST, 77.50 FEET TO THE NORTHEAST CORNER OF SAID PARCEL; 
 THENCE ALONG THE EAST LINE OF SAID PARCEL SOUTH 00° 03’
27” EAST, 95.84 FEET; 
 THENCE SOUTH 89° 56’ 34” WEST PARALLEL WITH THE NORTH LINE OF SAID PARCEL, 
 123.18 FEET TO THE TRUE POINT OF BEGINNING. 

 TOGETHER WITH THAT PORTION OF PARCEL B OF PARCEL MAP NO. 14712 IN THE CITY OF SAN BERNARDINO STATE OF CALIFORNIA,
AS PER MAP RECORDED IN BOOK 178 OF PARCEL MAPS, PAGES 41 THRU 44 RECORDS OF SAID COUNTY, DESCRIBED AS FOLLOWS: 
 BEGINNING AT THE SOUTHEAST CORNER OF SAID
PARCEL 16; 
 THENCE ALONG THE EAST LINE OF SAID PARCEL NORTH 00° 03’ 27” WEST, 122.89 FEET; 
 THENCE NORTH 89° 56’ 34” EAST, 80.97 FEET; 
 THENCE SOUTH
00° 03’ 27” EAST PARALLEL WITH THE EAST LINE OF SAID PARCEL, 105.07 FEET TO THE NORTHERLY RIGHT OF WAY OF HOSPITALITY LANE 45 FOOT HALF-WIDTH, PER SAID PARCEL MAP SAID POINT ALSO BEING THE BEGINNING OF A NON-TANGENT CURVE CONCAVE TO
THE NORTH, HAVING A RADIUS OF 655.00 FEET, AND THROUGH WHICH A RADIAL LINE BEARS SOUTH 16° 05’ 52” EAST; 
 THENCE WESTERLY ALONG SAID CURVE,
TO THE RIGHT, THROUGH A CENTRAL ANGLE OF 7° 15’ 26”, AN ARC DISTANCE OF 82.96 FEET TO THE POINT OF BEGINNING. 
 SAID LAND IS DESCRIBED
PURSUANT TO A CERTIFICATE OF COMPLIANCE FOR LOT LINE ADJUSTMENT BY THE CITY OF SAN BERNARDINO, RECORDED NOVEMBER 17, 2003 AS INSTRUMENT NO. 03-863281 OFFICIAL RECORDS. 
 EXCEPTING THEREFROM THE SIDEWALKS, SEWERS, STORM DRAINS, WATER MAINS, CURBS, GUTTERS, PAVING, ELECTROLLERS, STREET LIGHTS, STREET NAME SIGNS, TRAFFIC SIGNALS AND ALL APPURTENANCES AND APPURTENANT IMPROVEMENTS AND
RIGHTS (COLLECTIVELY, THE “IMPROVEMENTS”) WITHIN ASSESSMENT DISTRICT NO. 961 IN THE CITY OF SAN BERNARDINO, CALIFORNIA, WHICH ASSESSMENT DISTRICT IS SHOWN AND DESCRIBED IN THE ASSESSMENT DIAGRAM FOR ASSESSMENT DISTRICT NO. 961, RECORDED
FEBRUARY 6, 1985, IN BOOK 31 OF ASSESSMENT DISTRICT MAPS, PAGES 64, 65 AND 66, RECORDS OF SAN BERNARDINO COUNTY, CALIFORNIA, AS DESCRIBED IN THE DEED TO THE CITY OF SAN BERNARDINO RECORDED APRIL 11, 1985 AS INSTRUMENT NO. 85-085510, OFFICIAL
RECORDS. 
 PARCEL F-1: 
 ALL EASEMENTS, CONCERNING PARCEL
1 OF PARCEL MAP 13708, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 155 OF PARCEL MAPS, PAGES 6 AND 7, AND PARCELS A AND B OF PARCEL MAP 13910 AS PER PLAT RECORDED IN
BOOK 162 OF PARCEL MAPS, PAGES 76 THROUGH 79, IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA, THAT ARE APPURTENANT TO THE REAL PROPERTY DESCRIBED AS PARCEL “F” ABOVE, INCLUDING WITHOUT LIMITATION A RECIPROCAL
EASEMENT FOR ACCESS, PARKING AND PEDESTRIAN 

 
TRAFFIC AS ESTABLISHED BY DOCUMENT ENTITLED “MAJOR BLOCK DECLARATION, MAJOR BLOCK NO. 4 - CARNEGIE PLAZA, TRI-CITY CORPORATE CENTRE,” RECORDED ON
DECEMBER 20, 1990 AS INSTRUMENT NO. 90-501243 OFFICIAL RECORDS IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA, AND ALL EASEMENTS AND RIGHTS CREATED OR GRANTED BY ANY OF THE FOLLOWING INSTRUMENTS: 
 THAT CERTAIN MAJOR BLOCK DECLARATION FOR MAJOR BLOCK NO. 4 - CARNEGIE PLAZA, TRI-CITY CORPORATE CENTRE, DATED DECEMBER 19, 1990 RECORDED ON DECEMBER 20, 1990 AS
INSTRUMENT NO. 90-501244 IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA. 
 THAT CERTAIN FIRST AMENDMENT TO MAJOR BLOCK
DECLARATION, MAJOR BLOCK NO. 4 - CARNEGIE PLAZA, TRI-CITY CORPORATE CENTRE, DATED OCTOBER 3, 1991 AND RECORDED ON OCTOBER 8, 1991 AS INSTRUMENT NO. 91-384835 OFFICIAL RECORDS IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO COUNTY, CALIFORNIA.

 PARCEL G (APN 281-371-43, Lakeside Tower): 
 PARCEL 13 OF PARCEL MAP NO. 13910, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, AS PER MAP RECORDED IN BOOK 162 OF PARCEL MAPS, PAGES 76 THROUGH 79 INCLUSIVE, RECORDS OF SAID COUNTY. 
 PARCEL G-1: 
 NONEXCLUSIVE EASEMENTS FOR INGRESS, EGRESS AND VEHICULAR
PARKING OVER THOSE AREAS DESIGNATED AS SUCH IN DECLARATION RECORDED DECEMBER 20, 1990, AS INSTRUMENT NOS. 90-501243 AND 90-501244, OFFICIAL RECORDS OF SAID COUNTY AND AS AMENDED BY DOCUMENT RECORDED OCTOBER 8, 1991, AS INSTRUMENT NO. 91-384835,
OFFICIAL RECORDS OF SAID COUNTY, SAID EASEMENTS BEING LOCATED WITHIN THE FOLLOWING DESCRIBED PROPERTIES: 
 PARCEL 1 OF PARCEL MAP NO. 13708, AS PER PLAT
RECORDED IN BOOK 155 OF PARCEL MAPS, PAGES 6 AND 7, RECORDS OF SAID COUNTY; 
 PARCEL A AND PARCEL B OF PARCEL MAP NO. 13910, AS PER PLAT RECORDED IN BOOK
162 OF PARCEL MAPS PAGES 76 TO 79 INCLUSIVE, RECORDS OF SAID COUNTY.Research Collaboration and License Agreement, dated November 24, 2004

 Exhibit 10.1 
  
 Confidential Materials omitted and filed separately with the 
 Securities and Exchange Commission. Asterisks denote omissions. 
  
 RESEARCH COLLABORATION AND LICENSE AGREEMENT 
  
 THIS RESEARCH COLLABORATION AND LICENSE AGREEMENT (“Agreement”) is made effective as of November 24, 2004 (“Effective Date”) by and between ACHILLION PHARMACEUTICALS,
INC., a Delaware corporation (“Achillion”), with its principal place of business at 300 George Street, New Haven, Connecticut 06511, USA, and GILEAD SCIENCES, INC., a Delaware corporation (“Gilead”), with
its principal place of business at 333 Lakeside Drive, Foster City, California 94404, USA. Achillion and Gilead are sometimes referred to in this Agreement individually as a “Party” and collectively as the
“Parties”. 
  
 RECITALS 
  
 WHEREAS, Achillion has certain proprietary technology in compounds for
the prevention and treatment of chronic hepatitis C infection; 
  
 WHEREAS, Gilead and Achillion desire to enter into a collaboration to develop and commercialize Compounds (as hereinafter defined) upon the terms and conditions set forth herein; 
  
 WHEREAS, Gilead desires to obtain the right to develop and
commercialize Licensed Products in the Field (each as hereinafter defined) and Achillion desires to grant such rights, in each case upon the terms and conditions set forth herein. 
  
 NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the Parties
hereby agree as follows: 
  
 AGREEMENT 
  

	1.	DEFINITIONS 

  
 Unless specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, shall have the respective meanings set
forth below. References to “Articles”, “Sections” and “subsections” in this Agreement shall be to Articles, Sections and subsections respectively, of this Agreement unless otherwise specifically provided: 
  
 “Achillion Annual Budget Amount” means the Annual Budget
Amount allotted to Achillion in the Budget. 
  
 “Achillion
Know-How” means Know-How Controlled by Achillion (a) as of the Effective Date; (b) that is developed or acquired in the course of the Research Program; or (c)

 
that is developed or acquired outside of the course of the Research Program that is necessary or useful to the research, Development, manufacture, use, sale,
offer for sale, or importation of Compounds. 
  
 “Achillion Patents” means Patents Controlled by Achillion (a) that are listed in Exhibit 1.1; (b) as of the Effective Date; (c) that are conceived, reduced to practice or acquired in the course of the
Research Program; or (d) that claim or are directed to the research, Development, manufacture, use, sale, offer for sale or importation of Compounds. The Patents listed in Exhibit 1.1 shall be amended or supplemented from time to time by
Achillion to include any Patent Controlled by Achillion after the Effective Date and during the Research Program Term which claims or is directed to a composition of matter, or the manufacture or use thereof, that is necessary or useful to the
research, Development, manufacture, use, sale, offer for sale or importation of Compounds. 
  
 “Achillion Research Costs” means Research Costs incurred by Achillion. 
  
 “Achillion Technology” means Achillion Patents and Achillion Know-How. 
  
 “ADR” has the meaning given such term in Section 12.1(b). 
  
 “ADR Request” has the meaning given such term in
Section 12.1(b)(i). 
  
 “Affiliate” means
any corporation or other entity which has Corporate Control of, is under Corporate Control by, or is under common Corporate Control with, a Party to this Agreement. An entity shall be an Affiliate of a Party for only so long as such Corporate
Control exists. 
  
 “Annual Budget Amount” means
the Research Costs for both Parties reflected in the Budget for each calendar year in accordance with Section 2.4. 
  
 “Arbitration Panel” has the meaning given in Section 12.1(c)(i). 
  
 “Back-up Compound” means any Compound other than the Lead Compound. 
  
 “Back-up Program” means the component of the Research
Program devoted to Back-up Compounds. 
  
 “Blackout
Period” means the period beginning on the Effective Date, and ending on [**]. 
  
 “Budget” has the meaning given such term in Section 2.4(a)(i). 
  
 “Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending on
March 31, June 30, September 30 and December 31. 
  

 2 

 “Change of Corporate Control” means, with respect to a Party, the occurrence of any of
the following: 
  
 (a) any consolidation or merger of a Party with
or into any Third Party, or any other corporate reorganization involving a Third Party (“Merger”), as long as the stockholders of such Party immediately prior to the Merger own less than fifty percent (50%) of the surviving
entity’s voting power immediately after the Merger; 
  
 (b) a
change in the beneficial ownership of fifty percent (50%) or more of the voting securities of any Party (whether in a single transaction or series of related transactions) where, immediately after giving effect to such change, the legal or
beneficial owner of more than fifty percent (50%) of the voting securities of such Party is a Third Party, excluding any equity investments by venture capitalists or investment banks or other non-strategic investors, who alone or with their
Affiliates, are not themselves in the business of developing and commercializing pharmaceutical products; or 
  
 (c) the sale, transfer, lease, license or other disposition to a Third Party of all or substantially all of a Party’s assets in one or a series of
related transactions. 
  
 As used in this definition, “Party” shall
exclude Affiliates under Corporate Control by, or under common Corporate Control with, such Party. 
  
 “CMC” has the meaning given to such term in Section 4.1. 
  
 “Combination Product” means a product that includes one or more pharmaceutically active ingredients other
than a Compound in combination with at least one Compound. All references to Licensed Product in this Agreement shall be deemed to include a Combination Product. 
  
 “Commercially Diligent Efforts” mean those efforts to research, Develop, commercialize and market Licensed
Products that are consistent with the usual practice followed by pharmaceutical companies in pursuing the research, Development, commercialization and marketing of their pharmaceutical products with a comparable potential market, risk, and revenues.

  
 “Compound” has the meaning given in Exhibit
1.2. 
  
 “Confidential Information” has the
meaning given such term in Section 7.1(a). 
  
 “Control”, “Controls” and “Controlled” mean, with respect to a particular item of information or intellectual property right, that the applicable Party owns or has a license to such item or right and has
the ability to grant to the other Party access to and a license or sublicense (as applicable) under such item or rights as provided for herein without violating the terms of any agreement or other arrangement with any Third Party existing as of the
Effective Date or thereafter. 
  
 “Corporate Control”
means (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non-corporate
entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities. 
  

 3 

 “Develop” means the conduct of any pre-clinical, clinical or other studies required for
obtaining Regulatory Approval (including without limitation manufacturing, formulation, quality assurance and quality control activities) or for commercialization of a Compound, along with any other clinical studies, all in accordance with this
Agreement. The terms “Developing” and “Development” shall be interpreted accordingly. 
  
 “Development Committee” has the meaning given such term in Section 3.1(a). 
  
 “Development Plan” has the meaning given such term in
Section 3.2. 
  
 “Development Program Term”
means the period commencing when Proof of Concept is established and ending upon receipt of Regulatory Approvals from both the FDA and the EMEA. 
  
 “Discover” means the identification and optimization of the preclinical properties of Compounds. The terms “Discovering” and
“Discovery” shall be interpreted accordingly. 
  
 “Drug Approval Application” shall mean an application for Regulatory Approval of a Licensed Product, including without limitation an IND or NDA. 
  
 “EMEA” means the European Medicines Agency, or a successor agency thereto. 
  
 “European Market” means Germany, France, Italy, Spain and
the United Kingdom. 
  
 “External Research Costs”
means the reasonable and actual out-of-pocket costs, approved in advance by the Research Committee and reflected in the Budget, incurred by a Party from a Third Party, without mark-up or overhead charges, directly in furtherance of the Research
Program. Examples of External Research Costs that could be approved by the Research Committee are the costs charged by Third Parties for materials to make Compounds, contract researchers and/or toxicology studies. “External Research Costs”
shall not include any costs reflected in the FTE Rate. 
  
 “FDA” means the United States Food and Drug Administration, or a successor federal agency thereto. 
  
 “Field” means all human and animal therapeutic, diagnostic, and prophylactic uses, including, without limitation, the treatment,
prevention and prophylaxis of hepatitis C viral infections. 
  
 “Field-Based Personnel” has the meaning given such term in Section 4.2(b)(i). 
  
 “First Commercial Sale” means, with respect to any Licensed Product, the first sale for end use or consumption of such Licensed Product
in a Major Market after all required Regulatory Approvals with respect to such Licensed Product have been granted by the Regulatory Authority of such Major Market. For purposes of clarification, the first sale for end use or consumption of a
Licensed Product in a Major Market after conditional approval has been granted will constitute a First Commercial Sale for purposes of this Agreement. 
  

 4 

 “FTE” means an annualized full-time employee or equivalent, working no less than 1800
person hours per calendar year, with part-time personnel pro-rated as partial FTE’s. 
  
 “FTE Rate” means the amount a Party will pay the other Party over a consecutive twelve (12) month period for one (1) FTE. Unless otherwise agreed by the Parties: 
  
 (a) for Achillion FTEs conducting scientific research activities for Gilead
pursuant to the Research Program, the FTE Rate will be [**] Dollars ($[**]), with an annual cost of living adjustment (commencing January 1, 2006) in accordance with CPI-U as published by the Department of Labor Bureau of Labor Statistics; and

  
 (b) for FTEs employed by the Parties and identified in the
Research Plan and Budget as conducting activities in furtherance of the Research Program (other than activities conducted pursuant to subparagraph (a) above), the FTE Rate will be [**] Dollars ($[**]), with an annual cost of living adjustment
(commencing January 1, 2006) in accordance with CPI-U as published by the Department of Labor Bureau of Labor Statistics. 
  
 The FTE Rate shall reflect, and include, all personnel costs (including normal vacations, sick days, holidays and employee benefits), and costs of equipment, reagents,
travel, materials and supplies, allocation of general and administrative expenses, repairs, maintenance, utilities, rent, support staff and other overhead, for or associated with an FTE, provided that payment by a Party of the FTE Rate shall not be
deemed to give such Party any ownership interest in any equipment, reagents or other property purchased by the other Party using such research funding. 
  
 “GAAP” means United States Generally Acceptable Accounting Principles. 
  
 “Gilead Annual Budget Amount” means the Annual Budget Amount allotted to Gilead in the Budget. 

 
 “Gilead Know-How” means Know-How Controlled by Gilead
that is necessary or useful to the research, Development, manufacture, use, sale, offer for sale, or importation of Compounds. 
  
 “Gilead Patents” means any Patent Controlled by Gilead that is necessary or useful to the research, Development, manufacture, use, sale,
offer for sale, or importation of Compounds. 
  
 “Gilead
Research Costs” means Research Costs incurred by Gilead. 
  
 “Gilead Technology” means Gilead Patents and Gilead Know-How. 
  
 “HCV Field” means the treatment of chronic hepatitis C viral infections in humans. 
  
 “IND” means an Investigational New Drug application, Clinical Study Application, Clinical Trial Exemption, or similar application or
submission for approval to conduct human clinical investigations filed with or submitted to a Regulatory Authority in conformance with the requirements of such Regulatory Authority. 
  

 5 

 “Information” means any and all information, data, results, inventions, trade secrets,
techniques, material, or compositions of matter of any type or kind, including without limitation all know-how and all other scientific, pre-clinical, clinical, regulatory, manufacturing, marketing, personnel, financial, legal and commercial
information or data, whether communicated in writing, orally or by any other method, which is disclosed by one Party to the other Party in connection with this Agreement; provided that the foregoing is related to a Compound. 
  
 “Invention” means any process, method, use, composition of
matter, article of manufacture, discovery or finding, whether or not patentable. 
  
 “Joint Inventions” has the meaning given such term in Section 9.1. 
  
 “Joint Patents” has the meaning given such term in Section 9.1. 
  
 “Know-How” means all tangible and intangible (a) techniques, technology, practices, trade secrets,
inventions (whether patentable or not), methods, knowledge, know-how, skill, experience, test data and results (including pharmacological, toxicological and clinical test data and results), analytical and quality control data, results or
descriptions, software and algorithms and (b) compounds, compositions of matter, cells, cell lines, assays, animal models and physical, biological or chemical material Controlled by Party or its Affiliates, in either case that are necessary or
useful to the research, Development, formulation, manufacture, use or sale of Compounds. 
  
 “Lead Compound” has the meaning given such term in Section 2.2(a)(iv). 
  
 “Licensed Product” means any preparations in final form, bulk form or other form containing as an active pharmaceutical ingredient one or
more Compounds for sale by prescription, over-the-counter or any other method, including without limitation any Combination Product. 
  
 “Major Market” means each of the United States of America, Japan and each of the five (5) countries of the European Market.

  
 “NDA” means a New Drug Application, Biologics
License Application, Worldwide Marketing Application, Regulatory Approval application or similar application or submission for Regulatory Approval of a Licensed Product filed with a Regulatory Authority to obtain marketing approval for a biological
or pharmaceutical product in that country or in that group of countries. 
  
 “Net Difference” has the meaning give such term in Section 2.4(c)(iii). 
  
 “Net Sales” means, with respect to a given period of time, the total amount invoiced by Gilead or its Related Gilead Parties for sales of
Licensed Products to a Third Party (whether an end-user, wholesaler or otherwise) in the Territory, less the following deductions with respect to such sale, to the extent applicable to the Licensed Product and to the extent actually allowed and/or
taken: (a) trade, cash and quantity credits, discounts, credits, and refunds, (b) allowances or credits for returns or rejected Licensed Product and a reasonable allowance for bad debt expense consistent with GAAP; (c) prepaid freight
and insurance; (d) sales taxes and other 

  

 6 

 
governmental charges (including value added and similar taxes, but solely to the extent not otherwise creditable or reimbursed and excluding any income tax)
actually paid by Gilead or its Related Gilead Parties in connection with the sale; and (e) customary rebates (including, for this purpose, discounts provided by means of chargebacks or rebates) actually granted to managed health care
organizations, federal, state, or local governments (or their agencies) (including without limitation Medicaid rebates), all to the extent in accordance with GAAP as consistently applied across all products of Gilead. 
  
 Where Licensed Product is sold in the form of a Combination Product
containing one or more active pharmaceutical ingredients (“API”) in addition to a Compound, the Net Sales for such Combination Product for purposes of determining royalties payable under this Agreement will be calculated by
multiplying the Net Sales of such Combination Product (without regard to the adjustment established by this paragraph) by the fraction A/(A+B) where A is the Net Selling Price for the stock keeping unit most comparable to the component of the
Licensed Product containing that Compound as the sole API, if sold separately, in such country during the relevant fiscal quarter (or if not available in that quarter, the most recent available fiscal quarter), and B is the Net Selling Price for the
stock keeping unit, most comparable to the component containing other APIs, if sold separately, in such country during the relevant fiscal quarter. For clarity, if there are three or more APIs (including the Compound), additional B terms calculated
in the same manner, shall be included in the denominator so that such fraction shall be A/(A+B1+B2+    ). 
  
 If, on a country-by-country basis, one or more of the other APIs in the Combination Product are not sold separately in said country, the Net Sales for the
purpose of determining royalties payable under this Agreement for the Combination Product shall be calculated by multiplying the Net Sales of such Combination Product (without regard to the adjustment established by this paragraph) by the fraction
A/C where A is the Net Selling Price for the stock keeping unit most comparable to the component of the Licensed Product containing the relevant Compound as the sole API, if sold separately, in such country during the relevant fiscal quarter (or if
not available in that quarter, the most recent available fiscal quarter) and C is the Net Selling Price for the Combination Product in such country during the relevant fiscal quarter (or if not available in that quarter, the most recent available
fiscal quarter). 
  
 If, on a country-by-country basis, the
Licensed Product containing a Compound as the sole API is not sold separately in said country during the relevant fiscal quarter but one or more of the other APIs in the Combination Product are sold separately in said country during the relevant
fiscal quarter (or if not available in that quarter, the most recent available fiscal quarter), the Net Sales for the Combination Product shall be calculated by multiplying the Net Sales of such Combination Product (without regard to the adjustment
established by this paragraph) by the fraction (1-(D/C)) where D is the Net Selling Price for the stock keeping unit most comparable to the product containing the other API as the sole API and C is the Net Selling Price for the Combination Product
in such country during the relevant fiscal quarter (or if not available in that quarter, the most recent available fiscal quarter). 
  
 If, on a country-by-country basis, the Licensed Product containing a Compound as the sole API is not sold separately in a country and one or more of the
other APIs in the Combination Product are not sold separately in such country, the Net Sales of the Combination 

  

 7 

 
Product shall be deemed to be the Net Sales of such Combination Product (without regard to the adjustment established by this paragraph) multiplied by the
fraction A/C where A is the Net Selling Price on an average worldwide basis for the stock keeping unit most comparable to the Licensed Product containing the relevant Compound as the sole API, and C is the Net Selling Price for the Combination
Product on an average worldwide basis. 
  
 For clarification, sale
of a Licensed Product by Gilead or its Related Gilead Parties to Gilead or Related Gilead Parties for resale by such entity to an unaffiliated Third Party shall not be deemed a sale for purposes of “Net Sales” hereunder, but the sale of
such Licensed Product by such entity to an unaffiliated Third Party (whether an end-user, wholesaler, distributor, or otherwise) shall be deemed to be a sale by Gilead of a Licensed Product to a Third Party for purposes of calculating Net Sales
hereunder and royalties owed by Gilead under Section 6.5. Further, transfers or dispositions of Licensed Products in commercially reasonable quantities (consistent with Gilead’s usual practice as applied to other compounds and products of
a similar nature) and without receipt of compensation, or if sold on a not-for-profit basis for charitable or promotional purposes or for pre-clinical or clinical Development, manufacturing scale-up or regulatory purposes prior to receiving
Regulatory Approval shall not be deemed “sales” for purposes of “Net Sales” hereunder. 
  
 If Gilead intends to sell a Combination Product in any country in the Territory where the Compound contained in the Licensed Product is not sold
separately in such country, “Net Sales” for the Licensed Product shall be determined pursuant to Section 5.7. 
  
 “Net Selling Price” means the Net Sales (as defined in the first paragraph of the definition of “Net Sales”, without giving
effect to the subsequent paragraphs of such definition) of a product divided by the number of units of product sold. 
  
 “New HCV Compound” means any compound (other than a Compound) that is useful to prevent or treat chronic hepatitis C viral infections in
humans that as of the Effective Date is, or at any time during the term of this Agreement will be, under the Control of Achillion. 
  
 “Offer Notice” has the meaning given such term in Section 6.12(a). 
  
 “Offsetting IP” means: 
  
 (a) Know-How, Patents or information owned by a Third Party that is required for the research, Development, manufacture,
use, sale, offer for sale or importation, of Compounds; and 
  
 (b) any other Third Party intellectual property rights, not included in clause (a), for which Gilead pays Third Party Royalties, provided that Achillion has consented to have such intellectual property rights included as Offsetting IP, with
such consent not to be unreasonably withheld. 
  
 “Patent
Costs” shall mean all reasonable and actual out-of-pocket costs incurred by a Party for work performed before and after the Effective Date associated with filing, prosecuting, issuing and maintaining Achillion Patents, including
interference, opposition, reexamination and reissue actions; provided that the other Party shall prior to payment have the right to review and 

  

 8 

 
comment on any such costs that exceed $[**] for any calendar month, and any amount reasonably objected to by such other Party shall not constitute Patent
Costs. 
  
 “Patents” mean (a) all patents,
certificates of invention, applications for certificates of invention, and patent applications, including without limitation patent applications under the Patent Cooperation Treaty and the European Patent Convention, provisional, non-provisional,
and abandoned patent applications throughout the world, together with (b) any renewal, divisional, continuation (in whole or in part), or continued prosecution applications of any of such patents, certificates of invention and patent
applications, and any and all patents or certificates of invention issuing thereon, and any and all reissues, reexaminations, extensions, divisional, renewals, substitutions, confirmations, supplemental protection certificates, registrations,
revalidations, revisions, and additions of or to any of the foregoing, and any foreign counterparts of any of the foregoing and any other patents and patent applications claiming priority back to any of the foregoing. 
  
 “Phase 1 Clinical Trial” means a human clinical trial in any
country to initially evaluate the safety and/or pharmacological or antigenic effect of a Licensed Product in humans or that would otherwise satisfy the requirements of 21 CFR § 312.21(a) or the equivalent laws, rules or regulations in the
European Union or Japan. 
  
 “Phase 2 Clinical Trial”
means a human clinical trial in any country to initially evaluate the effectiveness of a Licensed Product (whether as a primary or secondary endpoint) for a particular indication or indications in humans with the disease or indication under
study or that would otherwise satisfy the requirements of 21 CFR § 312.21(b) or the equivalent laws, rules or regulations in the European Union or Japan. 
  

“Phase 3 Clinical Trial” means a pivotal human clinical trial in any country the results of which could be used to establish safety
and efficacy of a Licensed Product to support Regulatory Approval and as a basis for a NDA or that would otherwise satisfy the requirements of 21 CFR § 312.21(c) or the equivalent laws, rules or regulations in the European Union or Japan.

  
 “Proof of Concept” has the meaning given such
term in Exhibit 1.3. 
  
 “Proof of Concept Program”
means the component of the Research Program devoted to the Lead Compound. 
  
 “Regulatory Approval” means all governmental approvals (including pricing and reimbursement approvals), product and/or establishment licenses, registrations or authorizations necessary for the
manufacture, use, storage, import, export, transport and/or sale of a Licensed Product in a jurisdiction. 
  
 “Regulatory Authority” means any applicable government regulatory authority necessary to obtain approval to manufacture, market and sell
a Licensed Product in the Territory, including the FDA in the United States and the EMEA in the European Market. 
  
 “Related Gilead Party” means Gilead’s sub-licensees (which term does not include distributors or Affiliates of Gilead) permitted
under this Agreement outside the United States of 

  

 9 

 
America and the European Market. Notwithstanding the foregoing, in no event shall Achillion be considered a Related Gilead Party. 
  
 “Related Gilead Party Royalties” means royalties paid by a
Related Gilead Party to Gilead or its Affiliates for Net Sales of Licensed Products. 
  
 “Research Cost Cap” means the maximum amount, set forth in Section 2.4(b), (a) of Research Costs that the Parties are required to spend in total by both Parties in furtherance of the
Research Program, and (b) for which the Parties may receive reimbursement pursuant to Section 2.4(c). 
  
 “Research Costs” means (a) the reasonable and actual personnel costs of a Party, determined at the FTE Rate, and (b) External
Research Costs reasonably and actually incurred by such Party, in each case reasonably incurred in furtherance of the Research Program by or for the account of such Party after the Effective Date; provided that such costs are consistent with the
Research Plan and the Budget, and are specifically attributable to the Development of Compounds. For purposes of clarity, costs for activities that advance the Research Program but are not required for obtaining Proof of Concept shall not be
included under the Research Plan and the full amount of such costs shall be borne by Gilead. 
  
 “Research Committee” means the committee described in Section 2.1. 
  
 “Research Plan” has the meaning given such term in Section 2.2(a)(i). 
  
 “Research Program” means the research and development program for the Compounds described in
Section 2.3. 
  
 “Research Program Term” has
the meaning given such term in Section 2.3(c). 
  
 “Royalty Rights” has the meaning given such term in Section 6.12(a). 
  
 “Royalty Term” means, with respect to a Licensed Product, for each country in the Territory, the period of time commencing on the First
Commercial Sale of such Licensed Product in any country and ending the later of (a) [**] years after the date of First Commercial Sale in such country, or (b) the expiration of the last Valid Patent Claim of an Achillion Patent or
Joint Patent in such country. Upon expiration of the Royalty Term for a Licensed Product in a country, Gilead may thereafter continue to sell such Licensed Product in such country on a royalty-free basis. 
  
 “Sublicense Royalty” has the meaning given such term in
Section 6.5(b). 
  
 “Third Party” means an
entity other than Gilead and its Related Gilead Parties, and Achillion. 
  
 “Third Party Infringement Losses” has the meaning given such term in Section 11.1. 
  
 “Third Party Royalties” means up-front, milestone, royalty and any other similar payments paid by Gilead or any Related Gilead Party to
any Third Party for Offsetting IP for the 

  

 10 

 
development, manufacture, use sale, offer for sale, or importation of Compounds or Licensed Products. 
  
 “Territory” means all of the countries in the world, and
their territories and possessions. 
  
 “Valid Patent
Claim” means a claim of an issued and unexpired Patent, which has not been revoked or held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, and which is not appealable or has not been
appealed within the time allowed for appeal, and which has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer, otherwise. 
  

	2.	RESEARCH PROGRAM 

  
 2.1 Research Committee 
  
 (a) Formation and Duration. Within ten (10) days after the Effective Date, Achillion and Gilead shall establish the Research
Committee (“Research Committee”). Except to the extent otherwise provided by mutual written agreement of the Parties, the Research Committee shall disband upon the later of Proof of Concept or expiration of the Research Program
Term. 
  
 (b) Authority. For the duration
of the Research Program Term, the Research Committee will oversee the Parties’ activities in furtherance of the Research Program as follows: 
  
 (i) The Research Committee will review and if necessary revise the Research Plan and the Budget, coordinate activities under the
Research Plan, confer regarding the status of the Research Program, review relevant data, consider and advise on any technical issues that arise, set research priorities, review project milestones, advise on clinical and pre-clinical development,
regulatory, and manufacturing matters and strategies, and review and advise on financial matters relating to the Research Program. 
  
 (ii) In no event shall the Research Committee have the right to (A) modify or amend the terms and conditions of this
Agreement; (B) determine which personnel of a Party perform Research Program activities or act as such Party’s representatives on the Research Committee; or (C) determine any matter involving prosecution, defense or enforcement of
Patents. 
  
 (c) Composition 

 
 (i) Gilead shall designate three (3) named
representatives of Gilead and Achillion shall designate three (3) named representatives of Achillion. Each Party shall appoint its respective representatives to the Research Committee and, from time to time, may substitute one or more of its
representatives. 
  
 (ii) Additional
representatives or consultants of a Party may from time to time, with the consent of the other Party (with such consent not to be unreasonably withheld) attend Research Committee meetings, subject to such representative’s and/or
consultant’s written 

  

 11 

 
agreement to comply with the confidentiality and non-use obligations equivalent to those set forth in Section 7, and provided that such additional
representatives shall have no vote. 
  
 (iii) The Research Committee may establish such working groups or sub-committees as it may choose from, time to time to accomplish its purposes. 
  
 (iv) Members of the Research Committee may also serve as members of the Development Committee.

  
 (d) Governance 
  
 (i) The Research Committee shall be chaired by a
representative of Gilead. 
  
 (ii)
Decisions of the Research Committee shall be made by unanimous vote, with each Party’s representatives on the Research Committee collectively having one (1) vote. 
  
 (iii) In the event that the Research Committee cannot or does not, after good faith efforts, reach
agreement on an issue, such issue shall be referred to the Executive Vice President of Research and development for Gilead and the Chief Executive Officer for Achillion. Such officers of the Parties shall meet promptly thereafter and shall negotiate
in good faith to resolve such issue. If they cannot resolve such issue within [**] of commencing such negotiations, then the resolution and/or course of conduct shall be [**]. 
  
 (e) Meetings 
  
 (i) The Research Committee shall meet at least once each Calendar Quarter in accordance with a
schedule established by mutual written agreement of the Parties, with the location for such meetings determined by agreement of the Parties. 
  
 (ii) Either Party may call for non-scheduled meetings of the Research Committee for good cause, which shall occur at mutually
agreeable times. 
  
 (iii) The Research
Committee upon mutual agreement may meet by means of teleconference, videoconference or other similar communications equipment. 
  
 (iv) No Research Committee meeting may be conducted unless at least two (2) representatives of each Party are participating.

  
 (v) Each Party shall bear its own
expenses related to the attendance at Research Committee meetings. 
  
 (f) Records. The Research Committee chair, or his/her designee, shall have responsibility for preparing minutes of each Research Committee meeting. Such minutes shall provide a description, in reasonable
detail, of the Research Program progress to date, updates to the Budget, the discussions at the meeting, a list of any actions or determination approved by the Research Committee and any disagreements not resolved by the Research Committee. Such

  

 12 

 
minutes shall be circulated to all members of the Research Committee within thirty (30) days following the Research Committee meeting. 
  
 2.2 Research Plan 
  
 (a) Content 
  
 (i) The Parties shall, within sixty (60) days of
the Effective Date, agree on a plan (“Research Plan”), which shall be consistent with the Initial Research Plan attached as Exhibit 2.2 hereto. 
  
 (ii) The Research Plan will describe the Research Program. Such description shall include, among
other things: project milestones; timelines; the tasks to be conducted by the Parties; responsibilities of the Parties, the resources to be made available by each Party during the Research Program Term, the number of Achillion FTEs to be utilized
(which shall include [**] FTEs during the Research Program Term to work on the Back-up Program); the number of Gilead FTEs to be utilized; the Budget; matters relating to clinical and pre-clinical development, regulatory filings and manufacturing;
and such other matters as the Research Committee considers appropriate. 
  
 (iii) In the event of any conflict between the Research Plan and this Agreement, this Agreement shall prevail. 
  
 (iv) The Research Plan will provide that the Parties will pursue Development of one Compound at any time as a lead Compound (a
“Lead Compound”), and will specify those activities to be included in the Proof of Concept Program. 
  
 (v) The Research Plan will provide for Development of one or more Back-up Compounds, and will specify those activities to be
included in the Back-up Program. 
  
 (1)
Back-up Compounds may be Developed by both Parties pursuant to the Back-up Program as specified by the Research Plan, by Achillion pursuant to Section 2.4(d), or by Gilead outside the Research Program, subject to the limitations of
Section 2.4(d)(iv). 
  
 (2) The
Research Committee may amend the Research Plan to provide for reduction or termination of further development of the Lead Compound in favor of one or more Back-up Compounds. Any election by the Research Committee to reduce or terminate further
development of the Lead Compound in favor of development of a Back-up Compound shall be made on a commercially reasonable basis. If any Back-up Compound is so selected in favor of the Lead Compound, such Back-up Compound shall be designated by the
Research Committee as the Lead Compound for purposes of this Agreement. 
  
 (b) Amendment. The Research Plan may be amended from time to time by the Research Committee. Notwithstanding anything in this Agreement to the contrary, no amendment to the Research Plan that would transfer to
Gilead any responsibility or activity previously assigned to Achillion shall be made without Achillion’s consent; provided however, 

  

 13 

 
that such consent shall not be required for any such amendment that is necessitated by Achillion’s failure to perform such responsibility or activity in
a satisfactory or timely manner. 
  
 2.3 Research
Program 
  
 (a) Conduct of the
Program 
  
 (i) The Research Program
will be conducted by each Party pursuant to and consistent with the Research Plan. 
  
 (ii) Subject to the terms and conditions of this Agreement, each Party shall be responsible for managing and controlling their
personnel and performing their respective tasks pursuant to the Research Plan. 
  
 (iii) Each Party shall conduct the Research Program in good scientific manner, and in compliance in all material respects with all
requirements of applicable laws, rules and regulations. 
  
 (iv) Each Party shall use Commercially Diligent Efforts in the Research Program, including without limitation allocation of sufficient time, effort, equipment and facilities to the Research Program, and shall
use personnel with sufficient skills and experience as are required to accomplish the Research Program in accordance with the terms of this Agreement and the Research Plan. 
  
 (v) Notwithstanding anything else to the contrary in this Agreement, all activities conducted under
the Research Program shall continue only until expiration of the Research Program Term. 
  
 (b) Use of Third Parties. Achillion shall be entitled to utilize the services of Third Parties to perform Research Program
activities only upon the prior written consent of Gilead (not to be unreasonably withheld) or as specifically set forth in the Research Plan. In the event that either Party utilizes the services of Third Parties to perform Research Program
activities, such Party shall obtain the written agreement of each such Third Party, prior to the time such Third Party initiates work, to (A) assign ownership of Inventions related to Compounds made in the course of Research Program activities
to such Party and (B) maintain confidentiality of any Research Program activities or Information, and any Confidential Information in accordance with Section 7. 
  
 (c) Research Program Term. The Research Plan will provide that the term of the Research Program
(“Research Program Term”) will expire upon establishment of Proof of Concept in a Compound, unless the Parties otherwise agree in an amendment to the Research Plan, in which case the Research Program Term will expire on the date
agreed by the Parties. If Gilead elects to utilize Achillion FTEs to perform additional research pursuant to Section 2.4(d), the Research Program Term will continue until at least the end of the period that Gilead so elects to have Achillion
FTEs conduct such activities. 
  

 14 

 2.4 Costs Incurred for the Research Program 
  
 (a) Budget 
  
 (i) The Research Plan shall include a budget
(“Budget”), which shall specify the amount anticipated to be spent in each calendar year of the Research Program Term, for all research and development activities to be conducted in furtherance of the Research Program, broken into
such categories as the Research Committee considers appropriate. 
  
 (ii) Any proposed amendment to the Budget may be submitted by either Party to the Research Committee for consideration. The Research Committee shall agree on any amendment to the Budget as an amendment to the
Research Plan, in accordance with Section 2.1(d)(ii). 
  
 (b) Research Cost Cap. The Parties have agreed on a Research Cost Cap of [**] Dollars ($[**]). The amount of the Research Cost Cap may only be increased or decreased by written agreement of the Parties, signed
by the Chief Executive Officer for Achillion and the Executive Vice President for Research and Development for Gilead. 
  
 (c) Reimbursement for Research Costs 
  
 (i) [**] Percent ([**]%) of each Party’s Research Costs incurred between the Effective Date and the date Proof of Concept is
established shall be reimbursed by the other Party to the extent allowed, and pursuant to the procedure set forth in, this Section 2.4(c). 
  
 (ii) Within [**] following the end of each Calendar Quarter during the Research Program Term, each Party will send a statement of
the Research Costs incurred by such Party to the other Party (in such form and manner as the Parties shall agree from time to time); provided, however, that for any calendar year: 
  
 (1) Achillion shall not seek or obtain reimbursement for Research Costs that (A) would result
in reimbursement to Achillion of a total amount in any calendar year that exceeds [**]% of the Achillion Annual Budget Amount; or (B) would result in total reimbursement for all Research Costs that would exceed the Research Cost Cap; and

  
 (2) Gilead shall not seek or obtain
reimbursement for Research Costs that (A) would result in reimbursement to Gilead in any calendar year of a total amount that exceeds [**]% of the Gilead Annual Budget Amount; or (B) would result in total reimbursement for all Research
Costs that would exceed the Research Cost Cap. 
  
 (iii) The Research Committee shall determine whether the amounts reflected in the Parties’ statements are consistent with this Section 2.4 within [**] after receipt of the statements described in Section 2.4(c)(ii) and
determine the net difference (“Net Difference”) between the amounts reflected in such two statements. For purposes of this Section 2.4(c)(iii), the third sentence of Section 2.1(d)(iii) shall not apply. 
  
 (iv) Following the determination pursuant to
Section 2.4(c)(iii), the Party that incurred the lower Research Costs in such Calendar Quarter shall pay to the other 

  

 15 

 
Party, within [**] of the end of such Calendar Quarter, an amount equal to [**] Percent ([**]%) of the Net Difference for such Calendar Quarter. 

 
 (d) Development of Back-up Compounds After Proof of
Concept 
  
 (i) Within [**] after
Proof of Concept is established, Gilead may request that Achillion provide additional research support, for a period of up to [**] after Proof of Concept is established, by conducting research and Development work on Back-up Compounds or in other
areas. The Parties will negotiate in good faith the number of Achillion FTEs to be used and the work to be performed, and an extension to the Research Program Term, and will reflect any such agreement in an amendment to the Research Plan.

  
 (ii) If Gilead requests that Achillion
provide additional research support pursuant to above clause 2.4(d)(i), Gilead shall reimburse Achillion for [**] Percent ([**]%) of the cost of Achillion FTEs requested. Such reimbursement will be at the applicable FTE Rate. Such reimbursement
shall be prorated for the number of workdays actually worked by each FTE. 
  
 (iii) Within [**] following the end of each Calendar Quarter during which Achillion FTEs performed services pursuant to this Section 2.4(d)(iii), Achillion will send a statement of the amount owed by
Gilead, and Gilead shall pay such amounts due within [**] of receipt of such invoice. 
  
 (iv) If, after Proof of Concept is established, Gilead wishes to Discover Back-up Compounds, and if the Parties agree that
Achillion has the resources and capability to undertake such Discovery, Gilead shall offer to Achillion the opportunity to undertake such activities pursuant to this Section 2.4(d)(iv). If Achillion agrees to undertake such activities, Gilead
shall fund not less than [**] Achillion FTEs at the FTE Rate to Discover Back-up Compounds, for a period ending upon the earlier of (1) the conclusion of [**] years after Gilead commences such Discovery activities, or (2) Gilead ceases
such Discovery activities on Back-up Compounds. 
  
 2.5
Records and Reports 
  
 (a) Records. Achillion and Gilead shall each maintain records, in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, in laboratory notebooks (or equivalent), which shall fully and
properly reflect all work done and results achieved in the performance of the Research Program by such Party. 
  
 (b) Copies and Inspection of Records. No more frequently than once each calendar year during the Research Program Term and
for six (6) months thereafter, each Party shall have the right, during normal business hours and upon reasonable notice, to inspect and copy all records of the other Party referred to in Section 2.5(a); provided, however, that neither
Party shall have the right to review or copy records to the extent that such records contain information that does not relate directly to Compounds, and either Party, in lieu of providing such access to its records, may elect to provide copies of
the relevant records to the other Party. The receiving Party shall maintain such records and the information disclosed therein in confidence in accordance with Section 7. 
  

 16 

	3.	DEVELOPMENT 

  
 3.1 Development Committee 
  
 (a) Formation and Duration. No later than ten (10) days after Proof of Concept is established, Achillion and Gilead
shall establish the Development Committee (“Development Committee”). Except to the extent otherwise provided by mutual written agreement of the Parties, the Development Committee shall disband at the end of the Development
Program Term. 
  
 (b) Activities of the
Development Committee. The Development Committee will act in an advisory capacity to Gilead and, in such capacity, will review and comment on the Development Plan and monitor, evaluate, discuss and comment on the Development Plan and the
progress reports provided by Gilead pursuant to Section 3.1(d)(ii). 
  
 (c) Attendance 
  
 (i) Gilead shall designate three (3) named representatives of Gilead and Achillion shall designate three (3) named representatives of Achillion. Each Party shall appoint its respective representatives to the Development
Committee and, from time to time, may substitute one or more of its representatives. 
  
 (ii) Additional representatives or consultants of a Party may from time to time, with the consent of the other Party (with such
consent not to be unreasonably withheld) attend Development Committee meetings, subject to such representative’s and/or consultant’s written agreement to comply with the confidentiality and non-use obligations equivalent to those set forth
in Section 7. 
  
 (iii) The
Development Committee may establish such working groups or sub-committees as it may choose from time to time to accomplish its purposes. 
  
 (d) Meetings 
  
 (i) The Development Committee shall meet at least once each Calendar Quarter in accordance with a schedule established by mutual
written agreement of the Parties, with the location for such meetings determined by agreement of the Parties. 
  
 (ii) Prior to each meeting, Gilead shall provide written progress reports to the Development Committee, describing Gilead’s
Development activities and progress attained during the prior Calendar Quarter. 
  
 (iii) Either Party may call for non-scheduled meetings of the Development Committee for good cause, which shall occur at mutually
agreeable times. 
  
 (iv) The Development
Committee upon mutual agreement may meet by means of teleconference, videoconference or other similar communications equipment. 
  

 17 

 (v) No Development Committee meeting may be conducted unless at least two
(2) representatives of each Party are participating. 
  
 (vi) Each Party shall bear its own expenses related to the attendance at Development Committee meetings. 
  
 (e) Records. The Development Committee chair, or his/her designee, shall have responsibility for preparing minutes of each
Development Committee meeting. Such minutes shall provide a description of the discussions at the meeting, a list of any actions or determinations approved by the Development Committee and any disagreements not resolved by the Development Committee.
Such minutes shall be circulated to all members of the Development Committee within thirty (30) days following the Development Committee meeting. 
  
 3.2 Development Plan. Gilead shall, within [**] after Proof of Concept is established, draft a development plan (“Development
Plan”) and deliver the Development Plan to the Development Committee. The Development Plan shall describe Gilead’s planned Development activities. The Development Plan shall at all times include a designation of [**]. 
  
 3.3 Clinical Development. After Proof of Concept is
established, Gilead and its Related Gilead Parties shall be solely responsible, at its sole expense, for all clinical Development of Licensed Products worldwide, including the conduct of any clinical Development of Licensed Products. 
  
 3.4 Regulatory 
  
 (a) Filings. Between the Effective Date and
the date Proof of Concept is established, Achillion shall be responsible for and shall file and own all Drug Approval Applications. Upon establishment of Proof of Concept, Gilead shall become responsible for, and Achillion will transfer to Gilead,
all Drug Approval Applications, and thereafter Gilead shall file and own all Drug Approval Applications and shall be responsible for all communications with Regulatory Authorities in relation thereto (to the extent permitted by law). 
  
 (i) Prior to establishment of Proof of Concept,
Gilead and Achillion will collaborate to facilitate regulatory activities. In furtherance of that goal, Achillion shall promptly forward to Gilead copies of all Drug Approval Applications and communications with and decisions of Regulatory
Authorities. Gilead shall have the right to review, comment upon and participate in any decision made with respect to a Drug Approval Application, and will be given notice of any in-person or telephonic meetings with Regulatory Authorities
sufficient to permit Gilead’s participation in such meetings. Within ten (10) days of the Effective Date, Achillion shall provide Gilead with copies of any documents and communications described in this Section 3.4(a)(i) then in
Achillion’s possession, and shall provide Gilead with any additional relevant information or assistance that Gilead reasonably requests. 
  
 (ii) The Parties shall, as soon as practicable after Proof of Concept is established, cooperate to transfer and provide copies of
(to the extent that they are not then in Gilead’s possession) all Drug Approval Applications, Information, data, protocols, clinical study reports and Know-How that is reasonably required for Gilead to obtain Regulatory Approval for 

  

 18 

 
any Licensed Product. Further, Gilead shall keep Achillion reasonably apprised of the progress of all Drug Approval Applications through the progress reports
presented to the Development Committee, and will provide Achillion copies of all reasonably requested regulatory filings within a reasonable time after their submission to the relevant Regulatory Authority. 
  
 (b) Labeling. To the extent permitted by law
and Regulatory Authorities, Gilead shall identify Achillion as the licensor of each Licensed Product on the packaging and labeling for such Licensed Product in each country of the Territory in a manner approved in advance in writing by Achillion,
such consent not to be unreasonably withheld. 
  
 3.5
Diligence. Gilead shall use reasonably diligent efforts to Develop at least one Licensed Product in the HCV Field [**]. Solely for purposes of this Section 3.5, “reasonably diligent efforts” means those efforts that are
consistent with the usual practice that a pharmaceutical company would reasonably undertake in pursuing the Development of a licensed product with a comparable potential market, risk, and revenues, assuming that such pharmaceutical company [**].

  

	4.	COMMERCIALIZATION 

  
 4.1 Manufacturing. As soon as practicable, and in any event within sixty (60) days of the Effective Date, Achillion shall
transfer to Gilead all material information relating to the manufacture of Compounds or Licensed Products, including but not limited to data, Information and Achillion Know-How that is reasonably required or related to the manufacturing of Compounds
or Licensed Products, manufacturing specifications, raw materials, intermediates, API, and clinical supplies; provided, however, that Achillion may retain any materials, information or data that is reasonably required or necessary for Achillion to
conduct Development pursuant to the Research Program or otherwise pursuant to this Agreement, to conduct development outside of the scope of this Agreement to the extent permitted by this Agreement, or to fulfill its existing obligations to Third
Parties to the extent permitted by this Agreement. Gilead shall thereafter be responsible for the chemistry, manufacturing and control (“CMC”) of Compounds, clinical supplies and Licensed Products, and Achillion shall cooperate
fully with Gilead and will provide Gilead with any information, materials reasonably available or assistance that Gilead reasonably requests. 
  
 4.2 Commercial and Product Support Activities 
  
 (a) Gilead Activities. Except as provided in Section 4.2(b), Gilead and its Related
Gilead Parties shall be solely responsible, at its expense, for marketing and commercialization of one or more Licensed Products. 
  
 (b) Achillion Activities 
  
 (i) Achillion may make a one-time election to have field-based personnel (“Field-Based Personnel”) support
Gilead’s commercial activities in the United States relating to Licensed Products to the extent and pursuant to the procedures set forth in this Section 4.2(b). The Parties will agree on the number of Field-Based Personnel that will
support such activities and the duration of their period of service; provided that the number of such Field 

  

 19 

 
Based Personnel shall be up to [**] individuals at any given time, or such greater number as the Parties mutually agree, and Field-Based Personnel shall
serve, if Achillion so elects, for a period lasting up to [**]. Such Field Based Personnel (A) may be full- or part-time employees and (B) may be either (I) [**] assigned to work with physicians and other professionals [**] or (II)
[**]. 
  
 (ii) Gilead shall provide
Achillion with a written notice, at any time after commencement of a Phase 3 Clinical Trial and no less than [**] before the filing of an NDA, to the effect that it intends to file such an NDA. Within [**] following receipt of such notice, Achillion
shall provide Gilead with a written notice (A) indicating that it wishes to designate Field-Based Personnel to support Gilead’s commercial activities relating to Licensed Products; and (B) describing in reasonable detail the number
and type of Field-Based Personnel it wishes to nominate to support Gilead. 
  
 (iii) As soon as practicable after receiving notice from Achillion pursuant to Section 4.2(b)(ii), the Parties shall meet and negotiate in good faith the identity of the Field-Based Personnel and the
manner of their participation, taking into consideration the extent to which they have specialized knowledge or expertise related to the specific activity proposed to be conducted; whether they operate in geographic areas where Achillion has market
presence or proximity; and the extent to which they are qualified by appropriate experience and qualifications to perform the work assigned to such Field-Based Personnel in a capable and professional manner. 
  
 (iv) All Field-Based Personnel shall operate under
the supervision and control of Gilead’s Medical Affairs or National Accounts Divisions. Gilead may assign Field-Based Personnel to operate in any region of the United States it deems appropriate. All Field-Based Personnel shall comply with
Gilead’s internal rules and regulations, including Promotional Guidelines, and shall be trained by Gilead at Gilead’s expense. 
  
 (v) Gilead shall have the right to remove any Field-Based Personnel designated by Achillion from their position for failures of
performance or if Gilead reasonably determines such Field-Based Personnel have not complied with Gilead’s internal rules and regulations, including Gilead’s Promotional Guidelines. If Achillion elects for any reason to reduce the number of
Field Based Personnel utilized pursuant to this Section 4.2(b), Achillion shall give Gilead not less than [**] prior written notice. 
  
 (c) Cooperation and Interaction 
  
 (i) Gilead will supply Achillion with a copy of its plan for commercializing a Licensed Product and will present and discuss such
plan with Achillion. Senior management of Achillion shall be invited to attend such portions of conferences and meetings that pertain to the commercialization of Licensed Products. 
  
 (ii) Relevant Achillion Field-Based Personnel shall receive similar information and attend and
participate at a similar level to equivalent Gilead personnel, including 

  

 20 

 
but not limited to formal training, remote training, core skills training (including updates on medical practice, regulatory guidelines and presentation
skills), national conferences, regional meetings, educational events, speaker’s bureaus, regional consultants meetings, medical conferences (including pre-conference briefing and booth staffing) and Phase 3b/4 program meetings. 
  
 (iii) Subject to Section 4.2(b)(iv), the Parties
agree to consult with each other in good faith from time to time as necessary or appropriate as to matters that arise in connection with the use of Field-Based Personnel pursuant to this Section 4.2(b). Such consultations may cover matters such
as the deployment, management and removal of Field-Based Personnel. Each Party shall each designate a principal contact for the purpose of conducting any such consultations. 
  
 4.3 Achillion’s Costs. All costs associated with any activities undertaken by Achillion pursuant
to Section 4.2, including salary, benefits and travel of Field-Based Personnel designated pursuant to Section 4.2(b)(ii) and (iii), shall be borne solely by Achillion, except as otherwise expressly provided in Section 4.2(b)(iv).

  
 4.4 Diligence. Gilead shall,
itself and/or through Related Gilead Parties, at its own expense, use Commercially Diligent Efforts to commercialize and market [**] in the HCV Field [**]. 
  

	5.	LICENSES AND COVENANTS 

  
 5.1 License Grants to Gilead. Subject to the terms of this Agreement, Achillion hereby grants to Gilead an exclusive (even as
to Achillion except to the extent provided below), royalty-bearing (as set forth in Section 6.5) license, with the right to sublicense subject to Section 5.3(d), under Achillion Technology to Develop, make, have made, use, sell, have sold,
offer for sale and import Compounds and Licensed Products in the Field in the Territory; provided, however, that Achillion retains such rights under Achillion Technology as are necessary to perform its obligations under the Research Plan.

  
 5.2 License Grant to Achillion. Subject
to the terms and conditions of this Agreement, Gilead hereby grants to Achillion a non-exclusive, royalty-free license, without the right to sublicense, under Gilead Technology solely to perform Achillion’s obligations to conduct the Research
Program. 
  
 5.3 Negative Covenants

  
 (a) No Use of Achillion
Technology. For a period beginning on the Effective Date and ending upon the expiration of the last to expire Royalty Term, Achillion shall not Develop or use Achillion Technology for Compounds, or permit any Third Party to conduct any such
activities with respect to Achillion Technology for Compounds, except as expressly provided in this Agreement. 
  
 (b) No Research. Except as otherwise expressly provided in this Agreement, for a period beginning on the Effective Date and
ending upon the expiration of the last to expire Royalty Term, Achillion shall not: (1) on its own behalf or for any Third Party conduct any 

  

 21 

 
Development or commercialization of any Compound; nor (2) grant to any Third Party any license or other right to conduct any research, Development or
commercialization of any Compound, unless Gilead consents pursuant to this Agreement. 
  
 (c) No Implied Licenses. No right or license under any Patents or Information of either Party is granted or shall be granted by
implication or estoppel. All such rights or licenses are or shall be granted only as expressly provided in the terms of this Agreement. 
  
 (d) Major Market Sublicenses. Gilead shall not grant any sublicense for commercialization rights to any Achillion Technology to any
Third Party in a Major Market in any arrangement except where (a) Gilead would continue to actively participate in such commercialization; and (b) such arrangement involves [**]. Notwithstanding the foregoing, Gilead shall have the right
to grant a Third Party the right to use and sell Licensed Product in the Field in Japan. 
  
 5.4 Right of Discussion as to New HCV Compounds. Prior to executing any agreement under which Achillion or an affiliate controlled by Achillion would grant a Third Party a license or similar right
to Develop or commercialize any New HCV Compound in the Territory, Achillion shall so notify Gilead in writing. Upon receipt of such notice, Gilead shall have [**] to present and discuss with the senior executive officers of Achillion its
capabilities to participate in such Development or commercialization of such New HCV Compound. Unless otherwise agreed by the Parties in writing prior to the expiration of such [**] period, Achillion or its affiliate shall thereafter be free to
enter into an agreement with any Third Party for the Development or commercialization of such New HCV Compound with no further obligation to Gilead. Gilead’s rights under this Section 5.4 shall expire on the earlier of (a) the [**]
anniversary of the first Regulatory Approval of a Licensed Product; or (b) the date Achillion experiences a Change of Corporate Control. 
  
 5.5 Offsetting IP. Not less than [**] prior to entering into any agreement providing for payment of Third Party Royalties that
Gilead proposes qualify as a payment for Offsetting IP, Gilead shall send Achillion a written notice describing in reasonable detail the terms of the agreement and reasons for entering into such agreement The Parties shall meet and discuss
Achillion’s consent to having such Third Party Royalties included as payment for Offsetting IP, and therefore eligible for offset pursuant to Section 6.6(a), to the extent such consent is required. Achillion shall provide written notice to
Gilead as to whether it so consents (if required), within [**] of such notice. 
  
 5.6 Agreements with Related Gilead Parties. Gilead shall not, without the prior written consent of Achillion, enter into any agreement for [**] with any Related Gilead Party that provides for [**]
by such Related Gilead Party to Gilead [**], other than Related Gilead Party Royalties. 
  
 5.7 Combination Products. If Gilead intends to sell a Combination Product in any country in the Territory where the Compound contained in the Licensed Product is not sold separately in such
country, the Parties will discuss in good faith an appropriate methodology for 

  

 22 

 
determining the basis of calculating the Net Sales of such Licensed Product in such country based on the relative contribution of the Compound to the price
of the Combination Product. 
  

	6.	COMPENSATION 

  
 6.1 Up-front Payment. Gilead shall make a one-time, non-refundable, non-creditable payment to Achillion of Five Million U.S.
Dollars ($5,000,000) within thirty (30) calendar days of the Effective Date. 
  
 6.2 Purchase of Achillion Stock. Pursuant to the Stock Purchase Agreement dated the Effective Date, attached hereto as Exhibit 6.2A, Gilead shall purchase and Achillion shall sell to Gilead
Five Million Dollars ($5,000,000) of Achillion Series C-l Preferred Stock at a price of U.S. $2.1735 Dollars per share. At the same time, Gilead and Achillion shall also enter into the Investor Rights Agreement attached as Exhibit 6.2B, and the
Second Amended and Restated Stockholders’ Agreement, Exhibit 6.2C, each dated as of the Effective Date. 
  
 6.3 Research Cost Reimbursement. Each Party will reimburse the other Party for its work in furtherance of the Research Program
to the extent and at the times provided in Section 2. 
  
 6.4 Milestone Payments 
  
 (a) Notices of Milestone. The Party responsible for achieving the Development and commercialization milestones described in this Section 6.4 shall, promptly after achieving each such milestone (but
no later than [**] after such achievement), send a notice (which shall include any supporting information reasonably appropriate) to the other Party to such effect. 
  
 (b) Payment. Gilead will pay to Achillion the milestone payments set forth in this
Section 6.4 on the same date that the notice described in Section 6.4(a) is sent; provided, however, that such notice relates to the first achievement of the corresponding milestone, or such milestone is otherwise eligible for payment as
provided in this Section 6.4. Such milestone payments shall be nonrefundable. 
  
 (c) Lead Compound Events Triggering Obligation. Except as provided in Section 6.4(e), for any Licensed Product or Lead
Compound that is at the time of the applicable event a Lead Compound, the milestone events for such Licensed Product shall consist of the following: 
  

			
	 Milestone Event

	  	 Milestone Payment Amount

	 1.      The filing of [**]
	  	$[**]
		
	 2.      The first [**]
	  	$[**]
		
	 3.      The first [**]
	  	$[**]

  

 23 

			
	 4.      Submission [**] USA
	  	$[**]
		
	 5.      Submission [**]
	  	$[**]
		
	 6.      The first [**]
	  	$[**]
		
	 7.      The first [**]
	  	$[**]
		
	 8.      The first [**]
	  	$[**]
		
	 9.      Achievement [**]
	  	$[**]
		
	 10.    Achievement [**]
	  	$[**]

  
 (d) Back-up Compound Milestone Events Triggering Payment Obligation. Except as provided in Section 6.4(e), any Back-up Compound shall be eligible for milestone payments pursuant to this Section 6.4(d) if, at the time of the
applicable event, it is a Back-up Compound. The milestone events for such Back-up Compound shall consist of those established in Section 6.4(c) with respect to Licensed Products comprising Lead Compounds, except that the amount owed for each
milestone shall be [**] Percent ([**]%) of the amount shown in Section 6.4(c). 
  
 (e) Rules Regarding Multiple Milestone Payments. Notwithstanding anything in this Section 6.4 to the contrary, the
following rules shall apply to the payment of milestone events. 
  
 (i) No milestone payment shall be payable more than once for any Licensed Product comprising a Lead Compound, no matter how many times achieved with respect to one or more Licensed Products. 
  
 (ii) Milestone payments may be paid more than once
for one or more any Licensed Product(s) comprising a Back-up Compound. 
  
 (iii) If a Back-up Compound becomes a Lead Compound, such Lead Compound and any Licensed Product comprising such Lead Compound shall become eligible for milestone payments under Section 6.4(c) only to the
extent that any such milestone has not previously been paid for any Lead Compound or Licensed Product comprising a Lead Compound. 
  
 (f) Non-Royalty Consideration Paid by Related Gilead Parties. Gilead shall pay Achillion, within [**] of receipt by Gilead,
an amount equal to [**] Percent ([**]%) of any up-front, milestone and related payments paid by Related Gilead Parties for sublicenses of 

  

 24 

 
rights granted pursuant to Section 5.1; provided, however, that such milestone and related payments shall not include Related Gilead Party Royalties.

  
 6.5 Royalties 
  
 (a) Royalties for Sales by Gilead. During the
applicable Royalty Term in each country in the Territory, Gilead will pay Achillion, no later than [**] following the end of the preceding Calendar Quarter, a royalty payment on worldwide Net Sales of Licensed Product sold by Gilead and its
Affiliates (but not Net Sales by Related Gilead Parties) in such country (the “Royalty”), subject to adjustment in accordance with Sections 6.6: 
  
 (i) [**] percent ([**]%) on such worldwide Net Sales that are less than or equal to $[**] in a given calendar year; 
  
 (ii) [**] percent ([**]%) on such worldwide Net Sales
that are greater than $[**] and less than or equal to $[**] million in a given calendar year; 
  
 (iii) [**] percent ([**]%) on such worldwide Net Sales that are greater than $[**] Million in a given calendar year. 
  
 (b) Royalties for Sales by Related Gilead
Parties. During the applicable Royalty Term in each country in the Territory, Gilead will pay Achillion, no later than [**] following the end of the preceding Calendar Quarter, a royalty payment on Net Sales of Licensed Product sold by Related
Gilead Parties in such country (“Sublicense Royalty”), subject to adjustment in accordance with Section 6.6, of [**] percent ([**]%) on Net Sales by Related Gilead Parties. 
  
 (c) Royalties for Sublicense in the United States
and European Market. In the event that Gilead grants a sublicense for commercialization rights to any Achillion Technology to any Third Party in the United States of America or the European Market pursuant to Section 5.3(d), for purposes of
the definition of “Net Sales” and for calculating royalties under this Section 6.5, sales of Licensed Product by the sublicensee for such rights, or through such arrangement, shall be deemed to be sales by Gilead. 
  
 (d) Example. By way of example, if, in a given
year, worldwide Net Sales of Licensed Product by Gilead and its Affiliates equal $[**], and worldwide Net Sales of Licensed Product by Related Gilead Parties equal $[**] (worldwide Net Sales, including Net Sales by Related Gilead Parties, thus are
$[**]), then the royalty owed to Achillion shall equal $[**], calculated in the following manner: 
  

					
	 Amount of Net Sales

	  	Royalty Rate

	 	Royalty Payment

	 Gilead Net Sales of first $[**]
	  	[**]	 	$[**] Million
			
	 Gilead Net Sales greater than $[**] and less than or equal to $[**]
(e.g., $[**])
	  	[**]	 	$[**]
			
	 Gilead Net Sales greater than $[**] (.e.g., $[**])
	  	[**]	 	$[**]
			
	 Related Gilead Party Net Sales
(e.g., $[**])
	  	[**]	 	$[**]
	 	  	 	 	

	 Total Royalty
	  	 	 	$[**]

  

 25 

 6.6 Adjustments 
  
 (a) Third Party Royalties. The royalty
payments required to be paid on any given date pursuant to Section 6.5 shall be subject to an offsetting reduction on such date by Gilead in an amount equal to [**] Percent ([**]%) of the amount of Third Party Royalties that are paid to secure
Offsetting IP; provided however, that: 
  
 (i) such offset may be made only to the extent such Third Party Royalties have not previously been subject to offset pursuant to this Section 6.6(a), and/or have not otherwise been subject to reimbursement pursuant to
Section 6.6(c); and 
  
 (ii) no
offset made by Gilead on such date pursuant to this Section 6.6(a) shall exceed an amount equal to [**] Percent ([**]%) of the amount otherwise due pursuant to Section 6.5 on such date. 
  
 Any amount that has not been offset on such date because of Section 6.6(a) shall be
eligible for offset against the next succeeding royalty payment or payments due for such Licensed Product. If such deferred offset is again limited by Section 6.6(a), the deferred amount shall be subject to offset against future royalty
payments for such Licensed Product successively until a total of [**] Percent ([**]%) of all Third Party Royalties made in respect of such Licensed Product have been offset against royalty payments paid by Gilead for such Licensed Product.

  
 (b) Limitation on Royalties Due for
Sales by Related Gilead Parties. Notwithstanding anything else in this Agreement to the contrary, including Section 6.6(a)(ii), the Sublicense Royalty in any Calendar Quarter paid pursuant to Section 6.5(b) with respect to a particular
Related Gilead Party shall not, taken with all other royalty payments previously made by Gilead in respect of Net Sales by such Related Gilead Party, exceed [**] Percent ([**]%) of the difference between (i) and (ii) below: 
  
 (i) the Related Gilead Party Royalties paid, during
such Calendar Quarter, to Gilead by such Related Gilead Party; 
  
 (ii) any other deductions or offsets pursuant to Section 6.6(a) applicable to the sale of such Licensed Products by such Related Gilead Party. 
  
 (c) Reimbursement by Achillion for Third Party Royalties 
  
 (i) If, prior to the First Commercial Sale of
a Licensed Product, Gilead pays Third Party Royalties in respect of Compound, Achillion shall reimburse Gilead for 

  

 26 

 
[**] Percent ([**]%) of any such Third Party Royalty so paid for Offsetting IP identified by the Parties as of the Effective Date, within [**] of receipt by
Achillion of an invoice from Gilead. 
  
 (ii) If, after the First Commercial Sale of a Licensed Product, Gilead or any Related Gilead Party pays Third Party Royalties in respect of Compound, Gilead shall be permitted to offset its royalty payments for such Licensed Product
pursuant to Section 6.5 to the extent and as provided in Section 6.6(a). 
  
 (d) Third Party Infringement Losses. For purposes of this Section 6.6, Third Party Infringement Losses arising from
infringement of Third Party Patents that claim or are directed to the research, Development, manufacture, use, sale, offer for sale or importation of Compounds, or misappropriation of Third Party trade secrets directed to the research, Development,
manufacture, use, sale, offer for sale or importation of Compounds, shall be included with and be treated in the same manner as Third Party Royalties that are paid to secure Offsetting IP. 
  
 6.7 Payment; Report. Following the First Commercial Sale
of a Licensed Product, Gilead shall furnish to Achillion, within [**] following the end of each Calendar Quarter, a written report for such Calendar Quarter showing, for each Licensed Product, on a country-by-country basis, (A) the total amount
invoiced by Gilead or its Related Gilead Parties for sales to a Third Party (whether an end-user, wholesaler or otherwise) in the Territory; (B) total Net Sales; (C) the calculation of the amount of any applicable offsets or limitations
pursuant to Section 6.6; and (D) the calculation of royalties due. Gilead shall keep complete and accurate records in sufficient detail to enable the Royalties payable hereunder to be determined. 
  
 6.8 Exchange Rate; Manner and Place of Payment

  
 (a) Payments. Unless otherwise
specified in writing by Achillion, all payments to be made by Gilead to Achillion under this Agreement shall be made in United States dollars and shall be paid by bank wire transfer in immediately available funds from a bank account in the United
States selected by Gilead to a bank account in the United States designated in writing by Achillion from time to time. 
  
 (b) Sales Outside the United States. With respect to sales outside the United States, royalty amounts owed shall first be
calculated in the currency of sale, and then such amounts shall be converted into U.S. Dollars based on applicable currency exchange rates (as provided in Section 6.8(c)), and such Dollar amount of the royalties shall be paid to Achillion.

  
 (c) Exchange Rate. The conversion of
non-U.S. dollar sales into U.S. dollar sales shall be calculated in accordance with Gilead’s then current foreign exchange conversion methodology for external financial reporting to the Securities and Exchange Commission. 
  
 (d) Blocked Conversion. In any country where
conversion of the local currency is blocked and such currency cannot be removed from the country, Gilead will pay Achillion in local currency by deposit in a local bank account designated by Achillion. 
  

 27 

 6.9 Records and Audit 
  
 (a) Records. Gilead shall maintain, and shall require
its Affiliates, Related Gilead Parties and other sublicensees to maintain, complete and accurate books and records in connection with the sale of Licensed Products hereunder, as necessary to allow the accurate calculation of the royalties due to
Achillion hereunder. 
  
 (b) Audit.
Upon Achillion’s written notice to Gilead with reasonable advance notice and not more than once in each calendar year, Gilead shall permit external accountants selected by Achillion and reasonably acceptable to Gilead, at Achillion’
expense (except as set forth in Section 6.9(c)), to have access during normal business hours to such of the records of Gilead and its Affiliates as may be reasonably necessary to verify the accuracy of the royalty reports hereunder for any
calendar year ending not more than three (3) years prior to the date of such request. Gilead shall also provide the accountants such documentation relating to sales by Related Gilead Parties and other sublicensees as are reasonably necessary to
verify the accuracy of such royalty reports. The form of the report prepared by auditors shall be agreed upon prior to commencing the audit and in such report the accountants shall disclose to Achillion only whether the royalty reports are correct
or incorrect and the specific details concerning any discrepancies. No other information shall be provided to Achillion. Gilead shall be entitled to one (1) copy of all final reports and analyses resulting from the audit concurrently to such
report being issued to Achillion by such accountant In no event shall the accountants include any data in such reports considered confidential or proprietary by Gilead. 
  
 (c) Discrepancies. Except as otherwise provided in this Section 6.9(c), if such
accountants identify a discrepancy made during such period, the appropriate Party shall pay the other Party the amount of the discrepancy within thirty (30) days of the date of receiving such accountant’s written report, or as otherwise
agreed upon by the Parties, plus interest calculated in accordance with Section 6.10. The Party required to pay the discrepancy may challenge the results of such accountants’ report by providing notice within fifteen (15) days to the
other Party. The Parties will then mutually agree to designate an accountant to verify the accuracy of the initial report. The fees charged by such accountants shall be paid by Achillion; provided, that if the audit uncovers an underpayment of
royalties by Gilead in an amount that exceeds five percent (5%) of the total royalties owed, then the reasonable fees of such accountants shall be paid by Gilead. 
  
 (d) Confidentiality. Achillion shall treat all financial information subject to review under
this Section 6.9 or under any sublicense agreement in accordance with the confidentiality and non-use provisions of this Agreement, and shall cause the accountants selected by it to enter into an acceptable confidentiality agreement with Gilead
obligating such accountants to retain all such information in confidence pursuant to such confidentiality agreement. 
  
 6.10 Late Payments. Any amounts not paid when due under this Agreement shall be subject to interest from and including the date
payment is due through and including the date upon which Achillion has collected immediately available funds in an account designated by Achillion at an annual rate equal to the sum of two percent (2%) plus the annual prime rate of interest
quoted in the Money Rates section of the West Coast edition of the Wall Street Journal calculated daily on the basis of a 365-day year, or similar reputable data source, or, if lower, the highest rate permitted under applicable law.

  

 28 

 6.11 Taxes. If laws, rules or regulations require withholding of income taxes, VAT,
royalty withholding taxes, or other taxes imposed upon payments to Achillion set forth in this Section 6, Gilead shall make such withholding payments as required and subtract such withholding payments from the payments set forth in this
Section 6. Gilead shall submit appropriate proof of payment of the withholding taxes to Achillion within a reasonable period of time following such payment. Each Party shall provide reasonable assistance to the other Party in minimizing or
claiming exemptions from, refunds of, or credits for, any such applicable withholding taxes, upon the other Party’s written request. 
  
 6.12 Right of First Refusal for Sale of Royalty Rights 
  
 (a) Notice of Sale of Royalty Rights. If at any time Achillion desires to sell, assign or transfer to
a Third Party, pursuant to a bona fide offer received from such Third Party, the rights to receive payment owed by Gilead to Achillion under this Section 6 (“Royalty Rights”), Achillion shall send a written notice to Gilead
(“Offer Notice”) not less than [**] prior to consummating any such transaction. The Offer Notice shall describe in reasonable detail the terms and conditions of the offer and all other material information, including the identity of
the Third Party. 
  
 (b) Gilead Right to Match
Offer. Gilead shall have [**] after receipt of the Offer Notice in which to elect to acquire, for itself, the Royalty Rights, on terms no less favorable than those described in the Offer Notice. If Gilead makes such an election, Gilead shall
consummate any such transaction within [**] of sending its election to Achillion. 
  
 (c) Waiver of Gilead Rights. If Gilead does not make a timely election within [**] to acquire the Royalty Rights, then Achillion
shall be permitted, within [**] of the date of the Offer Notice, to consummate the transaction that was the subject of the Offer Notice with such Third Party, on terms no less favorable to Achillion than those contained in the Offer Notice. If
Achillion timely consummates such a transaction, Gilead’s rights contained in this Section 6.12 shall terminate and shall be of no further force or effect. If Achillion does not timely consummate such a transaction with such Third Party on
terms at least as favorable as those were contained in the Offer Notice, Gilead’s rights contained in this Section 6.12 shall remain in effect. 
  

	7.	CONFIDENTIAL INFORMATION 

  
 7.1 Nondisclosure Obligation 
  
 (a) Confidential Information. All Information disclosed by one Party to the other Party hereunder (“Confidential
Information”) shall be maintained in confidence by the receiving Party and shall not be disclosed to any non-Party or used for any purpose except to exercise its rights and perform its obligations under this Agreement without the prior
written consent of the disclosing Party, except to the extent that the receiving Party can demonstrate by competent written evidence that such Information: 
  
 (i) is known by the receiving Party at the time of its receipt and, not through a prior disclosure by the disclosing Party, as
documented by the receiving Party’s business records; 
  

 29 

 (ii) is in the public domain other than as a result of any breach of this
Agreement by the receiving Party; 
  
 (iii) is subsequently disclosed to the receiving Party on a non-confidential basis by a Third Party who may lawfully do so; or 
  
 (iv) is independently discovered or developed by the receiving Party without the use of Confidential Information provided by the
disclosing Party, as documented by the receiving Party’s business records. 
  
 (b) Return of Confidential Information Upon Expiration or Termination of Agreement. Within thirty (30) days after any
expiration or termination of this Agreement, each party shall destroy (and certify to the other Party such destruction) or return all Confidential Information provided by the other Party except as otherwise set forth in this Agreement, and except
that each Party may retain a single copy of the Confidential Information in its confidential legal files for the sole purpose of ascertaining its ongoing rights and responsibilities regarding the Confidential Information. 
  
 7.2 Permitted Disclosures 
  
 (a) Permitted Disclosure. Each Party may
disclose Confidential Information provided by the other Party to the extent such disclosure is reasonably necessary in the following instances: 
  
 (i) disclosure to governmental or other regulatory agencies in order to obtain Patents on Achillion Technology or to gain or
maintain approval to conduct clinical trials or to market Licensed Product (in each case to the extent permitted by this Agreement), but such disclosure may be only to the extent reasonably necessary to obtain Patents or authorizations; 

 
 (ii) complying with applicable court orders or
governmental regulations, including without limitation rules or regulations of the Securities and Exchange Commission, or by rules of the National Association of Securities Dealers, any securities exchange or NASDAQ; provided, however, that the
receiving Party shall first have given notice to the other Party hereto in order to allow such Party the opportunity to seek confidential treatment of the Confidential Information; 
  
 (iii) disclosure by Gilead to Related Gilead Parties or distributors for the sole purpose of
conducting Development and/or commercialization of Compounds and Licensed Products in accordance with the terms and conditions of this Agreement on the condition that such Related Gilead Parties agree to be bound by confidentiality and non-use
obligations at least equivalent in scope to those contained in this Agreement; provided the term of confidentiality for such Related Gilead Parties shall be no less than five (5) years; or 
  
 (iv) disclosure to consultants, agents or other Third
Parties solely to the extent required to accomplish the purposes of this Agreement or in connection with due diligence or similar investigations by such Third Parties, and disclosure to potential Third Party investors in confidential financing
documents, in each case on the condition that such Third Parties agree to be bound by confidentiality and non-use obligations at least equivalent in scope to those 

  

 30 

 
contained in this Agreement or for the purposes of such financing; provided the term of confidentiality for such Third Parties shall be no less than three
(3) years. 
  
 (b) Written
Agreements. Each Party shall obtain written agreements from each of its employees and consultants who perform work on the Research Program, which agreements shall obligate such persons to similar obligations of confidentiality and to assign to
such Party all inventions made by such persons during the course of performing the Research Program. Each Party will notify the other Party promptly upon discovery of any unauthorized use or disclosure of the Confidential Information of the other
Party. 
  
 (c) Required Disclosure.
If a Party is required by judicial or administrative process to disclose Information that is subject to the non-disclosure provisions of Section 7.1, such Party shall promptly inform the other Party of the disclosure that is being sought in
order to provide the other Party an opportunity to challenge or limit the disclosure obligations. Information that is disclosed by judicial or administrative process shall remain otherwise subject to the confidentiality and non-use provisions of
this Section 7, and the Party disclosing Information pursuant to law or court order shall take all reasonable steps necessary, including without limitation obtaining an order of confidentiality, to ensure the continued confidential treatment of
such Information. 
  
 7.3 Publication.
If a Party, its employees or consultants wishes to make a written publication or oral presentation related to a Compound, that Party shall deliver to the non-publishing Party a copy of the proposed written publication or an outline of an oral
disclosure at least thirty (30) days prior to submission for publication or presentation. The non-publishing Party shall have the right to review and propose modifications to the publication or presentation for patent reasons, trade secret
reasons or business reasons or (b) to request a reasonable delay in publication or presentation in order to protect patentable information. If the non-publishing Party requests modifications to the publication or presentation, the Party wishing
to make such written publication or oral presentation shall edit such publication or presentation to prevent disclosure of trade secret or proprietary business information of the non-publishing Party prior to submission of the publication or
presentation. 
  
 7.4 Publicity/Use of
Names 
  
 (a)
General. Each Party agrees to use reasonable efforts in press releases, web pages, or other public documents issued by a Party which mention a Compound Licensed Product to generally credit the other Party as licensor of licensee, as
applicable. Either Party shall be free to disclose, without the other Party’s prior written consent, the existence of this Agreement, the identity of the other Party and those terms of the Agreement which have already been publicly disclosed in
accordance herewith. 
  
 (b)
Trademarks. Except as set forth in Section 7.4(a), or as expressly permitted by this Agreement, neither Party shall use the name, trademark, trade name or logo of the other Party or its employees in any publicity, news release or
disclosure relating to this Agreement or its subject matter, without the prior express written permission of the other Party. 
  

 31 

 (c) Allowed Disclosure. A draft press release announcing the execution of
this Agreement is attached to this Agreement as Exhibit 7.4. The Parties acknowledge that each Party may desire or be required to issue subsequent press releases relating to the Agreement or activities thereunder. 
  
 (i) Gilead may issue such press releases or otherwise
make such public statements or disclosures as it considers appropriate, provided that it does not disclose any Confidential Information of Achillion. Until the expiration of the Development Program Term, prior to making any disclosure under this
Section 7.4(c)(i) Gilead shall provide Achillion with not less than 48 hours to review and comment on any such press releases, statements or disclosures, except to the extent that doing so is not feasible within the timeframe required for
compliance with any laws, regulations or market disclosure requirements. 
  
 (ii) Achillion agrees to consult with Gilead reasonably and in good faith with respect to the text and timing of such press releases or public disclosures prior to the issuance thereof. Notwithstanding the
foregoing, Achillion may issue such press releases or otherwise make such public statements or disclosures (such as in annual reports to stockholders or filings with the Securities and Exchange Commission) as it determines, based on advice of
counsel, are reasonably necessary to comply with laws or regulations or for appropriate market disclosure; provided, however, that (A) Achillion does not disclose any Confidential Information of Gilead; and (B) Achillion shall first
provide Gilead with not less than 48 hours to review and comment on any such press releases, statements or disclosures, except to the extent that doing so is not feasible within the timeframe required for compliance with such laws, regulations or
market disclosure requirements. 
  
 (d)
Protection of Interests. The Parties will use commercially reasonable efforts to ensure that the content of any oral statement or written disclosure or publication will comply with applicable laws and regulations and will not adversely affect
the Parties’ commercial interests. 
  

	8.	REPRESENTATIONS AND WARRANTIES 

  
 8.1 Mutual Representations and Warranties. Each Party hereby represents and warrants to the other Party as follows: 
  
 (a) Corporate Existence and Power. It is a
corporation duly organized, validly existing and in good standing under the laws of the state in which it is incorporated, and has full corporate power and authority and the legal right to own and operate its property and assets and to carry on its
business as it is now being conducted and as contemplated in this Agreement, including, without limitation, the right to grant the licenses granted hereunder. 
  

(b) Authority and Binding Agreement. As of the Effective Date, (a) it has the corporate power and authority and the
legal right to enter into this Agreement and perform its obligations hereunder, (b) it has taken all necessary corporate action on its part required to authorize the execution and delivery of the Agreement and the performance of its obligations
hereunder; and (c) the Agreement has been duly executed and delivered on behalf of such Party, 

  

 32 

 
and constitutes a legal, valid and binding obligation of such Party and is enforceable against it in accordance with its terms. 
  
 (c) No Conflict. It has not entered, and will
not enter, into any agreement with any Third Party which is in conflict with the rights granted to the other Party under this Agreement, and has not taken and will not take any action that would in any way prevent it from granting the rights granted
to the other Party under this Agreement, or that would otherwise materially conflict with or adversely affect the rights granted to the other Party under this Agreement. 
  
 8.2 Achillion Representations and Warranties. Achillion represents and warrants to Gilead as follows:

  
 (a) Non-infringement of Third Party
Rights. As of the Effective Date, it is unaware of any Patents or trade secret rights owned or controlled by a Third Party, that would dominate, or be infringed or misappropriated by the conduct of activities under the Research Program, and has
received no written claims relating to any claims of such domination, infringement or misappropriation. 
  
 (b) Non-infringement by Third Parties. As of the Effective Date, it is unaware of any activities by Third Parties that would
constitute infringement or misappropriation of any Achillion Technology relating to any Compound. 
  
 (c) Title. As of the Effective Date, it has sufficient legal and/or beneficial title under its intellectual property rights
necessary to perform activities contemplated under this Agreement and to grant the licenses contained in this Agreement. 
  
 8.3 No Other Representations or Warranties. The express representations and warranties stated in this Section 8 are in
place of all other representations and warranties, express, implied, or statutory, including without limitation, warranties of merchantability, fitness for a particular purpose, non-infringement or non-misappropriation of Third Party intellectual
property rights, title, custom or trade. 
  

	9.	OWNERSHIP OF INVENTIONS AND INTELLECTUAL PROPERTY RIGHTS 

  
 9.1 Inventorship. Each Party shall own any inventions made solely by its employees or agents in their activities hereunder.
Inventions hereunder made jointly by employees or agents of both Parties shall be owned jointly by the Parties (“Joint Inventions”). Inventorship shall be determined in accordance with U.S. patent laws. To the extent that the
Parties file Patents directed to Joint Inventions (“Joint Patents”), the Parties will negotiate in good faith an amendment to this Agreement that will, for the purposes of this Section 9, treat such Joint Patents as Achillion
Patents and will otherwise reasonably address other issues related thereto. 
  

 33 

 9.2 Patent Procurement 
  
 (a) Prosecution 
  
 (i) Within ten (10) days after the Effective
Date, Achillion shall provide powers of attorney for Achillion Patents to Gilead and Gilead shall be responsible for the prosecution and maintenance of the Achillion Patents on behalf of Achillion. As further described below, Achillion shall have
the right to review and comment upon such prosecution by Gilead of the Achillion Patents in the jurisdictions of the Territory. 
  
 (ii) Gilead shall be responsible for [**] percent ([**]%) of the Patent Costs and Achillion shall be responsible for [**] percent
([**]%) of the Patent Costs. Prior to the Effective Date, Achillion shall provide a detailed statement of the Patent Costs incurred prior to the Effective Date and Gilead shall reimburse Achillion for [**] percent ([**]%) of such costs within [**]
after the Effective Date. Thereafter, a Party seeking reimbursement of Patent Costs shall invoice the other Party on a quarterly basis in arrears, and shall provide copies of receipts and counsel bills supporting such invoice. The other Party shall
pay its share of such Patent Costs within [**]. 
  
 (iii) As used herein, “prosecution” shall mean any procedure or practice before an administrative agency such as the United States Patent and Trademark Office, or an equivalent agency, including but not limited to
interferences, reexaminations, reissues, oppositions, and the like. 
  
 (iv) Gilead shall furnish Achillion with copies of each communication regarding an Achillion Patent from a patent authority promptly following issuance of such communication. Gilead shall also furnish Achillion
with copies of each draft submission regarding an Achillion Patent to a patent authority of any jurisdiction in the Territory no later than [**] prior to the date such submission is proposed to be made, in the state that such submission is
reasonably in at such time (which may, for example, be in the form of descriptions of experiments and experimental data that may be used to demonstrate an actual reduction to practice of the relevant invention, which experiment may be ongoing) and
will consider reasonably Achillion’s comments thereon. If Achillion does not provide Gilead with reasonably timely comments, Gilead shall be free to proceed with its submission or other contemplated action. 
  
 (v) Notwithstanding anything in this Section 9.2
to the contrary, Gilead shall always be entitled to proceed with any submission or other contemplated action if it determines time is of the essence, provided that Gilead makes reasonable efforts to inform Achillion as early as practicable and to
consider its comments where applicable. 
  
 (vi) Gilead will make reasonable efforts to provide Achillion an update to any draft submission prior to filing to enable Achillion to monitor progress and further comment on the draft, and shall provide Achillion with a copy of each
submission to a patent authority of a jurisdiction within the Territory regarding an Achillion Patent reasonably promptly after making such filing. 
  
 (vii) If either Party becomes aware of any patents, information or proceeding that relate to Achillion Patents that may adversely
impact the validity, title or enforceability of Achillion Patents in the Territory, such Party shall promptly notify the other Party of such patent, information or proceeding. 
  

 34 

 (b) Abandonment. If Gilead determines to abandon or not maintain any
Achillion Patent anywhere in the Territory, then Gilead shall provide Achillion with thirty (30) days prior written notice of such determination and shall provide Achillion with the opportunity to prosecute and maintain such claim or Patent at
its sole expense. 
  
 (c)
Diligence. Gilead shall use Commercially Diligent Efforts to pursue claims in the Achillion Patents in a manner consistent with applicable law in the HCV Field [**]. It is expressly understood by the Parties that this Section 9.2(c) does
not obligate Gilead to pursue claims in the Achillion Patents in every country of the Territory. 
  
 (d) Patent Counsel. Gilead shall have the right to use outside patent counsel in the prosecution or maintenance of any
Achillion Patent at any time during the term of this Agreement; provided, however, that Achillion may object to the retention or continued retention of such counsel if Achillion reasonably believes such retention would be prejudicial to its
intellectual property interests (including, without limitation, conflicts of interest, such as if outside counsel prosecutes patents for products similar to the Licensed Product(s) for Third Parties). In all cases, Achillion shall provide
cooperation to Gilead or any patent counsel selected by Gilead (and not reasonably objected to by Achillion as provided for in this Section 9.2(d)), including, without limitation, providing references, publications or documents, granting
interviews and access to scientists, providing data and laboratory notebooks, and granting interviews with or otherwise providing Achillion employees where necessary for further prosecution of Patents. 
  
 (e) Interference, Opposition, Reexamination and
Reissue. Gilead shall inform Achillion of any request for, or filing or declaration of, any interference, opposition, or reexamination relating to Achillion Patents within thirty (30) days of learning of such event. Achillion shall
reasonably cooperate with Gilead with respect to such interference, opposition, or reexamination. Achillion shall have the right to review and consult with Gilead regarding any submission to be made in connection with such proceeding. Gilead shall
give Achillion timely notice of any proposed settlement of an interference relating to an Achillion Patent, and shall not enter into such settlement without Achillion’s prior written consent (such consent not to be unreasonably withheld).

  
 9.3 Patent Term Restoration.
Gilead shall obtain patent term restoration or supplemental protection certificates or their equivalents in any country in the Territory where applicable to Achillion Patents covering a Licensed Product. 
  
 9.4 Infringement by Third Parties 
  
 (a) Notice. If either Party learns of any
infringement of Achillion Patents, or any misappropriation or misuse of Know-How, of which the other Party is a sole owner, co-owner or licensee, such Party shall promptly notify the other Party of such infringement, misappropriation or misuse.

  

 35 

 (b) Gilead’s Right to Bring Suit 
  
 (i) Gilead shall have the sole right, but not the
obligation, to initiate and prosecute any legal action to enforce its rights in and to any Gilead Technology at its own expense and in the name of Gilead. 
  
 (ii) As the exclusive licensee of Achillion Technology, Gilead shall have the first right, but not the obligation, to initiate and
prosecute any legal action or defense with respect to any infringement of Achillion Technology by Third Parties at its own expense and, if necessary, to name Achillion as a co-party, or to control if any declaratory judgment action relating thereto,
and Gilead shall pay all attorneys fees and costs associated with such action. 
  
 (iii) If, within ninety (90) days or ten (10) days before the time limit, if any, set forth in the appropriate laws and
regulations for the filing of such actions, whichever comes first, Gilead fails to take such action, or if Gilead informs Achillion that it elects not to exercise such first right, Achillion (or its designee) thereafter shall have the right either
to initiate and prosecute such action or to control the defense of such declaratory judgment and Achillion shall pay all attorneys fees and costs associated with such action. 
  
 (c) Cooperation. For any action to terminate any infringement of Achillion Patents, or any
misappropriation or misuse of Achillion Know-How or infringement of Gilead Patents, or any misappropriation or misuse of Gilead Know-How, if either Party is unable to initiate or prosecute such action solely in its own name, the other Party shall
join such action voluntarily and shall execute all documents necessary to initiate litigation to prosecute and maintain such action. In connection with any such action, Gilead and Achillion shall cooperate fully and will provide each other with any
information or assistance that either reasonably requests. Each Party shall keep the other informed of developments in any such action or proceeding, including, to the extent permissible by law, the consultation and approval of any offer related
thereto. 
  
 (d) Costs and Awards.
Any recovery obtained by either or both Gilead and Achillion in connection with or as a result of any action contemplated by this Section 9.4, whether by settlement or otherwise, shall be shared in order as follows: 
  
 (i) The Party which initiated and prosecuted the
action shall recoup all of its costs and expenses incurred in connection with the action, plus a premium of [**] percent ([**]%) of such costs and expenses; 
  
 (ii) The other Party shall then, to the extent possible, recover its costs and expenses incurred in connection with the action,
plus a premium of [**] percent ([**]%) of such costs and expenses; 
  
 (iii) Any remaining amounts after such reimbursement of the Parties’ costs and expenses shall be awarded to the Party which initiated and prosecuted the action. If such award is obtained by Gilead and such
award is in excess of both Parties’ costs, expenses and associated [**] percent ([**]%) premium, the amount of such excess shall be considered Net Sales in the Calendar Quarter it is received for purposes of calculating royalties payable by
Gilead in accordance with Section 6.5 if the recovery is for infringement by a product that is 

  

 36 

 
competitive to a Licensed Product. Any other or additional recovery obtained by either Party shall be allocated [**] percent ([**]%) to Gilead and [**]
percent ([**]%) to Achillion. 
  
 (e)
Certifications. Each Party shall inform the other Party of any certification regarding any Achillion Patents pertaining to Compounds licensed to Gilead it has received pursuant to either 21 U.S.C. §§ 355(b)(2)(A)(iv) or
(j)(2)(A)(vii)(IV) or its successor provisions, or Canada’s Patented Medicines (Notice of Compliance) Regulations Article 5, or any similar provisions in a country other than the United States and Canada, and shall provide the other Party with
a copy of such certification within five (5) days of receipt by such Party. Achillion’s and Gilead’s rights with respect to the initiation and prosecution of any legal action as a result of such certification or any recovery obtained
as a result of such legal action shall be as defined in this Section 9.4. 
  
 9.5 Infringement of Third Party Rights 
  
 (a) Notice. If any Licensed Product manufactured, used or sold by either Party, its Affiliates, licensees or sublicensees
under this Agreement becomes the subject of a Third Party claim, or there is the potential for a claim, of patent infringement relating to the manufacture, use, sale, offer for sale or importation of Licensed Product, the Party first having notice
of the claim shall promptly notify the other Party, and the Parties shall promptly meet to consider the claim and the appropriate course of action. 
  
 (b) Defense 
  
 (i) Gilead shall have the right, but not the obligation, to defend against such claim or initiate any declaratory judgment action
relating to a Compound or Licensed Product or bring any such action necessary to protect its interest in such Compound or Licensed Product, at its own expense, and Achillion shall have the right to participate in any such suit, at its own expense.
The Parties shall reasonably cooperate with respect to the defense of the claim, including if required to conduct such defense, furnishing a power of attorney. 
  

(ii) If, within ninety (90) days of receiving the notice provided for in Section 9.5(a), or ten (10) days before
the time limit, if any, set forth in the appropriate laws and regulations for the filing of a claim or response in such actions, whichever comes first, Gilead fails to take such action, or if Gilead informs Achillion that it elects not to exercise
such first right, Achillion (or its designee) thereafter shall have the right to defend against such claim or initiate any declaratory judgment action relating to a Compound or Licensed Product or bring any such action necessary to protect its
interest in such Compound or Licensed Product, and may claim indemnification under Section 11.1 for such action. The Parties shall reasonably cooperate with respect to the defense of the claim, including if required to conduct such defense,
furnishing a power of attorney. 
  
 9.6 Other
Damages. In the event that Gilead, its Affiliates or sublicensees is held liable for increased damages or attorneys fees during the course of a suit against a Third Party brought under Section 9.4 or 9.5, or in any suit against a
Third Party or a claim under the Sherman Act (15 U.S.C. §§ 1 et. seq.) or other applicable statute, Gilead shall bear all costs for damages in any action brought by Gilead or where Gilead has not joined Achillion as a party to

  

 37 

 
such action provided, however, mat Achillion will bear all costs for damages or fees under this Section 9.6 associated with any Patent prosecuted by
Achillion that is held unenforceable due to inequitable conduct, or similar conduct, in such prosecution as a result of the action or inaction of Achillion or its Affiliates, by a decision of a court or government agency of competent jurisdiction,
that is unappealable or unappealed within the time allowed for appeal, if the action or inaction held to constitute such conduct, was unknown to Gilead when it initiated such defense or suit 
  
 9.7 Settlement. Each Party shall give the other
Party timely written notice of the proposed settlement of any action under Sections 9.4 or 9.5, and neither Party shall consent to the entry of any judgment or settlement or otherwise compromise any such action or suit in a way that adversely
affects the other Party’s intellectual property rights or its rights or interests with respect to Compounds or Licensed Products without such other Party’s prior written consent (not to be unreasonably withheld). 
  

	10.	TERM AND TERMINATION 

  
 10.1 Term. This Agreement shall commence on the Effective Date and, unless terminated earlier pursuant to Sections 10.2 or 10.3,
shall be in full force and effect until the expiration of the last to expire Royalty Term. 
  
 10.2 Elective Termination by Gilead. Gilead shall have the right in its sole discretion and for any reason to terminate this Agreement in its entirety, at any time after the Blackout
Period, upon one hundred twenty (120) days written notice to Achillion. 
  
 10.3 Termination for Material Breach. If a Party materially breaches this Agreement, the other Party may terminate this Agreement effective ninety (90) days after providing written
notice to the breaching Party, if within that time the breaching Party fails to cure its material breach and the non-breaching Party does not withdraw its termination notice. 
  
 10.4 Effects of Termination. If a Party terminates this Agreement under Sections 10.2 or 10.3,
all terms and provisions (including but not limited to all Royalty Terms and Achillion’s covenants under Section 5.3) shall terminate as of the effective date of termination, except as otherwise expressly provided in this Section 10.4
and in Section 10.5. 
  
 (a) Gilead
Elective Termination. If Gilead terminates this Agreement pursuant to Section 10.2 the provisions of Section 10.4(b) shall apply, except that the license grants in Section 5.1 shall terminate throughout the Territory. 

 
 (b) Termination for Gilead Breach. If Achillion
terminates this Agreement pursuant to Section 10.3: 
  
 (i) the Parties shall pay any amounts due pursuant to Section 2.4, Section 6 and Section 9 prior to the date of termination; 
  
 (ii) In the event of a material breach by Gilead under Section 3.5 or 4.4, Achillion’s termination rights shall be on a
Major Market-by-Major Market basis with respect to Major Markets affected by such material breach (and in the event Achillion terminates 

  

 38 

 
in all Major Markets pursuant to this Section 10.4(b)(ii), Achillion shall also have the right to terminate this Agreement in the remainder of the
Territory); 
  
 (iii) In the event of a
material breach by Gilead of obligations under this Agreement, other than those under Section 3.5 or 4.4, that is specific to a Licensed Product, Achillion’s termination rights under Section 10.3 shall be on a Licensed
Product-by-Licensed Product basis in all countries affected by such breach; 
  
 (iv) Gilead shall assign and promptly transfer to Achillion, or its Affiliates as requested by Achillion, at no expense to Achillion or its Affiliates, all of Gilead’s right, title and interest in and to
(A) all regulatory filings (such as INDs and drug master files), Regulatory Approvals, and clinical trial agreements (to the extent assignable and not cancelled) for Licensed Product(s) or Compound(s), to the extent that Achillion elects to
continue Development of such Licensed Product(s) or Compound(s); (B) all data, including clinical data, materials and information of any kind or nature whatsoever, in Gilead’s possession or in the possession of its Affiliates or its or
their respective agents related to the Licensed Produces) or any Compound(s); (C) all trademarks related to Licensed Products (if such termination occurs after approval of such trademark by a Regulatory Authority); and (D) all material
information, and any other information reasonably requested and required by Achillion, relating to the manufacture of Compounds and/or Licensed Products; 
  
 (v) Achillion shall revoke (and Gilead shall allow revocation of) any powers of attorney for Achillion Patents that Gilead holds as
of the time of such termination; 
  
 (vi)
Gilead shall supply (or cause its Third Party manufacturers to supply) Licensed Produces) and/or Compound(s) to Achillion to the extent Gilead had, prior to such termination, been manufacturing Licensed Produces) and/or Compound(s) and, at
Achillion’s request, shall assist in the transfer of manufacturing processes to new suppliers; 
  
 (vii) In the event that Gilead supplies Licensed Product and/or Compounds pursuant to Section 10.4(b)(vi), Achillion shall pay
Gilead (1) its out-of-pocket costs, to the extent such manufacture, transfer and supply activities are conducted by Third Parties and/or (2) a reasonable market rate, to the extent that Gilead conducts such manufacture, transfer and supply
activities. The Parties will cooperate to effect such transfer as soon as practicable. In any event, Gilead’s obligations to transfer and supply under Sections 10.4(b)(vi) and (vii) shall expire within [**] after such termination.

  
 (viii) Achillion may elect to acquire
a license to intellectual property Controlled by Gilead that is incorporated into a Compound or Licensed Product, with a right to sublicense, solely to Develop, make, have made, use, sell, have sold, offer for sale, and import such Compound or
Licensed Product in the Field in the Territory. In the event of such election, the Parties shall negotiate in good faith commercially reasonable terms for such license; provided, however, that such license shall not include any up-front fees or
milestone payments unless both Parties agree. 
  
 (ix) In the event that, at the time of termination, there is a Combination Product in Development or if such Combination Product has undergone a First Commercial Sale, 

  

 39 

 
the Parties shall, in good faith, negotiate an arrangement under which (i) the Parties shall jointly Develop and commercialize such Combination Product;
(ii) each Party shall bear its own costs associated with its commercialization activities; (iii) each Party shall share in the economic benefit of any such arrangement in accordance with the relative contribution of such Party’s
compound(s); and (iv) each Party would grant to the other Party a nonexclusive license to any intellectual property rights necessary solely to permit the arrangements described in this Section 
  
 (c) Termination for Achillion Breach. If
Gilead terminates this Agreement pursuant to Section 10.3: 
  
 (i) the Parties shall pay any amounts due pursuant to Section 2.4, Section 6 and Section 9 prior to the date of termination; 
  
 (ii) Gilead may elect to have the licenses granted to Gilead pursuant to Section 5.1 and the
negative covenants of Achillion under Section 5.3 survive; 
  
 (iii) Gilead shall have no further diligence obligations under Sections 3.5 or 4.4; 
  
 (iv) If Gilead elects to have the licenses granted to Gilead pursuant to Section 5.1 survive, subject to Gilead’s rights
to make claims against Achillion, Gilead’s obligations to Achillion under Section 6 shall survive; 
  
 (v) The obligations of the Parties under Sections 2 and 3 shall expire; and 
  
 (vi) Achillion shall assign and promptly transfer to
Gilead, or its Affiliates as requested by Gilead, at no expense to Gilead or its Affiliates, all of Achillion’s right, title and interest in and to (A) all regulatory filings (such as INDs and drug master files), Regulatory Approvals, and
clinical trial agreements (to the extent assignable and not cancelled) for the Licensed Product(s) or any Compounds, and (B) all data, including clinical data, materials and information of any kind or nature whatsoever, in Achillion’s
possession or in the possession of its Affiliates or its or their respective agents related to the Licensed Product(s) or any Compounds. 
  
 (d) Return of Confidential Information. Upon expiration or termination of this Agreement the Parties shall comply with
Section 7.1(b). 
  
 10.5 Accrued Rights and
Obligations; Survival. Termination of this Agreement by a Party pursuant to Section 10.3 shall not be a Party’s sole remedy for a material breach of this Agreement but shall be in addition to any other rights or remedies of a Party
under this Agreement Termination or expiration of this Agreement shall not affect any accrued rights or surviving obligations of the Parties. The provisions of Sections 2.5, 5.3(c), 6.9, 7, 8.3, 9, 10.4, 11 and 12 shall survive the expiration or
termination of this Agreement for any reason whatsoever. 
  

 40 

	11.	INDEMNIFICATION, INSURANCE, LIMITATIONS OF LIABILITY 

  
 11.1 Indemnification by Gilead. Gilead will indemnify, hold harmless and defend Achillion, its Affiliates, and their
respective employees and agents against any and all losses, damages, liabilities, judgments, fines, amounts paid in settlement, expenses and costs of defense (including without limitation reasonable attorneys’ fees and witness fees)
(“Losses”) resulting from any claim, demand, suit, action or proceeding brought or initiated by a Third Party (“Third Party Claim”) against them to the extent that such Third Party Claim arises out of (i) the
research, development, manufacture, use, sale or other commercialization of Licensed Products by Gilead, its Affiliates, sublicensees or distributors, including but not limited to infringement of Patents of Third Parties, or misappropriation of
trade secrets of Third Parties, resulting from such activities (such Losses arising out of infringement of Patents, “Third Party Infringement Losses”); (ii) the breach or alleged breach of any representation or warranty by
Gilead in Section 8; or (iii) the negligence or willful misconduct of Gilead, its Affiliates, or their respective employees or agents in the course of performance under this Agreement; provided that such indemnity shall not apply to the
extent Achillion has an indemnification obligation pursuant to Section 11.2 or 11.3 for such Loss. 
  
 11.2 Indemnification by Achillion. Achillion will indemnify, hold harmless and defend Gilead, its Affiliates and their
respective employees and agents against any and all Losses resulting from any Third Party Claim against them to the extent that such Third Party Claim arises out of (i) the research, development, and other activities under this Agreement by
Achillion, its Affiliates, and agents, excluding the infringement of Patents of Third Parties resulting from the research, development, manufacture, use, sale or other commercialization of Licensed Products by Gilead, its Affiliates, sublicensees or
distributors; (ii) the breach or alleged breach of any representation or warranty by Achillion in Section 8 and (iii) the negligence or willful misconduct of Achillion, its Affiliates, or their respective employees (which for the
purposes of Field Based Personnel shall mean such negligence or willful misconduct not directed by Gilead) or agents; provided that such indemnity shall not apply to the extent Gilead has an indemnification obligation pursuant to Section 11.1
or 11.3 for such Loss. 
  
 11.3 Product
Liability 
  
 (a) Achillion
will indemnify, hold harmless and defend Gilead, its Affiliates and their respective employees and agents against any and all Losses resulting from any Third Party product liability claim or any claim of bodily injury against them to the extent that
such claim (i) arises from clinical studies conducted by Achillion pursuant to the Research Program; (ii) any action or inaction by Field-Based Personnel in violation of laws or regulations (except to the extent such action or inaction is
directed by Gilead); or (iii) the gross negligence or willful misconduct of Achillion, its Affiliates, or their respective employees or agents to the extent that such gross negligence or willful misconduct is not related to the design of a
Licensed Product 
  
 (b) Gilead will
indemnify, hold harmless and defend Achillion, its Affiliates and their respective employees and agents against any and all Losses resulting from any Third Party product liability claim or any claim of bodily injury against them to the extent that
such claim involves Compounds and is not covered by claims described in Section 11.2 or 11.3(a). 
  
 11.4 Mechanics. If a Party, its Affiliate, or any of their respective employees or agents has a right to be indemnified under
this Section 11 (the “Indemnified Party”), (a) such 

  

 41 

 
Indemnified Party shall give thirty (30) days notice of such Third Party Claim to the other Party (the “Indemnifying Party”) and
(b) subject to Section 9.5, such Indemnifying Party shall have the first right to defend any such Third Party Claims, with the cooperation and at the expense of such Indemnifying Party, provided that the Indemnifying Party will not settle
any such Third Party Claim without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld, conditioned or delayed. If the Indemnifying Party does not wish to defend against a Third Party Claim, it shall
so notify the Indemnified Party in writing and the Indemnified Party shall have the right to defend and settle such Third Party Claim, at the expense of the Indemnifying Party, subject to obtaining the Indemnifying Party’s consent to any
settlement, such consent not to be unreasonably withheld, conditioned or delayed. If the Indemnifying Party is defending a Third Party Claim, the Indemnified Party shall have the right to be present in person or through counsel at substantive legal
proceedings at its own expense, hi the event that the Parties cannot agree as to the application of Section 11.4 and to any Loss or Third Party Claim, the Parties may conduct separate defenses of such Third Party Claim. In such case, each Party
further reserves the right to claim indemnity from the other in accordance with Sections 11.1 and 11.2 upon resolution of such underlying Third Party Claim. 
  
 11.5 Insurance Coverage. At all times during the term of this Agreement and any extended terms thereof, each Party represents
and warrants that it will provide and maintain, at its own expense, adequate insurance coverage for a pharmaceutical company of similar situation. Such insurance shall include comprehensive general liability insurance. This coverage shall be
provided by a carrier rated a minimum of AV by BEST Rating or its equivalent or by an adequately capitalized captive (in accordance with usual insurance standards), which covers all such Parry’s activities and obligations hereunder in
accordance with reasonable pharmaceutical industry standards of companies; provided, however, that the amount of such insurance shall be not less than $5 million for each occurrence and $5 million aggregate for all occurrences. In addition, each
Party shall carry products liability and/or clinical trials insurance in the amounts and for the periods that are appropriate in light of such Party’s activities pursuant to this Agreement. Should such coverage be written on a claims-made
basis, each Party agrees to maintain coverage for a period of not less than five (5) years after the expiration of this Agreement. Each Party will provide to other Party with prior written notice upon any cancellation or material change in such
insurance program. Upon request, each Party may receive a certificate of insurance evidencing insurance coverage. 
  
 11.6 Limitation Of Liability. Neither Party shall be liable to the other Party for incidental, consequential or special damages,
including but not limited to lost profits, whether in contract, tort or otherwise, arising from or relating to any breach of or activities under this Agreement, regardless of any notice of the possibility of such damages. Nothing in this
Section 11.6 is intended to limit or restrict the indemnification rights or obligations of any party under this Agreement. 
  

 42 

	12.	GENERAL PROVISIONS 

  
 12.1 Dispute Resolution; Governing Law 
  
 (a) Disputes 
  
 (i) The Parties recognize that disputes as to certain matters may from time to time arise during the
term of this Agreement which relate to either Party’s rights and/or obligations hereunder. It is the objective of the Parties to establish procedures to facilitate the resolution of disputes arising under this Agreement in an expedient manner
by mutual cooperation and without resort to litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in this Section 12.1 if and when a dispute arises under this Agreement. 
  
 (ii) In the event of disputes between the Parties, a
Party seeking to resolve such dispute will, by written notice to the other, have such dispute referred to their respective executive officers designated below or their successors, for attempted resolution by good faith negotiations within [**] after
such notice is received. Said designated officers are as follows: 
  

			
	 For Achillion:
	  	Michael Kishbauch, President and Chief Executive Officer
		
	 For Gilead:
	  	John F. Milligan, Ph.D., Executive Vice President & CFO

  
 (iii) In the event the designated executive officers are not able to resolve such dispute, either Party may at any time after the [**] period invoke the provisions of Section 12.1 hereinafter. 
  
 (b) Alternative Dispute Resolution. Following
settlement efforts pursuant to Section 12.1 (a), any dispute, controversy or claim arising out of or relating to the validity, construction, enforceability or performance of this Agreement, including disputes relating to alleged breach or to
termination of this Agreement under Section 10, other than disputes which are expressly prohibited herein from being resolved by this mechanism, shall be settled by binding alternative dispute resolution (“ADR”) in the manner
described below: 
  
 (i) If a Party
intends to begin an ADR to resolve a dispute, such Party shall provide written notice (the “ADR Request”) to counsel for the other Party, informing the other Party of such intention and the issues to be resolved. 
  
 (ii) Within [**] after the receipt of the ADR
Request, the other Party may, by written notice to the counsel for the Party initiating ADR, add additional issues to be resolved. 
  
 (iii) Disputes regarding the scope, validity and enforceability of Patents shall not be subject to this Section 12.1, and
shall be submitted to a court of competent jurisdiction. 
  
 (c) Arbitration Procedure. The ADR shall be conducted pursuant to the JAMS Rules then in effect, except that notwithstanding those rules, the following provisions shall apply to the ADR hereunder: 

 
 (i) The arbitration shall be conducted by a panel
of three arbitrators (the “Arbitration Panel”). The Arbitration Panel shall be selected from a pool of retired independent federal judges to be presented to the Parties by JAMS. 
  

 43 

 (ii) The time periods set forth in the JAMS rules shall be followed, unless a
Party can demonstrate to the Arbitration Panel that the complexity of the issues or other reasons warrant the extension of one or more of the time tables. In such case, the Arbitration Panel may extend such time tables, but in no event shall the
time tables be extended so that the ADR proceeding extends more than 18 months from the date of the ADR Request. In regard to such time tables, the Parties (A) acknowledge that the issues that may arise in any dispute involving this Agreement
may involve a number of complex matters and (B) confirm their intention that each Party will have the opportunity to conduct complete discovery with respect to all material issues involved in a dispute within the framework provided above.
Within such timeframes, each Party shall have the right to conduct discovery in accordance with the Federal Rules of Civil Procedure. The Arbitration Panel shall not award punitive damages to either Party and the Parties shall be deemed to have
waived any right to such damages. The Arbitration Panel shall in rendering its decision, apply the substantive law of the State of New York, except for any of its choice of law rules that would require the application of the laws of another
jurisdiction, except that the interpretation of and enforcement of this Section 12.1 shall be governed by the Federal Arbitration Act. The Arbitration Panel shall apply the Federal Rules of Evidence to the hearing. In the event that arbitration
is initiated by Gilead, the hearing shall convene in Boston, MA; in the event that arbitration is initiated by Achillion, the hearing shall convene in San Francisco, CA. The fees of the Arbitration Panels and JAMS shall be paid by the losing Party
which shall be designated by the Arbitration Panel. If the Arbitration Panel is unable to designate a losing Party, it shall so state and the fees shall be split equally between the Parties. 
  
 (iii) The Arbitration Panel is empowered to award any
remedy allowed by law, including money damages, prejudgment interest and attorneys’ fees, and to grant final, complete, interim, or interlocutory relief, including injunctive relief but excluding punitive damages. 
  
 (iv) Except as set forth in Section 12.1(c)(ii),
above, each Party shall bear its own legal fees and expenses against the Party losing the ADR unless it believes that neither Party is the clear loser, in which case the Arbitration Panel shall divide such fees, costs and expenses according to the
Arbitration Panel’s sole discretion. 
  
 (v) The ADR proceeding shall be confidential and the Arbitration Panel shall issue appropriate protective orders to safeguard each Party’s Confidential Information. Except as required by law, no Party shall make (or instruct the
Arbitration Panel to make) any public announcement with respect to the proceedings or decision of the Arbitration Panel without prior written consent of each other Party. The existence of any dispute submitted to ADR, and the award, shall be kept in
confidence by the Parties and the Arbitration Panel, except as required in connection with the enforcement of such award or as otherwise required by applicable law. 
  
 (d) Judicial Enforcement. The Parties agree that judgement on any arbitral award issued pursuant to
this Section 12 shall be entered in the United States District Court for the Northern District of California or, in the event such court does not have subject matter jurisdiction over the dispute in question, such judgment shall be entered in
the Superior Court of the State of California, in the County of San Mateo. 
  

 44 

 (e) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, except for any of its choice of law rules that would require the application of the laws of another jurisdiction. 
  
 12.2 Jurisdiction and Venue. In connection with any dispute arising hereunder or in connection with the
subject matter hereof that is not settled in accordance with Section 12.1, each of the Parties hereby consents to the non-exclusive jurisdiction and venue of the U.S. federal courts located within the state of California and of the California
state courts. Each Party hereby irrevocably waives any right that it may have to assert that any such court lacks jurisdiction or that such forum is not convenient. 
  
 12.3 Language. The official text of this Agreement and any exhibits referenced herein, or any notice
given or accounts or statements required by this Agreement shall be in English. In the event of any dispute concerning the construction or meaning of this Agreement, reference shall be made only to this Agreement as written in English and not to any
other translation into any other language. 
  
 12.4
Compliance with Laws. Each Party shall carry out its activities pursuant to this Agreement in compliance with all applicable supranational, national, state, provincial and other local laws, rules, regulations and guidelines.

  
 12.5 Notice. All notices hereunder shall
be in writing and shall be delivered personally, sent for next day delivery by internationally recognized courier service or transmitted by facsimile (transmission confirmed), with confirmation by next day delivery by an internationally recognized
courier service, to the following addresses and facsimiles of the respective Parties or such other address or facsimile as is notified pursuant to this Section 12.5: 
  

			
	 Gilead:
	  	Gilead Sciences, Inc.
	 	  	333 Lakeside Drive
	 	  	Foster City, CA 94404
	 	  	Attention: Executive Vice President and Chief Financial Officer
	 	  	Fax No.: (650) 522-5488
		
	 with a copy to:
	  	Gilead Sciences, Inc.
	 	  	333 Lakeside Drive
	 	  	Foster City, CA 94404
	 	  	Attention: Vice President and General Counsel
	 	  	Fax No.: (650) 522-5537
		
	 Achillion:
	  	Achillion Pharmaceuticals, Inc.
	 	  	300 George Street
	 	  	New Haven, Connecticut 06511
	 	  	Attention: Chief Executive Officer
	 	  	Fax: (203) 624-7003

  

 45 

			
	 with copies to:
	  	Achillion Pharmaceuticals, Inc.
	 	  	300 George Street
	 	  	New Haven, Connecticut 06511
	 	  	Attention: Vice President of Finance
	 	  	Fax: (203) 624-7003
		
	 	  	Steven D. Singer
	 	  	Wilmer Cutler Pickering Hale and Dorr
	 	  	60 State Street
	 	  	Boston, MA 02109
	 	  	Fax: (617) 526-5000

  
 12.6
Waiver. The failure on the part of a Party to exercise or enforce any rights conferred upon it hereunder shall not be deemed to be a waiver of any such rights nor operate to bar the exercise or enforcement thereof at any time or times
hereafter. 
  
 12.7 Assignment. Except
as otherwise provided in this Section 12.7, neither Party will assign its rights or duties under this Agreement to any Third Party without the prior express written consent of the other Party, which shall not be unreasonably withheld. Any
purported assignment not in compliance with this Section 12.7 will be void. 
  
 (a) Gilead Change of Corporate Control. Gilead may, without Achillion’s consent, assign this Agreement and its rights and
obligations hereunder in connection with a Change of Corporate Control. 
  
 (b) Achillion Change of Corporate Control. Achillion may, without Gilead’s consent, assign this Agreement and its rights and obligations hereunder in connection with a Change of Corporate Control,
subject to the conditions contained in this Section 12.7(b). Upon a Change of Corporate Control of Achillion, Achillion shall provide written notice to Gilead [**] prior to such assignment, which notice shall specify the identity of the
acquirer in the Change of Corporate Control. If Achillion so notifies Gilead, and the entity obtaining Corporate Control of Achillion is either an entity engaged in the pharmaceutical or biotechnology business, with a market capitalization of at
least $[**] U.S. Dollars, or an entity engaged in the development or commercialization of products in the HCV Field, Gilead shall have the right, at its election at any time within [**] after such notice, to elect in a written notice to Achillion,
to do any or all of the following: 
  
 (i)
terminate the provisions of Section 2 and/or Sections 3.1-3.4, in whole or in part; 
  
 (ii) terminate Achillion’s participation in Gilead’s commercial activities pursuant to Section 4.2(b); and/or

  
 (iii) disband the Research Committee,
the Development Committee, or both such Committees. 
  
 If Gilead makes any of the
foregoing elections, the Parties shall within [**] after any such election determine, if applicable, any amounts due pursuant to Section 2.4 and pay such amounts, and Achillion shall assign and transfer to Gilead, or its Affiliates as requested
by Gilead, all of 

  

 46 

 
Achillion’s right, title and interest in and to (A) all regulatory filings (such as INDs and drug master files), Regulatory Approvals, and clinical
trial agreements (to the extent assignable and not cancelled) for the Licensed Product(s) or any Compounds; and (B) all data, including clinical data, materials and information of any kind or nature whatsoever, in Achillion’s possession or
in the possession of its Affiliates or its or their respective agents related to the Licensed Product(s) or any Compounds. 
  
 12.8 Performance by Affiliates. A Party’s obligations under this Agreement may be performed by its Affiliates.
Obligations of the Party for which one of its Affiliates is performing hereunder shall be deemed to extend to such performing Affiliate. Each Party guarantees performance of this Agreement by its Affiliates. Wherever in this Agreement the Parties
delegate responsibility to Affiliates or local operating entities, the Parties agree that such entities shall not make decisions inconsistent with this Agreement, amend the terms of this Agreement or act contrary to its terms in any way. 

 
 12.9 Bankruptcy. All rights and licenses
granted under or pursuant to this Agreement by a bankrupt Party to the other Party are, and shall be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code and any similar law or regulation in any other country, licenses of rights
to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that all intellectual property rights licensed hereunder are part of the “intellectual property” as defined under
Section 1O1(35A) of the Bankruptcy Code subject to the protections afforded the non-terminating Party under Section 365(n) of the Bankruptcy Code, and any similar law or regulation in any other country. 
  
 12.10 Severability. The provisions of this
Agreement are severable. If any item or provision of this Agreement shall to any extent be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby, and each term and provision of this Agreement shall be valid and
shall be enforced to the fullest extent permitted by law. The Parties will use diligent good faith efforts to revise this Agreement as and to the extent reasonably necessary to effectuate their original intent and purpose under this Agreement.

  
 12.11 Force Majeure. Neither Party
shall be liable for any delay or failure of performance to the extent such delay or failure is caused by circumstances beyond its reasonable control and that by exercise of due diligence it is unable to prevent, provided that the Party claiming
excuse immediately notifies the other Party and uses and continues to use commercially reasonable efforts to overcome the same. 
  
 12.12 Entire Agreement; Modification. This Agreement, including any exhibits expressly named and referenced herein,
constitutes the entire agreement and understanding of the Parties and supersedes any prior agreements or understandings relating to the subject matter hereof. Any modification of this Agreement shall be effective only to the extent it is reduced to
writing and signed by a duly authorized representative of each Party hereto. 
  
 12.13 Headings. The captions to the several Articles and Sections hereof are not a part of this Agreement, but are merely for convenience to assist in locating and reading the several Articles and
Sections hereof. 
  

 47 

 12.14 Independent Contractors. It is expressly agreed that Gilead and Achillion
shall be independent contractors and that the relationship between the two Parties shall not constitute a partnership, joint venture or agency. Neither Gilead nor Achillion shall have the authority to make any statements, representations or
commitments of any kind, or to take any action, which shall be binding on the other Party, without the prior written consent of the other Party. 
  
 12.15 Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative
and in addition to any other remedy referred to in this Agreement or otherwise available under law. 
  
 12.16 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original and all of
which shall constitute together the same document. 
  
 The persons executing this
Agreement represent and warrant that they have the full power and authority to cause their respective entities to enter into this Agreement. 
  

 48 

 IN WITNESS WHEREOF the Parties have executed this agreement as of the effective date by their duly
authorized representatives. 
  

									
	 ACHILLION PHARMACEUTICALS, INC.
	 	 	 	 GILEAD SCIENCES, INC.

					
	 By:
	 	 /s/ Michael Kishbauch
	 	 	 	 By:
	 	 /s/ John F. Milligan

	 Name:
	 	 Michael Kishbauch
	 	 	 	 Name:
	 	 John F. Milligan, Ph.D.

	 Title:
	 	 President & CEO
	 	 	 	 Title:
	 	 Executive Vice President & CFO

 EXHIBIT 1.1: ACHILLION PATENTS AND PATENT APPLICATIONS: 
  
 US Patent Application Serial No. [**] 
  
 [**] US Provisional Patent Application Serial No. [**] 
  
 US Provisional Patent Application Serial No. [**] 
  
 US Patent Application Serial No. [**] 
  
 [**] 

 EXHIBIT 1.2: COMPOUNDS 
  
 Compound means each of the following: 
  
 (i) [**] as claimed under Achillion Patents and patent applications as listed in Exhibit 1.1; 
  
 (ii) any compound [**]; or 
  
 (iii) any [**] prior to the end of the term of the Agreement, [**]. For purposes of clarification of this clause (iii), “Compounds” included in this
clause (iii) [**]. 

 EXHIBIT 1.3: PROOF OF CONCEPT 
  
 “Proof of Concept” means: 
  
 Demonstration of [**]. 
  
 A clinical study of suitable design approved by the Research Committee [**] by either Gilead or Achillion from the contract research organization(s) implementing the study. 

 EXHIBIT 2.2: PROOF-OF-CONCEPT CLINICAL DEVELOPMENT PLAN 
  
 Studies prior to Phase 1 [**] 
  
 Non-clinical studies [**]. The criteria [**] will be determined. 
  
 Phase la Studies [**] 
  
 The Phase 1 study [**] will be studied. Specific parameters needed for advancement to the
“proof of principle” study will be determined prior to initiation of the study. 
  
 Phase lb [**] 
  
 This study will
[**] into longer-term studies. This study will [**]. This study will [**] and will be agreed to by the Research Committee. [**]. The parties will agree [**]. 

 RESEARCH PROGRAM: 
  
 PROOF-OF-CONCEPT PROGRAM 
  
 Objectives for Proof-of-Concept Program: 
  
 [**] 

 RESEARCH PROGRAM: 
  
 PROOF-OF-CONCEPT PROGRAM RESOURCE ALLOCATION 
  
 Internal Costs 
  

										
	 CATEGORY

	  	FTEs

	  	ACH FTEs

	  	GILD FTEs

	  	Internal Costs

	 IND-enabling pre-clinical
	  	[**]	  	[**]	  	[**]	  	$	[**]
	 Phase 1 PK/Safety Trial
	  	[**]	  	[**]	  	[**]	  	$	[**]
	 Phase lb/2 PoC Trial
	  	[**]	  	[**]	  	[**]	  	$	[**]
	 Manufacturing / Formulation
	  	[**]	  	[**]	  	[**]	  	$	[**]
	 R&D Management
	  	[**]	  	[**]	  	[**]	  	$	[**]
	 Totals
	  	[**]	  	[**]	  	[**]	  	$	[**]

  
 External Costs 
  

				
	 CATEGORY

	  	 
	 IND-enabling pre-clinical
	  	$	[**]
	 Phase 1 PK/Safety Trial
	  	$	[**]
	 Phase lb/2 PoC Trial
	  	$	[**]
	 Manufacturing / Formulation
	  	$	[**]
	 Total
	  	$	[**]

  
 Total Costs 
  

										
	 CATEGORY

	  	INTERNAL

	  	EXTERNAL

	  	Total Costs

	 IND-enabling pre-clinical
	  	$	[**]	  	$	[**]	  	$	[**]
	 Phase 1 PK/Safety Trial
	  	$	[**]	  	$	[**]	  	$	[**]
	 Phase lb/2 PoC Trial
	  	$	[**]	  	$	[**]	  	$	[**]
	 Manufacturing / Formulation
	  	$	[**]	  	$	[**]	  	$	[**]
	 R&D Management
	  	$	[**]	  	$	[**]	  	$	[**]
	 POC Program Budget
	  	$	[**]	  	$	[**]	  	$	[**]

 RESEARCH PROGRAM: 
  
 BACK-UP PROGRAM 
  
 Research Objectives for Backup Program 
  
 [**] 

 RESEARCH PROGRAM: 
  
 BACK-UP PROGRAM RESOURCE ALLOCATION 
  

					
	 Activity

	  	Achillion FTEs

	 	Duration

	 VIROLOGY
	  	 	 	 
	 •      [**]
	  	[**]	 	[**]
	 MECHANISM OF ACTION
	  	 	 	 
	 •      [**]
	  	[**]	 	[**]
	In vitro / In vivo Profiling and Bioanalytics	  	[**]	 	[**]
	 CHEMISTRY
	  	 	 	 
	 •      [**]
	  	[**]	 	[**]

  
 Back-up Program Cost

  

												
	 CATEGORY

	  	ACH
FTEs

	  	Internal

	  	External

	  	Total

	 Virology
	  	[**]	  	$	[**]	  	 	 	  	 	 
	 Mechanism of Action
	  	[**]	  	$	[**]	  	 	 	  	 	 
	 Profiling and Bioanalytics
	  	[**]	  	$	[**]	  	 	 	  	 	 
	 Chemistry
	  	[**]	  	$	[**]	  	 	 	  	 	 
	 Total
	  	 	  	$	[**]	  	$	[**]	  	$	[**]

 RESEARCH PROGRAM COST CAP 
  

										
	 CATEGORY

	  	INTERNAL

	  	EXTERNAL

	  	Total Costs

	 Research Program
	  	$	[**]	  	$	[**]	  	$	[**]

  
 COSTS BY RESEARCH
PROGRAM 
  

										
	 CATEGORY

	  	INTERNAL

	  	EXTERNAL

	  	Total Costs

	 POC Program Budget
	  	 	 	  	 	 	  	 	 
	 IND-enabling pre-clinical
	  	$	[**]	  	$	[**]	  	$	[**]
	 Phase I PK/Safety Trial
	  	$	[**]	  	$	[**]	  	$	[**]
	 Phase 1b/2 PoC Trial
	  	$	[**]	  	$	[**]	  	$	[**]
	 Manufacturing/Formulation
	  	$	[**]	  	$	[**]	  	$	[**]
	 R&D Management
	  	$	[**]	  	$	[**]	  	$	[**]
	 	  	$	[**]	  	$	[**]	  	$	[**]
	 Back-Up Program Cost
	  	 	 	  	 	 	  	 	 
	 Virology
	  	$	[**]	  	 	 	  	 	 
	 Mechanism of Action
	  	$	[**]	  	 	 	  	 	 
	 Profiling and Bioanalytics
	  	$	[**]	  	 	 	  	 	 
	 Chemistry
	  	$	[**]	  	 	 	  	 	 
	 	  	$	[**]	  	$	[**]	  	$	[**]
	 Total
	  	$	[**]	  	$	[**]	  	$	[**]

 EXHIBIT 7.4: PRESS RELEASE 
  

			
	Gilead Contacts:	  	Achillion Contacts:
	 Amy Flood, Media
	  	Kari Lampka, Media
	 (650) 522-5643
	  	(508) 647-0209
		
	 Susan Hubbard, Investors
	  	Mary Kay Fenton, Investors
	 (650) 522-5715
	  	(203) 624-7000

  
 DRAFT - NOT FOR RELEASE

  
 GILEAD AND ACHILLION ANNOUNCE COLLABORATION FOR THE
DEVELOPMENT AND COMMERCIALIZATION OF ACHILLION’S HEPATITIS C COMPOUNDS 
  
 Foster City, CA and New Haven, CT, November XX, 2004 - Gilead Sciences (Nasdaq: GILD) and Achillion Pharmaceuticals today announced that the companies have signed an exclusive agreement granting Gilead worldwide rights for the
research, development and commercialization of certain Achillion compounds for the treatment of infection with the hepatitis C virus (HCV). The compounds, small molecule inhibitors of HCV replication, are believed to act through a novel mechanism of
action involving HCV protease. In this collaboration, Achillion will continue development of the compounds, according to a mutually agreed upon development plan, through completion of a proof-of-concept clinical study in HCV-infected patients.
Following the proof-of-concept study, Gilead will assume full responsibilities and costs associated with development and commercialization for compounds warranting further development. 
  
 Under the terms of the agreement, Gilead will pay to Achillion a $5 million upfront license payment and will purchase $5 million of equity.
In addition, Gilead will provide partial funding through the completion of the proof-of-concept study. Achillion could also earn milestone payments in excess of $100 million under the agreement, based upon the achievement of certain development,
regulatory and commercial goals, and will have the option to participate in U.S. commercialization efforts for any future products arising from this collaboration. Achillion’s milestone payments could increase substantially assuming progress is
made on multiple related compounds. Gilead will receive exclusive worldwide license rights and will pay Achillion a royalty on net sales of future products arising from the collaboration. 
  
 “Gilead and Achillion share a commitment to developing advanced therapeutics for the treatment of significant unmet medical needs, such
as HCV,” said John C. Martin, Ph.D., President and Chief Executive Officer of Gilead Sciences. “Achillion’s drug discovery and development expertise, particularly in identifying unique drug targets with the potential to address drug
resistance, makes the company an ideal partner for Gilead. We believe Achillion’s compounds work through a novel mechanism, making them excellent potential candidates for HCV combination therapy regimens. We look forward to collaborating with
Achillion to rapidly advance new compounds for the treatment of HCV.” 
  
 “This collaboration highlights the strength of Achillion’s discovery and development capabilities and its ability not only to create important new compounds for treatment of life-threatening 

 
infectious diseases, but also to advance such compounds into clinical proof-of-concept studies. Gilead’s commercial franchise and expertise in antiviral
drug development has made the company our strongly preferred partner to advance and commercialize compounds from our exciting HCV program,” stated Michael Kishbauch, Chief Executive Officer of Achillion. “We believe that this agreement
provides an important catalyst to this program while also freeing up resources to advance our own HIV and antibacterial programs.” 
  
 Hepatitis C is a viral liver disease, caused by infection with the hepatitis C virus. Globally, more than 170 million people have chronic hepatitis C. About
3 million Americans are now estimated to be chronically infected with the hepatitis C virus. HCV is a leading cause of cirrhosis, a common cause of hepatocellular carcinoma, and is the leading cause of liver transplantation in the United
States. 
  
 ABOUT GlLEAD SCIENCES 
  
 Gilead Sciences, Inc. is a biopharmaceutical company that discovers, develops and
commercializes therapeutics to advance the care of patients suffering from life-threatening diseases worldwide. The company has seven marketed products, and focuses its research and clinical programs on anti-infectives. Headquartered in Foster City,
CA, Gilead has operations in North America, Europe and Australia. 
  
 About
Achillion 
  
 Achillion is an innovative pharmaceutical company dedicated
to bringing important new treatments to patients with infectious disease. The company’s proven discovery and development teams have advanced multiple product candidates with novel mechanisms of action. Achillion is focused on solutions for the
most challenging problems in infectious disease—HIV, hepatitis and resistant bacterial infections. 
  
 This press release includes forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that are subject to risks, uncertainties and other factors, including risks related
to the companies’ ability to move compounds into the clinic and to successfully discover, develop and/or commercialize any compounds under the agreement. These risks, uncertainties and other factors could cause actual results to differ
materially from those referred to in the forward-looking statements. The reader is cautioned not to rely on these forward-looking statements. These and other risks are described in detail in the Gilead Annual Report on Form 10-K for the year ended
December 31, 2003 and in the company’s Quarterly Reports on Form 10-Q, which are on file with the U.S. Securities and Exchange Commission. All forward-looking statements are based on information currently available to Gilead, and neither
company assumes any obligation to update any such forward-looking statements. 
  
 # # # 
  
 For more information
on Gilead Sciences, please visit the company’s web site at 
 www.gilead.com or call the Gilead Public Affairs Department at

 1-800-GILEAD-5 or 1-650-574-3000. 
  

For more information on Achillion Pharmaceuticals, please visit the company’s web site at 
 www.achillion.com or call Achillion at 1-203-624-7000.

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