Document:

exv10w8

 

EXHIBIT 10.8

SUBLEASE

     THIS SUBLEASE (the “Sublease”) is dated for reference purposes only as of the 31st
day of August, 2004, and is by and between Townsend and Townsend and Crew, LLP, a California
limited liability partnership (“Sublessor”) and Strata Pharmaceuticals, Inc., a Delaware
corporation (“Sublessee”).

RECITALS

	 	A.	 	Sublessor, as tenant, and Square 24 Associates L.P., a District of Columbia
limited partnership, as landlord (the “Landlord”), previously entered into that certain
Lease dated as of June 30, 2003, as amended by that certain First Amendment to Lease
dated as of June 9, 2004, (collectively the “Lease”) for Suites 400 and 410 (the
“Premises”) in the Building constituting a portion of the Project known as Highlands
Corporate Center located at 12730 High Bluff Drive, San Diego, California. A copy of
the Lease is attached hereto as Exhibit A.
	 
	 	B.	 	All capitalized terms used but not defined in this Sublease shall have the
respective meanings assigned to such terms in the Lease.
	 
	 	C.	 	Sublessor desires to sublease the Subleased Premises (as hereinbelow defined)
to Sublessee and Sublessee desires to sublease the Subleased Premises from Sublessor.

     NOW, THEREFORE, the parties agree as follows:

     1. Subleased Premises. Sublessor hereby leases to Sublessee and Sublessee hereby
leases from Sublessor that portion of the Premises commonly known as Suite 410 of the Building (the
“Subleased Premises”) consisting of 5,928 rentable square feet, as depicted on Exhibit B
attached hereto.

     2. Tender of Subleased Premises; Condition of Subleased Premises. Sublessor shall
deliver the Subleased Premises to Sublessee upon Sublessor’s Substantial Completion of the tenant
improvements (“Tenant Improvements”) as more specifically set forth on Exhibit C attached
thereto (the “Commencement Date”). As used herein, the term “Substantial Completion” shall mean
that date on which Sublessor’s or Sublessor’s agent or architect notifies Sublessee that the Tenant
Improvements are substantially complete, or would have been completed absent a Sublessee Delay,
except for such work as cannot be complete until Sublessee performs portions of Sublessee’s work,
and Sublessor’s or Sublessor’s agent or architect notifies Sublessee thereof. The term “Sublessee
Delay” as used herein shall mean any delay in construction of the Tenant Improvements caused by any
acts or omissions of Sublessee (i) in failing to grant any approvals or consents required of
Sublessee within the stipulated period of time; (ii) in unreasonably withholding any approval or
consent required by Sublessee; (iii) in materially interfering with construction of the Tenant
Improvements; or (iv) in failing diligently to obtain any consents or approvals required of
Landlord. Sublessor agrees to pay an amount not to exceed Three Thousand Dollars ($3,000.00)
towards the costs of expediting the delivery of Tenant Improvement materials (including, but not

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limited to doors, door frames and door hardware) to enable Sublessee to occupy the perimeter
offices of the Premises on or about September 15, 2004 and it is anticipated that Substantial
Completion of the Tenant Improvements by Sublessor will occur on or about September 22, 2004.
Sublessee shall be solely responsible for the costs of expediting the delivery of Tenant
Improvement materials in excess of Three Thousand Dollars ($3,000.00) and shall promptly reimburse
Sublessor for such excess costs upon demand. Provided Sublessee does not interfere with the
construction of the Tenant Improvements, Sublessee shall have the right with the prior consent of
Landlord, if required, to enter the Subleased Premises for the purpose of installing Sublessee’s
furniture, trade fixtures, data and telecommunication wiring and equipment, photocopy equipment and
other business equipment and to conduct limited business activities (the “Early Access Period”);
provided, all of the terms of this Sublease shall apply to such Early Access Period, except that no
Rent shall be due for any period of time prior to the Commencement Date, including the Early Access
Period. Sublessee and Sublessor shall coordinate such early access during the Early Access Period.
Sublessee shall immediately cease any work being undertaken by Sublessee and vacate the Subleased
Premises if Sublessee is notified that Sublessee is interfering with construction of the Tenant
Improvements. Sublessee shall also have access and use of the mailbox corresponding to the
Subleased Premises during the Early Access Period at no additional cost to Sublessee. Sublessee
agrees and acknowledges that, except as set forth on Exhibit C attached hereto, Sublessor
has not agreed to install any improvements to the Subleased Premises or perform any work to ready
the Subleased Premises for occupancy by Sublessee. Except as otherwise set forth in this Sublease
(including Exhibit C), Sublessee accepts the Subleased Premises “as is,” in its present
condition. Sublessee acknowledges that certain acts or conduct of Sublessee under this Sublease or
otherwise affecting the Subleased Premises may require the prior consent of Landlord. Sublessor
shall bear no responsibility in the event the Landlord withholds its consent under the Lease to
certain proposed conduct of Sublessee as provided for under the terms of this Sublease, but
Sublessor agrees to use its reasonable efforts and due diligence to obtain such consent from
Landlord.

     3. Master Lease. Except as otherwise specifically set forth herein, this Sublease is
subject to all of the terms and conditions of the Lease during the Term (as hereinabove defined.).
During the Term, Sublessee assumes and agrees to perform each and every obligation, and to comply
with each and every negative covenant, of Sublessor, as Tenant under the Lease, to the extent such
terms and conditions are applicable to the Subleased Premises, except Sublessee’s obligation for
payment of Base Rent and Sublessee’s Proportionate Share of Operating Costs Share Rent, Tax Share
Rent and Electricity Share Rent which shall be as set forth in Section 6 below. Sublessee shall
not commit or permit to be committed on the Subleased Premises any act or omission which would
violate any such term or condition of the Lease and shall indemnify and hold Sublessor harmless
against any and all loss, cost, expense, liability, claim, judgment, demand or cause of action
arising from any such violation committed or permitted to be committed by Sublessee in connection
with the Subleased Premises during the Term. Sublessor shall not by its act or omission to act,
cause a default under the Lease. Accordingly, in order to afford to Sublessee the benefits of this
Sublease and of those provisions of the Lease which by their nature are intended to benefit
Sublessee, and in order to protect Sublessor against a default by Sublessee which might cause a
default or event of default by Sublessor under the Lease:

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     (a) provided Sublessee shall timely pay all Rent when and as due under this Sublease,
Sublessor shall pay, when and as due, all Rent and other charges payable by Sublessor to Landlord
under the Lease;

     (b) except as otherwise expressly provided herein, Sublessor shall perform its covenants and
obligations under the Lease which do not require for their performance possession of the Subleased
Premises and which are not otherwise to be performed hereunder by Sublessee on behalf of Sublessor;
and

     (c) Sublessor hereby grants to Sublessee the right to receive all of the services and benefits
with respect to the Subleased Premises which are to be provided by Landlord under the Lease.

     4. Incorporation of Terms. Except for the following provisions of the Lease which
impose obligations on Landlord; Schedule items 6, 7, 8, 9, 10, 11, 12, and 14, Sections 1 (second
sentence through remainder of paragraph), 2.A(1), 2.D.(3) (reference to square footage of Premises
only), 2.D.(4), 3.A. (first sentence), 3.B, 4.H. (second sentence), 20, 23, 25, 30, 31, 32,
Appendix C, and Appendix E of the Lease; First Amendment to Lease Sections 4, 5, 6, 8 (last
sentence), all of the terms and conditions contained in the Lease are incorporated herein as terms
and conditions of this Sublease (with each reference therein to “Landlord” and “Tenant” to be
deemed to refer to Sublessor and Sublessee, respectively, and each reference therein to the
“Premises” to be deemed to refer to the Subleased Premises, to the extent applicable) and, along
with all of the paragraphs contained in this Sublease, shall be the complete terms and conditions
of this Sublease. Sublessee hereby assumes and agrees to perform all of the obligations of the
“Tenant” under the Lease with respect to the Subleased Premises (to the extent applicable);
provided, however, Sublessee shall have no right to exercise any option to extend, option to
expand, right of first offer, right of first negotiation, right of first refusal, or any other
similar right granted to Sublessor as “Tenant” under the Lease and Sublessee shall only be
obligated to perform such obligations as they relate to the Subleased Premises during the Term.
All waivers of claims against, and exculpations of, Landlord under the incorporated provisions of
the Lease shall run from Sublessee in favor of Sublessor. All waivers of claims against, and
exculpations of, Tenant, under the incorporated provisions of the Lease shall run from Sublessor in
favor of Sublessee. To the extent there is a conflict between the provisions of the Lease which
are incorporated herein by reference and the express provisions of this Sublease, the express
provisions of this Sublease shall prevail to the extent Landlord’s rights under the Lease are not
affected. The Lease contains express representations made by Landlord and describes Landlord’s
duties in connection with the operation of the Premises, Building and Project. Sublessor is not
obligated to perform any of Landlord’s obligations under the Lease, and Sublessor shall not be
liable for Landlord’s violation of any provision of the Lease or for any misrepresentation by
Landlord. If Landlord fails to perform any of its obligations under the Lease, then Sublessee
shall notify Sublessor of such failure, and thereafter Sublessor shall promptly notify Landlord and
demand performance. If Landlord continues to fail to perform, then Sublessee may seek recourse
against Landlord. If Sublessor has the right to proceed against Landlord, or otherwise enforce any
rights of Sublessee against Landlord, and Sublessee has no standing to enforce such rights, then
Sublessor, upon request, shall take such action as is reasonably necessary to enforce such rights.
Sublessee shall indemnify Sublessor against all expenses, including reasonable attorneys’ fees,

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incurred by Sublessor as a result of or in connection with enforcing rights against Landlord on
behalf of Sublessee.

     5. Term. The term (the “ Term”) of this Sublease shall commence on the Commencement
Date and shall expire twenty-four (24) months after the Commencement Date (the “Expiration Date”).

     6. Base Rent.

          (a) Base Rent. Sublessee shall pay monthly base rent (“Base Rent”) for the Subleased
Premises for the Term in the amount of Sixteen Thousand Eight Hundred Ninety-Four and 80/100
Dollars ($16,894.80), in advance on the first day of each month, commencing on the Commencement
Date, without deduction, offset, prior notice or demand, in lawful money of the United States of
America. Concurrently with the execution of this Sublease, Sublessee shall pay to Sublessor the
Base Rent due for the first full month of the Term.

          (b) Other Payment Obligations. Commencing on the Commencement Date and continuing
during each Fiscal Year or part thereof during the Term, Sublessee shall pay to Sublessor, monthly
in advance, as Additional Rent within twenty (20) days after receipt of an invoice therefor,
Sublessee’s Proportionate Share, as defined below, of (i) Sublessor’s Proportionate Share of Excess
Operating Costs (as defined in the Lease), (ii) Sublessor’s Proportionate Share of Excess Taxes (as
defined in the Lease), and (iii) Sublessor’s Electricity Share Rent (as defined in the Lease) for
the applicable Fiscal Year. Sublessee’s Proportionate Share is 45.85% of Sublessor’s Proportionate
Share of the Building and/or Sublessor’s Proportionate Share of Project. In addition, Sublessee
shall reimburse to Sublessor, within twenty (20) days after receipt of an invoice, for all amounts
paid by Sublessor pursuant to the Lease to the extent attributable to the Subleased Premises or to
the acts or omission of Sublessee, its agents or employees. To the extent Sublessor is able to
obtain the same from Landlord, Sublessor shall, promptly after execution of this Sublease, provide
Sublessee with an itemized estimate of projected Additional Rent for 2005.

          (c) General Conditions. If the Term commences on a day other than the first (1st) day
of a calendar month or ends on a day other than the last day of a calendar month, a prorated
monthly installment of Base Rent and other charges shall be paid at the then current rate for the
fractional month during which the Sublease commences and/or terminates. All Base Rent and other
sums required to be paid by Sublessee shall be paid to Sublessor at the address specified at the
end of this Sublease or at such other place as Sublessor may designate in writing.

          (d) Security Deposit. Upon execution of this Sublease, Sublessee shall deposit with
Sublessor the sum of Fifty Thousand Six Hundred Eighty-Five and 00/100 Dollars ($50,685.00), which
shall be held by Sublessor as a security deposit for Sublessee’s performance of all the terms,
covenants and conditions of this Sublease (the “Security Deposit”). If Sublessee defaults under
any provision of this Sublease, Sublessor may (but shall not be required to) use, apply or retain
all or any part of this Security Deposit for the payment of any amount Sublessor may spend by
reason of Sublessee’s default or to compensate Sublessor for any loss or damage Sublessor may
suffer because of Sublessee’s default. If any portion of the Security Deposit is so used or
applied, Sublessee shall, immediately after written demand, deposit cash with Sublessor in an

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amount sufficient to restore the Security Deposit to its original amount. Sublessor is not
required to keep the Security Deposit separate from its general funds, and all interest earned on
the security deposit shall accrue to the benefit of Sublessor. If Sublessee performs each of its
obligations under this Sublease, the Security Deposit, or any balance thereof, shall be returned to
Sublessee within thirty (30) days after the later of (i) the expiration of the Term or sooner
termination of the Sublease; (ii) the date Sublessee vacates the Subleased Premises; or (iii) the
date Sublessee will have no further unperformed obligations herein. Sublessee hereby waives the
provisions of Section 1950.7 of the California Civil Code (providing that a landlord may claim from
a security deposit only those sums reasonably necessary to remedy defaults in the payment of rent,
to repair damage caused by a tenant, or to clean the premises); provided, in so waiving the
provisions of Section 1950.7, Sublessee shall not be deemed to have agreed to permit Sublessor to
retain any portion of the Security Deposit in excess of that which would be required to make
Sublessor whole (whether prior to or following termination of the Sublease).

          (d) Rent. As used in this Sublease, the term Rent includes Base Rent, Additional Rent
and all other sums payable by Sublessee under this Sublease.

     8. Late Charge; Interest. If any sums due from Sublessee are not received by
Sublessor within five (5) days when due, Sublessee shall pay to Sublessor a late charge equal to
five percent (5%) of such overdue amount. The parties agree that such late charge represents a fair
and reasonable estimate of the costs Sublessor will incur by reason of late payment by Sublessee.
In addition, every payment due hereunder from Sublessee to Sublessor which is not paid when due
shall bear interest at ten percent (10%) per annum from the date that the same became due and
payable until paid, whether or not demand be made therefor.

     9. Use. Sublessee shall use the Subleased Premises in compliance with the Lease.
Sublessee shall not store, use or dispose of any Hazardous Materials in, on or about the Subleased
Premises, the Building or the Project. Sublessee shall immediately provide Sublessor with copies
of any notice, report or other correspondence between Sublessee and any governmental agency
concerning any Hazardous Materials in, on or about the Subleased Premises, the Building or the
Project.

     10. Default.

          (a) Events of Default. In addition to any other event specified in this Sublease as
an event of default, the occurrence of any one or more of the following events (“Events of
Default”) shall constitute a breach of this Sublease by Sublessee: (i) failure by Sublessee to pay
rent or any other sum when and as the same becomes due and payable and such failure continues for
more than four (4) days after Sublessor gives written notice thereof to Sublessee; or (ii) failure
by Sublessee to perform or observe any other obligations of Sublessee and such failure continues
for more than fourteen (14) days (or such shorter period as is allowed for the cure of the subject
default pursuant to the Lease) after Sublessor gives written notice thereof to Sublessee; provided,
however, that, except as hereinbelow set forth, if, by the nature of such agreement, covenant or
condition, such failure cannot reasonably be cured within the allotted time, an Event of Default
shall not exist as long as Sublessee commences with due diligence and dispatch the curing of such
failure within the allotted time and, having so commenced, thereafter prosecutes with diligence and
dispatch and

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completes the curing of such failure. Anything herein to the contrary notwithstanding, in no event
shall any grace period provided in this Section 10(a)(ii) be longer than the grace period for such
default provided in the Lease.

          (b) Sublessor’s Remedies. If an Event of Default occurs, Sublessor shall be entitled
to exercise against Sublessee all of the rights and remedies afforded to Landlord under the Lease
with respect to breaches of the Lease by Sublessor, and Sublessee shall indemnify, defend and hold
Sublessor harmless from all damages resulting from such Event of Default and shall reimburse
Sublessor for all sums incurred by Sublessor in fulfilling Sublessee’s obligations, together with
interest on those sums at ten percent (10%) per annum.

     11. Holding Over. Sublessor and Sublessee recognize that Sublessor’s damages resulting
from Sublessee’s failure to timely surrender possession of the Subleased Premises may be
substantial, may exceed the amount of the Rent payable hereunder, and will be impossible to
accurately measure. Accordingly, if possession of the Subleased Premises is not surrendered to
Sublessor on the Expiration Date or sooner termination of this Sublease, in addition to any other
rights or remedies Sublessor may have hereunder or at law, Sublessee shall pay to Sublessor during
the period Sublessee holds over in the Subleased Premises after the Expiration Date or sooner
termination of this Sublease, a sum equal to 200% of the Base Rent payable under this for each full
or partial month plus all other sum due under this Sublease. In addition, Sublessee shall
indemnify Sublessor against any and all claims, losses and liabilities for damages resulting from
failure to surrender possession, including, without limitation, any claims made by Landlord or any
succeeding tenant, and any Rent and other charges due under the Lease. In addition, no
holding-over by Sublessee, nor the payment to Sublessor of the amounts specified above, shall
operate to extend the Term hereof. Nothing herein contained shall be deemed to authorize Sublessee
to retain possession of the Subleased Premises after the Expiration Date or sooner termination of
this Sublease.

     12. Assignment and Subletting.

          (a) General. Sublessee shall not, without the prior written consent of Landlord and
Sublessor, which consent as to Sublessor shall not be unreasonably withheld, assign, sublet,
mortgage, pledge, encumber or otherwise transfer (collectively, “Transfer”) this Sublease, the term
or estate hereby granted, or any interest hereunder, or permit the Subleased Premises to be used or
occupied by anyone other than Sublessee. The foregoing notwithstanding, Sublessee acknowledges
that it shall be reasonable for Sublessor to withhold its consent to the proposed Transfer if the
Transferee proposes making any alterations to the Subleased Premises or Sublessee is not
transferring the entire Subleased Premises. In addition, Sublessee acknowledges and agrees that
Landlord may withhold its consent to a Transfer pursuant to the terms of the Lease, and that
Sublessor will not consent to any Transfer if Landlord does not consent to such Transfer. The
foregoing notwithstanding, Verus Pharmaceuticals, Inc. will be entitled to cohabitate with
Sublessee during the Term, provided that no alterations are made to the Subleased Premises.

          (b) Notice and Procedure. If at any time during the Term, Sublessee desires to
Transfer this Sublease, then Sublessee shall give Sublessor a notice (the “Notice”) which shall set
forth the name, address and business of the proposed transferee, financial statements and
references

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of the proposed assignee or sublessee and all material terms and conditions of the proposed
assignment or subletting, all in such detail as Sublessor may reasonably require. Within ten (10)
days of receipt of the Notice, Sublessor shall have the option, exercisable by giving notice to
Sublessee, to (a) consent to the Transfer, (b) withhold consent to the Transfer to the extent it is
reasonable to do so, or (c) terminate this Sublease as of the date upon which the Transfer was to
have occurred, in which event Sublessee shall be relieved of all further obligations hereunder. No
failure of Sublessor to exercise its termination right shall be deemed to be Sublessor’s consent to
the assignment or subletting.

          (c) Continuing Liability of Sublessee. No Transfer shall release Sublessee from its
obligation or alter the primary liability of Sublessee to pay the Rent and to perform all other
obligations to be performed by Sublessee hereunder. The acceptance of Rent by Sublessor from any
other person shall not be deemed a waiver by Sublessor of any provision hereof.

     13. Waiver of Liability; Indemnity.

          (a) Sublessor shall not be liable or responsible for, and Sublessee waives all claims against
Sublessor, its agents, employees, officers, directors and invitees with respect to or arising out
of, any death of or injury to Sublessee, its agents, employees, officers, directors invitees, or
any other person, from any causes whatsoever, or for any loss of or damage to any property outside
or within the Subleased Premises, unless such death, injury, loss or damage is caused by the
negligence or willful misconduct of Sublessor or its agents, employees, officers, directors and
invitees.

          (b) Sublessee shall hold Sublessor and Landlord and their respective agents and employees
harmless and defend Sublessor and Landlord, and their agents, employees, officers, directors and
invitees from and against any and all losses, damages, claims or liability for any damage to any
property or injury, illness or death of any person occurring in or about the Subleased Premises
arising at any time during the Term and from any cause whatsoever other than by reason of the
negligence or willful misconduct of Sublessor or Landlord or either of their agents, employees,
officers, directors and invitees including without limitation, claims, costs and liabilities,
including reasonable attorneys’ fees and costs, arising out of or in connection with the removal,
cleanup or abatement of any hazardous materials which may be in or about the Subleased Premises or
the Premises as a result of any act or omission of Sublessee, its employees, agents or contractors
during the Term. This Section 13(b) shall survive the termination of this Sublease.

     14. Insurance.

          (a) With respect to the Subleased Premises only, Sublessee shall comply with the obligations
of Tenant under the Lease with respect to insurance and subrogation including those obligations set
forth, without limitation, in Article 8 of the Lease, and shall cause Landlord and Sublessor to be
named as additional insureds and/or loss payees within all required policies of insurance with
waivers of subrogation in favor of Landlord and Sublessor.

          (b) Insurance Criteria. All the insurance required under this Sublease shall: (i) be
issued by insurance companies authorized to do business in the State in which the Building is
located and which are reasonably satisfactory to Sublessor; (ii) name Sublessor, Landlord and any

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managing agent and other designee as an additional insured; (iii) be issued as a primary policy and
not “excess over” or contributory with any other applicable insurance in force for or on behalf of
Sublessor and/or Landlord; (iv) contain an endorsement requiring thirty (30) days’ written notice
from the insurance company to both parties before cancellation or change in the coverage, scope, or
amount of any policy; and (v) specifically include the liability to be assumed hereunder by
Sublessee (provided, however, that the amount of such insurance shall not be construed to limit the
liability of Sublessee hereunder). A certificate of each policy, together with evidence of payment
of premiums, shall be deposited with Sublessor the earlier of Sublessee’s entry on the Subleased
Premises or the Commencement Date, and on renewal of the policy not less than twenty (20) days
before expiration of the term of the policy.

     15. Notices. All notices or demands shall be given only by personal service,
certified mail with a return-receipt (which shall be deemed delivered two (2) days after mailing,
postage prepaid) or delivery by a reputable overnight air courier service which provides written
evidence of delivery (which shall be deemed to be given on the next business day after delivery to
the courier service, prepaid). Notices shall be addressed to the addresses under the signatures
below. Either party may change its address for notices or demands by written notice delivered as
set forth above. Sublessee shall promptly after receipt thereof send to Sublessor copies of all
notices Sublessee receives from Landlord. For purposes of Sublessor’s response to any request by
Sublessee, all time periods in the Lease within which Landlord is required to act or respond shall
be extended by ten (10) business days.

     16. Parking. Sublessee have the right to use within the Project twenty (23)
unreserved surface parking spaces at no additional cost or expense to Sublessee, so long as Landlord
does not impose a charge for such surface parking, and if Landlord does impose a charge for such
parking, at Landlord’s prevailing monthly rate, without markup by Sublessor.

     17. Termination, Amendment and Modification of Lease. Except as specifically
permitted in the Lease, Sublease shall not terminate, amend or otherwise modify the Lease in any
way that could reasonably be expected to have a materially adverse effect on Sublessee’s rights
under this Sublease without the prior written consent of Sublessee, which consent shall not be
unreasonably withheld or delayed.

     18. Signage. Subject to Landlord’s consent, Sublessee shall be entitled have its name
listed in the Building standard directory and its name next to the door of the Subleased Premise.

     19. Attorneys’ Fees. The prevailing party in any action or proceeding (whether at the
administrative, trial or appellate levels) brought by either party against the other under this
Sublease shall recover attorneys’ fees and costs in such amount as the court or administrative body
may adjudge reasonable.

     20. Administration of this Sublease. If Sublessee requests that Sublessor execute any
document relating to or in connection with the Sublease or approve any assignment or subletting,
Sublessee shall reimburse Sublessor, within ten (10) days after billing, for the reasonable cost of
review and processing of Sublessee’s request including, without limitation, reasonable attorneys’
fees.

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     21. Estoppel Certificate. Sublessee shall, without charge to Sublessor or Landlord,
and Sublessor, without charge to Sublessee, at any time from time to time, within ten (10) business
days after receipt of written request therefor, deliver an executed certificate certifying, if
true: (a) that this Sublease is unmodified and in full force and effect, or if there have been any
modifications, that same is in full force and effect as modified and stating any such
modifications; (b) whether or not there is then existing any claim of default of the other party
hereunder and if so, specifying the nature thereof; and (c) the current amount of Base Rent payable
hereunder by Sublessee and the date to which the same has been paid.

     22. Damage and Destruction/Eminent Domain. If the Lease confers upon Sublessor the
right to terminate the Lease in the event of damage, destruction, eminent domain or similar
circumstances, the exercise by Sublessor of such termination right shall not constitute a default
or breach by Sublessor hereunder.

     23. Brokers. Sublessee and Sublessor represent to each other that they have not dealt
with any brokers in connection with this Sublease other than Corporate Real Estate Advisors and
Cushman & Wakefield of California, and Sublessee and Sublessor shall indemnify, protect, defend and
hold each other harmless from and against any and all claims, costs or liability arising out of or
relating to its breach of this representation. Sublessor shall pay the brokerage commissions or
fees owed to Corporate Real Estate Advisors pursuant to a separate agreement.

     24. Severability. If any provision of this Sublease shall be judicially or
administratively held invalid or unenforceable for any reason, such holding shall not be deemed to
affect, alter, modify or impair in any manner any other provision of this Sublease.

     25. Entire Agreement. This Sublease and the exhibits attached hereto constitute the
sole and exclusive agreement between the parties with respect to the Subleased Premises. No
amendment, modification of or supplements to this Sublease shall be effective unless in writing and
executed by Sublessor and Sublessee.

     26. Survival. All indemnities contained in this Sublease shall survive the expiration
or termination hereof.

     27. Landlord Consent. The effectiveness of this Sublease is contingent upon
Landlord’s written consent to the terms and conditions of this Sublease.

     28. Exhibits. Exhibits A, B and C attached hereto are incorporated herein by
reference.

     29. Counterparts. This Sublease may be executed concurrently in counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

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     IN WITNESS WHEREOF, this Sublease is made the day and year first above written.

	 	 	 	 	 	 	 	 	 	 	 
	SUBLESSOR:	 	 	 	SUBLESSEE:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Townsend and Townsend and Crew, LLP,
a California limited liability
partnership	 	 	 	Strata Pharmaceuticals, Inc., a
Delaware corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	/s/ Theodore R. Schroeder	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ [Unintelligible]  	 	 	 	Its:	 	President & CEO 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Its:
	 	Executive Director	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	Its:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Its:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Address:	 	 
	Address:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Two Embarcadero Center, Suite 700	 	 	 	10923 Cloverhurst Way	 	 
	 	 	 	 	 	 	 	 	 
	San Francisco, CA 94111	 	 	 	San Diego, CA 92130	 	 
	 	 	 	 	 	 	 	 	 
	Attn: Executive Directorexv10w9

 

EXHIBIT 10.9

SUMMARY OF BASIC LEASE INFORMATION AND DEFINITIONS

This SUMMARY OF BASIC LEASE INFORMATION AND DEFINITIONS (“Summary”) is hereby incorporated
into and made a part of the attached Office Lease which pertains to the Building described in
Section 1.4 below. All references in the Lease to the “Lease” shall include this Summary.
All references in the Lease to any term defined in this Summary shall have the meaning set forth in
this Summary for such term. Any initially capitalized terms used in this Summary and any initially
capitalized terms in the Lease which are not otherwise defined in this Summary shall have the
meaning given to such terms in the Lease. If there is any inconsistency between the Summary and
the Lease, the provisions of the Lease shall control.

	 	 	 	 	 
	1.1

	 	Landlord’s Address:	 	 
	 
	 	 	 	 
	 

	 	For Notice:
	 	Prentiss/Collins Del Mar Heights LLC
	 

	 	 	 	c/o Prudential Real Estate Investors
	 

	 	 	 	4 Embarcadero Center, Suite 2700
	 

	 	 	 	San Francisco, California 94111
	 

	 	 	 	Attn: Asset Management, PRISA II Portfolio
	 

	 	 	 	Facsimile:   (415) 398-1025
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Prentiss/Collins Del Mar Heights LLC
	 

	 	 	 	c/o Prudential Real Estate Investors
	 

	 	 	 	8 Campus Drive, 4th Floor
	 

	 	 	 	Parsippany, New Jersey 07054
	 

	 	 	 	Attention: Gregory D. Shanklin, Law Department
	 
	 	 	 	 
	 

	 	With a copy to:
	 	c/o Brandywine Realty Trust
	 

	 	 	 	705 Palomar Airport Road, Suite 320
	 

	 	 	 	Carlsbad, California 92011
	 

	 	 	 	Attention: Vice President
	 
	 	 	 	 
	 

	 	For Payment:
	 	Prentiss/Collins Del Mar Heights LLC
	 

	 	 	 	P.O. Box 100125
	 

	 	 	 	Pasadena, California 91189-0125
	 
	 	 	 	 
	1.2

	 	Tenant’s Address:
	 	Cadence Pharmaceuticals, Inc.
	 

	 	 	 	12730 High Bluff Drive, Suite 410
	 

	 	 	 	San Diego, California 92130
	 

	 	 	 	Attn: David Socks
	 

	 	 	 	Telephone:   (858) 436-1400
	 

	 	 	 	Facsimile:   (858) 436-1401
	 

	 	 	 	(Prior to Commencement Date)
	 
	 	 	 	 
	 

	 	 	 	12481 High Bluff Drive, Suite 200
	 

	 	 	 	San Diego, California 92130
	 

	 	 	 	Attn: Chief Financial Officer
	 

	 	 	 	Telephone:   (858) 436-1400
	 

	 	 	 	Facsimile:   (858) 436-1401
	 

	 	 	 	(After Commencement Date)
	 
	 	 	 	 
	1.3	 	Site; Project: The Site consists of the parcel(s) of real property
in that certain Project commonly known as High Bluff Ridge at Del Mar located at
12481-12531 High Bluff Drive, City of San Diego, County of San Diego, State of
California, as shown on the site plan attached hereto as Exhibit “A” as
such area may be expanded or reduced from time to time. The Project includes the
Site and all buildings, improvements and facilities, now or subsequently located
on the Site from time to time, including, without limitation, the buildings
currently located on the Site, as depicted on the site plan attached hereto as
Exhibit “A”. The aggregate rentable square feet of the Project contains
(as of the date hereof) approximately 157,567 rentable square feet.

 Summary and Definitions, Page 1

 

	1.4	 	Building: The term “Building” shall mean (i) a three (3) story
office building located on the Site and containing approximately 68,038 rentable
square feet, the address of which is 12481 High Bluff Drive, San Diego,
California 92130 (the “12481 Building”) and (ii) during the 12531 term only (as
defined below), a four (4) story office building located on the Site and
containing approximately 89,529 rentable square feet, the address of which is
12531 High Bluff Drive, San Diego, California 92130 (the “12531 Building”).
	 
	1.5	 	Premises: The term “Premises” shall mean (i) those certain
premises known as Suite 200 as generally shown on the plan attached hereto as
Exhibit “B-1”, located on the second (2nd) floor of the 12481
Building, and containing approximately 23,494 rentable square feet (22,405 usable
square feet) (the “12481 Premises” and (ii) during the 12531 Term only, those
certain premises known as Suite 120 as generally shown on the plan attached
hereto as Exhibit “B-2”, located on the first (1st) floor of
the 12531 Building, and containing approximately 1,832 rentable square feet
(1,655 usable square feet) (the “12531 Premises”).
	 
	1.6	 	Term: As used herein, “Term” shall mean (i) with respect to the
12481 Premises, a term of six (6) years, with one option to extend for five (5)
years pursuant to Section 37 below (the “12481
Term”), and (ii) with respect to the 12531 Premises, month-to-month, terminable
by either party upon 30 days’ written notice to the other party (the “12531
Term”).
	 
	1.7	 	Commencement Date: The Commencement Date for the 12481 Term shall
be the later to occur of (i) the date upon which Substantial Completion (as such
term is defined in Exhibit “C” attached hereto) of the Tenant
Improvements for the 12481 Premises occurs, or (ii) September 15, 2006. The
Commencement Date for the 12531 Term shall be June 1, 2006.
	 
	1.8	 	Monthly Basic Rent: Upon the commencement of the 12481 Term of
this Lease, and on the first day of each month thereafter during the Term of this
Lease, Tenant shall pay to Landlord, in advance and without offset, as Monthly
Basic Rent for the Premises the following monthly payments:

	 	 	 	 	 
	 	 	 	 	Monthly Basic Rent
	Months of Term	 	Monthly Basic Rent	 	per Rentable Square Foot*
	**Commencement Date – 01/31/07
	 	***$  56,553.10
	 	$3.65
	02/01/07 – 09/30/07
	 	$  85,753.10
	 	$3.65
	10/01/07 – 09/30/08
	 	$  88,807.32
	 	$3.78
	10/01/08 – 09/30/09
	 	$  91,861.54
	 	$3.91
	10/01/09 – 09/30/10
	 	$  95,150.70
	 	$4.05
	10/01/10 – 09/30/11
	 	$  98,439.86
	 	$4.19
	10/01/11 – 09/30/12
	 	$101,963.96
	 	$4.34

 

			
	*	 	Monthly Basic Rent is calculated solely based on the approximately 23,494 rentable square feet
contained in the 12481 Premises.
	 
	**	 	Including any partial month at the beginning of the Term if the Commencement Date does not fall
on the first day of the month.

 Summary and Definitions, Page 2

 

			
	***	 	Monthly Basic Rent for the period from 09/15/06 through 01/31/07 is abated with respect to 8,000
square feet of the approximately 23,494 rentable square feet contained in the 12481 Premises.

	1.9	 	Tenant’s Percentage: The term “Tenant’s Percentage” shall mean 14.91%, which
is the ratio that the rentable square footage of the 12481 Premises bears to the
rentable square footage of the Project. Tenant’s Percentage is subject to
adjustment in accordance with Section 1.3 of the Lease.
	 
	1.10	 	Landlord’s Contribution to Operating Expenses: Landlord’s
Contribution to Operating Expenses shall mean Tenant’s Percentage of Operating
Expenses incurred by Landlord during calendar year 2007 (the “Base Year”),
adjusted to reflect an assumption that the Project is fully assessed for real
property tax purposes as a completed Project ready for occupancy and that the
Project is ninety-five percent (95%) occupied during such year.
	 
	1.11	 	Security Deposit: In the form of a Letter of Credit in the amount
of $1,581,130, subject to the terms and conditions of, Section 5 below.
	 
	1.12	 	Permitted Use: General office purposes only consistent with the
character of the Building as a first class office building and for no other
purpose or purposes whatsoever.
	 
	1.13	 	Brokers: Grubb & Ellis/BRE Commercial representing Landlord and
Cushman & Wakefield representing Tenant.
	 
	1.14	 	Interest Rate: The lesser of: (a) the rate announced from time to
time by Wells Fargo Bank or, if Wells Fargo Bank ceases to exist or ceases to
publish such rate, then the rate announced from time to time by the largest (as
measured by deposits) chartered bank operating in California, as its “prime rate”
or “reference rate”, plus five percent (5%); or (b) the maximum rate permitted by
law.
	 
	1.15	 	Tenant Improvements: The tenant improvements installed or to be
installed in the Premises as described in the Work Letter Agreement attached
hereto as Exhibit “C”.
	 
	1.16	 	Parking: A total of one hundred six (106) parking privileges at
the 12481 Building, which shall be comprised of (i) a minimum of seventy-nine
(79) unreserved, uncovered parking privileges at no additional cost to Tenant,
and (ii) a maximum of twenty-seven (27) reserved, covered parking privileges at
an additional cost to Tenant of $100 per stall per month. All such parking
privileges shall be subject to the provisions set forth in Section 6.2 of
this Lease.
	 
	1.17	 	Business Hours for the Building. 7:00 a.m. to 6:00 p.m., Mondays
through Fridays (except Building Holidays) and 8:00 a.m. to 12:00 p.m. on
Saturdays (except Building Holidays). “Building Holidays” shall mean New Year’s
Day, Labor Day, Thanksgiving Day, Memorial Day, Independence Day and Christmas
Day.
	 
	1.18	 	Guarantor(s): N/A.

 Summary and Definitions, Page 3

 

OFFICE LEASE

This LEASE (the “Lease”), which includes the preceding Summary of Basic Lease Information and
Definitions (the “Summary”) attached hereto and incorporated herein by this reference, is made and
entered into as of the 12th day of May, 2006, by and between PRENTISS/COLLINS DEL MAR HEIGHTS LLC,
a Delaware limited liability company (“Landlord”), and CADENCE PHARMACEUTICALS, INC, a Delaware
corporation (“Tenant”).

1. Premises.

	1.1	 	Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the Premises described in Section 1.5 of the Summary above, improved
or to be improved with the Tenant Improvements. Such lease is upon, and subject to, the
terms, covenants and conditions herein set forth and each party covenants, as a material
part of the consideration for this Lease, to keep and perform their respective
obligations under this Lease.
	 
	1.2	 	Landlord’s Reservation of Rights. Provided Tenant’s use of and access to the
Premises is not materially interfered with in an unreasonable manner, and subject to the
terms of this Lease, Landlord reserves for itself the right from time to time to
install, use, maintain, repair, replace and relocate pipes, ducts, conduits, wires and
appurtenant meters and equipment above the ceiling surfaces, below the floor surfaces
and within the walls of the Building and the Premises.
	 
	1.3	 	Measurement of Premises, Building and/or the Project. Landlord and Tenant each
hereby stipulate and agree that (a) the terms usable area,” “usable square footage,”
“rentable area” and “rentable square footage” shall refer to the square footage
measurements set forth in Sections 1.3, 1.4 and 1.5, (b) such
measurements shall be conclusive for purposes of this Lease and (c) any re-measurement
of the Premises, the Building and/or the Project shall not result in the adjustment of
any provisions of this Lease which are based upon the area of the Premises, the Building
and/or the Project such as Tenant’s Percentage, Building’s Share, Monthly Basic Rent,
and the Allowance, if any. As used in this Lease, the following terms have the meanings
indicated:
	 
	1.4	 	Project. The term “Project,” as used in this Lease, shall include, collectively,
(i) the 12481 Building and the 12531 Building, (ii) the other buildings in the Project
(if and when constructed), (iii) any outside plaza areas, walkways, driveways,
courtyards, public and private streets, transportation facilitation areas and other
improvements and facilities now or hereafter constructed surrounding and/or servicing
the Building and the other buildings in the Project (if and when constructed), including
parking structures and surface parking facilities now or hereafter servicing the
Building and the other buildings in the Project (if and when constructed) (collectively,
the “Parking Facilities”), which are designated from time to time by Landlord as common
areas (or parking facilities, as the case may be) appurtenant to or servicing the
Building and the other buildings in the Project; (iv) any additional buildings,
improvements, facilities, parking areas and structures and common areas which Landlord
(and/or any common area association formed by Landlord or Landlord’s assignee for the
Project) may add thereto from time to time within or as part of the Project; and (v) the
land upon which any of the foregoing are situated. The site plan depicting the current
configuration of the proposed Project is set forth in Exhibit “A” attached
hereto (the “Site”). Notwithstanding the foregoing or anything contained in this Lease
to the contrary, (1) Landlord has no obligation to expand or otherwise make any
improvements within the Project, including, without limitation, any of the outside plaza
areas, walkways, driveways, courtyards, public and private streets, transportation
facilitation areas and other improvements and facilities depicted on Exhibit “A”
attached hereto (as the same may be modified by Landlord from time to time without
notice to Tenant), other than Landlord’s obligations set forth in the Work Letter
Agreement to construct the Base, Shell and Core of the Building, and (2) Landlord shall
have the right from time to time to include or exclude any improvements or facilities
within the Project, at Landlord’s reasonable discretion.

2. Term. The Term of this Lease shall be for the periods designated in Section 1.6
of the Summary commencing on the Commencement Date, and ending on the expiration of such period,
unless the Term is sooner terminated as provided in this Lease. Notwithstanding the foregoing, if
the Commencement Date falls on any day other than the first day of a calendar month then the term
of this Lease will be measured from the first day of the month following the month in which the
Commencement Date occurs so that the Term will end on the last day of a month. By written
instrument substantially in the form of Exhibit “D” attached hereto, Landlord shall notify
Tenant of the Commencement Date, the rentable and usable square feet of the Premises, Tenant’s
Percentage and all other matters stated therein, and Tenant shall, within ten (10) days following
delivery of such Commencement Notice, either (i) acknowledge and agree to all matters set forth in
the Commencement Notice by executing the same and delivering the fully executed Commencement Notice
to Landlord (in which case the Commencement Notice shall be conclusive and binding on Tenant as to
all matters set forth therein), or (ii) deliver written notice to Landlord of any objections to
matters contained in the Commencement Notice. The foregoing notwithstanding, Landlord’s failure to
deliver any Commencement Notice to Tenant shall not affect Landlord’s determination of the
Commencement Date nor Tenant’s right to object thereto.

3. Rent.

	3.1	 	Basic Rent. Tenant agrees to pay Landlord, as basic rent for the Premises, the
Monthly Basic Rent in the amounts designated in Section 1.8 of the Summary. The
Monthly Basic Rent shall be paid by Tenant in monthly installments in the amounts
designated in Section 1.8 of the Summary in advance on the first day of each and
every calendar month during the Term, without demand, notice, deduction or offset except
that the first full month’s Monthly Basic Rent shall be paid upon Tenant’s execution and
delivery of this
Lease to Landlord. Monthly Basic Rent for any partial month shall be prorated in the
proportion that the number of days this Lease is in effect during such month bears to
the actual number of days in such month.

 

 

	3.2	 	Additional Rent. All amounts and charges payable by Tenant under this Lease in
addition to the Monthly Basic Rent described in Section 3.1 above (including,
without limitation, payments for insurance, repairs and parking, and Tenant’s Percentage
of Operating Expenses in excess of Landlord’s Contribution to Operating Expenses as
provided in Section 1.10 of the Summary) shall be considered additional rent for
the purposes of this Lease, and the word “rent “ in this Lease shall include such
additional rent unless the context specifically or clearly implies that only the Monthly
Basic Rent is referenced. The Monthly Basic Rent and additional rent shall be paid to
Landlord as provided in Section 7, without any prior notice or demand therefor
and without any deduction or offset whatever, in lawful money of the United States of
America.

4. Common Areas; Operating Expenses.

	4.1	 	Definitions; Tenant’s Rights. During the Term of this Lease, Tenant shall have
the non-exclusive right to use, in common with other tenants in the Project, and subject
to the Rules and Regulations referred to in Section 6 below, those portions of
the Project (the “Common Areas “) not leased or designated for lease to tenants that are
provided for use in common by Landlord, Tenant and any other tenants of the Project (or
by the sublessees (agents, employees, customers invitees, guests or licensees of any
such party), whether or not those areas are open to the general public. The Common
Areas shall include, without limitation,

                    (i) any fixtures, systems, decor, facilities and landscaping contained, maintained or
used in connection with those areas, and shall be deemed to include any city sidewalks
adjacent to the Project, any pedestrian walkway system, park or other facilities located
on the Site and open to the general public;

                    (ii) the common entrances, lobbies, restrooms on multi-tenant floors, elevators,
stairways and accessways, loading docks, ramps, drives and platforms and any passageways
and serviceways thereto to the extent not exclusively serving another tenant or
contained within another tenant’s premises, and the common pipes, conduits, wires and
appurtenant equipment serving the Project; and

                    (iii) the parking structure and parking areas (subject to Section 6.2 below),
exercise facilities, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, driveways and landscaped areas appurtenant to the Project.

	4.2	 	Landlord’s Reserved Rights. Landlord reserves the right from time to time to use
any of the Common Areas and to do any of the following, as long as such acts do not
unreasonably interfere with Tenant’s use of or access to the Premises:
	 
	(a)	 	expand the Building and construct or alter other buildings or improvements on the
Site;
	 
	(b)	 	make any changes, additions, improvements, repairs or replacements in or to the
Project, the Site, the Common Areas and/or the Building (including the Premises if
required to do so by any law or regulation) and the fixtures and equipment thereof,
including, without limitation: (i) maintenance, replacement and relocation of pipes,
ducts, conduits, wires and meters; and (ii) changes in the location, size, shape and
number of driveways, entrances, stairways, elevators, loading and unloading areas,
ingress, egress, direction of traffic, landscaped areas and walkways and, subject to
Section 6.2, parking spaces and parking areas;
	 
	(c)	 	close temporarily any of the Common Areas while engaged in making repairs,
improvements or alterations to the Project, Site and/or Building;
	 
	(d)	 	perform such other acts and make such other changes with respect to the Project,
Site, Common Areas and Building, as Landlord may, in the exercise of its good faith
business judgment, reasonably deem to be appropriate;
	 
	(e)	 	form a common area association or associations under covenants, conditions and
restrictions to own, manage, operate, maintain, repair and/or replace all or any portion
of the landscaping, driveways, walkways, parking areas, public and private streets,
plazas, courtyards, transportation facilitation areas and/or other common areas located
outside of the Building and, subject to Section 4.4 below, include the common
area assessments, fees and taxes charged by the association(s) and the cost of
maintaining, managing, administering and operating the association(s), in Operating
Expenses; and
	 
	(f)	 	perform such other acts and make such other changes with respect to the Project
as Landlord may, in the exercise of good faith business judgment, reasonably deem to be
appropriate.

        Tenant hereby agrees that Landlord’s actions pursuant to this Section 4.2 shall in no
way constitute a constructive eviction of Tenant nor entitle Tenant to any abatement of rent.
Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or
indirect injury to or interference with Tenant’s business arising from Landlord’s actions with
respect to this Section 4.2, nor shall Tenant be entitled to any compensation or damages
from Landlord for loss of the use of the whole or any part of the Premises or of Tenant’s personal
property or improvements resulting from Landlord’s
actions with respect to this Section 4.2, or for any inconvenience or annoyance
occasioned by Landlord’s actions with respect to this Section 4.2.

	4.3	 	Excess Expenses. In addition to the Monthly Basic Rent required to be paid by
Tenant pursuant to Section 3.1 above, during each month during the Term of this
Lease (after the Base Year noted in Section 1.10 of the Summary), Tenant shall
pay to Landlord (a) the amount by which Tenant’s Percentage of Operating Expenses for
such calendar year exceeds Landlord’s Contribution to Operating Expenses (such amount
shall be referred to in this Section 4 as the “Excess Expenses“), in the manner
and at the times set forth in the following provisions of 

2

 

	 	 	this Section 4, and
(b) during the 12531 Term only, the sum of One Thousand Six Hundred Seventy Five and
No/100 Dollars ($1,675.00) per month.

	4.4	 	Definition of Operating Expenses. As used in this Lease, the term “Operating
Expenses “ shall consist of all costs and expenses of operation, maintenance, repair and
replacement of the Project and the Common Areas as determined by Landlord utilizing
standard commercial real estate accounting practices consistently applied and calculated
assuming the Project is ninety-five percent (95%) occupied. Operating Expenses shall
include the following costs by way of illustration but not limitation: (a) Real
Property Taxes and Assessments (as defined in Section 4.5 below) and any taxes
or assessments imposed in lieu thereof; (b) any and all assessments imposed with respect
to the Project, Common Areas, and/or Site pursuant to any covenants, conditions and
restrictions affecting the Site, Common Areas or Project; (c) except to the extent paid
by Tenant as part of Electricity Utility Charges (as defined in Section 16.1
below), water and sewer charges and the costs of electricity, heating, ventilating, air
conditioning and other utilities; (d) except to the extent paid by Tenant as part of
Electricity Utility Charges, utilities surcharges and any other costs, levies or
assessments resulting from statutes or regulations promulgated by any government
authority in connection with the use or occupancy of the Site, Project or the Premises
or the parking facilities serving the Site, Project or the Premises; (e) costs of
insurance obtained by Landlord pursuant to Section 21 of this Lease; (f) except
to the extent paid by Tenant as part of Electricity Utility Charges, waste disposal and
janitorial services; (g) security (if any); (h) costs incurred in the management of the
Site, Project and Common Areas, including, without limitation: (1) supplies, (2) wages,
salaries, benefits, pension payments, fringe benefits, uniforms and dry-cleaning thereof
(and payroll taxes, insurance and similar governmental charges related thereto) of
employees used exclusively in the operation and maintenance of the Site, Project and
Common Areas, (3) the rental of personal property used by Landlord’s personnel in the
maintenance, repair and operation of the Project, (4) reasonable management office
expenses including rent and operating costs, (5) accounting fees, legal fees and real
estate consultant’s fees, and (6) a management/administrative fee not to exceed five
percent (5%) of the annual gross revenues of the Project; (i) supplies, materials,
equipment and tools; (j) repair, replacement and maintenance of the elevators and the
structural portions of the Project, including the plumbing, heating, ventilating,
air-conditioning, electrical and other utility systems installed or furnished by
Landlord; (k) maintenance, costs and upkeep of all parking and Common Areas; (l)
amortization on a straight-line basis over the useful life (as reasonably determined by
Landlord utilizing standard commercial real estate accounting practices consistently
applied), together with interest at the Interest Rate (as defined in Section
1.14 of the Summary of this Lease) on the unamortized balance of all costs of a
capital nature (including, without limitation, capital improvements, capital
replacements, capital repairs, capital equipment and capital tools): (1) intended to
produce a reduction in operating charges or energy consumption or effect other economies
in the operation or maintenance of the Project; or (2) required after the date of this
Lease under any governmental law or regulation; (3) for repair or replacement of any
equipment or improvements needed to operate and/or maintain the Project, the Common
Areas and/or the Site at the same quality levels as prior to the repair or replacement;
or (4) which are reasonably determined by Landlord to be in the best interests of the
Project; (m) costs and expenses of gardening and landscaping; (n) maintenance of signs;
(o) personal property taxes levied on or attributable to personal property used in
connection with the Project, the Common Areas and/or the Site; and (p) costs and
expenses of repairs, resurfacing, repairing, maintenance, painting, lighting, cleaning,
refuse removal, security and similar items, including appropriate reserves. For
purposes of determining Landlord’s Contribution to Operating Expenses, Operating
Expenses shall not include (i) one-time special assessments, charges, costs or fees or
extraordinary charges or costs incurred in the Base Year only, (ii) market-wide
labor-rate increases due to extraordinary circumstances including, but not limited to,
boycotts and strikes, (iii) utility rate increases due to extraordinary circumstances
including, but not limited to, conservation surcharges, boycotts, embargoes or other
shortages, and (iv) amortization of any capital items including, but not limited to,
capital improvements, capital repairs and capital replacements (including such amortized
costs where the actual improvement, repair or replacement was made in prior years). In
no event shall costs for any item of utilities included in Operating Expenses for any
year subsequent to the Base Year be less than the amount included in Operating Expenses
for the Base Year for such utility item. In addition, if in any calendar year
subsequent to the Base Year, the amount of Operating Expenses decreases due to a
reduction in the cost of providing utilities, security and/or other services to the
Project for any reason, including without limitation, because of deregulation of the
utility industry and/or reduction in rates achieved in contracts with utilities and/or
service providers, then for purposes of the calendar year in which such decrease in
Operating Expenses occurred and all subsequent calendar years, the Operating Expenses
for the Base Year shall be decreased by an amount equal to such decrease.

Landlord shall have the right, from time to time, to equitably and in good faith allocate some
or all of the Operating Expenses between the different tenants of the Project and/or different
buildings of the Project as and when such different buildings are constructed and added to (and/or
excluded from) the Project or otherwise (the “Cost Pools”); provided that such Cost Pools may not
exceed 100% of the actual cost of such items. Such Cost Pools may include, without limitation, the
office space tenants of the Project or of a building or buildings in the Project. Such Cost
Pools may also include an allocation of certain Operating Expenses within or under covenants,
conditions and restrictions affecting the Project. In addition, Landlord shall have the right from
time to time, in its reasonable discretion, to include or exclude existing or future buildings in
the Project for purposes of determining Operating Expenses and/or the provision of various services
and amenities thereto, including allocation of Operating Expenses in any such Cost Pools.

Notwithstanding anything in the definition of Operating Expenses set forth above, Operating
Expenses shall not include the following:

	(a)	 	costs incurred in correcting construction defects in the original construction of
the Project;
	 
	(b)	 	the following costs incurred with respect to the tenant leases at the Project:
(i) the legal expenses and brokerage fees incurred in connection with negotiating and
documenting such leases, (ii) the cost with respect to tenant 

3

 

	 	 	improvements to the
premises demised by such leases, (iii) free rent and tenant allowance concessions
provided by Landlord to tenants under such leases, and (iv) the expenses of advertising
the Project to prospective tenants;

	(c)	 	depreciation, interest and principal payments on mortgage debt and other
non-operating debt of Landlord, if any;
	 
	(d)	 	costs for which the Landlord is reimbursed, or would have been reimbursed, if
Landlord had carried the insurance Landlord is required to carry pursuant to this Lease;
	 
	(e)	 	any bad debt loss, rent loss, or reserves for bad debts or rent loss or any
reserves of any kind (but Operating Expenses may include reasonable reserves imposed
upon the Project as part of the assessments under any covenants, conditions and
restrictions recorded against the Project);
	 
	(f)	 	costs associated with the operation of the business of the partnership or entity
which constitutes the Landlord, as the same are distinguished from the costs of
operation of the Project, including partnership accounting and legal matters, costs of
defending any lawsuits with any mortgagee (except as the actions of the Tenant may be in
issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of the
Landlord’s interest in the Project, and costs incurred in connection with any disputes
between Landlord and its employees, between Landlord and Project management, or between
Landlord and other tenants or occupants (and not such other tenants or occupants
generally);
	 
	(g)	 	the wages and benefits of any employee who does not devote substantially all of
his or her employed time to the Project unless such wages and benefits are prorated to
reflect time spent on operating and managing the Project vis-à-vis time spent on matters
unrelated to operating and managing the Project; provided, that in no event shall
Operating Expenses for purposes of this Lease include wages and/or benefits attributable
to personnel above the level of Project general manager unless those personnel are
acting in the capacity of their respective positions and the amount of salary being
charged to the Project is comparable to Comparable Buildings in the area;
	 
	(h)	 	late charges, penalties, liquidated damages, and interest arising out of
Landlord’s failure to make timely payment of any of Taxes or Operating Expenses;
	 
	(i)	 	amount paid by Landlord as ground rental for the Project;
	 
	(j)	 	costs of capital improvements (including rentals which would constitute a capital
improvement if purchased), alterations and repairs except as set forth in clause
(l) of the first paragraph of this Section 4.4 above;
	 
	(k)	 	any amount paid by Landlord or to the parent organization or a subsidiary or
affiliate of the Landlord for supplies and/or services in the Project to the extent the
same exceeds the costs of such supplies and/or services rendered by qualified,
first-class unaffiliated third parties on a competitive basis;
	 
	(l)	 	the cost of all items and services for which Tenant or any other tenant in the
Project is obligated to reimburse Landlord such cost, or the cost of such items and
services for which Landlord provides selectively to one or more tenants (other than
Tenant) without reimbursement;
	 
	(m)	 	electric power costs or costs for other utilities for which any tenant (including
Tenant) directly contracts with a public service company;
	 
	(n)	 	costs, other than those incurred in ordinary maintenance and repair, for
sculpture, paintings or other objects of art not constituting fixtures;
	 
	(o)	 	depreciation;
	 
	(p)	 	Landlord’s general corporate overhead and general and administrative expenses,
except for the property management fee and except as they relate to the specific
management of the Project such as tax management services and project accounting fees;
	 
	(q)	 	costs arising from the gross negligence or willful misconduct of Landlord;
	 
	(r)	 	costs incurred to comply with applicable laws with respect to Hazardous Materials
(as such term is defined in Section 6.4 below) in, on or under the Project and/or the
Building to the extent such Hazardous Materials are: (1) in existence as of the
Commencement Date and in violation of any applicable Environmental Law (as defined in
Section 6.4 below) in effect as of the Commencement Date, and were of such a nature that
a federal, state or municipal governmental or quasi-governmental authority, if it had
then had knowledge of the presence of such Hazardous Materials, in the state and under
the conditions that the same existed in the Building or on the Project, would have then
required removal, remediation or other action with respect to such Hazardous Materials;
or (2) introduced onto the Project and/or the Building after the Commencement Date by
Landlord or other tenants of the Project in violation of applicable laws in effect at
the date of introduction, and were of such a nature that a federal, state or municipal
governmental or quasi-governmental authority, if it had then had knowledge of the
presence of such Hazardous Materials, in the state and under the conditions that the
same existed in the Building or on the Project, would have then required removal,
remediation or other action with respect to such Hazardous Materials;
	 
	(s)	 	costs arising from Landlord’s charitable or political contributions;
	 
	(t)	 	the cost of any employee training or incentive programs, other than for tenant
life safety information services; and

4

 

	(u)	 	in-house legal and/or accounting (as opposed to office building bookkeeping)
fees.

Landlord shall (i) not make a profit by charging items to Operating Expenses that are
otherwise also charged separately to others and (ii) Landlord shall not collect Operating Expenses
from Tenant and all other tenants/occupants in the Building in an amount in excess of what Landlord
incurred for the items included in Operating Expenses. All assessments and premiums which are not
specifically charged to Tenant hereunder, which can be paid by Landlord in installments without the
imposition of fees, penalties or interest, shall be paid by Landlord in the maximum number of
installments that are permitted by law without the imposition of fees, penalties or interest and
not included as Operating Expenses except in the calendar year in which the assessment or premium
installment is actually paid; provided, however, that if the prevailing practice in Comparable
Buildings is to pay such assessments or premiums on an earlier basis, and Landlord pays on such
earlier basis, such assessments or premiums shall be included in Operating Expenses, as the case
may be, in the calendar year that such assessments or premiums are paid by Landlord; provided
further, however, that in such event, Landlord shall pro-rate the amount of any such assessment
and/or premiums and Tenant shall only pay the amount allocable to the Term.

	4.5	 	Definition of Real Property Taxes and Assessments. All Real Property Taxes and
Assessments shall be adjusted to reflect an assumption that the Project is fully
assessed for real property tax purposes as a completed building(s) ready for occupancy.
As used in this Lease, the term “Real Property Taxes and Assessments” shall mean: any
form of assessment, license fee, license tax, business license fee, commercial rental
tax, levy, charge, improvement bond, tax, water and sewer rents and charges, utilities
and communications taxes and charges or similar or dissimilar imposition imposed by any
authority having the direct power to tax, including any city, county, state or federal
government, or any school, agricultural, lighting, drainage or other improvement or
special assessment district thereof, or any other governmental charge, general and
special, ordinary and extraordinary, foreseen and unforeseen, which may be assessed
against any legal or equitable interest of Landlord in the Premises, Building, Common
Areas, Site or Project, including the following by way of illustration but not
limitation:
	 
	(a)	 	any tax on Landlord’s “right” to rent or “right” to other income from the
Premises or as against Landlord’s business of leasing the Premises;
	 
	(b)	 	any assessment, tax, fee, levy or charge in substitution, partially or totally,
of any assessment, tax, fee, levy or charge previously included within the definition of
real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was
adopted by the voters of the State of California in the June, 1978 election and that
assessments, taxes, fees, levies and charges may be imposed by governmental agencies for
such services as fire protection, street, sidewalk and road maintenance, refuse removal
and for other governmental services formerly provided without charge to property owners
or occupants. It is the intention of Tenant and Landlord that all such new and
increased assessments, taxes, fees, levies and charges be included within the definition
of “Real Property Taxes and Assessments” for the purposes of this Lease;
	 
	(c)	 	any assessment, tax, fee, levy or charge allocable to or measured by the area of
the Premises or other premises in the Building or the rent payable by Tenant hereunder
or other tenants of the Project, including, without limitation, any gross receipts tax
or excise tax levied by state, city or federal government, or any political subdivision
thereof, with respect to the receipt of such rent, or upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use or
occupancy by Tenant of the Premises, or any portion thereof but not on Landlord’s other
operations;
	 
	(d)	 	any assessment, tax, fee, levy or charge upon this transaction or any document to
which Tenant is a party, creating or transferring an interest or an estate in the
Premises; and/or
	 
	(e)	 	any assessment, tax, fee, levy or charge by any governmental agency related to
any transportation plan, fund or system (including assessment districts) instituted
within the geographic area of which the Project is a part.

Notwithstanding the foregoing, if after the Commencement Date Real Property Taxes and
Assessments are reduced, then for purposes of all subsequent calendar years including the calendar
year in which the reduction occurs, Landlord’s Contribution to Operating Expenses shall be
proportionately reduced. Notwithstanding the foregoing provisions of this Section 4.5
above to the contrary, “Real Property Taxes and Assessments “ shall not include Landlord’s federal
or state income, franchise, inheritance, estate, capital, stock, succession, transfer, franchise,
or gift tax; (ii) any item to the extent otherwise included in Operating Costs; (iii) costs or fees
payable to public authorities in connection with any future construction, renovation and/or
improvements to the Project other than the Improvements to the Premises made by or for Tenant,
including fees for transit, housing, schools, open space, child care, arts programs, traffic
mitigation measures, environmental impact reports, traffic studies, and transportation system
management plans; (iv) reserves for future Taxes; or (v) any personal property taxes attributable
to sculptures, paintings or other objects of art (except for objects of art installed in the Common
Areas pursuant to requirements of public authority). If any Taxes are payable in installments over
a period of time, Tenant shall be liable only for the payment of those installments falling due and
payable during the Term, with appropriate proration for fractional years.

	4.6	 	Estimate Statement. By the first day of April of each calendar year during the Term
of this Lease (after the Base Year noted in Section 1.10 of the Summary),
Landlord shall deliver to Tenant a statement (“Estimate Statement”) estimating the
Operating Expenses for the current calendar year and the estimated amount of Excess
Expenses payable by Tenant. Landlord shall have the right no more than three (3) times
in any calendar year to deliver a revised Estimate Statement showing the Excess Expenses
for such calendar year if Landlord determines that the Excess Expenses are greater than
those set forth in the original Estimate Statement (or previously delivered revised
Estimate Statement) for such calendar year. The Excess Expenses shown on the Estimate
Statement (or revised Estimate Statement, as applicable) shall be divided into twelve
(12) equal monthly installments, and 

5

 

	 	 	Tenant shall pay to Landlord, concurrently with the
regular Monthly Basic Rent payment next due following the receipt of the Estimate
Statement (or revised Estimate Statement, as applicable), an amount equal to one (1)
monthly installment of such Excess Expenses multiplied by the number of months from
January in the calendar year in which such statement is submitted to the month of such
payment, both months inclusive (less any amounts previously paid by Tenant with respect
to any previously delivered Estimate Statement or revised Estimate Statement for such
calendar year). Subsequent installments shall be paid concurrently with the regular
monthly rent payments for the balance of the calendar year and shall continue until the
next calendar year’s Estimate Statement (or current calendar year’s revised Estimate
Statement) is received.

	4.7	 	Actual Statement. By the first day of April of each succeeding calendar year
during the Term of this Lease, Landlord shall deliver to Tenant a statement (“Actual
Statement”) of the actual Operating Expenses and Excess Expenses for the immediately
preceding calendar year. If the Actual Statement reveals that Excess Expenses were
over-stated or under-stated in any Estimate Statement (or revised Estimate Statement)
previously delivered by Landlord pursuant to Section 4.6 above, then within
thirty (30) days after delivery of the Actual Statement, Tenant shall pay to Landlord
the amount of any such under-payment, or, Landlord shall credit Tenant against the next
monthly rent falling due (or promptly refund such amount if after the expiration or
earlier termination of the Lease), the amount of such over-payment, as the case may be.
Such obligation will be a continuing one which will survive the expiration or earlier
termination of this Lease.
	 
	4.8	 	No Release. Any delay or failure by Landlord in delivering any Estimate or
Actual Statement pursuant to this Section 4 shall not constitute a waiver of its
right to receive Tenant’s payment of Excess Expenses, nor shall it relieve Tenant of its
obligations to pay Excess Expenses pursuant to this Section 4, except that
Tenant shall not be obligated to make any payments based on such Estimate or Actual
Statement until ten (10) business days after receipt of such statement.
	 
	4.9	 	Audit Rights. In the event Tenant disputes the amount of the Operating Expenses
set forth in the Actual Statement for any particular calendar year delivered by Landlord
to Tenant pursuant to Section 4.7 above, Tenant shall have the right, at
Tenant’s cost, after reasonable notice to Landlord, to have Tenant’s authorized
employees or agents inspect, at Landlord’s office during normal business hours,
Landlord’s books, records and supporting documents concerning the Operating Expenses set
forth in such Actual Statement and any Operating Expenses attributable to the Base Year;
provided, however, Tenant shall have no right to conduct such inspection, have an audit
performed by the Accountant as described below, or object to or otherwise dispute the
amount of the Operating Expenses set forth in any such Actual Statement, unless Tenant
notifies Landlord of such objection and dispute, and has the Accountant commence such
audit within ninety (90) days immediately following Landlord’s delivery of the
particular Actual Statement in question (the “Review Period“); provided, further, that
notwithstanding any such timely objection, dispute, inspection, and/or audit, and as a
condition precedent to Tenant’s exercise of its right of objection, dispute, inspection
and/or audit as set forth in this Section 4.9, Tenant shall not be permitted to
withhold payment of, and Tenant shall timely pay to Landlord, the full amounts as
required by the provisions of this Section 4 in accordance with such Actual
Statement. However, such payment may be made under protest pending the outcome of any
audit which may be performed by the Accountant as described below. In connection with
any such inspection by Tenant, Landlord and Tenant shall reasonably cooperate with each
other so that such inspection can be performed pursuant to a mutually
acceptable schedule, in an expeditious manner and without interference with Landlord’s
operation and management of the Building. If after such inspection and/or request for
documentation, Tenant still disputes the amount of the Operating Expenses set forth in
the Actual Statement, Tenant shall have the right, within the Review Period, to cause
an independent certified public accountant which is not paid on a contingency basis,
which is not performing and has not performed similar audit work for other tenants of
the Project in connection with the Project, and which is mutually approved by Landlord
and Tenant (the “Accountant“) to complete an audit of Landlord’s books and records
pertaining to Operating Expenses for the calendar year which is the subject of such
Actual Statement to determine the proper amount of the Operating Expenses incurred and
amounts payable by Tenant for such calendar year. Such audit by the Accountant shall
be final and binding upon Landlord and Tenant. If Landlord and Tenant cannot mutually
agree as to the identity of the Accountant within thirty (30) days after Tenant
notifies Landlord that Tenant desires an audit to be performed, then the Accountant
shall be one of the “Big 4” accounting firms or other national or regional accounting
firms, which is not paid on a contingency basis, which is not performing and has not
performed similar audit work for other tenants of the Project in connection with the
Project, and which is selected by Tenant and reasonably approved by Landlord. If such
audit reveals that Landlord has over-charged Tenant, then within thirty (30) days
after the results of such audit are made available to Landlord, Landlord shall
reimburse to Tenant the amount of such over-charge. If the audit reveals that the
Tenant was under-charged, then within thirty (30) days after the results of such audit
are made available to Tenant, Tenant shall reimburse to Landlord the amount of such
under-charge. Tenant agrees to pay the cost of such audit unless it is subsequently
determined that Landlord’s original Actual Statement which was the subject of such
audit was in error to Tenant’s disadvantage by five percent (5%) or more of the total
Operating Expenses which was the subject of such audit. The payment by Tenant of any
amounts pursuant to this Section 4 shall not preclude Tenant from questioning
the correctness of any Actual Statement provided by Landlord at any time during the
Review Period, but the failure of Tenant to object thereto, conduct and complete its
inspection and have the Accountant conduct and complete the audit as described above
prior to the expiration of the Review Period shall be conclusively deemed Tenant’s
approval of the Actual Statement in question and the amount of Operating Expenses
shown thereon. In connection with any inspection and/or audit conducted by Tenant
pursuant to this Section 4.9, Tenant agrees to keep, and to cause all of
Tenant’s employees and consultants and the Accountant to keep, all of Landlord’s books
and records and the audit, and all information pertaining thereto and the results
thereof, confidential, and in connection therewith, Tenant shall cause such employees,
consultants and the Accountant to execute such commercially reasonable confidentiality
agreements as Landlord may require prior to conducting any such inspections and/or
audits.

6

 

5. Security Deposit.

	5.1	 	Letter of Credit. The Security Deposit shall be in the form of a Letter of
Credit in the amount set forth in Section 1.11 of the Summary above, subject to
the following additional terms and conditions:
	 
	(a)	 	(i) Tenant shall cause a Letter of Credit, in the amount of the Security Deposit
to be issued by a financial institution reasonably acceptable to Landlord and Tenant
(the “L/C Bank”) in favor of Landlord, and its successors, assigns, and transferees;
(ii) Tenant will cause the Letter of Credit to remain in full force and effect during
the entire Term and thereafter until thirty (30) days after expiration or earlier
termination of the Lease; (iii) the initial Letter of Credit will be delivered to
Landlord upon Tenant’s execution and delivery of this Lease to Landlord. The specific
requirements for the Letter of Credit and the rights of Landlord to make draws thereon
will be as set forth in this Section 5.1. Tenant’s failure to deliver and/or
thereafter cause the Letter of Credit to remain in full force and effect during the
entire Term shall constitute a default under the Lease.
	 
	(b)	 	Immediately upon, and at any time or from time to time after, the occurrence of
any one or more Draw Events (as hereinafter defined), Landlord will have the
unconditional right to draw on the Letter of Credit in accordance with this Section
5.1. Upon the payment to Landlord of the Draw Proceeds (as hereinafter defined),
Landlord will hold the Draw Proceeds in its own name and for its own account, without
liability for interest, to use and apply any and all of the Draw Proceeds only (i) to
cure any Event of Default by Tenant; (ii) to pay any other sum to which Landlord becomes
obligated by reason of Tenant’s failure to carry out its obligations under this Lease;
or (iii) to compensate Landlord for any monetary loss or damage which Landlord suffers
thereby arising from Tenant’s failure to carry out its obligations under this Lease. In
addition, if the Draw Event is the failure of Tenant to renew the Letter of Credit as
required hereunder, the Landlord shall be entitled to draw the entire Letter of Credit
as a cash security deposit, held as a pledge to secure Tenant’s obligations under this
Lease. Among other things, it is expressly understood that the Draw Proceeds will not
be considered an advance payment of Basic Rent or Additional Rent or a measure of
Landlord’s damages resulting from any Event of Default hereunder (past, present or
future). Further, immediately upon the occurrence and during the continuance of any one
or more Draw Events, Landlord may, from time to time and without prejudice to any other
remedy, use the Draw Proceeds (whether from a contemporaneous or prior draw on the
Letter of Credit) to the extent necessary to make good any arrearages of Basic Rent or
Additional Rent, to pay to Landlord any and all amounts to which Landlord is entitled in
connection with the pursuit of any one or more of its remedies hereunder, and to
compensate Landlord for any and all other damage, injury, expense, or liability caused
to Landlord by any and all such Events of Default. Any delays in Landlord’s draw on the
Letter of Credit or in Landlord’s use of the Draw Proceeds as provided in this
Section 5.1 will not constitute a waiver by Landlord of any of its rights
hereunder with respect to the Letter of Credit or the Draw Proceeds. Following any such
application of the Draw Proceeds, Tenant will either pay to Landlord on demand the cash
amount so applied in order to restore the Draw Proceeds to the full amount thereof
immediately prior to such application or cause the Letter of Credit to be replenished to
its full amount thereunder. In no
event shall Tenant be required to deposit or post at any time any amount which would
result in Landlord’s having a Security Deposit larger than the then-required amount of
the Letter of Credit after giving effect to all Scheduled Decreases (as hereinafter
defined) to which Tenant shall then be entitled under the provisions of this
Section 5.1. Landlord will not be liable for any indirect, consequential,
special, or punitive damages incurred by Tenant arising from a claim that Landlord
violated the Bankruptcy Code’s automatic stay in connection with any draw by Landlord
of any Draw Proceeds, Landlord’s liability (if any) under such circumstances being
limited to the reimbursement of direct costs as and to the extent expressly provided
in this Section 5.1. Nothing in this Lease or in the Letter of Credit will
confer upon Tenant any property rights or interests in any Draw Proceeds; provided,
however, that upon the expiration or earlier termination of this lease, and so long as
there then exist no Draw Events or Events of Default hereunder, Landlord agrees to
return any remaining unapplied balance of the Draw Proceeds then held by Landlord, and
the Letter of Credit itself (if and to the extent not previously drawn in full) to the
L/C Bank.
	 
	(c)	 	Applicable Definitions.
	 
	 	 	“Draw Event” means each of the following events:

                    (i) the occurrence of any one or more of the following which shall have also been
preceded, simultaneously accompanied, or succeeded by a Tenant’s Default (as hereinafter
defined) under this Lease regardless of the absence of any notice of default which might
otherwise be required with respect to a Tenant’s Default if the giving of notice to
Tenant about such breach by Tenant is stayed or barred due to one of the following
events: (A) Tenant’s filing of a petition under any chapter of the Bankruptcy Code, or
under any federal, state or foreign bankruptcy or insolvency statute now existing or
hereafter enacted, or Tenant’s making a general assignment or general arrangement for
the benefit of creditors, (B) the filing of an involuntary petition under any chapter of
the Bankruptcy Code, or under any federal, state or foreign bankruptcy or insolvency
statute now existing or hereafter enacted, or the filing of a petition for adjudication
of bankruptcy or for reorganization or rearrangement, by or against Tenant and such
filing not being dismissed within sixty (60) days, (C) the entry of an order for relief
under any chapter of the Bankruptcy Code, or under any federal, state or foreign
bankruptcy or insolvency statute now existing or hereafter enacted, (D) the appointment
of a “custodian,” as such term is defined in the Bankruptcy Code (or of an equivalent
thereto under any federal, state or foreign bankruptcy or insolvency statute now
existing or hereafter enacted), for Tenant, or the appointment of a trustee or receiver
to take possession of substantially all of Tenant’s assets located at the Premises or of
Tenant’s interest in this Lease and possession not being restored to Tenant within sixty
(60) days, or (E) the subjection of all or substantially all of Tenant’s assets located
at the Premises or of Tenant’s interest in this Lease to attachment, execution or other
judicial seizure and such subjection not being discharged within sixty (60) days;

                    (ii) the failure of Tenant, not less then thirty (30) days prior to the stated
expiration date of the Letter of Credit then in effect, to cause an extension, renewal
or replacement issuance of the Letter of Credit, at the

7

 

reduced amount, if any,
applicable under this Section 5.1, to be effected, which extension, renewal or
replacement issuance will be made by the L/C Bank, and, except as expressly provided in
this Section 5.1, will otherwise meet all of the requirements of the initial
Letter of Credit hereunder, which failure will be an Event of Default under this Lease;

                    (iii) the failure of Tenant to make when due any payment of Base Rent, of any monthly
installment of any Additional Rent, or pay any other monetary obligation within ten (10)
business days after the amount is due; or

                    (iv) the payment by Landlord of any sum to cure a failure by Tenant to comply with any
non-monetary obligation hereunder which Tenant has not cured within thirty (30) days
after notice thereof by Landlord (or, if Landlord is prevented from giving notice by
application of the Bankruptcy Code’s automatic stay, the payment of Landlord of any sum
to cure a failure by Tenant to comply with any non-monetary obligation hereunder that
Tenant has not cured within thirty (30) days from the date of breach).

        “Draw Proceeds” means the proceeds of any draw or draws made by Landlord under the Letter of
Credit, together with any and all interest accruing thereon.

        “L/C Bank” means any United Stated bank which is approved by Landlord, with such approval not
to be unreasonably withheld, conditioned or delayed.

        “Letter of Credit” means that certain one-year irrevocable letter of credit, in the amount set
forth in Section 1.11 of the Summary above, issued by the L/C Bank, as required under this
Section 5.1 and, if applicable, as extended, renewed, replaced or modified from time to
time in accordance with this Lease, which letter of credit will be in substantially the same form
as Exhibit “G” attached hereto.

	(d)	 	If the Security Deposit is in the form of a Letter of Credit, then
notwithstanding the preceding or any other provision of this Lease or the Letter of
Credit to the contrary, the parties understand and agree that: (i) the annual
anniversary dates of this Lease and the annual extension date(s) of the Letter of Credit
could be different due to the Letter of Credit possibly being posted on a date other
than the first (1st) day of the anniversary of the date of this Lease; and
(ii) due to such non-synchronous timing as described in the immediately preceding
clause, there could be certain periods when Tenant is entitled to a Scheduled Decrease
that is not yet reflected in the Letter of Credit because the Scheduled Decrease occurs
only upon the extension date of the Letter of Credit, and not upon the anniversary of
the date of this Lease; and (iii) notwithstanding that the then-face amount of the
Letter of Credit may exceed the amount that
Landlord is entitled to draw upon under the Lease because a Scheduled Decrease has not
yet been given effect under the Letter of Credit for the reasons described in the
immediately preceding clauses (i) and (ii), Landlord shall not be entitled to, nor
shall Landlord, draw upon the Letter of Credit in an amount which would result in
Landlord’s obtaining proceeds from the Letter of Credit which include all or any
portion of that amount which should otherwise have been a Scheduled Decrease to such
Letter of Credit to which Tenant is otherwise entitled under this Lease.
	 
	5.2	 	Scheduled Decreases. Commencing on the first anniversary of the Commencement
Date, the Security Deposit shall be decreased automatically on each of the first four
anniversaries of the Commencement Date by an amount equal to twenty-two percent (22%) of
the face amount of the Security Deposit as of the Commencement Date (a “Scheduled
Decrease”).
	 
	5.3	 	Transfer of Letter of Credit. If Landlord transfers its interest in the
Premises, or any portion thereof, during the Term, Landlord may transfer the Security
Deposit (whether in the form of case or if Tenant has provided a Letter of Credit, then
the Letter of Credit and all Draw Proceeds held by Landlord) to the transferee and
thereafter will have no further liability with respect to the Security Deposit,
including, without limitation, any liability for the return of the Letter of Credit (if
issued). Landlord shall pay any and all fees or costs (whether payable to the L/C Bank
or otherwise) in order to effectuate such transfer of the Letter of Credit.

6. Use.

	6.1	 	General. Tenant shall use the Premises solely for the Permitted Use specified in
Section 1.12 of the Summary, and shall not use or permit the Premises to be used
for any other use or purpose whatsoever. Tenant shall observe and comply with the
“Rules and Regulations” attached hereto as Exhibit “E”, and all reasonable
non-discriminatory modifications thereof and additions thereto from time to time put
into effect and furnished to Tenant by Landlord; provided that such modifications do not
materially increase Tenant’s obligations or decrease Tenant’s rights under this Lease.
Landlord shall use commercially reasonable efforts to enforce the Rules and Regulations,
but shall have no liability to Tenant for the violation or non-performance by any other
tenant or occupant of the Project or the Building of any such Rules and Regulations.
Tenant shall, at its sole cost and expense, observe and comply with all requirements of
any board of fire underwriters or similar body relating to the Premises, all recorded
covenants, conditions and restrictions now or hereafter affecting the Premises and all
laws, statutes, codes, rules and regulations now or hereafter in force relating to or
affecting the condition, use, occupancy, alteration or improvement of the Premises,
including, without limitation, the provisions of Title III of the Americans with
Disabilities Act of 1990 as it pertains to Tenant’s use, occupancy, improvement and
alteration of the Premises (whether, except as otherwise expressly provided herein,
structural or nonstructural, including unforeseen and/or extraordinary alterations
and/or improvements to the Premises, regardless of the period of time remaining in the
Lease Term). Tenant shall not use or allow the Premises to be used (a) in violation of
any recorded covenants, conditions and restrictions affecting the Site or of any law or
governmental rule or regulation, or of any certificate of occupancy issued for the
Premises or Building, or (b) for any improper, immoral, unlawful or reasonably
objectionable purpose. Tenant shall not do or permit to be done anything which will
unreasonably obstruct or interfere with the rights of other tenants or occupants of the
Project or the Building, or injure them.

8

 

	 	 	Tenant shall not cause, maintain or permit any
nuisance in, on or about the Premises, the Building, the Project or the Site, nor commit
or suffer to be committed any waste in, on or about the Premises.

	6.2	 	Parking.
	 
	(a)	 	Tenant’s Parking Privileges. During the Term of this Lease and any
extensions thereof, Landlord shall lease to Tenant, and Tenant shall lease from
Landlord, the number of parking privileges specified in Section 1.16 of the
Summary hereof for use by Tenant’s employees in the common parking areas for the
Building within the Project, as designated by Landlord from time to time. Landlord
shall at all times have the right to establish and modify the nature and extent of the
parking areas for the Building and Project (including whether such areas shall be
surface, underground and/or other structures) as long as Tenant is provided the number
of parking privileges designated in Section 1.16 of the Summary. In addition,
Landlord may, in its sole discretion, assign any unreserved and unassigned parking
privileges, and/or make all or a portion of such privileges reserved.
	 
	(b)	 	Visitor Parking. In addition to such parking privileges for use by
Tenant’s employees, Landlord shall permit access to the uncovered, unreserved parking
areas for Tenant’s visitors free of charge, subject to availability of spaces.
	 
	(c)	 	Parking Rules. The use of the parking areas shall be subject to the
Parking Rules and Regulations contained in Exhibit “E” attached hereto and any
other reasonable, non-discriminatory rules and regulations adopted by Landlord and/or
Landlord’s parking operators from time to time, including any system for controlled
ingress and egress. Tenant shall not use more parking privileges than its allotment and
shall not use any parking spaces specifically assigned by Landlord to other tenants of
the Building or Project or for such other uses as visitor parking. Tenant’s parking
privileges shall be used only for parking by vehicles no larger than normally sized
passenger automobiles or pick-up trucks. Tenant shall not permit or allow any vehicles
that belong to or are controlled by Tenant or Tenant’s employees, suppliers, shippers,
customers or invitees to be loaded, unloaded, or parked in areas other than those
designated by Landlord for such activities. If Tenant permits or allows any of the
prohibited activities described herein, then Landlord shall have the right, without
notice, in addition to such other rights and
remedies that it may have, to remove or tow away the vehicle involved and charge the
cost thereof to Tenant, which cost shall be immediately payable by Tenant upon demand
by Landlord.
	 
	6.3	 	Signs and Auctions. Tenant shall be entitled, at its sole cost and expense, to
one (1) identification sign on or near the entry doors of the Premises. Such sign shall
be installed by a signage contractor designated by Landlord. The location, quality,
design, style, lighting and size of such signs shall be consistent with the Landlord’s
Building standard signage program and shall be subject to Landlord’s prior written
approval, in its reasonable discretion. Upon the expiration or earlier termination of
this Lease, Tenant shall be responsible, at its sole cost and expense, for the removal
of such signage and the repair of all damage to the Building caused by such removal.
Except for such identification sign, Tenant may not install any signs on the exterior or
roof of the Building or the common areas of the Building or the Project. Any signs,
window coverings, or blinds (even if the same are located behind the Landlord approved
window coverings for the Building), or other items visible from the exterior of the
Premises or Building are subject to the prior approval of Landlord, in its reasonable
discretion. Tenant shall have no right to conduct any auction in, on or about the
Premises, the Building or Site. Tenant shall be entitled to one (1) line on the
Building directory to display Tenant’s name and suite number. Tenant shall also be
entitled to a sign on the Building’s monument, located on the south side of the Project.
Tenant’s logo shall appear on the upper right quadrant of the monument sign.
	 
	6.4	 	Hazardous Materials. Tenant will (i) obtain and maintain in full force and
effect all Environmental Permits (as defined below) that may be required from time to
time under any Environmental Laws (as defined below) applicable to Tenant’s use of the
Premises and (ii) be and remain in compliance in all respects with all terms and
conditions of all such Environmental Permits and with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations, schedules
and timetables contained in all Environmental Laws applicable to Tenant’s use of the
Premises. As used in this Lease, the term “Environmental Law” means any past, present
or future federal, state, local or foreign statutory or common law, or any regulation,
ordinance, code, plan, order, permit, grant, franchise, concession, restriction or
agreement issued, entered, promulgated or approved thereunder, relating to (a) the
environment, human health or safety, including, without limitation, emissions,
discharges, releases or threatened releases of Hazardous Materials (as defined below)
into the environment (including, without limitation, air, surface water, groundwater or
land), or (b) the manufacture, generation, refining, processing, distribution, use,
sale, treatment, receipt, storage, disposal, transport, arranging for transport, or
handling of Hazardous Materials. “Environmental Permits” means, collectively, any and
all permits, consents, licenses, approvals and registrations of any nature at any time
required pursuant to, or in order to comply with, any Environmental Law. Except for
ordinary and general office supplies, such as copier toner, liquid paper, glue, ink and
common household cleaning materials (some or all of which may constitute “Hazardous
Materials” as defined in this Lease), Tenant agrees not to cause or permit any Hazardous
Materials to be brought upon, stored, used, handled, generated, released or disposed of
on, in, under or about the Premises, the Building, the Common Areas or any other portion
of the Project by Tenant, its agents, employees, subtenants, assignees, licensees,
contractors or invitees (collectively, “Tenant’s Parties”), without the prior written
consent of Landlord, which consent Landlord may withhold in its reasonable discretion.
Upon the expiration or earlier termination of this Lease, Tenant agrees to promptly
remove from the Premises, the Building and the Project, at its sole cost and expense,
any and all Hazardous Materials, including any equipment or systems containing Hazardous
Materials which are installed, brought upon, stored, used, generated or released upon,
in, under or about the Premises, the Building and/or the Project or any portion thereof
by Tenant or any of Tenant’s Parties. To the fullest extent permitted by law, Tenant
agrees to promptly indemnify, protect, defend and hold harmless Landlord and Landlord’s
partners, officers, directors, employees, agents, successors and assigns (collectively,
“Landlord Indemnified Parties”) from and against any and all claims, damages, judgments,
suits, causes of action, losses, 

9

 

	 	 	liabilities, penalties, fines, expenses and costs
(including, without limitation, clean-up, removal, remediation and restoration costs,
sums paid in settlement of claims, attorneys’ fees, consultant fees and expert fees and
court costs) which arise or result from the presence of Hazardous Materials on, in,
under or about the Premises, the Building or any other portion of the Project to the
extent caused or permitted by Tenant or any of Tenant’s Parties. Tenant agrees to
promptly notify Landlord of any release of Hazardous Materials in the Premises, the
Building or any other portion of the Project which Tenant becomes aware of during the
Term of this Lease, whether caused by Tenant or any other persons or entities. In the
event of any release of Hazardous Materials caused or permitted by Tenant or any of
Tenant’s Parties, Landlord shall have the right, but not the obligation, to cause
Tenant, at Tenant’s sole cost and expense, to immediately take all steps required under
Environmental Law to remediate such release and prevent any similar future release. At
all times during the Term of this Lease, but not more frequently than once in any twelve
(12) month period, Landlord, at Landlord’s expense, will have the right, but not the
obligation, to enter upon the Premises to inspect, investigate, sample and/or monitor
the Premises to determine if Tenant is in compliance with the terms of this Lease
regarding Hazardous Materials. Tenant will, upon the request of Landlord or any
mortgagee at any time during which Tenant is in default under this Lease, cause to be
performed an environmental audit of the Premises at Tenant’s expense by an established
environmental consulting firm reasonably acceptable to Landlord and Landlord’s
mortgagee(s). As used in this Lease, the term “Hazardous Materials” shall mean and
include any hazardous or toxic materials, substances or wastes as now or hereafter
designated under any Environmental Laws, including, without limitation, asbestos,
petroleum, petroleum hydrocarbons and petroleum based products, urea formaldehyde foam
insulation, polychlorinated biphenyls (“PCBs”), and freon and other chlorofluorocarbons.
The provisions of this Section 6.4 will survive the expiration or earlier
termination of this Lease.

	 	 	Landlord represents to its actual knowledge that, as of the Commencement Date, the
Premises do not contain Hazardous Materials in violation of any applicable Environmental Law.
If the foregoing representation shall prove to be false, Tenant’s sole remedies shall be to
require Landlord to remediate such violation, at Landlord’s expense, and, if Tenant is unable
to use the Premises as a result of such violation, to abate Monthly Basic Rent and Operating
Expenses pursuant to Section 16.4, provided, however that the Eligibility Period
shall not apply with respect to such abatement.

7. Payments and Notices. All rent and other sums payable by Tenant to Landlord
hereunder shall be paid to Landlord at the address designated in Section 1.1 of the
Summary, or to such other persons and/or at such other places as Landlord may hereafter designate
in writing. Any notice required or permitted to be given hereunder must be in writing and may be
given by personal delivery (including delivery by nationally recognized overnight courier or
express mailing service), facsimile transmission sent by a machine capable of confirming
transmission receipt, with a hard copy of such notice delivered no later than one (1) business day
after facsimile transmission by another method specified in this Section 7, or by
registered or certified mail, postage prepaid, return receipt requested, addressed to Tenant at the
address(es) designated in Section 1.2 of the Summary, or to Landlord at the address
designated in Section 1.1 of the Summary. Either party may, by prior written notice to the
other, specify a different address for notice purposes. Notice given in the foregoing manner shall
be deemed given (i) upon confirmed transmission if sent by facsimile transmission, provided such
transmission is prior to 5:00 p.m. on a business day (if such transmission is after 5:00 p.m. on a
business day or is on a non-business day, such notice will be deemed given on the following
business day), (ii) when actually received or refused by the party to whom sent if delivered by a
carrier or personally served or (iii) if mailed, on the day of actual delivery or refusal as shown
by the certified mail return receipt or the expiration of three (3) business days after the day of
mailing, whichever first occurs. For purposes of this Section 7, a “business day” is
Monday through Friday, excluding holidays observed by the United States Postal Service.

8. Brokers. Landlord has entered into an agreement with the real estate broker specified
in Section 1.13 of the Summary as representing Landlord (“Landlord’s Broker “), and
Landlord shall pay any commissions or fees that are payable to Landlord’s Broker with respect to
this Lease in accordance with the provisions of a separate commission contract. Landlord shall
have no further or separate obligation for payment of commissions or fees to any other real estate
broker, finder or intermediary. Tenant represents that it has not had any dealings with any real
estate broker, finder or intermediary with respect to this Lease, other than Landlord’s Broker and
the broker specified in Section 1.13 of the Summary as representing Tenant (“Tenant’s
Broker”). Any commissions or fees payable to Tenant’s Broker with respect to this Lease shall be
paid exclusively by Landlord’s Broker. Each party represents and warrants to the other, that, to
its knowledge, no other broker, agent or finder (a) negotiated or was instrumental in negotiating
or consummating this Lease on its behalf, and (b) is or might be entitled to a commission or
compensation in connection with this Lease. Tenant shall indemnify, protect, defend (by counsel
reasonably approved in writing by Landlord) and hold Landlord harmless from and against any and all
claims, judgments, suits, causes of action, damages, losses, liabilities and expenses (including
attorneys’ fees and court costs) resulting from any breach by Tenant of the foregoing
representation, including, without limitation, any claims that may be asserted against Landlord by
any broker, agent or finder undisclosed by Tenant herein. Landlord shall indemnify, protect,
defend (by counsel reasonably approved in writing by Tenant) and hold Tenant harmless from and
against any and all claims, judgments, suits, causes of action, damages, losses, liabilities and
expenses (including attorneys’ fees and court costs) resulting from any breach by Landlord of the
foregoing representation, including, without limitation, any claims that may be asserted against
Tenant by any broker, agent or finder undisclosed by Landlord herein. The foregoing indemnities
shall survive the expiration or earlier termination of this Lease.

9. Surrender; Holding Over.

	9.1	 	Surrender of Premises. Upon the expiration or sooner termination of this Lease,
Tenant shall surrender all keys for the Premises to Landlord, and exclusive possession
of the Premises to Landlord broom clean and in a condition customary for office space
leased for a similar term and in good repair, reasonable wear and tear and casualty
excepted, with all of Tenant’s personal property (and those items, if any, of Tenant
Improvements and Tenant Changes identified by Landlord pursuant to Section 12.2
below) removed therefrom and all damage caused by such removal repaired, as required
pursuant to Sections 12.2 and 12.3 below. If, for any reason, 

10

 

	 	 	Tenant
fails to surrender the Premises on the expiration or earlier termination of this Lease
(including upon the expiration of any subsequent month-to-month tenancy consented to by
Landlord pursuant to Section 9.2 below), with such removal and repair
obligations completed, then, in addition to the provisions of Section 9.3 below
and Landlord’s rights and remedies under Section 12.4 and the other provisions
of this Lease, Tenant shall indemnify, protect, defend (by counsel approved in writing
by Landlord) and hold Landlord harmless from and against any and all claims, judgments,
suits, causes of action, damages, losses, liabilities and expenses (including attorneys’
fees and court costs) resulting from such failure to surrender, including, without
limitation, any claim made by any succeeding tenant based thereon. The foregoing
indemnity shall survive the expiration or earlier termination of this Lease.

	9.2	 	Hold Over With Landlord’s Consent. If, with or without Landlord’s express
written consent, Tenant remains in possession of the Premises after the expiration or
earlier termination of the Lease Term, Tenant shall become a tenant from month-to-month
upon the terms and conditions set forth in this Lease (including Tenant’s obligation to
pay all Excess Expenses and any other additional rent under this Lease), but at a
Monthly Basic Rent equal to the greater of: (a) one hundred fifty percent (150%) of the
Monthly Basic Rent applicable to the Premises immediately prior to the date of such
expiration or earlier termination; or (b) one hundred fifty percent (150%) of the
prevailing market rate (as reasonably determined by Landlord) for the Premises in effect
on the date of such expiration or earlier termination. Tenant shall pay an entire
month’s Monthly Basic Rent calculated in accordance with this Section 9.2 for
any portion of a month it holds over and remains in possession of the Premises pursuant
to this Section 9.2. This Section 9.2 shall not be construed to create any
expressed or implied right to holdover beyond the expiration of the Lease Term or any
extension thereof.
	 
	9.3	 	No Effect on Landlord’s Rights. The foregoing provisions of this Section
9 are in addition to, and do not affect, Landlord’s right of re-entry or any other
rights of Landlord hereunder or otherwise provided by law or equity.

10. Taxes on Tenant’s Property. Tenant shall be liable for, and shall pay before
delinquency, all taxes and assessments (real and personal) levied against (a) any personal property
or trade fixtures placed by Tenant in or about the Premises (including any increase in the assessed
value of the Premises based upon the value of any such personal property or trade fixtures); and
(b) any Tenant Improvements or alterations in the Premises (whether installed and/or paid for by
Landlord or Tenant) to the extent such items are assessed at a valuation higher than the valuation
at which tenant improvements conforming to the Building’s standard tenant improvements are
assessed. If any such taxes or assessments are levied against Landlord or Landlord’s property,
Landlord may, after written notice to Tenant, pay such taxes and assessments, and Tenant shall
reimburse Landlord therefor within thirty (30) days after demand by Landlord.

11. Condition of Premises; Repairs.

	11.1	 	Condition of Premises. Tenant acknowledges and agrees that it has had an
opportunity to inspect the Premises, the Building, the Site and the Project, and finds
the same in satisfactory condition and repair. Tenant accepts the Premises, the
Building, the Site and the Project in their “then as-is” condition as of the date
hereof, subject to Landlord’s obligations hereunder. Tenant also acknowledges that,
except as otherwise expressly set forth in this Lease, neither Landlord nor any agent of
Landlord has made any representation or warranty with respect to the Premises, the
Building, the Site or the Project or their condition, or with respect to the suitability
thereof for the conduct of Tenant’s business. The taking of possession of the Premises
by Tenant shall conclusively establish that the Project, the Site, the Premises, the
Tenant Improvements therein, the Building and the Common Areas were at such time
complete and in good, sanitary and satisfactory condition and repair with all work
required to be performed by Landlord, if any, pursuant to Exhibit “C” completed
and without any obligation on Landlord’s part to make any alterations, upgrades or
improvements thereto, subject to Landlord’s obligations hereunder (including, but not
limited to, Landlord’s obligations in Section 6 of Exhibit “C”); provided,
however, in the event that, as of the date of Substantial Completion, (A) the Base,
Shell and Core of the Building (as defined in Section 1 of Exhibit “C”), in its
condition existing as of such date without regard to any of the Tenant Improvements,
alterations or other improvements to be constructed or installed by or on behalf of
Tenant in the Premises or Tenant’s specific use of the Premises, but based on an
intended occupancy for general office, does not comply with all applicable laws in
effect as of the Commencement Date (including, without limitation, any Environmental Law
or the Americans with Disabilities Act of 1990), or (B) the Base, Shell and Core or
Tenant Improvements contain latent defects (not caused by Tenant’s acts or omissions),
then Landlord shall be responsible, at its sole cost and expense which shall not be
included in Operating Expenses (except as otherwise permitted in (and not excluded in)
Section 4 hereof), for promptly correcting any such non-compliance to the extent and as
and when required by applicable laws, and/or correcting any such latent defects as soon
as reasonably possible after receiving notice thereof from Tenant.
	 
	11.2	 	Landlord’s Repair Obligations. Subject to Sections 4.4, 18 and
19 of this Lease, Landlord shall, as part of the Operating Expenses, repair,
maintain and replace, as necessary (a) the Building shell and other structural portions
of the Building (including the roof and foundations), (b) the basic heating,
ventilating, air conditioning (“HVAC”), sprinkler, mechanical, plumbing and electrical
systems within the Building core and standard conduits, connections and distribution
systems thereof within the Premises (but not any above standard improvements installed
in the Premises such as, for example, but by way of limitation, custom lighting, special
or supplementary HVAC or plumbing systems or distribution extensions, special or
supplemental electrical panels or distribution systems, or kitchen or restroom
facilities and appliances to the extent such facilities and appliances are intended for
the exclusive use of Tenant), and (c) the Common Areas and exterior glass (including
exterior plate glass); provided, however, to the extent such maintenance, repairs or
replacements are required as a result of any act, neglect, fault or omission of Tenant
or any of Tenant’s agents, employees, contractors, licensees or invitees, Tenant shall
pay to Landlord, as additional rent, the costs of such maintenance, repairs and
replacements. Landlord shall not be liable to Tenant for failure to perform any such
maintenance, repairs or replacements, unless Landlord shall fail to make such
maintenance, repairs or replacements and such failure shall continue for 

11

 

	 	 	an unreasonable
time following written notice from Tenant to Landlord of the need therefor.
Notwithstanding the foregoing, Landlord shall be responsible, as part of the Operating
Expenses for repairing, maintaining and replacing, as necessary, the plumbing in the
kitchen and restroom facilities, provided, however, that if such work is necessary due
to the neglect, fault or omission of Tenant or any of Tenant’s agents, employees,
contractors, licensees or invitees, such work shall be performed at Tenant’s expense and
shall not be included in Operating Expenses. Without limiting the foregoing, Tenant
waives the right to make repairs at Landlord’s expense under any law, statute or
ordinance now or hereafter in effect (including the provisions of California Civil Code
Section 1942 and any successive sections or statutes of a similar nature). Except as
otherwise expressly provided in this Lease, Landlord shall not be liable under any
circumstances for a loss of, or injury to, property or for injury to, or interference
with, Tenant’s business, including, without limitation, loss of profits, however
occurring.

	11.3	 	Tenant’s Repair Obligations. Except for Landlord’s obligations specifically set
forth in Sections 11.1, 11.2, 16.1, 18.1 and
19.2 hereof, Tenant shall at all times and at Tenant’s sole cost and expense,
keep, maintain, clean, repair, preserve and replace, as necessary, the Premises and all
parts thereof including,
without limitation, all Tenant Improvements, Tenant Changes, utility meters, all
special or supplemental HVAC systems, electrical systems, pipes and conduits, located
within the Premises, all fixtures, furniture and equipment, Tenant’s storefront (if
any), Tenant’s signs, locks, closing devices, security devices, windows, window
sashes, casements and frames, floors and floor coverings, shelving, kitchen and/or
restroom facilities and appliances located within the Premises to the extent such
facilities and appliances are intended for the exclusive use of Tenant, if any, custom
lighting, and any alterations, additions and other property located within the
Premises in good condition and repair, reasonable wear and tear and casualty excepted.
Tenant shall replace, at its expense, any and all interior glass in the Premises
which is damaged or broken from any cause whatsoever except due to the gross
negligence or willful misconduct of Landlord, its agents, contractors or employees and
not covered by insurance maintained, or required to be maintained, by Tenant
hereunder. Such maintenance and repairs shall be performed with due diligence,
lien-free and in a good and workmanlike manner, by licensed contractor(s) which are
selected by Tenant and approved by Landlord, which approval Landlord shall not
unreasonably withhold or delay. Except as otherwise expressly provided in this Lease,
Landlord shall have no obligation to alter, remodel, improve, repair, renovate,
redecorate or paint all or any part of the Premises.

12. Alterations.

	12.1	 	Tenant Changes; Conditions. After installation of the initial Tenant
Improvements for the Premises pursuant to Exhibit “C”, Tenant may, at its sole
cost and expense, make alterations, additions, improvements and decorations to the
Premises (collectively, “Tenant Changes”) subject to and upon the following terms and
conditions:
	 
	(a)	 	Notwithstanding any provision in this Section 12 to the contrary, Tenant
is absolutely prohibited from making any alterations, additions, improvements or
decorations which: (i) affect any area outside the Premises; (ii) affect the Building’s
structure, equipment, services or systems, or the proper functioning thereof, or
Landlord’s access thereto; (iii) affect the outside appearance, character or use of the
Project, the Building or the Common Areas; (iv) weaken or impair the structural strength
of the Building; (v) in the reasonable opinion of Landlord, lessen the value of the
Project or Building; or (vi) will violate or require a change in any occupancy
certificate applicable to the Premises.
	 
	(b)	 	Before proceeding with any Tenant Change which is not otherwise prohibited in
Section 12.1(a) above, Tenant must first obtain Landlord’s written approval
thereof (including approval of all plans, specifications and working drawings for such
Tenant Change), which approval shall not be unreasonably withheld. However, Landlord’s
prior approval shall not be required for any Tenant Change which satisfies the following
conditions (hereinafter a “Pre-Approved Change”): (i) the costs of such Tenant Change
does not exceed Ten Thousand Dollars ($10,000) individually; (ii) the costs of such
Tenant Change when aggregated with the costs of all other Tenant Changes made by Tenant
during the Term of this Lease do not exceed Thirty Thousand Dollars ($30,000); (iii)
Tenant delivers to Landlord final plans, specifications and working drawings for such
Tenant Change at least ten (10) days prior to commencement of the work thereof; (iv) the
Tenant Change is not prohibited in Section 12.1(a) above; (v) the Tenant Change
does not require a building permit; and (vi) Tenant and such Tenant Change otherwise
satisfy all other conditions set forth in this Section 12.1.
	 
	(c)	 	After Landlord has approved the Tenant Changes and the plans, specifications and
working drawings therefor (or is deemed to have approved the Pre-Approved Changes as set
forth in Section 12.1(b) above), Tenant shall: (i) enter into an agreement for
the performance of such Tenant Changes with such contractors and subcontractors selected
by Tenant and approved by Landlord, which approval shall not be unreasonably withheld or
delayed; (ii) before proceeding with any Tenant Change (including any Pre-Approved
Change), provide Landlord with ten (10) days’ prior written notice thereof; and (iii)
pay to Landlord, within ten (10) days after written demand, the costs of any increased
insurance premiums incurred by Landlord to include such Tenant Changes in the fire and
extended coverage insurance obtained by Landlord pursuant to Section 21 below,
if Landlord elects in writing to insure such Tenant Changes. Landlord shall not be
required to include the Tenant Changes under such insurance. If such Tenant Changes are
not included in Landlord’s insurance, Tenant shall insure the Tenant Changes under its
casualty insurance pursuant to Section 20.1(a) below. In addition, before
proceeding with any Tenant Change, Tenant’s contractors shall obtain, on behalf of
Tenant and at Tenant’s sole cost and expense: (A) all necessary governmental permits and
approvals for the commencement and completion of such Tenant Change; and (B) security
reasonably satisfactory to Landlord for such Tenant Change. Landlord’s approval of any
contractor(s) and subcontractor(s) of Tenant shall not release Tenant or any such
contractor(s) and/or subcontractor(s) from any liability for any conduct or acts of such
contractor(s) and/or subcontractor(s).

12

 

	(d)	 	Tenant shall pay to Landlord, as additional rent, the reasonable costs of
Landlord’s engineers and other consultants (but not Landlord’s on-site management
personnel) for review of all plans, specifications and working drawings for the Tenant
Changes and for the incorporation of such Tenant Changes in the Landlord’s master
Building drawings, within ten (10) business days after Tenant’s receipt of invoices
either from Landlord or such consultants together with (in any event) an administrative
charge of five percent (5%) of the actual costs of such work.
	 
	(e)	 	All Tenant Changes shall be performed: (i) in accordance with the approved plans,
specifications and working drawings; (ii) lien-free and in a first-class workmanlike
manner; (iii) in compliance with all laws, rules, regulations of all governmental
agencies and authorities including, without limitation, the provisions of Title III of
the Americans with Disabilities Act of 1990; (iv) in such a manner so as not to
interfere with the occupancy of any other tenant in the Project or Building, nor impose any
additional expense upon nor delay Landlord in the maintenance and operation of the
Project or Building; and (v) at such times, in such manner and subject to such rules
and regulations as Landlord may from time to time reasonably designate.
	 
	(f)	 	Throughout the performance of the Tenant Changes, Tenant shall obtain, or cause
its contractors to obtain, workers compensation insurance and general liability
insurance in compliance with the provisions of Section 20 of this Lease.
	 
	12.2	 	Removal of Tenant Changes and Tenant Improvements. All Tenant Changes and the
initial Tenant Improvements in the Premises (whether installed or paid for by Landlord
or Tenant), shall become the property of Landlord and shall remain upon and be
surrendered with the Premises at the end of the Term of this Lease; provided, however,
Landlord may, by written notice delivered to Tenant (i) at the same time as Landlord’s
consent to such Tenant Change is given (if consent is required), (ii) within thirty (30)
days following notice of any Tenant Change for which Landlord’s consent is not required
or (iii) with respect to any Tenant Improvements, at the same time as Landlord approves
the Final Space Plan described in Section 3.2 of Exhibit “C” attached hereto,
require Tenant to remove such Tenant Change or Tenant Improvement, as applicable, at the
end of the Term of this Lease. If Landlord requires Tenant to remove any such items as
described above, Tenant shall, at its sole cost, remove the identified items on or
before the expiration or sooner termination of this Lease and repair any damage to the
Premises caused by such removal (or, at Landlord’s option, shall pay to Landlord all of
Landlord’s costs of such removal and repair).
	 
	12.3	 	Removal of Personal Property. All articles of personal property owned by Tenant
or installed by Tenant at its expense in the Premises (including business and trade
fixtures, furniture and moveable partitions) shall be, and remain, the property of
Tenant, and shall be removed by Tenant from the Premises, at Tenant’s sole cost and
expense, on or before the expiration or sooner termination of this Lease. Tenant shall
promptly repair any damage caused by such removal.
	 
	12.4	 	Tenant’s Failure to Remove. If Tenant fails to remove by the expiration or
sooner termination of this Lease all of its personal property, or any items of Tenant
Improvements or Tenant Changes identified by Landlord for removal pursuant to
Section 12.2 above, or if Tenant fails to comply with its obligations under
Section 12.3, Landlord may, at its option, treat such failure as a hold over
pursuant to Section 9.3 above, and/or may (without liability to Tenant for loss
thereof, at Tenant’s sole cost and in addition to Landlord’s other rights and remedies
under this Lease, at law or in equity: (a) remove and store such items in accordance
with applicable law; and/or (b) upon ten (10) days’ prior notice to Tenant, sell all or
any such items at private or public sale for such price as Landlord may obtain as
permitted under applicable law. Landlord shall apply the proceeds of any such sale to
any amounts due to Landlord under this Lease from Tenant (including Landlord’s
attorneys’ fees and other costs incurred in the removal, storage and/or sale of such
items), with any remainder to be paid to Tenant.

13. Liens. Tenant shall not permit any mechanic’s, materialmen’s or other liens to be
filed against all or any part of the Project, the Site, the Building or the Premises, nor against
Tenant’s leasehold interest in the Premises, by reason of or in connection with any repairs,
alterations, improvements or other work contracted for or undertaken by Tenant or any other act or
omission of Tenant or any Tenant Parties. Tenant shall, at Landlord’s request, provide Landlord
with enforceable, unconditional and final lien releases (and other evidence reasonably requested by
Landlord to demonstrate protection from liens) from all persons furnishing labor and/or materials
with respect to the Premises. Landlord shall have the right at all reasonable times to post on the
Premises and record any notices of non-responsibility which it deems necessary for protection from
such liens. If any such liens are filed, Tenant shall, at its sole cost, cause such lien to be
released of record or bonded to Landlord’s reasonable satisfaction within ten (10) business days of
Tenant’s obtaining knowledge of such a lien, so that the lien no longer affects title to the
Project, the Site, the Building or the Premises. If Tenant fails to cause such lien to be so
released or bonded, Landlord may, without waiving its rights and remedies based on such breach, and
without releasing Tenant from any of its obligations, cause such lien to be released by any means
it shall deem proper, including payment in satisfaction of the claim giving rise to such lien.
Tenant shall pay to Landlord within five (5) days after receipt of invoice from Landlord, any sum
paid by Landlord to remove such liens, together with interest at the Interest Rate from the date of
such payment by Landlord. NOTICE IS HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY LABOR,
SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT, OR TO ANYONE HOLDING THE PREMISES
THROUGH OR UNDER TENANT, AND THAT NO MECHANICS’ OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR
MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN THE PREMISES.

14. Assignment and Subletting.

	14.1	 	Restriction on Transfer. Except as otherwise expressly provided in this
Section 14, Tenant shall not, without the prior written consent of Landlord,
which consent Landlord will not unreasonably withhold, condition or delay, assign this
Lease or any interest herein or sublet the Premises or any part thereof, or permit the
use or occupancy 

13

 

	 	 	of the Premises by any party other than Tenant (any such assignment,
encumbrance, sublease, license or the like shall sometimes be referred to as a
“Transfer”). In no event may Tenant encumber or hypothecate this Lease. Any Transfer
without Landlord’s consent (except for a Permitted Transfer pursuant to Section
14.2 below) shall constitute a default by Tenant under this Lease, without the
benefit of any additional notice or cure period specified in Section 23.1 below,
and in addition to all of Landlord’s other remedies at law, in equity or under this
Lease, such Transfer shall be voidable at Landlord’s election. In addition, this Lease
shall not, nor shall any interest of Tenant herein, be assignable by operation of law
without the written consent of Landlord, which consent shall not be unreasonably
withheld, conditioned or delayed. For purposes of this Section 14, other than
with respect
to a Permitted Transfer under Section 14.2 and transfers of stock of Tenant if
Tenant is a publicly-held corporation and such stock is transferred publicly over a
recognized security exchange or over-the-counter market, if Tenant is a corporation,
partnership or other entity, any direct or indirect transfer, assignment, encumbrance
or hypothecation of fifty percent (50%) or more (individually or in the aggregate) of
any stock or other ownership interest in such entity, and/or any transfer, assignment,
hypothecation or encumbrance of any controlling ownership or voting interest in such
entity, shall be deemed a Transfer and shall be subject to all of the restrictions and
provisions contained in this Section 14.

	14.2	 	Permitted Controlled Transfers. Notwithstanding the provisions of Section
14.1 above to the contrary, Tenant may assign this Lease or sublet the Premises or
any portion thereof (herein, a “Permitted Transfer”), without Landlord’s consent and
without extending any sublease or termination option to Landlord, to any entity which
controls, is controlled by or is under common control with Tenant, or to any entity
resulting from a merger or consolidation with Tenant, or to any person or entity which
acquires substantially all the assets of Tenant’s business as a going concern, provided
that: (a) at least twenty (20) days prior to such assignment or sublease, Tenant
delivers to Landlord the financial statements and other financial and background
information of the assignee or sublessee described in Section 14.3 below; (b) if
an assignment, the assignee assumes, in full, the obligations of Tenant under this Lease
(or if a sublease, the sublessee of a portion of the Premises or Term assumes, in full,
the obligations of Tenant with respect to such portion); (c) if an assignment, the
financial net worth of the assignee or sublessee equals or exceeds that of Tenant as of
the date of execution of this Lease; (d) Tenant remains fully liable under this Lease;
(e) the use of the Premises under Section 6 remains unchanged; and (f) such
transaction is not entered into as a subterfuge to avoid the restrictions and provisions
of this Lease.
	 
	14.3	 	Landlord’s Options. If at any time or from time to time during the Term Tenant
desires to effect a Transfer (other than a Permitted Transfer), Tenant shall deliver to
Landlord, at least thirty (30) days prior to the date Tenant desires the Transfer to be
effective (“Transfer Date”), written notice (“Transfer Notice”) setting forth the
Transfer Date, the terms and provisions of the proposed Transfer, the identity of the
proposed assignee, sublessee or other transferee (sometimes referred to hereinafter as a
“Transferee”), and any ownership or commercial relationship between Tenant and the
proposed Transferee. Tenant shall also deliver to Landlord with the Transfer Notice, a
current financial statement and financial statements for the preceding two (2) years of
the Transferee which (i) with respect to any assignee or sublessee proposing to sublease
more than one half (1/2) of the rentable square footage in the Premises, have been
certified or audited by a reputable independent accounting firm acceptable to Landlord,
or (ii) with respect to any sublessee proposing to sublease less than one half (1/2) of
the rentable square footage of the Premises, have been certified or audited by a
reputable independent accounting firm acceptable to Landlord if such financial
statements are available, otherwise which have been certified by such sublessee’s chief
financial officer or equivalent officer, and in any event such other information
concerning the business background and financial condition of the proposed Transferee as
Landlord may reasonably request. Except with respect to a Permitted Transfer, Landlord
shall have the option, exercisable by written notice delivered to Tenant within thirty
(30) days after Landlord’s receipt of the Transfer Notice, such financial statements and
other information requested by Landlord, either to:
	 
	(a)	 	approve or disapprove such Transfer, which approval shall not be unreasonably
withheld, conditioned or delayed; or
	 
	(b)	 	sublet from Tenant that portion of the Premises which Tenant has requested to
sublease at the rental and on the other terms set forth in this Lease prorated for the
portion of the Premises to be sublet and for the term set forth in Tenant’s Notice, or,
in the case of an assignment or encumbrance, terminate this Lease with respect to the
entire Premises and recapture the Premises, which termination shall be effective as set
forth in Landlord’s notice.

If Landlord exercises its option to sublease any such space from Tenant following Tenant’s
request for Landlord’s approval of the proposed sublease of such space, (i) Landlord shall be
responsible for the construction of any partitions which Landlord reasonably deems necessary to
separate such space from the remainder of the Premises, and (ii) Landlord and any sub-subtenant or
assignee of Landlord with respect to such subleased space shall have the right to use in common
with Tenant all lavatories, corridors and lobbies which are within the Premises and which are
reasonably required for the use of such space. Landlord may sub-sublease such space or lease the
Premises to any person, including, without limitation, Tenant’s proposed sublessee or assignee.

	14.4	 	Additional Conditions; Excess Rent. If for a Transfer other than a Permitted
Transfer Landlord does not exercise its sublease or termination option and instead
approves of the proposed Transfer pursuant to Section 14.3(a) above, Tenant may
enter into the proposed Transfer with such proposed Transferee subject to the following
further conditions:
	 
	(a)	 	the Transfer shall be on the same terms set forth in the Transfer Notice
delivered to Landlord (if the terms have changed, Tenant must submit a revised Transfer
Notice to Landlord and Landlord shall have another twenty (20) days after receipt
thereof to make the election in Sections 14.3(a) or 14.3(b) above);

14

 

	(b)	 	no Transfer shall be valid and no Transferee shall take possession of the
Premises until an executed counterpart of the assignment, sublease or other instrument
affecting the Transfer has been delivered to Landlord pursuant to which the Transferee
shall expressly assume all of Tenant’s obligations under this Lease (or with respect to
a sublease of a portion of the Premises or for a portion of the Term, all of
Tenant’s obligations applicable to such portion) and the Transferee shall have
executed Landlord’s standard form of consent;
	 
	(c)	 	no Transferee shall have a further right to assign, encumber or sublet, except on
the terms herein contained; and
	 
	(d)	 	fifty percent (50%) of any rent or other economic consideration received by
Tenant as a result of such Transfer which exceeds, in the aggregate, (i) the total rent
which Tenant is obligated to pay Landlord under this Lease (prorated to reflect
obligations allocable to any portion of the Premises subleased, but excluding any
amortized tenant improvement costs, if any), (ii) any reasonable brokerage commissions,
attorneys’ fees, and moving costs actually paid by Tenant in connection with such
Transfer, and (iii) the actual, reasonable, out-of-pocket costs of any improvements to
the Premises (subject to Section 12 of this Lease) and/or any space planning,
architectural or design fees or marketing costs incurred by Tenant in connection with
such Transfer, provided that such costs shall be amortized over the remaining Lease Term
if such Transfer is an assignment or, if such Transfer is a sublease, over the term of
such sublease, shall be paid to Landlord within ten (10) days after receipt thereof as
additional rental under this Lease, without affecting or reducing any other obligations
of Tenant hereunder. Notwithstanding the foregoing, if and to the extent Tenant
subleases any portion of the Premises in accordance with this Section 14 during
the period that Monthly Basic Rent hereunder is abated with respect to 8,000 rentable
square feet of the 12481 Premises as set forth in Section 1.8 of the Summary
(i.e., the period between the Commencement Date and January 31, 2007), the excess rent
payable during such period to Landlord pursuant to this paragraph shall be calculated
based on the Monthly Basic Rent payable immediately following such period for the full
rentable square footage of the 12481 Premises.
	 
	14.5	 	Reasonable Disapproval. Landlord and Tenant hereby acknowledge that Landlord’s
approval of any proposed Transfer (other than a Permitted Transfer) pursuant to
Section 14.3(a) shall be deemed reasonably withheld if based upon any reasonable
factor, including, without limitation, any or all of the following factors: (a) the
proposed Transfer would result in more than two subleases of portions of the Premises
being in effect at any one time during the Term; (b) the net effective rent payable by
the Transferee (adjusted on a rentable square foot basis) is less than 82% of the net
effective rent then being paid by Tenant (unless competing space of comparable size, as
reasonably determined by Landlord, is then available for lease in the Building, in which
case Landlord’s approval shall be deemed reasonably withheld if the net effective rent
payable by the Transferee (adjusted on a rentable square foot basis) is less than the
net effective rent being quoted by Landlord for new leases in the Building for
comparable size space for a comparable period of time; (c) the proposed Transferee is an
existing tenant of the Project or is negotiating with Landlord (or has negotiated with
Landlord in the last six (6) months) for space in the Project; (d) the proposed
Transferee is a governmental entity; (e) the portion of the Premises to be sublet or
assigned is irregular in shape with inadequate means of ingress and egress; (f) the use
of the Premises by the Transferee (i) is not permitted by the use provisions in
Section 6 hereof, or (ii) violates any exclusive use granted by Landlord to
another tenant in the Building; (g) the Transfer would likely result in significant
increase in the use of the parking areas or Common Areas by the Transferee’s employees
or visitors, and/or significantly increase the demand upon utilities and services to be
provided by Landlord to the Premises; (h) the Transferee does not have the financial
capability to fulfill the obligations imposed by the Transfer; or (i) the Transferee is
not in Landlord’s reasonable opinion of reputable or good character or consistent with
Landlord’s desired tenant mix. Notwithstanding any contrary provision of this Lease, if
Tenant or any proposed Transferee claims that Landlord has unreasonably withheld or
delayed its consent to a proposed Transfer or otherwise has breached its obligations
under this Section 14, Tenant’s and such Transferee’s only remedy shall be to
seek a declaratory judgment and/or injunctive relief, and Tenant, on behalf of itself
and, to the extent permitted by law, such proposed Transferee waives all other remedies
against Landlord, including, without limitation, the right to seek monetary damages or
to terminate this Lease. Landlord and Tenant hereby acknowledge that Tenant intends to
sublease a portion of the 12481 Premises consisting of no more than 8,000 rentable
square feet commencing on or near the Commencement Date, which sublease (the “Initial
Sublease”) shall be subject to the terms and conditions of this Section 14 and
any other provision of this Lease relating to subleases and transfers. Notwithstanding
clause (b) of this Section 14.5, however, but subject to the other
provisions of this Section 14.5, Landlord’s consent to such Initial Sublease
shall be deemed reasonably withheld if the net effective rent payable by the sublessee
under such Initial Sublease is less than 82% of the net effective rent being paid by
Tenant at the time such Initial Sublease is executed, whether or not competing space (as
described in clause (b)) is then available for lease in the Building.
	 
	14.6	 	No Release. No Transfer shall release Tenant of Tenant’s obligations under this
Lease or alter the primary liability of Tenant to pay the rent and to perform all other
obligations to be performed by Tenant hereunder. Landlord may require that, during any
period of default (beyond applicable notice and cure periods) by Tenant, any Transferee
remit directly to Landlord on a monthly basis, all monies due Tenant by said Transferee,
and each sublease shall provide that if Landlord gives said sublessee written notice
that Tenant is in default under this Lease, said sublessee will thereafter make all
payments due under the sublease directly to or as directed by Landlord, which payments
will be credited against any payments due under this Lease. Tenant hereby irrevocably
and unconditionally assigns to Landlord all rents and other sums payable under any
sublease of the Premises; provided, however, that Landlord hereby grants Tenant a
license to collect all such rents and other sums so long as Tenant is not in default
under this Lease. Tenant shall, within ten (10) days after the execution and delivery
of any assignment or sublease, deliver a duplicate original copy there of to Landlord.
However, the acceptance of rent by Landlord from any other person shall not be deemed to
be a waiver by Landlord of any provision hereof. Consent by
Landlord to one Transfer shall not be deemed consent to any subsequent Transfer. In
the event of default by any Transferee of Tenant or any successor of Tenant in the
performance of any of the terms hereof, Landlord may proceed directly against Tenant
without the necessity of exhausting remedies against 

15

 

	 	 	such Transferee or successor.
Landlord may consent to subsequent assignments of the Lease or sublettings or
amendments or modifications to the Lease with assignees of Tenant, without notifying
Tenant, or any successor of Tenant, and without obtaining its or their consent thereto
and any such actions shall not relieve Tenant of liability under this Lease.

	14.7	 	Administrative and Attorneys’ Fees. If Tenant effects a Transfer or requests the
consent of Landlord to any Transfer, then Tenant shall, upon demand, pay any reasonable
attorneys’ and paralegal fees and costs (not to exceed $2,000) incurred by Landlord in
connection with such Transfer or request for consent (whether attributable to Landlord’s
in-house attorneys or paralegals or otherwise). Acceptance of the reimbursement of
Landlord’s attorneys’ and paralegal fees shall in no event obligate Landlord to consent
to any proposed Transfer.
	 
	14.8	 	Material Inducement. Tenant understands, acknowledges and agrees that (a)
Landlord’s option to sublease from Tenant any space which Tenant proposes to sublease or
terminate this Lease upon any proposed assignment or encumbrance of this Lease by Tenant
as provided in Section 14.3(b) above rather than approve the proposed sublease,
assignment or encumbrance, and (b) Landlord’s right to receive any excess consideration
paid by a Transferee in connection with an approved Transfer as provided in Section
14.4(d) above, are a material inducement for Landlord’s agreement to lease the
Premises to Tenant upon the terms and conditions herein set forth.

15. Entry by Landlord. Landlord and its employees and agents shall at all reasonable times
have the right to enter the Premises to inspect the same, to supply janitorial service and any
other service required to be provided by Landlord to Tenant under this Lease, to exhibit the
Premises to prospective lenders or purchasers (or during the last six (6) months of the Term, to
prospective tenants), to post notices of non-responsibility, and/or to alter, improve or repair the
Premises or any other portion of the Building or Project, all without being deemed guilty of or
liable for any breach of Landlord’s covenant of quiet enjoyment or any eviction of Tenant, and
without abatement of rent. In exercising such entry rights, Landlord shall use good faith,
commercially reasonable efforts to comply with Tenant’s reasonable security and confidentiality
requirements (which may include having such person escorted by an employee of Tenant and/or having
such person execute Tenant’s non-disclosure/confidentiality agreement) and to minimize, as
reasonably practicable, the interference with Tenant’s business, and shall provide Tenant with at
least 24 hours’ advance written notice of such entry (except in emergency situations and for
scheduled services). For each of the foregoing purposes, Landlord shall at all times have and
retain a key with which to unlock all of the doors in, upon and about the Premises, excluding
Tenant’s vaults, secure storage rooms, office furnishings (including file cabinets and document
storage systems) and safes, and Landlord shall have the means which Landlord may deem proper to
open said doors in an emergency in order to obtain entry to the Premises. Any entry to the
Premises obtained by Landlord by any of said means or otherwise shall not under any circumstances
be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or
an eviction of Tenant from the Premises or any portion thereof, or grounds for any abatement or
reduction of rent and Landlord shall not have any liability to Tenant for any damages or losses on
account of any such entry by Landlord except, subject to the provisions of Section 22.1, to
the extent of Landlord’s gross negligence or willful misconduct.

16. Utilities and Services.

	16.1	 	Standard Utilities and Services. Subject to the terms and conditions of this
Lease and the obligations of Tenant as set forth hereinbelow, and so long as the Lease
has not been terminated due to an uncured default by Tenant under the Lease, Landlord
shall furnish or cause to be furnished to the Premises the following utilities and
services, the costs of which shall be included in Operating Expenses, unless otherwise
specified below:
	 
	(a)	 	Landlord shall make the elevator of the Building available for Tenant’s
non-exclusive use, twenty-four (24) hours per day, seven (7) days per week.
	 
	(b)	 	Landlord shall furnish during the Business Hours for the Building specified in
Section 1.17 of the Summary, heating, ventilation and air conditioning (“HVAC”)
for the Premises as required in Landlord’s judgment for the comfortable and normal
occupancy of the Premises. The cost of maintenance and service calls to adjust and
regulate the HVAC system shall be charged to Tenant if the need for maintenance work
results from either Tenant’s adjustment of room thermostats or Tenant’s failure to
comply with its obligations under this Section 16, including keeping window
coverings closed as needed. Such work shall be charged at hourly rates equal to
then-current journeyman’s wages for HVAC mechanics. If Tenant desires HVAC at any time
other than during the Business Hours for the Building, Landlord shall provide such
“after-hours” usage after advance reasonable request by Tenant, and Tenant shall pay to
Landlord, as additional rent (and not as part of the Operating Expenses) the actual
cost, as fairly determined by Landlord, of such after-hours usage (as well as the cost
of any HVAC used by Tenant in excess of standard usage for the Building), including any
minimum hour charges for after-hours requests and any special start-up costs for
after-hours services which requires a special start-up (such as late evenings, weekends
and holidays) together with an administrative fee of ten percent (10%) of the cost of
such after-hours usage, which administrative fee shall also be payable by Tenant to
Landlord for the cost of any other services provided by Landlord to Tenant that are not
otherwise required to be provided by Landlord to Tenant hereunder. Landlord’s “cost”
for such after-hours usage shall be based on Landlord’s actual direct utility costs,
plus Landlord’s other direct costs. Landlord agrees that such hourly rate shall be
established at an amount which will reimburse Landlord for the actual cost to Landlord
to supply the service, but without a profit to Landlord.
	 
	(c)	 	Landlord shall furnish janitorial services to the Premises five (5) days per week
pursuant to janitorial and cleaning specifications as may be adopted by Landlord from
time to time. No person(s) other than those persons approved by Landlord shall be
permitted to enter the Premises for such purposes. Janitorial service shall include
ordinary dusting and cleaning by the janitor assigned to do such work and shall not
include cleaning of carpets or rugs, except normal vacuuming, or moving of furniture,
interior window cleaning, coffee or eating area cleaning and other special services.
Such additional services may be rendered by Landlord pursuant to written agreement 

16

 

	 	 	with
Tenant as to the extent of such services and the payment of the cost thereof.
Janitorial service will not be furnished to rooms that are occupied after 7:30 p.m. or
to rooms which are locked unless a key is furnished to the Landlord for use by the
janitorial contractor. Window cleaning shall be done only by Landlord, at such time and
frequency as determined by Landlord in Landlord’s reasonable discretion, but otherwise
consistent with other first-class office buildings in the Carmel Valley area of San
Diego. Tenant shall pay to Landlord the cost of removal of any of Tenant’s refuse and
rubbish to the extent that the same exceeds the refuse and rubbish usually attendant
upon the use of the Premises as offices.

	(d)	 	Landlord may, in Landlord’s sole discretion, provide security service or
protection in the Building and/or the Project, in any manner deemed reasonable by
Landlord at Landlord’s sole discretion, from the Commencement Date throughout the Term.
	 
	(e)	 	At Landlord’s option and at Landlord’s sole expense, Landlord may install water,
electricity and/or HVAC meters in the Premises to measure Tenant’s consumption of such
utilities, including any after-hours and extraordinary usage described above.
	 
	16.2	 	Tenant’s Obligations. Tenant shall control and be separately metered for the
electricity, gas, water, and telephone service for the Premises or other services which
are metered (collectively, the “Electricity Utility Charges”) to the Premises, at
Tenant’s sole cost and expense. Tenant shall make all such payments directly to the
utility provider as and when bills are rendered. Should Tenant fail to pay such
amounts, Landlord shall have the right to pay the same on Tenant’s behalf and Tenant
shall reimburse Landlord for all costs and expenses incurred by Landlord in conjunction
with such payment within ten (10) days after demand therefor. All such costs and
expenses incurred by Landlord on Tenant’s behalf shall be deemed additional rent payable
by Tenant and collectible by Landlord as such. At no time shall use of electricity in
the Premises exceed the capacity of existing feeders and risers to or wiring in the
Premises. Any risers or wiring to meet Tenant’s excess electrical requirements shall,
upon Tenant’s written request, be installed by Landlord, at Tenant’s sole cost, if, in
Landlord’s reasonable judgment, the same are necessary and shall not (i) cause permanent
damage or injury to the Project, the Building or the Premises, (ii) cause or create a
dangerous or hazardous condition, (iii) entail excessive or unreasonable alterations,
repairs or expenses, or (iv) interfere with or disturb other tenants or occupants of the
Building. Tenant shall cooperate fully at all times with Landlord, and abide by all
reasonable regulations and requirements which Landlord may prescribe for the proper
functioning and protection of the Building’s services and systems. Tenant shall not use
any apparatus or device in, upon or about the Premises which may in any way increase the
amount of services or utilities usually furnished or supplied to the Premises or other
premises in the Building. In addition, except for Tenant Changes permitted under
Section 12, Tenant shall not connect any conduit, pipe, apparatus or other
device to the Building’s water, waste or other supply lines or systems for any purpose.
Except for Tenant Changes permitted under Section 12, neither Tenant nor its
employees, agents, contractors, licensees or invitees shall at any time enter, adjust,
tamper with, touch or otherwise in any manner affect the mechanical installations or
facilities of the Building.
	 
	16.3	 	Failure to Provide Services. Landlord’s failure to furnish or delay in
furnishing any of the services described in Section 16.1 above when such failure
is caused by all or any of the following shall not result in any liability of Landlord:
(a) casualty, accident, breakage or repairs; (b) acts of terrorism, strikes, lockouts or
other labor disturbances or labor disputes of any such character; (c) governmental
regulation, moratorium or other governmental action; (d) inability, despite the exercise
of reasonable diligence, to obtain electricity, water or fuel, including due to
shortages, blackouts or any other cause; or (e) any other cause beyond Landlord’s
reasonable control. In addition, in the event of the failure of any said utilities or
services, Tenant shall not be entitled to any abatement or reduction of rent (except as
expressly provided in Sections 18.3 and 19.2 if such failure is a result
of a damage or taking described therein), no eviction of Tenant shall result, and Tenant
shall not be relieved from the performance of any covenant or agreement in this Lease.
Furthermore, Landlord shall not be liable under any circumstances for a loss of, or
injury to, property or for injury to, or interference with, Tenant’s business,
including, without limitation, loss of profits, however occurring, through or in
connection with or incidental to a failure to furnish any of the services as set forth
in this Section 16. In the event of any stoppage or interruption of services or
utilities, Landlord shall diligently attempt to resume such services or utilities as
promptly as practicable. Tenant hereby waives the provisions of California Civil Code
Section 1932(1) or any other applicable existing or future law, ordinance or
governmental regulation permitting the termination of this Lease due to an interruption,
failure or inability to provide any services.
	 
	16.4	 	Abatement of Rent When Tenant Is Prevented From Using Premises. In the event
that Tenant is prevented from using, and does not use, the Premises or any portion
thereof, for five (5) consecutive business days (the “Eligibility Period”) as a result
of (i) any repair, maintenance or alteration performed by Landlord after the
Commencement Date, or (ii) any failure to provide to the Premises any of the essential
utilities and services required to be provided in Sections 16.1(a),
16.1(b) or 16.1(c) above, (iii) any failure to provide access to the
Premises, or (iv) Landlord’s exercise of its rights in Section 4.1 of this
Lease, then Tenant’s obligation to pay Monthly Basic Rent and Operating Expenses shall
be abated or reduced,
as the case may be, from and after the first (1st) day following the Eligibility
Period and continuing until such time that Tenant continues to be so prevented from
using, and does not use, the Premises or a portion thereof, in the proportion that the
rentable square feet of the portion of the Premises that Tenant is prevented from
using, and does not use, bears to the total rentable square feet of the Premises;
provided, however, that Tenant shall only be entitled to such abatement of rent if the
matter described in clauses (i), (ii), (iii) or (iv) of this sentence is caused by
Landlord’s gross negligence or willful misconduct. To the extent Tenant shall be
entitled to abatement of rent because of a damage or destruction pursuant to
Section 18 or a taking pursuant to Section 19, then the Eligibility
Period shall not be applicable

17

 

17. Indemnification and Exculpation.

	17.1	 	Tenant’s Assumption of Risk and Waiver. Except to the extent such matter is not
covered by the insurance required to be maintained by Tenant under this Lease and such
matter is attributable to the gross negligence or willful misconduct of Landlord,
Landlord shall not be liable to Tenant, Tenant’s employees, agents or invitees for: (i)
any damage to property of Tenant, or of others, located in, on or about the Premises,
nor for (ii) the loss of or damage to any property of Tenant or of others by theft or
otherwise, (iii) any injury or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water, rain or leaks from any part
of the Premises or from the pipes, plumbing works or from the roof, street or subsurface
or from any other places or by dampness or by any other cause of whatsoever nature, or
(iv) any such damage caused by other tenants or persons in the Project, occupants of
adjacent property of the Project, or the public, or caused by operations in construction
of any private, public or quasi-public work. Landlord shall in no event be liable to
Tenant for any consequential damages or for loss of revenue or income and Tenant waives
any and all claims for any such damages. Notwithstanding anything to the contrary
contained in this Section 17.1, all property of Tenant, its agents, employees
and invitees kept or stored on the Premises, whether leased or owned by any such
parties, shall be so kept or stored at the sole risk of Tenant and Tenant shall hold
Landlord harmless from any claims arising out of damage to the same, including
subrogation claims by Tenant’s insurance carriers.
	 
	17.2	 	Tenant’s Indemnification of Landlord. Tenant shall be liable for, and shall
indemnify, defend, protect and hold Landlord and Landlord’s partners, officers,
directors, employees, agents, property manager, successors and assigns (collectively,
“Landlord Indemnified Parties”) harmless from and against, any and all claims, damages,
judgments, suits, causes of action, losses, liabilities and expenses, including
attorneys’ fees and court costs (collectively, “Indemnified Claims”), to the extent
arising or resulting from (a) any occurrence at the Premises, unless caused by the gross
negligence or willful misconduct of Landlord or its agents, employees or contractors and
not covered by the insurance required to be maintained by Tenant under this Lease, (b)
any act or omission of Tenant or any of Tenant’s agents, employees, contractors,
subtenants, assignees, licensees or invitees (collectively, “Tenant Parties”); (c) the
use of the Premises and Common Areas and conduct of Tenant’s business by Tenant or any
Tenant Parties, or any other activity, work or thing done, permitted or suffered by
Tenant or any Tenant Parties, in or about the Premises, the Building or elsewhere on the
Project; and/or (d) any default by Tenant of any obligations on Tenant’s part to be
performed under the terms of this Lease or the terms of any contract or agreement to
which Tenant is a party or by which it is bound, affecting this Lease or the Premises.
The foregoing indemnification shall include, but not be limited to, any injury to, or
death of, any person, or any loss of, or damage to, any property on the Premises, or on
adjoining sidewalks, streets or ways, or connected with the use, condition or occupancy
thereof, whether or not Landlord or its mortgagee has or should have knowledge or notice
of the defect or conditions causing or contributing to such injury, death, loss or
damage. In case any action or proceeding is brought against Landlord or any Landlord
Indemnified Parties by reason of any such Indemnified Claims, Tenant, upon notice from
Landlord, shall defend the same at Tenant’s expense by counsel approved in writing by
Landlord, which approval shall not be unreasonably withheld. Notwithstanding anything
in this Lease to the contrary, Tenant shall in no event be liable to any Landlord
Indemnified Party for any consequential or incidental damages or for loss of revenue,
and Landlord, for itself waives and shall cause the other Landlord Indemnified Parties
to waive, any and all claims for any such damages.
	 
	17.3	 	Reciprocal Indemnity. Notwithstanding any provisions of Lease Sections
17.1 and 17.2 to the contrary, Tenant shall not be required to indemnify and
hold Landlord harmless from any Indemnified Claims to any person, property or entity
resulting from the gross negligence or willful misconduct of Landlord or its agents,
contractors, servants, employees or licensees in connection with Landlord’s activities
in the Building (except for damage to the Tenant Improvements and Tenant’s personal
property, fixtures, furniture and equipment in the Premises, to the extent Tenant is
required to obtain the requisite insurance coverage pursuant to the Lease) or the Site.
Landlord shall indemnify and hold Tenant harmless from any such Indemnified Claims (but
not including any loss of business, loss of profits or other consequential damages);
provided, however, to the extent any damage or repair obligation is covered by insurance
obtained by Landlord as part of Operating Expenses, but is not covered by insurance
obtained by Tenant, then Tenant shall be relieved of its indemnity obligation up to the
amount of the insurance proceeds which Landlord is entitled to receive.
	 
	17.4	 	Survival; No Release of Insurers. The indemnification obligations under
Section 17.2 and Section 17.3 shall survive the expiration or earlier
termination of this Lease. The covenants, agreements and indemnification in
Sections 17.1, 17.2 and 17.3 above are not intended to and shall
not relieve any insurance carrier of its obligations under policies required to be
carried by Tenant or Landlord, as applicable, pursuant to the provisions of this Lease
to the extent that such policies cover the results of such acts, omissions or willful
misconduct.

18. Damage or Destruction.

	18.1	 	Landlord’s Rights and Obligations. In the event the Premises or any part of the
Building is damaged by fire or other casualty to an extent not exceeding twenty-five
percent (25%) of the full replacement cost thereof, and Landlord’s contractor estimates
in a writing delivered to the parties that the damage thereto is such that the Building
and/or Premises may be repaired, reconstructed or restored to substantially its
condition immediately prior to such damage within two hundred seventy (270) days from
the date of such casualty, and Landlord will receive insurance proceeds sufficient to
cover the costs of such repairs, reconstruction and restoration (including proceeds from
Tenant and/or Tenant’s insurance which Tenant is required to deliver to Landlord
pursuant to Section 18.2 below), then Landlord shall commence and proceed
diligently with the work of repair, reconstruction and restoration and this Lease shall
continue in full force and effect. If, however, the Premises or any other part of the
Building is damaged to an extent exceeding twenty-five percent (25%) of the full
replacement cost thereof, or Landlord’s contractor estimates that such work of repair,
reconstruction and restoration will require longer than two hundred seventy (270) days
to complete, or Landlord will not receive insurance proceeds (and/or proceeds 

18

 

	 	 	from
Tenant, as applicable) sufficient to cover the costs of such repairs, reconstruction and
restoration, then Landlord may elect to either:

	(a)	 	repair, reconstruct and restore the portion of the Building and Premises damaged
by such casualty (including the, to the extent of insurance proceeds received from
Tenant, the Tenant Improvements and the Tenant Changes), in which case this Lease shall
continue in full force and effect; or
	 
	(b)	 	terminate this Lease effective as of the date which is thirty (30) days after
Tenant’s receipt of Landlord’s election to so terminate.

Under any of the conditions of this Section 18.1, Landlord shall give written notice
to Tenant of its intention to repair or terminate within the later of sixty (60) days after the
occurrence of such casualty, or fifteen (15) days after Landlord’s receipt of said estimate from
Landlord’s contractor.

	18.2	 	Abatement of Rent. In the event that as a result of any such damage, repair,
reconstruction and/or restoration of the Premises or the Building, Tenant is prevented
from using, and does not use, the Premises or any portion thereof, then the Monthly
Basic Rent and Excess Expenses shall be abated or reduced, as the case may be, during
the period that Tenant continues to be so prevented from using and does not use the
Premises or portion thereof, in the proportion that the rentable square feet of the
portion of the Premises that Tenant is prevented from using, and does not use, bears to
the total rentable square feet of the Premises. Notwithstanding the foregoing to the
contrary, if the damage is due to the gross negligence or willful misconduct of Tenant
or any Tenant Parties, there shall be no abatement of Monthly Basic Rent or Excess
Expenses. Except for abatement of Monthly Basic Rent and Excess Expenses as provided
hereinabove, Tenant shall not be entitled to any compensation or damages for loss of, or
interference with, Tenant’s business or use or access of all or any part of the Premises
resulting from any such damage, repair, reconstruction or restoration.
	 
	18.3	 	Inability to Complete. Notwithstanding anything to the contrary contained in
this Section 18, in the event Landlord is obligated or elects to repair,
reconstruct and/or restore the damaged portion of the Building or Premises pursuant to
Section 18.1 above, but is delayed from completing such repair, reconstruction
and/or restoration beyond the date which is three (3) months after the date estimated by
Landlord’s contractor for completion thereof pursuant to Section 18.1, by reason
of any causes beyond the reasonable control of Landlord (including, without limitation,
delays due to Force Majeure events as defined in Section 32.15, and delays
caused by Tenant or any Tenant Parties), then Landlord or Tenant may elect to terminate
this Lease upon thirty (30) days’ prior written notice to Tenant.
	 
	18.4	 	Damage Near End of Term. In addition to its termination rights in Sections
18.1 and 18.4 above, Landlord and Tenant shall have the right to terminate
this Lease if any damage to the Building or Premises occurs during the last twelve (12)
months of the Term of this Lease and Landlord’s contractor estimates in a writing
delivered to the parties that the repair, reconstruction or restoration of such damage
cannot be completed within the earlier of (a) the scheduled expiration date of the Lease
Term, or (b) one hundred twenty (120) days after the date of such casualty.
	 
	18.5	 	Tenant’s Termination Right. In addition to any other right of termination which
Tenant may have under this Section 18, if the Premises or the Building is
damaged to an extent that Landlord’s contractor estimates that such work of repair,
reconstruction and restoration will require longer than two hundred seventy (270) days
to complete such that Tenant can make full use of the Premises as contemplated under
this Lease, then, regardless of whether Landlord elects to repair the Premises, Tenant
shall have the right to terminate this Lease by notice delivered to Landlord within
thirty (30) days of Tenant’s receipt of the notice from Landlord described in the last
sentence of Section 18.1, which termination shall be effective as of the date
which is thirty (30) days after Landlord’s receipt of Tenant’s election to so terminate.
	 
	18.6	 	Waiver of Termination Rights. This Lease sets forth the terms and conditions
upon which this Lease may terminate in the event of any damage or destruction.
Accordingly, the parties hereby waive the provisions of California Civil Code Section
1932, Subsection 2, and Section 1933, Subsection 4 (and any successor statutes thereof
permitting the parties to terminate this Lease as a result of any damage or
destruction).

19. Eminent Domain.

	19.1	 	Substantial Taking. Subject to the provisions of Section 19.4 below in
case the whole of the Premises, or such part thereof as shall substantially interfere
with Tenant’s use and occupancy of the Premises as reasonably determined by Landlord,
shall be taken for any public or quasi-public purpose by any lawful power or authority
by exercise of the right of appropriation, condemnation or eminent domain, or sold to
prevent such taking, either party shall have the right to terminate this Lease effective
as of the date possession is required to be surrendered to said authority.
	 
	19.2	 	Partial Taking; Abatement of Rent. In the event of a taking of a portion of the
Premises which does not substantially interfere with the conduct of Tenant’s business,
then, except as otherwise provided in the immediately following sentence, neither party
shall have the right to terminate this Lease and Landlord shall thereafter proceed to
make a functional unit of the remaining portion of the Premises (but only to the extent
Landlord receives proceeds therefor from the condemning authority), and rent shall be
abated with respect to the part of the Premises which Tenant shall be so deprived on
account of such taking. Notwithstanding the immediately preceding sentence to the
contrary, if any part of the Building or the Site shall be taken (whether or not such
taking substantially interferes with Tenant’s use of the Premises), Landlord may
terminate this Lease upon thirty (30) days’ prior written notice to Tenant.

19

 

	19.3	 	Condemnation Award. Subject to the provisions of Section 19.4 below, in
connection with any taking of the Premises or Building, Landlord shall be entitled to
receive the entire amount of any award which may be made or given in such taking or
condemnation, without deduction or apportionment for any estate or interest of Tenant,
it being expressly understood and agreed by Tenant that no portion of any such award
shall be allowed or paid to Tenant for any so-called bonus or excess value of this
Lease, and such bonus or excess value shall be the sole property of Landlord. Tenant
shall not assert any claim against Landlord or the taking authority for any compensation
because of such taking (including any claim for bonus or excess value of this Lease);
provided, however, if any portion of the Premises is taken, Tenant shall be granted the
right to recover from the condemning authority (but not from Landlord) any compensation
as may be separately awarded or recoverable by Tenant for the taking of Tenant’s
furniture, fixtures, equipment and other personal property within the Premises and for
Tenant’s relocation expenses.
	 
	19.4	 	Temporary Taking. In the event of a taking of the Premises or any part thereof
for temporary use, (a) this Lease shall be and remain unaffected thereby and rent shall
not abate, and (b) Tenant shall be entitled to receive for itself such portion or
portions of any award made for such use with respect to the period of the taking which
is within the Term, provided that if such taking shall remain in force at the expiration
or earlier termination of this Lease, Tenant shall perform its obligations under
Section 9 with respect to surrender of the Premises and shall pay to Landlord
the portion of any award which is attributable to any period of time beyond the Term
expiration date. For purpose of this Section 19.4, a temporary taking shall be
defined as a taking for a period of two hundred seventy (270) days or less.
	 
	19.5	 	Waiver of Termination Right. This Lease sets forth the terms and conditions upon
which this Lease may terminate in the event of a taking. Accordingly, the parties waive
the provisions of the California Code of Civil Procedure Section 1265.130 and any
successor or similar statutes permitting the parties to terminate this Lease as a result
of a taking.

20. Tenant’s Insurance.

	20.1	 	Types of Insurance. On or before the earlier of the Commencement Date or the
date Tenant occupies all or any portion of the Premises or commences or causes to be
commenced any work of any type in or on the Premises pursuant to this Lease, and
continuing during the entire Term, Tenant shall obtain and keep in full force and
effect, the following insurance:
	 
	(a)	 	Special Form (fka All Risk) insurance, including fire and extended coverage,
sprinkler leakage (including earthquake sprinkler leakage), vandalism, malicious
mischief and earthquake and flood coverage upon property of every description and kind
owned by Tenant and located in the Premises or Building, or for which Tenant is legally
liable including, without limitation, furniture, equipment and any other personal
property, in an amount not less then the full replacement cost thereof.
	 
	(b)	 	Commercial general liability insurance coverage, on an occurrence basis,
including personal injury, bodily injury (including wrongful death), broad form property
damage, operations hazard, owner’s protective coverage, contractual liability (including
Tenant’s indemnification obligations under this Lease, including Section 17
hereof), products and completed operations liability, and owned/non-owned auto
liability, with an initial combined single limit of liability of not less than Three
Million Dollars ($3,000,000.00). The limits of liability of such commercial general
liability insurance shall be increased every five (5) years during the Term of this
Lease to an amount reasonably required by Landlord in an amount consistent with other
first class office projects in the Carmel Valley area of San Diego.
	 
	(c)	 	Worker’s compensation and employer’s liability insurance, with limits no less
than One Million Dollars ($1,000,000.00) per occurrence, covering all persons employed
in connection with any work done on or about the Premises for which claims for death or
bodily injury could be asserted against Landlord, Tenant or the Premises.
	 
	(d)	 	Loss of income, extra expense and business interruption insurance in such amounts
as will reimburse Tenant for direct or indirect loss of earnings attributable to all
perils commonly insured against by prudent tenants or attributable to prevention of
access to the Premises, Tenant’s parking areas or to the Building as a result of such
perils.
	 
	(e)	 	Any other form or forms of insurance as Tenant or Landlords of comparable
buildings or the mortgagees of Landlord may reasonably require from time to time, in
form, amounts and for insurance risks against which a prudent tenant would protect
itself, but only to the extent such risks and amounts are available in the insurance
market at commercially reasonable costs.
	 
	20.2	 	Requirements. Each policy required to be obtained by Tenant hereunder shall: (a)
be issued by insurers which are approved by Landlord and/or Landlord’s mortgagees and
are authorized to do business in the state in which the Building is located and are
rated not less than financial class X, and not less than policyholder rating A in the
most recent version of Best’s Key Rating Guide (provided that, in any event, the same
insurance company shall provide the coverages described in Sections 20.1(a) and
20.1(d) above); (b) be in form reasonably satisfactory from time to time to
Landlord; (c) name Tenant as named insured thereunder and shall name Landlord and, at
Landlord’s request, Landlord’s mortgagees, ground lessors (if any) and managers of which
Tenant has been informed in writing, as additional insureds thereunder, all as their
respective interests may appear; (d) not have a deductible amount exceeding Ten Thousand
Dollars ($10,000.00), which amount shall be deemed self-insured with full waiver of
subrogation); (e) specifically provide that the insurance afforded by such policy for
the benefit of Landlord and Landlord’s mortgagees and ground lessors shall be primary,
and any insurance carried by Landlord or Landlord’s mortgagees and ground lessors shall
be excess and non-contributing; (f) contain an endorsement

20

 

	 	 	that the insurer waives its right to subrogation as described in Section 22 below;
(g) contain an undertaking by the insurer to notify Landlord (and the mortgagees and ground
lessors of Landlord who are named as additional insureds) in writing not less than thirty
(30) days prior to any material change, reduction in coverage, cancellation or other
termination thereof; (h) contain a cross liability or severability of interest endorsement;
and (i) be in amounts sufficient at all times to satisfy any coinsurance requirements
thereof. Each such policy shall also provide that any loss otherwise payable thereunder
shall be payable notwithstanding (i) any act or omission of Landlord or Landlord Indemnified
Parties or Tenant which might, absent such provision, result in a forfeiture of all or a part
of such insurance payment, (ii) the occupation or use of the Premises for purposes more
hazardous than permitted by the provisions of such policy, (iii) any foreclosure or other
action or proceeding taken by any mortgagee pursuant to any provision of the mortgage upon
the happening of a default thereunder, or (iv) any change in title or ownership of the
Premises. Tenant agrees to deliver to Landlord, in no event later than the earlier of (i)
the Commencement Date or (ii) the date Tenant takes possession of all or any part of the
Premises, certified copies of each such insurance policy (or certificates from the insurance
company evidencing the existence of such insurance and Tenant’s compliance with the foregoing
provisions of this Section 20). Tenant shall cause replacement policies or
certificates to be delivered to Landlord not less than thirty (30) days prior to the
expiration of any such policy or policies. If any such initial or replacement policies or
certificates are not furnished within the time(s) specified herein, Tenant shall be deemed to
be in material default under this Lease without the benefit of any additional notice or cure
period provided in Section 23.1 below, and Landlord shall have the right, but not the
obligation, to procure such policies and certificates at Tenant’s expense.

	20.3	 	Effect on Insurance. Tenant shall not do or permit to be done anything which will (a)
violate or invalidate any insurance policy maintained by Landlord or Tenant hereunder, or (b)
increase the costs of any insurance policy maintained by Landlord pursuant to Section
21 or otherwise with respect to the Building or the Project. If Tenant’s occupancy or
conduct of its business in, on or about the Premises results in any increase in premiums for
any insurance carried by Landlord with respect to the Building or the Project, Tenant shall
pay such increase as additional rent within ten (10) days after being billed therefor by
Landlord. If any insurance coverage carried by Landlord pursuant to Section 21 or
otherwise with respect to the Building or the Project shall be cancelled or reduced (or
cancellation or reduction thereof shall be threatened) by reason of the use or occupancy of
the Premises by Tenant or by anyone permitted by Tenant to be upon the Premises, and if Tenant
fails to remedy such condition within five (5) days after notice thereof, Tenant shall be
deemed to be in default under this Lease, without the benefit of any additional notice or cure
period specified in Section 23.1 below, and Landlord shall have all remedies provided
in this Lease, at law or in equity, including, without limitation, the right (but not the
obligation) to enter upon the Premises and attempt to remedy such condition at Tenant’s cost.

21. Landlord’s Insurance. During the Term, Landlord shall insure the Building and the
Premises (excluding, however, Tenant’s furniture, equipment and other personal property) against
damage by fire and standard extended coverage perils and with vandalism and malicious mischief
endorsements, rental loss coverage, at Landlord’s option, earthquake damage coverage, and such
additional coverage as Landlord deems appropriate. Landlord shall also carry commercial general
liability insurance, in such reasonable amounts and with such reasonable deductibles as would be
carried by a prudent owner of a similar building in the State of California. At Landlord’s option,
all such insurance may be carried under any blanket or umbrella policies which Landlord has in
force for other buildings and projects. In addition, at Landlord’s option, Landlord may elect to
self-insure all or any part of such required insurance coverage. Landlord may, but shall not be
obligated to, carry any other form or forms of insurance as Landlord or the mortgagees or ground
lessors of Landlord may reasonably determine is advisable. The cost of insurance obtained by
Landlord pursuant to this Section 21 (including self-insured amounts and deductibles) shall
be included in Operating Expenses except to the extent excluded by the terms of this Lease.

22. Waiver of Claims; Waiver of Subrogation.

	22.1	 	Mutual Waiver of Parties. Landlord and Tenant hereby waive their rights against each other
with respect to any claims or damages or losses which are caused by or result from (a)
occurrences insured against under any insurance policy carried by Landlord or Tenant (as the
case may be) pursuant to the provisions of this Lease and enforceable at the time of such
damage or loss, or (b) occurrences which would have been covered under any insurance required
to be obtained and maintained by Landlord or Tenant (as the case may be) under Sections
20 and 21 of this Lease (as applicable) had such insurance been obtained and
maintained as required therein. The foregoing waivers shall be in addition to, and not a
limitation of, any other waivers or releases contained in this Lease.
	 
	22.2	 	Waiver of Insurers. Each party shall cause each property and loss of income insurance policy
required to be obtained by it pursuant to Sections 20 and 21 to provide that
the insurer waives all rights of recovery by way of subrogation against either Landlord or
Tenant, as the case may be, in connection with any claims, losses and damages covered by such
policy. If either party fails to maintain property or loss of income insurance required
hereunder, such insurance shall be deemed to be self-insured with a deemed full waiver of
subrogation as set forth in the immediately preceding sentence.

23. Tenant’s Default and Landlord’s Remedies.

	23.1	 	Tenant’s Default. The occurrence of any one or more of the following events shall constitute
a default under this Lease by Tenant:
	 
	(a)	 	the vacation or Abandonment of the Premises by Tenant. “Abandonment” is defined in Section
1951.3 of the California Civil Code;

21

 

	(b)	 	the failure by Tenant to make any payment of rent or additional rent or any other payment
required to be made by Tenant hereunder, where such failure continues for three (3) business
days after written notice thereof from Landlord that such payment was not received;
	 
	(c)	 	the failure by Tenant to observe or perform any of the express covenants or provisions of
this Lease to be observed or performed by Tenant, other than as specified in Sections
23.1(a) or (b) above, where such failure shall continue for a period of thirty
(30) days after written notice thereof from Landlord to Tenant; provided, however, that if the
nature of Tenant’s default is such that more than thirty (30) days are reasonably required for
its cure, then Tenant shall not be deemed to be in default if Tenant shall commence such cure
within said thirty (30) day period and thereafter diligently prosecute such cure to
completion;
	 
	(d)	 	(i) the making by Tenant of any general assignment for the benefit of creditors, (ii) the
filing by or against Tenant of a petition to have Tenant adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days), (iii) the
appointment of a trustee or receiver to take possession of substantially all of Tenant’s
assets located at the Premises or of Tenant’s interest in this Lease, where possession is not
restored to Tenant within sixty (60) days, or (iv) the attachment, execution or other judicial
seizure of substantially all of Tenant’s assets located at the Premises or of Tenant’s
interest in this Lease where such seizure is not discharged within sixty (60) days;
	 
	(e)	 	any material representation or warranty made by Tenant in this Lease or any other document
delivered in connection with the execution and delivery of this Lease or pursuant to this
Lease proves to be incorrect in any material respect;
	 
	(f)	 	Tenant shall be liquidated or dissolved or shall begin proceedings towards its liquidation or
dissolution; and
	 
	(g)	 	The failure by Tenant to deliver and/or maintain in full force and effect the Letter of
Credit described in Section 5.

Any notice sent by Landlord to Tenant pursuant to this Section 23.1 shall be in lieu of,
and not in addition to, any notice required under California Code of Civil Procedure Section 1161.

	23.2	 	Landlord’s Remedies; Termination. In the event of any default by Tenant, in addition to any
other remedies available to Landlord under this Lease, at law or in equity, Landlord shall
have the immediate option to terminate this Lease and all rights of Tenant hereunder. In the
event that Landlord shall elect to so terminate this Lease, then Landlord may recover from
Tenant:
	 
	(a)	 	the worth at the time of award of any unpaid rent which had been earned at the time of such
termination; plus
	 
	(b)	 	the worth at the time of the award of the amount by which the unpaid rent which would have
been earned after termination until the time of award exceeds the amount of such rental loss
that Tenant proves could have been reasonably avoided; plus
	 
	(c)	 	the worth at the time of award of the amount by which the unpaid rent for the balance of the
term after the time of award exceeds the amount of such rental loss that Tenant proves could
be reasonably avoided; plus
	 
	(d)	 	any other amount necessary to compensate Landlord for all the detriment proximately caused by
Tenant’s failure to perform its obligations under this Lease or which, in the ordinary course
of things, would be likely to result therefrom including, but not limited to: unamortized
Tenant Improvement costs; attorneys’ fees; brokers’ commissions; the costs of refurbishment,
alterations, renovation and repair of the Premises; and removal (including the repair of any
damage caused by such removal) and storage (or disposal) of Tenant’s personal property,
equipment, fixtures, Tenant Changes, Tenant Improvements and any other items which Tenant is
required under this Lease to remove but does not remove.

As used in Sections 23.2(a) and 23.2(b) above, the “worth at the time of award “ is
computed by allowing interest at the Interest Rate set forth in Section 1.14 of the
Summary. As used in Section 23.2(c) above, the “worth at the time of award” is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%).

	23.3	 	Landlord’s Remedies; Re-Entry Rights. In the event of any such default by Tenant, in
addition to any other remedies available to Landlord under this Lease, at law or in equity,
Landlord shall also have the right, subject to applicable law, with or without terminating
this Lease, to re-enter the Premises and remove all persons and property from the Premises;
such property may be removed, stored and/or disposed of pursuant to Section 12.4 of
this Lease or any other procedures permitted by applicable law. No re-entry or taking
possession of the Premises by Landlord pursuant to this Section 23.3, and no
acceptance of surrender of the Premises or other action on Landlord’s part, shall be construed
as an election to terminate this Lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court of competent jurisdiction.
	 
	23.4	 	Continuation of Lease. Landlord shall have the remedy described in California Civil Code
Section 1951.4 (lessor may continue lease in effect after lessee’s breach and abandonment and
recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to
reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on
account of any default by Tenant, Landlord may, from time to time, without terminating this
Lease, enforce all of its rights and remedies under this Lease, including the right to recover
all rent as it becomes due.

22

 

	23.5	 	Landlord’s Right to Perform. Except as specifically provided otherwise in this Lease, all
covenants and agreements by Tenant under this Lease shall be performed by Tenant at Tenant’s
sole cost and expense and without any abatement or offset of rent. If Tenant shall fail to
pay any sum of money (other than Monthly Basic Rent) or perform any other act on its part to
be paid or performed hereunder and such failure shall continue for five (5) business days with
respect to monetary obligations (or thirty (30) days with respect to non-monetary obligations,
except in case of emergencies, in which such case, such shorter period of time as is
reasonable under the circumstances) after Tenant’s receipt of written notice thereof from
Landlord, Landlord may, without waiving or releasing Tenant from any of Tenant’s obligations,
make such payment or perform such other act on behalf of Tenant. All sums so paid by Landlord
and all necessary incidental costs incurred by Landlord in performing such other acts shall be
payable by Tenant to Landlord within five (5) days after demand therefor as additional rent.
	 
	23.6	 	Interest. If any monthly installment of Rent or Operating Expenses, or any other amount
payable by Tenant hereunder is not received by Landlord within five (5) days following the
date when due, it shall bear interest at the Interest Rate set forth in Section 1.14
of the Summary from the date due until paid. All interest, and any late charges imposed
pursuant to Section 23.7 below, shall be considered additional rent due from Tenant to
Landlord under the terms of this Lease.
	 
	23.7	 	Late Charges. Tenant acknowledges that, in addition to interest costs, the late payments by
Tenant to Landlord of any Monthly Basic Rent or other sums due under this Lease will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being
extremely difficult and impractical to fix. Such other costs include, without limitation,
processing, administrative and accounting charges and late charges that may be imposed on
Landlord by the terms of any mortgage, deed of trust or related loan documents encumbering the
Premises, the Building or the Project. Accordingly, if any monthly installment of Monthly
Basic Rent or Operating Expenses or any other amount payable by Tenant hereunder is not
received by Landlord within five (5) days following the date when due, Tenant shall pay to
Landlord an additional sum of five percent (5%) of the overdue amount as a late charge, but in
no event more than the maximum late charge allowed by law. The parties agree that such late
charge represents a fair and reasonable estimate of the costs that Landlord will incur by
reason of any late payment as hereinabove referred to by Tenant, and the payment of late
charges and interest are distinct and separate in that the payment of interest is to
compensate Landlord for the use of Landlord’s money by Tenant, while the payment of late
charges is to compensate Landlord for Landlord’s processing, administrative and other costs
incurred by Landlord as a result of Tenant’s delinquent payments. Acceptance of a late charge
or interest shall not constitute a waiver of Tenant’s default with respect to the overdue
amount or prevent Landlord from exercising any of the other rights and remedies available to
Landlord under this Lease or at law or in equity now or hereafter in effect.
	 
	23.8	 	Rights and Remedies Cumulative. All rights, options and remedies of Landlord contained in
this Section 23 and elsewhere in this Lease (including Section 28 below) shall
be construed and held to be cumulative, and no one of them shall be exclusive of the other,
and Landlord shall have the right to pursue any one or all of such remedies or any other
remedy or relief which may be provided by law or in equity, whether or not stated in this
Lease. Nothing in this Section 23 shall be deemed to limit or otherwise affect
Tenant’s indemnification of Landlord pursuant to any provision of this Lease.
	 
	23.9	 	Tenant’s Waiver of Redemption. Tenant hereby waives and surrenders for itself and all those
claiming under it, including creditors of all kinds, (i) any right and privilege which it or
any of them may have under any present or future law to redeem any of the Premises or to have
a continuance of this Lease after termination of this Lease or of Tenant’s right of occupancy
or possession pursuant to any court order or any provision hereof, and (ii) the benefits of
any present or future law which exempts property from liability for debt or for distress for
rent.
	 
	23.10	 	Costs Upon Default and Litigation. Tenant shall pay to Landlord and its mortgagees as
additional rent all the expenses incurred by Landlord or its mortgagees in connection with any
default by Tenant hereunder or the exercise of any remedy by reason of any default by Tenant
hereunder, including reasonable attorneys’ fees and expenses. If Landlord or its mortgagees
shall be made a party to any litigation commenced against Tenant or any litigation pertaining
to this Lease or the Premises, at the option of Landlord and/or its mortgagees, Tenant, at its
expense, shall provide Landlord and/or its mortgagees with counsel approved by Landlord and/or
its mortgagees and shall pay all costs incurred or paid by Landlord and/or its mortgagees in
connection with such litigation.

24. Landlord’s Default. Landlord shall not be in default in the performance of any
obligation required to be performed by Landlord under this Lease unless Landlord has failed to
perform such obligation within thirty (30) days after the receipt of written notice from Tenant
specifying in detail Landlord’s failure to perform; provided however, that if the nature of
Landlord’s obligation is such that more than thirty (30) days are required for its performance,
then Landlord shall not be deemed in default if it commences such performance within such thirty
(30) day period and thereafter diligently pursues the same to completion. Upon any such uncured
default by Landlord, Tenant may exercise any of its rights provided in law or at equity; provided,
however: (a) Tenant shall have no right to offset or abate rent in the event of any default by
Landlord under this Lease, except to the extent offset rights are specifically provided to Tenant
in this Lease; (b) Tenant shall have no right to terminate this Lease; (c) Tenant’s rights and
remedies hereunder shall be limited to the extent (i) Tenant has expressly waived in this Lease any
of such rights or remedies and/or (ii) this Lease otherwise expressly limits Tenant’s rights or
remedies, including the limitation on Landlord’s liability contained in Section 31 hereof,
and (d) in no event will Landlord be liable for consequential damages or loss of business profits.
Notwithstanding anything in this Lease to the contrary, if Landlord fails beyond the foregoing cure
periods to perform its maintenance and repair obligations under this Lease, and, as a consequence,
Tenant’s use of the Premises is substantially impaired, then Tenant shall have the right to cause
such repair or maintenance to be performed at Landlord’s expense and Landlord agrees to reimburse
Tenant for the actual, reasonable, out-of-pocket costs thereof within fifteen (15) business days
following written request for the same.

23

 

25. Subordination. Without the necessity of any additional document being executed by
Tenant for the purpose of effecting a subordination, except as otherwise provided in Section
26 below, and at the election of Landlord or any mortgagee of a mortgage or a beneficiary of a
deed of trust now or hereafter encumbering all or any portion of the Building or Site, or any
lessor of any ground or master lease now or hereafter affecting all or any portion of the Building
or Site, this Lease shall be subject and subordinate at all times to such ground or master leases
(and such extensions and modifications thereof), and to the lien of such mortgages and deeds of
trust (as well as to any advances made thereunder and to all renewals, replacements, modifications
and extensions thereof). Notwithstanding the foregoing, Landlord and any mortgagee and/or ground
lessor of Landlord (“Holder”), as applicable, shall have the right to subordinate or cause to be
subordinated any or all ground or master leases or the lien of any or all mortgages or deeds of
trust to this Lease. In the event that any ground or master lease terminates for any reason or any
mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any
reason, at the election of Landlord’s successor in interest, Tenant shall attorn to and become the
tenant of such successor. Tenant hereby waives its rights under any current or future law which
gives or purports to give Tenant any right to terminate or otherwise adversely affect this Lease
and the obligations of Tenant hereunder in the event of any such foreclosure proceeding or sale.
Tenant covenants and agrees to execute and deliver to Landlord within ten (10) business days after
receipt of written demand by Landlord and in the form reasonably required by Landlord and
reasonably acceptable to Tenant, any additional documents evidencing the priority or subordination
of this Lease with respect to any such Holder or the lien of any such mortgage or deed of trust or
Tenant’s agreement to attorn. Such documents may include commercially reasonable provisions in
favor of such Holder, including, without limitation, additional time on behalf of such Holder to
cure defaults of the Landlord and provide that (a) neither Holder nor any successor-in-interest
shall be bound by (i) any payment of the rent, additional rent, or other sum due under this Lease
for more than 1 month in advance or (ii) any amendment or modification of the Lease made without
the express written consent of Holder or any successor-in-interest; (b) neither Holder nor any
successor-in-interest will be liable for (i) any act or omission or warranties of any prior
landlord (including Landlord), (ii) the breach of any warranties or obligations relating to
construction of improvements on the Project or any tenant finish work performed or to have been
performed by any prior landlord (including Landlord), or (iii) the return of any security deposit,
except to the extent such deposits have been received by Holder; and (c) neither Holder nor any
successor-in-interest shall be subject to any offsets or defenses which Tenant might have against
any prior landlord (including Landlord). Should Tenant fail to sign and return any such documents
within said ten (10) business day period, Tenant shall be in default hereunder without the benefit
of any additional notice or cure periods specified in Section 23.1 above. Tenant shall
indemnify, defend (with counsel reasonably approved by Landlord in writing) and hold Landlord
harmless from and against any and all claims, judgments, suits, causes of action, damages, losses,
liabilities and expenses (including attorneys’ fees and court costs) attributable to any failure by
Tenant to timely deliver any such documents to Landlord. Notwithstanding the foregoing, it shall
be a condition precedent to the subordination of this Lease to any future ground or underlying
lease or to the lien of any future mortgage or deed of trust that Landlord shall obtain for the
benefit of Tenant a subordination, non-disturbance and attornment agreement from the Holder in
connection with such future instrument. Notwithstanding such subordination, Tenant’s right to
quiet possession of the Premises shall not be disturbed if Tenant is not in default beyond
applicable notice and grace periods and so long as Tenant shall pay the rent and observe and
perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to
its terms. If any Holder shall elect to have this Lease and any Options granted hereby prior to
the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to
Tenant, this Lease and such Options shall be deemed prior to such mortgage, deed of trust, or
ground lease, whether this Lease or such Options are dated prior or subsequent to the date of said
mortgage, deed of trust or ground lease or the date of recording thereof.

26. Estoppel Certificate.

	26.1	 	Landlord’s and Tenant’s Obligations. Within ten (10) business days following written request
from one party, the other party shall execute and deliver to the requesting party an estoppel
certificate, in a form substantially similar to the form of Exhibit “F” attached
hereto, certifying: (a) the Commencement Date of this Lease; (b) that this Lease is unmodified
and in full force and effect (or, if modified, that this Lease is in full force and effect as
modified, and stating the date and nature of such modifications); (c) the date to which the
rent and other sums payable under this Lease have been paid; (d) that there are not, to the
best of the responding party’s knowledge, any defaults under this Lease by either Landlord or
Tenant, except as specified in such certificate; and (e) such other matters as are reasonably
requested by the requesting party. Any such estoppel certificate delivered pursuant to this
Section 26.1 may be relied upon by any mortgagee, beneficiary, Transferee (including a
Permitted Transferee), purchaser or prospective purchaser of any portion of the Site, as well
as their assignees.
	 
	26.2	 	Failure to Deliver. The failure by the responding party to deliver such estoppel certificate
within such time shall constitute a default hereunder without the applicability of the notice
and cure periods specified in Section 23.1 above and shall be conclusive upon the
responding party that: (a) this Lease is in full force and effect without modification, except
as may be represented by the requesting party; (b) there are no uncured defaults in Landlord’s
or Tenant’s performance (other than the responding party’s failure to deliver the estoppel
certificate); and (c) not more than one (1) month’s rental has been paid in advance.

27. [Intentionally Deleted]

28. Modification and Cure Rights of Landlord’s Mortgagees and Lessors.

	28.1	 	Modifications. If, in connection with Landlord’s obtaining or entering into any financing or
ground lease for any portion of the Building or Site, the lender or ground lessor shall
request modifications to this Lease, Tenant shall, within ten (10) business days after request
therefor, execute an amendment to this Lease including such modifications, provided such
modifications are reasonable, do not increase the obligations of Tenant hereunder, or
adversely affect the leasehold estate created hereby or Tenant’s rights hereunder.

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	28.2	 	Cure Rights. In the event of any default on the part of Landlord, Tenant will give notice by
registered or certified mail to any beneficiary of a deed of trust or mortgagee covering the
Premises or ground lessor of Landlord whose address shall have been furnished to Tenant, and
shall offer such beneficiary, mortgagee or ground lessor a reasonable opportunity to cure the
default (including with respect to any such beneficiary or mortgagee, time to obtain
possession of the Premises, subject to this Lease and Tenant’s rights hereunder, by power of
sale or a judicial foreclosure, if such should prove necessary to effect a cure).

29. Quiet Enjoyment. Landlord covenants and agrees with Tenant that, so long as Tenant
performs all of the covenants and provisions on Tenant’s part to be observed and performed under
this Lease (including payment of rent hereunder), Tenant shall have the right to use and occupy the
Premises in accordance with and subject to the terms and conditions of this Lease as against all
persons claiming by, through or under Landlord.

30. Transfer of Landlord’s Interest. The term “Landlord” as used in this Lease, so far as
covenants or obligations on the part of the Landlord are concerned, shall be limited to mean and
include only the owner or owners, at the time in question, of the fee title to, or a lessee’s
interest in a ground lease of, the Site. In the event of any transfer or conveyance of any such
title or interest (other than a transfer for security purposes only), the transferor shall be
automatically relieved of all covenants and obligations on the part of Landlord contained in this
Lease accruing after the date of such transfer or conveyance provided that such transferee
expressly assumes Landlord’s obligations hereunder. Landlord and Landlord’s transferees and
assignees shall have the absolute right to transfer all or any portion of their respective title
and interest in the Site, the Building, the Premises and/or this Lease without the consent of
Tenant, and such transfer or subsequent transfer shall not be deemed a violation on Landlord’s part
of any of the terms and conditions of this Lease.

31. Limitation on Liability

	31.1	 	Limitation on Landlord’s Liability. Notwithstanding anything contained in this Lease to the
contrary, the obligations of Landlord under this Lease (including any actual or alleged breach
or default by Landlord) do not constitute personal obligations of the individual partners,
directors, officers, members or shareholders of Landlord or Landlord’s partners, and Tenant
shall not seek recourse against the individual partners, directors, officers, members or
shareholders of Landlord or against Landlord’s partners or any other persons or entities
having any interest in Landlord, or any of their personal assets for satisfaction of any
liability with respect to this Lease. In addition, in consideration of the benefits accruing
hereunder to Tenant and notwithstanding anything contained in this Lease to the contrary,
Tenant hereby covenants and agrees for itself and all of its successors and assigns that the
liability of Landlord for its obligations under this Lease (including any liability as a
result of any actual or alleged failure, breach or default hereunder by Landlord), shall be
limited solely to, and Tenant’s and its successors’ and assigns’ sole and exclusive remedy
shall be against, Landlord’s interest in the Project, and no other assets of Landlord.
	 
	31.2	 	Limitation on Tenant’s Liability. Notwithstanding anything contained in this Lease to the
contrary, the obligations of Tenant under this Lease (including any actual or alleged breach
or default by Tenant) do not constitute personal obligations of the individual directors,
officers or shareholders of Tenant, and Landlord shall not seek recourse against the
individual directors, officers or shareholders of Tenant or any other persons or entities
having any interest in Tenant, or any of their personal assets for satisfaction of any
liability with respect to this Lease.

32. Miscellaneous.

	32.1	 	Governing Law. This Lease shall be governed by, and construed pursuant to, the laws of the
State of California.
	 
	32.2	 	Successors and Assigns. Subject to the provisions of Section 30 above, and except as
otherwise provided in this Lease, all of the covenants, conditions and provisions of this
Lease shall be binding upon, and shall inure to the benefit of, the parties hereto and their
respective heirs, personal representatives and permitted successors and assigns; provided,
however, no rights shall inure to the benefit of any Transferee of Tenant unless the Transfer
to such Transferee is made in compliance with the provisions of Section 14, and no
options or other rights which are expressly made personal to the original Tenant hereunder or
in any rider attached hereto shall be assignable to or exercisable by anyone other than the
original Tenant and any Permitted Transferee under this Lease.
	 
	32.3	 	No Merger. The voluntary or other surrender of this Lease by Tenant or a mutual termination
thereof shall not work as a merger and shall, at the option of Landlord, either (a) terminate
all or any existing subleases, or (b) operate as an assignment to Landlord of Tenant’s
interest under any or all such subleases.
	 
	32.4	 	Professional Fees. If either Landlord or Tenant should bring suit against the other with
respect to this Lease, including for unlawful detainer or any other relief against the other
hereunder, then all costs and expenses incurred by the prevailing party therein (including,
without limitation, its actual appraisers’, accountants’, attorneys’ and other professional
fees and court costs), shall be paid by the other party.
	 
	32.5	 	Waiver. The waiver by either party of any breach by the other party of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any subsequent breach of the
same or any other term, covenant and condition herein contained, nor shall any custom or
practice which may become established between the parties in the administration of the terms
hereof be deemed a waiver of, or in any way affect, the right of any party to insist upon the
performance by the other in strict accordance with said terms. No waiver of any default of
either party hereunder shall be implied from any acceptance by Landlord or delivery by Tenant
(as the case may be) of any rent or other payments due hereunder or any omission by the
non-defaulting party to take any action on account of such default if such default persists or
is repeated, and no express waiver shall affect defaults other

25

 

	 	 	than as specified in said waiver. The subsequent acceptance of rent hereunder by Landlord
shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease other than the failure of Tenant to pay the particular rent so
accepted, regardless of Landlord’s knowledge of such preceding breach at the time of
acceptance of such rent.
	 
	32.6	 	Terms and Headings. The words “Landlord” and “Tenant” as used herein shall include the
plural as well as the singular. Words used in any gender include other genders. The Section
headings of this Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof. Any deletion of language from this Lease
prior to its execution by Landlord and Tenant shall not be construed to raise any presumption,
canon of construction or implication, including, without limitation, any implication that the
parties intended thereby to state the converse of the deleted language.
	 
	32.7	 	Time. Time is of the essence with respect to performance of every provision of this Lease in
which time or performance is a factor. All references in this Lease to “days” shall mean
calendar days unless specifically modified herein to be “business” days.
	 
	32.8	 	Prior Agreements; Amendments. This Lease (and the Exhibits attached hereto) contain all of
the covenants, provisions, agreements, conditions and understandings between Landlord and
Tenant concerning the Premises and any other matter covered or mentioned in this Lease, and no
prior agreement or understanding, oral or written, express or implied, pertaining to the
Premises or any such other matter shall be effective for any purpose. No provision of this
Lease may be amended or added to except by an agreement in writing signed by the parties
hereto or their respective successors in interest. The parties acknowledge that all prior
agreements, representations and negotiations are deemed superseded by the execution of this
Lease to the extent they are not expressly incorporated herein.
	 
	32.9	 	Severability. The invalidity or unenforceability of any provision of this Lease (except for
Tenant’s obligation to pay Monthly Basic Rent and Excess Expenses under Sections 3 and
4 hereof) shall in no way affect, impair or invalidate any other provision hereof, and
such other provisions shall remain valid and in full force and effect to the fullest extent
permitted by law.
	 
	32.10	 	Recording. Except as otherwise provided in this Lease, neither this Lease, nor any
memorandum, affidavit or other writing with respect thereto, shall be recorded by Tenant or by
anyone acting through, under or on behalf of Tenant, and the recording thereof in violation of
this provision shall make this Lease null and void at Landlord’s election.
	 
	32.11	 	Exhibits. All Exhibits attached to this Lease are hereby incorporated in this Lease as
though set forth at length herein.
	 
	32.12	 	Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount
than the rent payment herein stipulated shall be deemed to be other than on account of the
rent, nor shall any endorsement or statement on any check or any letter accompanying any check
or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord’s right to recover the balance of such rent or pursue
any other remedy provided in this Lease. Tenant agrees that each of the foregoing covenants
and agreements shall be applicable to any covenant or agreement either expressly contained in
this Lease or imposed by any statute or at common law.
	 
	32.13	 	Financial Statements. Upon ten (10) days prior written request from Landlord (which
Landlord may make at any time during the Term but no more often than once in any calendar
year), Tenant shall deliver to Landlord a current financial statement of Tenant. Such
statements shall be prepared in accordance with generally acceptable accounting principles and
certified as true in all material respects by Tenant (if Tenant is an individual) or by an
authorized officer of Tenant (if Tenant is a corporation or limited liability company) or a
general partner or CFO of Tenant (if Tenant is a partnership).
	 
	32.14	 	No Partnership. Landlord does not, in any way or for any purpose, become a partner of
Tenant in the conduct of its business, or otherwise, or joint venturer or a member of a joint
enterprise with Tenant by reason of this Lease.
	 
	32.15	 	Force Majeure. In the event that either party hereto shall be delayed or hindered in or
prevented from the performance of any act required hereunder by reason of strikes, lock-outs,
labor troubles, inability to procure materials, failure of power, governmental moratorium or
other governmental action or inaction (including failure, refusal or delay in issuing permits,
approvals and/or authorizations), injunction or court order, riots, insurrection, war, fire,
earthquake, flood or other natural disaster or other reason of a like nature not the fault of
the party delaying in performing work or doing acts required under the terms of this Lease
(but excluding delays due to financial inability) (herein collectively, “Force Majeure
Delays”), then performance of such act shall be excused for the period of the delay and the
period for the performance of any such act shall be extended for a period equivalent to the
period of such delay. The provisions of this Section 32.15 shall not apply to nor
operate to excuse Tenant from the payment of Monthly Basic Rent, Operating Expenses,
additional rent or any other payments strictly in accordance with the terms of this Lease.
	 
	32.16	 	Counterparts. This Lease may be executed in one or more counterparts, each of which shall
constitute an original and all of which shall be one and the same agreement.
	 
	32.17	 	Nondisclosure of Lease Terms. Tenant acknowledges and agrees that the terms of this Lease
are confidential and constitute proprietary information of Landlord. Disclosure of the terms
could adversely affect the ability of Landlord to negotiate other leases and impair Landlord’s
relationship with other tenants. Accordingly, Tenant

26

 

	 	 	agrees that it, and its partners, officers, directors, employees, agents and attorneys, shall
not intentionally and voluntarily disclose the terms and conditions of this Lease to any
newspaper or other publication or any other person, including without limitation, any other
tenant or apparent prospective tenant of the Building or other portion of the Project, or
real estate agent, either directly or indirectly, without the prior written consent of
Landlord, which Landlord may withhold in its sole discretion, provided, however, that Tenant
may disclose the terms to prospective subtenants or assignees under this Lease.
	 
	32.18	 	Independent Covenants. This Lease shall be construed as though the covenants herein between
Landlord and Tenant are independent and not dependent and Tenant hereby expressly waives the
benefit of any statute to the contrary and agrees that if Landlord fails to perform its
obligations set forth herein, Tenant shall not be entitled to make any repairs or perform any
acts hereunder at Landlord’s expense or to any setoff of the Rent or other amounts owing
hereunder against Landlord; provided, however, that the foregoing shall in no way impair the
right of Tenant to commence a separate action against Landlord for any violation by Landlord
of the provisions hereof so long as notice is first given to Landlord and any holder of a
mortgage or deed of trust covering the Building, Project or any portion thereof, of whose
address Tenant has theretofore been notified, and an opportunity is granted to Landlord and
such holder to correct such violations as provided above.

33. Lease Execution.

	33.1	 	Tenant’s Authority. If Tenant executes this Lease as a limited liability company,
partnership or corporation, then Tenant represents and warrants that: (a) Tenant is a duly
organized and validly existing limited liability company, partnership or corporation, as the
case may be, and is qualified to do business in the state in which the Premises are located;
(b) such persons and/or entities executing this Lease are duly authorized to execute and
deliver this Lease on Tenant’s behalf in accordance with the Tenant’s operating agreement (if
Tenant is a limited liability company), Tenant’s partnership agreement (if Tenant is a
partnership), or a duly adopted resolution of Tenant’s board of directors and Tenant’s by-laws
(if Tenant is a corporation); and (c) this Lease is binding upon Tenant in accordance with its
terms. Concurrently with Tenant’s execution and delivery of this Lease to Landlord and/or at
any time during the Lease Term within ten (10) days of Landlord’s request, Tenant shall
provide to Landlord a copy of any documents reasonably requested by Landlord evidencing
Tenant’s representations and warranties hereunder.
	 
	33.2	 	Joint and Several Liability. If more than one person or entity executes this Lease as
Tenant: (a) each of them is and shall be jointly and severally liable for the covenants,
conditions, provisions and agreements of this Lease to be kept, observed and performed by
Tenant; and (b) the act or signature of, or notice from or to, any one or more of them with
respect to this Lease shall be binding upon each and all of the persons and entities executing
this Lease as Tenant with the same force and effect as if each and all of them had so acted or
signed, or given or received such notice.
	 
	33.3	 	Building Name and Signage. Landlord shall have the right at any time to designate and/or
change the name and/or address of the Project, the Building and/or any other building in the
Project, and to install, affix and maintain any and all signs on the exterior and on the
interior of the Project, the Building and/or any other building in the Project, as Landlord
may, in Landlord’s sole discretion, desire. Tenant shall not use the name of the Project, the
Building or any other building in the Project, or use pictures or illustrations of the
Project, the Building or any other building in the Project, in advertising or other publicity,
without the prior written consent of Landlord, which Landlord may withhold in its sole
discretion.
	 
	33.4	 	Landlord’s Title; Air Rights. Landlord’s title is and always shall be paramount to the title
of Tenant. Nothing herein contained shall empower Tenant to do any act which can, shall or
may encumber the title of Landlord. No rights to any view or to light or air over any
property, whether belonging to Landlord or any other person, are granted to Tenant by this
Lease.
	 
	33.5	 	Time of Essence. Time is of the essence of this Lease and each of its provisions.
	 
	33.6	 	No Option. The submission of this Lease for examination or execution by Tenant does not
constitute a reservation of or option for the Premises and this Lease shall not become
effective as a Lease until it has been executed by Landlord and delivered to Tenant.

34. Waiver of Jury Trial. EACH PARTY HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION SEEKING SPECIFIC PERFORMANCE OF ANY PROVISION OF THIS LEASE, FOR DAMAGES FOR ANY BREACH
UNDER THIS LEASE, OR OTHERWISE FOR ENFORCEMENT OF ANY RIGHT OR REMEDY HEREUNDER (EACH A
“DISPUTE” AND COLLECTIVELY, THE “DISPUTES”).

35. Consent to Judicial Reference. If and to the extent that Section 34
immediately above is determined by a court of competent jurisdiction to be unenforceable or is
otherwise not applied by any such court, each of Landlord and Tenant hereby consents and agrees
that (a) any and all Disputes shall be heard by a referee in accordance with the general reference
provisions of California Code of Civil Procedure Section 638, sitting without a jury in the County
of San Diego, California, (b) such referee shall hear and determine all of the issues in any
Dispute (whether of fact or of law), including issues pertaining to a “provisional remedy” as
defined in California Code of Civil Procedure Section 1281.8, including without limitation,
entering restraining orders, entering temporary restraining orders, issuing temporary and permanent
injunctions and appointing receivers, and shall report a statement of decision; provided that, if
during the course of any Dispute, any party desires to seek such a “provisional remedy” at a time
when a referee has not yet been appointed or is otherwise unavailable to hear the request for such
provisional remedy, then such party may apply to the San Diego County Superior Court for such
provisional relief, and (c) pursuant to California Code of Civil Procedure Section 640(a), judgment
may be entered upon the decision of such referee in the same manner as if the Dispute had been
tried directly

27

 

by a court. The parties shall use their respective commercially reasonable and good faith efforts
to agree upon and select such referee, provided that such referee must be a retired California
state or federal judge, and further provided that if the parties cannot agree upon a referee, the
referee shall be appointed by the Presiding Judge of the San Diego County Superior Court. Each
party hereto acknowledges that this consent and agreement is a material inducement to enter into
this Agreement, the Loan Documents and all other agreements and instruments provided for herein or
therein, and that each will continue to be bound by and to rely on this consent and agreement in
their related future dealings. The parties shall share the cost of the referee and reference
proceedings equally; provided that, the referee may award attorneys’ fees and
reimbursement of the referee and reference proceeding fees and costs to the prevailing party,
whereupon all referee and reference proceeding fees and charges will be payable by the
non-prevailing party (as so determined by the referee). Each party hereto further warrants and
represents that it has reviewed this consent and agreement with legal counsel of its own choosing,
or has had an opportunity to do so, and that it knowingly and voluntarily gives this consent and
enters into this agreement having had the opportunity to consult with legal counsel. This consent
and agreement is irrevocable, meaning that it may not be modified either orally or in writing, and
this consent and agreement shall apply to any subsequent amendments, renewals, supplements, or
modifications to this Agreement or any other agreement or document entered into between the parties
in connection with this Agreement. In the event of litigation, this Agreement may be filed as
evidence of either or both parties’ consent and agreement to have any and all Disputes heard and
determined by a referee under California Code of Civil Procedure Section 638.

36. ERISA. Tenant represents and warrants to Landlord that: (i) Tenant is not an employee
pension benefit plan subject to the provisions of Title IV of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) or subject to the minimum funding standards under Part
3, Subtitle B, Title I of ERISA or Section 412 of the Internal Revenue Code or Section 302 of
ERISA, and none of its assets constitutes or will constitute assets of any such employee benefit
plan subject to Part 4, Subtitle B, Title I of ERISA; (ii) Tenant is not a “governmental plan”
within the meaning of Section 3(32) of ERISA and the funds used by Tenant to satisfy its
obligations under the Lease are not subject to State statutes regulating investments of and
fiduciary obligations with respect to governmental plans; (iii) The assets of Tenant do no
constitute plan assets of one or more employee benefit plans within the meaning of 29 C.F.R.
2510.3-101; and (iv) Tenant is not The Prudential Insurance Company of America, a separate account
of Prudential or an “affiliate” of Prudential as defined in Section IV(b) of Prohibited Transaction
Exemption 90-1 granted by the U.S. Department of Labor.

37. Option.

37.1 Grant of Option. Landlord hereby grants to Tenant the option to extend the term of this Lease
for a five (5) year period (the “Option”) commencing on the date the prior term expires (the
“Option Period”) upon each and all of the following terms and conditions:

	(a)	 	Tenant gives to Landlord, and Landlord actually receives, on a date which is prior to the
date that the Option Period would commence (if exercised) by at least nine (9) and not more
than twelve (12) months, a written notice of exercise of the option to extend this Lease for
said additional term, time being of the essence. If said notification of the exercise of said
option is not so given and received, this option shall automatically expire;
	 
	(b)	 	All of the terms and conditions of this Lease shall apply, except that Tenant shall have no
further option to extend the term of this Lease;
	 
	(c)	 	Any prior Tenant that has not been expressly released from liability under this Lease
expressly reaffirms in writing the extension of its liability for the term of the Option; and
	 
	(d)	 	The Monthly Basic Rent for each month of the Option Period shall be the Fair Market Rent (as
defined below) of the Premises as of the commencement of the Option Period.

37.2 Effect of Default.

(a) Tenant shall have no right to exercise the Option, notwithstanding any provision in the grant
of the Option to the contrary, (i) during the time commencing from the date Landlord gives to
Tenant a notice of default pursuant to Sections 23.1(b) or 23.1(c) (or the
date of the default if notice is not required pursuant to the terms of this Lease) and
continuing until the default alleged in said notice of default is cured, or (ii) during the
period of time commencing on the day after a monetary obligation to Landlord is due from
Tenant and unpaid (without any necessity for notice thereof to Tenant) continuing until the
obligation is paid, or (iii) at any time after an event of default described in Sections
23.1(a), 23.1(d), 23.1(e) or 23.1(f) (without any necessity of
Landlord to give notice of such default to Tenant), or (iv) in the event that Landlord has
given to Tenant three or more notices of default under Section 23.1(b), where a late
charge has become payable under Section 23.7 for each of such defaults, or Section
23.1(c), whether or not the defaults are cured, during the 12 month period prior to the
time that Tenant intends to exercise the Option.

(b) All rights of Tenant under the provisions of the Option shall terminate and be of no further
force or effect, notwithstanding Tenant’s due and timely exercise of the Option, if, after such
exercise and during the term of this Lease, (i) Tenant fails to pay to Landlord a monetary
obligation of Tenant for a period of 30 days after such obligation becomes due (without any
necessity of Landlord to give notice thereof to Tenant), or (ii) Tenant fails to commence to cure a
default specified in Section 23.1(c) within 30 days after the date that Landlord gives
notice to Tenant of such default and/or Tenant fails thereafter to diligently prosecute said cure
to completion, (iii) Tenant commits a default described in Sections 23.1(a),
23.1(d), 23.1(e) or 23.1(f) (without any necessity of Landlord to give
notice of such default to Tenant), or (iv) Landlord gives to Tenant three or more notices of
default under Section 23.1(b), where a late charge becomes payable under Section
23.7 for each such default, or Section 23.1(c), whether or not the defaults are cured
or (v) Tenant commits a default under this Lease where this Lease provides that no notice or cure
period is afforded the Tenant.

28

 

37.3 Personal to Tenant. The Option is personal to Tenant and may not be exercised or be assigned,
voluntarily or involuntarily, by or to any person or entity other than Tenant. The Option is not
assignable separate and apart from this Lease.

37.4 Fair Market Rent.

(a) The term “Fair Market Rent” as used in this Lease is defined to mean the rent, including all
escalations, at which tenants are leasing non-sublease, non-encumbered, non-equity space comparable
in size and quality to the Premises for the Option Period the San Diego, California metropolitan
area, giving appropriate consideration to the annual rental rates per square foot and the standard
of measurement by which the square footage is measured. In determining Fair Market Rent it shall
be assumed that:

     (i) The Premises are in excellent condition and repair and there shall be no deduction for
depreciation, obsolescence or deferred maintenance (but less reasonable wear and tear as long as
maintained by Tenant in accordance with this Lease);

     (ii) The Premises would be leased for the Option Period by a tenant with the credit standing
of Tenant, as the same exists at that time;

     (iii) The Premises would be leased on the same terms of this Lease insofar as the obligations
for repair, maintenance, insurance and real estate taxes existed as of the expiration of the
original term of this Lease.

     (iv) No deduction shall be given nor consideration given to allowances for real estate
brokerage commissions.

     (v) The Premises will be used for its highest and best use.

     (vi) An minimum annual rent escalation of three percent (3%) would be applicable.

     (vii) The Base Year set forth in the Basic Lease Information will be adjusted to correspond
with the first year of the extended term.

(b) Landlord shall initially determine the Fair Market Rent in each instance, and shall give Tenant
notice (the “Market Rent Notice”) of such determination and the basis on which such determination
was made on or before the 60th day prior to the date on which such determination is to take effect,
or as soon thereafter as is reasonably practicable.

(c) In the event that Tenant notifies Landlord in writing, on or before the 20th business day
following any Market Rent Notice, that Tenant disagrees with the applicable determination, Landlord
and Tenant shall negotiate in good faith to resolve such dispute within 10 business days thereafter
(The 30th business day after any Market Rent Notice is referred to herein as the “Outside Agreement
Date”). If not resolved by the Outside Agreement Date each party shall submit to the other its
determination of Fair Market Rent and the dispute shall be submitted to arbitration in accordance
with the procedures outlined in the following subsection (d). Until any such dispute is resolved,
any applicable payments due under this Lease shall correspond to Landlord’s determination and, if
Tenant’s determination becomes the final determination, Landlord shall refund any overpayments to
Tenant, within 5 business days following the final resolution of the dispute.

(d) The arbitration procedures referred to in subsection (c) are:

     (i) Landlord and Tenant shall each appoint one (1) arbitrator who shall by profession be a
licensed real estate broker or appraiser who shall have been active over the five (5) year period
ending on the date of such appointment in the leasing or appraising of properties similar to the
Premises in the surrounding area of San Diego County. The determination of the arbitrators shall
be limited solely to the issue of whether Landlord’s or Tenant’s submitted Fair Market Rent for the
Premises is the closest to the actual Fair Market Rent for the Premises as determined by the
arbitrators, taking into account the requirements of this subparagraph regarding the same. Each
such arbitrator shall be appointed within 15 days after the Outside Agreement Date. Landlord and
Tenant may not consult with either such arbitrator prior to resolution.

     (ii) The two arbitrators so appointed shall within fifteen (15) days of the date of the
appointment of the last appointed arbitrator, meet and attempt to reach a decision as to whether
the parties shall use Landlord’s or Tenant’s submitted Fair Market Rent, and shall notify Landlord
and Tenant of their decision, if any.

     (iii) If the two arbitrators are unable to reach a decision, the two (2) arbitrators shall,
within thirty (30) days of the date of the appointment of the last appointed arbitrator, agree upon
and appoint a third arbitrator who shall be a broker who shall be qualified under the same criteria
set forth hereinabove for qualification of the initial two (2) arbitrators.

     (iv) The three (3) arbitrators shall, within thirty (30) days of the appointment of the third
arbitrator, reach a decision as to whether the parties shall use Landlord’s or Tenant’s submitted
Fair Market Rent, and shall notify Landlord and Tenant thereof.

     (v) The decision of the majority of the three (3) arbitrators shall be binding upon Landlord
and Tenant.

     (vi) If either Landlord or Tenant fails to appoint an arbitrator within fifteen (15) days
after the Outside Agreement Date, the arbitrator appointed by one (1) of them shall reach a
decision, notify Landlord and Tenant thereof, and such arbitrator’s decision shall be binding upon
Landlord and Tenant.

29

 

     (vii) If the two (2) arbitrators fail to agree upon and to appoint a third arbitrator, then
the appointment of the third arbitrator shall be dismissed, and the matter to be decided shall be
forthwith submitted to arbitration under the provisions of the American Arbitration Association,
but subject to the instructions set forth in this Lease.

     (viii) The cost of arbitration shall be paid by Landlord and Tenant equally.

30

 

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

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TENANT:	 	 	 	LANDLORD:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CADENCE PHARMACEUTICALS, INC,

a Delaware corporation	 	 	 	PRENTISS/COLLINS DEL MAR HEIGHTS LLC,

a Delaware limited liability company
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	By:	 	Cognac High Bluffs LLC,	 	 
	*By:	/s/ Theodore R. Schroeder	 	 	 	 	 	a Delaware limited liability company,	 	 
	Print Name:	    Theodore R. Schroeder 	 	 	 	 	 	its managing member	 	 
	Print Title:
	    President
& CEO 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	By:	 	The Prudential Insurance Company of America,	 	 
	 	 	 	 	 	 	 	 	 	 	a New Jersey corporation,	 	 
	*By: 	/s/ David A. Socks	 	 	 	 	 	 	 	its sole member	 	 
	Print Name:
	    David
A. Socks	 	 	 	 	 	 	 	 	 	 	 	 
	Print Title:
	    V.P.
Business Development
&
         Corporate Secretary	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	By:	 	/s/ Darin Bright	 	 
	 

	 	 	 	 	 	 	 	 	 	Name:
	 	Darin
Bright

	 	 
	 

	 	 	 	 	 	 	 	 	 	Title:
	 	Vice
President

	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 

 

			
	*	 	NOTE:

If Tenant is a California corporation, then one of the following alternative requirements must be
satisfied:

          (i) This Lease must be signed by two (2) officers of such corporation: one being the chairman
of the board, the president or a vice president, and the other being the secretary, an assistant
secretary, the chief financial officer or an assistant treasurer. If one (1) individual is signing
in two (2) of the foregoing capacities, that individual must sign twice; once as one officer and
again as the other officer.

          (ii) If there is only one (1) individual signing in two (2) capacities, or if the two (2)
signatories do not satisfy the requirements of (A) above, then Tenant shall deliver to Landlord a
certified copy of a corporate resolution in a form reasonably acceptable to Landlord authorizing
the signatory(ies) to execute this Lease.

If Tenant is a corporation incorporated in a state other than California, then Tenant shall deliver
to Landlord a certified copy of a corporate resolution in a form reasonably acceptable to Landlord
authorizing the signatory(ies) to execute this Lease.

S-1

 

EXHIBIT “A”

PROJECT SITE PLAN

A-1

 

EXHIBIT “B-1”

12481 PREMISES

High Bluff Ridge

12481 High Bluff Drive

2nd Floor

B-1-1

 

EXHIBIT “B-2”

12531 PREMISES

High Bluff Ridge

12531 High Bluff Driver

1st Floor

B-2-1

 

EXHIBIT “C”

WORK LETTER AGREEMENT

     This Work Letter Agreement (“Work Letter Agreement”) sets forth the terms and conditions
relating to the construction of improvements for the 12481 Premises. All references in this Work
Letter Agreement to “the Lease” shall mean the relevant portions of the Lease to which this Work
Letter Agreement is attached as Exhibit ”C”.

SECTION 1.

BASE, SHELL AND CORE

     Landlord has constructed, through its contractor, the base, shell and core of the 12481
Premises and the Building (collectively, the “Base, Shell and Core”), and Tenant shall accept the
Base, Shell and Core in its current “As-Is” condition existing as of the date of the Lease and the
Commencement Date, subject to the terms of the Lease. Landlord shall install in the 12481 Premises
certain “Tenant Improvements” (as defined below) pursuant to the provisions of this Work Letter
Agreement. Except for the Tenant Improvement work described in this Work Letter Agreement and
except for the Tenant Improvement Allowance set forth below and except as otherwise provided in the
Lease, Landlord shall not be obligated to make or pay for any alterations or improvements to the
12481 Premises, the Building or the Project.

SECTION 2.

TENANT IMPROVEMENTS

     2.1 Tenant Improvement Allowance. Tenant shall be entitled to a one-time tenant
improvement allowance (the “Tenant Improvement Allowance”) in the amount of up to, but not
exceeding Fifty-Five Dollars ($55.00) per usable square foot of the 12481 Premises (i.e., up to One
Million One Hundred Ninety Thousand Five Hundred Thirty Dollars ($1,190,530) based on a usable
square footage for the 12481 Premises of 21,646 square feet for purposes of this Work Letter
Agreement), for the costs relating to the initial design and construction of Tenant’s improvements
which are permanently affixed to the 12481 Premises (the “Tenant Improvements”), which costs shall
include all hard and soft costs, including project management, but excluding data cabling, security
systems and fees for consultants other than the Architect and Engineers (as defined below). In no
event shall Landlord be obligated to make disbursements pursuant to this Work Letter Agreement in a
total amount which exceeds the Tenant Improvement Allowance. Tenant shall not be entitled to
receive any cash payment or credit against rent or otherwise for any portion of the Tenant
Improvement Allowance which is not used to pay for the Tenant Improvement Allowance Items (as such
term is defined below).

     2.2 Disbursement of the Tenant Improvement Allowance. Except as otherwise set forth
in this Work Letter Agreement, the Tenant Improvement Allowance shall be disbursed by Landlord
(each of which disbursement shall be made pursuant to Landlord’s standard disbursement process),
only for the following items and costs (collectively, the “Tenant Improvement Allowance Items”):

          2.2.1 Payment of the fees of the “Architect” and the “Engineers,” as those terms are defined
in Section 3.1 of this Work Letter Agreement (provided, however, that only an amount not to
exceed Three and 00/100 Dollars ($3.00) per usable square foot of the 12481 Premises (i.e., up to
Sixty Four Thousand Nine Hundred Thirty Eight and No/100 Dollars ($64,938.00) based on a usable
square footage of 21,646 square feet for the 12481 Premises for purposes of this Work Letter
Agreement) may be deducted from the Tenant Improvement Allowance to pay for such fees), and payment
of the fees incurred by, and the cost of documents and materials supplied by, Tenant or Landlord
and Tenant’s or Landlord’s consultants in connection with the preparation and review of the
Construction Drawings, as that term is defined in Section 3.1 of this Work Letter
Agreement;

          2.2.2 The payment of plan check, permit and license fees relating to construction of the
Tenant Improvements;

          2.2.3 The cost of construction of the Tenant Improvements, including, without limitation,
contractors’ fees and general conditions, testing and inspection costs, costs of utilities, trash
removal, parking and hoists, and the costs of after-hours freight elevator usage;

          2.2.4 The cost of any changes in the Base, Shell and Core when such changes are required by
the Construction Drawings (including if such changes are due to the fact that such work is prepared
on an unoccupied basis), such cost to include all direct architectural and/or engineering fees and
expenses incurred in connection therewith;

          2.2.5 The cost of any changes to the Construction Drawings or Tenant Improvements required by
any applicable laws;

          2.2.6 Sales and use taxes and Title 24 fees related to the Tenant Improvements;

          2.2.7 Landlord’s Supervision Fee, as that term is defined in Section 4.3.2 of this
Work Letter Agreement; and

          2.2.8 All other costs to be expended by Landlord in connection with the construction of the
Tenant Improvements.

     2.3 Specifications for Building Standard Improvements. Landlord has established
specifications (the “Specifications”) for the Building standard components to be used in the
construction of the Tenant Improvements in the

C-1

 

12481 Premises which Specifications have been received by Tenant. Unless otherwise agreed to
by Landlord, the Tenant Improvements shall comply with or exceed the Specifications.

SECTION 3.

CONSTRUCTION DRAWINGS

     3.1 Selection of Architect/Construction Drawings. Tenant shall retain an
architect/space planner (the “Architect“) approved by Landlord, which approval shall not be
unreasonably withheld, conditioned or delayed, to prepare the Construction Drawings. Tenant shall
retain engineering consultants reasonably approved by Landlord, which approval shall not be
unreasonably withheld, conditioned or delayed (the “Engineers “), to prepare all plans and
engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC,
life-safety, and sprinkler work in the 12481 Premises. The plans and drawings to be prepared by
Architect and the Engineers hereunder shall be known collectively as the “Construction Drawings.”
All Construction Drawings shall comply with the drawing format and specifications determined by
Landlord, and shall be subject to Landlord’s approval, which approval shall not be unreasonably
withheld, conditioned or delayed. Tenant and Architect shall verify, in the field, the dimensions
and conditions as shown on the relevant portions of the base building plans, and Tenant and
Architect shall be solely responsible for the same, and Landlord shall have no responsibility in
connection therewith. Landlord’s review of the Construction Drawings as set forth in this
Section 3, shall be for its sole purpose and shall not imply Landlord’s review of the same,
or obligate Landlord to review the same, for quality, design, compliance with applicable laws or
other applicable laws or other like matters. Accordingly, notwithstanding that any Construction
Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and
notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord’s
space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever
in connection therewith and shall not be responsible for any omissions or errors contained in the
Construction Drawings.

     3.2 Final Space Plan. On or before the date set forth in Schedule 1, attached
hereto, Tenant and Architect shall prepare the final space plan for Tenant Improvements in the
12481 Premises (the “Final Space Plan“), which Final Space Plan shall include a layout and
designation of all offices, rooms and other partitioning, their intended use, and equipment to be
contained therein, and shall deliver the Final Space Plan to Landlord for Landlord’s approval,
which approval shall not be unreasonably withheld, conditioned or delayed.

     3.3 Final Working Drawings. On or before the date set forth in Schedule 1, Tenant,
Architect and the Engineers shall complete the architectural and engineering drawings for the 12481
Premises, and Architect shall compile a fully coordinated set of architectural, structural,
mechanical, electrical and plumbing working drawings in a form which is complete to allow
subcontractors to bid on the work and to obtain all applicable permits (collectively, the “Final
Working Drawings”), and shall submit the same to Landlord for Landlord’s approval, which approval
shall not be unreasonably withheld, conditioned or delayed.

     3.4 Approved Working Drawings. On or before the date set forth therefor in Schedule
1, Tenant shall submit the Final Working Drawings approved by Landlord (the “Approved Working
Drawings”) to the applicable local governmental agency for all applicable building permits
necessary to allow “Contractor,” as that term is defined in Section 4.1 of this Work Letter
Agreement, to commence and fully complete the construction of the Tenant Improvements
(collectively, the “Permits”), and, in connection therewith, Tenant shall coordinate with Landlord
in order to allow Landlord, at Landlord’s option, to take part in all phases of the permitting
process, and shall supply Landlord, as soon as possible, with all plan check numbers and dates of
submittal. Notwithstanding the foregoing, Tenant hereby agrees that neither Landlord nor
Landlord’s consultants shall be responsible for obtaining any building permit or certificate of
occupancy for the 12481 Premises and that the obtaining of the same shall be Tenant’s
responsibility; provided, however, that Landlord shall, in any event, cooperate with Tenant in
executing permit applications and performing other ministerial acts reasonably necessary to enable
Tenant to obtain any such permit or certificate of occupancy. No changes, modifications or
alterations in the Approved Working Drawings may be made without the prior written consent of
Landlord, provided that Landlord may not unreasonably withhold, condition or delay its consent.,

     3.5 Time Deadlines. Landlord and Tenant shall cooperate with Architect, the Engineer,
and each other to complete all phases of the Construction Drawings and the permitting process and
to receive the permits, and with Contractor, for approval of the “Cost Proposal,” as that term is
defined in Section 4.2 below, in accordance with the dates set forth in Schedule 1. Tenant
shall meet with Landlord on a weekly (or such other basis as Landlord shall determine) to discuss
Tenant’s progress in connection with the same. Certain of applicable dates for approval of items,
plans and drawings as described in this Section 3, Section 4, below, and in this
Work Letter Agreement are set forth and further elaborated upon in Schedule 1 (the “Time
Deadlines”), attached hereto. Tenant agrees to comply with the Time Deadlines, subject to Force
Majeure.

SECTION 4.

CONSTRUCTION OF THE TENANT IMPROVEMENTS

     4.1 Contractor. A contractor, under the supervision of and selected by Landlord,
shall construct the Tenant Improvements (the “Contractor”); provided, however that one (1) of the
following contractors will be recommended by Tenant for Landlord’s selection and once selected
shall be deemed approved by Tenant: Pacific Building Group, Bycor, Burger Construction, Bilbro and
Roel.

     4.2 Cost Proposal. After the Approved Working Drawings are signed by Landlord and
Tenant, Landlord shall provide Tenant with a cost proposal in accordance with the Approved Working
Drawings, which cost proposal shall include, as nearly as possible, the cost of all Tenant
Improvement Allowance Items to be incurred by Tenant in connection

C-2

 

with the construction of the Tenant Improvements (the “Cost Proposal”). Notwithstanding the
foregoing, portions of the cost of the Tenant Improvements may be delivered to Tenant as such
portions of the Tenant Improvements are priced by Contractor (on an individual item-by-item or
trade-by-trade basis), even before the Approved Working Drawings are completed (the “Partial Cost
Proposal”). Tenant shall approve and deliver the Cost Proposal to Landlord within five (5)
business days of the receipt of the same (or, as to a Partial Cost Proposal, within two (2)
business days of receipt of the same). The date by which Tenant must approve and deliver the Cost
Proposal, or the last Partial Cost Proposal to Landlord, as the case may be, shall be known
hereafter as the “Cost Proposal Delivery Date.” The total of all Partial Cost Proposals, if any,
shall be known as the Cost Proposal.

     4.3 Construction of Tenant Improvements by Landlord’s Contractor under the Supervision of
Landlord.

          4.3.1 Over-Allowance Amount. On the Cost Proposal Delivery Date and throughout the
construction process, Tenant shall deliver to Landlord cash in an amount (the “Over-Allowance
Amount”) equal to the difference between (i) the amount of the Cost Proposal and (ii) the amount of
the Tenant Improvement Allowance (less any portion thereof already disbursed by Landlord, or in the
process of being disbursed by Landlord, on or before the Cost Proposal Delivery Date). Tenant
shall deliver the Over-Allowance Amount in the following manner: 50% of the Over-Allowance Amount
on the Cost Proposal Delivery Date, 35% of the Over-Allowance Amount upon completion of dry-wall
taping, and the remaining 15% of the Over-Allowance Amount upon Substantial Completion (as defined
in Section 5 of this Work Letter). The Over-Allowance Amount shall be disbursed by
Landlord prior to the disbursement of any then remaining portion of the Tenant Improvement
Allowance, and such disbursement shall be pursuant to the same procedure as the Tenant Improvement
Allowance. In the event that, after the Cost Proposal Date, any revisions, changes, or
substitutions shall be made to the Construction Drawings or the Tenant Improvements, any additional
costs which arise in connection with such revisions, changes or substitutions shall be added to the
Cost Proposal and shall be paid by Tenant to Landlord immediately upon Landlord’s request to the
extent such additional costs increase any existing Over-Allowance Amount or result in an
Over-Allowance Amount. Following completion of the Tenant Improvements, Landlord shall deliver to
Tenant a final cost statement which shall indicate the final costs of the Tenant Improvement
Allowance Items, and if such cost statement indicates that Tenant has underpaid or overpaid the
Over-Allowance Amount, then within ten (10) business days after receipt of such statement, Tenant
shall deliver to Landlord the amount of such underpayment or Landlord shall return to Tenant the
amount of such overpayment, as the case may be.

          4.3.2 Landlord Supervision. After Landlord selects the Contractor, Landlord shall
independently retain Contractor to construct the Tenant Improvements in accordance with the
Approved Working Drawings and the Cost Proposal and Landlord shall supervise the construction by
Contractor, and Tenant shall pay a construction supervision and management fee (the “Landlord’s
Supervision Fee”) to Landlord in an amount equal to the product of (i) three percent (3%) and (ii)
an amount equal to the Tenant Improvement Allowance plus the Over-Allowance Amount (as such
Over-Allowance Amount may increase pursuant to the terms of this Work Letter Agreement).

          4.3.3 Contractor’s Warranties and Guaranties. Landlord hereby assigns to Tenant all
warranties and guaranties by Contractor relating to the Tenant Improvements, which assignment shall
be on a non-exclusive basis such that the warranties and guarantees may be enforced by Landlord
and/or Tenant, and Tenant hereby waives all claims against Landlord relating to, or arising out of
the construction of, the Tenant Improvements.

          4.3.4 Tenant’s Covenants. Tenant hereby indemnifies Landlord for any loss, claims,
damages or delays arising from the actions of Architect and the Engineers on the 12481 Premises or
in the Building. Within ten (10) days after completion of construction of the Tenant Improvements,
Landlord shall cause a Notice of Completion to be recorded in the office of the Recorder of the
County in which the Building is located in accordance with Section 3093 of the Civil Code of the
State of California or any successor statute and furnish a copy thereof to Landlord upon
recordation, failing which, Landlord may itself execute and file the same on behalf of Tenant as
Tenant’s agent for such purpose. In addition, Tenant, immediately after the Substantial Completion
of the 12481 Premises, shall have prepared and delivered to the Building management office a copy
of the “as built” plans and specifications (including all working drawings) for the Tenant
Improvements, together with a computer disk containing the Approved Working Drawings in AutoCAD
format.

SECTION 5.

SUBSTANTIAL COMPLETION

     5.1 Substantial Completion. For purposes of the Lease, including for purposes of
determining the Commencement Date (as set forth in Section 1.7 of the Summary to the
Lease), “Substantial Completion” of the 12481 Premises shall occur upon satisfaction of
both of the following conditions: (a) the completion of the construction of the Tenant
Improvements in the 12481 Premises pursuant to the Approved Working Drawings, with the exception of
the any punchlist items, and (b) the issuance by the City Building Inspector of a temporary
certificate of occupancy or certificate of occupancy.

     5.2 Tenant Delays. To the extent there are any delays in Substantial Completion of
the 12481 Premises as a direct, indirect, partial, or total result of any of the following
(collectively, “Tenant Delays”):

          5.2.1 Tenant’s failure to comply with the Time Deadlines (except as a result of Force
Majeure);

          5.2.2 Tenant’s failure to timely approve any matter requiring Tenant’s approval, including a
Partial Cost Proposal or the Cost Proposal (except as a result of Force Majeure);

          5.2.3 a breach by Tenant of the terms of this Work Letter Agreement or the Lease;

C-3

 

          5.2.4 changes in any of the Construction Drawings because the same do not comply with
applicable laws;

          5.2.5 Tenant’s request for changes in the Approved Working Drawings;

          5.2.6 Tenant’s requirement for materials, components, finishes or improvements which are not
available in a reasonable time (based upon the anticipated date of the Commencement Date set forth
in Section 1.7 of the Summary) or which are different from, or not included in, the
Specifications;

          5.2.7 changes to the Base, Shell and Core required by the Approved Working Drawings;

          5.2.8 any changes in the Construction Drawings and/or the Tenant Improvements required by
applicable laws if such changes are directly attributable to Tenant’s use of the 12481 Premises or
Tenant’s specialized tenant improvement(s); or

          5.2.9 any other acts or omissions of Tenant, or its agents, or employees;

then, notwithstanding anything to the contrary set forth in the Lease and regardless of the actual
date of the Substantial Completion of the 12481 Premises, the Commencement Date (as set forth in
Section 1.7 of the Summary) shall be deemed to be the date the Commencement Date would have
occurred if no Tenant Delays, as set forth above, had occurred.

SECTION 6.

MISCELLANEOUS

     6.1 Tenant’s Entry Into the 12481 Premises Prior to Substantial Completion. Subject
to the terms hereof and provided that Tenant and its agents do not interfere with, or delay,
Contractor’s work in the Building and the 12481 Premises, at Landlord’s reasonable discretion,
Landlord and Contractor shall allow Tenant access to the 12481 Premises prior to the Substantial
Completion of the 12481 Premises for the purpose of Tenant installing overstandard equipment or
fixtures (including Tenant’s data and telephone equipment and furniture) in the 12481 Premises.
Prior to Tenant’s entry into the 12481 Premises as permitted by the terms of this Section
6.1, Tenant shall submit a schedule to Landlord and Contractor, for their approval, which
schedule shall detail the timing and purpose of Tenant’s entry. In connection with any such entry,
Tenant acknowledges and agrees that Tenant’s employees, agents, contractors, consultants, workmen,
mechanics, suppliers and invitees shall fully cooperate, work in harmony and not, in any manner,
interfere with Landlord or Landlord’s Contractor, agents or representatives in performing work in
the Building and the 12481 Premises, or interfere with the general operation of the Building and/or
the Project. If at any time any such person representing Tenant shall not be cooperative or shall
otherwise cause or threaten to cause any such disharmony or interference, including, without
limitation, labor disharmony, and Tenant fails to immediately institute and maintain corrective
actions as directed by Landlord, then Landlord may revoke Tenant’s entry rights upon twenty-four
(24) hours’ prior written notice to Tenant. Tenant acknowledges and agrees that any such entry
into and occupancy of the 12481 Premises or any portion thereof by Tenant or any person or entity
working for or on behalf of Tenant shall be deemed to be subject to all of the terms, covenants,
conditions and provisions of the Lease, excluding only the covenant to pay rent (until the
occurrence of the Commencement Date). Tenant further acknowledges and agrees that Landlord shall
not be liable for any injury, loss or damage which may occur to any of Tenant’s work made in or
about the 12481 Premises in connection with such entry or to any property placed therein prior to
the Commencement Date, the same being at Tenant’s sole risk and liability. Tenant shall be liable
to Landlord for any damage to any portion of the 12481 Premises, including the Tenant Improvement
work, caused by Tenant or any of Tenant’s employees, agents, contractors, consultants, workmen,
mechanics, suppliers and invitees. In the event that the performance of Tenant’s work in
connection with such entry causes extra costs to be incurred by Landlord or requires the use of any
Building services, Tenant shall promptly reimburse Landlord for such extra costs and/or shall pay
Landlord for such Building services at Landlord’s standard rates then in effect. In addition,
Tenant shall hold Landlord harmless from and indemnify, protect and defend Landlord against any
loss or damage to the Building or 12481 Premises and against injury to any persons caused by
Tenant’s actions pursuant to this Section 6.1.

     6.2 Tenant’s Representative. Tenant has designated Steve Shupp of Cushman & Wakefield
as its sole representative with respect to the matters set forth in this Work Letter Agreement,
who, until further notice to Landlord, shall have full authority and responsibility to act on
behalf of the Tenant as required in this Work Letter Agreement.

     6.3 Landlord’s Representative. Landlord has designated Steven Stewart as its sole
representative with respect to the matters set forth in this Work Letter Agreement, who, until
further notice to Tenant, shall have full authority and responsibility to act on behalf of the
Landlord as required in this Work Letter Agreement.

     6.4 Time of the Essence in This Work Letter Agreement. Unless otherwise indicated,
all references herein to a “number of days” shall mean and refer to calendar days. In all
instances where Tenant is required to approve or deliver an item, if no written notice of approval
is given or the item is not delivered within the stated time period, at Landlord’s sole option, at
the end of said period the item shall automatically be deemed approved or delivered by Tenant and
the next succeeding time period shall commence.

     6.5 Tenant’s Lease Default. Notwithstanding any provision to the contrary contained
in the Lease, so long as an event of default by Tenant, beyond all applicable notice and cure
periods, as described in Section 23 of the Lease or any default by Tenant, beyond all
applicable notice and cure periods under this Work Letter Agreement, has occurred at any time on or
before the Substantial Completion of the 12481 Premises and is continuing, then (i) in addition to
all other rights and remedies granted to Landlord pursuant to the Lease, at law and/or in equity,
Landlord shall have the right to withhold payment of all or any portion of the Tenant Improvement
Allowance and/or Landlord may cause Contractor to

C-4

 

cease the construction of the 12481 Premises (in which case, Tenant shall be responsible for
any delay in the Substantial Completion of the 12481 Premises caused by such work stoppage as set
forth in Section 5.2 of this Work Letter Agreement), and (ii) all other obligations of
Landlord under the terms of this Work Letter Agreement shall be forgiven until such time as such
default is cured pursuant to the terms of the Lease (in which case, Tenant shall be responsible for
any delay in the Substantial Completion of the 12481 Premises caused by such inaction by Landlord).
In addition, if the Lease is terminated prior to the Commencement Date for any reason due to a
default by Tenant of Tenant’s obligations under the Lease or under this Work Letter Agreement
(except for obligations of Tenant that cannot, as a practical matter, take effect until Tenant
takes possession of the Premises), in addition to any other remedies available to Landlord under
the Lease, at law and/or in equity, Tenant shall pay to Landlord, as additional rent under the
Lease, within five (5) days of receipt of a statement therefor, any and all costs incurred by
Landlord (including any portion of the Tenant Improvement Allowance disbursed by Landlord) and not
reimbursed or otherwise paid by Tenant through the date of such termination in connection with the
Tenant Improvements to the extent planned, installed and/or constructed as of such date of
termination, including, but not limited to, any costs related to the removal of all or any portion
of the Tenant Improvements and restoration costs related thereto.

[Signatures on following page]

C-5

 

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

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TENANT:	 	 	 	LANDLORD:	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CADENCE PHARMACEUTICALS, INC,

a Delaware corporation	 	 	 	PRENTISS/COLLINS DEL MAR HEIGHTS LLC,

a Delaware limited liability company
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	By:	 	Cognac High Bluffs LLC,	 	 
	*By:	 	 	 	 	 	 	a Delaware limited liability company,	 	 
	Print Name:	 	 	 	 	 	 	its managing member	 	 
	Print Title:
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	By:	 	The Prudential Insurance Company of America,	 	 
	 	 	 	 	 	 	 	 	 	 	a New Jersey corporation,	 	 
	*By:	 	 	 	 	 	 	 	 	its sole member	 	 
	Print Name:
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Print Title:
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	Name:
	 	 

	 	 
	 

	 	 	 	 	 	 	 	 	 	Title:
	 	 

	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

	 	 

C-6

 

SCHEDULE 1

TIME DEADLINES

	 	 	 	 	 	 	 
	Dates	 	 	 	Actions to be Performed
	1.

	 	May 9, 2006
	 	 	 	Final Space Plan to be completed by Tenant and
delivered to Landlord.
	 
	 	 	 	 	 	 
	2.

	 	June 4, 2006
	 	 	 	Tenant to deliver Final Working Drawings to Landlord.
	 
	 	 	 	 	 	 
	3.

	 	June 4, 2006
	 	 	 	Tenant to submit Approved Working Drawings to the
City of San Diego for all applicable building
permits.
	 
	 	 	 	 	 	 
	4.

	 	Five (5)
business days after
the receipt of the
Cost Proposal by
Tenant.
	 	 	 	Tenant to approve Cost Proposal and deliver Cost
Proposal to Landlord.

C-7

 

EXHIBIT “D”

FORM OF COMMENCEMENT NOTICE

     This Commencement Notice is delivered this                      day of                                         , 2006, by
PRENTISS/COLLINS DEL MAR HEIGHTS, LLC, a California limited liability company (“Landlord”) to
CADENCE PHARMACEUTICALS, INC. (“Tenant”), pursuant to the provisions of Section 2.1 of that
certain Office Lease (the “Lease”) dated                     , 2006 , by and between Landlord and Tenant
covering certain space in the Building known as 12481 & 12531 High Bluff Ridge. All terms used
herein with their initial letter capitalized shall have the meaning assigned to such terms in the
Lease.

Gentlemen:

In accordance with the above-referenced Lease, we wish to advise and/or confirm as follows:

	1.	 	That the Building, the Premises, the Parking Facilities, and all other improvements required
to be constructed and furnished by Landlord in accordance with the terms of the Lease have
been accepted by Tenant as being substantially complete and that there is no deficiency in
construction.
	 
	2.	 	That Tenant has accepted and is in possession of the Premises, and acknowledges that under
the provisions of the Lease, the Term of the Lease is for Six (6) years, with One (1) options
to renew for Five (5) years each, and commenced upon the Commencement Date of [SEPTEMBER 15,
2006] and is currently scheduled to expire on [SEPTEMBER 30, 2012], subject to earlier
termination as provided in the Lease.
	 
	3.	 	That in accordance with the Lease, rental payment has commenced (or shall commence) on
[SEPTEMBER 15, 2006].
	 
	4.	 	If the Commencement Date of the Lease is other than the first day of the month, the first
billing will contain a pro rata adjustment. Each billing thereafter, with the exception of
the final billing, shall be for the full amount of the monthly installment as provided for in
the Lease.
	 
	5.	 	Rent is due and payable in advance on the first day of each and every month during the Term
of the Lease. Your rent checks should be made payable to Prentiss/Collins Del Mar Heights
LLC, at P.O. Box 100555 Pasadena, California 91189-0555.
	 
	6.	 	The exact number of rentable square feet within the 12481 Premises is                      square feet.
The exact number of usable square feet within the 12481 Premises is                                          square feet.
The exact number of rentable square feet within the 12531 Premises is                      square feet. The
exact number of usable square feet within the 12531 Premises is                                          square feet.
	 
	7.	 	Tenant’s Percentage, as adjusted based upon the exact number of Rentable Square Feet within
the 12481 Premises, is                     %.
	 
	 	 	IN WITNESS WHEREOF, this instrument has been duly executed by Landlord as of the date first
written above.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	LANDLORD:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	PRENTISS/COLLINS DEL MAR HEIGHTS LLC,

a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	Cognac High Bluffs LLC,

a Delaware limited liability company,

its managing member	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	The Prudential Insurance Company of America,

a New Jersey corporation,

its sole member	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 

[Signatures continue on following page]

D-1

 

	 	 	 	 	 
	ACKNOWLEDGED AND AGREED TO THIS                      DAY

OF                                         , 2006, BY TENANT:	 	 
	 
	 	 	 	 
	CADENCE PHARMACEUTICALS, INC,

a Delaware corporation	 	 
	 
	 	 	 	 
	*By:
	 	 	 	 
	 

	 	 	 	 
	Print Name:
	 	 	 	 
	Print Title:

	 	 
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	*By:
	 	 	 	 
	 

	 	 	 	 
	Print Name:
	 	 	 	 
	 

	 	 	 	 
	Print Title:
	 	 	 	 
	 

	 	 	 	 

SAMPLE ONLY [NOT FOR EXECUTION]

 

 

EXHIBIT “E”

RULES AND REGULATIONS

     Notwithstanding anything to the contrary contained in this Exhibit E, if any rule or
regulation is in conflict with any term, covenant or condition of the Lease, the Lease shall
prevail. In addition, no rule or regulation, or any subsequent amendment thereto shall in any way
alter, reduce or adversely affect any of Tenant’s rights or increase Tenant’s obligations under
this Lease. Following a written request from Tenant, Landlord shall use commercially reasonable
efforts to enforce the rules and regulations in a non-discriminatory manor against Tenant and other
tenants of the Site.

	1.	 	No sign, advertisement, name or notice shall be installed or displayed on any part of the
outside or inside of the Building without the prior written consent of Landlord. Landlord
shall have the right to remove, at Tenant’s expense and without notice, any sign installed or
displayed in violation of this rule. All approved signs or lettering on doors and walls shall
be printed, painted, affixed or inscribed at the expense of Tenant by a person approved by
Landlord, using materials and in a style and format approved by Landlord.
	 
	2.	 	Tenant shall not place anything or allow anything to be placed near the glass of any window,
door, partition or wall which may appear unsightly from outside the Premises. No awnings or
other projection shall be attached to the outside walls of the Building without the prior
written consent of Landlord. No curtains, blinds, shades or screens shall be attached to or
hung in, or used in connection with, any window or door of the Premises, other than Building
standard materials, without the prior written consent of Landlord.
	 
	3.	 	Tenant shall not obstruct any sidewalks, halls, passages, exits, entrances, elevators,
escalators or stairways of the Building. The halls, passages, exits, entrances, elevators,
escalators and stairways are not for the general public, and Landlord shall in all cases
retain the right to control and prevent access thereto of all persons whose presence in the
judgment of Landlord would be prejudicial to the safety, character, reputation and interests
of the Building and its tenants; provided, that nothing herein contained shall be construed to
prevent such access to persons with whom any tenant normally deals in the ordinary course of
its business, unless such persons are engaged in illegal activities. Tenant and no employee,
invitee, agent, licensee or contractor of Tenant shall go upon or be entitled to use any
portion of the roof of the Building.
	 
	4.	 	The directory of the Building will be provided exclusively for the display of the name and
location of tenants only, and Landlord reserves the right to exclude any other names
therefrom.
	 
	5.	 	All cleaning and janitorial services for the Building and the Premises shall be provided
exclusively through Landlord or Landlord’s janitorial contractors in accordance with the
provisions of Section 18.1(d) of the Lease. No person or persons other than those
approved by Landlord shall be employed by Tenant or permitted to enter the Building for the
purpose of cleaning the same. Tenant shall not cause any unnecessary labor by carelessness or
indifference to the good order and cleanliness of the Premises. Landlord shall not in any way
be responsible to Tenant for loss of property on the Premises, however occurring, or for any
damage to Tenant’s property by the janitors or any other employee or any other person.
	 
	6.	 	Landlord will furnish Tenant, free of charge, with two keys to each door lock in the Premises
and 24-hour access cards to the Building for each of Tenant’s employees. Landlord may impose
a reasonable charge for any additional keys or replacement access cards. Tenant may not make
or have made additional keys, and Tenant shall not alter any lock or install a new additional
lock or bolt on any door or window of its Premises. Tenant, upon termination of its tenancy,
shall deliver to Landlord the keys of all doors which have been furnished to, or otherwise
procured by Tenant, and, in the event of loss of any keys, shall pay Landlord the cost of
replacing the same or of changing the lock or locks opened by such lost key if Landlord shall
deem it necessary to make such change.
	 
	7.	 	Electric wires, telephones, telegraphs, burglar alarms or other similar apparatus shall not
be installed in the Premises except with the approval and under the direction of Landlord.
The location of telephones, call boxes and any other equipment affixed to the Premises shall
be subject to the approval of Landlord. Any installation of telephones, telegraphs, electric
wires or other electric apparatus made without permission shall be removed by Tenant at
Tenant’s own expense. No machines other than standard office machines, such as typewriters
and calculators, photo copiers, personal computers and word processors, UL listed kitchenette
appliances, and vending machines permitted by the Lease, shall be used in the Premises without
the approval of Landlord.
	 
	8.	 	No furniture, freight, or equipment of any kind shall be brought into the Building without
prior notice to Landlord and all moving of the same into or out of the Building shall be done
at such time and in such manner as Landlord shall designate. No furniture, equipment or
merchandise shall be received in the Building or carried up or down in the elevator, except
between such hours as shall be designated by Landlord. Deliveries during normal office hours
shall be limited to normal office supplies and other small items. No deliveries shall be made
which impede or interfere with other tenants or the operation of the Building.
	 
	9.	 	Tenant shall not place a load upon any floor of the Premises which exceeds the load per
square foot which such floor was designed to carry and which is allowed by law. Landlord
shall have the right to reasonably prescribe the weight and size of all unusually heavy
equipment, materials, furniture or other property brought into the Building. Heavy objects,
if such objects are considered necessary by Tenant, as reasonably determined by Landlord,
shall stand on such platforms as determined by Landlord to be necessary to properly distribute
the weight. Business machines and mechanical equipment which cause noise or vibration that
may be transmitted to the structure of the Building or to any space therein to such a degree
as to be objectionable to Landlord or to any tenants in the Building, shall be placed and
maintained by Tenant, at Tenant’s expense, on vibration eliminators or other devices

E-1

 

	 	 	sufficient to eliminate noise or vibration. Landlord will not be responsible for loss of, or
damage to, any such equipment or other property from any cause, and all damage done to the
Building by maintaining or moving such equipment or other property shall be repaired at the
expense of Tenant. Landlord acknowledges and agrees that Tenant may use and maintain
fire-rated storage and filing cabinets that are heavier in nature than typical filing
systems.
	 
	10.	 	Tenant shall not use or keep in the Premises any kerosene, gasoline or inflammable or
combustible fluid or material other than those limited quantities necessary for the operation
or maintenance of office equipment. Tenant shall not use or permit to be used in the Premises
any foul or noxious gas or substance, or permit or allow the Premises to be occupied or used
in a manner offensive or objectionable to Landlord or other occupants of the Project by reason
of noise, odors or vibrations, nor shall Tenant bring into or keep in or about the Premises
any birds or animals.
	 
	11.	 	Tenant shall not use any method of heating or air-conditioning other than that supplied by
Landlord.
	 
	12.	 	Tenant shall not waste electricity, water or air-conditioning and agrees to cooperate fully
with Landlord to assure the most effective operation of the Building’s heating and
air-conditioning and to comply with any governmental energy-saving rules, laws or regulations
of which Tenant has actual notice, and shall not adjust controls other than room thermostats
installed for Tenant’s use. Tenant shall keep corridor doors closed and shall close window
coverings at the end of each business day.
	 
	13.	 	Landlord reserves the right from time to time, in Landlord’s sole and absolute discretion,
exercisable without prior notice and without liability to Tenant, to: (a) name or change the
name of the Building, Site or Project; (b) change the address of the Building or Project,
and/or (c) install, replace or change any signs in, on or about the Common Areas, the Building
or Site (except for Tenant’s signs, if any, which are expressly permitted by the Lease).
	 
	14.	 	Landlord reserves the right to exclude from the Building between the hours of 6:00 p.m. and
7:00 a.m., or such other hours as may be established from time to time by Landlord, and on
legal holidays, any person unless that person is known to the person or employee in charge of
the Building and has a pass or is properly identified. Landlord shall not be liable for
damages for any error with regard to the admission to or exclusion from the Building of any
person. Tenant shall be responsible for all persons for whom it requests passes and shall be
liable to Landlord for all acts of such persons. Landlord reserves the right to prevent
access to the Building in case of invasion, mob, riot, public excitement or other commotion by
closing the doors or by other appropriate action.
	 
	15.	 	Tenant shall close and lock all doors of its Premises and entirely shut off all water faucets
or other water apparatus, and, except with regard to Tenant’s computers and other equipment
which reasonably require electricity on a 24-hour basis, all electricity, gas or air outlets
before Tenant and its employees leave the Premises. Tenant shall be responsible for any
damage or injuries sustained by other tenants or occupants of the Building or by Landlord for
noncompliance with this rule.
	 
	16.	 	The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any
purpose other than that for which they were constructed, and no foreign substances of any kind
whatsoever shall be thrown therein.
	 
	17.	 	Tenant shall not sell, or permit the sale at retail, of newspapers, magazines, periodicals,
theater tickets, or any other goods or merchandise to the general public in or on the
Premises. Tenant shall not make any room-to-room solicitation of business from other tenants
in the Project. Tenant shall not use the Premises for any business or activity other than
that specifically provided for in the Lease.
	 
	18.	 	Tenant shall not install any radio or television antenna, loudspeaker or other device on the
roof or exterior walls of the Building. Tenant shall not interfere with radio or television
broadcasting or reception from or in the Building or elsewhere.
	 
	19.	 	Except as expressly permitted in the Lease, Tenant shall not mark, drive nails, screw or
drill into the partitions, window mullions, woodwork or plaster, or in any way deface the
Premises or any part thereof, except to install normal wall hangings. Tenant shall repair any
damage resulting from noncompliance under this rule.
	 
	20.	 	Tenant shall not install, maintain or operate upon the Premises any vending machines without
the prior written consent of Landlord, which shall not be unreasonably withheld.
	 
	21.	 	Canvassing, soliciting and distribution of handbills or any other written material, and
peddling in and around the Project or the Building are expressly prohibited, and each tenant
shall cooperate to prevent same.
	 
	22.	 	Landlord reserves the right to exclude or expel from the Project and/or the Building any
person who, in Landlord’s judgment, is intoxicated or under the influence of liquor or drugs
or who is in violation of any of the Rules and Regulations of the Project or Building.
	 
	23.	 	Tenant shall store all its trash and garbage within its Premises. Tenant shall not place in
any trash box or receptacle any material which cannot be disposed of in the ordinary and
customary manner of trash and garbage disposal. All garbage and refuse disposal shall be made
in accordance with directions reasonably issued from time to time by Landlord.
	 
	24.	 	The Premises shall not be used for the storage of merchandise held for sale to the general
public, or for lodging or for manufacturing of any kind. No cooking shall be done or
permitted by Tenant on the Premises, except that

E-2

 

	 	 	use by Tenant of Underwriters’ Laboratory-approved equipment for brewing coffee, tea, hot
chocolate and similar beverages shall be permitted and the use of a microwave shall be
permitted, provided that such equipment and use is in accordance with all applicable federal,
state, county and city laws, codes, ordinances, rules and regulations.
	 
	25.	 	Tenant shall not use in any space, or in the public halls of the Building, any hand trucks
except those equipped with rubber tires and side guards, or such other material-handling
equipment as Landlord may approve. Tenant shall not bring any other vehicles of any kind into
the Building.
	 
	26.	 	Tenant agrees that it shall comply with all fire and security regulations that may be issued
from time to time by Landlord, and Tenant also shall provide Landlord with the name of a
designated responsible employee to represent Tenant in all matters pertaining to such fire or
security regulations. Tenant shall cooperate fully with Landlord in all matters concerning
fire and other emergency procedures.
	 
	27.	 	Tenant assumes any and all responsibility for protecting its Premises from theft, robbery and
pilferage. Such responsibility shall include keeping doors locked and other means of entry to
the Premises closed.
	 
	28.	 	Landlord may waive any one or more of these Rules and Regulations for the benefit of Tenant
or any other tenant, but no such waiver by Landlord shall be construed as a waiver of such
Rules and Regulations in favor of Tenant or any other such tenant, nor prevent Landlord from
thereafter enforcing any such Rules and Regulations against any and all of the tenants in the
Building.
	 
	29.	 	These Rules and Regulations are in addition to, and shall not be construed to in any way
modify or amend, in whole or in part, the terms, covenants, agreements and conditions of any
lease of premises in the Project or Building.
	 
	30.	 	Landlord reserves the right to make such other and reasonable Rules and Regulations as, in
its judgment, may from time to time be needed for safety, security, care and cleanliness of
the Project and/or Building and for the preservation of good order therein. Tenant agrees to
abide by all such Rules and Regulations hereinabove stated and any additional rules and
regulations which are adopted.
	 
	31.	 	Tenant shall be responsible for the observance of all of the foregoing rules by Tenant’s
employees, agents, clients, customers, invitees or guests.
	 
	32.	 	Tenant shall not lay linoleum, tile, carpet or other similar floor covering so that the same
shall be affixed to the floor of the Premises in any manner except by a paste, or other
material which may easily be removed with water, the use of cement or other similar adhesive
materials being expressly prohibited. The method of affixing any such linoleum, tile, carpet
or other similar floor covering shall be subject to the approval of Landlord. The expense of
repairing any damage resulting from a violation of this rule shall be borne by Tenant.

PARKING RULES AND REGULATIONS

In addition to the parking provisions contained in the Lease to which this Exhibit “E” is
attached, the following rules and regulations shall apply with respect to the use of the Building’s
parking facilities.

	1.	 	Every parker is required to park and lock his/her own vehicle. All responsibility for damage
to or loss of vehicles is assumed by the parker and Landlord shall not be responsible for any
such damage or loss by water, fire, defective brakes, the act or omissions of others, theft,
or for any other cause.
	 
	2.	 	Tenant shall not park or permit its employees to park in any parking areas designated by
Landlord as areas for parking by visitors to the Project. Tenant shall not leave vehicles in
the parking areas overnight nor park any vehicles in the parking areas other than automobiles,
motorcycles, motor driven or non-motor driven bicycles or four wheeled trucks.
	 
	3.	 	Parking stickers or any other device or form of identification supplied by Landlord as a
condition of use of the parking facilities shall remain the property of Landlord. Such
parking identification device must be displayed as requested and may not be mutilated in any
manner. The serial number of the parking identification device may not be obliterated.
Devices are not transferable and any device in the possession of an unauthorized holder will
be void.
	 
	4.	 	No overnight or extended term storage of vehicles shall be permitted.
	 
	5.	 	Vehicles must be parked entirely within painted stall lines of a single parking stall.
	 
	6.	 	All directional signs and arrows must be observed.
	 
	7.	 	The speed limit within all parking areas shall be five (5) miles per hour.
	 
	8.	 	Parking is prohibited: (a) in areas not striped for parking; (b) in aisles; (c) where “no
parking” signs are posted; (d) on ramps; (e) in cross-hatched areas; and (f) in reserved
spaces and in such other areas as may be designated by Landlord or Landlord’s parking
operator.

E-3

 

	9.	 	Loss or theft of parking identification devices must be reported to the Management Office
immediately, and a lost or stolen report must be filed by the Tenant or user of such parking
identification device at the time. Landlord has the right to exclude any vehicle from the
parking facilities that does not have an identification device.
	 
	10.	 	Any parking identification devices reported lost or stolen found on any unauthorized car will
be confiscated and the illegal holder will be subject to prosecution.
	 
	11.	 	Washing, waxing, cleaning or servicing of any vehicle in any area not specifically reserved
for such purpose is prohibited.
	 
	12.	 	The parking operators, managers or attendants are not authorized to make or allow any
exceptions to these rules and regulations.
	 
	13.	 	Tenant’s continued right to park in the parking facilities is conditioned upon Tenant abiding
by these rules and regulations and those contained in this Lease. Further, if the Lease
terminates for any reason whatsoever, Tenant’s right to park in the parking facilities shall
terminate concurrently therewith.
	 
	14.	 	Tenant agrees to sign a parking agreement with Landlord or Landlord’s parking operator within
five (5) days of request, which agreement shall provide the manner of payment of monthly
parking fees for covered reserved parking spaces and otherwise be consistent with the Lease
and these rules and regulations.
	 
	15.	 	Landlord reserves the right to refuse the sale or use of monthly stickers or other parking
identification devices to any tenant or person who willfully refuse to comply with these rules
and regulations and all city, state or federal ordinances, laws or agreements.
	 
	16.	 	Landlord reserves the right to establish and change parking fees, and to modify and/or adopt
such other reasonable and non-discriminatory rules and regulations for the parking facilities
as it deems necessary for the operation of the parking facilities. Landlord may refuse to
permit any person who violates these rules to park in the parking facilities, and any
violation of the rules shall subject the vehicle to removal, at such vehicle owner’s expense.

E-4

 

EXHIBIT “F”

SAMPLE FORM OF TENANT ESTOPPEL CERTIFICATE

The undersigned                      hereby certifies to                                         , and                                         , a
                                         corporation as follows:

	1.	 	Attached hereto is a true, correct and complete copy of that certain Office Lease dated
                    , 2006 between PRENTISS/COLLINS DEL MAR HEIGHTS LLC, a Delaware limited
liability company (“Landlord”), and CADENCE PHARMACEUTICALS, INC, a Delaware corporation
(“Tenant”) (the “Lease”), which demises Premises which are located at 12481 & 12531 High Bluff
Drive, San Diego, CA 92130. To the undersigned’s best knowledge, the Lease is now in full
force and effect, and the Lease has not been amended, modified or supplemented, except as set
forth in Section 6 below.
	 
	2.	 	The term of the Lease commenced on                     , 2006.
	 
	3.	 	The term of the Lease is currently scheduled to expire on September 30, 2012.
	 
	4.	 	Tenant has no option to renew or extend the Term of the Lease except: One option to renew
the lease for a period of Five (5) years.
	 
	5.	 	Tenant has no preferential right to purchase the Premises or any portion of the Building or
Site upon which the Premises are located, and Tenant has no rights or options to expand into
other space in the Building.
	 
	6.	 	The Lease has: (Initial One)

	 	 	 	 	 
	 

	 	(     )
	 	not been amended, modified, supplemented, extended, renewed or assigned.
	 
	 	 	 	 
	 

	 	(     )
	 	been amended, modified, supplemented, extended, renewed or assigned by the
following described agreements, copies of which are attached hereto:                                                                                                                                                                 .

	7.	 	Tenant has accepted and is now in possession of the Premises and has not sublet, assigned or
encumbered the Lease, the Premises or any portion thereof except as follows:                                                             
                                               
          .
	 
	8.	 	The current Monthly Basic Rent is $                    ; and current monthly parking charges are
$                    .
	 
	9.	 	Tenant’s Percentage is                     %, and Tenant’s Percentage of Operating Expenses currently
payable by Tenant is $                     per month, which amount is Landlord’s current estimate of
Tenant’s Percentage of Operating Expenses in excess of the Operating Expenses incurred in
calendar year                     .
	 
	10.	 	The amount of security deposit (if any) is $                    . No other security deposits have
been made.
	 
	11.	 	All rental payments payable by Tenant have been paid in full as of the date hereof. No rent
under the Lease has been paid for more than thirty (30) days in advance of its due date.
	 
	12.	 	All work required to be performed by Landlord under the Lease has been completed and has been
accepted by Tenant, and all tenant improvement allowances have been paid in full.
	 
	13.	 	To the best of the undersigned’s knowledge, as of the date hereof, there are no defaults on
the part of Landlord or Tenant under the Lease.
	 
	14.	 	To the undersigned’s knowledge, as of the date hereof, Tenant has no defense as to its
obligations under the Lease and claims no set-off or counterclaim against Landlord.
	 
	15.	 	Tenant has no right to any concession (rental or otherwise) or similar compensation in
connection with renting the space it occupies, except as expressly provided in the Lease.
	 
	16.	 	All insurance required of Tenant under the Lease has been provided by Tenant and all premiums
have been paid.
	 
	17.	 	There has not been filed by or against the undersigned a petition in bankruptcy, voluntary or
otherwise, any assignment of creditors, any petition seeking reorganization or arrangement
under the bankruptcy laws of the United States or any state thereof, or any other action
brought pursuant to such bankruptcy laws with respect to the undersigned.
	 
	18.	 	Tenant pays rent due Landlord under the Lease to Landlord and does not have any knowledge of
any other person who has any right to such rents by collateral assignment or otherwise.

The foregoing certification is made with the knowledge that is about to [FUND A LOAN TO
LANDLORD/TENANT OR PURCHASE THE BUILDING FROM LANDLORD OR TAKE AN ASSIGNMENT FROM TENANT], and that
is relying upon the representations herein made in [FUNDING SUCH LOAN OR PURCHASING THE BUILDING OR
TAKING SUCH ASSIGNMENT].

F-1

 

	 	 	 	 	 	 	 	 	 	 	 
	Dated:                                         , 20                    .
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	                      “TENANT”

	 	 	 	 	 	 	,	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	a	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 
	 

	 	Print Name:	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Its:	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 

F-2

 

EXHIBIT “G”

FORM OF LETTER OF CREDIT

(On Letterhead of Issuing Bank)

	 	 	 
	Date: (Insert Date)

	 	Credit Number: (Insert Number)
	 
	 	 
	 

	 	Expiration Date: (Insert Date)
	 
	 	 
	Beneficiary:

	 	Applicant: (Insert Identification of Tenant)

(Insert Identification of Landlord)

                                                            

                                                            

                                                            

Ladies/Gentlemen:

     We hereby establish our irrevocable letter of credit (the “Credit”) in favor of Beneficiary,
in the aggregate amount of                                          Dollars U.S. Currency ($                                        ).

     All or any part of the Credit is available by sight draft or drafts drawn on us by you. Such
draft or drafts must be accompanied by a statement, signed by an officer or agent of Beneficiary,
to the effect that the amount drawn herewith represents funds which Beneficiary is entitled to draw
from this Credit pursuant to that certain Office Space Lease dated ___ by and between
Beneficiary, as landlord, and Applicant, as tenant.

     All documents presented to us in connection with any demand for payment hereunder, as well as
all notices and other communications to us in respect of this Credit, shall be in writing and shall
make specific reference to this Credit by number. All drafts must be marked “Drawn under
(Insert Name of Issuing Bank) Credit No. (Insert Number).”

     We hereby agree that drafts drawn under and in compliance with the terms of this Credit will
be honored upon presentation and delivery of drafts as specified, without inquiry by us into the
accuracy of any of the statements contained in any of such drafts, if presented at this office,
(Insert Address of Issuing Bank as Shown on Letterhead). We further acknowledge and agree
that: (a) this Credit shall permit partial draws and, in the event you elect to draw upon less
than the full stated amount hereof, the stated amount of this Credit shall be automatically reduced
by the amount of such partial draw; and (b) you shall be entitled to assign your interest in this
Credit from time to time without our approval and without charge.

     This Credit is subject to the Uniform Customs and Practice for Documentary Credits (1993
revision) ICC Publication No. 500. This Credit is transferable in accordance with ICC Publication
500. The transfer fee payable in connection with such transfer, if any, shall be paid by
Applicant.

     This Credit will be automatically renewed for a one year period upon the expiration date set
forth above and upon each anniversary of such date, unless we notify you in writing by registered
mail, at least thirty (30) days prior to such expiration date or at least thirty (30) days prior to
the expiration of the period for which this Credit is renewed, that we elect not to so renew this
Credit. Upon renewal, we will notify you in writing that this Credit has been automatically
renewed.

	 	 	 
	 

	 	(INSERT IDENTIFICATION OF AND
EXECUTION
BY ISSUING BANK)
	 
	 	 
	 

	 	                                                                                

G-1

 

HIGH BLUFF RIDGE AT DEL MAR

OFFICE LEASE

LANDLORD:

PRENTISS/COLLINS DEL MAR HEIGHTS, LLC,

a California limited liability company

TENANT:

CADENCE PHARMACEUTICALS, INC.,

a Delaware corporation

 

 

TABLE
OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	1.	 	Premises	 	1
	 
	 	1.1	 	Premises	 	1
	 
	 	1.2	 	Landlord’s Reservation of Rights	 	1
	 
	 	1.3	 	Measurement of Premises, Building and/or the Project	 	1
	 
	 	1.4	 	Project	 	1
	2.	 	Term	 	1
	3.	 	Rent	 	1
	 
	 	3.1	 	Basic Rent	 	1
	 
	 	3.2	 	Additional Rent	 	2
	4.	 	Common Areas; Operating Expenses	 	2
	 
	 	4.1	 	Definitions; Tenant’s Rights	 	2
	 
	 	4.2	 	Landlord’s Reserved Rights	 	2
	 
	 	4.3	 	Excess Expenses	 	2
	 
	 	4.4	 	Definition of Operating Expenses	 	3
	 
	 	4.5	 	Definition of Real Property Taxes and Assessments	 	5
	 
	 	4.6	 	Estimate Statement	 	5
	 
	 	4.7	 	Actual Statement	 	6
	 
	 	4.8	 	No Release	 	6
	 
	 	4.9	 	Audit Rights	 	6
	5.	 	Security Deposit	 	7
	 
	 	5.1	 	Letter of Credit	 	7
	 
	 	5.2	 	Scheduled Decreases	 	8
	 
	 	5.3	 	Transfer of Letter of Credit	 	8
	6.	 	Use	 	8
	 
	 	6.1	 	General	 	8
	 
	 	6.2	 	Parking	 	9
	 
	 	6.3	 	Signs and Auctions	 	9
	 
	 	6.4	 	Hazardous Materials	 	9
	7.	 	Payments and Notices	 	10
	8.	 	Brokers	 	10
	9.	 	Surrender; Holding Over	 	10
	 
	 	9.1	 	Surrender of Premises	 	10
	 
	 	9.2	 	Hold Over With Landlord’s Consent	 	11
	 
	 	9.3	 	No Effect on Landlord’s Rights	 	11
	10.	 	Taxes on Tenant’s Property	 	11
	11.	 	Condition of Premises; Repairs	 	11
	 
	 	11.1	 	Condition of Premises	 	11
	 
	 	11.2	 	Landlord’s Repair Obligations	 	11
	 
	 	11.3	 	Tenant’s Repair Obligations	 	12
	12.	 	Alterations	 	12
	 
	 	12.1	 	Tenant Changes; Conditions	 	12
	 
	 	12.2	 	Removal of Tenant Changes and Tenant Improvements	 	13
	 
	 	12.3	 	Removal of Personal Property	 	13
	 
	 	12.4	 	Tenant’s Failure to Remove	 	13
	13.	 	Liens	 	13
	14.	 	Assignment and Subletting	 	13
	 
	 	14.1	 	Restriction on Transfer	 	13
	 
	 	14.2	 	Permitted Controlled Transfers	 	14

i

 

TABLE
OF CONTENTS
(continued)

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 
	 	14.3	 	Landlord’s Options	 	14
	 
	 	14.4	 	Additional Conditions; Excess Rent	 	14
	 
	 	14.5	 	Reasonable Disapproval	 	15
	 
	 	14.6	 	No Release	 	15
	 
	 	14.7	 	Administrative and Attorneys’ Fees	 	16
	 
	 	14.8	 	Material Inducement	 	16
	15.	 	Entry by Landlord	 	16
	16.	 	Utilities and Services	 	16
	 
	 	16.1	 	Standard Utilities and Services	 	16
	 
	 	16.2	 	Tenant’s Obligations	 	17
	 
	 	16.3	 	Failure to Provide Services	 	17
	 
	 	16.4	 	Abatement of Rent When Tenant Is Prevented From Using Premises	 	17
	17.	 	Indemnification and Exculpation	 	18
	 
	 	17.1	 	Tenant’s Assumption of Risk and Waiver	 	18
	 
	 	17.2	 	Tenant’s Indemnification of Landlord	 	18
	 
	 	17.3	 	Reciprocal Indemnity	 	18
	 
	 	17.4	 	Survival; No Release of Insurers	 	18
	18.	 	Damage or Destruction	 	18
	 
	 	18.1	 	Landlord’s Rights and Obligations	 	18
	 
	 	18.2	 	Abatement of Rent	 	19
	 
	 	18.3	 	Inability to Complete	 	19
	 
	 	18.4	 	Damage Near End of Term	 	19
	 
	 	18.5	 	Tenant’s Termination Right	 	19
	 
	 	18.6	 	Waiver of Termination Rights	 	19
	19.	 	Eminent Domain	 	19
	 
	 	19.1	 	Substantial Taking	 	19
	 
	 	19.2	 	Partial Taking; Abatement of Rent	 	19
	 
	 	19.3	 	Condemnation Award	 	20
	 
	 	19.4	 	Temporary Taking	 	20
	 
	 	19.5	 	Waiver of Termination Right	 	20
	20.	 	Tenant’s Insurance	 	20
	 
	 	20.1	 	Types of Insurance	 	20
	 
	 	20.2	 	Requirements	 	20
	 
	 	20.3	 	Effect on Insurance	 	21
	21.	 	Landlord’s Insurance	 	21
	22.	 	Waiver of Claims; Waiver of Subrogation	 	21
	 
	 	22.1	 	Mutual Waiver of Parties	 	21
	 
	 	22.2	 	Waiver of Insurers	 	21
	23.	 	Tenant’s Default and Landlord’s Remedies	 	21
	 
	 	23.1	 	Tenant’s Default	 	21
	 
	 	23.2	 	Landlord’s Remedies; Termination	 	22
	 
	 	23.3	 	Landlord’s Remedies; Re-Entry Rights	 	22
	 
	 	23.4	 	Continuation of Lease	 	22
	 
	 	23.5	 	Landlord’s Right to Perform	 	23
	 
	 	23.6	 	Interest	 	23
	 
	 	23.7	 	Late Charges	 	23
	 
	 	23.8	 	Rights and Remedies Cumulative	 	23
	 
	 	23.9	 	Tenant’s Waiver of Redemption	 	23

ii

 

TABLE
OF CONTENTS
(continued)

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 
	 	23.10	 	Costs Upon Default and Litigation	 	23
	24.	 	Landlord’s Default	 	23
	25.	 	Subordination	 	24
	26.	 	Estoppel Certificate	 	24
	 
	 	26.1	 	Landlord’s and Tenant’s Obligations	 	24
	 
	 	26.2	 	Failure to Deliver	 	24
	27.	 	[Intentionally Deleted]	 	24
	28.	 	Modification and Cure Rights of Landlord’s Mortgagees and Lessors	 	24
	 
	 	28.1	 	Modifications	 	24
	 
	 	28.2	 	Cure Rights	 	25
	29.	 	Quiet Enjoyment	 	25
	30.	 	Transfer of Landlord’s Interest	 	25
	31.	 	Limitation on Liability	 	25
	 
	 	31.1	 	Limitation on Landlord’s Liability	 	25
	 
	 	31.2	 	Limitation on Tenant’s Liability	 	25
	32.	 	Miscellaneous	 	25
	 
	 	32.1	 	Governing Law	 	25
	 
	 	32.2	 	Successors and Assigns	 	25
	 
	 	32.3	 	No Merger	 	25
	 
	 	32.4	 	Professional Fees	 	25
	 
	 	32.5	 	Waiver	 	25
	 
	 	32.6	 	Terms and Headings	 	26
	 
	 	32.7	 	Time	 	26
	 
	 	32.8	 	Prior Agreements; Amendments	 	26
	 
	 	32.9	 	Severability	 	26
	 
	 	32.10	 	Recording	 	26
	 
	 	32.11	 	Exhibits	 	26
	 
	 	32.12	 	Accord and Satisfaction	 	26
	 
	 	32.13	 	Financial Statements	 	26
	 
	 	32.14	 	No Partnership	 	26
	 
	 	32.15	 	Force Majeure	 	26
	 
	 	32.16	 	Counterparts	 	26
	 
	 	32.17	 	Nondisclosure of Lease Terms	 	26
	 
	 	32.18	 	Independent Covenants	 	27
	33.	 	Lease Execution	 	27
	 
	 	33.1	 	Tenant’s Authority	 	27
	 
	 	33.2	 	Joint and Several Liability	 	27
	 
	 	33.3	 	Building Name and Signage	 	27
	 
	 	33.4	 	Landlord’s Title; Air Rights	 	27
	 
	 	33.5	 	Time of Essence	 	27
	 
	 	33.6	 	No Option	 	27
	34.	 	Waiver of Jury Trial	 	27
	35.	 	Consent to Judicial Reference	 	27
	36.	 	ERISA	 	28
	37.	 	Option	 	28
	 
	 	37.1	 	Grant of Option	 	28
	 
	 	37.2	 	Effect of Default	 	28
	 
	 	37.3	 	Personal to Tenant	 	29
	 
	 	37.4	 	Fair Market Rent	 	29

iii

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