LEASE

Exhibit 10.321

LEASE

HCP TPSP, LLC

“Landlord”

AND

LIGAND PHARMACEUTICALS, INCORPORATED

“Tenant”

11085 NORTH TORREY PINES ROAD

SAN DIEGO, CALIFORNIA

TABLE OF CONTENTS

 

 

(i)

 

(ii)

LEASE

THIS LEASE (“Lease”) is made as of the 7 ^th day of August, 2009, by and between HCP TPSP, LLC, a Delaware limited liability company (“Landlord”), and LIGAND PHARMACEUTICALS INCORPORATED, a Delaware corporation (“Tenant”).

1. Lease Premises .

1.1 Premises . Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, those certain premises (“Premises”) consisting of a total of approximately 30,343 rentable square feet of space in that certain office building located at 11085 North Torrey Pines Road, San Diego, California (the “Building”), and comprised of (i) approximately 10,181 rentable square feet of office space located on the first (1 ^st ) floor of the Building (the “First Floor Premises”), and (ii) approximately 20,162 rentable square feet of office and laboratory space on the third (3 ^rd ) floor of the Building (the “Third Floor Premises”). The outline of the Premises is set forth in Exhibit A attached hereto. The parties hereto hereby acknowledge that the purpose of Exhibit A is to show the approximate location of the Premises in the Building, only, and such Exhibit is not meant to constitute an agreement, representation or warranty as to the construction of the Premises, the precise area thereof or the specific location of the “Common Areas,” as that term is defined in Section 1.3 , below, or the elements thereof or of the accessways to the Premises or the Project, as that term is defined in Section 1.2 , below.

1.2 The Building and The Project . The Building is part of an office project currently known as “Torrey Pines Science Park”. The term “Project,” as used in this Lease, shall mean (i) the Building and the Common Areas, (ii) the other buildings located in the vicinity of the Building and within Torrey Pines Science Park (the “Adjacent Buildings”), (iii) the land (which is improved with landscaping, parking facilities and other improvements) upon which the Building, the Adjacent Buildings and the Common Areas are located , and (iv) at Landlord’s discretion, any additional real property, areas, land, buildings or other improvements added thereto outside of the Project (provided that the addition of any such areas shall not increase the amounts payable by Tenant under this Lease on a net basis). The site plan for the Project is attached hereto as Exhibit A-1 .

1.3 Common Areas . 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 Article 10 of this Lease, those portions of the Project which are provided, from time to time, for use in common by Landlord, Tenant and any other tenants of the Project (such areas are collectively referred to herein as the “Common Areas”). The Common Areas may include a cafeteria or other restaurant located within the Project, a health club located within the Project, park or other facilities open to the general public and sidewalks, walkways, parkways, driveways and landscape areas located within and appurtenant to the Project. However Landlord makes no representation that any such Common Areas, whether or not such Common Areas are available as of the date of this Lease, shall be available throughout the entire Lease Term. The manner in which the Common Areas are maintained and operated shall be in the reasonable discretion of Landlord, provided that Landlord shall maintain and operate the same in a manner consistent with that of other first-class life science buildings in the vicinity of the Project, and the use thereof shall be subject to such rules, regulations and restrictions as Landlord may make from time to time. Landlord reserves the right (i) to close temporarily, make alterations or additions to, or change the location of elements of the Project and the Common Areas, including, without limitation, changes in the location, size, shape and number of street entrances, driveways, passages ways, stairways, direction of traffic, landscaped areas, loading and unloading areas, and

walkways; (ii) to add additional buildings and improvements to the Common Areas; (iii) to use the Common Areas while engaged in making additional improvements, repairs, or alterations to the Project; and (iv) to do and perform such other acts and make such other changes in, to or with respect to the Common Areas as Landlord may deem to be appropriate; provided, however, that in no event shall any such actions by Landlord materially increase the amount of Additional Rent payable by Tenant or materially decrease Tenant’s beneficial use and enjoyment of the Premises. To the extent that the fitness center currently existing in the Building remains an amenity available to the other tenants and occupants of the Project, Tenant shall be entitled to the non-exclusive use of such fitness center during the Lease Term, provided such use shall be subject to Landlord’s reasonable rules and regulations, and subject to the payment of the then-applicable standard and non-discriminatory usage fees.

2. Basic Lease Provisions .

2.1 For convenience of the parties, certain basic provisions of this Lease are set forth herein. The provisions set forth herein are subject to the remaining terms and conditions of this Lease and are to be interpreted in light of such remaining terms and conditions.

2.1.1 Rentable Area of the Premises : Approximately 30,343 square feet.

2.1.2 Rentable Area of the Building : Approximately 85,021 square feet.

2.1.3 Rentable Area of Project : Approximately 291,541 square feet.

2.1.4 Basic Annual Rent : $1,219,788.60, subject to three percent (3%) annual increases.

2.1.5 Monthly Installment of Basic Annual Rent :

 

2.1.6 Term Commencement Date : October 1, 2009.

2.1.7 Term Expiration Date : Twenty-seven (27) months from the Term Commencement Date

2.1.8 Permitted Use : Uses permitted in Section 10.1

 

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2.1.9 Address for Rent Payment :

HCP Life Science REIT

File 51091

Los Angeles, California 90074-1091

Addresses for Notices to Landlord:

HCP TPSP, LLC

c/o HCP Estates USA Inc.

444 North Michigan Avenue, Suite 3230

Chicago, IL 60611

Attn: Randy Rohner

Telecopier: (312) 755-0700

with a copy to:

HCP TPSP, LLC

c/o HCP, Inc.

3760 Kilroy Airport Way, Suite 300

Long Beach, CA 90806-2473

Attn: Legal Department

Telecopier: (562) 733-5219

and a copy to:

Allen Matkins Leck Gamble Mallory & Natsis

1901 Avenue of the Stars, Suite 1800

Los Angeles, CA 90067

Attn: Anton N. Natsis

Telecopier: (310) 788-2400

Address for Notices to Tenant:

Ligand Pharmaceuticals Incorporated

11085 North Torrey Pines Road, Suite 100

San Diego, California 92121

Attn: Chief Financial Officer

2.1.10 Security Deposit : $203,298.10

3. Term .

3.1 The term of this Lease (the “Term”) shall commence on the date set forth in Section 2.1.5, above, and each of the provisions hereof shall be binding upon and inure to the benefit of Landlord and Tenant from the date of execution hereof by each of the parties hereto.

3.2 The approximate Term of this Lease is as set forth in Section 2.1.6. The actual Term of this Lease will be that period from the Term Commencement Date through the Term Expiration Date, subject to earlier termination of this Lease or extension of the term of this Lease as provided herein.

 

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3.3 Tenant acknowledges and agrees that the Premises under this Lease may not be Ready for Occupancy on October 1, 2009. In such case, the Term Commencement Date shall nevertheless be October 1, 2009, since under (and subject to) the terms of that certain Lease Termination Agreement dated as of July 31, 2009, by and between Tenant, as tenant, and TPSC IX, LLC, as landlord (the “Lease Termination Agreement”), with respect to the Science Center Premises, Tenant shall have no further obligation to pay rent with respect to such Science Center Premises on and after October 1, 2009.

3.4 Notwithstanding the foregoing, in the event that Landlord fails to cause the Tenant Improvements in the First Floor Premises to be Substantially Completed on or before December 1, 2009 (the “Outside Anticipated Term Commencement Date”) (subject to events of force majeure and Tenant delays as set forth in Section 5.2 of the Tenant Work Letter), then for the period commencing as of the Outside Anticipated Commencement Date, and ending upon the date Landlord causes the Premises to be Ready for Occupancy (each day thereof, a “Day of Late Delivery”), then Tenant shall be entitled to receive, on a day-for-day basis, an abatement of the Base Rent (as that term is defined in Section 3.1, below) otherwise attributable to the Premises commencing on the Outside Anticipated Term Commencement Date and continuing for the total number of Days of Late Delivery.

4. Possession and Commencement Date .

4.1 Landlord shall tender possession of the Premises to Tenant on or before the Outside Anticipated Term Commencement Date.

4.2 Landlord and Tenant shall execute a written acknowledgment of the Term Commencement Date and the Term Expiration Date when such is established, in substantially the form attached hereto as Exhibit C .

4.3 Landlord hereby consents to Tenant’s early entry into the Third Floor Premises on or after the full execution and delivery of this Lease by Landlord and Tenant (“ Early Entry Period ”) for the purpose of installing telecommunications cablings, furniture, fixtures and equipment as more particularly set forth in Section 6.1 of the Tenant Work Letter, or for the conduct of the Permitted Use for such Third Floor Premises as more particularly set forth in Section 10.1, below. During any period Tenant is in the Premises prior to the Term Commencement Date, Tenant will comply with and observe all laws, safety rules and procedures, and comply with, and be bound by, all terms and conditions of this Lease other than payment of Rent.

4.4 Landlord acknowledges that (i) the occupant of the Premises immediately prior to Tenant, Torrey Pines Therapeutics (“ Prior Occupant ”), utilized Hazardous Material (as defined in Section 33.5 below) in the Premises; (ii) Prior Occupant has completed its required cleanup and decommissioning of the Premises prior to Tenant’s entry into the Premises pursuant to this Lease, (iii) copies of applicable documentation relating to such clean-up and decommissioning have been provided to Tenant, and (iv) notwithstanding any provision of this Lease (including, but not limited to, the Tenant Work Letter), Tenant is not liable or responsible for anything related to or caused by Prior Occupant’s use of the Premises.

5. Rent .

5.1 Tenant agrees to pay Landlord as Basic Annual Rent for the Premises the sum set forth in Section 2.1.3, subject to the rental adjustments provided in Article 6. Basic Annual Rent shall be paid in the equal monthly installments set forth in Section 2.1.4, each in advance on the first day of each and every calendar month during the term of this Lease.

 

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5.2 In addition to Basic Annual Rent, Tenant agrees to pay to Landlord as additional rent (“Additional Rent”), at the times hereinafter specified in this Lease, Direct Expenses as provided in Article 7, reimbursement and expenses of Landlord’s performance of any obligations of Tenant under this Lease, and all other amounts that Tenant assumes or agrees to pay under the provisions of this Lease, including without limitation any and all other sums that may become due by reason of any default of Tenant or failure on Tenant’s part to comply with the agreements, terms, covenants and conditions of this Lease to be performed by Tenant.

5.3 Basic Annual Rent and Additional Rent shall together be denominated “Rent.” Except as expressly set forth in this Lease, Rent shall be paid to Landlord, without notice, demand, abatement, suspension, deduction, setoff, counterclaim, or defense except as set forth in this Lease or pursuant to law (unless otherwise set forth in this Lease), at the office of Landlord as set forth in Section 2.1.8 or to such other person or at such other place as Landlord may from time to time designate in writing.

5.4 In the event the term of this Lease commences or ends on a day other than the first day of a calendar month, then the Rent for such fraction of a month shall be prorated for such period on the basis of a thirty (30) day month and shall be paid at the then current rate for such fractional month prior to the commencement of the partial month.

5.5 Except as otherwise expressly set forth in this Lease, this is an absolutely triple net lease to Landlord. It is the intent of the parties that the Basic Annual Rent payable under this Lease shall be a net return to Landlord and that Tenant shall pay all costs and expenses relating to the Premises unless otherwise expressly provided in this Lease.

6. Rental Adjustments . As shown in Section 2.1.4 the initial Basic Annual Rent set forth in Section 2.1.3 shall be increased each year by three percent (3%). As more particularly set forth in Section 2.1.4, the first such increase shall become effective commencing with that monthly rental installment which is first due on or after the first (1st) annual anniversary of the Term Commencement Date and subsequent increases shall become effective on the same day of each calendar year thereafter for so long as this Lease continues in effect.

7. Additional Rent and Direct Expenses .

7.1 General Terms . In addition to paying the Basic Annual Rent specified in Article 2 of this Lease, Tenant shall pay “ Tenant’s Share ” of the annual “Direct Expenses ,” as those terms are defined in Sections 7.2.6 and 7.2.2 of this Lease, respectively. All amounts due under this Article 7 as Additional Rent shall be payable for the same periods and in the same manner as the Basic Annual Rent. Without limitation on other obligations of Tenant which survive the expiration of the Term, the obligations of Tenant to pay the Additional Rent provided for in this Article 7 shall survive the expiration of the Term.

7.2 Definitions of Key Terms Relating to Additional Rent . As used in this Article 7 , the following terms shall have the meanings hereinafter set forth:

7.2.1 “Cost Pools” shall have the meaning set forth in Section 7.3 , below.

7.2.2 “Direct Expenses” shall mean “Operating Expenses” and “Tax Expenses.”

 

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7.2.3 “Expense Year” shall mean each calendar year in which any portion of the Term falls, through and including the calendar year in which the Term expires, provided that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive month period, and, in the event of any such change, Tenant’s Share of Direct Expenses shall be equitably adjusted for any Expense Year involved in any such change.

7.2.4 “Operating Expenses” shall mean, subject to the limitations and provisions of this Lease, all expenses, costs and amounts of every kind and nature which Landlord pays or accrues during any Expense Year because of or in connection with the ownership, management, maintenance, security, repair, replacement, restoration or operation of the Project, or any portion thereof. Without limiting the generality of the foregoing, Operating Expenses shall specifically include any and all of the following: (i) the cost of supplying all utilities (other than to tenant-occupied portions of the Project), the cost of operating, repairing, maintaining, and renovating the utility, telephone, mechanical, sanitary, storm drainage, and elevator systems, and the cost of maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections and the reasonable cost of contesting any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with a governmentally mandated transportation system management program or similar program; (iii) the cost of all insurance carried by Landlord in connection with the Project as reasonably determined by Landlord; (iv) the cost of landscaping, relamping, and all supplies, tools, equipment and materials used in the operation, repair and maintenance of the Project, or any portion thereof; (v) the cost of parking area operation, repair, restoration, and maintenance; (vi) fees and other costs, including reasonable and commercially typical management fees and reasonable accounting fees of the Project, and other fees of all contractors and consultants in connection with the management, operation, maintenance and repair of the Building; (vii) payments under any equipment rental agreements and the fair rental value of any management office space; (viii) subject to item (f), below, wages, salaries and other compensation and benefits, including taxes levied thereon, of all persons engaged in the operation, maintenance and security of the Project; (ix) costs under any instrument pertaining to the sharing of costs by the Project; (x) operation, repair, maintenance and (subject to (xiii) below) replacement of all systems and equipment and components thereof of the Project; (xi) the cost of janitorial services (other than to tenant-occupied portions of the Project), the cost of alarm, security and other services, replacement of wall and floor coverings, ceiling tiles and fixtures in common areas, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (xii) amortization (including interest on the unamortized cost) over such period of time as Landlord shall reasonably determine, of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Project, or any portion thereof; (xiii) the cost of capital improvements or other costs incurred in connection with the Project (A) which are intended to effect economies in the operation or maintenance of the Project, or any portion thereof, or to reduce current or future Operating Expenses or to enhance the safety or security of the Project or its occupants in commercially reasonable manner, (B) that are required to comply with legally mandated conservation programs, (C) which are replacements or modifications of nonstructural items located in the Common Areas required to keep the Common Areas in good order or condition, or (D) that are required under any governmental law or regulation; provided, however, that any capital expenditure shall be amortized (including interest on the amortized cost) over such period of time as is commercially reasonable; and (xiv) costs, fees, charges or assessments imposed by, or resulting from any mandate imposed on Landlord by, any federal, state or local government for fire and police protection, trash removal, community services, or other services which do not constitute “Tax Expenses” as that term is defined in Section 7.2.5 , below, and (xv) payments under any easement, license, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs by the Building with adjacent property, including, without limitation, any covenants, conditions and restrictions affecting the property, and reciprocal easement agreements affecting the property, any parking licenses, and any agreements with transit agencies affecting the Property, or any other Project Documents (as that term is defined in Section 10.2, below, other than parking agreements entered into by Landlord with respect to the temporary use of the Project parking facilities by

 

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third parties (for example, such as in connection with parking for U.S. Open golfing events). Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses shall not, however, include:

(a) costs, including legal fees, space planners’ fees, advertising and promotional expenses (except as otherwise set forth above), and brokerage fees incurred in connection with the original or future construction or development, or original or future leasing of the Project, and costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements made for tenants occupying space in the Project after the Term Commencement Date or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Project (excluding, however, such costs relating to any Common Areas of the Project or parking facilities);

(b) except as set forth in items (xii), (xiii), and (xiv) above, depreciation, interest and principal payments on mortgages and other debt costs, if any, penalties and interest, costs of capital repairs and alterations, and costs of capital improvements and equipment;

(c) costs for which the Landlord is reimbursed by any tenant or occupant of the Project or by insurance by its carrier or any tenant’s carrier or by anyone else, and electric power costs for which any tenant directly contracts with the local public service company;

(d) any bad debt loss, rent loss, or reserves for bad debts or rent loss;

(e) 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 (which shall specifically include, but not be limited to, accounting costs associated with the operation of the Project). Costs associated with the operation of the business of the partnership or entity which constitutes the Landlord include costs of 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;

(f) 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 manager;

(g) amount paid as ground rental for the Project by the Landlord;

(h) except for a Project management fee to the extent allowed pursuant to item (l) below, overhead and profit increment paid to the Landlord or to subsidiaries or affiliates of the Landlord for services in the Project to the extent the same exceeds the costs of such services rendered by qualified, first-class unaffiliated third parties on a competitive basis;

 

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(i) any compensation paid to clerks, attendants or other persons in commercial concessions operated by the Landlord, provided that any compensation paid to any concierge at the Project shall be includable as an Operating Expense;

(j) rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment which if purchased the cost of which would be excluded from Operating Expenses as a capital cost, except equipment not affixed to the Project which is used in providing engineering, janitorial or similar services and, further excepting from this exclusion such equipment rented or leased to remedy or ameliorate an emergency condition in the Project ;

(k) all items and services for which Tenant or any other tenant in the Project reimburses Landlord or which Landlord provides selectively to one or more tenants (other than Tenant) without reimbursement;

(l) fees payable by Landlord for management of the Project in excess of four percent (4%) of Landlord’s base rental revenues;

(m) any costs expressly excluded from Operating Expenses elsewhere in this Lease;

(n) rent for any office space occupied by Project management personnel to the extent the size or rental rate of such office space exceeds the size or fair market rental value of office space occupied by management personnel of the comparable buildings in the vicinity of the Building, with adjustment where appropriate for the size of the applicable project;

(o) costs arising from the gross negligence or willful misconduct of Landlord in connection with this Lease; and

(p) costs incurred to comply with laws relating to the removal of hazardous material (as defined under applicable law) which was in existence in the Building or on the Project prior to the Term Commencement Date, and was of such a nature that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions that it then existed in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto; and costs incurred to remove, remedy, contain, or treat hazardous material, which hazardous material is brought into the Building or onto the Project after the date hereof by Landlord or any other tenant of the Project and is of such a nature, at that time, that a federal, State or municipal governmental authority, if it had then had knowledge of the presence of such hazardous material, in the state, and under the conditions, that it then exists in the Building or on the Project, would have then required the removal of such hazardous material or other remedial or containment action with respect thereto.

If Landlord is not furnishing any particular work or service (the cost of which, if performed by Landlord, would be included in Operating Expenses) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would reasonably have been incurred during such period by Landlord if it had at its own expense furnished such work or service to such tenant. If the Project is not at least one hundred percent (100%) occupied during all or a portion of any Expense Year, Landlord shall make an appropriate adjustment to the components of Operating Expenses for such year to determine the amount of Operating Expenses that would have been incurred had the Project been one hundred percent (100%) occupied; and the amount so determined shall be deemed to have been the amount of Operating Expenses for such year.

 

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7.2.5 Taxes .

7.2.5.1. “Tax Expenses” shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary (including, without limitation, real estate taxes, general and special assessments, transit taxes, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, unless required to be paid by Tenant, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with the Project, or any portion thereof), which shall be paid or accrued during any Expense Year (without regard to any different fiscal year used by such governmental or municipal authority) because of or in connection with the ownership, leasing and operation of the Project, or any portion thereof.

7.2.5.2. Tax Expenses shall include, without limitation: (i) Any tax on the rent, right to rent or other income from the Project, or any portion thereof, or as against the business of leasing the Project, or any portion thereof; (ii) Any assessment, tax, fee, levy or charge in addition to, or 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 (“Proposition 13”) 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, and, in further recognition of the decrease in the level and quality of governmental services and amenities as a result of Proposition 13, Tax Expenses shall also include any governmental or private assessments or the Project’s contribution towards a governmental or private cost-sharing agreement for the purpose of augmenting or improving the quality of services and amenities normally provided by governmental agencies; (iii) Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the Rent payable hereunder, including, without limitation, any business or gross income tax or excise tax with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; and (iv) 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 or the improvements thereon.

7.2.5.3. Any costs and expenses (including, without limitation, reasonable attorneys’ and consultants’ fees) incurred in attempting to protest, reduce or minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such expenses are incurred. Tax refunds shall be credited against Tax Expenses and refunded to Tenant regardless of when received, based on the Expense Year to which the refund is applicable, provided that in no event shall the amount to be refunded to Tenant for any such Expense Year exceed the total amount paid by Tenant as Additional Rent under this Article 7 for such Expense Year. If Tax Expenses for any period during the Term or any extension thereof are increased after payment thereof for any reason, including, without limitation, error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord upon demand Tenant’s Share of any such increased Tax Expenses.

7.2.5.4. Notwithstanding anything to the contrary contained in this Section 7.2.5 (except as set forth in Section 7.2.5.1 , above), there shall be excluded from Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes, and other taxes to the extent applicable to

 

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Landlord’s general or net income (as opposed to rents, receipts or income attributable to operations at the Project), (ii) any items included as Operating Expenses, and (iii) any items paid by Tenant under Section 7.5 of this Lease.

7.2.6 “Tenant’s Share” shall mean 10.41%, which is based on the Rentable Area of the Premises divided by the Rentable Area of the Project.

7.3 Cost Pools . Landlord shall have the right, from time to time, to equitably allocate some or all of the Direct Expenses for the Project among different portions or occupants of the Project (the “ Cost Pools ”), in Landlord’s reasonable discretion. Such Cost Pools may include, but shall not be limited to, the office space tenants of a building of the Project or of the Project, and the retail space tenants of a building of the Project or of the Project. The Direct Expenses within each such Cost Pool shall be allocated and charged to the tenants within such Cost Pool in an equitable manner.

7.4 Calculation and Payment of Additional Rent . Tenant shall pay to Landlord, in the manner set forth in Section 7.4.1 , below, and as Additional Rent, Tenant’s Share of Direct Expenses for each Expense Year.

7.4.1 Statement of Actual Direct Expenses and Payment by Tenant . Within one hundred twenty (120) days after the end of each Expense Year, Landlord shall give to Tenant a statement (with reasonable detail and explanation) (the “Statement”) which shall state the Direct Expenses incurred or accrued for such preceding Expense Year, and which shall indicate the amount of Tenant’s Share of Direct Expenses. Upon receipt of the Statement for each Expense Year commencing or ending during the Term, Tenant shall pay, with it’s the next installment of Basic Annual Rent due more than thirty (30) days after Tenant’s receipt of the Statement, the full amount of Tenant’s Share of Direct Expenses for such Expense Year, less the amounts, if any, paid during such Expense Year as “Estimated Direct Expenses,” as that term is defined in Section 7.4.2 , below, and if Tenant paid more as Estimated Direct Expenses than the actual Tenant’s Share of Direct Expenses, Tenant shall receive a credit in the amount of Tenant’s overpayment against Rent next due under this Lease. The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord or Tenant from enforcing its rights under this Article 7 . Even though the Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant’s Share of Direct Expenses for the Expense Year in which this Lease terminates, Tenant shall pay to Landlord such amount within thirty (30) days of Tenant’s receipt of the Statement, and if Tenant paid more as Estimated Direct Expenses than the actual Tenant’s Share of Direct Expenses, Landlord shall, within thirty (30) days, deliver a check payable to Tenant in the amount of the overpayment. The provisions of this Section 7.4.1 shall survive the expiration or earlier termination of the Term.

7.4.2 Statement of Estimated Direct Expenses . In addition, Landlord shall use commercially reasonable efforts to give Tenant, as soon as the same is available, a yearly expense estimate statement with reasonable detail and explanation (the “Estimate Statement”) which shall set forth Landlord’s reasonable estimate (the “Estimate”) of what the total amount of Direct Expenses for the then-current Expense Year shall be and the estimated Tenant’s Share of Direct Expenses (the “Estimated Direct Expenses”). The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Estimated Direct Expenses under this Article 7 , nor shall Landlord be prohibited from revising any Estimate Statement or Estimated Direct Expenses theretofore delivered to the extent necessary. Thereafter, Tenant shall pay, with the installment of Basic Annual Rent due thirty (30) days after Tenant’s receipt of the Estimate Statement, a fraction of the Estimated Direct Expenses for the Expense Year (reduced by any amounts paid pursuant to the last sentence of this Section 7.4.2 ). If the thirty (30) day period ends prior to the commencement of the applicable Expense Year, then the fraction to the period is one-twelfth

 

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(1/12th). If not, such one-twelfth (1/12th) fraction shall have as its numerator the number of months which have elapsed in such current Expense Year, including the month of such payment, and twelve (12) as its denominator. Until a new Estimate Statement is furnished (which Landlord shall have the right to deliver to Tenant at any time), Tenant shall pay monthly, with the monthly Basic Annual Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated Direct Expenses set forth in the previous Estimate Statement delivered by Landlord to Tenant.

7.5 Taxes and Other Charges for Which Tenant Is Directly Responsible .

7.5.1 Tenant shall be liable for and shall pay ten (10) days before delinquency, taxes levied against Tenant’s equipment, furniture, fixtures and any other personal property located in or about the Premises. If any such taxes on Tenant’s equipment, furniture, fixtures and any other personal property are levied against Landlord or Landlord’s property or if the assessed value of Landlord’s property is increased by the inclusion therein of a value placed upon such equipment, furniture, fixtures or any other personal property and if Landlord pays the taxes based upon such increased assessment, which Landlord shall have the right to do regardless of the validity thereof but only under proper protest if requested by Tenant, Tenant shall upon demand repay to Landlord the taxes so levied against Landlord or the proportion of such taxes resulting from such increase in the assessment, as the case may be.

7.5.2 If the tenant improvements in the Premises, whether installed and/or paid for by Landlord or Tenant and whether or not affixed to the real property so as to become a part thereof, are assessed for real property tax purposes at a valuation higher than the valuation at which tenant improvements conforming to Landlord’s “building standard” in other space in the Building are assessed, then the Tax Expenses levied against Landlord or the property by reason of such excess assessed valuation shall be deemed to be taxes levied against personal property of Tenant and shall be governed by the provisions of Section 7.5.1 , above.

7.5.3 Notwithstanding any contrary provision herein, Tenant shall pay prior to delinquency any (i) rent tax or sales tax, service tax, transfer tax or value added tax, or any other applicable tax on the rent or services herein or otherwise respecting this Lease, (ii) taxes assessed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or Tenant’s Share of any portion of the Project, including the Project parking facility; or (iii) taxes assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises.

7.6 Intentionally deleted .

7.7 Allocation of Direct Expenses . The parties acknowledge that the Building is a part of a multi-building project and that the costs and expenses incurred in connection with the Project ( i.e. , the Direct Expenses) should be shared between the tenants of the Building and the tenants of the other buildings in the Project. Accordingly, certain of the Direct Expenses, which portion shall be determined by Landlord on an equitable basis, are determined annually for the Project as a whole (the “ Project Direct Expenses ”), and a portion of such Project Direct Expenses shall be allocated to the tenants of the Building (as opposed to the tenants of any other buildings in the Project) based on the proportion of the rentable square footage of the Building as compared to the rentable square footage of all the buildings in the Project, and such portion shall be deemed to be Direct Expenses which are applicable to the Building for purposes of this Lease. In addition, to the extent that the fitness center currently existing in the Building remains an amenity available to the other tenants and occupants of the Project, the Direct Expenses incurred with respect to such fitness center shall be deemed Direct Expenses applicable to the entire Project, as opposed to Direct Expenses applicable to the only the Building.

 

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8. Tenant’s Right to Inspect . Tenant shall have the right, upon reasonable notice, to inspect and copy documents showing in reasonable detail the actual Direct Expenses expense paid by Landlord. Landlord shall maintain such documents as are reasonably necessary for such purpose for a period of not less than one (1) year. If, after such inspection, Tenant disputes the amount of Direct Expenses payable by Tenant, Tenant shall be entitled to retain an independent nationally or regionally recognized certified public accountant to audit or review Landlord’s records to determine the proper amount of Direct Expenses. If such audit or review reveals that Landlord has overcharged Tenant, then within ten (10) business days after the results of such audit are made available to Landlord, Landlord shall reimburse Tenant the amount of such overcharge. If the audit reveals that Tenant was undercharged, then within ten (10) business days after the results of the audit are made available to Tenant, Tenant shall reimburse Landlord the amount of such undercharge. Tenant agrees to pay the cost of such audit if Tenant the Direct Expenses charged to Tenant are within three percent (3%) of Landlord’s actual costs, and Landlord shall pay the cost of such audit if its actual costs are less than ninety-seven percent (97%) or more than one hundred three percent (103%) of the Direct Expenses charged to Tenant.

9. Security Deposit . Concurrently with Tenant’s execution of this Lease, Tenant shall deposit with Landlord a security deposit (the “Security Deposit”) in the amount set forth in Section 2.1.9 , as security for the faithful performance by Tenant of all of its obligations under this Lease. If Tenant defaults with respect to any provisions of this Lease, including, but not limited to, the provisions relating to the payment of Rent, the removal of property and the repair of resultant damage, Landlord may, without notice to Tenant, but shall not be required to apply all or any part of the Security Deposit for the payment of any Rent or any other sum in default and Tenant shall, upon demand therefor, restore the Security Deposit to its original amount. Any unapplied portion of the Security Deposit shall be returned to Tenant, or, at Landlord’s option, to the last assignee of Tenant’s interest hereunder, within sixty (60) days following the expiration of the Term. Tenant shall not be entitled to any interest on the Security Deposit. Tenant hereby irrevocably waives and relinquishes any and all rights, benefits, or protections, if any, Tenant now has, or in the future may have, under Section 1950.7 of the California Civil Code, any successor statue, and all other provisions of law, now or hereafter in effect, including, but not limited to, any provision of law which (i) establishes the time frame by which a landlord must refund a security deposit under a lease, or (ii) provides 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 subject premises. Tenant acknowledges and agrees that (A) any statutory time frames for the return of a security deposit are superseded by the express period identified in this Article 9 , above, and (B) rather than be so limited, Landlord may claim from the Security Deposit (i) any and all sums expressly identified in this Article 9 , above, and (ii) any additional sums reasonably necessary to compensate Landlord for any and all losses or damages caused by Tenant’s default of this Lease, including, but not limited to, all damages or rent due upon termination of this Lease pursuant to Section 1951.2 of the California Civil Code.

10. Use .

10.1 Tenant shall use the First Floor Premises solely for general office use consistent with a first-class suburban, science park office building and Tenant shall not use or permit the First Floor Premises to be used for any other purpose or purposes whatsoever without the prior written consent of Landlord, which may be withheld in Landlord’s sole discretion, exercised in good faith. With regard to the Third Floor Premises, Tenant may use the Third Floor Premises for any of those purposes, and only those purposes, allowed by (i) the City of San Diego Scientific Research Zone Ordinance in effect from time to time and as applicable to the Third Floor Premises, (ii) any other applicable laws, regulations, ordinances, requirements, permits and approvals applicable to the Project, and (iii) all covenants, conditions and restrictions in the Project Documents (defined in the following Section 10.2) or otherwise recorded against the Project, and shall not use the Third Floor Premises, or permit or suffer the Third Floor Premises to

 

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be used, for any other purpose without the prior written consent of Landlord, which consent may be withheld in Landlord’s sole discretion, exercised in good faith. Landlord acknowledges that Tenant’s activities may include scientific research and development pertaining to pharmaceuticals (including radio-active materials and other regulated substances), corporate and other office space, ancillary manufacturing capabilities, and a vivarium, subject to the terms, conditions and restrictions set forth in Article 33. Tenant may change the use of the Third Floor Premises from time to time as long as such changed use is authorized by this Section 10.1, such use is legally permissible, and Tenant first obtains the written consent of Landlord, which consent may be withheld in Landlord’s sole discretion, exercised in good faith. Tenant shall be responsible, at its sole cost and expense, for obtaining all operating permits, licenses and governmental approvals necessary for the operation of the uses permitted hereunder (the “Permitted Uses”) from the Premises and for determining that the Premises and Building are suitable for the Permitted Use. Tenant shall deliver copies of all such operating permits, licenses and governmental approvals to Landlord prior to using the Premises for any purpose for which any such permit, license or approval is required and upon any renewal or replacement thereof.

10.2 Tenant shall conduct its business operations and use the Premises in compliance with all federal, state, and local laws, regulations, ordinances, regulations, requirements, permits and approvals applicable to the Premises, and the Project Documents described below. Tenant shall not use or occupy the Premises in violation of any law or regulation. Tenant shall immediately deliver to Landlord copies of all written notices pertaining to any alleged violation of federal, state or local laws, regulations, ordinances, requirements, permits, approvals or any alleged violation of any of the Project Documents.

Tenant shall comply with any direction of any governmental authority having jurisdiction which shall, by reason of the nature of Tenant’s use or occupancy of the Premises, impose any duty upon Tenant or Landlord with respect to the Premises or with respect to the use or occupation thereof, including any duty to make structural or capital improvements, alterations, repairs and replacements to the Premises.

This Lease, and any sublease or assignment entered into by Tenant under the provisions of this Lease, shall be subject and subordinate to any of the Project Documents affecting the Property which may be amended or modified from time to time in a manner consistent. with the terms and intent of such Project Documents.

The “Project Documents” include the Hazardous Material Documents, as such are defined in Section 33.4, as they may be amended from time to time.

10.3 Tenant shall not do or permit to be done anything which will invalidate or increase the cost of any fire, extended coverage or any other insurance policy covering the Premises, or which will make such insurance coverage unavailable on commercially reasonable terms and conditions, and shall comply with all rules, orders, regulations and requirements of the insurers of the Premises.

10.4 Subject to the terms of the Tenant Work Letter attached hereto as Exhibit B, Tenant shall comply with the Americans with Disabilities Act of 1990 (“ADA”), and the regulations promulgated thereunder, as amended from time to time. All responsibility for compliance with the ADA relating to the Premises and the activities conducted by Tenant within the Premises shall be exclusively that of Tenant and not of Landlord (subject, however, to the terms of Section 1.1 of the Tenant Work Letter), including any duty to make structural or capital improvements (as set forth in Section 7.2 above), alterations, repairs and replacements to the Premises. Any alterations to the Premises made by Tenant for the purpose of complying with the ADA or which otherwise require compliance with the ADA shall be done in accordance with Article 17 of this Lease; provided, that Landlord’s consent to such alterations shall not constitute either Landlord’s assumption, in whole or in part, of Tenant’s responsibility for compliance with the ADA, or

 

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representation or confirmation by Landlord that such alterations comply with the provisions of the ADA. However, nothing in this Lease shall be construed to require Tenant to make structural or capital improvements, alterations, repairs or replacements to comply with ADA unless and until Landlord or Tenant has received written notice of the need for such capital improvements, alterations, repairs or replacements from a court of law exercising proper jurisdiction with regard thereto, or from any government entity. Notwithstanding the foregoing, Tenant shall have the right to object to and defend against any such notice from a governmental entity, provided that (a) Tenant has good faith belief that such improvements, alterations, repairs or replacements are unnecessary and not required to comply with ADA and (b) Tenant agrees to indemnify and defend Landlord against and save Landlord harmless from all demands, claims, causes of action and judgments, and all reasonable expenses incurred in investigating or resisting the same (including reasonable attorneys’ fees), relating to Tenant’s objection or defense against any such notice from a governmental entity.

10.5 No sign, advertisement, or notice shall be exhibited, painted or affixed by Tenant on any part of the Premises which is visible from outside the Building, or any part of the exterior of the Building or elsewhere in the Premises, without the prior written consent of Landlord, which consent may be withheld in Landlord’s reasonable discretion. The expense of design, permits, purchase and installation of any signs shall be the responsibility of Tenant and the cost thereof shall be borne by Tenant. Tenant’s identifying signage shall be provided by Landlord, at Tenant’s cost, and such signage shall be comparable to that used by Landlord for other similar floors in the Building and shall comply with Landlord’s Building standard signage program. At the termination of the Lease, all signs shall be the property of Tenant and may be removed from the Premises by Tenant, subject to the provisions of Article 28.

10.6 No equipment shall be placed at a location within the Building other than a location designed to carry the load of the equipment. Equipment weighing in excess of floor loading capacity shall not be placed in the Building.

10.7 Tenant covenants and agrees that Tenant shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary to the provisions of the rules and regulations set forth in Exhibit D , attached hereto.

11. Brokers . Other than Tenant paying a commission to Cushman & Wakefield, Inc., pursuant to a separate agreement, the parties represent and warrant one to the other that there have been no dealings with any real estate broker or agent in connection with the negotiation of this Lease. Tenant and Landlord shall each be responsible for any commission or other amount claimed by or due as set forth above. Each shall indemnify, defend, protect, and hold harmless the other from any claim of any broker as a result of any act or agreement of the indemnitor.

12. Holding Over .

12.1 If, with Landlord’s written consent, Tenant holds possession of all or any part of the Premises after the expiration or earlier termination of this Lease, Tenant shill become a tenant from month to month upon the date of such expiration or earlier termination, and in such case Tenant shall continue to pay in accordance with Article 5 the Basic Annual Rent as adjusted from the Term Commencement Date in accordance with Article 6, together with Operating Expenses in accordance with Article 7 and other Additional Rent as may be payable by Tenant, and such month-to-month tenancy shall be subject to every other term, covenant and condition contained herein. Such continued occupancy with Landlord’s consent shall include up to three (3) months so long as Tenant has given written notice to Landlord at least nine (9) months prior to such expiration or termination of the term.

 

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12.2 If Tenant remains in possession of all or any portion of the Premises after the expiration or earlier termination of the term hereof without the express written consent of Landlord, Tenant shall become a tenant at sufferance upon the terms of this Lease as may be applicable to a tenant at sufferance and any such holdover shall not constitute an extension of this Lease; except that Tenant shall pay monthly rental for the first three (3) months shall be equal to one hundred twenty percent (120%) of the Basic Annual Rent in effect during the last twelve (12) months of the Term, and thereafter shall be equal to one hundred fifty percent (150%) of the Basic Annual Rent in effect during the last twelve (12) months of the regular Lease Term. In addition, if Landlord delivers ninety (90) days prior written notice to Tenant that a specifically identified successor occupant is ready, willing and able to move in and occupy the Premises upon the expiration or termination of the term hereof, then Landlord may pursue any and all legal remedies available to Landlord under applicable law with respect to such unconsented holding over by Tenant, may recover all damages, direct or consequential resulting therefrom, and Tenant shall indemnify, defend, and hold Landlord harmless from and against any losses, damages, or claims related thereto.

12.3 Acceptance by Landlord of Rent after such expiration or earlier termination shall not result in a renewal or reinstatement of this Lease.

12.4 The foregoing provisions of this Article 12 are in addition to and do not affect Landlord’s right to re-entry or any other rights of Landlord under Article 24 or elsewhere in this Lease or as otherwise provided by law.

13. Intentionally Omitted .

14. Condition of Premises .

14.1 Subject to the terms of the Tenant Work Letter and this Lease, Tenant acknowledges and agrees that Tenant is taking possession of the Premises in their “as-is” condition and that neither Landlord nor any agent of Landlord has made any representation or warranty, express or implied, with respect to the condition of the Premises, or with respect to their suitability for the conduct of Tenant’s business.

14.2 Subject to the terms of the Tenant Work Letter and this Lease, Tenant’s taking possession of the Premises shall constitute acceptance of the Premises in the condition in which they then exist, and shall waive any right or claim Tenant may have against Landlord for any cause directly or indirectly arising out of the condition of the Premises, appurtenances thereto, the improvements thereon and the equipment thereof.

14.3 Landlord hereby assigns to Tenant, and Tenant shall have the benefit of on a non-exclusive basis, any and all warranties (if any) with respect to the design, materials and construction of the improvements within the Premises which are assignable to Tenant. Landlord and Tenant agree to cooperate with regard to the enforcement of all such warranties, rights and claims. All such warranties, rights and claims shall revert to Landlord exclusively upon the expiration or earlier termination of this Lease. Tenant shall comply with whatever maintenance and similar standards are required to maintain any applicable warranties in affect.

14.4 Landlord shall not be sued or named as a party in any suit or action to enforce any such warranty except as may be necessary to secure jurisdiction of Landlord or to the extent necessary to enforce any such warranty. Landlord shall not be required to answer or otherwise plead to any complaint and no judgment will be taken or writ of execution levied against Landlord with respect thereto. Without limited the foregoing, Tenant shall (i) not name Landlord as a party or participant in any suit or action to such warranty except as may be necessary to secure jurisdiction of Landlord or to the extent necessary to enforce any. such warranty, (ii) Tenant shall indemnify, defend and hold harmless Landlord against any claims, suits or actions related to the enforcement of any such warranties.

 

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14.5 At the expiration, or earlier termination of this Lease, or upon the exercise of any right of Landlord to dispossess Tenant from the Premises, Tenant shall surrender the Premises in good and clean condition and repair, ordinary wear and tear, casualty and condemnation excepted, and in accord with the requirements of this Lease, including Article 33 hereof.

15. Parking Facilities . Commencing on the Term Commencement Date, Tenant shall have the right to use three (3) parking spaces per each 1,000 square feet of Rentable Area of Premises, on a monthly basis throughout the Term without fee or charge, in the parking facility serving the Building. Tenant shall be responsible for the full amount of any taxes imposed by any governmental authority in connection with the use of such parking passes by Tenant or the use of the parking facility by Tenant. Tenant’s continued right to use the Building parking is conditioned upon Tenant abiding by all rules and regulations which are prescribed from time to time for the orderly operation and use of the parking facility where the parking passes are located (including any sticker or other identification system established by Landlord and the prohibition of vehicle repair and maintenance activities in the parking facilities), Tenant’s cooperation in seeing that Tenant’s employees and visitors also comply with such rules and regulations. Except for Landlord’s negligence or intentional misconduct, Tenant’s use of the Building parking facility shall be at Tenant’s sole risk and Tenant acknowledges and agrees that Landlord shall have no liability whatsoever for damage to the vehicles of Tenant, its employees and/or visitors, or for other personal injury or property damage or theft relating to or connected with the parking rights granted herein or any of Tenant’s, its employees’ and/or visitors’ use of the parking facilities. Tenant’s rights hereunder are subject to the terms of any Project Documents. Landlord specifically reserves the right to change the size, configuration, design, layout, location and all other aspects of the parking facility serving the Building at any time and Tenant acknowledges and agrees that Landlord may, without incurring any liability to Tenant and without any abatement of Rent under this Lease, from time to time, temporarily close-off or restrict access to the Building parking facility for purposes of permitting or facilitating any such construction, alteration or improvements. In connection with any such actions, Landlord shall use commercially reasonable efforts to minimize interference with Tenant’s use of the Project parking areas. Landlord reserves the right to require attended parking from time to time. Landlord may delegate its responsibilities hereunder to a parking operator in which case such parking operator shall have all the rights of control attributed hereby to the Landlord. The parking passes are provided to Tenant solely for use by Tenant’s own personnel and such passes may not be transferred, assigned, subleased or otherwise alienated by Tenant without Landlord’s prior approval. Tenant may validate visitor parking by such method or methods as the Landlord may establish, at the validation rate from time to time generally applicable to visitor parking. Tenant shall not place any equipment, storage containers or any other property on the surface parking area except as approved by Landlord, which approval may be withheld in Landlord’s sole discretion.

16. Utilities and Services .

16.1 Standard Tenant Services . Landlord shall provide the following services on all days (unless otherwise stated below) during the Lease Term.

16.1.1 Subject to the terms of the Tenant Work Letter, Landlord shall provide Tenant with the existing heating, ventilation and air conditioning (“ HVAC ”) systems servicing in the Premises, in its “as-is” condition, and which HVAC systems shall be repaired and maintained by Tenant, at it’s sole cost and expense. Tenant shall pay the cost of all electricity used by such HVAC systems pursuant to Section 16.2 below.

 

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16.1.2 Landlord shall provide the currently existing, separately metered electrical system with respect to the Third Floor Premises, and Landlord shall provide electrical sub-meters for the electrical system with respect to the First Floor Premises (which, to the extent not already installed, such electrical sub-meters shall be part of the First Floor Tenant Improvements constructed pursuant to the terms of Section 1.2 and 1.3 of the Tenant Work Letter), and Tenant shall pay the cost of the electrical service as set forth in Section 16.2 below.

16.1.3 Landlord shall provide city water from the regular Building outlets for drinking, lavatory and toilet purposes in the Building Common Areas. Tenant shall pay the cost of any water provided to the Premises as set forth in Section 16.2 , below.

16.1.4 Landlord shall not be obligated to provide janitorial services to the Premises. Tenant shall retain a janitorial contractor to provide janitorial services to the Premises a minimum of five (5) days per week in a manner consistent with other comparable buildings in the vicinity of the Building.

16.1.5 Landlord shall provide nonexclusive, non-attended automatic passenger elevator service at all times, including on the Holidays and shall provide nonexclusive, non-attended automatic passenger escalator service during Building Hours only.

Tenant shall cooperate fully with Landlord at all times and abide by all regulations and requirements that Landlord may reasonably prescribe for the proper functioning and protection of the HVAC, electrical, mechanical and plumbing systems.

16.2 Payment of Utilities Costs . Tenant agrees, at its own expense, to pay for all water, power, gas, electric current, telephone and all similar utilities used by Tenant in the Premises (including, without limitation, all sales, use and other taxes imposed thereon by any governmental authority). Subject to the terms of the Tenant Work Letter, Tenant agrees to provide, prior to Tenant’s occupancy and at Tenant’s sole cost and expense, all utility meters for all utility usage in the Premises. In the event that any utilities are furnished to the Premises by Landlord, whether submetered or otherwise, then Tenant shall pay to Landlord the cost of such utilities, including an administrative charge for Landlord’s supervision and reimbursement for any penalties for usage or other surcharges imposed by any utility company. If charges for any such utilities are not separately charged to Tenant by the utility company, or separately submetered to the Premises, Landlord will apportion the costs of such utilities among the tenants utilizing the utility or service on an equitable basis as determined by Landlord. Within thirty (30) days after receipt of Landlord’s statement of apportionment or statement setting forth the charges payable by Tenant, Tenant shall pay to Landlord as Additional Rent, the cost of such services and utilities so apportioned or so provided by Landlord. If Landlord shall from time to time determine that the use of any such utility or service in the Premises is disproportionate to the use of other tenants, Landlord may adjust Tenant’s share of the cost thereof from a date determined by Landlord to take equitable account of such disproportionate use.

16.3 Interruption of Use . Landlord shall not be liable for, nor shall any eviction of Tenant result from, any failure of any such utility or service, and in the event of such failure Tenant shall not be entitled to any abatement or reduction of Rent, nor be relieved from the operation of any covenant or agreement of this Lease, and Tenant waives any right to terminate this Lease on account thereof, provided, however, if any such failure is due to the gross negligence or willful misconduct of Landlord, and such failure continues beyond three (3) consecutive calendar days, then Rent shall be equitably abated until uninterrupted service is restored. Tenant acknowledges and agrees that it shall insure against any risks it determines are necessary to be insured against pursuant to this Section 16.2.

 

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17. Alterations .

17.1 Tenant shall make no alterations, additions or improvements (hereinafter in this section, “improvements”) in or to the Premises, other than interior non-structural alterations, additions or improvements costing less than Fifty Thousand Dollars ($50,000) (“Permitted Alterations”), without notice to Landlord. For any alteration not a Permitted Alteration, Tenant shall deliver notice to Landlord, with plans and specifications and working drawings for the improvements.

17.2 The improvements shall be constructed only by licensed contractors. Any such contractor must have in force a general liability insurance policy of not less than $3,000,000, property damage insurance, and other insurance or at such higher limits as Landlord may reasonably require, which policy of insurance shall name Landlord, Landlord’s property manager and lender, as an additional insured. Except for the negligence or willful misconduct of Landlord’s Agents (as hereinafter defined), each contractor, and Tenant with respect to any activity of each contractor, shall indemnify defend and hold Landlord and Landlord’s Agents harmless from and against any and all claims, demands, liabilities, damages, actions, losses, costs and expenses (including, but not limited to, reasonable attorneys’ fees), to the extent arising out of or in connection with the presence on the Premises of, and the actions or failures to act of, such contractors or subcontractors. Tenant shall provide Landlord with the name of all contractors prior to the commencement of construction. Tenant shall maintain, and shall provide copies to Landlord of, all plans, specifications, drawings (including, particularly, “as-builts”) of any and all improvements, alterations, additions, renovations, repairs, installations of fixtures or other equipment and the like for which as-built drawings are typically provided. Landlord shall be permitted to observe any and all such work by Tenant on the Premises so long as Landlord does not interfere with or hinder any of Tenant’s use or occupancy of the Premises, or the work of construction.

17.3 Tenant agrees that any work by Tenant shall be accomplished in such a manner as to permit any fire sprinkler system and fire water supply lines to remain fully operable at all times except when minimally necessary for building reconfiguration work.

17.4 Tenant covenants and agrees that all work done by Tenant shall be performed and completed in substantial compliance with the plans and specifications and in compliance with all laws, rules, orders, ordinances, directions, regulations, permits, approvals, and requirements of all governmental agencies, offices, departments, bureaus and boards having jurisdiction, and in substantial compliance with the rules, orders, directions, regulations, and requirements of any applicable fire rating bureau.

17.5 Before commencing any work (other than Permitted Alterations), Tenant shall give Landlord at least five (5) days’ prior written notice of the proposed commencement of such work.

17.6 All alterations, additions and improvements installed in, on or about the Premises, shall be part of the Building and shall be the property of Landlord.

17.7 Tenant may install, maintain, replace, remove or use any communications or computer wires and cables (collectively, the “Lines”) in or serving the Premises, provided that (i) Tenant shall obtain Landlord’s prior written consent (which shall not be unreasonably withheld), use an experienced and qualified contractor approved in writing by Landlord, and comply with all of the other provisions of this Article 17 , (ii) an acceptable number of spare Lines and space for additional Lines shall be maintained for existing and future occupants of the Building, as determined in Landlord’s commercially reasonable opinion, (iii) the Lines therefor (including riser cables) shall be appropriately insulated to prevent excessive electromagnetic fields or radiation, and shall be surrounded by a protective conduit reasonably acceptable to Landlord, (iv) any new or existing Lines servicing the Premises shall comply with all applicable governmental laws and regulations, (v) as a condition to permitting the installation of new Lines, Landlord may require that Tenant remove existing Lines located in or serving the Premises and repair any damage in connection with such removal, and (vi) Tenant shall pay all costs in connection therewith. Upon the expiration of the Term, Tenant shall leave all Lines installed by Tenant.

 

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18. Repairs and Maintenance .

18.1 Except as set forth in this Section 18.1 , Tenant shall, throughout the term of this Lease, at its own cost and expense (subject to recovery under any warranties assigned to Tenant under Section 14.3), and without any cost or expense to Landlord, keep and maintain in good, sanitary and neat order, and repair, the Premises and every part thereof (subject to wear and tear consistent with commercially reasonable maintenance and repair standards applicable to comparable buildings), including, without limitation, all improvements, fixtures, furnishings, and systems and equipment therein (including, without limitation, plumbing fixtures and equipment serving the Premises, the HVAC systems and equipment exclusively serving the Premises, and all other Premises electrical and mechanical systems). Notwithstanding the foregoing, Landlord shall be responsible for repairs to the (i) those portions of the following that doe not exclusively serve the Premises HVAC, plumbing, Building safety systems, electrical systems, plumbing fixtures, and (ii) exterior walls, foundation and roof of the Building, and the structural portions of the floors of the Building, and the base building systems and equipment of the Building (and all such repairs by Landlord shall be included in Direct Expenses to the extent consistent with the terms of Article 7, above, and otherwise shall be at Landlord’s sole cost and expense), except to the extent that such repairs are required due to the negligence or willful misconduct of Tenant; provided, however, that if such repairs are due to the negligence or willful misconduct of Tenant, Landlord shall nevertheless make such repairs at Tenant’s expense, or, if covered by Landlord’s insurance, Tenant shall only be obligated to pay any deductible in connection therewith. Landlord may, but shall not be required to, enter the Premises at all reasonable times to make such repairs, alterations, improvements or additions to the Premises or to the Building or to any equipment located in the Building as Landlord shall desire or deem necessary or as Landlord may be required to do by governmental or quasi-governmental authority or court order or decree. Tenant hereby waives any and all rights under and benefits of subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code or under any similar law, statute, or ordinance now or hereafter in effect.

18.2 There shall be no liability of Landlord by reason of any injury to or interference with Tenant’s business arising from the making of any repairs, alterations or improvements in or to any portion of the Premises, or in or to improvements, fixtures, equipment and personal property therein, unless and to the extent of Landlord’s negligent or intentional misconduct.

19. Liens .

19.1 Tenant shall keep the Premises and every part thereof free from any encumbrances or any liens arising out of work performed, materials furnished or obligations incurred by Tenant. Tenant further covenants and agrees that any encumbrance or lien filed against the Premises (except to the extent caused by Landlord) will be discharged by Tenant, by bond or otherwise, within thirty (30) days after the filing thereof (or within ten (10) days after the filing thereof if requested by Landlord as necessary to facilitate a pending sale or refinancing), at the cost and expense of Tenant.

19.2 In the event Tenant shall lease or finance the acquisition of office equipment, furnishings, or other personal property utilized by Tenant in the operation of Tenant’s business, Tenant warrants that any Uniform Commercial Code financing statement executed by Tenant will upon its face or by exhibit thereto indicate that such financing statement is applicable only to personal property of Tenant specifically described in the financing statement. Should any holder of a security agreement executed by Tenant record or place of record a financing statement which appears to constitute a lien against any interest of Landlord, Tenant shall within

 

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thirty (30) days after Landlord delivers notice thereof to Tenant, cause (1) copy of the security agreement or other documents to which the financing statement pertains to be furnished to Landlord to facilitate Landlord’s being in a position to show such lien is not applicable to any interest of Landlord. Notwithstanding the foregoing, no such financing or grant of security interest shall attach to any such item which must remain on the Premises at the expiration or the earlier termination of this Lease (including, but not limited to, lab benches, fume hoods, cold rooms (including all equipment and ancillary items necessary to the proper functioning thereof) and wet laboratories (including all equipment and ancillary items necessary to the proper functioning thereof)), and Tenant shall execute such documents, in recordable form if necessary, to establish and provide notice of Landlord’s prior and superior rights in this regard.

20. Indemnification and Exculpation .

20.1 Tenant agrees to indemnify Landlord, and its partners and affiliates, and their respective shareholders, directors, officers, agents, contractors and employees (collectively, “Landlord’s Agents”), against, and to protect, defend, and save them harmless from, all demands, claims, causes of action, liabilities, losses and judgments, and all reasonable expenses incurred in investigating or resisting the same (including reasonable attorneys’ fees), for death of or injury to person or damage to property arising out of (i) Tenant’s use, occupancy, repairs, maintenance, and improvements of the Premises and all improvements, fixtures, equipment and personal property thereon, and (ii) any negligent or willful act or omission of Tenant, its shareholders, directors, officers, agents, employees, servants, contractors, invitees and subtenants. Tenant’s obligation under this Section 20.1 shall survive the expiration or earlier termination of the term of this Lease.

20.2 Landlord agrees to indemnify Tenant and Tenant’s shareholders, directors, officers, agents, and employees (collectively “Tenant’s Agents”) against and save them harmless from all demands, claims, causes of action and judgments, and all reasonable expenses incurred in investigating or resisting the same (including reasonable attorneys’ fees), for death of, or injury to, any person or damage to property arising from or out of any occurrence in, upon, or about the Premises or the Project during the term of this Lease if caused by the willful misconduct or negligence of Landlord or Landlord’s directors, officers, agents, employees, servants, contractors, invitees and subtenants, unless caused in