|
|
|
|
Document Preview Lease |
||||
|
|
||||
|
Click "Add to Cart" button to purchase document. |
||||
|
|
||||
|
Title: |
Lease |
|||
|
Entities: |
Alexandria Real Estate Equities Inc.; Alexandria Real Estate Equities, LP; QRS Corp.; Union Bank of California, NA; ZymoGenetics, Inc.; Stoel Rives; ARE-1201/1208 Eastlake Avenue, LLC |
|||
|
Date: |
2003 |
|||
|
Size: |
261KB total |
|||
|
Price: |
$70 |
|||
|
ID: |
#332015 |
|||
|
|
||||
|
||||
|
|
||||
|
Start of Preview |
||||
LEASE
LAKE UNION STEAM PLANT BUILDING
THIS LEASE is entered into and effective as of October 4, 2002 ("Effective
Date"), between ARE-1201/1208 EASTLAKE AVENUE, LLC, a Delaware limited liability
company ("Landlord") and ZYMOGENETICS, INC., a Washington corporation
("Tenant").
The parties agree as follows:
1. PREMISES/LEASE
1.1 Premises. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord on the terms contained herein all property purchased by
Landlord from Tenant and located at 1201 Eastlake Avenue East, Seattle,
Washington ("Premises"), including (Section 27.2) the land described on Exhibit
A, together with the easements, rights and appurtenances thereto and the
buildings and other improvements located thereon ("Improvements"); including the
Fixed Equipment (Section 8.8) and excluding the Removable Equipment (Section
8.8).
1.2 Operating Lease. Landlord and Tenant stipulate that this Lease
is a true lease and does not represent a financing arrangement. Each party shall
reflect the transactions represented by this Lease in a manner consistent with
"true lease" treatment rather than "financing" treatment in all applicable
books, records and reports (including income tax filings). Tenant intends to
record this Lease as an operating lease for SEC reporting purposes in accordance
with generally accepted accounting principles ("GAAP"), but failure to do so
shall not be considered a default under this Lease.
1.3 Acceptance of Premises. As the prior owner of the Premises,
Tenant designed and constructed substantial modifications to the Improvements on
the Premises and has occupied the Improvements since completion of those
modifications and is therefore completely familiar with the condition of the
Improvements. By entering this Lease, Tenant is deemed to have accepted the
Premises in its current condition, AS-IS and with all faults. To the extent
necessary to comply with its obligations to maintain and repair the Premises,
Tenant shall enforce the warranties and other obligations of contractors and
suppliers for the original construction of the Premises and Landlord shall
cooperate with Tenant in doing so, but Landlord shall have no other
responsibility or liability for the design, construction or condition of
Premises and makes no warranties with respect thereto and Tenant shall reimburse
Landlord for all its reasonable out-of-pocket third party costs and expenses,
including its attorneys' fees, incurred in connection with its cooperation.
Landlord shall not be required to make any repairs or replacements of any kind
whatsoever during the Term. Notwithstanding the sale of the Premises to
Landlord, all warranties and guaranties regarding the development of the
Premises remain with Tenant for the Term and any remaining warranties and
guaranties will be deemed automatically transferred to Landlord upon termination
of this Lease.
2. TERM
2.1 Initial Term. The "Initial Term" of this Lease shall be 15
years commencing on October 4, ("Commencement Date") and ending on October 3,
2017, unless sooner terminated pursuant to any provision hereof. Tenant and
Landlord's affiliate are parties to the Earl Davie Building Lease (Section
15.2). If the Initial Term of the Earl Davie Building Lease is extended by
operation of Section 24.11 of the Earl Davie Building Lease, then the Initial
Term of this Lease will be extended to the same expiration date, and the parties
shall enter into an amendment to this Lease in the form of Exhibit I evidencing
such extension. As used herein, "Term" shall mean the Initial Term and any
Renewal Term (Section 2.2) which becomes effective hereunder.
2.2 Extensions. Provided that Tenant is not in default on exercise
of a right to extend or on the commencement of the Renewal Term (unless such
default is cured within any applicable cure period),
1
{PAGE}
Tenant shall have the right to extend this Lease for 4 consecutive renewal terms
(each, a "Renewal Term") of 5 years each, with at least 16 months prior written
notice to Landlord. If Landlord does not receive such notice 16 months prior to
the end of a current Term, Tenant's renewal rights shall lapse. The rights to
extend the Lease for the Renewal Terms are personal to Tenant and may not be
assigned, pledged or transferred to any third party. Notwithstanding the
foregoing, such rights may be assigned or transferred to Tenant's Affiliates
(Section 13.2).
2.3 Rent For Renewal Terms. As of the commencement of each Renewal
Term, the Base Rent (Section 3.1) shall be adjusted to the greater of (a) the
fair market rental value of the Premises as of the commencement of the Renewal
Term, or (b) 90% of the Base Rent applicable to the last year of the term prior
to commencement of the applicable Renewal Term. Fair market rental value shall
be the amount of rent which a well-informed tenant, willing, but not obliged to
lease the Premises, would pay, and which a well-informed landlord, willing, but
not obligated to lease, would accept, taking into consideration all uses to
which the Premises is adapted and might in reason be applied, and the then
market terms being offered in the Seattle metropolitan area (e.g. including
Elliott Bay, the University District, Queen Anne/Interbay, Lake Union, Denny
Triangle, etc.) for space reasonably comparable to the Premises. If, after
bargaining in good faith for 30 days (the "Bargaining Period"), the parties have
not reached agreement on the fair market rental value, it shall be established
by binding arbitration in accordance with Section 2.4. Commencing at the start
of the second year of each Renewal Term and continuing each year thereafter, the
Renewal Term's Base Rent shall be increased by 3.5%.
2.4 Arbitration. The arbitration process outlined below must be
commenced no more than 18 months before the first day of the ensuing Renewal
Term and pursued in good faith. Each arbitrator shall be an MAI real estate
appraiser with at least 7 years experience in appraising real property used for
comparable "wet science" biological laboratory and research and development
facilities or such similar uses to which the parties agree ("Arbitrator"). If
the parties are able to reach agreement on a single Arbitrator within 10 days
after the end of the Bargaining Period, that Arbitrator shall determine the fair
market rental value. Otherwise, each party shall select its own Arbitrator and
shall provide the name to the other party within 15 days following expiration of
the Bargaining Period. The two Arbitrators shall meet within 20 days following
their selection and attempt in good faith during such 20 days to reach agreement
on the fair market rental value of the Premises. If the two Arbitrators are
unable to agree, they shall jointly select a third Arbitrator. If they fail to
either agree on the fair market rental value or appoint a third Arbitrator
within 20 days following their appointments, the third Arbitrator shall be
selected by the then Presiding Judge of King County Superior Court upon the
request of either party. Within 10 days after the appointment of the third
Arbitrator, the first two Arbitrators shall each submit in writing to the third
Arbitrator the amount which they propose be established as the Renewal Term's
Base Rent ("Submissions"). The Submissions shall not be disclosed by the third
Arbitrator until the third Arbitrator has received both of the other
Arbitrators' Submissions. Each Arbitrator may include in such Submissions any
information which he/she deems relevant or helpful to the third Arbitrator in
determining the fair market rental value of the Premises, and the third
Arbitrator may not obtain, accept or consider any additional information in
making its decision. The third Arbitrator's determination of the fair market
rental value is strictly limited to selection, as the more reasonable
approximation of the fair market rental value of the Premises, of the amount
stated in one of the Submissions, and third Arbitrator may not select or declare
any third number. The third Arbitrator's decision shall be made within 20 days
after delivery of the Submissions, by a report in writing to each of the parties
and in any event at least 12 1/2 months before the commencement of the Renewal
Term. Each party shall pay the costs of its own Arbitrator and one-half of the
single Arbitrator or the third Arbitrator's fee. If the Arbitrator's
determination of fair market rental value is greater than 110% of the then Base
Rent payable during the 12 months immediately preceding the applicable Renewal
Term, Tenant may elect to rescind exercise of the option by written notice to
Landlord given at least 12 months before the commencement of the Renewal Term.
Notwithstanding the provisions of this Section 2.4, if during the arbitration
period, Tenant and Landlord reach agreement on fair market rental value
(independent of Arbitrator's findings), the arbitration shall be terminated and
the determination of the parties shall govern.
2
{PAGE}
3. RENT
3.1 Base Rent. Commencing on the Commencement Date, and continuing
on the first of each month thereafter, Tenant shall pay to Landlord $284,220.54
per month ("Base Rent"). Base Rent shall be remitted to the Landlord at its
address stated for notices in this Lease as the same may be amended from time to
time or to such other address required by Landlord in a written notice to Tenant
and shall be due and payable on the first day of each month during the Term and
tendered in cash. Base Rent for any partial month shall be prorated based on the
number of days in the applicable calendar month.
3.2 Increases in Base Rent. Commencing one year after the
Commencement Date and continuing annually thereafter, the Base Rent shall be
increased by 3.5%.
3.3 Intentionally Omitted
3.4 Additional Rent. All amounts other than Base Rent due by
Tenant to Landlord under this Lease shall be deemed "Additional Rent" and
Landlord shall have all of the same remedies for Tenant's failure to pay
Additional Rent as for failure to pay Base Rent. The term "Rent" shall mean the
combined Base Rent and Additional Rent. Tenant's obligations to pay Rent are in
the nature of independent covenants and all Rent shall be paid without demand,
notice, abatement, reduction or offset, except that Additional Rent may be
subject to demand or notice where provided in this Lease.
3.5 Late Fee. If any installment of Base Rent is not received by
Landlord by the 5/th/ of the month, Tenant shall pay to Landlord, on demand, a
late charge equal to six percent (6%) on such overdue installment of Base Rent
(the "Late Fee"). Notwithstanding the foregoing, Landlord agrees that pursuant
to Section 15.2 below, Landlord will deliver notice to Tenant of any such
delinquency and, not more than once each Lease Year, Landlord will waive the
Late Fee if such delinquency is paid within three business days after Tenant's
receipt of such notice. Tenant acknowledges that such late charge represents a
reasonable estimate of the costs Landlord will incur as a result of such late
payment.
3.6 Fines/Penalties. Subject to Section 22, Tenant shall pay and
discharge when due all other amounts and obligations which Tenant assumes or
agrees to pay pursuant to this Lease.
3.7 Abatement of Rent. Except as expressly agreed upon in Sections
10 and 12 below, Tenant's obligations to pay Rent shall not abate during any
period that the Premises or any part thereof are untenantable regardless of the
cause of such untenantability.
3.8 Asset Management Fee. In addition to the Base Rent, Tenant
shall pay to Landlord each month with the Base Rent an asset management fee
equal to one-half of one percent (0.5%) of the Base Rent.
4. USE
4.1 Use. Tenant may use the Premises only for office and
laboratory, and research and development facilities and uses that are a
reasonably necessary adjunct thereto. "Laboratory" as used herein refers to that
portion of the Premises devoted to "wet" laboratory and related research and
development use. Exhibit H shows the current allocation of Laboratory and office
spaces. Changes resulting in more than 50% or less than 25% of the net rentable
square feet of the Premises designated for office use will be considered a
change in use. The methodology which will be used for calculating the percent of
use will be calculated consistent with the methodology as was employed to
calculate the current use percentage as described on Exhibit H (said uses and
the permitted deviation in the ratio being hereinafter referred to as the "Use
Requirements"). Any other uses or changes in uses shall require Landlord's
approval, in accordance with the approval standards set forth in Section 8. The
Premises shall not be used for any purpose which would constitute a public or
private nuisance or waste, or violate the agreements listed on Exhibit B ("Title
Encumbrances").
3
{PAGE}
4.2 Compliance with Laws. Tenant shall, at its cost, comply with all
Laws (Section 27.2) and the requirements of any board of fire underwriters,
including all modifications required thereby, relating to or affecting the
condition, use or occupancy of the Premises. Upon request of Landlord, Tenant
shall provide Landlord with copies of all documents evidencing Tenant's
compliance with any particular Law specified by Landlord. Tenant shall notify
Landlord in writing immediately of any threatened or actual notice or citation,
regarding an alleged failure of the Premises to comply with any Law.
4.3 Mechanic's Liens. Except for claims for delinquent payments
for which Landlord is contractually obligated, which shall be the sole
responsibility of Landlord, Tenant agrees that during the Term hereof it shall
not do or suffer any waste to the Premises, or cause, suffer or permit any liens
for labor, services or materials to attach to the Premises by reason of any act
or omission of Tenant or person claiming through Tenant. If any lien is filed
arising out of work performed for Tenant, Tenant shall either discharge the lien
or post a bond pursuant to RCW 60.04.161 to remove the lien from the Premises
within 30 days after it receives notice of the lien.
4.4 Quiet Enjoyment. So long as no Event of Default (Section 15.2)
exists hereunder, Landlord covenants that Tenant shall have quiet occupation and
enjoyment of the Premises from any person claiming through Landlord.
4.5 Development Agreement. During the Term, Tenant shall be
responsible for all of Tenant's obligations under that certain Real Estate
Agreement, Development Conditions, and Physical Restrictions for Lake Union
Steam Plant dated May 5, 1993 (the "Development Agreement"). Capitalized terms
used in this Section 4.5 which are not defined in this Lease shall have the
meanings set forth in the Development Agreement. Tenant's obligations under the
Development Agreement shall not include the following:
(a) without impairing Tenant's own obligations to cooperate,
any failure of Landlord to cooperate with the City of Seattle (the "City") as
required by Section 7.1.1 of the Development Agreement;
(b) any exoneration of the City from liability under the
Development Agreement as a result of Landlord's entering into a consent decree
or consent order under Section 7.1.4 of the Development Agreement without the
consent of Tenant;
(c) the costs of any remediation of Hazardous Materials under
any consent decree or consent order under Section 7.1.4 of the Development
Agreement that was entered into without the consent of Tenant unless such
remediation is otherwise an obligation of Tenant under this Lease and its
failure to pursue the same is an Event of Default;
(d) any costs, expenses, penalties, attorneys' or consultants'
fees which become owed to the City under Section 7.1.5 of the Development
Agreement as a result of the release of Historic Contamination by Landlord or
Landlord Related Parties (Section 14); or
(e) any costs, expenses, damages, fees or penalties relating
to the remediation of Historic Contamination that become owed to the City under
Section 7.5 of the Development Agreement as a result of the action of Landlord
or Landlord Related Parties; provided, however, Tenant's use and occupancy of
the Premises and the obligations of Tenant under the Lease to maintain,
construct, alter, expand, repair, or restore any existing or future improvements
on the Premises shall be deemed the sole acts of Tenant hereunder, whether the
same are performed by (a) Tenant, or (b) Landlord on behalf of Tenant as a
result of any Event of Default.
5. MAINTENANCE AND REPAIR
5.1 Tenant's Obligations. Tenant shall keep and maintain all
portions of the Premises in good order and condition, in a manner typical of
other properly maintained and operated facilities of a
4
{PAGE}
similar nature and in accordance with all Laws and with the standards of
maintenance and repair adhered to by Tenant prior to the Commencement Date.
Tenant shall promptly make all repairs and replacements required in order to
keep and maintain the Premises in such order and condition. Tenant shall also
keep the Premises in compliance with all Laws and the requirements of the
property and environmental insurance coverages. The provisions of this Section
shall not conflict with Tenant's rights to obtain insurance and condemnation
proceeds under Sections 10, 11 and 12. If Tenant fails to perform the required
maintenance and repairs, Landlord shall have the cure rights described in
Section 15.7.
5.2 Condition on Surrender. Upon termination of this Lease, Tenant
shall remove its personal property, repair any damage caused by removal, comply
with any removal and Restoration Requirements (Section 8), and leave the
Premises in good repair and condition, subject to Section 10.3. In addition,
prior to termination of the Lease, Tenant shall perform all decommissioning
required by governmental agencies and shall provide copies of all
decommissioning reports to Landlord. If Tenant has failed to complete the
governmental decommissioning process by the expiration or earlier termination
date of this Lease, and as a result, the Premises cannot be relet, the Tenant
shall be required to continue to pay full Rent and perform its obligations
hereunder until such decommissioning is complete. The foregoing shall also be
considered holding over and be subject to the terms of Section 27.13 if, and for
so long as, Tenant fails to pursue such decommissioning with due diligence. The
Fixed Equipment then existing in the Premises shall be surrendered with the
Premises in good and operating condition and free of any liens, financing leases
or other encumbrances created by or imposed against Tenant, and belong solely to
Landlord.
6. UTILITIES AND TAXES
6.1 Utilities. Subject to Section 22, Tenant shall pay when due
all charges for utility services provided to the Premises including power, water
and sewer, and gas. No interruption of utility service shall give Tenant the
right to abate Rent or terminate this Lease.
6.2 Taxes. Subject to Section 22, Tenant shall pay when due all
Real Property Taxes. "Real Property Taxes" shall mean: (i) the ad valorem
property taxes and other similar taxes levied against the Premises which become
due and payable during the Term, (ii) all installments of assessments imposed by
governmental entities on the Premises which become due and payable during the
Term, and (iii) governmental licensing or similar fees. Real Property Taxes
shall include all taxes and assessments levied against the Premises other than
conveyance taxes arising from Landlord's transfer of the Premises, Landlord's
rental taxes (if any), Landlord's business and occupation taxes, franchise or
net income taxes of Landlord, any estate, succession, gift, capital levy or
similar taxes. If any assessment may be paid in installments, Tenant shall be
responsible only for those installments due and payable during the Term and for
those portions of installments to the extent they accrued during the Lease Term,
even if they are payable thereafter. If Landlord enters into private agreements
for off-site improvements for the benefit of the Premises which are in lieu of
government imposed improvements, Tenant shall pay Landlord's installments
thereunder to the extent they accrued during the Term. Notwithstanding the
foregoing, if the amortization period used in calculating the amount of the
installments is less than the amortization period that would have been used for
the government assessment that would have otherwise been imposed, then Tenant
shall pay a portion of the Landlord's installments due under such private
agreements, to the extent they accrued during the Term, recalculated using the
same amortization period as would have been used for the government assessment.
Tenant shall pay all personal property taxes levied against the Premises as and
when due to the extent the levy thereof is attributable to the Term and all such
taxes are assessed against its own property. It is Landlord's and Tenant's
express intent that all Fixed Equipment identified on Exhibit G and all
substitutions, modifications or additions thereto, is part of the real property
and not personal property. No personal property is being leased by Landlord to
Tenant. Notwithstanding the foregoing, if the Department of Revenue assesses any
personal property taxes relating to the Premises, the Fixed Equipment or this
Lease, Tenant shall pay such taxes, subject to Section 22.
5
{PAGE}
7. SECURITY DEPOSIT
7.1 General Requirements. Upon execution of this Lease, Tenant
will provide to Landlord a security deposit ("Security Deposit") in the amount
of $568,441.08 (i.e. two months Base Rent). Tenant shall increase the amount of
the Security Deposit to correspond to increases in Base Rent at the time such
adjustments become effective. Tenant can elect to provide the Security Deposit
in the form of either a letter of credit ("LOC"), or pledged marketable
securities from Tenant's corporate cash investment portfolio, or a combination
thereof, variable over the Term. Landlord will hold the Security Deposit as
security for the performance of Tenant's obligations under the Lease. The
Security Deposit will not be considered an advance payment of Rent or a measure
of Tenant's liability for damages. Landlord may, from time to time, without
prejudice to any other remedy, upon the occurrence of an Event of Default, use
all or a portion of the Security Deposit to cure any Event of Default. Following
any such application of the Security Deposit, Tenant will replenish the Security
Deposit to its required amount. Landlord shall transfer the Security Deposit to
any subsequent owner of the Premises. Landlord and its successors and assigns
will not be bound by any assignment or encumbrance of the Security Deposit by
Tenant, provided, however, if Tenant's interest in the Lease has been assigned,
Landlord will return the Security Deposit to such assignee in accordance with
the terms and conditions hereof. Within 30 days following the expiration of this
Lease and the performance by Tenant of all of its obligations hereunder,
Landlord shall return the then existing balance of the Security Deposit to
Tenant. Landlord shall have no obligation to pay interest on the Security
Deposit. If Landlord returns the Security Deposit to Tenant's assignee as
aforesaid, Landlord will have no further obligation to any party with respect
thereto. Tenant shall not encumber the Security Deposit.
7.2 Letter of Credit. During any period that Tenant elects to
satisfy all or any portion of the Security Deposit with an LOC, the LOC must be
an irrevocable and unconditional standby letter of credit, issued by the Bank of
America or its successors or another financial institution reasonably
satisfactory to Landlord and with a term of at least one year substantially in
the form of Exhibit D. Landlord may draw upon the LOC to cure any Event of
Default, as described in Section 7.1. In addition, if at any time there are less
than 30 days remaining before the expiration of the LOC, and if Tenant does not
deliver an extension or replacement of the LOC within 5 business days after
notice from Landlord, Landlord may draw upon the LOC; provided that if Tenant
subsequently provides a replacement LOC, and to the extent Landlord has not
applied the same to any default, Landlord will return the funds drawn to Tenant
without interest.
7.3 Pledged Securities. So long as Tenant's reported Cash Position
(defined below) is at least $50,000,000.00 (the "Cash Position Minimum"), Tenant
may satisfy all or any portion of the Security Deposit with marketable
securities satisfying the criteria stated in this Section 7.3. "Cash Position"
is defined as the sum of unrestricted cash, cash equivalents and marketable
securities as determined by reference to GAAP. If Tenant's reported Cash
Position drops below the Cash Position Minimum at any time, then Tenant shall
immediately convert all of its Security Deposit to an LOC. Tenant may
subsequently satisfy its Security Deposit with marketable securities once Tenant
has again exceeded the Cash Position Minimum for at least two consecutive
quarters. During any period that Tenant elects to satisfy all or any portion of
the Security Deposit with marketable securities, the pledge will be of short
term (2 years or less) fixed income marketable securities from Tenant's
corporate cash investment portfolio, including money market funds, rated not
lower than Aa, AA, A1 or P1 or equivalent by a nationally recognized credit
rating service. The pledged marketable securities will be held by Union Bank of
California or another bank or financial institution mutually approved by
Landlord and Tenant as custodian for Landlord, either in a separate custodian
account or as specially designated securities within a larger custodian account.
The pledge agreement must be substantially in the form of Exhibit E and provide
Landlord with a perfected first lien security interest in the pledged
securities. The custodial agreement must be substantially in the form of Exhibit
F and provide direct access authorization which would permit Landlord in an
Event of Default, without approval of Tenant, to authorize the sale of the
securities and the withdrawal of the proceeds thereof (not to exceed the amount
of the then required Security Deposit) for application by Landlord to cure any
Event of Default, as described in Section 7.1. So long as the value of the
pledged securities comply with the requirements of this Lease, Tenant will be
entitled to retain all interest and other earnings generated by the pledged
securities. If the market value
6
{PAGE}
of the pledged securities drops below the required amount of the Security
Deposit, Tenant will immediately add additional marketable securities to the
pledge to increase the value of the pledged securities to equal or exceed the
required level. Failure of Tenant to increase the pledged securities as required
within 3 business days of notice from Landlord and/or the account custodian will
constitute an Event of Default. Tenant will have the right to substitute
marketable securities meeting the rating criteria and having all of the other
characteristics specified above for the securities subject to the pledge.
8. ALTERATIONS
8.1 General. All alterations of Premises shall be made at Tenant's
sole cost and expense. All alterations shall be made in a good and workmanlike
manner and in compliance with all Laws and insurance requirements and Tenant
shall enforce any warranties to the extent necessary to cause any defects in
workmanship or materials to be corrected. Subject to Section 8.6, all
alterations shall be fully consistent with the overall character of the Premises
as a first class scientific research and development facility (the "Function
Requirements") and the Use Requirements. Tenant shall indemnify, defend and hold
Landlord harmless from all claims, costs (including attorneys' fees and costs)
or damage occurring in connection with Tenant's alterations; notwithstanding the
foregoing, Tenant shall not be liable to reimburse Landlord for Landlord's
overhead and expenses in reviewing any plans, specifications and other documents
or in otherwise confirming Tenant's conformance to the requirements of this
Section 8 ("Review Costs") except that for Category D and E Alterations, Tenant
shall pay Landlord a fee equal to the lesser of $10,000 or 5% of all costs
incurred by Tenant or its contractors or agents in connection with any Category
D or E Alteration, to defray Landlord's Review Costs. Prior to commencing any
alterations, Tenant shall obtain all necessary permits from governmental
authorities. Irrespective of Landlord's receipt, review and any approval of the
plans and specifications for Tenant's alterations, Tenant, and not Landlord,
shall have sole responsibility for the accuracy or sufficiency of the plans and
specifications, their compliance with applicable Laws, codes, regulations or
statutes, and their fitness for Tenant's purpose. If any alterations by Tenant
trigger any legal requirements to make other modifications to the Premises,
Tenant shall make such modifications at its sole cost and expense. Tenant shall
provide to Landlord as-built drawings for all alterations by Tenant promptly
after completion of the alteration. Except for Removable Equipment, all
alterations shall become the property of Landlord immediately upon installation
or completion and shall be subject to all of the terms of this Lease. Prior to
commencing any Category "B-E" Alteration, Tenant must deliver to Landlord
evidence of insurance from all contractors and subcontractors reasonably
satisfactory to Landlord to protect Landlord against liability for personal
injury or property damage during construction, naming Landlord as an additional
insured.
8.2 Category "A" Alterations. An alteration is a "Category A
Alteration" if the estimated cost of such alteration is less than $5,000 and the
alteration does not fall within the definition of Category D or E Alterations.
For Category A Alterations, in addition to the requirements of Section 8.1,
Tenant will deliver notice to Landlord describing the alteration promptly after
its completion, in the manner stated in Section 27.3.
8.3 Category "B" Alterations. An alteration is a "Category B
Alteration" if the estimated cost of such alteration is between $5,000 and
$25,000, and the alteration does not fall within the definition of Category D or
E Alterations. For Category B Alterations, in addition to the requirements of
Section 8.1, Tenant shall notify Landlord, in the manner stated in Section 27.3,
of the planned alteration at least 5 business days prior to commencement of the
work, providing a brief description of the work, the estimated cost, and any
permit drawings, if applicable.
8.4 Category "C" Alterations. An alteration is a "Category C
Alteration" if the estimated cost of such alteration exceeds $25,000 and the
alteration does not fall within the definition of Category D or E Alterations.
For Category C Alterations, in addition to the requirements of Section 8.1,
Tenant shall notify Landlord, in the manner stated in Section 27.3, of the
planned alteration at least 10 business days prior to the commencement of the
work, providing a description of the work, the estimated cost and any permit
drawings for Landlord's review and approval. Landlord will not withhold its
approval of the alteration, however Landlord may impose reasonable conditions on
the alteration to the extent necessary to protect its investment, provided that
Landlord may not require Tenant to restore the Premises or
7
{PAGE}
remove the Category C Alteration as a condition of its consent. For Category C
Alterations, if Landlord does not respond to Tenant's notice of such alteration
within the 10 business day period, Landlord shall be deemed to have approved
such alteration without conditions.
8.5 Category "D" Alterations. An alteration is a "Category D
Alteration," regardless of estimated cost, if such alteration does not fall
within the definition of a Category E Alteration, and either (a) such alteration
when aggregated with past alterations and concurrent alterations, fails to
comply with the Use Requirements, or (b) such alteration results in a net change
in rentable square footage for any Function which is outside of the "Function
Tolerances" set forth in the Table of Uses contained in Exhibit H.
"Function" is defined by reference to physical and functional
distinctions evident in the floor plans attached as Exhibit H. For Category D
Alterations, in addition to the requirements of Section 8.1, Tenant must obtain
Landlord's prior written approval, which shall not be unreasonably withheld. To
request Landlord's approval, Tenant shall provide to Landlord schematic drawings
for Category D Alterations and Landlord shall respond with its comments on such
proposed alteration within 10 business days after receipt thereof. Such approval
is also subject to Landlord's subsequent 10 business day review and approval of
the construction drawings for the proposed alteration. Landlord shall be
required to approve the Category D Alteration and the construction drawings, if
(i) Landlord had previously approved the schematic drawings, and (ii) the
construction drawings reflect the same alterations as such schematic drawings.
If Landlord disapproves of either the schematic drawings or the construction
drawings, it shall provide Tenant with reasonably detailed reasons therefor.
Failure to provide any such notice shall not be construed as an approval of or
consent to any alteration. Landlord may condition its approval of Category D
Alterations on a Restoration Requirement (Section 8.7).
8.6 Category "E" Alterations. An alteration is a "Category E
Alteration," regardless of estimated cost, if such alteration (a) fails to
comply with the Function Requirements, (b) incorporates materials or employs
construction standards that are of a materially lesser quality than those used
in the then existing Premises, (c) decreases the number of net rentable square
feet in the Premises, (d) involves any alterations to the foundation, roof or
structural components of the Improvements, (e) alters the exterior appearance of
the Premises (but specifically excluding landscaping, Removable Equipment,
antennas or mechanical systems on the roof, and signage when reasonably required
for Tenant's business); (f) is designed for any use that is not expressly
permitted under Section 4.1; (g) results in Laboratory space being improved for
use as a "Process Lab" (defined by reference to Exhibit H) outside of the
"Extreme Max" Function Tolerances set forth in Exhibit H; (h) results in more
than 60% of the Premises being improved for office use; or (i) results in more
than 80% of the Premises being improved for Laboratory use (Section 4.1). For
Category E Alterations, in addition to the requirements of Section 8.1, Tenant
must request Landlord's prior written approval, which is subject to Landlord's
sole discretion. To request Landlord's approval, Tenant shall provide to
Landlord schematic drawings for Category E alterations and Landlord shall
respond with its comments on the proposal within 10 business days after receipt
thereof, which is subject to Landlord's subsequent 10 business day review and
approval of the construction drawings. Landlord shall approve the Category E
Alteration and the construction drawings, if (i) Landlord had previously
approved the schematic drawings, and (ii) the construction drawings reflect the
same alterations as such schematic drawings. If Landlord disapproves of either
the schematic drawings or the construction drawings, it shall provide Tenant
with reasonably detailed reasons therefor. Failure to provide any such notice
shall not be construed as an approval of or consent to any alteration. Landlord
may condition its approval of Category E Alterations on a Restoration
Requirement.
8.7 Restoration Requirement and Restoration Deposit. Landlord may
condition its approval of Category D and E Alterations on a requirement that
Tenant remove such alterations at the end of the Term and fully restore the
Premises to the location, size, design, configuration, condition and state of
improvement and fixturing that existed immediately prior to making such
alterations and consistent with the degree of maintenance and repair required by
this Lease (the "Restoration Requirement"). If Landlord conditions its approval
of a Category D or E Alteration on a Restoration Requirement, Landlord may
further require that Tenant post a deposit (the "Restoration Deposit") in an
amount equal to Landlord's reasonable estimate of the removal and restoration
costs in any circumstance
8
{PAGE}
in which the same exceed $100,000 and which shall be subject to the same terms
and conditions as those that are applicable to the Security Deposit; provided,
however, the Restoration Deposit shall be returned to Tenant to the extent and
at the earlier of such time as (a) Landlord waives its requirement in writing
that such alterations be removed and the Premises restored, which election shall
be at Landlord's sole and absolute discretion, or (b) Tenant completes the
removals and restorations, Landlord accepts the same as having complied with
Tenant's obligations under this section, and Tenant provides Landlord with final
lien waivers and evidence of payment for all of the costs and expenses incurred
to do so. Notwithstanding the foregoing, in no event shall Tenant be required to
post a Restoration Deposit unless (a) Landlord has made a good faith
determination that Restoration will likely be required and (b) Tenant's cash
flow position drops below the Cash Position Minimum (Section 7.3).
8.8 Fixed and Removable Equipment. This Lease arises
simultaneously with the sale of the Premises by Tenant to Landlord pursuant to
that certain Agreement of Purchase and Sale dated August 29, 2002, as amended
(the "Purchase Agreement"). In order to establish which elements and/or pieces
of equipment within the Premises were included in the sale and which were not,
the parties applied the criteria listed below to develop the listing contained
on Exhibit G containing those items which were considered affixed and part of
the Premises. All other items not listed on Exhibit G were considered personal
property retained by Tenant. "Fixed Equipment" is defined as the equipment
listed on Exhibit G, plus any new equipment brought onto the Premises which
either replaces the items listed on Exhibit G, has the same the physical and
functional distinctions as the equipment listed on Exhibit G, or satisfies the
criteria stated below.
FIXED EQUIPMENT CRITERIA:
1) Equipment that is built into the facility in such a manner
that it will require the removal of walls, floors, ceilings or
additions to or modifications of existing structural support,
whether temporary or permanent, to install or relocate it;
2) Equipment that is connected to common building systems in such
a way that the service must be modified outside the local area
or room where the equipment is located when the equipment is
disconnected; or
3) Equipment that provides service to other Fixed Equipment or
without which such other Fixed Equipment would not be
functional.
As new equipment is brought into the Premises, the determination of
whether such equipment is considered Fixed Equipment or Removable Equipment will
be made by using the physical and functional distinctions evident in the listing
attached as Exhibit G and where that does not provide sufficient guidance,
applying the above Fixed Equipment criteria. If any alteration is intended to
include attached equipment, Tenant shall give written notice to Landlord of its
suggested classification as either Fixed or Removable when it gives the notices
or requests the approvals as required above. New Fixed Equipment shall become
Landlord's property immediately. No Fixed Equipment may be leased or subject to
any lien or security interest by Tenant.
9. INSURANCE
9.1 Tenant's Insurance. Tenant shall maintain at its sole cost and
expense the following insurance on the Premises, and in all cases such policies
shall name as additional insureds (a) Landlord, (b) any lender of Landlord
holding any security interest in the Premises, and (c) any management company
retained by Landlord to manage the Premises:
9.1.1 Property. Insurance against loss or damage to the
Premises on an all risk basis, including sprinkler damage and flood for an
amount not less than the actual replacement cost of the Premises. The insurance
shall include coverage from business interruption and extra expense for a period
of not less than 18 months. Tenant shall also carry earthquake insurance and
insurance against damage caused by terrorism and acts of war to the extent the
same is or are available at commercially
9
{PAGE}
reasonable rates and is required by Landlord. In determining whether such
insurance is available at a commercially reasonably rate, the parties will take
into consideration the cost and availability of similar policies for Landlord's
(or its affiliates') other Seattle properties (or in similarly rated seismic
areas if Landlord or its affiliates no longer own other Seattle properties). At
Tenant's option, the Premises may be included in Landlord's (or its affiliates')
blanket policy of insurance, if and for so long as the same is maintained by
Landlord (or its affiliates), in which case the cost of insurance allocable to
the Premises will be based on the insurer's cost calculations. In addition,
Tenant shall maintain during the Term all risk insurance for Tenant's personal
property (including business interruption and extra expense coverage) covering
the full replacement cost of all property, improvements and equipment placed in
or on the Premises by Tenant, with the understanding that the proceeds of such
policies shall be paid to and belong to Tenant.
9.1.2 Liability. Commercial liability insurance with a
combined single limit (including umbrella) of at least $10 million per
occurrence and $10 million in the aggregate, naming Landlord as an additional
insured and such insurance shall be primary to and not contributory with any
insurance carried by Landlord regarding events that occur in the Premises.
9.1.3 Boiler. Insurance against loss or damage from explosion
of any steam or pressure boilers or similar apparatus located in or about the
Premises in an amount not less than the actual cost to repair or replace the
insured equipment/machinery. At Tenant's option, the Premises may be included in
Landlord's (or its affiliates') blanket policy of insurance, if and so long as
the same is maintained by Landlord (or its affiliates), in which case the cost
allocable to the Premises will be based on the insurer's cost calculations.
9.1.4 Builder's Risk. Whenever Tenant, whether as Landlord's
construction agent or otherwise, is engaged in alterations costing in excess of
$5 million, Tenant shall obtain completed value builder's risk insurance.
9.1.5 Environmental Insurance. To the extent available at a
commercially reasonable rate, pollution legal liability insurance with a limit
of not less than $10,000,000 covering the Premises and contamination therefrom.
In determining whether such insurance is available at a commercially reasonable
rate, the parties will take into consideration the cost and availability of
similar policies for other of Landlord's (or its affiliates') similar
properties. Such insurance shall be on a claims-made basis. At Tenant's option,
the Premises may be included in Landlord's (or its affiliates') blanket policy
of insurance, if and for so long as Landlord (or its affiliates) maintains such
policies, in which case the cost of such insurance allocable to the Premises
will be based on the insurer's cost calculations.
9.1.6 Workers' Compensation. Tenant shall maintain workers'
compensation insurance with no less than the minimum limits required by law.
9.1.7 Other Tenant Insurance. In addition to the insurance
coverage listed above in this Section 9.1, at Tenant's and Landlord's option,
Tenant may be included in Landlord's (or its affiliates') blanket policy for
other insurance (e.g. mold insurance), if and for so long as Landlord (or its
affiliates) maintains such policies, in which case the cost of such insurance
allocable to the Premises will be based on the insurer's cost calculations.
9.1.8 Landlord's Evidence of Insurance. In those instances
where Tenant is included in Landlord's (or its affiliates') blanket policies of
insurance, at Tenant's request, Landlord shall provide Tenant with insurance
certificates, or such other reasonable evidence of coverage under such policies.
9.2 Rating. The insurance required by Section 9.1 shall be written
by companies rated not less than A - and having a size rating of X or higher in
the current edition of A. M. Best's Key Rating Guide, and all such companies
shall be authorized to do insurance business in Washington, or otherwise agreed
to by Landlord. The insurance policies shall be in amounts sufficient at all
times to satisfy any coinsurance requirements thereof. If said insurance or any
part thereof shall expire or be withdrawn,
10
{PAGE}
Tenant shall immediately obtain new or additional insurance reasonably
satisfactory to Landlord. As of the date of the Lease, Tenant's insurers are
rated A++ (Chubb) and A+ (FM Global).
9.3 Mortgagee. Each insurance policy referred to in Sections 9.1.1,
9.1.3 and 9.1.4, shall contain standard non-contributory mortgagee clauses in
favor of any mortgagee. Each such policy shall provide that the issuer will
endeavor to notify the mortgagee if there are any material changes to the
policy.
9.4 Renewal. Tenant shall pay when due all premiums for the insurance
required by this Section 9 and shall deliver to Landlord copies of any insurance
policy upon Landlord's request and a certificate or other evidence (reasonably
satisfactory to Landlord) of the existing policies and of renewal or replacement
policies prior to the policy expiration date (which may be by extension of the
existing policy). If Tenant fails to comply with the requirements of this
Section 9 within 5 business days after written notice by Landlord to Tenant,
Landlord shall be entitled to procure such insurance pursuant to Section 15.7.
9.5 Landlord's Blanket Policies. As noted in Sections 9.1.1, 9.1.3, and
9.1.5, Tenant shall have the option of obtaining the insurance through
Landlord's (or its affiliates') blanket insurance policies for its portfolio to
obtain improved coverage or cost savings, if and for so long as Landlord (or its
affiliates) maintains such policies. At Tenant's request, Landlord will provide
Tenant with premium rating information, copies of insurance policies, and other
information reasonably necessary to facilitate Tenant's evaluation of this
option.
9.6 Landlord's Insurance. Landlord, at its expense, shall carry
comprehensive general liability insurance with a combined single limit
(including umbrella) of at least $5 million per occurrence and $5 million in the
aggregate.
9.7 Waiver of Subrogation. Notwithstanding any other provisions of
this Lease to the contrary, Landlord and Tenant waive their respective rights of
recovery against the other and the officers, employees, agents and
representatives of such other party for damage to the property of the other by
fire or other casualty to the extent such damage is insured or required
hereunder to be insured. The insurance policies carried by Landlord and Tenant
shall include a waiver of the insurer's rights of subrogation.
10. CASUALTY; OBLIGATION TO RESTORE
10.1 Definitions.
"Casualty" shall mean damage to or destruction of the Premises by
storm, fire, lightning, earthquake, or from any other cause, other than such
damage or destruction which is the subject of a Condemnation (Section 12).
"Excess Insurance Proceeds" shall mean that portion of any Insurance
Proceeds which are received by the Landlord or its mortgagee that are not used
to pay the third party costs of restoring any damage to the Premises or any
other third party out of pocket costs incurred, including attorneys' fees, in
connection with the Casualty, including such costs to obtain the Insurance
Proceeds, but in any event excluding Tenant's Proceeds. The determination of
Excess Insurance Proceeds shall be made upon completion of the Casualty
Restoration.
"Excess Insurance Proceeds Rent Reduction" shall mean a dollar for
dollar reduction to the Base Rent for the then remainder of the Term until
exhausted, from and after the date Landlord receives any Excess Insurance
Proceeds.
"Fair Market Value of Premises" for purposes of this Section 10 is
defined in Exhibit L.
11
{PAGE}
"Insurance Proceeds" shall mean the proceeds of any insurance
maintained by Tenant under Section 9, which is paid for a Casualty Restoration
(Section 10.4), but excludes Tenant's Proceeds.
"Substantial or Full Casualty" shall mean a Casualty which is
certified, by an affidavit from Tenant's president, chief executive officer or
chief financial officer, stating with a reasonable basis that such event has
rendered the Premises (taken separately from any other properties owned or
leased by Tenant) unavailable for Tenant's continued business operations in
compliance with the Use Requirements and Function Requirements for more than 12
months and the cost of restoring the Premises is reasonably estimated to exceed
$10,000,000.
"Tenant's Proceeds" shall mean any proceeds of insurance policies
payable for Tenant's business interruption or damage to Tenant's personal
property.
10.2 Substantial or Full Casualty in Last 18 Months of Term. If and
only if there is a Substantial or Full Casualty of the Premises during the last
18 months of the then current Term, then (i) Landlord will receive the Insurance
Proceeds; and (ii) provided Tenant has maintained the insurance coverages
required under this Lease, the Lease will terminate effective as of the date of
the Casualty, and Tenant's obligations under the Lease will be replaced by an
obligation for Tenant to pay any deductibles under applicable insurance
policies, plus Rent for the balance of the then current Term.
10.3 Substantial or Full Casualty Prior to Last 18 Months of Term.
If and only if there is a Substantial or a Full Casualty of the Premises prior
to the last 18 months of the then current Term, then Tenant shall have the
option to either (i) continue the Lease pursuant to Section 10.3.1 below; or
(ii) make a rejectable offer to purchase pursuant to Section 10.3.2 below. If
Tenant makes a rejectable offer to purchase, unless and until Tenant closes on
the purchase, or the Lease terminates pursuant to 10.3.2, Tenant shall continue
to pay Rent when due.
10.3.1 Lease Continuation. If there is a Substantial or Full
Casualty of the Premises prior to the last 18 months of the then current Term,
unless Tenant delivers a Termination Notice under Section 10.3.2 below, the
Lease shall continue in full force and effect, and no Rent shall abate under
this Lease as a result of such Substantial or Full Casualty; provided, however,
the Base Rent under this Lease shall be subject to an Excess Insurance Proceeds
Rent Reduction (as defined above). In such event, Tenant's restoration
obligations set forth in Section 10.4 below shall apply. If Tenant elects to
restore, and pursuant to Tenant's rights to sublet or assign under Section 13,
Tenant may exercise up to 2 of its remaining 5 year Renewal Options. In such
event Tenant waives its rescission right under Section 2.4 as it relates to such
exercise only.
10.3.2 Lease Termination. If there is a Substantial or Full
Casualty of the Premises prior to the last 18 months of the then current Term,
and Tenant will not be re-occupying the Premises following such Substantial or
Full Casualty Restoration, then Tenant may elect to terminate this Lease by
delivering notice of such election to Landlord within 90 days after the Casualty
("Casualty Termination Notice"). The Casualty Termination Notice shall include
an offer by Tenant to purchase the Premises from Landlord for the greater of (i)
the original purchase price paid by Landlord for the Premises; or (ii) the Fair
Market Value of the Premises. Within 60 days from Landlord's receipt of the
Casualty Termination Notice, Landlord will notify Tenant whether it will accept
or reject Tenant's offer to purchase the Premises, with Landlord's silence
deemed rejection.
If Landlord accepts Tenant's offer to purchase, then notwithstanding
Section 10.5 below, Tenant shall be entitled to all Insurance Proceeds, and such
purchase shall close on the later of (i) 10 business days after Tenant's receipt
of all Insurance Proceeds; or (ii) 30 days after Tenant's receipt of Landlord's
acceptance of such offer.
If Landlord rejects, or is deemed to have rejected, Tenant's offer to
purchase, then the Lease will be deemed terminated effective as of the date of
Landlord's rejection, with Landlord retaining the Insurance Proceeds. In such
event, Tenant shall also be liable to pay Landlord any applicable deductibles on
insurance policies relating to the Casualty Restoration, and Tenant shall pay
such
12
{PAGE}
deductible amount to Landlord within 30 days of the date of Landlord's rejection
and the Lease's termination date.
10.4 Obligation to Restore. If there is a Casualty and the Lease
has not terminated by the application of Sections 10.2 or 10.3 above, then,
irrespective of the extent of the Casualty or whether the cause is covered by
insurance, Tenant shall repair, restore and rebuild the Premises in accordance
with the Function Requirements and the Use Requirements and all applicable
building and zoning codes at the time of rebuilding to substantially the same
location, size, design, configuration and condition immediately prior to damage
or destruction (with any departures from said characteristics in accordance with
Section 8 for Alterations) and this Lease shall remain in full force and effect.
Such repair, restoration and rebuilding, including the repair, restoration or
replacement of Fixed Equipment (all of which are herein called a "Casualty
Restoration") shall be commenced as soon as reasonably practical and taking into
consideration a reasonable time for the insurance adjustment of the loss, the
work to design the repairs/replacements, and permitting delays; and shall be
diligently pursued to completion.
10.5. Insurance Proceeds. Insurance Proceeds shall be paid to Tenant
for application to costs of Casualty Restoration; provided that if the proceeds
exceed $3 million (unless Landlord's mortgagee should require a lesser amount,
but in no event less than $1 million), they shall be held by an insurance
trustee pursuant to Section 11. If the Insurance Proceeds are insufficient to
cover the cost of repair, the deficit shall be paid by Tenant. Any Excess
Insurance Proceeds shall be paid and belong to Landlord. For avoidance of doubt,
this Section 10.5 shall not apply to Tenant's Proceeds; in every instance
Tenant's Proceeds shall be paid to and be the sole property of Tenant.
10.6 No Casualty Termination. Notwithstanding any other provisions
of this Lease to the contrary, unless Sections 10.2 or 10.3 above apply, this
Lease may not be terminated by Tenant or Landlord as a result of a Casualty to
the Premises, irrespective of the extent thereof, whether such loss is insured
or when such Casualty occurs, or whether such damage is legally permitted to be
restored, and Tenant and Landlord waive the provisions of any Law permitting
termination of a lease due to destruction of the Premises.
10.7 No Abatement of Rent. Except to the extent stated in Sections
10.2 and 10.3 above, no Rent shall abate under this Lease as a result of any
Casualty, whether or not or to the extent the same may be insured, and
irrespective of whether or not such damage or destruction is prohibited from
being repaired or restored; provided, however, the Base Rent shall be subject to
an Excess Insurance Proceeds Rent Reduction.
11. INSURANCE TRUSTEE
11.1 Procedure. If the Insurance Proceeds exceed $3 million (unless
Landlord's mortgagee should require a lesser amount, but in no event less than
$1 million) and this Lease has not terminated by application of Sections 10.2 or
10.3, then such Insurance Proceeds shall be held by an insurance trustee which
shall be a financial institution jointly selected by Landlord and Tenant and
reasonably satisfactory to any mortgagee(s) (the "Trustee"). If Landlord's
mortgagee is an institutional lender, such lender may elect to be the Trustee.
Each insurer is authorized to make payment directly to the Trustee; and Tenant
and Landlord each appoints such Trustee as its attorney-in-fact to endorse any
check for Insurance Proceeds after approval by Tenant of the Trustee (if other
than Landlord's mortgagee). The Insurance Proceeds, net of reasonable expenses
incurred in obtaining them, shall be retained in a separate interest-bearing
federally insured account by the Trustee for application to restoration, with
the interest added to the proceeds. The Trustee shall make the net Insurance
Proceeds available to Tenant for restoration, in accordance with the provisions
of this Section 11. The net Insurance Proceeds held by the Trustee shall be
disbursed in accordance with the following conditions:
11.1.1 Landlord's Approval. The plans and specifications for
the restoration shall be subject to Landlord's reasonable approval, which
approval shall be granted to the extent that the plans and specifications
conform with the conditions specified in Section 10.4.
13
{PAGE}
11.1.2 No Default. At the time of any disbursement, no Event
of Default shall exist and no mechanics' or materialmen's liens shall have been
filed and remain undischarged or unbonded except to the extent the disbursement
would satisfy and discharge such liens.
11.2 Disbursements. After all of the uninsured costs to repair and
restore the Premises have been paid by Tenant out of its own funds,
disbursements shall be made monthly by the Trustee to reflect that percentage of
the work that is being paid for with the Insurance Proceeds that has been
completed since the prior disbursement upon receipt of (1) a Draw Certificate
(Section 11.3), (2) completion and performance of the work to date in a good and
workmanlike manner in accordance with the contracts, plans and specifications,
(3) customary lien waivers for the work covered by the prior progress payments,
and (4) other reasonable evidence of cost and payment so that Trustee can verify
that the amounts disbursed from time to time constitute the same percentage of
the total budgeted Casualty Restoration costs, as such budget may be adjusted
from time to time.
11.3 Draw Certificates. Each request for disbursement shall be
accompanied by a certificate using AIA Forms G702 and G703 ("Draw
Certificates"), as the same may be amended or replaced by AIA or a similar
entity describing the work, materials or other costs or expenses, for which
payment is requested, stating the cost incurred in connection therewith and
stating that Tenant has not previously received payment for such work or
expense. For soft costs, where the referenced AIA Forms would not apply,
Tenant's delivery of reasonable documentation of such costs shall satisfy the
Draw Certificate requirement. The Draw Certificate to be delivered by Tenant
upon completion of the work shall, in addition, state that the work covered by
the request has been substantially completed.
12. CONDEMNATION
12.1 Definitions.
"Condemnation" shall mean any taking of the Premises by condemnation or
other eminent domain proceedings pursuant to any Law or any conveyance under
threat thereof.
"Excess Condemnation Award" shall mean that portion of any Condemnation
Award which is paid to Landlord or its mortgagee and not used by Landlord, its
mortgagee or Tenant to pay the third party out of pocket costs of restoring any
damage to the Premises caused by the Condemnation or any third party out of
pocket costs, including attorneys' fees, incurred by Landlord or its mortgagee
in connection with the Condemnation.
"Fair Market Value of Premises" for purposes of this Section 12 is
defined in Exhibit L.
"Substantial or Complete Condemnation" shall mean a Condemnation that
is not a Temporary Taking, which is certified by an affidavit from Tenant's
president, chief executive officer or chief financial officer, stating with a
reasonable basis that such Condemnation has rendered the Premises (taken
separately from any other properties owned or leased by Tenant) unavailable for
Tenant's continued business operations in compliance with this Lease's Use
Requirements and Function Requirements and results in a loss of 35% or more of
the rentable square feet of the Premises.
"Temporary Taking" shall mean a condemnation of all or part of the
Premises for up to two (2) years.
12.2 Notice/Award. Either party, promptly upon obtaining knowledge of
any Condemnation proceeding affecting the Premises, shall notify the other party
and both parties shall be entitled to participate in any Condemnation
proceeding. Subject to the provisions of this Section 12, Tenant hereby
irrevocably assigns to Landlord any award or payment with respect to any
Condemnation of Landlord's interest in the Premises (the "Condemnation Award"),
except that nothing in this Lease shall be deemed to preclude Tenant from making
a separate claim for an award on account of the Removable Equipment,
14
{PAGE}
moving expenses, relocation costs, business interruption or out-of-pocket
expenses incidental to the move so long as in doing so the amount of Landlord's
award is not reduced.
12.3 Substantial or Complete Condemnation. If there is a
Substantial or Complete Condemnation of the Premises Tenant will deliver notice
thereof to Landlord within 120 days after receipt of demand for turnover from
the condemning agency ("Condemnation Termination Notice")and this Lease shall
terminate. The Condemnation Termination Notice shall verify the Substantial or
Complete Condemnation and include an offer by Tenant to terminate the Lease by
paying Landlord the greater of (i) the original purchase price paid by Landlord
for the Premises; or (ii) the Fair Market Value of the Premises (the
"Termination Fee"). Within 60 days from Landlord's receipt of the Termination
Notice, Landlord will notify Tenant whether it will accept or reject Tenant's
offer to terminate the Lease with Landlord's silence deemed rejection.
If Landlord accepts Tenant's offer to terminate the Lease, then
notwithstanding Section 12.2 above, Tenant shall be entitled to the entire
Condemnation Award, and Tenant shall pay Landlord the Termination Fee by the
later of (y) 10 business days after Tenant's receipt of the Condemnation Award;
or (z) 30 days after Tenant's receipt of Landlord's acceptance of such offer. If
there is less than a total condemnation, Landlord shall transfer to Tenant fee
title to any remainder of the Premises, upon Landlord's receipt of the
Termination Fee.
If Landlord rejects, or is deemed to have rejected Tenant's offer to
terminate the Lease, then the Lease will be deemed terminated effective as of
the date the Premises are surrendered to the condemning authority, with Landlord
retaining the Condemnation Award (subject to Section 12.2).
Tenant shall continue to pay Rent until the latest of date on which (a)
the Termination Fee is paid, (b) the Lease is deemed terminated, or (c) the
Tenant vacates the Premises.
12.4 Partial Condemnation. If there is a partial Condemnation which
is not a Substantial or Complete Condemnation, Section 12.3 shall not apply,
this Lease will not terminate and the Condemnation Award shall be made available
to Tenant to restore the Premises to a complete architectural unit with the
character, function and commercial value as nearly as possible equal to the
value of the Premises immediately prior to the taking. For such purposes,
Landlord may require that the Condemnation Award be deposited with and disbursed
by a trustee in the same manner that would have been applicable had the Premises
been damaged by a casualty that invoked the provisions of Section 11. The Base
Rent shall then be reduced to reflect the reduction in the Premises. If the
reduction is to the interior, the Rent would be proportionately reduced to
reflect the reduction in the rentable square feet; if the reduction affects the
number of parking spaces available, the Rent reduction will reflect the excess
cost to Tenant for comparable parking. There will be no Rent reduction for the
Condemnation of unimproved or landscaped areas. Notwithstanding the foregoing,
in no event shall the net present value of the Rent reduction exceed the Excess
Condemnation Award.
12.5 Temporary Taking. If there is a Temporary Taking, then
notwithstanding Section 12.2 above, the entire Condemnation Award shall be paid
to Tenant to the extent it is attributable to the Term and Tenant shall continue
to pay the Rent due hereunder without abatement or adjustment.
13. SUBLETTING AND ASSIGNMENT
13.1 General. Tenant shall have the right to assign or sublet the
Premises, in whole or in part (any of which events being a "Transfer" and any
assignee or sublessee being a "Transferee"), with the consent of Landlord, which
shall not be unreasonably withheld as further detailed in this Section 13.
Landlord will be deemed to have approved the Transfer unless within 10 business
days after receipt of Tenant's request complying with this Section 13, Landlord
gives written notice specifying its objections to the Transfer. Such request
shall be accompanied by a complete and accurate copy of the proposed assignment
or sublease, the name of the proposed assignee or sublessee, its address,
telephone number and principal representative who may be contacted for
information and inquiries, the uses it intends to make of the Premises, if and
how it is affiliated with Tenant, and a then current credit report, an operating
15
{PAGE}
statement for the immediately preceding 12 months and a then current financial
statement reflecting its financial condition in accordance with GAAP (Section
1.2).
13.2 Affiliates/Cooperative Business Arrangements. Notwithstanding
Section 13.1, Tenant shall have the right, upon not less than 30 days' advance
written notice to Landlord but without Landlord's consent, to Transfer this
Lease in whole or in part to Affiliates. "Affiliates" shall mean (a) entities
which control, are controlled by or are under common control with Tenant; (b)
Tenant's successor entities by merger or acquisition; and (c) entities in which
Tenant is a 50% or more owner or joint venturer, and jointly pursuing business
objectives consistent with Tenant's business operations, such as discovery or
development of pharmaceutical products, so long as such entity has a Cash
Position equal to or greater than Tenant's then Cash Position (Section 7.3).
13.3 Landlord's Consent. Landlord will not withhold its consent to
a Transfer if:
(a) The proposed uses of the Transferee comply with the
provisions of Section 4.1.
(b) In the case of a sublease, the demising configuration
between the retained space and the subleased space does not unreasonably impair
the marketability of the remaining space.
13.4 No Release. No Transfer shall release Tenant from any
obligations hereunder and Tenant shall remain primarily liable for performance
of its obligations under this Lease. Landlord may accept any Rent or performance
of Tenant's obligations from any Transferee and such acceptance shall not
constitute a waiver of Landlord's rights. If an Event of Default occurs,
Landlord may proceed directly against Tenant, or any Transferee, without first
exhausting Landlord's remedies against any other person or entity responsible
therefor.
13.5 Assumption. Any assignee of this Lease shall execute an
assumption agreement in form and substance reasonably satisfactory to Landlord
in which such assignee becomes jointly and severally liable with Tenant for the
performance of Tenant's obligations under the Lease to the extent claims arise
after the effective date of the assumption.
13.6 Subleases. Each sublease shall provide that (a) it is subject
and subordinate to this Lease; (ii) the term is not longer than the then Term of
this Lease, plus any extensions which have been irrevocably exercised, and (iii)
if this Lease is terminated for any reason, Landlord may, at its option, either
(A) terminate the sublease, or (B) takeover all of the rights and interest of
Tenant under the sublease, in which case the sublessee shall attorn to Landlord.
If Landlord elects to takeover the rights and interest of Tenant, Landlord shall
not (1) be liable for any previous act or omission of Tenant under the sublease,
(2) be subject to any defense or offset in favor of the sublessee against
Tenant, (3) be bound by any modification to the sublease made without Landlord's
written consent or by any prepayment by sublessee of more than one month's rent,
or (4) be liable for the application or return of any security deposit not
actually received by Landlord. Landlord will agree to the same waiver of
subrogation with sublessees as is set forth in Section 9.7.
13.7 Assignment and Sublease Profit. Landlord and Tenant shall each
be entitled to 50% of the rent profit on assignment consideration (i.e.
consideration for assignment of the Lease) and sublease rents. The assignment
consideration shall be determined and paid as and when received by Tenant. For
any nonmonetary consideration, Tenant will have option of assigning half of such
non-monetary consideration to Landlord, or having the nonmonetary consideration
fairly valued and half of such value paid to Landlord in immediately available
funds within a reasonable time after receipt by Tenant of the consideration, to
allow for liquidation/valuation. The rent profit on subleases will be determined
and paid each month during the sublease term. The rent profit on subleases shall
be calculated by taking the rent and other consideration and reimbursements
payable by the sublessee to Tenant or to any third party pursuant to the
sublease and subtracting (a) the Base Rent due from Tenant hereunder with
respect to the subleased space over the same period to which the sublessee's
rent applies (per square foot allocation), (b) the monthly amortization of the
costs incurred in connection with the sublease for commissions, tenant
improvement costs and legal fees (all amortized on a straight-line basis over
the
16
{PAGE}
sublease term), (c) any reasonable amounts specified in the sublease as rental
payments for use of equipment owned by Tenant, (d) Tenant's reasonable estimate
of those third party costs payable by Tenant under the Lease or under the
sublease and other direct actual reimbursements of third party costs incurred at
sublessee's request in connection with the Premises or sublessee's business
operations at the Premises, (e) Tenant's reasonable estimate of the cost of
providing additional services to the sublessee such as maintaining agreed
temperature ranges with regard to the HVAC system and specified air pressures to
fume hoods that are in addition to the costs Tenant would otherwise incur for
such portion of the Premises. If the sublease is subsequently extended, the then
outstanding balance of costs described in clause (b) above shall be reamortized
over the remainder of the then sublease term and including the extension.
Landlord shall have the right to require Tenant to provide subsequent reports
for and confirmations and calculations of the amounts subtracted for (b) through
(e) above and the parties agree that Landlord's share of the rent profit may be
adjusted from time to time to more closely reflect the actual costs incurred by
Tenant and reasonably allocated to sublessee pursuant to this Section.
14. TENANT'S INDEMNIFICATION
Except to the extent caused by the gross negligence or willful
misconduct of Landlord or any Landlord Related Parties, and subject to the
waiver of subrogation in Section 9.7, Tenant shall indemnify, defend and hold
Landlord, its employees, mortgagee(s) and agents ("Landlord Related Parties")
harmless from and against all claims, liabilities, damages and costs (including
attorneys fees and costs) arising out of (a) its use of or activities on the
Premises, (b) any acts or omissions (including violations of Law) by Tenant or
Tenant Related Parties (Section 19.1), and (c) any breach of this Lease by
Tenant or Tenant Related Parties.
15. TENANT'S INSOLVENCY OR DEFAULT
15.1 Insolvency. Tenant shall be in default upon the occurrence of
one or more of the following events (each, an "Event of Default"): (i) Tenant
files a petition in bankruptcy or otherwise seeks any judicial protection, stay
or relief against its creditors generally, (ii) an involuntary petition in
bankruptcy against Tenant or any request for the appointment of a receiver or a
custodian or other similar officer for any portion of the Tenant's property is
filed or made and not dismissed within 90 days; or (iii) the assignment for the
benefit of creditors of any portion of the Tenant's property is made; or (iv)
Tenant's interests in this Lease shall be attached, levied upon or judicially
seized, whereupon Landlord may, by notice to Tenant, terminate this Lease, and
neither Tenant nor any person claiming through or under Tenant shall be entitled
to be in possession of the Premises but shall forthwith surrender the same, and
Landlord, in addition to the other rights Landlord may have, retains as security
for its damages any Rent, Security Deposit or other monies received by Landlord
on behalf of Tenant. If any such action, case or petition has been commenced by
an unrelated third party against Tenant and is dismissed within a period of 90
days, then the Event of Default shall be deemed cured for purposes hereof. This
Lease is upon the further condition that if a petition for relief under any
chapter of the Bankruptcy Code is filed by an unrelated third party against
Tenant and the trustee or debtor or debtor in possession has not cured all
defaults hereunder and assigned or assumed this Lease under the Bankruptcy Code
within 90 days after the entry of the Order for Relief, then this Lease shall,
at Landlord's sole option, terminate. In case of termination pursuant to this
Section 15.1, Tenant shall indemnify Landlord against all costs and expenses and
loss of Rent, including amounts due under Section 15.3.
15.2 Defaults. Tenant shall be in default hereunder if: (i) Tenant
fails to pay any installment of Base Rent or Additional Rent when due; or (ii)
Tenant abandons the Premises, or (iii) Tenant fails to perform any other
covenant, term, agreement or condition of this Lease not referred to in (i),
(ii) or (iv) when required; or (iv) any insurance required to be maintained by
Tenant is cancelled or reduced below its required limits or in its scope of
coverage and Tenant does not replace the same at least 20 business days before
the effective date of such cancellation or reduction (an "Insurance Default").
An "Event of Default" will exist if (a) Tenant is in default under subsection
(i) and the default is not cured within 5 days after Landlord gives Tenant
written notice of such default; (b) Tenant abandons the Premises, (c) Tenant is
in default under subsection (iii) and the default is not cured within 30 days
after Landlord gives Tenant written notice specifying the default (provided that
if the default can not be cured within the 30 day period,
17
{PAGE}
Tenant shall have such additional time to cure the default as is reasonably
necessary so long as Tenant commences the cure within 10 days after such notice
is given and diligently prosecutes the cure to completion within 90 days after
Tenant is given the default notice, and such deadline may be further extended
for Force Majeure (Section 27.11), provided that Tenant delivers notice to
Landlord of such Force Majeure and monthly written status reports during any
further extension arising therefrom), (d) an Insurance Default has occurred and
Tenant has not cured such default by the sooner of 5 days after Landlord's
notice of default or 10 days before the effective date of such cancellation or
reduction, or (e) a default by Tenant occurs and is not cured within any
applicable cure period, under (i) the Purchase Agreement, (ii) the Lease between
Landlord's affiliate and Tenant dated concurrently herewith for the property
located at 1208 Eastlake Avenue East, Seattle, WA ("Earl Davie Building Lease"),
or (iii) the Line of Credit Loan (Section 26). When there is an Event of
Default, Landlord may, at any time thereafter, exercise any of its legal,
equitable or contractual remedies for a Tenant default, which may include an
election to terminate this Lease by notice, lawful entry or otherwise, in which
latter event Landlord shall be entitled to recover possession of the Premises
from Tenant and those claiming through Tenant. Any termination of this Lease and
any repossession of the Premises shall be without prejudice to any remedies
which Landlord might otherwise have. In case of such termination, Tenant shall
indemnify Landlord against all third party out of pocket costs and expenses
including the amounts due under Section 15.3 and loss of Rent. All notice and
cure periods provided for in this Lease shall run concurrently with any notice
and cure periods provided for in any and all of the agreements referred to in
part (e) of this Section.
15.3 Expense Recovery. Expenses for which Tenant shall indemnify
Landlord shall include all third-party out of pocket collection costs, including
attorneys' fees and all other third party out of pocket costs proximately caused
by the Event of Default, with or without litigation, including any such costs
incurred in connection with issues that are particular to a bankruptcy or any
other type of proceeding and on appeal. These sums shall be due immediately upon
notice from Landlord and shall bear interest at the Default Rate (Section 15.8)
if not paid within 5 business days after written demand. If proceedings are
brought under the Bankruptcy Code which relate to this Lease, Landlord shall be
paid the costs incurred by Landlord in connection with the proceedings.
15.4 Damages. Notwithstanding termination of this Lease and reentry
by Landlord pursuant to Section 15.1 or Section 15.2, Landlord shall be entitled
to recover from Tenant:
(i) The worth at the time of an award (including interest at the
Default Rate) of any unpaid Rent which had been earned by Landlord at the time
of termination; plus
(ii) The worth at the time of an award (including interest at the
Default Rate) of the amount by which the unpaid Rent which would have been
earned after termination until the time of an award exceeds the amount of loss
of Rent that Tenant proves could have been reasonably avoided; plus
(iii) The worth at the time of an award of the amount by which the
unpaid Rent and Additional Rent for the balance of the Term (as extended, if at
all prior to termination) exceeds the amount of such loss of Rent that Tenant
proves could have been reasonably avoided (including Default Interest from the
date of the award until paid). Such worth at the time of award shall be computed
at the discount rate of the Federal Reserve Bank of San Francisco, or successor
Federal Reserve Bank, on the date of termination; plus
(iv) Any other amount necessary to compensate Landlord for all the
damage proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom, including amounts due and payable pursuant to Section 15.3.
15.5 Non-Termination of Lease. If Landlord reenters the Premises
pursuant to Section 15.1, Landlord may elect, by notice to Tenant, not to
terminate this Lease, in which case Tenant shall indemnify Landlord for the loss
of Rent by a payment at the end of each month during the remaining Term
representing the difference between the Rent due in accordance with this Lease
and the rental actually
18
{PAGE}
derived from the Premises by Landlord for such month. Without any previous
notice or demand, separate actions may be maintained by Landlord against Tenant
from time to time to recover any damages which, at the commencement of any
action, have then or theretofore become due and payable to Landlord under this
Section 15 without waiting until the end of the Term.
15.6 Reletting. If this Lease is terminated as hereinabove provided
or by summary proceedings or otherwise, Landlord may at any time and from time
to time relet the Premises in whole or in part either in its own name or as
agent of Tenant for any period equal to or greater or less than the remainder of
the then-current Term. All rentals received by Landlord from such reletting
shall be applied first to the payment of the costs of the reletting and
alterations and repairs; second, to the payment of any amounts other than Base
Rent due to Landlord; third, to Rent due and unpaid hereunder, and the residual,
if any, shall be held by Landlord and applied in payment of future Rent when it
becomes due.
15.7 Right of Landlord to Cure Defaults. If an Event of Default
occurs, Landlord may, but shall not be required to, cure the Event of Default,
for the account and at the expense of Tenant, if Tenant has not cured the
default within 15 business days' after written notice from Landlord that
Landlord intends to take action to cure Tenant's Event of Default; provided,
however, such notice need not precede Landlord's payment or action in any
circumstance that involves an immediate risk of foreclosure, loss or impairment
of any insurance, property damage, personal injury, or enforcement by any
governmental entity. Where an Event of Default concerns a release or imminent
release of Hazardous Materials, Landlord will not have the ability to exercise
self-help if Tenant (a) has previously delivered to Landlord a Hazardous
Materials Response Plan (the "Response Plan") which outlines methods and persons
reasonably acceptable to Landlord to address, treat, abate, forestall or prevent
the release or imminent release of Hazardous Materials; and (b) promptly
delivers written notice to Landlord of any release or imminent release of
Hazardous Materials along with confirmation that Tenant is complying with the
Response Plan. Tenant shall reimburse Landlord for any third party out of pocket
expenses incurred in such cure, with interest accruing pursuant to Section 15.8,
as Additional Rent, within 30 days after receipt of Landlord's invoice.
15.8 Default Interest. Any amounts owing from Tenant to Landlord
under this Lease which are not paid when due shall bear interest at the greater
of (a) 12% per annum or (b) 4% higher than and varying daily with the prime rate
quoted by any of the three largest banks in the United States (as measured by
assets) or such similar rate that is generally publicly announced by commercial
lending institutions as an index for loans to its most credit-worthy customers
(said prime rate or similar rate being hereinafter referred to as the "Prime
Rate"), in either event calculated from the date due or expended until and
including the date of payment (the "Default Rate").
15.9 Other Available Remedies. At Landlord's election, upon an
Event of Default, Landlord may pursue such other amounts or other remedies in
addition to or in lieu of any one or more of the specific remedies listed in
this Section and no articulation of any remedy shall be construed to be in lieu
of any others that may be available to Landlord at law or in equity.
16. LANDLORD'S DEFAULT
16.1 Default. Landlord shall be in default hereunder if Landlord
fails to perform any of its obligations hereunder within 30 business days after
receipt of written notice from Tenant specifying such failure; provided that if
the nature of the default is such that more than 30 business days are necessary
for the cure, Landlord shall have such additional time as is reasonably
necessary so long as Landlord commences the cure within the cure period and
diligently pursues it to completion. Tenant shall not have the right to
terminate the Lease due to a Landlord default.
16.2 Limitations on Landlord's Liability. The term "Landlord" as
used herein shall mean only the owner or owners, at the time in question, of the
fee title of the Premises. If Landlord transfers its interest in this Lease
other than for security purposes, Landlord shall cause its assignee or
transferee to assume the provisions of this Lease and Landlord shall deliver
notice of such assignment or transfer and a copy of the effective instrument of
transfer to Tenant within 15 business days after the date of transfer.
19
{PAGE}
Tenant shall be entitled to continue to pay Rent and give all notices to
Landlord until Tenant has received the foregoing from Landlord. Landlord shall
deliver all funds in which Tenant has an interest except those which are then in
the possession of an insurance or condemnation trustee, including but not
limited to Tenant's Security Deposit to Landlord's purchaser or assignee. From
and after such transfer, Landlord shall be released from all liability toward
Tenant arising from this Lease due to any act, occurrence or omission of
Landlord's successors occurring after the transfer of Landlord's interest in
this Lease, provided Landlord's purchaser or assignee expressly assumes
Landlord's duties and covenants under this Lease subject to the same limitations
upon its personal liability as are applicable to Landlord in Section 16.3.
La