Document:

EXHIBIT
10.10

 

FORM OF

AWARD AGREEMENT

under the

Gardenburger, Inc.

2001 Stock Incentive Plan

 

INCENTIVE STOCK OPTION

 

 

	
  Company:

  	
  GARDENBURGER, INC.

  
	
   

  	
  1411 SW Morrison Street

  
	
   

  	
  Suite 400

  
	
   

  	
  Portland, Oregon 97205

  
	
   

  	
   

  
	
   

  	
   

  
	
  Participant:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  

 

Company maintains the Gardenburger, Inc. 2001 Stock
Incentive Plan (the “Plan”).  The Plan
is administered by the Stock-Based Awards Committee (the “Committee”) of the
Board of Directors of Company (the “Board”).

 

This Award Agreement evidences the grant of an Incentive
Stock Option (the “Option”) to Participant under the Plan.

 

Company and Participant agree as follows:

 

1.             Defined
Terms

 

When used in this
Agreement, the following terms have the meaning specified below:

 

“Cause” Cause for
termination of employment means:

 

a.     A material act of fraud or dishonesty by
Participant within the course of performing Participant’s duties for Company or
its Affiliates;

 

b.     Gross negligence or intentional misconduct
by Participant in performing material duties for Company or its Affiliates, or
unjustifiable neglect by Participant of the performance of material duties for
Company or its Affiliates;

 

1

 

c.     Commission of an act (or failure to take an
action) intentionally against the interest of Company or its Affiliates that
causes Company or an Affiliate material injury; or

 

d.     An act of serious moral turpitude that
causes Company or an Affiliate material injury.

 

This provision will not be deemed to restrict the
authority, discretion, or power of the Board, by any action taken in compliance
with Company’s articles of incorporation and bylaws, to terminate Participant’s
employment with Company, with or without Cause.  Rather, the foregoing provisions merely define, for purposes of
Participant’s contractual rights and remedies under this Agreement, the
circumstances in which termination of Participant’s employment will constitute
termination for Cause.

 

“Change in Control” a
change in control of Company means:

 

a.     The acquisition by any Person of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 25 percent or more of the combined voting power of the then
outstanding Voting Securities; provided, however, that for purposes of this
paragraph (a), the following acquisitions will not constitute a Change of
Control: (1) any acquisition directly from Company, (2) any acquisition by
Company, (3) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Company or any corporation controlled by Company, or
(4) any acquisition by any corporation pursuant to a transaction which complies
with clauses (1), (2), and (3) of paragraph (c) below; or

 

b.     individuals who, as of the date of this
Agreement, constitute the Board (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date of this Agreement whose
election, or nomination for election by Company’s shareholders, was approved by
a vote of at least a majority of the directors then comprising the Incumbent
Board will be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or

 

c.     consummation of a reorganization, merger,
or consolidation or sale or other disposition of all or substantially all of
the assets of Company (a “Business Combination”) in each case, unless,
following such Business Combination, (1) all or substantially all of the
individuals and entities who were the beneficial owners of the Voting
Securities outstanding immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 75 percent of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns Company or 

 

2

 

all or substantially all
of Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination, of the Voting Securities, (2) no Person (excluding
any employee benefit plan (or related trust) of Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 50 percent or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (3) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such Business
Combination.

 

 “Continuation Period”
means a period described in Section 3.7.1 during which the Option
continues after termination of employment.

 

“Dollars” or “$” refers to United States
dollars.

 

“Employer” means Company or a Subsidiary of
Company.

 

“Good Reason” for all purposes of this
Agreement, termination by Participant of Participant’s employment with Company
for “Good Reason” means termination based on any of the following:

 

a.     A change in Participant’s status or
position or positions with Company that represents a material demotion from
Participant’s status or position or positions as of the date of this Agreement
or a material change in Participant’s duties or responsibilities that is
inconsistent with such status or position or positions;

 

b.     A reduction by Company in Participant’s
base salary (as in effect on the date of this Agreement or as increased at any
time during the Term of the Option); or

 

c.     The failure of Company to continue
Participant’s participation (on terms comparable to those for other key
employees of Company) in any plans and vacation programs or arrangements in
which other key employees of Company are participants (unless such failure to
continue is caused by an action or status of Participant).

 

“Grant Date” means the date the Option is
granted, which is reflected as the date of this Agreement.

 

“Termination Date” means the date
Participant ceases to be a full-time employee of any Employer for any
reason, including death, Disability, and Retirement.

 

“Voting Securities” means  Company’s
issued and outstanding securities ordinarily having the right to vote at
elections of Company’s Board.

 

Capitalized terms not otherwise defined in this
Agreement have the meanings given them in the Plan.

 

3

 

2.             Grant of
Option

 

Subject to the terms and conditions of this Agreement
and the Plan, Company grants to Participant the Option to purchase
          Shares of Company’s
common stock with a per-share option exercise price of
$        .

 

3.             Terms of the
Option

 

The Option will be subject to all applicable
provisions of the Plan and to the following terms and conditions:

 

3.1           Incentive Stock Option.  The Option is intended to qualify as an
incentive stock option meeting the requirements of IRC § 422.

 

3.2           Term.  The term of the Option commenced on the
Grant Date and will expire on the tenth anniversary of the Grant Date unless
terminated earlier in accordance with this Agreement.

 

3.3           Exercisability.  The Option is initially unexercisable in
whole or in part, and unless the exercisability of the Option is accelerated or
the Option is terminated or canceled earlier in accordance with this Agreement,
the Option will become exercisable as to 20 percent of the Shares as of each of
the first five anniversaries of the Grant Date.

 

3.4           Effect of Meeting Performance
Goals.  Notwithstanding the
provisions of Section 3.3, if Company’s earnings before interest, taxes,
depreciation, and amortization (“EBITDA”) for Company’s fiscal year ending
September 30, 2001, equals or exceeds
$       , the Option will become exercisable
as to 20 percent on September 30, 2001, and will become exercisable as to an
additional 20 percent as of each of the following four anniversaries of the
Grant Date.

 

3.5           Effect of Death or Disability.  Notwithstanding the provisions of
Section 3.3, the entire Option will become fully exercisable upon
Participant’s death or upon termination of Participant’s employment by reason
of Disability.

 

3.6           Effect of Change in Control.
Notwithstanding the provisions of Section 3.3, the entire Option will
become fully exercisable as of the Termination Date in the event that, at any
time following a Change in Control of Company, Participant is terminated by an
Employer without Cause or Participant terminates employment with an Employer
for Good Reason.

 

3.7           Effect of Termination of
Employment.  For purposes of this
Agreement, “employment” includes periods of illness or other leaves of absence
authorized by the Employer, and a transfer of Participant’s employment from one
Employer to another Employer will not be treated as a termination of
employment.  If Participant ceases to be
a full-time employee of any Employer for any reason, the effect on the
exercisability of the Option will be as set forth in this Section 3.7.

 

4

 

3.7.1                        Continuation Period.  The Continuation Period for the Option upon
a termination of Participant’s employment with an Employer is the period ending
on the earlier of the expiration of the original term of the Option or:

 

(a)   If the termination of employment is by reason
of Participant’s death or Disability—the expiration of one year following the
termination date; or

 

(b)   If the termination of employment is for any
other reason, including Retirement—the expiration of 90 days following the
Termination Date.

 

3.7.2                        Continuation of
Option.  After termination of
employment, the term of the Option will continue for the applicable
Continuation Period described in Section 3.7.1.  The Option will remain exercisable during the Continuation
Period, if at all, only to the extent the Option had become exercisable
pursuant to this Agreement on or prior to the Termination Date.  The Option, to the extent not previously
exercised, will be canceled automatically at the end of the applicable
Continuation Period.

 

3.8           Method of Exercise.  The Option, or any portion thereof, may be
exercised, to the extent it has become exercisable pursuant to this Agreement,
by delivery to Company of a written Notice of Exercise in the form attached to
this Agreement as Appendix A stating the number of Shares and form of payment
and tendering full payment of the option exercise price for such Shares.  Within a reasonable time after its receipt
of Participant’s Notice of Exercise, Company will deliver to Participant a
certificate for the Shares purchased pursuant to such exercise of the Option.

 

3.9           Other Documents.  Upon any exercise of the Option, Participant
must furnish Company before the closing of such exercise such other documents
or representations as Company may require to assure compliance with applicable
laws and regulations.

 

3.10         Payment.  The exercise price for the Shares purchased
upon exercise of the Option must be paid in full at or before closing by one or
a combination of the following:

 

(a)   Payment in cash;

 

(b)   Delivery to Company of shares of Common Stock
with a Fair Market Value as of the date of such delivery equal to the option
exercise price (such shares, if acquired by Participant from Company, having
been held by Participant for at least 6 months); or

 

(c)   By delivery (in a form approved by the
Committee) of an irrevocable direction to a securities broker acceptable to the
Committee to sell Shares subject to the Option and to deliver all or a part of
the sales proceeds to Company in payment of all or a part of the exercise price
and withholding taxes due.

 

3.11         Transferability.  The Option is not transferable other than by
will or the laws of descent and distribution and may be exercised during the
lifetime of Participant only by Participant or, in the case Participant becomes
legally incompetent, by Participant’s guardian or legal representative.

 

5

 

4.             Tax Reimbursement

 

Participant agrees
to pay to Company an amount sufficient to provide for any withholding or
similar tax liability imposed on Company in connection with or with respect to
any exercise of the Option.

 

5.             Covenants,
Warranties, and Representations by Participant

 

5.1           Acceptance of Option.  By executing this Agreement, Participant
accepts the Option and agrees to be bound by the terms and conditions of this
Agreement and the Plan.

 

5.2           Tax Consequences.   Participant acknowledges that exercise of
the Option and the sale of the Shares purchased pursuant to exercise of the
Option will have income tax consequences for which Participant should seek
individual advice from Participant’s own tax advisors.

 

5.3           Indemnification by Participant.  Participant agrees to indemnify and hold the
Company harmless from any loss or damage, including attorney’s fees or other
legal expenses, incurred in the defense or payment of any such claim against
the Company resulting from a breach by Participant of the representations,
warranties or provisions contained in this Agreement.

 

5.4           No Right to Continued Relationship.  Participant acknowledges that nothing in the
Plan or in this Agreement will confer upon Participant the right to continue as
an officer or employee of Company or any Employer or affect any right that
Company or any Employer may have to terminate its relationship with
Participant.

 

5.5           Rights as Shareholder.
Participant acknowledges that Participant will have no rights as a shareholder
of Company on account of the Option or on account of the Shares subject to the
Option until such time as Company has issued and delivered stock certificates
to Participant following an exercise of the Option by Participant.

 

5.6           Further Assurances.  From time to time and upon request by
Company, Participant agrees to execute such additional documents as Company may
reasonably require in order to effect the purposes of the Plan and this
Agreement.

 

6.             Waivers/Modifications.

 

No waivers, alterations or modifications of this Agreement will be valid unless in
writing and duly executed by the party against whom enforcement of such waiver,
alteration or modification is sought. 
The failure of any party to enforce any rights against the other party
for breach of any of the terms of this Agreement will not be construed a waiver
of such rights as to any continued or subsequent breach.

 

7.             Governing
Law.

 

                This
Agreement will be governed by the
laws of the State of Oregon.

 

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8.             Conditions
Precedent

 

Company will use its best efforts to obtain approval
of the Plan and this Option by any state or federal agency or authority that
Company determines has jurisdiction. 
Without limiting the foregoing, Company will not be required to issue
any Shares upon exercise of all or any portion of the Option until Company has
taken all action required to comply with all applicable federal and state
securities laws.

 

9.             Termination
for Cause.

 

The grant of the Option governed by this Agreement is
provisional until Participant becomes entitled to a certificate for Shares in
settlement of the Option.  In the event
the employment of Participant is terminated by an Employer for Cause, any
portion of the Option that is provisional will be annulled as of the date of
such termination for Cause.

 

10.           Successorship

 

Subject to restrictions on transferability set forth
in Section 3.11, this Agreement will be binding upon and benefit the
parties, their successors and assigns.

 

11.           Notices

 

Any notices under this Option must be in writing and
will be effective when actually delivered personally or, if mailed, when
deposited as registered or certified mail directed to the address of the
parties set forth above or to such other address as a party may certify by
notice to the other party.

 

12.           Arbitration

 

Any dispute or claim that arises out of or that
relates to this Agreement or to the interpretation, breach, or enforcement of
this Agreement, must be resolved by mandatory arbitration in accordance with
the then effective arbitration rules of Arbitration Service of Portland, Inc.,
and any judgment upon the award rendered pursuant to such arbitration may be
entered in any court having jurisdiction thereof.

 

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13.           Attorneys’ Fees

 

In the event of
any suit or action or arbitration proceeding to enforce or interpret any
provision of this Agreement (or that is based on this Agreement), the
prevailing party will be entitled to recover, in addition to other costs,
reasonable attorneys’ fees in connection with such suit, action, or
arbitration, and in any appeal.  The
determination of who is the prevailing party and the amount of reasonable attorneys’
fees to be paid to the prevailing party will be decided by the arbitrator or
arbitrators (with respect to attorneys’ fees incurred prior to and during the
arbitration proceedings) and by the court or courts, including any appellate
courts, in which the matter is tried, heard, or decided, including the court
that hears any exceptions made to an arbitration award submitted to it for
confirmation as a judgment (with respect to attorneys’ fees incurred in such
confirmation proceedings).

 

	
   

  	
  Gardenburger, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Its

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Participant

  	
   

  

 

8

 

APPENDIX A

 

NOTICE OF EXERCISE OF INCENTIVE OPTION

Under the Gardenburger, Inc.,

2001 Stock Incentive Plan

 

I,
                 ,
hereby exercise the option to purchase
        shares of no par value common
stock (the “Shares”), of Gardenburger, Inc. (“Company”), granted to me pursuant
to the terms and conditions of the Gardenburger, Inc., 2001 Stock Incentive Plan (the
“Plan”) and the Incentive Stock Option Award Agreement dated
          , 2001, bearing
Option No.     (the “Option”).

 

Accompanying
this Notice is: [select one]

 

•                  cash, certified or cashier’s check in the amount
of $        ,

 

•                        shares of the
Company’s Common Stock valued at $       
(their Fair Market Value, as defined in the Plan, as of this date), or

 

•                  I hereby request that this Option be exercised
through a cashless transaction and have provided the name and address of my
broker below.  I understand that if I
elect a cashless transaction, the Company will request and authorize its stock
transfer agent to issue the certificate(s) in the name of my broker to
facilitate the completion of the transaction.

 

 

	
   

  	
   

  	
   

  	
   

  	
  Date:  

  	
   

  	
   

  
	
   

  	
  (Participant’s
  Signature)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Participant’s
  Name:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Participant’s
  Address:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Broker’s
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Broker’s
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
														

 

9Exhibit 10.1

 

AGREEMENT OF PURCHASE AND SALE

 

THIS AGREEMENT OF PURCHASE AND SALE
(“Agreement”), made and entered into by and between ARENA PHARMACEUTICALS, INC., a Delaware corporation
(“Seller”), and LINCOLN PROPERTY COMPANY
COMMERCIAL, INC., a Texas corporation, or its assigns (“Purchaser”).

 

WITNESSETH:

 

1.                                       Purchase
and Sale.  Subject to the terms and
conditions of this Agreement, and for good and valuable consideration, Seller
agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, all
of the following (collectively, the “Property”):

 

(a)                                  The real property
(the “Land”) located at 6138-6150 Nancy Ridge Drive, City of San Diego, County
of San Diego, State of California, legally described on Exhibit A
attached hereto, including all right, title and interest of Seller in and to
all adjacent streets, alleys, rights-of-way, any strips or gores between the
Land and adjacent properties, and all tenements, hereditaments, easements,
appurtenances, access rights and parking rights benefiting the Land (provided
that Seller shall retain any right, title or interest to any of the foregoing
to the extent appurtenant to any real property owned or leased by Seller that
is not being transferred pursuant to this Agreement).

 

(b)                                 The buildings known as
Buildings B and C situated on the Land containing approximately
54,000 rentable square feet, and any and all other structures, fixtures and
improvements of every kind and character situated on the Land, including,
without limitation, all chemistry hoods and all mechanical, electrical,
heating, air conditioning and plumbing fixtures (collectively, the
“Improvements”); provided, however, the emergency generator, the security
system and related equipment,  and
moveable personal property will not be conveyed pursuant to this Agreement.

 

(c)                                  All licenses,
permits, certificates of occupancy, zoning approvals, dedications, subdivision
maps or plats, entitlements, and utility deposits issued, approved or granted
by any authorities or otherwise filed, recorded, issued or granted in
connection with the Land or the Improvements (collectively, the “Licenses and
Permits”).

 

(d)                                 To the extent owned by
Seller, all of the following items which are in the possession of, under the
control or, or reasonably available to Seller (collectively, the “Records and
Plans”):

 

(i)                                     all preliminary,
final and proposed building plans and specifications (including “as-built”
drawings) respecting the Improvements;

 

Execution Version

 

 

(ii)                                  all structural
reviews, architectural drawings, and engineering, soils, architectural,
environmental, seismic and drainage reports, studies and certificates and other
documents pertaining to the Land and the Improvements;

 

(iii)                               all warranties,
guaranties and bonds relating to the Improvements.

 

2.                                       Purchase
Price.  The purchase price for the
Property (the “Purchase Price”) is Thirteen Million and No/100 Dollars
($13,000,000.00), and shall be payable in cash at the Closing (as hereinafter
defined) by wire transfer through the Federal Reserve System or other immediately
available funds.  The Purchase Price is
based on the assumption that the buildings comprising the Improvements (the
“Buildings”) contain 54,000 rentable square feet.  The number of rentable square feet contained in the Buildings
shall be verified to the satisfaction of Seller and Purchaser during the
Inspection Period (as defined in Paragraph 6), and if it is determined that the
Buildings contain more or less than 54,000 rentable square feet, then the
Purchase Price shall be adjusted to equal the product of $240.74 times the
number of rentable square feet contained in the Buildings.  The number of rentable square feet shall be
specified in the Lease (as defined in Paragraph 10).

 

3.                                       Opening
of Escrow/Deposit.  Within one
business day after the execution of this agreement by both parties, an escrow
shall be opened with First American Title Insurance Company (the “Title
Company”), 515 South Figueroa Street, Suite 700, Los Angeles,
California 90071, Attn: Greg Schultz, Telephone (213) 623-1552 (the “Escrow
Agent”), and Purchaser shall deposit with the Escrow Agent as earnest money the
sum of Fifty Thousand and No/100 Dollars ($50,000.00) (the “Initial Deposit”),
to be held by the Escrow Agent pursuant to the terms of this Agreement.  Subject to Purchaser’s right to terminate
this Agreement pursuant to paragraph 6(a) hereof, on or before the last
day of the Inspection Period (as defined in paragraph 6(a) hereof),
Purchaser shall deposit with the Escrow Agent as additional earnest money the
additional sum of Fifty Thousand and No/100 Dollars ($50,000.00) (the
“Additional Deposit”), to be held by the Escrow Agent pursuant to the terms of
this Agreement.  As used in this
Agreement, the term “Deposit” shall initially refer to the Initial Deposit,
and, if the Additional Deposit is made, the term “Deposit” shall refer
collectively to the Initial Deposit and the Additional Deposit.  The term “Deposit” shall also include
interest earned thereon.  The Deposit
shall be either in the form of a check which shall be immediately cashed by the
Escrow Agent or by wire transfer to the Escrow Agent, and the proceeds thereof
shall be deposited in an interest bearing account.  If this Agreement closes, the Deposit shall be applied toward the
payment of the Purchase Price at the Closing. 
If this Agreement does not close, then the Deposit shall be either
returned to Purchaser or paid to Seller in accordance with the provisions of
paragraph 15 below.

 

2

 

4.                                       Evidence
of Title; Survey.

 

(a)                                  Title
Report.  Within ten (10) days after
the Effective Date (as hereinafter defined), Seller, at its sole expense, shall
furnish or cause to be furnished to Purchaser (i) a preliminary report (the
“Title Report”) issued by the Title Company, showing the state of title to the
Property, together with (ii) true, correct and legible copies of any and all
instruments (the “Title Exceptions”) referred to in the Title Report as
constituting or containing exceptions or restrictions upon the title of Seller.

 

(b)                                 Title
and Survey Review.  Purchaser shall
have a period of twenty (20) days after receipt of the Title Report and the
Title Exceptions within which to review such documents and to notify Seller in
writing of any items which Purchaser deems, in its sole discretion,
objectionable.  Any Title Exception
included in the Title Report to which Purchaser does not timely object shall be
deemed to be a “Permitted Exception.” 
If there are objections by Purchaser (which objections may include
endorsements requested by Purchaser which the Title Company is unwilling to
issue), Seller shall have the opportunity to attempt to cure the same, but
Seller shall not be obligated to cure any of Purchaser’s objections.  Within five (5) days after receipt of
Purchaser’s notice of title objections, Seller shall deliver written notice to
Purchaser listing any of Purchaser’s objections which Seller agrees to cure and
those which Seller is either unable or unwilling to cure.  If Seller does not deliver the notice within
the five (5) days provided in the previous sentence, such inaction shall
constitute notice that Seller is unwilling to cure Purchaser’s objections.  If Seller does not agree to cure all of
Purchaser’s objections, Purchaser shall have the right to either (i) terminate
this Agreement by delivering written notice thereof to Seller within a further
five (5) days or (ii) waive its objections and accept such title as Seller is
able to convey, in which case the title objections which are not cured shall
also be deemed to be Permitted Exceptions. 
Notwithstanding anything contained herein to the contrary, Seller shall
be obligated (on or before the Closing) to obtain a release of any liens
against the Property securing indebtedness of Seller.

 

5.                                       Additional
Documents and Information.  Within
five (5) days after the Effective Date, Seller shall deliver the following
documents and items to Purchaser to the extent Seller has Knowledge of them and
they are either in Seller’s possession or readily available to Seller, without
any representations or warranties by Seller other than as provided in paragraph
8:

 

(a)                                  Copies of all
material correspondence in Seller’s possession with any city, county or other
governmental entity relating to the ownership, development or operation of the
Property.

 

(b)                                 Copies of all as-built
plans and specifications relating to the Improvements.

 

(c)                                  Legible copies of all
Licenses and Permits, specifically including, without limitation, the
certificate of occupancy for the Improvements.

 

3

 

(d)                                 Legible copies of all
insurance policies in effect with respect to the Property, and copies of all
claims and settlements of $25,000.00 or more.

 

(e)                                  Legible copies of all
service contracts and maintenance agreements (the ”Service Contracts”) and
all modifications or amendments thereto and all correspondence and other
documents, agreements and writings affecting the Service Contracts.

 

(f)                                    Copies of all
landscape plans, irrigation plans, utility plans and maintenance records in the
possession of, or reasonably available to Seller.

 

(g)                                 Legible copies of all
Records and Plans.

 

(h)                                 A list of all
presently pending claims, actions, suits or any other legal or administrative
proceedings relating to the Property, which list shall describe in reasonable
detail the current status of all such matters and the estimated monetary
exposure thereunder.  Seller shall
notify Purchaser within five (5) days after any additional claim or matter is made
or instituted.

 

(i)                                     Copies of ad valorem
tax statements covering the Property for the current year, if available, and
for the two (2) immediately preceding calendar years and all subsequent notices
of assessment or appraised value with respect to the Property.

 

(j)                                     Copies of all
reports and logs maintained by Seller regarding the condition and maintenance
of the Improvements, specifically including, without limitation, the roof, HVAC
and mechanical systems.

 

(k)                                  Copies of any
environmental audits of the Property obtained by or delivered to Seller,
including any reports regarding asbestos abatement or remediation that may have
been performed at the Property.

 

(l)                                     Copy of the most
recent survey of the Land and the Improvements in Seller’s possession, if any.

 

If this Agreement does not close for any reason, all reports or studies
given to Purchaser by Seller will be promptly returned to Seller as provided in
paragraph 16(d).

 

6.                                       Conditions
Precedent to Purchaser’s Obligation. 
Purchaser’s obligation to close the sale and purchase hereunder is subject
to the following conditions precedent:

 

(a)                                  Inspection
Period.

 

(i)                                     Purchaser shall
have a period ending at 5:00 p.m. Pacific Time on the date which is sixty
(60) days after the Effective Date (the “Inspection Period”), within which to

 

4

 

(i) review the items described
in paragraph 5 above, (ii) conduct a physical inspection of the
Property, (iii) verify the square footage of the buildings comprising the
Improvements, (iv) conduct such other inspections, tests, investigations
and feasibility studies as Purchaser may deem necessary or advisable in
connection with its purchase of the Property, and (v) secure adequate
financing for the purchase of the Property on terms acceptable to Purchaser in
Purchaser’s sole and absolute discretion. 
Purchaser and its duly authorized agents and representatives shall be
given reasonable access to the Property at any time, and from time to time,
prior to the Closing for the purpose of conducting such inspections, tests, studies
and other investigations; provided, however, that Purchaser shall not
unreasonably disturb any business of Seller in connection with the Property and
provided that Seller shall be afforded the opportunity to participate in such
visitations.  Purchaser shall keep the
Property free and clear of any mechanics’ liens, materialmen’s liens or claims
arising out of any of Purchaser’s activities or of Purchaser’s representatives
on or with respect to the Property.  All
entries onto the Property by Purchaser and all inspections and examinations
thereof shall be at Purchaser’s sole cost and expense, shall be done in a
workmanlike manner in accordance with all applicable codes, statutes,
ordinances, rules, regulations and laws and shall not disturb in any way the
quiet occupancy or enjoyment of any occupant of the Property.  Purchaser shall not perform any test or
inspection or carry out any activity at the Property which may damage the
Property in any way or which is physically intrusive into the Improvements or the
Land without the prior written consent of Seller, which consent shall not be
unreasonably withheld or delayed.  After
each entry onto any portion of the Property, Purchaser, at its sole cost and
expense shall repair (which shall include replacement where necessary) any
damage to the Property arising from such entry.  In connection with any inspection on the Property, Purchaser and
Purchaser’s representatives shall (x) carry liability insurance adequate in
Seller’s reasonable judgment and, upon the request of Seller, will provide
Seller with written evidence of same, and (y) name Seller as an additional
insured for such liability insurance. 
Purchaser will give Seller reasonable prior notice of its intention to
conduct any inspections or tests with respect to the Property and Seller
reserves the right to have a representative present.

 

(ii)                                  If all the items
listed in paragraph 5 above are not provided to Purchaser prior to the end of
the Inspection Period, or if such inspections, tests, studies or other investigations
are not satisfactory, or if Purchaser determines that the Property is
unsuitable for any other reason, in Purchaser’s sole and absolute discretion,
Purchaser shall have the right to terminate this Agreement.  If Purchaser elects to proceed with this
transaction, Purchaser shall deliver written notice to such effect to Seller
and make the Additional Deposit with the Escrow Agent on or before the last day
of the Inspection Period.  If Purchaser
fails to provide Seller with written notice of its intent to proceed with this
transaction or to make the Additional Deposit on or before the last day of the
Inspection Period, then Purchaser shall be deemed to have exercised its right
to terminate this Agreement under this paragraph 6(a).  Purchaser agrees to indemnify and hold
Seller harmless from any liens, claims, damages, losses or expenses incurred by
Purchaser in connection with its inspections, tests, studies or other
investigations hereunder; provided, however, Purchaser’s obligation shall not
extend to any diminution in the value of the Property caused by, or other
consequences of, Purchaser’s discovery of problems or other conditions on or
with respect to the

 

5

 

Property, nor shall Purchaser’s
obligation extend to the cost of remediation of any such problem or other
condition not caused by Purchaser.  If
the Title Report, Title Exceptions and Exhibit B have not been received by
Purchaser within ten (10) days after the Effective Date, then the Inspection
Period shall be extended one (1) day for each day of delay in Purchaser’s
receipt of such items, provided, in no event, shall the Inspection Period be
extended by more than fifteen (15) days.

 

(b)                                 Representations,
Warranties and Covenants of Seller. 
Seller shall have duly performed each and every agreement to be
performed by Seller hereunder, and Seller’s representations and warranties set
forth in paragraph 8 below shall be true and correct in all material
respects as of the Closing Date.

 

(c)                                  Continued
Operation.  Seller shall operate the
Property in an efficient and business-like manner and shall maintain the
Property in substantially its present state of repair up to the Closing Date.

 

(d)                                 Service Contracts.  Purchaser shall be satisfied that all Service
Contracts are either personal in a nature to Seller or can be terminated
without liability to Purchaser.

 

In the event any of the conditions set forth in this paragraph 6 are
not timely satisfied, Purchaser shall have the right to terminate this Agreement.  The conditions set forth in this paragraph 6
are solely for the benefit of Purchaser and may be waived only by
Purchaser.  Purchaser shall at all times
have the right to waive any condition. 
The waiver by Purchaser of any condition shall relieve Seller of any
liability or obligation as respects any representation, warranty or covenant of
Seller unless Seller shall otherwise agree in writing.  Neither Seller nor Purchaser shall act or
fail to act for the purpose of permitting or causing any condition in this
paragraph 6 to fail (except to the extent Purchaser, in its sole
discretion, exercises its right to disapprove any such items or matters).

 

7.                                       [intentionally
deleted]

 

8.                                       Representations
and Warranties.  Seller hereby
represents and warrants to Purchaser that the following facts are, as of the
date hereof, true and correct, which representations and warranties shall
terminate one year after the Closing (it being understood that such
representations and warranties are subject to Exhibit B which shall be prepared
by Seller and delivered to Purchaser within ten (10) days after the Effective
Date):

 

(a)                                  No part of the
Property is subject to any judgment of any court, agency or instrumentality or
to any litigation, and Seller has no Knowledge of any pending or threatened
litigation affecting the Property, except as set forth on Exhibit B
attached hereto.

 

(b)                                 Seller is not in
material default under any Service Contract or other agreement affecting the
Property.

 

6

 

(c)                                  No part of the
Property is subject to any condemnation or similar proceeding, and Seller has
no Knowledge of any pending or threatened condemnation or similar proceeding.

 

(d)                                 Seller has received no
written notice from any governmental authority that the Property is in
violation of any governmental order, regulation, statute, ordinance, rule or
restriction dealing with the use, operation, safety or maintenance thereof,
except as set forth on Exhibit B attached hereto, and Seller has
received no notices from any insurance carriers requiring repairs or
alterations to the Land or the Improvements.

 

(e)                                  Seller has not
obligated itself in any manner whatsoever to sell or otherwise dispose of the
Property, or any part thereof, to any party other than Purchaser.

 

(f)                                    At the Closing,
Seller will deliver exclusive possession of the Property to Purchaser free and
clear of any leases, tenancies or parties in possession except for the Lease
(as defined in paragraph 10).

 

(g)                                 No commitments have
been made to any governmental authority, utility company, school board, church
or other religious body, homeowners or homeowners’ association, or to any other
organization, group or individual, relating to the Property which would impose
an obligation upon Purchaser or its successors and assigns to make any
contributions or dedications of money or land or to construct, install or
maintain any improvements of a public or private nature on or off the Property.
The provisions of this subparagraph shall not apply to any regular and
nondiscriminatory local real estate or school taxes assessed against the
Property or to normal development fees payable to the City.

 

(h)                                 This Agreement has
been approved by Seller’s Board of Directors, the person executing this
Agreement on behalf of Seller has full right, title, authority and capacity to
execute and perform this Agreement, and Seller will deliver at the Closing
documentation in form acceptable to Purchaser evidencing Seller’s authority to
execute and deliver the Deed and all other documents relating to the Closing of
this transaction.

 

(i)                                     To the Knowledge
of Seller, all water, sewer, gas, electric, telephone and drainage facilities,
and other utilities required for the normal and proper operation of the
Property are installed and are adequate to serve the Property for its current
use.  To the Knowledge of Seller, all
utilities serving the Property enter the Property through publicly dedicated
roads or through currently effective public or private easements, except as
otherwise disclosed on Exhibit B attached hereto.  To the Knowledge of Seller, no fact or
condition exists which would result in the termination or impairment of such
utility services to the Property.

 

(j)                                     To the Knowledge
of Seller, and except as otherwise disclosed on Exhibit B attached
hereto, the Property complies with, and is not in material violation of,
Environmental Laws

 

7

 

related to the Property and
there has been no release of Hazardous Materials on or from the Property in
violation of law.  The term
“Environmental Laws” shall include, without limitation, the Federal Clean Air
Act, the Federal Clean Water Act, the Water Quality Act of 1987, the Federal
Insecticide, Fungicide and Rodenticide Act (“FIFRA”), the Federal Marine
Protection, Research and Sanctuaries Act, the National Environmental Policy
Act, the Noise Control Act, the Occupational Safety and Health Act, the
Resource Conservation and Recovery Act (“RCRA”), as amended by the Hazardous
and Solid Waste Amendments of 1984, the Safe Drinking Water Act, the
Comprehensive Environmental Response, Compensation and Liability Act
(“CERCLA”), as amended by the Superfund Amendments and Reauthorization Act and
the Emergency Planning and Community Right to Know Act, the Toxic Substance
Control Act (“PACIFIC”), and the Atomic Energy Act, all as may be amended, with
implementing regulations and guidelines. 
Environmental Laws shall also include all state, regional, county, municipal
and other local laws, regulations and ordinances that are equivalent or similar
to the federal laws recited above or purport to regulate Hazardous
Materials.  The term “Hazardous
Materials” shall include, without limitation, any hazardous substance, pollutant,
or contaminant regulated under CERCLA, oil and petroleum products and natural
gas, liquified natural gas, synthetic gas usable for fuel, pesticides regulated
under FIFRA, asbestos, polychlorinated, biphenals, and other substances
regulated under PACIFIC, source material, special nuclear material, and
by-product materials regulated under the Atomic Energy Act, and industrial
process and pollution control waste to the extent regulated under applicable
Environmental Laws.

 

(k)                                  To the Knowledge of
Seller, no dry wells or underground storage facilities have been or are
situated on the Land.

 

(l)                                     To the Knowledge
of Seller, there are no soil or archaeological conditions on the Land adverse
to its current use other than earthquake fault lines.

 

(m)                               No transaction,
privilege, use, sales, personal property, withholding or other tax with respect
to the Property is delinquent.

 

(o)                                 No attachments,
execution proceedings, assignments for the benefit of creditors, insolvency,
bankruptcy, reorganization or other proceedings are pending or, to Seller’s Knowledge,
threatened against Seller or the Property, nor are any of such proceedings
contemplated by Seller.

 

(p)                                 No bill or other
payment due with respect to the ownership, operation and maintenance of the
Property is delinquent.

 

(q)                                 To the Knowledge of Seller,
there are no material physical defects in the construction of the Improvements
except as set forth on Exhibit B attached hereto.

 

8

 

(r)                                    To the Knowledge of
Seller, there are no covenants, restrictions or other agreements affecting the
Property other than Permitted Exceptions and those items delivered pursuant to
paragraph 5 above or as set forth on Exhibit B attached hereto.

 

9.                                       Purchaser Representation.  Purchaser hereby represents and warrants to Purchaser
that, as of the date hereof, the person executing this Agreement on behalf of
Purchaser has full right, title, authority and capacity to execute and perform
this Agreement and all other documents relating to the Closing of this
transaction.

 

10.                                 Lease-Back.  At the Closing, Seller shall lease the
Property from Purchaser pursuant to a lease agreement (the “Lease”) including
the following basic terms and provisions (which have been agreed to by Seller
and Purchaser):

 

(a)                                  The primary term of
the Lease shall be fifteen (15) years.

 

(b)                                 Base rent shall be
payable in monthly installments at the initial rate of $1.95 per rentable
square foot contained in the Buildings (using the same number of rentable
square feet on which the Purchase Price is calculated pursuant to Paragraph 2),
with two and one-half percent (2 1/2%) annual increases on a cumulative basis.

 

(c)                                  The Lease shall be
“triple net” and Seller shall pay all costs and expenses relating to the
ownership and operation of the Property, including, without limitation, ad
valorem taxes, insurance, utilities and maintenance costs.

 

(d)                                 Seller shall have two
options to renew the term of the Lease for two (2) consecutive periods of five
(5) years each.  Base rent for the first
renewal term shall be at the same rate (with the annual increase) as determined
pursuant to subparagraph (b) above (by way of example, the base rent for the
first year for the first renewal term shall be the base rent applicable during
the last year of the primary term increased by 2 1⁄2%), and base rent for the
second renewal term shall be at the then current market rate.

 

(e)                                  Seller shall provide
a security deposit in an amount equal to twelve (12) months’ initial base rent;
provided, however, that so long as Seller is not then in default under the
Lease, and no event or condition has occurred which, with the giving of notice
or the passage of time, could result in a default by Seller under the Lease,
then the security deposit shall be reduced to six (6) months base rent after
the tenth year of the Lease.  The
security deposit shall be in the form of an irrevocable standby letter of
credit issued by a national bank satisfactory to Purchaser and in form and
content satisfactory to Purchaser.  The
letter of credit shall remain in effect throughout the entire lease term,
including any renewals thereof, and for thirty (30) days thereafter.

 

(f)                                    Seller shall have
the option to purchase the Property concurrent with the expiration of the
primary lease term at a cash price of $20,000,000.00.

 

9

 

(g)                                 Seller
shall have Purchaser’s proxy to vote at association meetings or take action by
written consent in lieu of such association meeting, provided Purchaser’s prior
approval to vote or take action by written consent is needed before Seller
votes on any matter which would impose a monetary obligation on Purchaser.

 

(h)                                 Seller shall have the
right to make further improvements to the Land and Buildings during the Lease
term in accordance with provisions to be set forth in the Lease.

 

The remaining terms and conditions of the Lease shall be negotiated by
Seller and Purchaser after the Effective Date. 
The initial draft of the Lease shall be prepared by Seller’s counsel.  If the form of the Lease is not finalized
and agreed to by both parties (despite their good faith efforts to do so)
within thirty-five (35) days after the Effective Date (the “Lease Approval
Period”), then either party shall have the right to terminate this Agreement by
delivering written notice thereof to the other party at any time after the
expiration of the Lease Approval Period. 
If Purchaser has not received the initial draft of the Lease from
Seller’s counsel within five (5) days after the Effective Date, then the Lease
Approval Period and the Inspection Period shall be extended by one day for each
day of delay.  The Lease will be in a
form with terms and conditions consistent with other comparable bio-tech lease
transactions in the area.

 

11.                                 Right
of First Offer.

 

(a)                                  If Seller should desire
to offer the property known as 6154 Nancy Ridge Drive, as more
particularly described on Exhibit C attached hereto and made a part
hereof (the “Adjoining Property”), for sale, Seller shall first give written
notice to Purchaser stating the purchase price and other terms (the “Proposed
Terms”) which Seller would be willing to accept.  At any time within thirty (30) days following written notice to
Purchaser of the Proposed Terms (the “Offer Period”), Purchaser may elect to
purchase the Adjoining Property on the Proposed Terms by written notice to
Seller accompanied by a cashier’s check payable to the escrow agent specified
in the Proposed Terms in an amount equal to the earnest money specified in the
Proposed Terms.  In addition, Seller
agrees to negotiate with Purchaser regarding the Adjoining Property during the
Offer Period, and it is acknowledged that Purchaser and Seller may reach an
agreement during the Offer Period for the sale of the Adjoining Property to
Purchaser on terms other than the Proposed Terms.  The Proposed Terms, if accepted by Purchaser, or any such other
terms to which Seller and Purchaser shall agree are referred to herein as the
“Agreed Terms”.

 

(b)                                 If Purchaser elects to
purchase the Adjoining Property as provided in subparagraph (a), then
Seller and Purchaser shall proceed to close the sale of the Adjoining Property
on the Agreed Terms at the closing date specified in the Agreed Terms which
shall be not less than sixty (60) days and not more than ninety (90) days after
written notice to Purchaser of the Proposed Terms.  If the closing fails to occur by reason of a default of
Purchaser, Seller shall be entitled to receive the earnest money as liquidated
damages, and Seller shall thereafter be free to

 

10

 

sell the Adjoining Property
without further compliance with the provisions of this paragraph 11.  If the closing fails to occur by reason of a
default of Seller, then, at the option of Purchaser, either the earnest money
shall be returned to Purchaser and the provisions of this paragraph 11
shall apply to any subsequent sale of the Adjoining Property, or Purchaser
shall be entitled to the remedy of specific performance.

 

(c)                                  If Purchaser does not
elect to purchase the Adjoining Property as provided in subparagraph (a),
then Seller may negotiate a contract of sale to sell the Adjoining Property to
another party; provided that if the sales price offered to such other party is
more than five percent (5%) below the sales price offered to Purchaser in the
Proposed Terms (“Reduced Price Terms”), then Seller shall give written notice
of such reduced price to Purchaser, and Purchaser shall have a period of ten
(10) days following the delivery of such written notice within which to elect
to purchase the Adjoining Property at such reduced price, before Seller may
close the sale with such other party. 
If Purchaser elects to purchase the Adjoining Property as provided in
this subparagraph (c), then Seller and Purchaser shall proceed to close the sale
of the Adjoining Property on the Reduced Price Terms at a closing to be held
not more than forty-five (45) days after written notice to Purchaser of the
Reduced Price Terms.  If the closing
fails to occur within said forty-five (45) day period for any reason other than
default of Seller, Seller shall be entitled to receive the earnest money as
liquidated damages, and Seller shall thereafter be free to sell the Adjoining
Property without further compliance with the provisions of this
paragraph 11.  If the closing fails
to occur by reason of a default of Seller, then, at the option of Purchaser,
either the earnest money shall be returned to Purchaser and the provisions of
this paragraph 11 shall apply to any subsequent sale of the Adjoining
Property, or Purchaser shall be entitled to the remedy of specific performance.

 

(d)                                 The provisions of this
paragraph 11 shall survive the Closing. 
The provisions of this paragraph 11 shall have no force and effect if
the Closing does not occur.

 

12.                                 Closing.  As used herein, the term “Closing” shall
mean the recording of the grant deed and completion of the events described in
this paragraph 12.

 

(a)                                  Closing
Date.  The Closing shall be held on
or before the date (the “Closing Date”) which is thirty (30) days after the last
day of the Inspection Period.

 

(b)                                 Seller’s
Deliveries.  On or before the
Closing Date, Seller shall deliver, or cause to be delivered, to the Escrow
Agent the following items, and at the Closing the Escrow Agent shall deliver
such items to Purchaser:

 

(iii)                               A grant deed (the
“Deed”) conveying to Purchaser the Property.

 

(iv)                              A General Conveyance and
Assignment assigning all of Seller’s right, title and interest in and to the
Licenses and Permits, and the Records and Plans.

 

11

 

(v)                                 As a condition to
closing, and not as a covenant, Seller shall cause the Title Company to deliver
to Purchaser an ALTA Owner’s Extended Coverage Title Policy (the “Title
Policy”) in the amount of the Purchase Price issued by the Title Company, with
such endorsements as Purchaser may require, insuring good and marketable title
to the Property and any easements benefiting the Property and being subject to
no exceptions other than (a) any liens placed on the Property in connection
with Purchaser’s financing of its purchase of the Property, and (b) the
Permitted Exceptions.

 

(vi)                              Any lien affidavits,
title insurance statements of information, transfer declarations or mechanics
lien indemnifications as may be reasonably requested by the Title Company in
order to issue the Title Policy.

 

(vii)                           Copies of all Records and
Plans, all Licenses and Permits, and all other documents or contracts
pertaining to the ownership, operation or maintenance of the Property (but not
those relating to operation of Seller’s business unless specific to owning or
operating the Property) as may be in the possession of, or reasonably available
to Seller.

 

(viii)                        A list of all utilities
pertaining to the Property together with utility account numbers.

 

(ix)                                An executed counterpart
of the Lease.

 

(c)                                  Purchaser’s
Deliveries.  On or before the
Closing Date, Purchaser shall deliver the following items to the Escrow Agent,
and at the Closing the Escrow Agent shall deliver such items to Seller:

 

(i)                                     The Purchase Price
in the manner as provided in paragraph 2.

 

(ii)                                  An executed
counterpart of the Lease.

 

(d)                                 Possession.  At the Closing, Seller shall deliver to
Purchaser possession of the Property, free and clear of all tenancies of every
kind and the rights of parties in possession except for the Lease.

 

(e)                                  Additional
Deliveries.  On or before the
Closing Date each party shall provide to the other, to the Escrow Agent and to
the Title Company such documentation as may be reasonably requested or required
in order to confirm the proper authority of such party to consummate this
transaction and for the Title Company to issue the Title Policy.

 

(f)                                    Closing
Costs and Expenses.  Seller shall
pay that portion of the premium for the Title Policy that would have been
charged for a CLTA owner’s title policy, and Purchaser

 

12

 

shall pay the balance of the
premium plus cost of endorsements. 
Seller shall pay the cost of state and any other documentary stamps or
transfer taxes required in connection with the Deed.  Seller shall pay the recording costs relating to the sale and
purchase and Purchaser shall pay the recording costs relating to its
financing.  Escrow charges shall be
divided equally between the parties. 
Except as otherwise provided herein, all escrow and closing costs shall
be allocated to and paid by Seller or Purchaser in accordance with the manner
in which such costs are customarily paid by such parties in sales of similar
property in the county in which the Land is located; provided, however, each
party shall pay its own attorneys’ fees.

 

(g)                                 Withholding
of Taxes for Foreign Persons. 
Seller agrees to furnish to Purchaser at least ten (10) days prior to
the Closing Date all documentation required by Internal Revenue Code Section
1445 and California Revenue and Taxation Code Sections 18805 and 26131, if
applicable.

 

(h)                                 Reporting
Transaction to Internal Revenue Service. 
Purchaser and Seller hereby acknowledge and agree that the Escrow Agent
shall be responsible for preparing a Form 1099-S and providing such form to the
Internal Revenue Service.

 

13.                                 Prorations.  Purchaser shall pay to Seller or Seller
shall pay to Purchaser, as the case may be, in cash at Closing a sum equal to
the net balance determined by computation of the following closing
adjustments.  All such adjustments shall
be made as of the Closing Date.

 

(a)                                  Credits
to Seller.

 

(i)                                     Prepaid premiums
on insurance policies carried by Seller, if any, which are assigned to
Purchaser at the Closing at the request of Purchaser.

 

(ii)                                  Prepaid charges for
public utility services or other operating expenses paid by Seller, if any.

 

(iii)                               Prepaid ad valorem taxes
for any period prior to the Closing Date (for the current year computed on the
basis of current tax statements, if available; and if not available, computed
on the basis of tax statements for the immediately preceding year, and later
adjusted as of the Closing Date on the basis of tax statements for the current
year, when they become available)

 

(b)                                 Credits
to Purchaser.  Unpaid ad valorem
taxes for any period prior to the Closing Date (for the current year computed
on the basis of current tax statements, if available; and if not available,
computed on the basis of tax statements for the immediately preceding year, and
later adjusted as of the Closing Date on the basis of tax statements for the
current year, when they become available).

 

13

 

14.                                 Casualty
or Condemnation.  If, on the Closing
Date or prior thereto, any casualty shall occur with respect to the
Improvements or any condemnation proceedings affecting a material part of the
Property shall be commenced or threatened, Purchaser may, at its option, either
(i) terminate this Agreement by delivering written notice thereof to Seller or
(ii) in the event Purchaser does not elect to terminate this Agreement or if
the condemnation does not affect a material part of the Property, proceed to
close this transaction with no reduction in the Purchase Price, and Purchaser
shall be entitled to all casualty insurance proceeds or all right, title and
interest in and to any condemnation proceeds or awards or sales price in lieu
of condemnation, and Purchaser shall also receive a credit against the Purchase
Price in an amount equal to any deductible under Seller’s insurance; provided,
however, that Purchaser shall be obligated to comply with its obligations under
the applicable provisions of the Lease regarding application of any such
casualty insurance proceeds and any condemnation proceeds or awards or sale
price in lieu of condemnation. 
Notwithstanding anything to the contrary in this Agreement, in the event
of any casualty or condemnation that is likely to exceed One Hundred Thousand
Dollars to repair or diminution in value, Seller may at its option terminate
this Agreement by delivering written notice to Purchaser.  Seller agrees to notify Purchaser in writing
immediately after any casualty has occurred or any condemnation proceedings are
commenced or threatened.  Purchaser
shall be entitled to participate in the negotiation of any settlement with the
casualty insurance carrier or the condemning authorities, and unless or until
this Agreement is terminated, Seller shall take no action with respect to any
such activity or proceeding without the prior written approval of Purchaser,
which approval shall not be unreasonably withheld.

 

15.                                 Termination,
Default and Remedies.

 

(a)                                  Permitted
Termination.  If this Agreement is
terminated because of a failure of one or more of the contingencies or under
the authorizations specified in paragraphs 4(b), 6, 10, 14 or 15(c) hereof (a
“Permitted Termination”), the Deposit shall be immediately returned to
Purchaser, and the parties shall have no further rights or obligations
hereunder.

 

(b)                                 DEFAULT
BY PURCHASER.  BY PLACING THEIR
INITIALS IMMEDIATELY BELOW, SELLER AND PURCHASER ACKNOWLEDGE THAT, IN THE EVENT
OF A BREACH OF THIS AGREEMENT BY PURCHASER, SELLER’S DAMAGES WOULD BE DIFFICULT
TO ASCERTAIN. THEREFORE, THE PARTIES HAVE AGREED TO A MEANS OF ESTABLISHING
LIQUIDATED DAMAGES IN AN AMOUNT THAT WILL PROVIDE REASONABLE COMPENSATION TO
SELLER FOR ITS POTENTIAL LOSSES.  IF
SELLER SHALL NOT BE IN DEFAULT HEREUNDER AND PURCHASER SHALL FAIL TO CONSUMMATE
THIS AGREEMENT FOR ANY REASON OTHER THAN A PERMITTED TERMINATION, SELLER SHALL
HAVE THE RIGHT TO RECEIVE THE DEPOSIT AS LIQUIDATED DAMAGES, AS SELLER’S SOLE
AND EXCLUSIVE REMEDY FOR PURCHASER’S DEFAULT, ALL OTHER CLAIMS TO DAMAGES OR
OTHER REMEDIES BEING HEREIN EXPRESSLY WAIVED BY SELLER.  BY PLACING THEIR INITIALS AT THE PLACES
PROVIDED, EACH PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE
ABOVE AND THE FACT THAT EACH

 

14

 

PARTY WAS REPRESENTED BY
COUNSEL WHO EXPLAINED THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION AT
THE TIME THIS AGREEMENT WAS MADE.

 

PURCHASER        /init/        (initials)                                                   SELLER        /init/        (initials)

 

(c)                                  Default
by Seller.  If Purchaser shall not
be in default hereunder and if Seller fails to consummate this Agreement for
any reason, Purchaser shall have the right to either (i) terminate this
Agreement and receive a refund of the Deposit, or (ii) enforce specific
performance of Seller’s obligations under this Agreement, maintain an action
against Seller for damages, or seek all other rights, recourses or remedies
available to Purchaser whether hereunder, at law, or in equity, said rights,
remedies and recourses being cumulative.

 

(d)                                 Attorneys’
Fees.  If either party shall be
required to employ an attorney to enforce or defend the rights of such party
hereunder, the prevailing party shall be entitled to recover reasonable
attorneys’ fees and costs, specifically including the fees of any expert
witnesses.

 

16.                                 No
Brokers.  Seller and Purchaser each
represent to the other that there are no brokers instrumental in the
procurement of this Agreement or the transaction contemplated hereby.  Seller and Purchaser hereby indemnify and
hold harmless each other from and against any and all claims, losses, damages,
costs or expenses of any kind or character arising out of or resulting from any
agreement, arrangement or understanding alleged to have been made by the
indemnifying party or on its behalf with any broker or finder in connection
with this Agreement or the transaction contemplated hereby.  This paragraph shall survive the Closing or
any termination of this Agreement.

 

17.                                 Miscellaneous.

 

(a)                                  Notices.  Any notice or communication required or
permitted hereunder shall be in writing and shall be deemed to be delivered
when actually received or, regardless of whether actually received or not, (i)
when deposited with Federal Express, Emery, DHL, UPS, or other overnight air
courier service, (ii) when transmitted via facsimile, or (iii) when deposited
in the United States mail, postage prepaid, certified mail, return receipt
requested, addressed to the addressee as follows or to such other address or
facsimile number as shall hereafter be designated by written notice by the
addressee actually received by the other party at least twenty (20) days prior
to the effective date of the change:

 

	
  If to Seller:

  	
   

  	
  Arena Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  6166 Nancy Ridge Drive

  
	
   

  	
   

  	
  San Diego, California 92121

  
	
   

  	
   

  	
  Attn:     Chief Financial Officer

  

 

15

 

	
   

  	
   

  	
  Facsimile No.  858/677-0505

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Arena Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  6166 Nancy Ridge Drive

  
	
   

  	
   

  	
  San Diego, California  92121

  
	
   

  	
   

  	
  Attn:     General Counsel

  
	
   

  	
   

  	
  Facsimile No.  858/677-0065

  
	
   

  	
   

  	
   

  
	
  If to Purchaser:

  	
  Lincoln Property Company Commercial, Inc.

  
	
   

  	
   

  	
  800 West Sixth Street, Suite 1680

  
	
   

  	
   

  	
  Los Angeles, California 90017

  
	
   

  	
   

  	
  Attn:     John Ghiselli

  
	
   

  	
   

  	
  Facsimile No.  213/996-2601

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with copies to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Lincoln Property Company

  
	
   

  	
   

  	
  3300 Lincoln Plaza

  
	
   

  	
   

  	
  500 North Akard

  
	
   

  	
   

  	
  Dallas, Texas 75201

  
	
   

  	
   

  	
  Attn:     Gregory S. Courtwright

  
	
   

  	
   

  	
  Facsimile No.  214/740-3460

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Powell & Coleman, L.L.P.

  
	
   

  	
   

  	
  8080 North Central Expressway, Suite 1380

  
	
   

  	
   

  	
  Dallas, Texas 75206

  
	
   

  	
   

  	
  Attn:     William D. Powell

  
	
   

  	
   

  	
  Facsimile No.  214/373-8768

  
	
   

  	
   

  	
   

  
	
  If to Escrow Agent:

  	
   

  	
  First American Title Insurance Company

  
	
   

  	
   

  	
  515 South Figueroa Street, Suite 700

  
	
   

  	
   

  	
  Los Angeles, California 90071

  
	
   

  	
   

  	
  Attn: Greg Schultz

  
	
   

  	
   

  	
  Facsimile No.  213/623-2868

  
				

 

(b)                                 Effective
Date.  The term “Effective Date” as
used herein shall mean the date on which the Escrow Agent receives a fully
executed copy of this Agreement by Purchaser and Seller.

 

16

 

(c)                                  Confidentiality.  The Lease will include a provision to
protect Seller’s proprietary information.

 

(d)                                 Return of Documents. 
In the event this Agreement is terminated or Purchaser fails
to perform hereunder, Purchaser shall promptly return to Seller any statements,
documents, schedules, exhibits and other written information obtained from
Seller in connection with this Agreement or the transaction contemplated
herein.

 

(e)                                  Integration.  This Agreement contains the complete agreement between the
parties and cannot be varied except by the written agreement of the
parties.  The parties agree that there
are no oral agreements, understandings, representations or warranties which are
not expressly set forth herein.

 

(f)                                    Multiple
Counterparts.  This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and all of which taken together shall constitute one and the same
instrument.

 

(g)                                 Severability.  If one or more of the provisions contained
in this Agreement are held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions shall not
be affected or impaired, unless the absence of the invalidated provision(s)
adversely affects the substantive rights of the Parties.  The Parties shall in such case use their
best efforts to replace the invalid, illegal or unenforceable provision(s) with
valid, legal and enforceable provision(s) which, insofar as practical,
implement the purposes of this Agreement.

 

(h)                                 Successors
and Assigns.  This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns.

 

(i)                                     Business
Days.  If the final day of any
period or any date of performance under this Agreement falls on a Saturday,
Sunday or legal holiday under the laws of the State of California or the United
States, then the final day of the period or the date of performance shall be
extended to the second consecutive day which is not a Saturday, Sunday or legal
holiday.

 

(j)                                     Indemnity.  Seller shall fully indemnify and hold
Purchaser harmless from and against any claim, demand, loss, liability, damage
or expense (including reasonable attorneys’ fees) arising out of or in
connection with the ownership, condition and/or operation of the Property prior
to the Closing Date.

 

(k)                                  Knowledge.  For purposes of this Agreement, “Knowledge”
means the actual knowledge of the Chief Executive Officer, Chief Financial
Officer, the General Counsel and Facilities Manager of Seller without any duty
of inquiry.

 

17

 

(l)                                     Survival. 
Any portion of this Agreement not otherwise consummated at the Closing,
specifically including, without limitation, the indemnity by Purchaser set
forth in paragraph 6(a), the representations and warranties of Seller set forth
in Paragraph 8, the provisions of paragraph 11, and the indemnity by
Seller set forth in paragraph 17(j), and will survive the Closing of this
transaction as a continuing agreement by and between the parties, provided that
the representations and warranties of Seller set forth in Paragraph 8 shall
terminate one year after the Closing Date.

 

(m)                               Applicable
Law.  This Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of California.

 

(n)                                 Escrow.  The Escrow Agent shall hold all monies
and/or documents delivered in escrow pursuant to this Agreement in accordance
with the terms of an Escrow Agreement to be entered into among Seller,
Purchaser and the Escrow Agent after the execution of this Agreement.  If any of the provisions of this Agreement
conflict with said Escrow Agreement, this Agreement shall govern and
control.  Any cancellation fees of the
Escrow Agent shall be borne equally by the parties.

 

(o)                                 Operation
of Property.  While this Agreement
is in effect Seller will not, without the prior written consent of Purchaser,
which may be granted or withheld in Purchaser’s reasonable discretion, execute
or enter into any leases, service contracts or other instruments or agreements
encumbering the Property or the ownership thereof in any way.  Seller covenants and agrees that between the
Effective Date and the Closing Date, Seller shall operate, manage and maintain
the Property in good condition and repair and consistent with Seller’s prior
practice, not commit waste of any portion of the Property affecting the value
of the Property in any material respect, maintain all insurance coverages in
effect, advise Purchaser promptly of any litigation, arbitration or
administrative hearing before any court or governmental agency concerning or
affecting the Property which is instituted or threatened after the date of this
Agreement, not create any lien or encumbrance (other than the Permitted
Exceptions) on the Property or any portion thereof, and pay or cause to be paid
all taxes, assessments and other impositions levied or assessed on the Property
or any part thereof prior to the date on which the payment thereof is due.

 

(p)                                 Exhibits.  All exhibits attached to this Agreement
shall be deemed to be incorporated herein and made a part hereof.

 

18

 

IN WITNESS WHEREOF,
the parties have executed and delivered this instrument as of the dates set
forth below.

 

	
   

  	
   

  	
  SELLER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARENA PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Joseph F. Mooney

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
  Date

  	
  March 11, 2003

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PURCHASER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LINCOLN PROPERTY COMPANY

  COMMERCIAL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John Ghiselli

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  S.V.P.

  	
   

  
	
  Date:

  	
  March 12, 2003

  	
   

  	
   

  
								

 

19

 

ACKNOWLEDGEMENT OF RECEIPT

 

The undersigned Escrow Agent acknowledges
receipt of a fully-executed copy of this Agreement of Purchase and Sale, and
agrees to hold and disburse the Deposit and any other funds received by it in
accordance with the terms and conditions of this Agreement; subject, however,
to the terms and provisions of any Escrow Agreement entered into by and among
Seller, Purchaser and the Escrow Agent.

 

	
   

  	
   

  	
  FIRST AMERICAN TITLE INSURANCE

  COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Carolin Hoff

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Certified Escrow Officer

  
	
  Date: 

  	
  March 13, 2003

  	
   

  	
   

  	 

							

 

20

 

SCHEDULE OF EXHIBITS

 

 

Exhibit A - Description of Land

 

Exhibit B - Disclosures

 

Exhibit C - Description of Adjoining Property

 

 

EXHIBIT A

 

THE LAND REFERRED TO HEREIN IS
SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF SAN DIEGO, AND IS DESCRIBED AS
FOLLOWS:

 

PARCEL A:

 

PARCEL 9 OF PARCEL MAP NO.
17347, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, AS
PER THE MAP THEREOF FILED IN THE OFFICE OF THE SAN DIEGO COUNTY RECORDER ON
APRIL 13, 1994 AS FILE NO. 1994-0242762 OF OFFICIAL RECORDS.

 

RESERVING THEREFROM, ALL
EASEMENTS AS CREATED, SET FORTH, DEFINED DESCRIBED AND GRANTED IN THAT CERTAIN
“DECLARATION OF RECIPROCAL EASEMENTS OF THE SORRENTO RIDGE BUSINESS PARK
PLANNED INDUSTRIAL DEVELOPMENT” RECORDED APRIL 13, 1994 AS FILE NO.
1994-0242763 OF OFFICIAL RECORDS.

 

PARCEL B:

 

A NONEXCLUSIVE EASEMENT FOR
INGRESS AND EGRESS BY VEHICULAR AND PEDESTRIAN TRAFFIC AND VEHICLE PARKING
UPON, OVER AND ACROSS THE “COMMON AREA” FOR THE BENEFIT OF THE OWNER, PRESENT
AND FUTURE, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, TENANTS, CUSTOMERS AND
INVITEES, TOGETHER WITH A NONEXCLUSIVE EASEMENT UNDER AND THROUGH THE “COMMON
AREA” FOR THE INSTALLATION, MAINTENANCE, REMOVAL, AND REPLACEMENT OF WATER
DRAINAGE SYSTEMS OR STRUCTURES, WATER MAINS, SEWERS, WATER SPRINKLER SYSTEM
LIENS, TELEPHONE OR ELECTRICAL CONDUITS OR SYSTEMS, GAS MAINS AND ANY OTHER
PUBLIC UTILITIES AND/OR SERVICE EASEMENTS, AS CREATED SET FORTH, DEFINED,
DESCRIBED AND GRANTED IN THAT CERTAIN “DECLARATION OF RECIPROCAL EASEMENTS OF
THE SORRENTO RIDGE BUSINESS PARK PLANNED INDUSTRIAL DEVELOPMENT” RECORDED APRIL
13, 1994 AS FILE NO. 1994-0242763 OF OFFICIAL RECORDS.

 

 

EXHIBIT
B

 

 

Paragraph 8 of the Agreement,
Subparagraph:

 

(d)                                 Seller
has received notices from governmental authorities regarding certain
environmental health and safety and other violations.  These writings have
been disclosed to Purchaser pursuant to Paragraph 5 of the Agreement.

 

(i)                                     Seller
maintains an emergency generator on the Property.  This generator
does not enter the Property through a publicly dedicated road or easement.

 

(j)                                     See
the Phase One Environmental Site Assessment, dated November 28, 1994, which has
been provided to Purchaser pursuant to Paragraph 5 of the Agreement.

 

(r)                                    See
the title exceptions listed in the preliminary title report provided by Title
Company.  Seller has many agreements
relating to the operation of its business which may be deemed to “affect” the
Property.

 

 

EXHIBIT C

 

THE LAND REFERRED TO HEREIN IS
SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF SAN DIEGO, AND IS DESCRIBED AS
FOLLOWS:

 

PARCEL A:

 

PARCEL 12 OF PARCEL MAP NO.
17347, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, AS
PER THE MAP THEREOF FILED IN THE OFFICE OF THE SAN DIEGO COUNTY RECORDER ON
APRIL 13, 1994 AS FILE NO. 1994-0242762 OF OFFICIAL RECORDS.

 

PARCEL B:

 

A NONEXCLUSIVE EASEMENT FOR
INGRESS AND EGRESS BY VEHICULAR AND PEDESTRIAN TRAFFIC AND VEHICLE PARKING
UPON, OVER AND ACROSS THE “COMMON AREA” FOR THE BENEFIT OF THE OWNER, PRESENT
AND FUTURE, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, TENANTS, CUSTOMERS AND
INVITEES, TOGETHER WITH A NONEXCLUSIVE EASEMENT UNDER AND THROUGH THE “COMMON
AREA” FOR THE INSTALLATION, MAINTENANCE, REMOVAL, AND REPLACEMENT OF WATER
DRAINAGE SYSTEMS OR STRUCTURES, WATER MAINS, SEWERS, WATER SPRINKLER SYSTEM
LIENS, TELEPHONES OR ELECTRICAL CONDUITS OR SYSTEMS, GAS MAINS AND ANY OTHER
PUBLIC UTILITIES AND/OR SERVICE EASEMENTS, AS CREATED SET FORTH, DEFINED,
DESCRIBED AND GRANTED IN THAT CERTAIN “DECLARATION OF RECIPROCAL EASEMENTS OF
THE SORRENTO RIDGE BUSINESS PARK PLANNED INDUSTRIAL DEVELOPMENT” RECORDED APRIL
13, 1994 AS FILE NO. 1994-0242763 OF OFFICIAL RECORDS.

 

APN:  343-350-29-00

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